Canadian oil and gas explorer Sintana Energy plans to expand in Namibia’s Walvis Basin

Canadian oil and gas explorer Sintana Energy (TSXV/AIM:SEI, OTCQX:SEUSF) has entered into a Letter of Intent (LOI) with Namibia-based Paragon Oil & Gas, giving it exclusive rights for a limited period to assess a potential investment that would grant Sintana an indirect interest in Petroleum Exploration Licence 37 (PEL 37) in the Walvis Basin, offshore Namibia.

PEL 37 is currently operated by an indigenous Namibian company Paragon Oil and Gas, which holds a 100% interest. Located in the Walvis Bay, the licence covers an area of 17,295 square kilometres in relatively shallow water (100 - 1500m).

According to Sintana Energy’s statement on January 21, PEL 37 holds identified prospects at water depths between 300 and 600m, and with multiple large fans directly overlying a proven, mature oil-prone Aptian source rock.

The block lies immediately to the North of PEL 82 operated by the Namibian subsidiary of US energy supermajor Chevron (NYSE:CVX) with the majority working interest (80%). Other shareholders are Namibia-focused privately held Custos Energy and the National Petroleum Corporation of Namibia (NAMCOR), each holding a 10% stake.

Sintana holds a 49% indirect stake in Custos Energy, giving it an effective 5% carried interest in PEL 82. As noted in Sintana’s statement, Chevron has previously announced its intention to accelerate exploration activities on PEL 82 including drilling an exploration well.

The LOI gives Sintana exclusive rights until 30 April 2026 to carry out technical, commercial and legal due diligence on Paragon and PEL 37. The parties will also negotiate terms for Sintana to invest capital to meet work commitments. This would make Sintana a shareholder in Paragon and an indirect holder of an interest in PEL 37. Sintana will pay a $1mn deposit for exclusivity, of which one third is non-refundable if it chooses not to proceed.

“The LOI we have entered into provides, at low cost, exclusivity over a material indirect interest in PEL 37, which is a high-impact block at the heart of the Walvis Basin,” Sintana CEO Robert Bose said. “In particular, PEL 37 is immediately adjacent to PEL 82, where we already have an interest and where an initial exploration well is expected over the coming quarters.”

Bose noted that investing for a material stake in PEL 37 would result in additional optionality associated with upcoming activity in Sintana Energy’s existing portfolio.

“In the coming months, and with the benefit of the exclusivity secured, we will undertake the work needed to assess whether we wish to pursue this strategic expansion of our core portfolio - further announcements will be made in due course,” he added.