Petroleum Africa
Find us on: 
Monday, August 18, 2014
Eland Oil & Gas reported that Wester Ord Oil & Gas Ltd., a wholly owned subsidiary of Eland, has agreed to acquire a 40% participating interest in the Ubima Field in Nigeria from Allgrace Energy Ltd. Wester Ord entered into the farm-in agreement with Allgrace for a 40% interest and as consideration for the assignment, will pay a signature bonus of $7 million to Allgrace and, contingent on production and receipt of ministerial consent to the transfer of the participating interest, a production bonus of $3 million.
Wester Ord also entered into a separate commercial agreement to fund the initial work program. The terms of this agreement entitle Wester Ord to 88% of production cash flow from Ubima until the costs have been recovered. According to Eland the most recent independent 2C resources estimate for the field is 34 million barrels of oil. The estimate was prepared by AGR TRACS. The field also has a resource estimate of 66.9 million barrels of oil with an extra 2C resource estimate of 97 Bcf of non-associated gas in two reservoirs.
Ubima lies onshore in the northern part of Rivers State and has been carved out of OML 17, which is held by NNPC, SPDC, Total E&P Nigeria Ltd., and Nigerian Agip Oil Company Ltd. The field has 3D seismic coverage and four wells have been drilled in the field between the 1960s and 1981 with hydrocarbons being encountered in all four wells in multiple stacked reservoirs.
The Ubima 1 well was suspended and identified for completion and production by the previous operator, but this program was not executed and Wester Ord is planning to re-enter this well and perform an extended production test; oil produced will then be trucked to the nearest sales point prior to the Ubima export pipeline being in place.
The company believes that an initial four development wells can be drilled and put into production nine to 12 months from commencement of the full work program. The full work program is estimated to require development capital expenditure of $125 million, however a proportion of this is anticipated to be met from early cash flows from the extended production test.
The company will guarantee the obligations of Wester Ord under the farm-in agreement and the signature bonus will be paid from existing cash resources. The company is currently in discussions to increase the existing debt facilities to fund the Ubima development. The completion of the transfer of the 40% participating interest from Allgrace to Wester Ord is contingent on the approval of the head-farmors and the Nigerian Minister of Petroleum Resources. Pending receipt of ministerial consent to transfer the 40% participating interest, Wester Ord will exercise the rights and benefits of its 40% interest in Ubima via the Financial and Technical Services Agreement which takes effect from completion.
The Ubima Field was awarded to Allgrace by Nigeria’s DPR in 2011. The award also included a commitment to develop viable small scale gas utilization project within 30 months of commencement of production. This could include a small-scale power generation project where the availability of electricity in rural areas is severely restricted. Since the award Allgrace has conducted no work on the Ubima Field and therefore there are currently no profits/losses attributable to Western Ords acquisition of 40% of the field.
As a designated marginal field, Ubima will benefit from attractive fiscal terms available in Nigeria as part of the government indigenization program.
Leslie Blair, CEO of Eland, commented: “The acquisition of Ubima is a very attractive and accretive deal for Eland on very positive terms. As the Technical and Financial Partner we will be able to lead the development and move quickly to bring these assets into early production generating strong cash flow for the benefit of all stakeholders.”
" alt="First LNG Realized at the Greater Tortue Ahmeyim Project">
" alt="United Energy Acquires Western Desert Producer APEX">
" alt="Baker Hughes Announces Major Gas Technology Orders for Venture Global LNG">
" alt="ReconAfrica: Naingopo Results Demonstrate a Working Petroleum System">
" alt="Tullow Highlights 2025 Operational Plans in Ghana">
" alt="TotalEnergies to Supply 1.5 TWh to STMicroelectronics in France Over 15 years">
" alt="Rockhopper Reaches Final Settlement with United on Egypt’s Abu Sennan Concession">
" alt="Oil & Gas Crucial for African Growth: AEC Calls for Industry Support to Defend African Market">
