Operator boosts stake in high-profile Orange basin block as supermajors circle

Africa Oil has boosted its operating stake in a highly promising exploration block in South Africa’s Orange basin that is attracting the interest of supermajors, with a farm-in deal understood to be close and drilling plans being worked up.

Deep-water Block 3B/4B lies on trend with the prolific geological play opened up by Shell and TotalEnergies in neighbouring Namibia and, according a third-party consultancy, has the potential to hold resources equivalent to about 4 billion barrels of oil, spread across 24 mapped prospects.

Plans are being worked on to drill two exploration wells — and potentially up to five wells in total — while discussions are underway with various potential partners to farm out as much as 55% in the block.

Toronto and Stockholm-listed Africa Oil has signed a $10.5 million letter of intent (LoI) to acquire a 6.25% interest from block partner Azinam, a wholly owned subsidiary of Eco (Atlantic) Oil & Gas.

Assuming the agreement is finalised, Africa Oil’s interest in 3B/4B will increase to 26.25%, with Eco Altantic’s falling to 20% and privately-owned South African player Ricocure’s stake remaining at 53.75%

The price paid by Africa Oil has been broken down into four elements: $2.5 million within 30 days after the signing of the LoI; $2.5 million when the government approves the transfer; $4 million upon completion of a farm-out deal; and $1.5 million when the first exploration well starts drilling.

Article continues below the advert

Africa Oil is a major shareholder in Eco Atlantic with a 15.02% stake.

Africa Oil said its directors other than chief executive Keith Hill, who is also a director of Eco, have reviewed and approved the terms of the LoI.

Commenting on the deal with Africa Oil, Gil Holzman co-founder and chief executive of Eco Atlantic, said the interest transfer “will strengthen the joint venture position amid ongoing negotiations with third parties to farm into the block and execute a drilling campaign.”

He expects securing regulatory approval for the transfer to be straightforward.

Holzman said the initial cash to be received from Africa Oil will enable Eco Atlantic to fund growth opportunities elsewhere, without shareholder dilution, while at the same time maintaining a “strategic and considerable” stake in 3B/4B.