Eco snaps up Tullow’s stake and operatorship in block off Guyana
UK-headquartered oil and gas company Tullow Oil has set the wheels in motion to sell its entire interest in Tullow Guyana (TGBV), which includes the Orinduik licence, to Eco Guyana Oil and Gas (Barbados) Limited, a subsidiary of Eco (Atlantic) Oil & Gas, in exchange for a combination of upfront cash and contingent consideration.
Tullow’s decision to exit the Orinduik licence, where the firm holds a 60 per cent operated interest, is in line with its strategy to focus on its high-return production assets in Africa and infrastructure-led exploration around producing hubs. It also delivers the firm’s objective to unlock value in emerging basins. In line with its strategy, the company gained approval in Gabon for the extension of several of its licences to 2046.
While the UK player drilled two exploration wells on the Orinduik Block in 2019, which yielded uncommercial oil discoveries, the firm still recognises the material oil resource potential remaining in the Orinduik licence and as such, the terms of the transaction allow it to retain exposure to any potential future success in the region.
As the company signed a sale and purchase agreement (SPA) with Eco for the transfer of its entire interest in the Orinduik licence, the transaction is expected to complete in the second half of 2023, subject to the satisfaction of certain market standard conditions precedent, including government and JV approvals.
On 31 December 2022, the gross asset value attributable to the transferred interests amounted to $1.5 million as per the audited TGBV financial statements. As of 31 December 2022, the gross 2C resource attributable to this amounted to 47.7 mmbbls. Tullow will receive a $700,000 cash payment upon transfer of its 60 per cent equity and operatorship of the Orinduik licence to Eco.
However, contingent consideration will be payable to the UK firm in line with a series of potential future milestones, entailing a $4 million payment in the event of a commercial discovery, a $10 million payment upon the issuance of a production licence from the government of Guyana, and royalty payments on future production – 1.75 per cent of the 60 per cent working interest entitlement revenue net of capital expenditure and lifting costs.
Jean-Medard Madama, Tullow’s Director Exploration, Non-Operated Assets and Decommissioning, commented: “This transaction is in line with our strategy to optimise our portfolio through opportunities to unlock value from our emerging basin licences, whilst focusing our capital expenditure on our high return producing assets and growth opportunities around existing infrastructure.”
What does Eco say about this deal?
While confirming this deal, Eco explains that it is in line with its strategy to deliver material value for its stakeholders through early entry and exploring for hydrocarbons in some of the most prolific petroleum basins in the world. The company, via its wholly owned subsidiary Eco (Atlantic) Guyana, currently holds a 15 per cent working interest in the Orinduik Block.
Gil Holzman, President and Chief Executive Officer of Eco Atlantic, remarked: “We are delighted to have reached this agreement with Tullow and to be able to begin to unlock the Orinduik Block’s full potential. Since 2014, we have believed in the potential of this block, with our initial two wells in 2019 proving two different oil plays.
“We will proactively engage in a farm-out process for this highly prospective license and begin preparations to drill a well testing the cretaceous, where all light oil discoveries have been made in the adjacent Stabroek Block.”
Upon completion, Eco, as operator and majority interest holder in the Orinduik Block, will hold a 75 per cent interest and intends to drive the exploration process and focus on its strategy to attract new partners to join the license and proactively engage in drilling. The company’s JV partner in the Orinduik license will be TOQAP Guyana with the remaining 25 per cent stake.
Colin Kinley, Co-founder and Chief Operating Officer of Eco Atlantic, stated: “The Orinduik Block sits on the series of continental shelves leading into the basin. This rich and prolific basin is clean sand filled and sealed nicely to trap the massive volumes of oil found thus far. Following ten years of basin evaluation and research, we have a solid and highly experienced team to take over the operatorship role.
“We will start by targeting stacked pay opportunities we see in the cretaceous and look forward to continuing our aggressive approach to discovery. We see an opportunity in the multi-hundred millions of recoverable range and now is the time to drill our targets.”
The Orinduik Block is situated in shallow water (70 – 1,400 m), 170 km offshore Guyana and is located 11 km up-dip from ExxonMobil’s Liza discovery and 6 km up-dip from Hammerhead discovery on the Stabroek Block.
Eco was hard at work last year to expand its portfolio. As a result, the company secured all the required approvals for the acquisition of an additional interest in a block located offshore South Africa, south of recent discoveries made by oil majors Shell and TotalEnergies off Namibia.