8 Oct 2014 07:00
8 October 2014
Eland Oil & Gas PLC
("Eland" or the "Company")
New CPR and Operational Update
Eland Oil & Gas plc (AIM: ELA), an oil & gas development and exploration company operating in West Africa with a principal focus on Nigeria, is pleased to announce the results of a new competent persons report ("CPR" or "Report") provided by Netherland, Sewell & Associates Inc. ("NSAI") as at 30 June 2014.
The results of the CPR, details of which are set out below, demonstrate a material increase in the value to Eland of the reserves and resources of OML 40 as at 30 June 2014 as compared with the previous Report dated 30 June 2013. The new Report takes into account the recently granted Petroleum Profits Tax ("PPT") incentive, awarded to Elcrest Exploration and Production Nigeria Ltd ("Elcrest") in May 2014, which results in a significant increase in cash flows and net present value.
· | Gross and Net OML 40 Reserves
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- | Proved ("1P") of 38.7 million barrels ("MMB"), 16.4 MMB net to Eland (before royalties), 13.2 MMB net to Eland (post royalties)
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- | Proved plus Probable ("2P") of 81.4 MMB, 25.3 MMB net to Eland (before royalties), 20.2 MMB net to Eland (post royalties)
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- | Proved plus Probable plus Possible ("3P") of 104.8 MMB, 30.9 MMB net to Eland (before royalties), 24.7 MMB net to Eland (post royalties)
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· | Eland's Net (Entitlement) Present Value at 10%
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- | 1P of US$ 440 million, US$ 505 million with financing arrangement, an increase of 26.5%
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- | 2P of US$ 649 million, US$ 679 million with financing arrangement, an increase of 52.4%
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- | 3P of US$ 740 million, US$ 768 million with financing arrangement, an increase of 62.2%
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· | Gross OML 40 Contingent Resources
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- | 1C of 16.7 MMB, a decrease of 9.2%
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- | 2C of 41.2 MMB, a decrease of 9.1%
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- | 3C of 114.7 MMB, a decrease of 17.2%
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· | Gross OML 40 Prospective Resources
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- | Low Estimate of 80.3 MMB, an increase of 59.0%
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- | Best Estimate of 254.5 MMB, an increase of 113.0%
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- | High Estimate of 772.4 MMB, an increase of 223.9%
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Operational Update
On 30 June 2014, the Company announced that Elcrest Exploration and Production Nigeria Ltd ("Elcrest"), Eland's joint venture company, had been awarded approval of a five year petroleum profits tax ("PPT") exemption. The Company is pleased to announce that Elcrest has now received the anticipated acknowledgement from the Federal Inland Revenue Service of Nigeria that until 30 April 2019 Elcrest will only be liable for withholding tax and VAT but not PPT.
In the light of an ongoing review of operations and some consequential changes to the Company's work programme and delays in dredging, the Company is now anticipating development drilling on new production wells to begin in Q1 2015. As part of the review, the Company will also evaluate the potential for additional production through the re-entry of existing non-producing wells (Op-4,-5 and -7) on Opuama. The re-entry work will be carried out before or in conjunction with the revised development drilling programme.
The Company is currently on production and working towards satisfying debt accessibility, which is anticipated in the near-term. The Company, which on 30 September 2014 had cash reserves of $18.2 million, has no immediate need to draw down the debt facility. However, accessing the debt provides greater flexibility and optionality with regard to the work programme.
Eland's new investor presentation is now available on the Company's website at www.elandoilandgas.com.
Mr George Maxwell, CEO, commented:
"The updated Competent Person Report highlights the value of the tax incentive to Eland and demonstrates a material increase in the value of the reserves, increasing the NPV per net 2P barrel by over 75%.
The increase in prospective resources high estimate to over 750 million barrels confirms our belief that OML 40 truly represents a portfolio within a single licence."
For further information:
Eland Oil & Gas PLC | +44 (0) 207 016 3180 |
George Maxwell, CEO | |
Louis Castro, CFO | |
Edward Cozens, IR | |
Canaccord Genuity Limited | +44 (0) 207 523 8000 |
Henry Fitzgerald-O'Connor | |
Peter Stewart | |
FirstEnergy Capital LLP | +44 (0) 207 448 0200 |
Majid Shafiq | |
Khalid Ahmed | |
Citigate Dewe Rogerson | +44 (0) 207 638 9571 |
Martin Jackson | |
Shabnam Bashir |
In accordance with the guidelines of the AIM Market of the London Stock Exchange, Gilles Krijger, MSc of Delft University, with 35 years of experience in the oil and gas sector, is a Reservoir Engineer and member of the Society of Petroleum Engineers who meets the criteria of qualified persons under the AIM guidance note for mining and oil and gas companies, has reviewed and approved the technical information contained in this announcement.
In compiling the Report, NSAI has used the definitions and guidelines as set forth in the 2007 Petroleum Resources Management System ('PRMS') approved by the Society of Petroleum Engineers (SPE)
SUMMARY OF OIL RESERVES AS AT 30 JUNE 2014
Oil Reserves (MB) | ||||||
Gross | Net Entitlement | |||||
Category | Before Royalties | After Royalties | After Royalties | % | ||
Proved (1P) | 38,705.9 | 30,964.7 | 13,151.4 | 42.5% | ||
Proved + Probable (2P) | 81,445.7 | 65,156.6 | 20,222.7 | 31.0% | ||
Proved + Probable + Possible (3P) | 104,753.1 | 83,802.5 | 24,741.4 | 29.5% | ||
SUMMARY OF CONTINGENT AND PROSPECTIVE OIL RESOURCES:
GROSS LEASE CONTINGENT RESOURCES (UNRISKED)
· | 1C of 16.7 MMB, a decrease of 9.2%
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· | 2C of 41.2 MMB, a decrease of 9.1%
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· | 3C of 114.7 MMB, a decrease of 17.2%
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The contingent resources have been updated to reflect the Company's purchase and review of additional off-block well data as well as the reprocessing of 3-D seismic on the Western flank of the license block.
The largest change was due to the changed structural location of the Polobo-1 well on the reprocessed seismic data.
SUMMARY OF UNRISKED GROSS CONTINGENT RESOURCES AS AT 30 JUNE 2014
Unrisked Gross Contingent Oil Resources (MB) | ||||
Low Estimate | Best Estimate | High Estimate | ||
Abiala North | 909 | 1,981 | 4,112 | |
Abiala South | 4,259 | 14,105 | 70,643 | |
Adagbassa Creek | 647 | 1,495 | 2,845 | |
Opuama | 1,940 | 5,621 | 12,803 | |
Polobo | 8,614 | 17,354 | 23,230 | |
Ugbo | 298 | 630 | 1,082 | |
Total | 16,665 | 41,186 | 114,715 | |
Note: | |
1. | Based on current market conditions in Nigeria, neither contingent resources nor values have been attributed to gas or natural gas liquid volumes. However, the Company has rights to monetise gas volumes and is currently discussing and assessing the market potential for development.
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2. | Columns may not add due to rounding.
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GROSS LEASE PROSPECTIVE RESOURCES (UNRISKED)
· | Low Estimate of 80.3 MMB, an increase of 59.0%
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· | Best Estimate of 254.5 MMB, an increase of 113.0%
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· | High Estimate of 772.4 MMB, an increase of 223.9%
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The prospective resources have been updated to reflect the Company's purchase and review of additional off-block well data as well as the reprocessing of 3-D seismic on the Western flank of the license block.
The largest changes are the identification of additional potential reservoirs and oil bearing reservoirs in the newly acquired wells which increased the potential undiscovered original-in-place for existing prospects (Polobo and Amobe) and increased the chance of discovery of hydrocarbons. Further increases in prospective resources arise from the inclusion of 2 new prospects (Polobo East and Tsekelewu Northwest).
SUMMARY OF UNRISKED GROSS PROSPECTIVE RESOURCES AS AT 30 JUNE 2014
Unrisked Gross Prospective Oil Resources (MB) | ||||
Low Estimate | Best Estimate | High Estimate | ||
Abiala North | 568 | 1,530 | 3,413 | |
Abiala Northeast | 3,970 | 10,996 | 24,516 | |
Abiala South | 5,731 | 13,289 | 26,449 | |
Abiala South South | 932 | 2,432 | 4,698 | |
Amobe | 15,300 | 78,430 | 340,070 | |
Dudu Town | 5,879 | 13,207 | 23,847 | |
Dudu Town East | 4,707 | 10,492 | 19,383 | |
Gbetiokun West | 8,124 | 16,744 | 31,740 | |
Gbetiokun South | 3,880 | 8,538 | 17,394 | |
Old Nana Town | 2,761 | 6,491 | 12,436 | |
Opuama North | 1,228 | 2,909 | 5,951 | |
Polobo | 4,090 | 19,250 | 57,090 | |
Polobo East | 9,425 | 20,640 | 42,495 | |
Tongarafa | 1,286 | 3,058 | 6,593 | |
Tsekelewu Northwest | 5,907 | 30,858 | 123,451 | |
Ugbo East | 2,484 | 6,260 | 13,253 | |
Ugbo North | 4,006 | 9,397 | 19,611 | |
Total | 80,278 | 254,522 | 772,390 | |
Note: | |
1. | There is no certainty that any portion of the prospective resources will be discovered. If discovered, there is no certainty that it will be economically viable or technically feasible to produce any portion of the resources.
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2. | Columns may not add due to rounding.
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PRICING ASSUMPTIONS
The report, which is dated as at 30 June 2014, was prepared using a base Brent oil price of US$100 per barrel and is adjusted for a regional price differential where Nigerian crudes typically trade at a premium to Brent.
GLOSSARY
US$ | United States Dollars |
% | Percent |
1C | Low estimate scenario of contingent resources |
2C | Best estimate scenario of contingent resources |
3C | High estimate scenario of contingent resources |
1P | Proved |
2P | Proved plus probable |
3P | Proven plus probable plus possible |
2D or 2D Seismic | Seismic data which is acquired along a line with a "Shot and Receiver" configuration that allows the signal-to-noise ratio to be enhanced by linear stacking of the reflections caused by subsurface interfaces between rocks with different acoustic properties |
3D or 3D Seismic | Seismic data which is acquired in a multi-azimutual pattern and processed such that the signal-to-noise ratio is enhanced by three dimensional stacking of the reflections caused by subsurface interfaces between rocks with different acoustic properties |
bbl / bbls | barrel / barrels |
Contingent Resources | Those quantities of petroleum estimated, as of a given date, to be potentially recoverable from known accumulations by application of development projects but which are not currently considered to be commercially recoverable due to one or more contingencies. Contingent Resources are a class of discovered Recoverable Resources. |
CPR | The reserves and resources evaluation provided by Netherland, Sewell & Associates Inc. as at 30 June 2014 |
MMB | Million barrels |
OML 40 | Oil Mining Lease 40 |
Prospective Resources | Those quantities of petroleum estimated, as of a given date, to be potentially recoverable from undiscovered accumulations by application of future development projects. Prospective Resources have both an associated chance of recovery and a chance of development. Prospective Resources are further subdivided in accordance with the level of certainty associated with the recoverable estimates assuming their discovery and development and may be sub-classified based on project maturity |
Proved Reserves ('Proved') | Those quantities of petroleum, which by analysis and geoscience, can be estimated with reasonable certainty to be commercially recoverable. It is likely that the actual remaining quantities recovered will exceed the estimated Proved Reserves |
Probable Reserves ('Probable') | Those additional reserves that are less likely to be recovered than Proved Reserves but more certain to be recovered than Possible Reserves. It is equally likely that actual remaining quantities recovered will be greater than or less than the sum of the estimated proved plus Probable Reserves |
Possible Reserves ('Possible') | Those additional reserves which analysis and geoscience and engineering data suggest are less likely to be recovered than Probable Reserves. The total quantities ultimately recovered from the project have a low probability to exceed the sum of proved plus probable plus Possible Reserves |
Shell | Shell Petroleum Development Company of Nigeria Limited |