‘Maersk’ and ‘Africa Oil’ agree to Co-Own Onshore exploration Licenses in Kenya and Ethiopia

rigDanish Oil giant Maersk Oil has entered a farm-out agreement with Canadian based Africa Oil Corporation to acquire 50 percent stake in three of the latter’s onshore exploration licences in Kenya and a further two in Ethiopia.

The exploration areas in question cover the Turkana region of northern Kenya and southern Ethiopia.

According to a statement by Maersk, The licences cover an area of ca. 100,000 square kilometres and include eight recent oil discoveries, with ongoing exploration and appraisal activities. Four of the blocks are operated by Tullow Oil and the remaining by Africa Oil Corporation.

Africa Oil corporations says under the terms of the farm-out agreement, upon closing of the transaction Maersk will pay Africa Oil US$350 million as reimbursement for approximately 50% of past costs incurred by Africa Oil prior to the agreed March 31, 2015 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 US$75 million of the Company’s share of development expenditures upon confirmation of resources and US$15 million of the Company’s share of exploration expenditures.

The agreement further stipulates in Final Investment Decision (“FID”), Maersk will also carry up to US$405 million of Africa Oil’s working interest share of development expenditures for the Lokichar Development Project.

Africa Oil Corporation said 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.

Maersk Chief Executive officer Jakob Thomasen said in a statement that the firm-out with Africa Oil corp signals the companies commitment to pursue profitable business ventures as a way of extending company presence across the world.

“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,” Thomasen he said

Meanwhile Africa oil corporation looks at the transaction as a major opportunity that will bring solutions to the technology and financial challenges to the the companies projects in both Kenya and Tanzania.

“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,” Africa Oil’s CEO Keith Hill said

Hill also added that Maersk’s 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.

He said the 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.” he said

Find Transaction Summary in Africa Oil Corporation Statement below;

Farm Out Release (Africa Oil Corp)

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