REG - Eco (Atlantic) O&G - Strategic Acquisition of JHI

Eco (Atlantic) Oil & GasAnnouncement

14/03/2022 07:00

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RNS Number : 5876E  Eco (Atlantic) Oil and Gas Ltd.  14 March 2022

14 March 2022

 

ECO (ATLANTIC) OIL & GAS LTD.

("Eco," "Eco Atlantic," "Company," or together with its subsidiaries, the
"Group")

 

Strategic Acquisition of JHI and its Interest in Canje Block Offshore Guyana

Further consolidating Eco's position as an exploration business of scale

 

Eco (Atlantic) Oil & Gas Ltd. (AIM: ECO, TSX ‐ V: EOG), the oil and
gas exploration company focused on the offshore Atlantic Margins, announces
today that it has signed a Commercially Binding Term Sheet to acquire 100% of
JHI Associates Inc. ("JHI"), including JHI's 17.5% Working Interest ("WI") in
the Canje Block offshore Guyana (the "Acquisition").

 

Highlights

 

·    A proposed cashless acquisition, with a value of approximately US$52
million at the Company's current share price, which would make Eco the sole
owner of JHI's cash balance and its 17.5% WI in the Canje Block

·    The Canje Block, offshore Guyana, is directly adjacent to the
prolific Stabroek Block where ExxonMobil has discovered in excess of 10
Billion Barrels of Oil

·    Eco will acquire JHI's capital balance, which is expected to be a
minimum of US$15 million upon completion of the Acquisition

·    Consideration in the form of new common shares issued to JHI's
shareholders based on an exchange ratio of 1.1994 new Eco common shares and
convertible securities leading to JHI shareholders holding approximately 34%
of Eco post Acquisition at current share count

·    The Acquisition adds to Eco's strategic acreage position in Guyana
and paves the way for further drilling activity on the Company's blocks over
the coming years

·    The Acquisition is currently expected to close in Q2 2022 subject,
inter alia, to the signing of an Arrangement Agreement and satisfactory
completion of due diligence by Eco and any requisite Government of Guyana,
Canje Block partners, and stock exchange approvals

·    On closing, JHI has the right to appoint two non-executive Directors
to Eco's eight-member Board of the enlarged Group, bringing further
exploration expertise to the Company

 

Information on the Acquisition

 

JHI is a private company incorporated in Ontario and headquartered in Toronto,
Canada.   If and once completed the Acquisition provides the enlarged Eco
Group with ownership of 17.5% PI in the Canje Block offshore Guyana. The Canje
Block is Operated by Esso Exploration & Production Guyana Limited (35%), a
subsidiary of ExxonMobil Corporation, with the remaining partners including
TotalEnergies E&P Guyana B.V. (35%), JHI Associates (BVI) Inc. (17.5%) and
Mid-Atlantic Oil & Gas Inc. (12.5%).  On closing of the Acquisition, JHI
is to have a minimum cash balance of $USD 15 million, acquired as part of the
transaction with Eco.  The Canje Block is approximately 4,800km(2), located
approximately 180 to 300 kilometers offshore Guyana in water depths ranging
between 1700 and 3000 meters.

 

The Canje Block is a large and significant license which captures the lower
slope and base of slope play fairways, channels and fans outboard of multiple
ExxonMobil discoveries in the adjacent Stabroek Block which is immediately
up-dip of Canje. Canje is covered with 6,100km(2) of 3D seismic and holds over
three dozen prospects in four proven plays in the Lower Tertiary and Upper
Cretaceous confined channels, Lower Cretaceous Carbonate structures and, with
recent drilling of Sapote-1 well and Stabroek discoveries, now offers the
opportunity of yet deeper horizons.

 

Pursuant to the Term Sheet and subject, inter alia, to the signing of a
binding Arrangement Agreement and completion of the Acquisition, Eco Atlantic
will issue to JHI's shareholders, along with the holders of any JHI options
and warrants, such number of new common shares in Eco that at the above-stated
exchange ratio and current share count (post the issue of the Azinam Group
Limited acquisition consideration shares) will provide JHI's shareholders with
34.1% of Eco's issued share capital as enlarged by such issue ("Enlarged Share
Capital"), or approximately 127 million new common shares of Eco, providing
for a cashless acquisition, with a value of approximately US$52 million at the
Company's current share price, to become the sole owner of JHI's cash balance
and its 17.5% PI in the Canje Block. The Term Sheet provides Eco with a 90-day
exclusivity period and terminates, or may be terminated, upon the occurrence
of certain events.

 

Completion of the Acquisition ("Completion") is subject, inter alia, to the
signing of an Arrangement Agreement and satisfactory completion of due
diligence by Eco and any requisite approvals from the Government of Guyana,
the Canje Block partners, and the TSX Venture and AIM exchanges.  In
addition, certain shareholders of JHI will enter into a lock-up agreements to
restrict the sale of the consideration shares.

 

As of 31 December 2021, JHI's audited financial statements provides that it
had total gross assets of approximately US$30.7 million, of which
approximately US$19.7 million is cash and cash equivalents and US$3.5 million
is the book value of its interest in the Canje Block. These financial
statements also provide that JHI had total liabilities to third parties of
approximately US$500,000.

 

A further announcement will be issued on the execution of the binding
Arrangement Agreement.

 

John Cullen, Founder and CEO of JHI commented:

 

"This transaction provides JHI's shareholders access to Eco's exciting
portfolio of exploration opportunities in the emerging oil basins of Namibia
and South Africa, and in Guyana with their Orinduik block, while maintaining
their exposure to the Canje Block, where we have been working steadily with
our partners to identify the next prospect to drill.  It also represents the
culmination of a tremendous amount of work from JHI's technical team which,
over the last six years, saw two supermajors join the Canje Block, and three
wells drilled providing valuable information towards unlocking the potential
of the deeper water portions of the Guyana-Suriname Basin.

 

"JHI's team has come to work well with Eco's team since they became
shareholders last year, and we know that they will continue to be good
stewards of the Canje Block as they add it into their impressive and expanding
exploration portfolio."

 

Gil Holzman, Co-Founder and CEO of Eco Atlantic commented:

 

"Being a shareholder of JHI since last year has given us a deep understanding
of the Canje Block and its prospectivity. It has also given us the opportunity
to get to know the great management team at JHI and their technical and
business achievements to date.  Because of these facts, we believe that there
is considerable strategic rationale in acquiring JHI. Eco's ambition is to
become the "go-to" small-cap exploration vehicle for investors seeking
exposure to high-impact drilling programs in three of the world's most
exciting hydrocarbon provinces in Guyana, Namibia and South Africa. This
acquisition gets us another step closer to that goal and builds on the Azinam
acquisition we announced earlier this year.

 

"This transaction adds to Eco's strategic acreage position in Guyana and
ensures that there will be a number of drilling catalysts over the next couple
of years on Eco's eight offshore blocks. In addition, the enlarged Group will
benefit from JHI's current cash position, adding US$15million to Eco's balance
sheet, further strengthening the Company's liquidity position.

 

Given Eco's strategic investor base and proven access to the public capital
markets, the anticipated addition of JHI's interest in the Canje Block and its
working capital, will further augment the enlarged Group cash position for its
share of all near term exploration programs on its current blocks including:
2B in South Africa where drilling preparations for a late Q3 spud are underway
and the Eco Orinduik Block offshore Guyana to follow, Block 3B/4B in Orange
basin South Africa and elsewhere in the current and future portfolio of the
enlarged entity.

 

"Ahead of our planned drilling campaign on Block 2B offshore South Africa in
late Q3 2022, we are also looking to finalise drilling targets in Eco's
Orinduik Block, offshore Guyana. Demonstrating that, as ever, the Eco team are
head down and focused on delivering value for shareholders. We look forward to
providing further corporate updates as appropriate."

 

**ENDS**

 

For more information, please visit www.ecooilandgas.com or contact the
following:

 

 Eco Atlantic Oil and Gas                                   c/o Celicourt +44 (0) 20 8434 2754
 Gil Holzman, CEO

 Colin Kinley, COO

 Alice Carroll, Head of Marketing and IR                    +44(0)781 729 5070 | +1 (416) 318 8272
 Strand Hanson Limited (Financial & Nominated Adviser)

                                                            +44 (0) 20 7409 3494
 James Harris

 James Bellman

 Berenberg (Broker)                                         +44 (0) 20 3207 7800
 Emily Morris

 Detlir Elezi

 Celicourt (PR)                                             +44 (0) 20 8434 2754
 Mark Antelme

 Jimmy Lea
 Hannam & Partners (Research Advisor)
 Neil Passmore                                              +44 (0) 20 7905 8500

The information contained within this announcement is deemed by the Company to
constitute inside information as stipulated under the Market Abuse Regulation
(EU) No. 596/2014 as it forms part of United Kingdom domestic law by virtue of
the European Union (Withdrawal) Act 2018 (as amended).

 

About JHI and the Canje Block:

JHI's assets include cash and a 17.5% non-operated participating interest in
the Canje Block located offshore Guyana.  The ~4,800 km2 Canje Block is
operated by ExxonMobil and ranges from 1700-3000m in water depth.

The Canje Block lies 180km offshore Guyana in deep to ultra-deep water.
Canje's environment of deposition is unique among offshore Guyana blocks in
that it contains both continental slope and basin floor terrain. The majority
of the discoveries offshore Guyana to date have been made in the slope
environment. Canje will be the first block offshore to test prospects on the
basin floor - which have the potential to contain larger accumulations of
recoverable hydrocarbons.

Canje's source story is also unique in that it is blanketed by two world-class
source rocks. Present across the Guyana-Suriname Basin is the
Cenomanian/Turonian source, which is locally known as the "Canje source rock."
This source has been actively generating hydrocarbons for ~6 million years.
The Canje Block is also covered by a much thicker and older Lower Albian
source rock which was in place and generating hydrocarbons for over 40 million
years.

The proximity to these world-class source rocks means that reservoirs on the
Canje block are in direct contact with the source and are charged through
vertical migration. Effectively, Canje's reservoirs are filled first before
hydrocarbons migrate up-dip to other blocks.

About Eco Atlantic:

 

Eco Atlantic is a TSX-V and AIM quoted Atlantic Margin focused oil & gas
exploration company with offshore license interests in Guyana, Namibia, and
South Africa. Eco aims to deliver material value for its stakeholders through
its role in the energy transition to explore for low carbon intensity oil and
gas in stable emerging markets close to infrastructure.

 

Offshore Guyana in the proven Guyana-Suriname Basin, the Company holds a 15%
Working Interest in the 1,800 km(2) Orinduik Block Operated by Tullow Oil.
In Namibia, the Company holds Operatorship and an 85% Working Interests in
four offshore Petroleum Licences: PEL's: 97, 98, 99 and 100 representing a
combined area of 28,593 km(2) in the Walvis Basin.

 

Offshore South Africa, Eco will become designated Operator and hold a 50%
working interest in Block 2B, and a 20% Working Interest in Blocks 3B/4B
operated by Africa Oil Corp., totalling some 20,643 km(2).

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