Eco (Atlantic) Oil & Gas Ltd. (AIM: ECO, TSX ‐ V: EOG), the oil and gas exploration company focused on the offshore Atlantic Margins, is pleased to announce that it has signed a legally binding Letter of Intent (the “Agreement”) pursuant to which its wholly owned subsidiary, Azinam Limited (“Azinam”), will farm out 6.25% Participating Interest in Block 3B/4B, offshore South to Africa Oil SA Corp, a wholly owned subsidiary of Africa Oil Corp. (“Africa Oil”) (the “Acquisition”). Pursuant to the terms of the LOI, the completion of the Acquisition is subject to the satisfaction of customary conditions precedent including, but not limited to, the receipt of requisite regulatory approvals from the government of South Africa and the TSX Venture Exchange (the “TSXV”).
The consideration for the Acquisition is up to US$10.5m in cash, payable conditional on certain milestones as set out below:
· US$2.5m within 30 days of signing of the LOI;
· US$2.5m upon government approval for the transfer of the 6.25% interest in Block 3B/4B to Africa Oil;
· US$4m upon the completion of targeted farm out to a third party; and
· US$1.5m upon spud of the first exploration well in Block 3B/4B
On closing of the Acquisition, which is subject, amongst other things, to Section 11 approval for the transfer from the government of South Africa, TSXV approval and customary pre-emption provisions, the Block 3B/4B interests of the JV partners in Block 3B/4B will be as follows:
· Africa Oil SA Corp, a wholly owned subsidiary of Africa Oil Corp. and the Operator of the Block, holding a 26.25% Participating Interest;
· Azinam Limited, a wholly owned subsidiary of Eco Atlantic, holding a Participating Interest of 20%; and
· Ricocure (Proprietary) Limited, holding the remaining 53.75% Participating Interest.
The JV partners continue to progress the collaborative farm-out process, as previously announced, for up to a 55% gross working interest in the Block, with various potential parties.
As announced on 21 March 2023, the application process for a permit to drill one well and one contingent well (and potentially up to five wells) within an area of interest in the north of Block 3B/4B remains underway.
Completion of previously announced acquisition of additional interest in Block 3B/4B, South Africa
Further to the Company’s announcement of 27 June 2022, the Company can confirm that it will issue 1,200,000 new common shares of no par value in the Company (“Common Shares”) to Lunn Family Trust in place of the US$500,000 cash consideration due in respect of the acquisition of the 6.25% interest in Block3B/4B from Lunn Family Trust (“Consideration Shares”). The Consideration Shares represent the full and final component of the completion consideration in respect of the acquisition announced on 27 June 2022 and there are no additional shares or cash due to the seller.
Gil Holzman, Co-Founder and Chief Executive Officer of Eco Atlantic, commented: “We are very pleased to agree this transfer of a portion of our WI on the Block to our strategic alliance partner Africa Oil. The restructure of the WI will result in Africa Oil holding 26.25% and Eco 20% and will strengthen the JV position amid ongoing negotiations with third parties to farm into the Block and execute a drilling campaign. Since Africa Oil is already established as JV partner and Operator on the Block, receipt of the requisite regulatory approval for the transfer is expected to be straight forward.
“We look forward to continuing our work with the South African government and regulatory bodies in terms of our Environmental Authorisation process and in the active exploration of Block 3B/4B. The initial cash to be received from Africa Oil will enable Eco Atlantic to fund its growth opportunities elsewhere and with no shareholders dilution, while maintaining a strategic and considerable 20% working interest in this highly prospective Block (pre farm out to a third party).”
