Eco Atlantic Oil and Gas: Drilling the Atlantic Margin Exploration Hotspots

Commercially focused exploration company with catalysts

Eco Atlantic Oil and Gas (Eco) is a frontier exploration focused company with significant potential exploration upside in Guyana and Namibia. It is a lean organisation with a highly experienced management team, has a proven track record of exercising Petroleum Agreements and farm-outs, is fully funded for its current planned activity and beyond, has an early mover advantage in its blocks and, we think, management would sell for the right price.

Valuation: >100% upside to risked NAV and >15x unrisked upside

Our risked NAV for Eco of 103p/sh includes a core value of 12p/sh (cash and farm-in proceeds), with the remainder risked exploration based on 4 prospects. The unrisked valuation is >15x versus the current price. With the cash and carry available, Eco is well funded for the two highly likely exploration wells and will have cash left over for either further exploration or a new country entry, potentially with Africa Oil following their strategic alliance.

Catalyst rich story as wells are drilled near term across key assets

We see several specific catalysts for the stock over the next year. In Guyana we are watching for the appraisal of Exxon's Hammerhead discovery which extends onto Eco's block, Exxon's 3 rig drilling campaign, further prospectivity on Eco'sOrinduik block (following the recent receipt of the final 3D data) and a firm drilling commitment for at least one well in Q3'19. In Namibia there will be readthrough from Chariot's well on Prospect S, to PEL 50 (Eco 80%); Tullow needs to decide by YE'18 whether it will drill a well on the Cooper block potentially in Q3'19 (Azinam has announced it would like to proceed). We also think a new country entry is likely at some point.

Guyana: better economics vs. the Permian and de-risked exploration

The frontier exploration discoveries of >4Bboe next to Eco's Orinduik block have de-risked the region, especially given their high quality and oily nature. The fiscal terms are attractive and the shallow water location means lowerdevelopment costs. TOTAL's decision to farm-in without waiting the 120 days it had to decide, shows its confidence in the acreage. Eco's 15% stake in the Iatuk D prospect (just one of 10 prospects in the CPR) is worth >£2/sh unrisked,demonstrating the scale of the upside, with a well to be drilled in early Q3'19.Given the success rates on the Stabroek block we think a 22% geological COS is conservative.

Namibia: proven hydrocarbon system in which Eco is well positioned

Namibia is truly a frontier oil and gas province with attractive fiscal terms. There was a wave of exploration activity ~5 years ago, which resulted in no commercial successes. Although the market took this negatively, the wells have de-risked the oil potential by proving a working source rock (as did the recent Tullow operated Cormorant dry hole). With the entry of supermajors such as Exxon/TOTAL and further wells planned this year by Chariot and Shell, any success should re- invigorate interest in the region. Eco has a first mover advantage with 4 well- positioned blocks and an alliance with the state oil company.

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Eco AtlanticEco Atlantic Oil & GasDrillingAtlantic MarginexplorationGuyanaNamibiaOffshore

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