Simba Energy signs LoI to farm-out Kenyan onshore block

oil kenya-rsvstks sxc.huSimba Energy holds a 100 per cent interest in Kenya’s Block 2A. (Image source: rsvstks/sxc.hu)Simba Energy has announced that it has signed an exclusive letter of intent (LoI) with a Canadian firm to farm-out up to 40 per cent of its interest in the production sharing contract (PSC) for Block 2A onshore Kenya

The value of the deal with the unnamed Canadian explorer is worth US$8.6mn, according to company sources. Simba Energy currently holds a 100 per cent interest in the oil and gas block.

The terms of the contract include that the African explorer is entitled to a US$2mn cost recovery upon signing of the definitive agreement and the funds will be released to Simba Energy once the farm-out agreement is approved by the Kenyan government.

This payment recovery will empower the Canadian company to a 10 per cent interest in the PSC, Simba Energy added.

The remaining US$6.6mn will include exploration work on a minimum of 421km of 2D seismic that will be carried out in 2014, according to Simba Energy.

Robert Dinning, CEO of Simba Energy, said, “This LOI provides a fully funded and accelerated exploration programme through to selecting drill targets and allows Simba Energy to recover US$2mn in costs upon completion of the definitive agreement and host government approval.

“This block is highly prospective given the exploration work completed to date by the company and exploration activities underway by neighbouring energy companies, including: Tullow Oil, Africa Oil, Marathon Oil, Afren and Taipan on the adjacent blocks to 2A in the Anza Basin.”

Dinning added that the Anza Basin is one of the largest Tertiary-age rift basins in East Africa and they expected the definitive agreement to be signed in Q1 2014.

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