Oil company Tullow Oil agreed to sell its total interest in Tullow Guyana, which includes the Orinduik license (Tullow 60% operated equity) in Guyana to Eco Atlantic's subsidiary Eco Guyana Oil and Gas (Barbados) Limited in exchange for a combination of upfront cash and contingent consideration.
"Tullow's decision to exit the Orinduik license is in line with its strategy to focus on its high return production assets in Africa and infrastructure-led exploration around producing hubs and delivers its objective to unlock value in emerging basins," Tullow Oil said.
Tullow Oil and partners in 2019 made two oil discoveries at the Jethro and Joe wells at Orinduik, however, it later turned out two discoveries contained heavy oil with a high sulfur percentage, with discoveries deemed uncommercial oil.
"Nonetheless, Tullow recognizes the material oil resource potential remaining in the Orinduik licence and as such, the terms of the transaction allow Tullow to retain exposure to any potential future success in the region," Tullow said.
Eco Atlantic will pay $700,000 in cash upon the transfer of Tullow Oil's 60% equity and operatorship of the Orinduik license to Eco.
There is also a contingent consideration that could be paid by Eco to Tullow, which is linked to a series of potential future milestones and triggered as follows: US$4 million in the event of a commercial discovery; US$10 million payment upon the issuance of a production licence from the Government of Guyana; Royalty payments on future production - 1.75% of the 60% working interest entitlement revenue net of capital expenditure and lifting costs;
The transaction and payment of the initial consideration outlined above is subject to certain market-standard conditions precedent, including Government and JV approvals. Tullow said that the proceeds from the transaction would be put towards general corporate purposes.
The completion is expected to occur in the second half of 2023.
Jean-Medard Madama, Tullow's Director of Exploration, Non-Operated Assets, and Decommissioning, said: "This transaction is in line with our strategy to optimise our portfolio through opportunities to unlock value from our emerging basin licenses, whilst focusing our capital expenditure on our high return producing assets and growth opportunities around existing infrastructure."
Eco Atlantic said the acquisition was in line with its strategy to deliver material value for its stakeholders through early entry and exploring for hydrocarbons in some of the most prolific petroleum basins in the world.
Eco currently holds a 15% working interest in the Orinduik Block. On completion of the Transaction, Eco, as operator and majority interest holder in the Orinduik Block, intends to drive the exploration process and focus on its strategy to attract new partners to join the license and proactively engage in drilling, the company said.
Gil Holzman, President and Chief Executive Officer of Eco Atlantic, commented: "We are delighted to have reached this agreement with Tullow and to be able to begin to unlock the Orinduik Block's full potential. Since 2014, we have believed in the potential of this Block, with our initial two wells in 2019 proving two different oil plays. We will proactively engage in a farm out process for this highly prospective license and begin preparations to drill a well testing the cretaceous, where all light oil discoveries have been made in the adjacent Stabroek Block."
Colin Kinley, Co-founder and Chief Operating Officer of Eco Atlantic, added:"The Orinduik Block sits on the series of continental shelves leading into the basin. This rich and prolific basin is clean sand filled and sealed nicely to trap the massive volumes of oil found thus far. Following ten years of basin evaluation and research, we have a solid and highly experienced team to take over the Operatorship role. We will start by targeting stacked pay opportunities we see in the cretaceous and look forward to continuing our aggressive approach to discovery. We see an opportunity in the multi-hundred millions of recoverable range and now is the time to drill our targets."