16 Feb 2016 07:00
16 February 2016
Eland Oil & Gas PLC
("Eland" or the "Company" and, together with its subsidiaries, the "Group")
Operational update
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 following operational update:
George Maxwell, CEO of Eland, commented:
"The strong production performance from the Opuama field in OML40 continued throughout 2015, with production and uptime at record levels. Following a highly successful workover of Opuama-1 in Q4, production from the field increased by more than 50% to 4,500 bopd, and has remained at these higher levels since.
Following the successful work-over of Opuama-1, we now turn our attention to two further low capex, high production workovers on OML 40. We are excited by the prospect of completing the further workover opportunity on Opuama-3 within the next two months. This involves intervention on both production strings which we expect will increase gross production by a further 50 to 100 per cent. We also see the potential for re-entry, completion and production of Gbetiokun-1 well later this year. The successful completion of these two workover projects are expected to increase production on OML 40 without using a drilling rig and whilst the Opuama-5 production was disappointing, the anticipated incremental production gains from that well have been largely offset by the better than expected performance of Opuama-1.
At the year end of 2015 we had available cash of over $8m, having drawn only $15m of a $35m committed facility from Standard Chartered Bank. Our short-term focus on highly accretive workovers will insure that our capital expenditure requirements for 2016 remain modest.
Following the success of the Opuama-1 workover, we have placed renewed focus on low cost workover potential in the licence. It is most welcome that we have seen a material and sustainable increase in production from this initiative. With further workovers planned, we have a number of options to continue these production increases prior to commencement of the development drilling campaign. Whilst we await formal ratification of operatorship of OML40, our ability to substantially boost production via workover operations is extremely encouraging".
2015 HIGHLIGHTS
Operational
· Opuama exited the period with production at circa. 4,500 bopd (2,025 bopd net to Elcrest Exploration and Production Nigeria Ltd, Eland's joint venture company). Average uptime on the field remained high throughout the year and averaged 84%, with Q4 running at 82% uptime.
· Elcrest (Eland's joint venture company) recorded total liftings (unaudited) of 341,000 bbls of crude in 2015, a 195% increase on 2014. Elcrest has completed the loading and sale of 38,000 bbls so far in 2016.
· Elcrest undertook a highly successful workover on Opuama-1, which completed in November. A successful intervention in the field resulted in a material 50% increase in average gross production output to 4,500 bopd (2,025 bopd net to Elcrest)
· The Opuama-5 workover did not deliver the expected 400-600 bopd of incremental short term production from the E2000 reservoir due to higher than expected water cut and the well was shut in on the 20th of January 2016. However, the workover has provided valuable information on the E2000 reservoir, which will be a drilling target in future wells, while Opuama-5 will be utilised as a water disposal well which will result in significantly reduced tariffs and operating expenditure. In addition, the operational lessons learned resulted in increased efficiency during the recent Opuama-1 workover and have been incorporated in our planning of the forthcoming Opuama-3 workover.
Financial
· In 2015 the Company embarked upon a cost reduction programme in response to the falling oil price. We anticipate hitting our targeted reduction of 30% in operating costs by the end of Q1 2016.
· Cash and cash equivalents held as at 31 December 2015 of US$8.4 million (31 December 2014 US$15.0 million).
· A Reserve Based Lending (RBL) facility of up to $75 million was signed with Standard Chartered Bank to fund development of OML 40. Of this amount, $35 million has been committed. As at 31 December 2015, $15m had been drawn from the RBL. Due to their very attractive high production relative to capex spend, the workovers are excellent candidates to be worked into our Reserve Based Lending Facility.
Outlook
· The Opuama-3 workover is funded and scheduled for Q1-2016 and is expected to lead to a material increase in production from the Opuama field, which we believe could be in the order of 2,000-4,000 bopd (on a gross basis). Following detailed technical work, including interference testing in January 2016, it is planned to initiate production from the undeveloped D1000 Upper and D2000 reservoirs. Both are high quality reservoirs containing light oil and are at original (D1000 Upper) or near-original (D2000) conditions. The new zones will be perforated using a state of the art directional perforating system and are expected to flow at up to 2,000 bopd each.
· We are also currently evaluating the re-entry, completion and production of Gbetiokun-1 well, whilst continuing our evaluation and execution of additional work-over opportunities on OML 40.
· To the east, in OML 17, we are considering options of achieving early production at low cost from the Ubima Field discovery by re-entering, completing and producing well Ubima-1.
For further information:
Eland Oil & Gas PLC (+44 (0)1224 737300)
www.elandoilandgas.com
George Maxwell, CEO
Louis Castro, CFO
Finlay Thomson, IR
Canaccord Genuity Limited (+44 (0)20 7 523 8000)
Henry Fitzgerald O'Connor
Wei Loon Yap