Eco (Atlantic) Oil & Gas (CVE:EOG) has managed to close an amended farmout agreement with AziNam on its Namibian petroleum blocks which shifts upcoming cost obligations to its partner without reducing exploration.
The company received all regulatory approvals from the Ministry of Mines and Energy of Namibia, thus closing the transaction that restates the terms of a farmout agreement initially signed in April 2012.
Under the new terms, Eco (Atlantic) will get a total of C$4.2 million in cash, while future costs have been shifted to AziNam without cutting back on exploration in conjunction with the farmout of a portion of each of its Cooper, Sharon and Guy licenses in the Walvis Basin offshore Namibia.
"The completion of this farmout transaction with our long term partners, AziNam, is a part of our strategy to actively operate and explore our blocks at a very low to zero cost, and at the same time generate a substantial treasury balance," said chief executive officer Gil Holzman.
"With the restrained outlook taken by the world markets as a result of the recent fall in oil prices, we have affected a self-strengthening strategy that maintains mid- long term value."
At its Cooper block, Eco (Atlantic) will have a 32.5 percent working interest, and is carried through drilling. It will also have a 50 percent stake in the Guy block, with a 33 percent partial carry through 3D seismic and fully carried through the new 1,100 km 2D survey. At the Sharon block, it will have a 60 percent working interest, with 45 percent partial carry through 3D work, and fully carried on the recently acquired 3,000 km recent 2D, the company said.
Eco (Atlantic) recently completed the acquisition of Pan African Oil, solidifying its position as the dominant license holder in offshore Namibia and putting the company in a "very healthy financial position," said its CEO.
According to Holzman, the combination of the merger and the farmout transaction with AziNam will contribute an additional $7.3 million to Eco (Atlantic)'s treasury, for over $9 million in total.
"We have also recently significantly reduced cost overhead without diminishing our core strengths, as well as increased our carry on our licenses.
"This shift in work obligations puts us in a very low cost obligation position," added Holzman.