Petroleum Africa
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Monday, December 21, 2015
Africa Energy Corp. executed three definitive agreements as part of its new corporate strategy that will result in it holding a 90% working interest and operatorship of Block 2B offshore South Africa. One of the sale and purchase agreements is with Afren’s administrators and certain subsidiaries of the company which has it acquiring a 25% participating interest in Block 2B for a cash consideration of $1 million.
The second definitive agreement has Africa Energy acquiring all shares of Thombo Petroleum, who also holds a stake in Block 2B. The acquisition will give the company another 34.5% stake in the block for a cash consideration of $2 million, plus the issuance of 14.8 million new common shares of the company. Under the Thombo acquisition the company has also agreed to issue up to an additional 20 million common shares of Africa Energy and, at the option of the company, to either pay and/or issue up to $1.5 million in additional contingent cash and/or shares of Africa Energy, both payable on milestones associated with the commercialization of Block 2B.
The third definitive agreement revolves around a farm-in agreement with Crown Energy for a 30.5% participating interest in Block 2B, bringing its total interest in the block to 90%. The company will reimburse Crown for $0.3 million of net back costs and will fund costs for Crown’s remaining 10% participating interest associated with the drilling and testing of the next well in Block 2B.
Completion of each of these transactions is subject to receipt of all requisite government and other regulatory approvals, third party consents, and waiver of pre-emptive rights.
In order to finance these transactions the company agreed to sell on a non-brokered, private placement basis, an aggregate of up to 115,041,666 common shares of the company at a price of CDN $0.06 (US$0.0435 and ZAR 0.6552 equivalent) per share for gross proceeds of approximately $5 million. Net proceeds of the private placement will be used towards the company’s acquisition costs for the three South African acquisitions and related exploration activities, as well as for general working capital purposes.
Block 2B is an under explored, shallow water area off the west coast of South Africa containing a proven hydrocarbon-bearing rift basin. A well drilled by South African state company Soekor in the 1980s discovered and tested oil from a Cretaceous sandstone section but there has been limited exploration since then. Block 2B contains numerous prospects identified recently by 3D seismic and limited work is now required to recommence drilling activities in the area.
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