London-listed United Oil & Gas has bought into a prospect in West Africa, its first excursion into the continent.
It has signed an agreement with UK firm Elephant Oil, giving it the option to take a stake in Elephant acreage in Benin, West Africa.
The block is located in an area called the Dahomey Embayment. No wells have been drilled in the area yet, though there have been some limited seismic surveys on the relevant block. They indicate it could hold more than 200 million barrels of oil reserves.
To get the farm-in option agreement, United has agreed to fund further seismic surveys up to a value of $175,000 (€155,000).
The idea is to get a better idea of what could be under the ground before United decides to exercise its farm-in option.
If it does decide to farm-in, it would get a 20pc interest and would have to fund 20pc of drilling costs, and 30pc of non-drilling costs, under the first phase of a planned work programme.
United would also pay Elephant just over $1m (€890,000).
United CEO Brian Larkin, a veteran of both Tullow Oil and Providence Resources, said the group was “delighted to take a position in this exciting new opportunity”.
He and his team have previous experience of working in West Africa, from their time with Tullow.
“The new licence is a great fit with the United business model, where we are continuing to build a portfolio of near-term low-risk assets and a viable producing business based in Europe, with carefully selected frontier exploration licences with transformational upside in South America and Africa,” he added.
Mr Larkin said the company has been assessing a number of other new opportunities, where it is close to agreeing deals.
“This agreement in Benin is additional to our existing pipeline of potential near-term acquisitions and joint ventures,” Mr Larkin said.
“We believe that Benin can be transformational for United.”
The company also has projects in the UK and Italy.
Founded in 2016, United initially raised funding through private investment. In 2017 the company listed on the London stock market.
Shares in the company closed up 1.32pc in London yesterday.