Petroleum Africa
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Tuesday, February 25, 2020
ADM Energy has entered into a sale and purchase agreement with EER (Colobus) Nigeria to acquire, subject to satisfaction of certain conditions, a participating interest of 2.25% from EER in oil mining lease OML 113, which includes the Aje field, in which it already has an interest of 2.7%.
Consideration for the acquisition is $3,000,000, to be satisfied by the issue of $2,000,000 of new ordinary shares at 7 pence per share and $1,000,000 in cash at the time of completion.
Highlights of the Agreement
ADM will acquire 25% of the interests, rights and obligations held by EER in the Block subject to conditions and on completion, ADM’s participating interest will increase to approximately 4.9%. Corresponding revenue and cost bearing interests will increase to 9.2% and 12.3% respectively and upon completion, ADM’s net 2P reserves will increase from 8.9 MMboe (as announced on 2 May 2019) to 16.4 MMboe. The post completion, net daily production is expected to increase to approximately 273 bopd from 148 bopd
OML 113 covers an area of 858 sq km in the western Nigeria offshore Dahomey basin, some 24 km south of the coast and 64km from Lagos, in water depths ranging from 100 to 1,000 meters. The West African Gas Pipeline (WAGP) intersects the northwest part of the license. There are currently five partners in the licence: Yinka Folawiyo Petroleum Company Limited, New Age Exploration Nigeria Limited, Pan Petroleum Aje Limited, EER and ADM.
Completion of the transaction is conditional upon the consent of the Nigerian Minister of Petroleum Resources for the transfer of the interest from EER to ADM. Subject to completion, ADM will acquire 25% of the interests, rights and obligations held by EER in the Block such that, on completion, ADM’s participating interest will increase to 4.9% with corresponding revenue and cost bearing interests increasing to 9.2% and 12.3% respectively. Further, ADM shall be responsible for a corresponding interest in EER’s alleged outstanding disputed unpaid cash calls with the operator of the Block which, for ADM as a purchaser of 1/4 of EER’s interest in the Block, represents approximately $1,500,000 plus applicable interest. Subject to verification through audit, should it be determined that all or a portion of the outstanding cash calls are due, it is the intention that any sums deemed outstanding by the partners will continue to be settled from production revenue at the project level.
It is expected that the requisite consents and authorizations may take a number of months to be received such that a long stop date of 180 days after signing of the Agreement has been agreed, following which either party is entitled to terminate the transaction.
Osamede Okhomina, CEO of ADM, said: “’In keeping with our strategic development agenda, I am pleased to announce our first investment under the Company’s new leadership. OML 113 is well known to us and it is a fantastic asset that covers the spectrum of field types from current oil production to several appraisal plays. It is also very wet-gas rich which provides the potential for the operator to be able to bring into the market, alongside dry gas, resources like condensate and LPG.
“As envisaged under the intended Strategic Alliance signed earlier this month, we have proposed this project as one Trafigura may consider investing in. We look forward to updating the market further in due course.”
Yinka Ogundare, CEO of EER, commented: “We are very pleased with this transaction that was structured to help further consolidate our working relationship with ADM. The transaction would result in deepening our collaborative relationship and help the partners and the operator develop the asset further.”
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