Canada-based oil and gas explorer Simba Energy has inked a memorandum of understanding (MOU) with a privately-owned oil and gas company Ajax Exploration, to farm-out 66% interest and operatorship of its 10% owned Block 2A, onshore Kenya.
Subject to government approval, Simba will execute the farmout agreement with Ajax and transfer 66% interest to the company.
Simba Energy Operations managing director Hassan Hassan said the MOU provides the company an opportunity to speed up its exploration program in Kenya.
“Simba’s first Farmout Agreement provides an attractive valuation marker for part of its asset portfolio and delivers the required funding for our upcoming exploration campaign,” Hassan added.
Ajax Exploration chairman Andrew Shrager said in 2012, the company’s associate GeoDynamics Worldwide conducted a seismic survey and identified potential areas for further exploration efforts.
“We now intend to apply our suite of technologies with the aim of speeding up the exploration phase, and drill our first well in late 2014,” Shrager added.
As per the farmout agreement the deal is expected to provide an investment in Simba’s Kenya asset, deliver a fully carried pre-drill exploration program and a commitment to drill and carry Simba for one exploration well.
Under the agreement, Ajax will execute work, including drilling of one well for Simba representing a gross investment of up to $36.5m (assuming a well cost of $25m in Kenya)
Ajax will also pay Simba up to $3.1m in back costs and provide a net carry of up to $12.4m.