Simba in Kenya
Shares in TSX Venture-quoted Simba Energy are nudging 52-week highs as things start to heat up for the Vancouver-based explorer in Kenya. The small cap has never been shy about headlining the potential of its frontier exploration portfolio in Africa, with its Block 2A in Kenya being the flagship asset. However, last year the company hit a bump in the road when its planned farm-out to Ajax Exploration fell apart when the two parties failed to reach agreement on a forward work programme.
By January 2014, however, Simba had signed an exclusive letter of intent with a private Calgary-based company to farm-out up to 40 per cent of Block 2A in return for US$2 million in back costs and a carry through a US$6.6 million exploration programme, including a 421 km 2D seismic survey in 2014, giving an implied valuation for the block of US$21.5 million.
This looks a little short compared to other deals inked in Kenya, particularly those on the main fairway that Tullow and Africa Oil have pioneered to the west, and is certainly less generous than the terminated Ajax farm-out, which had implied a full block valuation of US$60 million and put the company on track for a late-2014 maiden well spud. What matters now, however, is to get busy on the ground to build momentum and move the acreage up the value chain. (The deal also opened the door to Simba signing an LoI with some of the backers of the Calgary group to farm-out up to 45 per cent of its Guinea PSC in West Africa for US$6.5 million.
It should help that Simba's neighbours in Kenya are getting busy as this under-scores the regional prospectivity, de-risks the play book by providing more data on the subsurface and reduces costs by introducing service and hardware capabilities into the region. Africa Oil and Marathon, for example, are preparing to spud the Sala prospect on Block 9 to the west of Simba while Taipan Resources is conducting 2D seismic over its neighbouring block 2B, where a first wildcat is planned for later this year.
Importantly Taipan plans to extend some of its seismic coverage over the southwest corner of Simba's Block 2A just to the north of Taipan's Pearl prospect. Taipan, which in Q3 2013 inked a farm-out to London's Premier Oil which valued its block at US$55.5 million, is gearing up to drill its first well in Q4 of this year. The current work – 22 km of 2D already shot on Block 2B and permission granted to acquire an additional 24 km on Simba's block – is designed to finalise a drilling location for the Pearl prospect, which is currently modelled to host around 126 million boe.
Simba director James D--- said the Sala and Pearl wells planned by Africa Oil and Taipan respectively “strongly suggest that a potential "String of Pearls" trend passes through the south western corner of our block, as both prospects are located at the basin edge where this type of play is found”. “The Anza Basin's edge passes through the western part of Block 2A," said D---.
The Anza Basin is one of the largest Tertiary-age rift basins in the East African rift system and demonstrates a similar geological setting to the South Lokichar basin where Tullow and Africa Oil have had their play-opening discoveries. Success by fellow operators in the region, particularly Taipan's Pearl prospect, could prove very significant for Simba.