25th Aug 2009 07:00
Afren plc (AFR LN)
Afren enters into a Joint Venture Agreement with Oriental Energy Resources and Addax Petroleum Nigeria Offshore Limited for the development of the Okwok Field, offshore Nigeria
London, 25 August 2009 - Afren plc ("Afren" or the "Company") announces that it has entered into a Joint Venture Agreement ("JVA") with Oriental Energy Resources Limited ("Oriental") and Addax Petroleum Nigeria Offshore Limited, a subsidiary of Addax Petroleum Corporation ("Addax
Petroleum") for the development of the Okwok Field, located in OML 67 offshore South East Nigeria, adjacent to the Ebok development.
Highlights
Farm-in agreement with Addax Petroleum to acquire 70 per cent. of its 40 per cent. legal interest (28 per cent.) in the Okwok field
Okwok is located in OML 67 offshore South East Nigeria, adjacent to Afren and Oriental's Ebok field
Similar to Ebok, Okwok was discovered by the ExxonMobil / NNPC Joint Venture (Okwok-1), with two subsequent appraisal wells drilled (Okwok-2 and Okwok-3)
In 2006, Oriental and Addax Petroleum drilled three additional exploration / appraisal wells on Okwok
Afren estimates that Okwok holds in excess of 225 mmbbls Stock Tank Oil Initially In Place ("STOIIP") with recoverable reserves in excess of 70 mmbbls
Afren has identified significant exploration potential at the deeper Qua Iboe level (two prospects identified, each estimated to contain circa 200 mmbbls STOIIP)
Potential for joint development synergies between Ebok and Okwok
Enhanced understanding of regional geology, through Ebok, and relevant technical experience will aid optimal appraisal and development of Okwok
Background
Afren has extended its indigenous partnership in Nigeria with Oriental and formed its first Nigerian partnership with Addax Petroleum, to jointly develop the Okwok Field ("Okwok"). Under the terms of the farm-in agreement with Addax Petroleum, Afren as Technical Advisor, will acquire a 28 per cent legal interest and an effective 70 per cent economic interest (pre cost recovery), reverting to 56 per cent (post cost recovery), subject to gross volumes lifted. Afren has undertaken to fund the drilling of one exploration or appraisal well, after which Afren and Addax Petroleum will jointly fund field development costs pro-rata (70 per cent. and 30 per cent. respectively).
In 2001, Mobil Producing Nigeria Limited ("Mobil") contributed Okwok to Nigeria's Marginal Field Program, which was established by the Nigerian government to encourage greater indigenous participation in the oil and gas sector. Pursuant to this program, Oriental completed a farm-in agreement for Okwok with Mobil and the Nigerian National Petroleum Corporation ("NNPC") in June 2006. Addax Petroleum subsequently entered into a JVA with Oriental, acquiring a 40 per cent interest in Okwok and assumed the role of Technical Advisor. The field benefits from the Nigerian Marginal Field Fiscal and Tax Regime.
Following the farm-in to develop the nearby Ebok Field with Oriental in March 2008, Afren had entered into a collaborative agreement with Oriental to pursue other assets in the region. Okwok represents an important step within this collaboration agreement, focused on a region where a large number of existing fields similar to Okwok and Ebok are good candidates for future development.
Field technical description
Okwok is an undeveloped oil field located in OML 67, 50 km offshore in 132 ft of water and 15 km east of the Afren/Oriental owned Ebok development.
The field was discovered by the ExxonMobil / NNPC JV in 1967 (Okwok-1), and two subsequent appraisal wells were drilled in 1968 (Okwok-2 and Okwok-3) but not production tested. The wells encountered oil in the LD1and D2 series of reservoirs with over 100 ft of oil pay logged in the Okwok-2 well at the D2 level plus multiple 50 ft oil bearing sections in the LD1 in Okwok-1 and Okwok-2.
Oriental and Addax Petroleum drilled a further three wells in 2006 which found over 100 ft of oil pay in the D2 of Okwok-4st and an approximate equivalent amount of pay in the LD1 series in Okwok-8. The Okwok-4ST1 well sampled 32° API quality crude, while Okwok-8 tested 27°API quality crude oil at a rate of 1,200 bopd per day from the LD1 reservoir interval.
Through the Company's enhanced technical understanding of the area based on detailed work and appraisal drilling at Ebok, Afren estimates:
That the field has STOIIP of 225 mmbbls in the D2 and LD1c, LD1d and LD1e reservoirs;
Assuming a 32 per cent. recovery factor, 70 mmbbls of oil in place could potentially be produced; and
Upside exploration potential at the deeper Qua Iboe level could add significantly to the reserves base. Two prospects have been identified and are each estimated to contain circa 200 mmbbls STOIIP.
Synergies with Ebok development
Following recent appraisal success on the Ebok field, Afren has confirmed a 53 mmbbls development with upside to 152 mmbbls. Ebok offers significant synergies that will provide an optimal development solution for Okwok, providing scope for cost reduction and savings at both fields. Joint storage and export operations together with shared services are expected to result in reduced costs for the development of both fields.
Forward work programme
The near-term work programme will consist of:
Detailed sub-surface technical studies to determine an optimum exploration or appraisal well location;
Definition of an optimum field development concept; and
Preparations for a potential well spud in mid 2010 or earlier, depending on rig availability.
Commercial terms
The joint venture agreement signed between Afren, Oriental and Addax Petroleum defines the commercial terms under which Afren will participate in the development of Okwok, and provides for Afren to acquire a 28 per cent. legal interest in Okwok (subject to requisite approvals). Under this agreement, Afren will fund 100 per cent. of the costs of an exploration or appraisal well (to a minimum depth of the Lower D2 horizon), after which Afren and Addax Petroleum will be required to fund all capital and operating costs for development of the field on a pro-rata basis (70 per cent. and 30 per cent. respectively). Afren will be entitled to 70 per cent. of net field revenues (pre cost recovery), reverting to 56 per cent. (post cost recovery), subject to gross volumes lifted.
Further information on the Okwok field, including location and proximity to the Ebok field, can be found at www.afren.com.
Osman Shahenshah, Chief Executive of Afren, commented:
"We are delighted to have further extended our collaboration with Oriental to include the Okwok field, and at the same time enter into our first joint venture partnership with Addax Petroleum in Nigeria, who we are also partnered with in Gabon and the JDZ Block 1. The Okwok field represents a material discovered but undeveloped opportunity in close proximity to the Ebok field where, in partnership with Oriental, we recently enjoyed appraisal success and proved a 53 mmbbls reserve base with upside to 152 mmbbls. By deploying our understanding of the sub-surface and experience gained at Ebok, we will seek to further delineate and prove up the reserves base at the Okwok field. Okwok will be developed as part of a larger combined development with Ebok, offering significant synergies."
Alhaji Mohammed Indimi, Chairman of Oriental, commented:
"Having formalised our relationship with Afren during 2008 and experienced significant appraisal success with the Ebok Field appraisal program thereafter, we welcome Afren's participation in the Okwok development. Oriental believes that Afren's presence in both projects will bring significant synergies to the development of the Ebok and Okwok fields."
Enquiries:
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Afren plc |
+44 20 7451 9700 |
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Osman Shahenshah |
Chief Executive |
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Galib Virani |
Head of Acquisitions and Investor Relations |
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Jefferies International Limited |
+44 20 7029 8000 |
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Jack Pryde |
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Pelham Public Relations |
+44 20 7743 6673 |
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James Henderson |
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Mark Antelme |
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Conference call
In conjunction with this announcement, Afren will be hosting a conference call at 13.30 BST / 08.30 EST. The presentation materials that will be referred to during the call will be available at the Company's website (www.afren.com).
To access the conference call please dial +44 (0)20 8515 2302 shortly before the call and ask for the Afren Conference Call (code 4148659).
A replay facility will be available from approximately 14.30 BST on 25 August until 1 September. To access this facility dial +44 (0)20 7190 5901.
Background information
Please click on the link below to view map of Block OML 67.
http://www.rns-pdf.londonstockexchange.com/rns/9306X_-2009-8-24.pdf
Afren Plc
Afren plc (www.afren.com) was founded in 2004 with the vision to become the premier pan-African independent exploration and production Company, through a differentiated strategy based on a strong African representation in the Board and management, partnering with indigenous companies, partnering with National Oil Companies and Governments as well as finding a solution to the vast untapped gas reserves in the Gulf of Guinea. Since the Company's listing on the AIM market in 2005, Afren has rapidly expanded its portfolio to 16 assets across 6 African countries.
Oriental Energy Resources Limited
Oriental Energy Resources (www.oriental-er.com) Limited is a privately held Nigerian oil exploration and production company with its headquarters in Abuja, the Federal capital of Nigeria. In addition to the Okwok Field, Oriental is the Operator of the Ebok Field and OML 115, an oil mining lease located near Ebok in southeastern offshore Nigeria.
Note
In accordance with the AIM Rules, the technical information in this release has been reviewed and signed off by Iain Wright, who is Technical Director at Afren Plc and has over 25 years relevant experience within the sector. He consents to the information in the form and context in which it appears. The Company estimates its reserves in accordance with the guidelines and definitions of the Society of Petroleum Engineers / World Petroleum Congress ("SPE/WPC") reserves classification (March 1997) using accepted engineering principles.
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