Eco Atlantic aims to expand Guyana foothold by acquiring JHI

UK-based Eco (Atlantic) Oil & Gas said on March 14 that it had expanded its foothold in Guyana’s offshore zone by striking an agreement on the acquisition of JHI Associates, a Canadian company that holds a 17.5% working interest in the Canje block.

In a statement, Eco Atlantic said it had signed a commercially binding term sheet to acquire 100% of JHI, including its cash and capital balances as well as its equity stake in Canje. It put the value of the transaction at about $52mn at current stock prices and noted that the proposed deal would be cashless.

The acquisition will be accomplished via the issuance of new common shares to JHI stockholders, “based on an exchange ratio of 1.1994 new Eco common shares and convertible securities,” the company said. Once the new shares in Eco Atlantic have been issued, JHI’s investors will hold approximately 34% of the former company’s equity, assuming that the current share count holds, it explained.

It also said JHI would have the right to appoint two non-executive directors to Eco Atlantic’s eight-member board of directors following the completion of the transaction. This will “[bring] further exploration expertise” to Eco Atlantic, the statement remarked. It will also lift JHI’s cash balance up to at least $15mn.

The parties hope to finalise the deal in the second quarter of 2022, provided that the government of Guyana and the relevant regulatory authorities issue the appropriate approvals and permits, it added.

Gil Holzman, the CEO and co-founder of Eco Atlantic, expressed enthusiasm for the deal. “This transaction adds to Eco’s strategic acreage position in Guyana and ensures that there will be a number of drilling catalysts over the next couple of years on Eco’s eight offshore blocks. In addition, the enlarged Group will benefit from JHI’s current cash position, adding $15mn to Eco’s balance sheet, further strengthening the company’s liquidity position,” he stated.

Holzman also indicated that his company intended to finalise its selection of new drilling targets at Orinduik, another block located offshore Guyana, later this year but did not give a specific date.

Meanwhile, John Cullen, the founder and CEO of JHI, also spoke positively about the agreement. “JHI’s team has come to work well with Eco’s team since they became shareholders last year, and we know that they will continue to be good stewards of the Canje block as they add it into their impressive and expanding exploration portfolio,” he commented.

The Canje block covers an area of around 4,800 square km and is located 180-300 km from the Guyanese coast in waters ranging from 1,700 to 3,000 metres deep. Equity in the licence area is currently split between ExxonMobil (US), the operator, with 35%; TotalEnergies (France), with 35%; JHI, with 17.5%, and Mid-Atlantic Oil & Gas (Canada), with 12.5%. Canje is located immediately down-dip from the prolific Stabroek block, where ExxonMobil has discovered more than 20 oilfields containing at least 10bn barrels of oil equivalent (boe) in recoverable reserves.