14 Mar 2019 07:00
14 March 2019
Eland Oil & Gas Plc ("Eland" or the "Company")
OML 40 and Ubima Competent Persons Report
Eland Oil & Gas PLC (AIM:ELA), an oil & gas production and development company operating in West Africa with an initial 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 31 December 2018.
OML 40 licence
· | Gross OML 40 Reserves, following 2018 gross production of 6.5 million barrels of oil:
| |
- | Proved ("1P") of 42.9 million barrels ("MMB"), an increase of 8% since the 31 December 2017 CPR | |
- | Proved plus Probable ("2P") of 82.2 MMB, a 1% decrease | |
- | Proved plus Probable plus Possible ("3P") of 116.8 MMB, a 1% decrease
| |
· | Eland's Net (Entitlement*) Present Value at a 10% discount rate with a flat price deck of $71.16 per barrel of oil
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- | 1P of US$ 473.9 million, an increase of 68.2% | |
- | 2P of US$ 568.9 million, an increase of 35.7% | |
- | 3P of US$ 620.7 million, an increase of 28.1%
| |
* Net entitlement is based on treating Eland funding of the Starcrest Nigeria Energy Limited share of Elcrest E&P Nigeria Limited as a carried working interest, resulting in an Eland participating interest of 45 percent before payout of the loans and 20.25 percent after payout.
Since the previous independent CPR for OML 40 which had an effective date of 31 December 2017, the Opuama field has produced 6.5 million gross barrels of oil.
Despite record Opuama field production, proved oil reserves increased by 3.3 million barrels. The minor reduction in 2P reserves reflects that the Opuama field proved plus probable reserves replacement, as a result of the 2018 drilling campaign, has been limited to approximately 80% of production volumes. Eland will continue to assess reservoir performance of the current well stock with a view to identifying volumetric upside potential, particularly in the flank areas of the field.
NSAI has also increased its estimates of Contingent Resource (2C) for OML 40 by 25% from 40.4 million barrels to 50.7 million barrels of oil gross. This increase follows a re-evaluation of the 1989 Abiala-1 discovery leading to an upward revision from 16.1 million barrels to 26.4 million barrels gross of oil. Eland expects to drill an appraisal well on Abiala in 2020. The upside (3C) estimate for Abiala is 80.5 million barrels gross recoverable.
The 2P NPV10 Net (Entitlement*) ascribed in the CPR of $569 million has risen significantly from the prior year. This change is mainly driven by commercial and development assumptions, such as a higher oil price deck, updated work programme and development costs, changes in the fiscal tax rate and for the first time the value of Elcrest's tax losses incurred while the Company was in Pioneer status. The tax losses, including capital allowances, as at 31 December 2018 will be utilised over the coming years with the effect of deferring Petroleum Profits Tax (PPT) payable in Nigeria. In addition, it is the view of our tax advisors that the Company will benefit from the existing new entrant tax rate of 65.75% for five years following the end of Pioneer status period which ends on 30 April 2019. The NSAI report previously included the assumption that the Company would be liable for Petroleum Profits at 85% following the end of Pioneer status.
Ubima licence (Eland Working Interest 40%)
· | Gross Ubima Reserves
| |
- | Proved ("1P") of 6.2 million barrels, an increase of 634% | |
- | Proved plus Probable ("2P") of 9.3 MMB, an increase of 285% | |
- | Proved plus Probable plus Possible ("3P") of 13.1 MMB, an increase of 298%
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· | Eland's Net (Entitlement) Present Value at a 10% discount rate with a flat price deck of $71.16 per barrel of oil
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- | 1P of US$ 17.2 million, an increase of 673% | |
- | 2P of US$ 31.4 million, an increase of 200% | |
- | 3P of US$ 39.7 million, an increase of 165%
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The most recent CPR for the Ubima licence had an effective date of April 2016. At this time AGR TRACS International Limited estimated gross 2P reserves of 2.4 million barrels of oil. In 2018 Eland and its partner successfully re-entered and tested the Ubima-1 discovery well. The new CPR by NSAI estimates gross 2P reserves of 9.3 million barrels representing an almost fourfold increase. NSAI also calculates an NPV net to Eland of over $31 million compared to $10m in the previous CPR.
Aggregated across both licences, the 1P and 2P Reserves Replacement Ratio are 233% and 188% respectively.
George Maxwell, CEO of Eland, commented:
"I am pleased to announce updated CPRs for the Company's OML 40 and Ubima licences. These show great progress in both licences, is a testimony to the high quality of the assets and also the significant investments we have made in each. After such a successful year with record production volumes it is very satisfying to record a 2P Reserves Replacement Ratio of 188%.
We have always believed that OML 40 had significantly more to offer than simply the Opuama and Gbetiokun fields. We will be drilling our first near field exploration well on the licence later this year with the Amobe prospect, followed next year by appraisal drilling on Abiala. These two wells have the potential to more than double the licence's current 2P reserves base. At Ubima, I look forward to the initial phase of development for this field in 2019 following the fourfold increase in reserves estimates."
I am delighted that the CPRs ascribes a value for Eland's share of 2P reserves in OML 40 and Ubima of approximately $600 million, suggesting there is still material potential upside within the Company".
For further information:
Eland Oil & Gas PLC (+44 (0)1224 737300)
www.elandoilandgas.com
George Maxwell, CEO
Ronald Bain, CFO
Finlay Thomson, IR
Peel Hunt LLP, Nominated Adviser & Joint Broker (+44 (0)20 7418 8900)
Richard Crichton / David McKeown
Stifel Nicolaus Europe Limited, Joint Broker (+44 (0)20 7710 7600)
Callum Stewart / Nicholas Rhodes / Ashton Clanfield
Camarco (+44 (0) 203 757 4980)
Billy Clegg / Georgia Edmonds / Tom Huddart
In accordance with the guidelines of the AIM Market of the London Stock Exchange, Yannis Korakakis, MSc of Leoben University, with 32 years of experience in the oil and gas sector, is a Petroleum 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.
Notes to editors:
Eland Oil & Gas is an AIM-listed independent oil and gas company focused on production and development in West Africa, particularly the highly prolific Niger Delta region of Nigeria.
Through its joint venture company Elcrest, Eland's core asset is a 45% interest in OML 40 which is in the Northwest Niger Delta approximately 75 km northwest of Warri and has an area of 498 km².
In addition, the Company has a 40% interest in the Ubima Field, onshore Niger Delta, in the northern part of Rivers State.
The OML 40 licence holds gross 2P reserves of 82.2 million barrels, gross 2C contingent resources of 50.7 million barrels and a best estimate of 252.1 million barrels of gross un-risked prospective resources*
The Ubima field holds gross 2P reserves of 9.3 million barrels of oil and gross 2C resource estimates of 4.2 million barrels*
Net production figures relate to Elcrest Exploration and Production Nigeria Ltd ("Elcrest"), Eland's joint venture company. Production rates, when oil is exported via Forcados, are as measured at the Opuama PD meter, are subject to reconciliation and will differ from sales volumes.
*Netherland, Sewell & Associates Inc CPR report 31 December 2018*
The information contained within this announcement is considered to be inside information prior to its release, as defined in Article 7 of the Market Abuse Regulation No. 596/2014, and is disclosed in accordance with the Company's obligations under Article 17 of those Regulations.
In compiling the announcement, the Company 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).
OML 40 SUMMARY OF OIL RESERVES AS AT 31 DECEMBER 2018
Oil Reserves (MB) | Future Net Revenues (M$) | |||||||||
Gross | Net Entitlement* | Present Worth at 10% | ||||||||
Category | Before Royalties | After Royalties | After Royalties | % | Total | |||||
1P | 42,870.7 | 34,296.6 | 13,040.9 | 38.0% | 572,697.4 | 473,920.1 | ||||
2P | 82,205.0 | 65,764.0 | 18,952.4 | 28.8% | 681,692.7 | 568,876.9 | ||||
3P | 116,761.6 | 93,409.3 | 24,287.8 | 26.0% | 760,145.1 | 620,731.2 | ||||
*Net entitlement is based on treating Eland funding of the Starcrest Nigeria Energy Limited share of Elcrest E&P Nigeria Limited as a carried working interest, resulting in an Eland participating interest of 45 percent before payout of the loans and 20.25 percent after payout.
Since the last CPR dated 31st December 2017, Opuama reserves have declined by 1.3 MMB from 45.4 MMB to 44.1 MMB, however within this time period over 6.5 MMB have been produced, representing an upwards reserves revision of 5.2 MMB. Reserves at Gbetiokun have increased marginally from 38.0 MMB to 38.1 MMB.
OML 40 GROSS LEASE CONTINGENT RESOURCES (UNRISKED)
| 1C of 21.0 MMB |
| 2C of 50.7 MMB |
| 3C of 117.5 MMB |
OML 40 GROSS LEASE PROSPECTIVE RESOURCES (UNRISKED)
| Low Estimate of 79.3 MMB |
| Best Estimate of 252.1 MMB |
| High Estimate of 772.4 MMB
|
UBIMA SUMMARY OF OIL RESERVES AS AT 31 DECEMBER 2018
Oil Reserves (MB) | Future Net Revenues (M$) | ||||||||
Gross | Net Entitlement | Present Worth at 10% | |||||||
Category | Before Royalties | After Royalties | After Royalties | % | Total* | ||||
1P | 6,178.5 | 5,437.0 | 4,128.7 | 75.9% | 37,443.6 | 17,157.5 | |||
2P | 9,315.4 | 8,197.6 | 5,389.4 | 65.7% | 52,459.0 | 31,403.7 | |||
3P | 13,066.8 | 11,498.8 | 6,820.8 | 59.3% | 66,665.5 | 39,688.5 | |||
*Future net revenue is inclusive of revenue generated through financing repayment
UBIMA SUMMARY OF GROSS LEASE CONTINGENT RESOURCES (UNRISKED)
| 1C of 0.7 MMB |
| 2C of 4.2 MMB |
| 3C of 8.2 MMB |
PRICING ASSUMPTIONS
This oil price used in this report is based on a Brent Crude price of $70.00 per barrel and is adjusted for quality, transportation fees, and market differentials. The adjusted oil price of $71.16 per barrel is held constant throughout the lives of the properties.
GLOSSARY
US$ | 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 18 November 2015 |
MB | Thousand barrels |
MMB | Million barrels |
Mmtsb
NPV10
| Million stock tank barrels
Net present value at a 10% discount rate |
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 |