Africa Energy dissolves Pancontinental farmout deal in offshore oil block
Africa Energy, a Toronto-listed oil and gas exploration company is backing out of a 10% stake in an offshore Namibian oil block after completing a due diligence.
Africa Energy said last week that it exercised its right to terminate the agreement as a result of due diligence procedures performed by the company, which identified discrepancies in respect of certain agreed commercial terms of the transaction. The 10% stake would have been in PEL 37, an offshore oil exploration block close to the Angolan border.
Late in 2016, the acquisition was first announced by an upbeat Africa Energy but prospects soon turned out to be not what the oil explorer expected.
“I’m very pleased to announce our acquisition of a 10% fully carried interest in PEL 37, offshore Namibia,” said James Phillips, president and CEO of Africa Energy on 29 November 2016 when the agreement with Pancontinental Oil & Gas N.L was entered into.
Since the deal was not completed, Pancontinental still holds a 30% equity interest in PEL 37. The other partners in the PEL 37 are Tullow Oil with 65% interest and the operatorship and Paragon Oil & Gas with the remaining 5%.
Under the November 2016 agreement, Africa Energy would pay Pancontinental US$1.7 million at the close of the farmout agreement, and an additional US$4.8 million upon spud of the first exploration well.
Pancontinental said that Africa Energy reached out to the company on 16 January 2017, wanting to restructure the agreement. However, since the duo failed to conclude a mutually satisfactory revised agreement within the given period for negotiation, the farmout agreement has lapsed.
The Canadian oil and gas exploration company also holds a 90% participating interest in block 2B, offshore South Africa, and is actively building an exploration portfolio in Africa.
The speculated block is made up of a series of extensive base of slope fan prospects which Pancontinental sees as holding significant potential. The slope directly overlie a mature oil-prone source rock of Aptian age, which was recently proven by the 2013 Murombe-1 and Wingat-1 wells in which the latter well recovered light oil.
Africa Energy’s technical team has experience in these West African Cretaceous slopes and was looking forward to the drilling of a similar well.” Phillips said in November last year.
Under the terms of the agreement and similar to the terms of Pancontinental’s participating interest, Africa Energy’s share of all joint venture costs, including the drilling of the first exploration well on PEL 37, was supposed to be carried through the current exploration period by a joint venture partner.