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 results of a new competent persons report (“CPR” or “Report”) provided by Netherland, Sewell & Associates Inc. (“NSAI”) as at 31 December 2018.
OML 40 licence
|·||Gross OML 40 Reserves, following 2018 gross production of 6.5 million barrels of oil:|
|–||Proved (“1P”) of 42.9 million barrels (“MMB”), an increase of 8% since the 31 December 2017 CPR|
|–||Proved plus Probable (“2P”) of 82.2 MMB, a 1% decrease|
|–||Proved plus Probable plus Possible (“3P”) of 116.8 MMB, a 1% decrease|
|·||Eland’s Net (Entitlement*) Present Value at a10% discount rate with a flat price deck of $71.16 per barrel of oil|
|–||1P of US$ 473.9 million, an increase of 68.2%|
|–||2P of US$ 568.9 million, an increase of 35.7%|
|–||3P of US$ 620.7 million, an increase of 28.1%|
* Net entitlement is based on treating Eland funding of the Starcrest Nigeria Energy Limited share of Elcrest E&P Nigeria Limited as a carried working interest, resulting in an Eland participating interest of 45 percent before payout of the loans and 20.25 percent after payout.
Since the previous independent CPR for OML 40 which had an effective date of 31 December 2017, the Opuama field has produced 6.5 million gross barrels of oil.
Despite record Opuama field production, proved oil reserves increased by 3.3 million barrels. The minor reduction in 2P reserves reflects that the Opuama field proved plus probable reserves replacement, as a result of the 2018 drilling campaign, has been limited to approximately 80% of production volumes. Eland will continue to assess reservoir performance of the current well stock with a view to identifying volumetric upside potential, particularly in the flank areas of the field.
NSAI has also increased its estimates of Contingent Resource (2C) for OML 40 by 25% from 40.4 million barrels to 50.7 million barrels of oil gross. This increase follows a re-evaluation of the 1989 Abiala-1 discovery leading to an upward revision from 16.1 million barrels to 26.4 million barrels gross of oil. Eland expects to drill an appraisal well on Abiala in 2020. The upside (3C) estimate for Abiala is 80.5 million barrels gross recoverable.
The 2P NPV10Net (Entitlement*)ascribed in the CPR of $569 million has risen significantly from the prior year. This change is mainly driven by commercial and development assumptions, such as a higher oil price deck, updated work programme and development costs, changes in the fiscal tax rate and for the first time the value of Elcrest’s tax losses incurred while the Company was in Pioneer status. The tax losses, including capital allowances, as at 31 December 2018 will be utilised over the coming years with the effect of deferring Petroleum Profits Tax (PPT) payable in Nigeria. In addition, it is the view of our tax advisors that the Company will benefit from the existing new entrant tax rate of 65.75% for five years following the end of Pioneer status period which ends on 30 April 2019. The NSAI report previously included the assumption that the Company would be liable for Petroleum Profits at 85% following the end of Pioneer status.
Ubimalicence(Eland Working Interest 40%)
|·||Gross Ubima Reserves|
|–||Proved (“1P”) of 6.2 million barrels, an increase of 634%|
|–||Proved plus Probable (“2P”) of 9.3 MMB, an increase of 285%|
|–||Proved plus Probable plus Possible (“3P”) of 13.1 MMB, an increase of 298%|
|·||Eland’s Net (Entitlement) Present Value at a10% discount rate with a flat price deck of $71.16 per barrel of oil|
|–||1P of US$ 17.2 million, an increase of 673%|
|–||2P of US$ 31.4 million, an increase of 200%|
|–||3P of US$ 39.7 million, an increase of 165%|
The most recent CPR for the Ubima licence had an effective date of April 2016. At this time AGR TRACS International Limited estimated gross 2P reserves of 2.4 million barrels of oil. In 2018 Eland and its partner successfully re-entered and tested the Ubima-1 discovery well. The new CPR by NSAI estimates gross 2P reserves of 9.3 million barrels representing an almost fourfold increase. NSAI also calculates an NPV net to Eland of over $31 million compared to $10m in the previous CPR.
Aggregated across both licences, the 1P and 2P Reserves Replacement Ratio are 233% and 188% respectively.
George Maxwell, CEO of Eland, commented:
“I am pleased to announce updated CPRs for the Company’s OML 40 and Ubima licences. These show great progress in both licences, is a testimony to the high quality of the assets and also the significant investments we have made in each. After such a successful year with record production volumes it is very satisfying to record a 2P Reserves Replacement Ratio of 188%.
We have always believed that OML 40 had significantly more to offer than simply the Opuama and Gbetiokun fields. We will be drilling our first near field exploration well on the licence later this year with the Amobe prospect, followed next year by appraisal drilling on Abiala. These two wells have the potential to more than double the licence’s current 2P reserves base. At Ubima, I look forward to the initial phase of development for this field in 2019 following the fourfold increase in reserves estimates.”
I am delighted that the CPRs ascribes a value for Eland’s share of 2P reserves in OML 40 and Ubima of approximately $600 million, suggesting there is still material potential upside within the Company”.
Source: Eland Oil & Gas