(Reuters) - France’s Total has agreed to pay $1 million for an option to buy a 25 percent stake in an oil exploration block offshore Guyana, its first foray into an area close to where ExxonMobil made one of the largest discoveries of the last decade.
Eco Atlantic Oil & Gas, a small Canadian exploration company which earlier this year listed on London’s junior AIM market, said on Tuesday Total now had the option to acquire the stake in the Orinduik Block for another $12.5 million following the 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.
If Total proceeds with the deal, Eco Atlantic’s interest in Orinduik will fall to 15 percent, while partner Tullow Oil maintains a 60 percent stake and the block’s operatorship.
Tullow Oil declined to comment and Total was not immediately available for comment.
Eco Atlantic’s London shares were up 9.5 percent at 1057 GMT and traded up to 19.5 pence, the highest in more than five months. Tullow’s shares traded 2.1 percent higher, while Total was down 0.3 percent.
“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,” said analysts at Jefferies.
The waters offshore Guyana and Suriname have been a hotbed for oil and gas exploration since ExxonMobil made its huge Liza discovery in 2015, part of the Stabroek Block where it estimates lay 2.25-2.75 billion barrels of oil.
In June, ExxonMobil and its partners gave the go-ahead for the $4.4 billion development of Liza, one of a handful of mega-projects approved at a time when the oil industry remains in cash saving mode.
Reporting by Karolin Schaps; Additional reporting by Bate Felix in Paris; Editing by Mark Potter