TIDMELA
RNS Number : 8045S
Eland Oil & Gas PLC
14 March 2019
14 March 2019
Eland Oil & Gas Plc ("Eland" or the "Company")
OML 40 and Ubima Competent Persons Report
Eland Oil & Gas PLC (AIM:ELA), an oil & gas production
and development company operating in West Africa with an initial
focus on Nigeria, is pleased to announce the results of a new
competent persons report ("CPR" or "Report") provided by
Netherland, Sewell & Associates Inc. ("NSAI") as at 31 December
2018.
OML 40 licence
-- Gross OML 40 Reserves, following 2018 gross production of
6.5 million barrels of oil:
- Proved ("1P") of 42.9 million barrels ("MMB"), an increase
of 8% since the 31 December 2017 CPR
- Proved plus Probable ("2P") of 82.2 MMB, a 1% decrease
- Proved plus Probable plus Possible ("3P") of 116.8
MMB, a 1% decrease
-- Eland's Net (Entitlement*) Present Value at a 10% discount
rate with a flat price deck of $71.16 per barrel of oil
- 1P of US$ 473.9 million, an increase of 68.2%
- 2P of US$ 568.9 million, an increase of 35.7%
- 3P of US$ 620.7 million, an increase of 28.1%
* Net entitlement is based on treating Eland funding of the
Starcrest Nigeria Energy Limited share of Elcrest E&P Nigeria
Limited as a carried working interest, resulting in an Eland
participating interest of 45 percent before payout of the loans and
20.25 percent after payout.
Since the previous independent CPR for OML 40 which had an
effective date of 31 December 2017, the Opuama field has produced
6.5 million gross barrels of oil.
Despite record Opuama field production, proved oil reserves
increased by 3.3 million barrels. The minor reduction in 2P
reserves reflects that the Opuama field proved plus probable
reserves replacement, as a result of the 2018 drilling campaign,
has been limited to approximately 80% of production volumes. Eland
will continue to assess reservoir performance of the current well
stock with a view to identifying volumetric upside potential,
particularly in the flank areas of the field.
NSAI has also increased its estimates of Contingent Resource
(2C) for OML 40 by 25% from 40.4 million barrels to 50.7 million
barrels of oil gross. This increase follows a re-evaluation of the
1989 Abiala-1 discovery leading to an upward revision from 16.1
million barrels to 26.4 million barrels gross of oil. Eland expects
to drill an appraisal well on Abiala in 2020. The upside (3C)
estimate for Abiala is 80.5 million barrels gross recoverable.
The 2P NPV10 Net (Entitlement*) ascribed in the CPR of $569
million has risen significantly from the prior year. This change is
mainly driven by commercial and development assumptions, such as a
higher oil price deck, updated work programme and development
costs, changes in the fiscal tax rate and for the first time the
value of Elcrest's tax losses incurred while the Company was in
Pioneer status. The tax losses, including capital allowances, as at
31 December 2018 will be utilised over the coming years with the
effect of deferring Petroleum Profits Tax (PPT) payable in Nigeria.
In addition, it is the view of our tax advisors that the Company
will benefit from the existing new entrant tax rate of 65.75% for
five years following the end of Pioneer status period which ends on
30 April 2019. The NSAI report previously included the assumption
that the Company would be liable for Petroleum Profits at 85%
following the end of Pioneer status.
Ubima licence (Eland Working Interest 40%)
-- Gross Ubima Reserves
- Proved ("1P") of 6.2 million barrels, an increase of
634%
- Proved plus Probable ("2P") of 9.3 MMB, an increase
of 285%
- Proved plus Probable plus Possible ("3P") of 13.1 MMB,
an increase of 298%
-- Eland's Net (Entitlement) Present Value at a 10% discount
rate with a flat price deck of $71.16 per barrel of oil
- 1P of US$ 17.2 million, an increase of 673%
- 2P of US$ 31.4 million, an increase of 200%
- 3P of US$ 39.7 million, an increase of 165%
The most recent CPR for the Ubima licence had an effective date
of April 2016. At this time AGR TRACS International Limited
estimated gross 2P reserves of 2.4 million barrels of oil. In 2018
Eland and its partner successfully re-entered and tested the
Ubima-1 discovery well. The new CPR by NSAI estimates gross 2P
reserves of 9.3 million barrels representing an almost fourfold
increase. NSAI also calculates an NPV net to Eland of over $31
million compared to $10m in the previous CPR.
Aggregated across both licences, the 1P and 2P Reserves
Replacement Ratio are 233% and 188% respectively.
George Maxwell, CEO of Eland, commented:
"I am pleased to announce updated CPRs for the Company's OML 40
and Ubima licences. These show great progress in both licences, is
a testimony to the high quality of the assets and also the
significant investments we have made in each. After such a
successful year with record production volumes it is very
satisfying to record a 2P Reserves Replacement Ratio of 188%.
We have always believed that OML 40 had significantly more to
offer than simply the Opuama and Gbetiokun fields. We will be
drilling our first near field exploration well on the licence later
this year with the Amobe prospect, followed next year by appraisal
drilling on Abiala. These two wells have the potential to more than
double the licence's current 2P reserves base. At Ubima, I look
forward to the initial phase of development for this field in 2019
following the fourfold increase in reserves estimates."
I am delighted that the CPRs ascribes a value for Eland's share
of 2P reserves in OML 40 and Ubima of approximately $600 million,
suggesting there is still material potential upside within the
Company".
For further information:
Eland Oil & Gas PLC (+44 (0)1224 737300)
www.elandoilandgas.com
George Maxwell, CEO
Ronald Bain, CFO
Finlay Thomson, IR
Peel Hunt LLP, Nominated Adviser & Joint Broker (+44 (0)20
7418 8900)
Richard Crichton / David McKeown
Stifel Nicolaus Europe Limited, Joint Broker (+44 (0)20 7710
7600)
Callum Stewart / Nicholas Rhodes / Ashton Clanfield
Camarco (+44 (0) 203 757 4980)
Billy Clegg / Georgia Edmonds / Tom Huddart
In accordance with the guidelines of the AIM Market of the
London Stock Exchange, Yannis Korakakis, MSc of Leoben University,
with 32 years of experience in the oil and gas sector, is a
Petroleum Engineer and member of the Society of Petroleum Engineers
who meets the criteria of qualified persons under the AIM guidance
note for mining and oil and gas companies, has reviewed and
approved the technical information contained in this
announcement.
Notes to editors:
Eland Oil & Gas is an AIM-listed independent oil and gas
company focused on production and development in West Africa,
particularly the highly prolific Niger Delta region of Nigeria.
Through its joint venture company Elcrest, Eland's core asset is
a 45% interest in OML 40 which is in the Northwest Niger Delta
approximately 75 km northwest of Warri and has an area of 498
km(2).
In addition, the Company has a 40% interest in the Ubima Field,
onshore Niger Delta, in the northern part of Rivers State.
The OML 40 licence holds gross 2P reserves of 82.2 million
barrels, gross 2C contingent resources of 50.7 million barrels and
a best estimate of 252.1 million barrels of gross un-risked
prospective resources*
The Ubima field holds gross 2P reserves of 9.3 million barrels
of oil and gross 2C resource estimates of 4.2 million barrels*
Net production figures relate to Elcrest Exploration and
Production Nigeria Ltd ("Elcrest"), Eland's joint venture company.
Production rates, when oil is exported via Forcados, are as
measured at the Opuama PD meter, are subject to reconciliation and
will differ from sales volumes.
*Netherland, Sewell & Associates Inc CPR report 31 December
2018*
The information contained within this announcement is considered
to be inside information prior to its release, as defined in
Article 7 of the Market Abuse Regulation No. 596/2014, and is
disclosed in accordance with the Company's obligations under
Article 17 of those Regulations.
In compiling the announcement, the Company has used the
definitions and guidelines as set forth in the 2007 Petroleum
Resources Management System ('PRMS') approved by the Society of
Petroleum Engineers (SPE).
OML 40 SUMMARY OF OIL RESERVES AS AT 31 DECEMBER 2018
Oil Reserves (MB) Future Net Revenues
(M$)
--------------------------------------------------- -------------------------
Gross Net Entitlement* Present
Worth
at 10%
------------------------ ---------------------- ----------
Category Before After After % Total
Royalties Royalties Royalties
--------- ----------- ----------- ----------- --------- ------------- ----------
1P 42,870.7 34,296.6 13,040.9 38.0% 572,697.4 473,920.1
2P 82,205.0 65,764.0 18,952.4 28.8% 681,692.7 568,876.9
3P 116,761.6 93,409.3 24,287.8 26.0% 760,145.1 620,731.2
--------- ----------- ----------- ----------- --------- ----------- ------------
*Net entitlement is based on treating Eland funding of the
Starcrest Nigeria Energy Limited share of Elcrest E&P Nigeria
Limited as a carried working interest, resulting in an Eland
participating interest of 45 percent before payout of the loans and
20.25 percent after payout.
Since the last CPR dated 31(st) December 2017, Opuama reserves
have declined by 1.3 MMB from 45.4 MMB to 44.1 MMB, however within
this time period over 6.5 MMB have been produced, representing an
upwards reserves revision of 5.2 MMB. Reserves at Gbetiokun have
increased marginally from 38.0 MMB to 38.1 MMB.
OML 40 GROSS LEASE CONTINGENT RESOURCES (UNRISKED)
1C of 21.0 MMB
2C of 50.7 MMB
3C of 117.5 MMB
OML 40 GROSS LEASE PROSPECTIVE RESOURCES (UNRISKED)
Low Estimate of 79.3 MMB
Best Estimate of 252.1 MMB
High Estimate of 772.4 MMB
UBIMA SUMMARY OF OIL RESERVES AS AT 31 DECEMBER 2018
Oil Reserves (MB) Future Net Revenues
(M$)
----------------------------------------------- -------------------------
Gross Net Entitlement Present Worth
at 10%
------------------------ ------------------- --------------
Category Before After After % Total*
Royalties Royalties Royalties
--------- ----------- ----------- ----------- ------ --------- --------------
1P 6,178.5 5,437.0 4,128.7 75.9% 37,443.6 17,157.5
2P 9,315.4 8,197.6 5,389.4 65.7% 52,459.0 31,403.7
3P 13,066.8 11,498.8 6,820.8 59.3% 66,665.5 39,688.5
--------- ----------- ----------- ----------- ------ --------- --------------
*Future net revenue is inclusive of revenue generated through
financing repayment
UBIMA SUMMARY OF GROSS LEASE CONTINGENT RESOURCES (UNRISKED)
1C of 0.7 MMB
2C of 4.2 MMB
3C of 8.2 MMB
PRICING ASSUMPTIONS
This oil price used in this report is based on a Brent Crude
price of $70.00 per barrel and is adjusted for quality,
transportation fees, and market differentials. The adjusted oil
price of $71.16 per barrel is held constant throughout the lives of
the properties.
GLOSSARY
US$ United States Dollars
% Percent
1C Low estimate scenario of contingent resources
2C Best estimate scenario of contingent resources
3C High estimate scenario of contingent resources
1P Proved
2P Proved plus probable
3P Proven plus probable plus possible
2D or 2D Seismic Seismic data which is acquired along a line
with a "Shot and Receiver" con guration that
allows the signal-to-noise ratio to be enhanced
by linear stacking of the re ections caused
by subsurface interfaces between rocks with
different acoustic properties
3D or 3D Seismic Seismic data which is acquired in a multi-azimutual
pattern and processed such that the signal-to-noise
ratio is enhanced by three dimensional stacking
of the re ections caused by subsurface interfaces
between rocks with different acoustic properties
bbl / bbls barrel / barrels
Contingent Resources Those quantities of petroleum estimated, as
of a given date, to be potentially recoverable
from known accumulations by application of
development projects but which are not currently
considered to be commercially recoverable
due to one or more contingencies. Contingent
Resources are a class of discovered Recoverable
Resources.
CPR The reserves and resources evaluation provided
by Netherland, Sewell & Associates Inc. as
at 18 November 2015
MB Thousand barrels
MMB Million barrels
Mmtsb Million stock tank barrels
NPV10 Net present value at a 10% discount rate
OML 40 Oil Mining Lease 40
Prospective Those quantities of petroleum estimated, as
Resources of a given date, to be potentially recoverable
from undiscovered accumulations by application
of future development projects. Prospective
Resources have both an associated chance of
recovery and a chance of development. Prospective
Resources are further subdivided in accordance
with the level of certainty associated with
the recoverable estimates assuming their discovery
and development and may be sub-classi ed based
on project maturity
Proved Reserves Those quantities of petroleum, which by analysis
('Proved') and geoscience, can be estimated with reasonable
certainty to be commercially recoverable.
It is likely that the actual remaining quantities
recovered will exceed the estimated Proved
Reserves
Probable Reserves Those additional reserves that are less likely
('Probable') to be recovered than Proved Reserves but more
certain to be recovered than Possible Reserves.
It is equally likely that actual remaining
quantities recovered will be greater than
or less than the sum of the estimated proved
plus Probable Reserves
Possible Reserves Those additional reserves which analysis and
('Possible') geoscience and engineering data suggest are
less likely to be recovered than Probable
Reserves. The total quantities ultimately
recovered from the project have a low probability
to exceed the sum of proved plus probable
plus Possible Reserves
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
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