Eland Oil & Gas PLC (AIM: ELA), an oil and gas production and development company operating in West Africa with an initial focus on Nigeria, is pleased to announce the following update.
George Maxwell, CEO of Eland, commented:
“Despite a challenging market environment, Eland ended 2016 on a highly positive note and has since, through Elcrest, reached record production levels from OML 40 onshore Nigeria.
“We have made strong progress in 2017 and are confident of the next phase of our growth as we continue to deliver our low cost workover programme which has the potential to more than double our current production once again.”
2016 highlights and 2017 developments
· Challenging year due to prolonged Forcados shut-in and reduced revenues, requiring careful working capital management.
· Cash currently at $6 million with active working capital management to bridge return to Forcados pipeline cash flows.
· Successful equity placing in April 2016 raised $18.5 million (gross) to support the planned work programme.
· $15m of the Reserve Based Lending (“RBL”) facility with Standard Chartered Bank had been drawn down by 31 December 2016. The borrowing base amount was $25 million in 2016 with $3.5 million held in reserve until return to production. The facility underwent a redetermination in early 2017 with the borrowing base confirmed at $23.9 million, and the $3.5 million reserve requirement released.
· Elcrest continues to benefit from Pioneer Tax status in respect of OML 40. Elcrest is exempt from paying Petroleum Profits Tax during the Pioneer period and in addition has an estimated $433 million tax loss pool subject to agreement by the Nigerian tax authorities to be utilised to offset future taxes.
· Elcrest has recognised a $17.25 million liability to its local shareholder for management fees accruing since inception and invoiced subsequent to the period. Elcrest’s liability to Eland for the same had already been recorded. Therefore, Eland, through its subsidiary Westport, now has an amount to recover from Elcrest of $380.2 million in principal and interest as at 31 December 2016 and remains the sole secured creditor.
· The Opuama field in OML 40 recommenced production in January 2017 at initial rates of c.10,000 bopd from a single well before stabilising at 8,500 bopd.
· Updated CPR for four wells in OML 40 which trebled gross 2P reserves to 33mmbbl of oil.*
· Eland has reacted decisively to the shut-in at Forcados by developing an alternative export solution, with c.500k barrels of crude having been exported via shipping to an offshore FPSO. Multiple cargoes have been delivered in the year to date. This followed an 11-month hiatus for the field caused by the shut-down of the Forcados terminal.
· Eland has recently returned to production in May 2017 via Forcados with c.11,500 bopd produced from 2 wells (Opuama-1 and Opuama-3).
· Following the highly successful workover on Opuama-3 in April 2016, Eland now plans to perform a sidetrack on Opuama-7 in early H2 2017, potentially boosting production from the field by a further 6,000 bopd gross.**
· The Company also plans to complete an Early Production System (EPS) on Gbetiokun-1 in OML 40 with a well recompletion planned for H2 2017. This could contribute an initial gross 7,800 bopd to OML production.**
· An EPS on the Ubima field is planned to follow with the re-entry and completion of Ubima-1 potentially contributing production of 2,500 bopd.**
· Expected 2017 near-term production rate of 17,500 bopd, which will be driven by the phasing of, and flow rates from, Opuama-7. Further upside remains after Gbetiokun-1 and Ubima-1 brought on stream.
· Continue to focus on cost reductions and working capital management as further discussed in the CFO statement.
Source: Press Release