Maersk Oil to Acquire 50% of Africa Oil's Interests in Kenya, Ethiopia
Maersk Oil & Gas will acquire 50 percent of Africa Oil Corp’s interests in blocks 10BB, 13T and 10BA in Kenya and the Rift Basin and South Omo blocks in Ethiopia in exchange for the 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 percent 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 the Final Investment Decision (FID), Maersk will also carry up to $405 million of Africa Oil's working interest share of development expenditures for the Lokichar Development Project in Kenya.
When the deal is complete, blocks 10BB, 13T, 10BA in Kenya and the Rift Basin block in Ethiopia will all be owned 25 percent by Africa Oil, 25 percent by Maersk and 50 percent by Tullow. The South Omo block in Ethiopia will be owned 15 percent by Africa Oil, 15 percent by Maersk and 50 percent by Tullow.
Commenting on the farm-out agreement, Keith Hill, Africa Oil's CEO, said in a company statement:
"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.
"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."
Maersk Oil CEO Jakob Thomasen commented in a Maersk Oil Statement:
“Maersk Oil is committed to pursuing profitable growth by focusing on expanding within our core geographies. In addition we are rebuilding the exploration business with new acreage positions and pre-development discoveries to balance the risk profile in our portfolio. This agreement with Africa Oil is an example of this.
“As part of the Maersk Group, we are in a position, where we can take advantage of opportunities arising in current market conditions. This investment adds to an already attractive non-operated onshore portfolio for Maersk Oil that includes our 25 year presence in Algeria. This is an important driver of long term value.”
Oil and gas industry analysts at Jefferies International Limited stated that this deal was a “positive” development, which marked “the first major farm-in event to this acreage since September 2010”. Analysts at First Energy Capital echoed Jefferies’ comments, stating that the market reaction to this deal was “very positive” and that the agreement was a “big vote of confidence on the quality and materiality of these assets that have been plagued by uncertainty”.
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