Simba Energy has signed an exclusive Letter of Intent (LoI) with a Canadian investment firm to farm-out its production sharing contract (PSC) for Blocks 1 & 2 onshore Guinea
The unnamed group can earn up to a 45 per cent interest in Simba Energy’s PSC with a total investment of US$6.5mn, the energy explorer said.
Simba Energy is an onshore pan-African oil and gas explorer with assets in Kenya, Guinea and Chad.
According to the terms of the deal, Simba Energy will receive US$700,000 for cost recovery and upon completion of the definitive agreement, Canadian group is expected to spend US$3.8mn for an airborne full tensor gravity gradiometry (FTG) survey that will cover a minimum of 9,000 sq km.
This total initial expenditure of US$4.5mn will earn the group a 25 per cent interest in Simba Energy’s Guinea PSC, the explorer said.
Meanwhile, the investor group can earn an additional 20 per cent interest by carrying out a 2D seismic programme with a minimum expenditure of US$2mn to bring the blocks to drill ready status.
Robert Dinning, CEO of Simba Energy, said, “This LoI provides immediate recovery of expenses to Simba Energy and accelerates the completion of an FTG airborne survey. The US$700,000 payment allows Simba Energy to recover a portion of its costs incurred in Guinea to date. These blocks are highly prospective given the exploration work completed to date by the company and should provide Simba Energy with drill ready targets later this year.”
He added that it was expected that the definitive agreement would replace the LoI before the end of Q1 2014.
In total, Simba Energy has signed farmout LoIs for its Kenya and Guinea PSCs estimated at US$15.1mn in total in 2014.
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