Eco (Atlantic) Oil & Gas (CVE:EOG) (NSX:EOG) said it is farming out part of its offshore licenses in Namibia for carry and cash, as part of a plan to reduce its financial obligations.
It has signed a revised farmout agreement with existing partner Azinam, amending the terms of the original farmout from April 2012. Under the new deal, Eco (Atlantic) will get a total of C$4.2 million in cash, and lower its financial commitments for work on its offshore blocks.
In exchange, it has agreed to transfer additional participating interests in its Guy, Sharon and Cooper blocks, with another 10 percent for Guy and Sharon, respectively, and an additional 12.5 percent for Cooper.
The company also said it has agreed with the local ministry to delay its planned 3D survey programs on its Guy and Sharon blocks in Namibia by at least one year, to March 2016.
"We are delighted to have the opportunity to enter into this transaction with our long time strategic block partner, Azinam," said chief executive officer Gil Holzman.
"With the significant reduction of our financial commitments on the blocks over the short to medium term on the one hand, and with earning meaningful cash contribution on the other, we are perfectly positioned to further progress our offshore licenses in Namibia together with our partners Azinam and Tullow Oil, and explore additional opportunities."
Eco Atlantic owns and operates four licenses in Namibia, three of which have more than 21.5 billion barrels of prospective resources, covering over 28,500 square km in the Walvis Basin.
The company announced the acquisition of Pan African Oil late last year, further strengthening its position as the dominant license holder offshore Namibia. Pan African, an Africa-focused oil and gas explorer, operates two licenses in offshore Namibia, which cover close to 13,000 square km.
Following the closing of the transaction set out in the revised agreement, Eco (Atlantic) will hold a 50 percent participating interest in the Guy block, a 50 percent participating stake in Sharon and a 32.5 percent carried interest in the Cooper block.
"We have illustrated the company's ability to raise finance while maintaining majority ownership in our very prospective Namibian assets," said Holzman.
"Eco Atlantic recognizes the current instability in the upstream exploration sector and has structured its assets for maximum growth with tight control of capital."
"We are proud of our resourcefulness, enabling us to continue to create shareholder value for the longer term when Namibia offshore, and especially Walvis Basin, will prove to be oil prone."