Erin Energy entered a definitive farmout agreement that will see FAR Ltd. acquire 80% interest and operatorship of Erin Energy’s offshore A2 and A5 blocks in The Gambia, West Africa. Erin Energy will retain a 20% working interest in both blocks.
Under the terms of the farmout agreement, which is subject to approval by the government of the Republic of The Gambia, upon closing of the transaction, FAR will pay Erin Energy a purchase price of US$5.18 million and will carry $8 million of Erin Energy’s share of costs in a planned exploration well to be drilled in late 2018. In addition, if Erin Energy’s share of the exploration well is less than $8 million, the balance is to be paid in cash to Erin Energy.
The A2 and A5 blocks cover an area of approximately 2683sq km (663,000 acres) within the emerging and prolific Mauritania-Senegal-Guinea-Bissau Basin and lie approximately 30km offshore in water depths of 50-1200m (164-3900ft).
Blocks A2 and A5 are adjacent and on trend with FAR’s 2014 SNE-1 oil field discovery, which was the industry’s largest offshore oil discovery that year, says Erin Energy. Since the drilling of the SNE-1 well, FAR has drilled five successful appraisal wells on the SNE field and increased the field’s best case 2C contingent recoverable oil resource to 641 MMbbl on a 100% basis, according to FAR internal estimates.
In 2017, Erin Energy and FAR plan to undertake reprocessing and interpretation of 3D seismic data recently acquired by Erin Energy to further mature identified prospects on Blocks A2 and A5. Erin Energy acquired 1504sq km of modern 3-D seismic data and has identified prospects on the blocks, which are similar to the “shelf edge” play FAR is targeting in its offshore Senegal blocks.
“This partnership will allow us to keep a significant stake in these highly-prospective blocks with no additional capital investment required through the first exploration well, while also strengthening the balance sheet and allowing us the ability to consider additional growth opportunities. This farmout highlights our strategy of maximizing our exploration breadth while minimizing exploration risk,” says Jean-Michel Malek, Erin Energy interim CEO.