Canadian junior lures Total SA into Exxon’s offshore Guyana hotbed
(FinancialPress)— Guyana’s offshore oil field produced one of the largest discoveries of the last decade, and has been making ExxonMobil (NYSE:XOM) look good ever since. So good, that France’s petro-giant Total SA (OTC:TTFNF) has taken notice, and has joined the fray.
Through an option agreement announced earlier today, Total signed a deal with Canadian junior explorer Eco (Atlantic) Oil & Gas (OTC:ECAOF)(TSX.V:EOG) to acquire a 25% stake in Guyana’s offshore Orinduik Block.
The deal also brings together Total with fellow major Tullow Oil (OTC:TUWLF) that owns a majority stake in the block.
As per the terms of the deal, Total is still just dipping a toe, by agreeing to pay Eco Atlantic $1 million for an option to buy a 25% stake. Going forward, Total now has the option to acquire the quarter stake for an additional $12.5 million, following further analysis of recently collected 3D seismic data.
“In the event that the option is exercised by Total, the deal proceeds will recoup all our expenses on the expanded 3D program and fund us for drilling a minimum of two wells based on current well costs,” said Gil Holzman, President and CEO of Eco Atlantic.
Should Total go forward with the acquisition, Eco Atlantic’s interests in Orinduik fall to 15%, while Tullow would maintain its 60% stake, along with its status as the block’s operator.
The region, while still very under developed, has caught the oil industry by storm since ExxonMobil announced its massive Liza discovery in 2015. That discovery was made inside the Stabroek Block, where estimates peg there are 2.25-2.75 billion barrels of oil in play.
While the rest of the oil industry has been scrimping on its cash expenditures, Liza gave ExxonMobil and its partners enough incentive to go ahead and develop the Liza discovery to the tune of $4.4 billion.
So far the news of the deal has caused a disconnect between Eco Atlantic’s North American and European markets. Shares on London’s AIM exchange for the company traded up nearly 9.5%, while the company’s TSX-Venture shares traded high volume, while dipping a penny from $0.30 to $0.29.
Meanwhile, Tullow’s shares on the OTC are 6.5% on the day, and Total’s are up 2.8%.
Analysts at Jefferies made a note regarding what they perceive as Total’s cautionary measures on the deal, stating: “It is of course positive to see a company such as Total show interest in this exploration license but the manner of the agreement, as an option, shows a certain degree of to-be-educated geological caution on the part of Total.”
The agreement comes just three weeks after Eco Atlantic and Tullow completed their 2,500km2 3D seismic survey on the block. Processing of the data is due later this fa