Davy Research |
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Tullow Oil
(TLW LN)
Marathon Oil farms into Kenya block
23 July 2012
Job Langbroek
| Closing Price: | 1430p | Rating: | Outperform | 30/06/09 |
FACTS: Africa Oil Corporation has announced that Marathon Oil has taken a 50% share in Block 9, onshore Kenya, and a 15% share in Block 12A, also onshore Kenya. Separately, it stated that Tullow Oil had increased its stake in Block 12A to 65% by acquiring an additional 15% share of the licence from Africa Oil.
ANALYSIS: Marathon is paying Africa Oil an entry payment of $35m. This fee includes past costs. In addition, it is paying up to a maximum of $43.5m of Africa Oil's costs over the next three years. The Tullow Oil entry cost was $0.75m in past expenditure and the purchase of 520 km of seismic up to a total of $3.1m.
DAVY VIEW: Following the recent successes announced in Kenya, the area in general (rift basin plays in particular) is attracting a second wave of industry interest. This is facilitated by the de-risking of the play concept and the ongoing cash requirements for relatively small companies. It provides further mainstream validation of onshore African oil plays.