Asset A&D

Africa Energy to Increase Stake in Block 11B/12B Offshore South Africa

By Mahati K L
August 25, 2020
2 minutes read
Block 11B/12B Offshore South Africa

Lundin Group entity Africa Energy Corp. has entered into various agreements to increase its effective interest in Block 11B/12B in the Outeniqua basin located off the coast of South Africa. The company currently has a 4.9% indirect interest in the block through its 49% stake in Main Street 1549 (Proprietary) Ltd., which holds a 10% participating interest in the block. Arostyle Investments (RF) (Proprietary) Ltd., an entity controlled by South African businessman Phuthuma Nhleko, holds the remaining 51% stake in Main Street.

Block 11B/12B covers an area of approximately 19,000 sq. km, located 175 km off the southern coast of South Africa, with water depths ranging from 200 to 1,800 meters. The block contains the Brulpadda discovery, made in late 2018, and the Luiperd prospect. Other partners in the block include subsidiaries of French energy major TOTAL SA (45% operated interest), Qatar Petroleum (25%) and Canadian Natural Resources Ltd. (20%).

Africa Energy and Arostyle have now entered into an agreement that provides for certain amendments to the existing Main Street shareholders agreement as well as amendments to an existing loan agreement between Arostyle and privately held, UK-based E&P company Impact Oil & Gas Ltd. Under the terms of the agreement, Africa Energy has agreed to fund 100% of the obligations of Main Street effective immediately, in return for a risk-adjusted return linked to the proceeds on any future sale of Main Street or the participating interest in the block.

In addition, the shareholders’ agreement will now provide for an option whereby either party has the right to trigger the sale of the participating interest to a wholly-owned subsidiary of Africa Energy. The option will become exercisable by either party after completion of the Luiperd-1X exploration well and is subject to receiving all required regulatory approvals and joint venture partner consents and waivers.

Under the terms of the agreement with Impact, Africa Energy will obtain control of its subsidiary Impact Oil & Gas SA Blocks 11B-12B Ltd., whose sole asset is a loan agreement with Arostyle that provides for an indirect financial interest in Main Street. Impact has also entered into a subscription agreement with Africa Energy to subscribe for common shares of Africa Energy that is subject to completion of the controlling investment in Impact 11B/12B.

“Block 11B/12B offshore South Africa contains one of the most exciting oil and gas exploration plays in the world today. In anticipation of the Luiperd-1X well results expected later this year, we have agreed with Impact and Arostyle to simplify and consolidate Main Street’s 10% interest in Block 11B/12B under Africa Energy,” said Garrett Soden, Africa Energy’s President & CEO.

The Impact transaction is expected to close in October this year, while the closing of the Arostyle transaction is dependent on closing of the deal with Impact. Upon completion of the transactions, Africa Energy will have acquired the entire 10% participating interest currently held by Main Street, with Impact and Arostyle becoming shareholders in Africa Energy, holding approximately a 37% and 5% stake, respectively, in the company.

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