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Tuesday, March 12, 2019
United Oil & Gas (UOG) signed an option agreement with Elephant Oil to farm in to their Block B onshore acreage in Bénin, potentially taking a 20% interest in the PSC. UOG was established in 2015 by former Tullow Oil team members, thus the Benin acreage is right in their bailiwick of experience.
Under the farm-in option agreement, UOG has agreed to fund passive seismic and field studies up to a value of $175,000. The completion of the passive seismic program is being targeted for April. The goal of the proposed work program will be to calibrate the depth to basement and obtain further information on the oil and gas seeps. This will further de-risk maturity and migration in the area ahead of the completion of a final decision to exercise the farm-in option.
If UOG chooses to exercise the option, then it will farm into the PSC for a 20% interest and will be responsible to fund 30% of the non-drilling and 20% of the drilling costs in the Phase 1 work program as approved under the PSC. It would also pay Elephant the sum of $260,000, representing one quarter of the pro rata (20%) past costs expended by Elephant on the prospect, with the remaining $780,000 paid in three equal six monthly instalments.
The Bénin Onshore Block B is located in the Dahomey Embayment (Coastal Basin) and covers an area of 4,590 sq km. The Dahomey Embayment of onshore Benin is a frontier area, with no wells drilled in it to date. However, the license is surrounded by prolific hydrocarbon producing regions, and there are excellent positive indications of a working petroleum system. Not only has a working system been demonstrated in the Shelfal area offshore Benin – with the Seme and Dahomey fields containing approximately 100 mmbbls of reserves, but wells drilled along the coast in the same Dahomey Embayment onshore Ghana and Nigeria have encountered hydrocarbons. Oil and gas seeps have been reported from water wells within Benin Block B, and an extensive tar belt, potentially indicating the migration of oil through the targeted Cretaceous stratigraphy of Block B, has been reported to the north east of the area.
At this point, the Block B license data is limited to a single seismic line and a CGG-acquired airborne Falcon Gravity Gradiometer survey. This data suggests the presence of numerous large structures in the license, with the potential to hold >200mmbbls. The Allada structure has already been identified by Elephant Oil as a prospect.
Commenting on the deal, UOG CEO Brian Larkin said “We are delighted to take a position in this exciting new opportunity. The new license is a great fit with the United business model, where we are continuing to build a portfolio of near-term low risk assets and a viable producing business based in Europe, with carefully selected frontier exploration licenses with transformational upside in South America and Africa.
“United has, for some time, stated that our technical and commercial teams have been actively assessing a number of new opportunities that are development and production focused. Indeed, a number of these more mature opportunities are under NDA and nearing advanced stages of due diligence and commercial negotiation; however, when this early stage, high-impact opportunity in Benin came to our attention, we immediately considered ourselves fortunate to be able to take a position instantly bulking up and adding further diversification to our high-impact portfolio offerings. This agreement in Benin is additional to our existing pipeline of potential near-term acquisitions and joint ventures.
“As with our assets in Jamaica, the scale of this new license in Benin and its proximity to other working hydrocarbon systems lend it to having huge potential high-impact upside with early data suggesting the presence of numerous large structures.
“Through working in Ghana and the Cote d’Ivoire, the United management has significant experience of Western Africa. As with our other frontier exploration acreage in Jamaica, we believe that Benin can be transformational for United and it is indeed a testament to the technical and commercial skills of the wider team in being able to identify and assess such exceptional opportunities and speedily onboard these to the growing United portfolio. This excellent opportunity has been added to our portfolio at a very small initial commitment and is one which we look forward to continuing to update investors upon as we work with our new partners to further derisk and eventually market this exciting new play.”
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