African Petroleum signed nonbinding heads of terms and a binding exclusivity agreement with a “well-funded, listed oil and gas company with a strong track record in offshore deepwater drilling,” for a drilling campaign offshore Senegal and The Gambia.
The heads of terms and exclusivity agreement provide a framework for the incoming third party to secure a 70% operated interest in African Petroleum’s SOSP production sharing contract (PSC) in Senegal and the A1 and A4 licenses in The Gambia.
The exclusivity agreement grants the incoming third party an initial eight-week period of exclusivity over the company’s SOSP PSC in Senegal and the A1 and A4 licenses in The Gambia. This period of exclusivity may be further extended under certain conditions.
During the period of exclusivity, African Petroleum and the incoming party will work together to finalize negotiations with the respective governments to amend the work commitment in Senegal and to enter the next phase of the licenses in The Gambia, complete due diligence, and agree and execute farm-in documentation.
The heads of terms sets out the broad commercial terms under which the incoming party intends to, subject to certain conditions, farm-in to the company’s SOSP PSC in Senegal and the A1 and A4 licenses in The Gambia. The terms propose that the incoming party will pay up to US$8.5 million to the company, fund 100% of at least two deepwater offshore wells at a gross cost of up to $35 million per well, fund 100% of a 3D seismic acquisition, fund 100% of pre-stack depth migration (PSDM) processing/reprocessing, and potentially fund 100% and 85% respectively of a further two wells at a gross cost of up to $35 million per well.
“This is a significant development for the company with a well-funded credible partner with strong deepwater drilling experience. Whilst final farm-in agreements are subject to completion and the successful outcome of negotiations with the governments in Senegal and The Gambia, we are confident that the proposed partner’s reputation, strong balance sheet and appetite to explore the potential of these exciting licenses with the drill-bit, will greatly increase our ability to conclude the discussions with an outcome that benefits all parties,” says African Petroleum CEO Jens Pace. “Our objective is to ensure that African Petroleum’s shareholders retain significant exposure to several firm and contingent wells, at no cash cost to the Company, in one of the most exciting hydrocarbon basins in the world.”