TIDMELA
RNS Number : 7469D
Eland Oil & Gas PLC
11 July 2016
11 July 2016
Eland Oil & Gas PLC
("Eland" or the "Company")
Operations 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 provide an operational update for
the six months ended 30 June 2016.
Highlights
- Work on two supplementary and independent export routes to diversify crude deliveries:
o Barging proposals have been received from a number of vendors
to allow shipping of oil from the Opuama flowstation to a tie in
point on the Benin River and via a shuttle vessel from the Benin
River to an offshore FSO
o Implementation of the barging solution remains subject to
agreement of terms with barging vendors and crude oil offtakers and
timing of the Forcados terminal ("Forcados") restarting
o Pipeline survey has commenced to identify the optimal route
for a 6 km pipeline into a nearby terminal, as a direct extension
from the existing OML 40 JV's export pipeline
- Following successful workover operations, the testing of
Opuama-3 well achieved a combined initial flow-rate from two
separate horizons of over 10,500 bopd under three separate
sequential production tests, materially ahead of expectations
- Following flow rate optimization, combined production from
Opuama field is expected to reach over 10,000 bopd when
re-started
- Maintenance activity and equipment re-certification at the
Opuama Flow Station have now been completed to ensure high
equipment uptime once Forcados comes back on line
- Engineering work was completed on a de-watering initiative to
maximise ullage of our production and reduce operating cost per
barrel by shipping dry crude instead of wet crude from Opuama
- Ubima field CPR with gross 2P Reserves of 2.4mmbbl (net:
1.1mmbbl) to the Ubima-1 early production system and 2C Contingent
Resources of 31.1mmbbls (net: 13.1mmbbls) to the full field
development plan
- Gbetiokun-1 early production system, OML 40 CPR with gross 2P
Reserves of 10.8mmbbls (net: 3.9mmbls)
- Active 2016 work programme including:
o Re-entry and completion of Ubima-1 targeting four oil zones to
prove up the contingent resources and move towards the early
production system scheduled for H2 2016
o Re-entry, completion and production of the Gbetiokun-1 well to
commence in H2 2016
o Development of supplementary production export routes
- Strong un-audited cash position of $20.6 million as of 30 June 2016.
o Successful equity placing of $18.5 million in April 2016
increased from the base size of $15 million, priced at a premium to
the previous closing mid-market price.
o Prepayment sale of production to Shell of $3.0 million in
April 2016
o As at 30 June 2016 the position of the reserved based lending
facility ("RBL Facility") with Standard Chartered Bank remains
unchanged. Drawdowns to date amount to $15 million and the Company
does not intend to make any further drawdowns this year in order to
execute it's outlined work programme.
- Average first half production up to the point of Forcados
shutdown in February of 4,230 bopd gross based on production days
(H1 2015: 2,190 bopd) with 38,200 bbls of crude oil lifted in the
period (H1 2015: 163,100 bbls)
George Maxwell, CEO of Eland, commented
""Despite the challenging market conditions, Eland has made
considerable progress so far in 2016 as we continue to deliver on
our low cost well re-entry strategy to sharply grow our production.
During the period we have successfully raised $18.5 million,
boosted our 2P reserves following the upgrades at Gbetiokun-1 and
Ubima and demonstrated the potential to double our production rates
again following a successful workover at Opuama-3 which had initial
flow-rates of over 10,500 bopd.
"We continue to execute the outlined work program presented
during our recent fund raise and have used the recent production
downtime due to the Forcados Terminal shutdown to accelerate our
Planned Preventative Maintenance program and improve the efficiency
and reliability of the Flow Station. These actions will reduce
operating costs and progress the diversification of export routes
available to the Company through the proposed Benin River tie-in
access for barging options and an additional 6 km pipeline to
provide access to an alternative terminal.
"We have an active work programme in the second half of the year
which includes the re-entry of Ubima- 1 to accelerate the
development of this asset, and achieve early production and the
re-entry of the Gbetiokun-1."
Diversification of export routes
Forcados remains shut-in due to sabotage and the Company is
awaiting a further update from the Operator as to when it will
become operational. To alleviate the Company's single export route
option, Eland has identified two supplementary and independent
export routes to diversify its crude deliveries:
-- A barging option utilising a tie-in point on the Benin river
-- A dedicated 6 km pipeline extension directly into a nearby terminal
The Company is making good progress in the delivery of the
tie-in point at Benin River to allow shipping of oil via a shuttle
vessel from the Benin River and then on to an alternate terminal.
Barging proposals have been received from a number of vendors and
the Company expects to implement the barging of production subject
to economics and the timing of Forcados restarting.
The Benin River tie-in will also be used for the injection of
additional oil production from the planned Gbetiokun-1well
delivered by barge via a short route along the Benin River.
A bid for the pipeline survey has commenced to identify the
optimal route for the 6 km pipeline into the nearby terminal
directly linked from the OML 40 JV's export pipeline.
On completion the Company will have production security with
three evacuation routes for its OML 40 crude oil.
Opuama
Elcrest successfully re-completed the Opuama-3 well in April
2016, achieving a combined initial flow-rate from two separate
horizons of over 10,500 bopd and successfully shutting off 1,500
bbls water production confirmed with three separate sequential
production tests. The well, which produced materially ahead of
expectations, initiated production from the D1000 Upper and D2000
reservoirs for the first time, as well as providing valuable field
data for future workover and development activities. The combined
production from Opuama Flow Station is expected to reach in excess
of 10,000 bopd when re-started and flow rates have been
optimised.
Since the Forcados shut down, the Company has used the downtime
to perform critical maintenance activity and equipment
re-certification at the Opuama flow-station, which have now been
completed. This will ensure high equipment uptime once Forcados
comes back on line.
In addition, work has been completed to maximise efficiency of
our production and reduce operating cost per barrel. Dewatering of
Opuama production currently takes place at Forcados at a cost in
the region of $2.50 per/bbl. Our full de-watering initiative, in
conjunction with the water shut off work completed on Opuama 3 will
considerably reduce operating costs and allow production and
transport of dry crude.
Ubima
In April 2016, AGR TRACS International Limited ("TRACS")
assigned 2P Reserves of 2.4 mmbbl (net: 1.1 mmbbl) to Ubima 1, and
2C Contingent Resources of 31.1 mmbbls (net: 13.1 mmbbls) to the
full field development.
Following the publication of the Ubima CPR the Company announced
plans to accelerate the development of this asset, and achieve
early production with its partner AllGrace Energy by re-entering,
completing and producing Ubima-1.
Site clearance and well site preparation is under way utilising
local community contractors. Tenders have been issued for well and
rig services and a rig has been identified for award of contract.
The Company expects to commence re-entering and completing Ubima-1
in second-half 2016 and will be targeting four oil zones to prove
up the contingent resources and produce through an early production
system.
Production from the Ubima Field will diversify the Eland
portfolio, bringing in a secondary cash flow stream while
appraising the larger upside on the block, and remains an exciting
opportunity for the Company in the second half of 2016.
Gbetiokun-1
In April the Company announced the results of a Reserves and
Resources evaluation on Gbetiokun-1, OML 40, provided by Netherland
Sewell as at 31 March 2016 which assigned 2P reserves of 10.8
mmbbls (net: 3.9 mmbls) and oil-in-place estimates for E2000 and
E6000 on OML 40 to be 25.9 and 12.8 MMstb respectively, increases
of 73% and 45% compared to its previously announced 30 June 2014
evaluation.
The net proceeds of the placing successfully completed in April
are in part to be used to fund the re-entry, completion and
production of the Gbetiokun-1 well. The Company alongside our
partner NPDC have commenced tendering on the procurement process
and we are on track to commence operations in H2 2016.
Financial
At 30 June 2016, the Company had a strong un-audited cash
position of $20.6 million and is fully funded for its 2016 work
programme.
As at 30 June 2016 the position of the RBL Facility through
Standard Chartered Bank remains unchanged. Drawdowns to date amount
to $15 million and the Company does not intend to make any further
drawdowns this year in order to execute it's outlined work
programme.
In April 2016 the Company announced that it had successfully
undertaken an equity placing which raised gross proceeds of $18.5
million increased from the base size of $15 million owing to strong
investor demand. The placing was executed at a price of 34p/share
which was a premium to the previous closing mid-market price.
The net proceeds of the Placing will be used:
- to fund the re-entry, completion and production of the
Gbetiokun-1 well, an existing discovery within the OML 40 licence
and the Ubima-1 well, an existing discovery within the Ubima
block;
- to develop a supplementary export route for OML 40 production; and
- for working capital purposes.
In May 2016, the Company made forward sales to its offtake
partner, Shell Western Supply and Trading Limited, which has
yielded a further $3 million in part to cover any further potential
interruptions at the Forcados Terminal.
Management
Olivier Serra joined the board of Eland as an Executive Director
and CFO in May 2016 following the departure of Louis Castro.
This announcement may contain inside information
For further information:
Eland Oil & Gas PLC (+44 (0)1224 737300)
www.elandoilandgas.com
George Maxwell, CEO
Olivier Serra, CFO
Finlay Thomson, IR
Canaccord Genuity Limited (+44 (0)20 7 523 8000)
Henry Fitzgerald O'Connor
Nilesh Patel
Panmure Gordon (UK) Limited (+44 (0)20 7 886 2500)
Adam James / Atholl Tweedie
Tom Salvesen
Camarco (+44 (0) 203 757 4980)
Billy Clegg / Georgia Mann
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
OML 40 located in the Northwest Niger Delta approximately 75km
northwest of Warri and covers an area of 498km(2). In addition, the
Company has a 40% interest in the Ubima Field, onshore Niger Delta,
in the northern part of Rivers State and has been carved out of OML
17.
The Company's strategy is to sharply grow its production base
through low cost operations and well re-entries. Since November
2015, the Company has delivered a three-fold increase to its
production base from the Opuama field in OML 40 through a number of
lower-cost workovers and the field most recently produced at over
4,400 bopd (exit 2015). The Company's current export route is via
the Forcados terminal and is currently working on adding two
supplementary evacuation routes to diversify its crude
deliveries
The OML 40 licence area holds gross 2P reserves of 83.2 mmbbls,
gross 2C contingent resources of 41.2 mmbbls and a best estimate of
254.5 mmbbls of gross unrisked prospective resources. The Ubima
field holds gross 2P reserves of 2.4 mmbbl of oil and gross 2C
resource estimates of 31.1 mmbbl.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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