27th Apr 2016 11:36
LONDON (Alliance News) - The chief executive of Eland Oil & Gas PLC on Wednesday said he is confident the company can begin producing oil from its licence in Nigeria before the end of the year after publishing a resource and reserve update covering one of the fields within the licence.
The expectation for production to begin from the Gbetiokun field within the OML40 licence follows on from the company's announcement back in April that said production from the Ubima field in Nigeria, but in a separate licence, also could start before the close of 2016.
The OML40 licence that hosts the Gbetiokun field also holds the already-producing Opuama field, and the evaluation of the reserves and resources published Wednesday covers the Gbetiokun-1 workover well which was carried out by Netherland, Sewell & Associates Inc.
"Following the recent success of the Opuama-3 re-entry well on licence 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," said Chief Executive George Maxwell.
Similar to what Eland plans to do with the Ubima field, the company wants to kickstart production from Gbetiokun-1 in the second half of 2016 using an early production system, which allows companies to initiate production from a field whilst full development plans are progressed.
To get the Gbetiokun-1 well producing using that system, Eland's 45.0% share of capital expenditure will be around USD6.5 million of the total USD14.5 million budget, with Eland's partner, NPDC, funding the remaining balance.
Of that total budget, half is attributable to re-entry costs whilst the other half will be associated with facility costs, Eland said.
The 1P proven oil reserves allocated to the Gbetiokun-1 well through the early production system at the end of March stood at 7.0 million barrels of oil on a gross basis before royalties, dropping to 5.6 million barrels post-royalties.
Of that, Eland's net entitlement after royalties of those proven reserves stands at 2.5 million barrels of oil, giving it net future revenue of around USD26.4 million.
Probable 2P reserves on a gross basis stand at 10.8 million barrels before royalties and at 8.6 million barrels post-royalties, making Eland's net entitlement 3.9 million barrels with future net revenues of USD43.9 million.
"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 barrels of oil per day on a gross basis. We are highly encouraged that NSAI calculate a present worth net to Eland of almost USD44.0 million for the first phase alone, from an investment of only USD6.5 million," said Eland's Maxwell.
Possible 3P reserves on a gross basis stand at 15.4 million barrels before royalties and 12.4 million post-royalties, giving Eland a net entitlement of 5.6 million barrels with future net revenue of around USD70.4 million.
In addition, Eland said the updated reserve report has estimated there is stock tank oil-initially-in-place (STOIIP) within the E2000 and E6000 reservoirs within the OML40 licence totalling 25.9 and 12.8 million barrels, respectively. That means the oil estimate in E2000 has risen 73.0% from the previous report in June 2014, whilst the oil estimate in E6000 has increased 45.0%.
"Given that Netherland, Sewell & Associates 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," said Eland.
On the corporate front, Eland said Chief Financial Officer Louis Castro has decided to step down from the company at the end of May to pursue other interests. A hand-over will take place over the coming month to Olivier Serra, currently an independent advisor to oil and gas companies, Eland said.
Serra acted as the chief financial officer of Canadian-firm Sea Dragon Energy between 2010 and 2015 and was involved in investment banking prior to that, including his role heading up the oil & gas finance department of French multi-national bank BNP Paribas.
Eland said it had a cash balance of USD5.7 million at the end of March and said the amount drawn down from its debt facility with Standard Chartered remains at USD15.0 million. Eland's borrowing base, of its committed USD35.0 million facility, currently stands at USD25.4 million and will be redetermined in June, when Eland is expecting it to improve based on current oil prices.
Eland shares were trading up 4.4% to 35.50 pence per share on Wednesday.
By Joshua Warner; [email protected]; @JoshAlliance
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