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 provide an operational update for the six months ended 30 June 2017 (the “Period”).
· Production of oil from OML 40 recommenced in January 2017, with the oil being exported by ship to a floating storage vessel (FPSO) located offshore. Export by ship continued until 24 May when export by pipeline to the Forcados oil terminal resumed. The option remains to resume export by ship should interruption to export via Forcados reoccur.
· Since export via Forcados resumed, there have been over 56 days of production, at an average rate for producing days of over 11,400 barrels of oil per day (bopd) gross (5,130 bopd net *), the highest level of production since 1977 on OML 40. More than 600,000 barrels of oil were produced in this period into the Facardos terminal since 24 May, with only 5.3% downtime for maintenance during this time.
· Total gross production from OML 40 in the first six months of 2017 was 954,728 barrels of crude oil 429,627 bbls net*). Average production in the Period was 5,275 bopd gross (2,374 bopd net*). Average production for producing days during the Period was 9,454 bopd gross (4,254 bopd net*)
· Strong unaudited cash position of $22.35 million at 30 June 2017
o Successful equity raise of $19.5 million in June 2017
o A total of 225,000 barrels of crude lifted from Forcados terminal since export via this route resumed, with funds of approximately $9.9million expected to be received in the coming week.
o Reserves Based Loan (RBL) facility with Standard Chartered Bank remains unchanged at $23.9 million at the Period end, with only $15million currently drawn.
· Updated Competent Persons Report (CPR) for four wells in OML 40 in June 2017 trebled the estimate of gross 2P reserves that will be produced by these wells to 33 MMstb oil.
· Fully funded near-term work programme commencing with the sidetrack of existing well Opuama-7 in August which is forecast to increase gross production by 5,900 bopd (2,655 bopd net*), increasing near term production from OML 40 to about 17,500 bopd gross (7,875 bopd net*).
George Maxwell, CEO of Eland, commented:
“I am pleased to report that the first six months of 2017 have been incredibly successful and busy period for the Company with record high production levels achieved, an oversubscribed placing raising $19.5million and the creation of diversification of our export routes.
“As we enter the second half of 2017, we are fully funded for the drilling of Opuama-7 and the additional well we have the option for under the rig contract, with Opuama-7 alone due to increase current production by 50% this quarter. We intend to use the resulting increase in cashflows to fund the further development of our asset base in the Niger Delta and I am hugely excited by the momentum currently being created within the business.”
Average production in the Period was 5,275 bopd gross (2,374 bopd net*). Average production for producing days during the Period was 9,454 bopd gross (4,254 bopd net*). Daily production increased to 11,473 bopd gross (5,163 bopd net*) , during June 2017 from two wells, Opuama-3 and Opuama-1, following the recommencement of export via Forcados on 24 May 2017. Production operations have subsequently been maintained with only 5.3% downtime for maintenance since 24 May 2017 and over 56 days of production recorded. No non-producing days have been recorded since 1 June 2017.
Diversification of export routes
The Company acted decisively following the shut-in at Forcados by developing an alternative export solution and successfully implemented the export of its crude from the Opuama Field through shipping to a secure offshore FPSO facility via the Benin River at the beginning of the year. During the period, nearly 520,000 barrels of oil were successfully delivered using this route.
The export of crude via Forcados recommenced on 24 May 2017 and shipping operations subsequently ceased. The Company’s shipping system is readily repeatable as and when required.
Preparatory work has begun on the installation of a Lease Automatic Custody Transfer unit (“LACT unit”) at OML 40’s custody transfer point with the Trans Escravos Pipeline (“TEP”). The LACT unit and accessories were shipped on the 23 June and expected to arrive in Nigeria by the end of July. The installation contract has been executed and installation work is to commence on delivery to the crude export custody transfer point at Otumara. With the LACT in place the Company will have more accurate measurement of crude transferred at the fiscal transfer point and preserve optimal value of crude export payments from transportation to Forcados.
In early 2017 the Company’s commissioned a CPR on the Opuama-1, Opuama-3, Opuama-7 and Gbetiokun-1 wells, which trebled the estimate of gross 2P reserves that will be produced from these wells to 33 MMstb oil.
Following the Company’s successful oversubscribed placing in June 2017 Eland accelerated the commencement of the workover and side-track of the Opuama-7 well. Its joint venture company, Elcrest Exploration and Production Nigeria Ltd (“Elcrest”) has signed a rig contract with OES Energy Services Limited (“OES”), for the OES Teamwork Rig for the well. The rig is undergoing its final rig inspection before being ready to be mobilised to the Opuama field this month and drilling is expected to commence in August 2017. The side-tracking of the existing Opuama-7 well is expected to initially produce at about 5,900 bopd gross, increasing near term production from OML 40 to nearly 17,500 bopd gross (7,875 bopd net*).
Eland successfully completed an equity placing in June 2017 raising gross proceeds of approximately $19.5 million at a price of 55 pence per share. At 30 June 2017, the Company had a strong un-audited cash position of $22.35 million and is fully funded for its 2017 work programme.
At the end of the Period, the position of the RBL Facility through Standard Chartered Bank remained at $23.9 million with only $15 million currently drawn from the facility. A re-determination of the facility has commenced and is expected to complete in September 2017.
225,000 barrels of oil have been lifted since resumption of operations at Forcados Terminal by Elcrest’s offtake partner, Shell Western Supply and Trading Limited (“Shell”) with funds of approximately $9.9million expected to be received in the coming week, $3 million of which has been applied to settled the Shell prepayment as reported at full year results.
Final revenue receipts from shipping and settlement of associated amounts due to shipping contractors are expected to be concluded within the next month resulting in net increase in c $2m to the Company’s cash balance.
Source: Press Release