Calima Energy has signed an agreement to divest its interest in the PEL 90 licence off Namibia to the local subsidiary of Tullow Oil.

Calima will receive a consideration of $2m upon completion and is entitled to receive success bonuses amounting to $10m. The success bonus will be paid in two tranches of $5m each, one after receiving the production licence and the second after the commercial production starts at the site.

Both parties have agreed to a 60-day exclusivity period to fulfil certain preceding industry-standard conditions. It includes signing on the formal sale and purchase agreement, customary due diligence and approval from the Tullow board. The transaction is also subject to government and partner approvals to enable the transfer of ownership.

Calima managing director Alan Stein said: “With recent drilling success in the Montney, this transaction allows us to focus capital allocation towards Canada while maintaining financial leverage to exploration success in Namibia.

“The Namibian block is a world-class exploration play with extraordinary upside but it will require considerable investment and time to reach the point of exploration drilling.

“The Montney offers our shareholders a significant value proposition in the short term where the company can now put in place the building blocks of a world-class development with modest capital investment.”

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The Namibia PEL 90 licence (Block 2813B) encompasses an area of 5,433km² in the Orange River Basin of Namibia. Calima operated the licence with a 56% stake. The remaining interest is shared between Trago Energy (20%), Harmattan Energy (14%) and Namcor (10%).