15 Jan 2019 07:00
15 January 2019
Eland Oil & Gas PLC
("Eland" or the "Company")
Operational update and 2019 guidance
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 provide an update on operations and guidance for 2019.
Highlights
· Average production in 2018 was 8,000 barrels of oil per day ("bopd") net to Elcrest, more than doubling the 2017 average production of 3,934 bopd
· 2018 exit production rate of 13,240 bopd net to Elcrest (29,425 bopd gross), a record production rate for OML 40 and Eland. Peak record production of 13,986 bopd net to Elcrest (31,081 bopd gross)
· Ubima field tested at combined rates of up to 1,400 bopd net to Eland (3,500 bopd gross), with commercial production commencing soon
· The most active development period in the Company's history with seven wells drilled, re-entered and completed on the Opuama, Gbetiokun and Ubima fields
· Successfully refinanced existing reserve-based lending facility ("RBL") with the potential to increase to US$200 million (subject to production growth and reserves). Borrowing Base at $103m and currently $75m fully syndicated
· Year-end unaudited cash position of $42.6 million and net debt position of $4.7 million
· Post year-end 2018 the Company, via its operating entity Elcrest, has received $20 million from NPDC for its share of drilling costs for OP8 and OP9
Outlook
· 2019 production is expected to average in the range of 14,000 to 17,000 bopd net to Elcrest (post 15% budgeted downtime)
· 2019 capex guidance of $80 - 90 million net to Elcrest
· 2019 active development work programme targeting four new wells across Opuama and Gbetiokun
· Amobe exploration prospect, the Company's first pure exploration well, expected to spud at the end of Q2 2019, targeting best case gross resources of 78 million stock tank barrels1 ("MMstb"), with a 42% probability of success ("PoS")
· Commercial production from the Ubima field expected in H1 2019
· Post-period end two liftings are scheduled from the Forcados Oil Terminal for January and February totalling 678,000 barrels of oil
George Maxwell, CEO of Eland, commented:
"2018 was an exceptional operational year for Eland, with net production increasing some 60% from the start of the year to over 13,000 bopd by the year end, a record for the Company and for the OML 40 licence. Moreover, the Ubima field tested at combined rates of up to 1,400 bopd net to Eland and this is expected to enter commercial production in H1 2019. Gbetiokun will also provide a step-change in production as we forecast over 6,700 bopd net to the Company following commencement of the extended well test in Q1 2019.
This performance is a testament to the commitment of our exceptional staff and in-country partners, and I look forward to further operational success throughout 2019, which is shaping up to be a very busy period for the Company. The sharply higher production rates throughout 2018 have led to a strengthening of our financial position and we commence this year with a largely unused new debt facility and a strongly cash generative business, ensuring we are fully-funded for the next phase of growth."
Record production growth
Elcrest exited 2018 with a record production rate from OML 40 of 13,240 bopd (29,425 bopd gross), a 60% increase compared to end-2017 exit production rate. The Company drilled four highly successful infill wells on the Opuama field, which all contributed materially to production growth. These wells demonstrated rapid financial paybacks (averaging under three months) and benefitted from materially lower drilling costs and improved oil prices. Opuama is proving to be a truly outstanding asset, and we look forward to the continuation of its development.
As a result of the updated work programme outlined below, the Company expects 2019 average production to be in the range of 14,000 to 17,000 bopd net to the Company (post 15% budgeted downtime). The range in this forecast reflects the OES Teamwork rig retrofit, production performance from the Opuama field, timing uncertainty from the phasing of the Gbetiokun field, and the extended well test ("EWT") on the Ubima field. The production guidance range will narrow after each of these events.
Fully funded work programme
Following a highly successful 2018 the Company is targeting five wells in its 2019 drilling programme across Eland's world-class asset base. This programme includes four production wells on Opuama and Gbetiokun, and the Amobe exploration prospect on OML 40: the Company's first pure exploration well. The Company's operating environment remains conducive to the substantial investment planned.
OML 40
Opuama
As previously announced, the Company successfully drilled Opuama-11 in Q4 2018, the fourth well in Opuama to be completed in 2018, all of which are currently producing.
The Company anticipates undertaking a well intervention on Opuama-7 in Q1 2019 to isolate water producing reservoir sand and to recomplete on a shallower zone and thereby increasing overall oil production rates for this well. This intervention was deferred from Q4 2018 to improve overall recovery from lower zones prior to being isolated. The Company will undertake a workover on Opuama-1 in Q3 2019 after which two further Opuama production wells, OP-12 and OP-13, will be drilled in Q4 2019 helping offset the natural field decline in 2020.
Gbetiokun
The drilling of Gbetiokun-3 was successfully completed in early January 2019, with the Early Production System due online in Q1 2019. The Company also intends to complete a refurbishment of the OES Teamwork rig in Q1 2019. Following completion of the rig refurbishment in Q2 2019 the Company intends to further increase production by drilling two additional development wells, Gbetiokun-4 and Gbetiokun-5.
The development of the Gbetiokun field represents a step-change in Eland's growth and provides a material second producing asset within OML 40.
Amobe
Preparatory activities continue for the drilling of the Amobe exploration prospect in OML 40 with a rig move scheduled for Q2 2019, the first pure exploration well in the Company's history. The well is located only 6km from the Opuama flowstation allowing, in the event of success, for an accelerated development tied back to existing facilities. Netherland Sewell & Associates ('NSAI'), the Company's reserves auditor, carries a best estimate (P50) for resources from the Amobe prospect of 78 MMstb, with a 42% PoS and upside (P10) of 340 MMstb. The best-case basis would double the existing reserves of the Company.
Ubima
The Company, together with its partner All Grace Energy Limited, continues to appraise the Ubima field, following the strong initial test results at Ubima-1 in Q4 2018. The F7000 reservoir was tested at flow rates of up to 2,500 bopd gross (1,000 bopd net Eland, economic share 88% until payback reached) on a 24/60" choke, whilst the E1000/E2000 reservoirs flowed at 900 to 1,000 bopd gross (360 to 400 bopd net Eland) on a 28/64" choke. A dual completion has been installed and EWT production is expected to commence in H1-2019.
Ubima-1 provides Eland with a diversification of production outside OML 40 and opens a new operational leg in Rivers State, Nigeria, with ultimately different export routes than those from the OML 40 licence.
Financials
Eland ended 2018 in a strong financial position with a 2018 year-end unaudited cash position of $42.6million and a net debt position of $4.7 million. In November the Company announced that it had successfully refinanced its existing reserve-based lending facility with a new 5-year RBL facility currently syndicated to US$75 million, with the ability to grow this to $200m via an accordion, subject to incremental production and reserves.
Post period end two liftings are scheduled from Forcados Oil Terminal for January and February totalling 678,000 barrels of oil, which will provide a material boost to our short-term cash position.
We anticipate a capital expenditure programme during 2019 of $80 - 90 million net to the Company.
Post year-end 2018 the Company, via its operating entity Elcrest, has received $20 million from NPDC for its share of drilling costs for OP8 and OP9.
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 75km northwest of Warri and has an area of 498km².
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 83.4 mmbbls, gross 2C contingent resources of 40.4 mmbbls and a best estimate of 254.5 mmbbls of gross un-risked prospective resources*
The Ubima field holds gross 2P reserves of 2.4 mmbbls of oil and gross 2C resource estimates of 31.1 mmbbl**
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 2017
**AGR TRACS April 2016
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