Petroleum Africa
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Tuesday, November 10, 2015
Africa Oil Corp. lessened its financial burden for the development of resources discovered in East Africa. The company farmed out half of its stakes in five different assets in Kenya and Ethiopia to Maersk Oil & Gas. The Danish firm acquired 50% of Africa Oil’s interests in Blocks 10BB, 13T and 10BA in Kenya and the Rift Basin and South Omo Blocks in Ethiopia in consideration for reimbursement of a portion of Africa Oil’s past costs and a future carry on certain exploration and development costs.
Under the terms of the farm-out agreement, upon closing of the transaction Maersk will pay Africa Oil $350 million as reimbursement for approximately 50% of past costs incurred by Africa Oil prior to the agreed March 31 effective date. Maersk will also reimburse Africa Oil for its acquired working interest share of costs incurred between the effective date and the closing date.
Commencing on the effective date, Maersk will also carry up to $75 million of Africa Oil’s share of development expenditures upon confirmation of resources and $15 million of the company’s share of exploration expenditures. In addition, upon FID, Maersk will also carry up to $405 million of Africa Oil’s working interest share of development expenditures for the Lokichar Development Project. The total carry amount will depend on the Lokichar Development Project meeting certain thresholds of resource growth, and the timing of first oil.
The transaction is subject to host government and applicable regulatory approvals.
Keith Hill, Africa Oil’s CEO, commented, “We are delighted to have attracted a partner of the stature of Maersk Oil into our East Africa venture. We believe they bring significant technical, financial and infrastructure development capabilities at a critical time when the Lokichar Development and related pipeline projects are moving towards sanction. Their parent company’s standing as the world’s leading logistical and transportation company will provide benefits not only to the project but to the host countries as well. This transaction allows Africa Oil to keep a significant stake in the project with no additional equity financing expected prior to first oil. The resulting strength of Africa Oil’s balance sheet will allow it to consider additional growth opportunities in this highly attractive acquisition and divestiture market.”
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