The U.K. supermajor BP Plc (BP) has signed a farm-in agreement with London-listed Serica Energy. Per the transaction, which is subject to the approval of the Ministry of Mines and Energy in Namibia, BP will assist Serica in the exploration of four deep-water blocks in Namibia’s Luderitz basin.
The license 0047, offshore Namibia, includes blocks 2512A, 2513A, 2513B and a portion of 2612A, which were awarded to Serica only two months back. The license spans approximately 17,400 square kilometers.
The agreement entitles BP a 30% interest in the license by reimbursing all of Serica’s past costs as well as paying the full cost of an extensive 3D seismic assessment.
Currently, Serica holds an 85% interest in the blocks that is likely to be reduced to 55% upon completion of the seismic survey. The other partners in the blocks are — National Petroleum Corporation of Namibia and Indigenous Energy, holding 10% and 5% interests, respectively.
Further, BP has the option to increase its holding in the license to 67.5% by paying in full for the drilling and testing of an exploration well to the Barremian level. This option needs to be exercised prior to the end of first four-year exploration period.
If BP opts to exercise this option it will gain operatorship of the license with Serica stake getting reduced to 17.5%. However, during the initial seismic survey Serica will continue to be the operator of the well.
Earlier, Serica had inked a similar contract with Polarcus Seismic Limited to expand its 3D seismic to about 4,150 square kilometers across the license.
BP holds a Zacks #3 Rank, which translates into a Hold rating for a period of one to three months. For the long term, we maintain a Neutral recommendation on the stock. BP faces major competition from ExxonMobil Corporation (XOM).
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