Africa Oil Corp., Vancouver, BC, updated its progress on several farmout agreements in East Africa.
Marathon Oil Corp. will acquire the rights to obtain an interest from Africa Oil in two exploratory blocks in Kenya. Marathon will acquire a 50% interest in Block 9 and a 15% interest in Block 12A.
Africa Oil will remain operator of Block 9, and Marathon has the right to assume operatorship if a commercial discovery is made. Africa Oil and Marathon have agreed to jointly explore Ethiopia. The transactions are subject to host country government approvals.
The resulting interest in the Kenyan exploration blocks upon approvals and subsequent closing of the Marathon farmout, together with the completion of a separate farmout transaction with Tullow Oil PLC will be on Block 9 Africa Oil and Marathon 50-50 and on Block 12A Tullow 65%, Africa Oil 20%, and Marathon 15%. The net working interests are subject to back-n rights or carried working interests, if any.
Marathon will pay Africa Oil a $35 million entry payment that includes prior expenditures and has agreed to fund Africa Oil’s working interest share of future joint venture expenditures anticipated to be spent over the next 3 years up to a maximum of $43.5 million.
Africa Oil said the consideration to be received from Marathon “will allow us to both accelerate the exploration in the blocks that Marathon Oil is farming into as well as provide additional funding to the company for the accelerated exploration program on the Tertiary rift trend being executed in partnership with Tullow Oil.”
Meanwhile, Africa Oil completed an additional farmout with Tullow. Under the Tullow farmout, approved by the government, Tullow paid Africa Oil $759,000 in consideration of past costs to acquire a further 15% interest in Block 12A in Kenya.
Tullow will also fund Africa Oil’s working interest share of costs related to the acquisition of 520 line-km of 2D seismic until an expenditure cap of $3.1 million net to Africa Oil has been met, following which Africa Oil will be responsible for its working interest share of seismic acquisition costs. Tullow previously acquired a 50% interest in and operatorship of Block 12A in a transaction that was completed in February 2011.
Africa Oil also signed a definitive agreement with New Age (Africa Global Energy) Ltd. under which New Age will acquire a further 25% interest in Africa Oil’s Blocks 7 and 8 in Ethiopia, together with operatorship of Blocks 7 and 8 and the Adigala area. New Age will pay to Africa Oil $1.5 million in consideration of past costs. Following the completion of the New Age farmout transaction, the resulting interest in Blocks 7 and 8 will be Africa Oil 30%, Afren PLC 30%, and New Age 40%.
The transfer of operatorship will occur on completion of the acquisition of the Blocks 7 and 8 interest by New Age. This transaction is also subject to host government approvals, the waiver of preemption rights by Africa Oil's partners, and applicable regulatory requirements.