LONDON (ResourceInvestor.com) -- Oil and gas prospector Equator Exploration was today admitted to the AIM. The company is searching for offshore hydrocarbons in the territorial waters of Sao Tome and Principe in the Gulf of Guinea. The 'significantly oversubscribed' flotation raised lb53m at 100p per share, leaving the company with an AIM top 50 market capitalisation of lb113m after one of the largest IPOs this year in the alternative market. The company was advised by Nabarro Wells.
Equator's primary current prospect lies in its right to acquire two concession areas of its choice within the 160,000sqkm Sao Tome Exclusive Economic Zone, and after this to enter into production sharing contracts with the government. In addition the company may participate up to a maximum share of 15% of any concession the government operates within the Exclusive Economic Zone.
The desired concession blocks will be selected and negotiations entered into with the government regarding production sharing agreements by the end of this year, after which a full seismic survey of the licences will be carried out by Equator. If these results are positive, then the company may either begin drilling itself or more likely will farm out this operation to another firm.
A total 8000km of existing two dimensional seismic data for the exclusive zone reportedly indicates important similarities with hydrocarbon producing areas in the proximate territorial waters of Gabon, Nigeria, and Equatorial Guinea, with a geological extension postulated. A number of specific prospects have been identified covering four different play types.
The company also has access to seismic data for the neighbouring and formerly disputed Joint Development Zone, over which Sao Tome and Nigeria agreed recently to cooperate economically.
Equator is also engaged in the procurement and sale to other prospectors of seismic data acquired by the company in cooperation with surveying partner PGS Exploration covering both the exclusive and joint zones.
A number of additional opportunities in the area are currently being evaluated and 'aggressively pursued', including some within the nations of Nigeria and Equatorial Guinea, in view of Equator's stated aim to assemble a portfolio of regional assets. Negotiations are said to be at an advanced stage on several potential acquisitions.
Equator's stated strategic tenets are: to acquire minority stakes in potentially high reward prospects in conjunction with the oil majors, to avoid the costs of operating fields itself, and to keep financial risk low by farming out initial prospective drilling operations, but to participate in the development of any commercial discoveries made.
The company confirms that the region of West Africa and in particular the waters of Sao Tome and Principe, where it has been active since 2001 and its management are experienced will remain its primary focus of operations.
Sao Tome itself is a desperately poor archipelago that has recently been afflicted by a failed coup, government infighting and a territorial dispute with much larger neighbour Nigeria. These problems seem to have come to some sort of resolution, and the regime is now said to be under the tutelage of the US government, but political risk is still a prime concern for investors.
Chief Executive of Equator Wade Cherwayko had summary comment on the flotation: 'The flotation of Equator has provided investors with a unique opportunity to invest in the highly prospective deepwater oil exploration potential in the Gulf of Guinea. We have been delighted with the institutional response, with the issue being significantly oversubscribed. The flotation on AIM will provide us with the necessary capital and company structure to develop our existing interests as well as make strategic acquisitions of additional assets within the region.'
The waters of the Gulf of Guinea continue to experience heavy exploration activity as oil firms seek to diversify their assets away from the political volatility of the Arabian Gulf. The region produces around 6% of annual global oil production, but this is anticipated to increase to around 10% over the next decade as new fields totalling 17bn barrels come on stream. Oil leviathans ChevronTexaco and ExxonMobil have plans for further prospective drilling locally.
The Gulf of Guinea's recent discoveries include the 1bn barrel Akpo field and the 710m barrel Agbami field, both off Nigeria, and the 1bn barrel Zafiro field off Equatorial Guinea.