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Thursday, April 28, 2016
Eland Oil & Gas released the results of the reserves and resource evaluation conducted by Netherland, Sewell & Associates (NSAI) for the Gbetiokun-1 on Nigeria’s OML 40. NSAI estimates STOIIP in the E2000 and E6000 reservoirs in OML 40 to be 25.87 and 12.77 MMstb respectively, increases of 73% and 45% compared to its previously announced estimates in June 2014.
In its previous evaluation, NSAI estimated STOIIP in Gbetiokun, within OML 40, to be 81.16 MMstb, with gross Reserves of 4.7 (1P) – 25.8 (2P) – 32.3 (3P) MMstb. Given that NSAI has significantly increased its estimate of STOIIP in the E2000 and E6000 reservoirs in its March 2016 report, Eland expects its estimate of full field STOIIP and reserves to also increase when NSAI updates its assessment of Gbetiokun as a whole later this year.
In addition, Eland said that following the successful re-entry of Opuama-3 it intends to initiate production by the use of an Early Production System (EPS) in H2. This is the initial stage of a planned phased development of the Gbetiokun field. The capex associated with this initial phase is estimated by Eland at $14.5 million (net: $6.5 million) which is roughly equally split between re-entry and facilities costs. Eland’s joint-venture subsidiary Elcrest Exploration and Production Nigeria Ltd holds 45% equity in the OML 40 license.
On its current financial position, the company said it had a cash balance of $5.7 million, with the last crude oil sale taking place at the end of January. The amount drawn under the debt facility with Standard Chartered Bank remains at $15 million. The company’s borrowing base, of its committed $35 million facility, currently stands at $25.4 million (previously $35m and re-determined downward on a lower oil price deck) and will be re-determined next in June 2016 where, based on current oil prices, it is expected to improve. This is further enhanced where the lenders can have regard to the higher flow rates from Opuama-3 workover and to the improved reserves base pursuant to the Gbetiokun CPR and the planned Gbetiokun-1 well mentioned in this announcement. Upon completion of this re-determination the company intends to continue, in conjunction with Standard Chartered Bank, with the syndication of the facility up to $75 million.
George Maxwell, CEO of Eland, commented: “Following the recent success of the Opuama-3 re-entry well on license OML 40, we are now keen to accelerate the first phase of development of the Gbetiokun field with Gbetiokun-1 being an excellent candidate to continue our strategy of cased hole workovers.
“We believe that we can commence production before the end of the year, with the Competent Person’s Report predicting initial oil flow rates of 7,800 bpd on a gross basis. We are highly encouraged that NSAI calculate a Present Worth net to Eland of almost $44 million for the first phase alone, from an investment of only $6.5 million. Alongside our recently announced CPR for the Ubima field, we believe we are well positioned to materially accelerate oil production and cash flows over the coming twelve months.”
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