LONDON (Alliance News) - Eland Oil & Gas PLC on Wednesday said it invested "heavily" in OML 40 license in Nigeria, as 2017 loss narrowed on "record" oil production.
Eland Oil has 45% interest in Elcrest Exploration & Production Nigeria Ltd, the joint venture vehicle through which Eland is involved in OML 40.
The oil and gas production company reported a pretax loss of USD15.6 million for 2017 compared with USD31.4 million the year before. This was after revenue rose to USD68.9 million from USD2.4 million.
The prior year, revenue was hit by the shutdown of the Royal Dutch Shell PLC-operated Forcados terminal in February 2016.
During 2017, the group reduced its administrative expenses to USD4.5 million from USD5.8 million the year earlier. However, costs of sales grew significantly year-on-year to USD77.3 million from USD25.5 million and finance costs increased to USD3.3 million versus UDS2.8 million the prior year.
Eland Oil said it saw a "breakthrough" year, as it entered 2017 with zero production and ended the period at over 18,500 barrels of oil per day, as at the end of December, from the OML 40 license in Nigeria, which contains the Opuama, Gbetiokun, Polobo, Abiala and Amobe fields.
Production during year averaged 8,743 barrels per day, which was a record for the company, it said.
The group said it achieved a realised price of USD50.98 per barrel, nearly doubled from USD28.52 the year before.
Eland also said that it benefited from a marked improvement in overall market conditions for the oil & gas industry.
Looking ahead, the company said that it already invested "heavily" in OML 40 and have plans for Ubima field, Nigeria. It begun talks with partners regarding OML 40 licence renewal and is looking forward for evaluation and production of Ubima 1 in 2018.
"2017 has been the most successful year in Eland's history," said Chief Executive George Maxwell. "The company will continue to pursue the strategy of investing and development on near term producing assets in Nigeria and West Africa. These opportunities are ever increasing for the company as we continue to prove our capabilities in delivering value to all our stakeholders."
In the separate statement, Eland Oil said that a new competent persons report completed by the engineering consultant Netherland Sewell & Associates Inc showed a small increase in 2P reserves in OML 40 as at the end of 2017.
The company said that it has already produced 3.9 million barrels of oil from Opuama field and the significant quantity of reserves and resources remain to be extracted from the license.
The group said it delighted that the increase in 2P reserves from the Gbetiokun field more than offsets the Opuama decline.
Since the previous competent persons report in June 2015, Eland Oil said that Opuama 2P reserves have declined to 45.4 million stock tank barrels from 57.4 million barrels.
In comparison, Gbetiokun 2P reserves have increased to 38.0 million barrels as at December 31 from 25.8 million barrels as at June 2015.
"I am pleased to announce an updated competent persons report for the company's core OML 40 licence," said Maxwell. "I sincerely believe that this updated competent persons report highlights the significant upside that we still see within our flagship licence OML 40."
In addition, Eland Oil said that the back-up engines required to renew drilling on Opuama-9 have arrived at site and the well is now fully functional. The company estimates to drill E2000 reservoir to the total depth of about 9,000 feet for evaluation by the end of April.
The goup said it will begin production once the well has been completed, tested and tied back to the existing production facilities. Opuama-9 is expected to provide another significant boost to production of 4,000 to 6,000 barrels of oil per day, Eland Oil said.
Following the completion of drilling activities on Opuama-9, the company said it plans to move the rig to the Opuama-10 well location.
"It is encouraging to see progress on the Opuama-9 well following the mechanical issues experienced with the engines on the rig," Maxwell said. "We now anticipate quick progress to completing the well and hooking it up as another producer on the field. Thereafter drilling operations on Opuama-10 will commence."
Shares in Eland Oil were trading 2.8% higher at 83.28 pence per share on Wednesday.
