20th Apr 2016 09:26
LONDON (Alliance News) - Eland Oil & Gas PLC shares rose on Wednesday morning after the company said it is more confident of starting production from the Ubima field in Nigeria before the end of this year after the re-evaluation of the reserves and resources at the field was completed.
Eland shares were trading 8.9% higher on Wednesday morning at 29.0 pence per share.
The London-listed firm owns a 40% working interest in Ubima through one of its subsidiaries alongside its partner, Allgrace Energy Ltd, which holds the remaining stake in the field.
The pair hired AGR TRACS International Ltd to carry out the revaluation of the onshore field, which has boosted Eland's confidence of kick-starting production before the end of 2016 by using an early production system.
Early production systems allow companies to initiate production from a field whilst full field development plans are progressed and the wider project is advanced, allowing companies to get some oil out of the ground and cashflow through the door before the larger project takes off.
The notable change in the reserves and resources at Ubima following the revaluation Wednesday is the amount of oil that has been categorised as suitable reserves to be produced using an early production system, whereas all the Ubima oil was categorised as contingent resources beforehand.
Ubima now has proven 1P gross reserves that can be extracted using an early production system totalling 840,000 barrels of oil, probable 2P reserves totalling 2.4 million barrels of oil and possible 3P reserves of 3.3 million barrels of oil.
Those proven 1P reserves have a net present value of over USD4.8 million whilst the probable 2P reserves have an NPV of USD25.5 million. The possible 3P reserves have been given a value of USD36.8 million.
Of those total reserves, 490,000 barrels of 1P proven reserves are attributable to Eland based on its stake in the field, as well as 1.1 million barrels of the 2P probable reserves and 1.5 million barrels of the possible 3P reserves.
Eland's proven 1P reserves have an NPV of USD2.2 million, the probable 2P reserves have a value of USD10.5 million and the possible 3P reserves have an NPV of USD15.0 million to the London-listed firm.
"We are pleased to announce the results of this Ubima competent persons report, which we believe moves the asset significantly closer to monetisation. It is particularly encouraging that AGR TRACS classify oil associated with the early production system as reserves in contrast to the previous contingent resources classification," said Eland Chief Executive George Maxwell.
The contingent resources at Ubima, which are quantities of oil that could potentially be recovered from known accumulations but not developed enough to be considered as a commercial development opportunity, were also published on Wednesday.
Overall 1C contingent resources at Ubima total 20.6 million barrels of oil with a net present value of USD89.8 million, 2C contingent resources of 31.1 million barrels with an NPV of USD144.2 million and 3C contingent resources of 66.0 million barrels with a value of USD278.7 million.
Of those contingent resources, 9.1 million of the 1C resources are net to Eland with an NPV of USD35.5 million whilst Eland's net 2C resources stands at 13.1 million barrels worth around USD57.0 million. Of the 3C resources, 25.7 million barrels are net to Eland and have an NPV of USD111.9 million.
Eland also said Wednesday that its other OML 40 licence in Nigeria is "gathering pace" as it continues to flowtest the Opuama-3 well, which it is expecting to materially increase production from current rates.
"With plans to increase Eland production from Opuama-3, Gbetiokun-1 and Ubima in the near term; attractive timeframes for returns on investment, even at these lower oil prices; and an operating environment that is increasingly favourable, we look forward to the coming months with significant confidence," said Eland's Maxwell.
By Joshua Warner; [email protected]; @JoshAlliance
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