Billionaire aims for South Africa prize as Azinam closes farm-out

Azinam Limited and Panoro Energy have received governmental approval and closed the previously announced farm-out agreement on Block 2B offshore South Africa with Africa Energy.

Illustration; Source: Azinam

In 2020, Panoro and Azinam signed farm-out agreements with a subsidiary of Africa Energy Corporation, which is part of the Lundin Group.

Africa Energy on Monday announced the completion of a farm-out with the two companies whereby Azinam Limited will take a 50 per cent share and operatorship in Block 2B while Panoro will acquire a 12.5 per cent stake.

Azinam is a private Southern Africa-focused oil and gas exploration company supported by Seapulse, a vehicle backed by American/Canadian billionaire Robert Friedland and energy investment group Seacrest Capital Group.

Africa Energy’s aggregate 62.5 per cent participating interest in the exploration right for Block 2B was transferred in consideration for a carry through the next exploration well, Gazania-1, which is expected to spud by the end of 2021 and the rig tender process is already underway.

In consideration for the assignment of this interest, Azinam paid Africa Energy $0.8 million at closing, which includes reimbursement of costs incurred before completion. Also, Azinam will pay a disproportionate amount of the Gazania-1 exploration well and other joint venture costs. To support this obligation, Azinam paid a second $1.5 million deposit to Africa Energy at close and is required to place additional funds in escrow prior to signing a rig contract.

Panoro will carry the Africa Energy’s subsidiary for up to $2.5 million of the well cost. The company’s funding of costs is subject to the escrow funds being deposited by Azinam.

The two agreements reduce Africa Energy’s stake in Block 2B from 90 per cent to 27.5 per cent. Crown Energy indirectly holds the remaining 10 per cent participating interest.

John Hamilton, CEO of Panoro, said: “Following our recently announced successful entry into Equatorial Guinea, we are pleased to now be adding a further country into our growing portfolio of African E&P assets.

Block 2B represents a compelling exploration opportunity for Panoro, in a country with exciting world-class oil and gas discoveries.

The Gazania-1 well is an exploration prospect updip of an existing oil discovery with material potential upside. We look forward to drilling this well with our partners, Africa Energy and Azinam, by the end of the year”.

Garrett Soden, Africa Energy’s president and CEO, stated: “We are excited to partner with Azinam and Panoro on Block 2B to drill the Gazania-1 exploration well this year. Block 2B has the A-J1 oil discovery from 1988 in shallow water close to shore with significant contingent and prospective resources.

Gazania will target a relatively low-risk rift basin oil play up-dip from the discovery. IHS Markit recently highlighted Gazania as one of the top high-impact wells expected to be drilled globally in 2021.

We have already started the rig contracting process, and we look forward to proving up more resource offshore South Africa”.

As for the block, Block 2B is located in the Orange Basin and covers 3,062 square kilometres off the west coast of South Africa, some 300 kilometres north of Cape Town with water depths ranging from 50 to 200 meters.

Location of Block 2B; Source: Azinam

Oil was discovered and tested by Soekor in the A-J1 borehole drilled in 1988. Thick reservoir sandstones were intersected between 2,985 meters and 3,350 meters. The well was tested and flowed 191 barrels of oil per day of 36-degree API oil from a 10-meter sandstone interval at about 3,250 meters.

Significant prospectivity has been identified over the entire A-J graben area using 686 square kilometres of 3D seismic data from 2013.

Block 2B contains the A-J graben, a typical rift basin, similar to others in which major oil accumulations have been discovered in Africa.

Using more recent 3D seismic data, significant upside potential has been identified in six prospect areas at depths of up to 1,000 metres shallower than the original well. The next proposed exploration well, Gazania-1, will be drilled into the Gazania and Namaqualand prospects identified on 3D seismic data.