The somewhat clumsily titled oil explorer Eco (Atlantic) Oil & Gas (ECO:AIM) is up 12.5% on its 16p issue price at 18p as it makes its debut on AIM.
OVERSUBSCRIBED PLACING
Already listed in Toronto, the company raised £5.1m in an oversubscribed placing ahead of joining London’s junior market.
The funds will help meet its share of the costs of a 3D seismic survey on its 1,800 kilometre Orinduik block offshore Guyana in partnership with Tullow Oil (TLW). Eco has 40% and Tullow 60%.
Guyana is an increasingly sought after postcode in exploration terms after ExxonMobil (XOM:NYSE) made two substantial discoveries: Liza and Payara. Liza, in particular, is estimated to contain recoverable resources of up to 1.4bn barrels of oil equivalent.
Orinduik is adjacent to these finds and Eco’s chief executive Gil Holzman tells Shares the company is ‘being hassled, people are knocking on the door to take a piece of the asset’.
The company hopes to be drill-ready by the end of 2017, Holzman adds that because the asset is located in shallow water the costs of drilling a well at current rates might be as little as $30m.
FARM OUT STRATEGY
The strategy has been to farm out interests to reduce exposure to costs. Holzman notes the company has allocated CDN$30m to exploration to date, despite ‘keeping its share structure pretty tight’ with only CDN$9m raised through equity. The remainder is accounted for by carries linked to farm out agreements.
He says its choice of funding for any Guyanese well will depend on whether it faces more dilution at the equity level through a placing or at the asset level through a farm out deal.
He dismisses fears Tullow might shy away from investing in this exploration effort despite its mounting debts (it reported today these widened 19% in 2016 to $4.8bn) given the relatively modest costs involved and its bullishness about the block.
The company is also partnered with Tullow offshore Namibia, as well as private firm Azimuth, and is in the process of applying for drilling permits. For now, though, the main focus appears to be on Guyana.
Holzman concludes that his ‘highly experienced technical team’ will continue to look for exploration opportunities where it can duplicate its current strategy.
