Eco (Atlantic) Oil & Gas (CVE:EOG)(NSX:EOG) has agreed to acquire Pan African Oil (CVE:PAO) in an all-share deal that will save on costs and strengthen its position as the dominant license holder offshore Namibia, the company said.
Pan African shareholders will get up to 0.326 of a common share of Eco Atlantic for each Pan African share held, with the new merged company to become a subsidiary of Eco Atlantic.
Pan African, an Africa-focused oil and gas explorer, operates two licenses in offshore Namibia, which cover close to 13,000 square km. The company has already completed the first term work commitments for both licenses, and has found a new potentially prospective geological fairway, said Eco.
Meanwhile, Eco Atlantic owns and operates four licenses in Namibia, three of which have more than 21.5 billion barrels of prospective resources, covering over 28,500 square km in the Walvis Basin.
The company said the deal will not only bolster its position in the region, but will also deliver cost savings and other efficiencies for the combined Namibian operations.
The acquisition still requires two thirds shareholder approval from Pan African, with a special meeting expected to be held on January 21. Regulatory clearance is also necessary.
On closing of the deal, Eco Atlantic said it expects to receive about $3.1 million in cash, as the closing balance. If the closing balance excluding transaction costs is less, the exchange ratio will be adjusted, it added.
Starting out as a pure exploration play focused in Namibia - which is considered a stable region with low political risk --- Eco Atlantic decided earlier this year to diversify and look further afield.
In July, the company received parliamentary ratification from the Republic of Ghana to acquire a 50.51 percent working interest in the Deepwater Cape Three Points West Block, which is just 15 km southeast of Tullow Oil's Jubilee field, which currently produces in excess of 100,000 barrels of oil per day.