Marathon Oil deal highlights Kenya’s status as exploration hot spotReported by Proactive Investors on Tuesday, 24 July 2012 (on July 24, 2012)
News of Marathon Oil’s (NYSE:MRO) entry to the Kenyan oil play provides a further signal that Kenya and East Africa is fast becoming a hot spot for onshore exploration.
It was announced today that Marathon is buying a 15 per cent stake in Tullow Oil’s Block 12A through a deal with venture partner, Africa Oil (CVE:AOI).
The block is located immediately south of Block 10BB, where Tullow’s Ngamia well struck Kenya’s first significant oil discovery earlier this year.
Marathon is paying US$35 million to acquire the stake, and it will pay US$43.5 million of Africa Oil’s future costs too. It also gets a 50 per cent stake in Kenyan Block 9 as part of the deal. This area is located further east and spans 30,000 square kilometres.
Separately, Tullow also topped up its stake in 2A as a result of an existing farm-out deal, agreed with Africa Oil last February. Tullow is acquiring 15 per cent for US$750,000 and the purchase of seismic exploration data worth US$3.1 million.
Going forward, Block 12A will be explored by the three parties with Tullow owning 65 per cent, while Africa Oil and Marathon own 20 and 15 per cent respectively. And Block 9 will be a jointly owned venture between Africa Oil and Marathon.
Africa Oil chief Keith Hill this morning said that East Africa is rapidly becoming the most prospective oil and gas province in the world.
This view was echoed today by Dublin-based broker Davy. And according to analyst Job Langbroek, Kenyan oil projects are now attracting a new wave of industry interest.
“It [the Marathon deal] provides further mainstream validation of onshore African oil plays,” he said in a note to clients.
Langbroek says this new wave of interest is being facilitated by the de-risking that comes with ongoing exploration successes and also the needs of smaller companies, which require spending commitments for future exploration.
Tullow’s Ngamia discovery in March was a breakthrough for Kenyan oil exploration, a point reflected by the fanfare that accompanied the strike – Kenya’s President personally declared the discovery to the public.
And it has since been reported that the government would play its part in promoting Kenya’s nascent oil industry with tax breaks on offer for oil firms that invest in the country.
Understandably, Kenya is increasingly being seen as an ‘up and coming’ destination for explorers.
And today’s latest development will be followed closely by investors with interests in other explorers that have already staked acreage in Kenya.
London-listed Afren is partnered with Tullow in Block 10A, to the north of Ngamia. It also has a stake in Block 01 in Kenya’s north east, as well as two coastal blocks in the country’s south east.
The Marathon deal may also be of interest to investors in Toronto-quoted Simba Energy (CVE:SMB) as it owns 100 per cent of Block 2A, located immediately east of Block 9 – now jointly owned by Marathon and Africa Oil.
Last month Simba unveiled a new independent assessment of Block 2A, which estimated the area could potentially contain as much as 1.9 billion barrels of oil.
Simba’s next step will involve further seismic exploration to further delineate targets ahead of a future drill programme.
Analysts have previously said that Simba would be a position to attract a major farm-in partner to help fund a wider exploration programme by the end of this year.
Links: Full news story
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