Eland Oil & Gas PLC
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Eland Oil & Gas PLC is a company incorporated on 28 August 2009 and registered in Scotland with company number SC364753. Eland commenced operational activities in May 2010 with the principal business objective of identifying and acquiring interests in oil and gas assets in West Africa, focused initially on Nigeria including the prolific Niger Delta, and to develop and bring acquired oil and gas assets into production. The Company has, to date, established offices in Nigeria (Abuja), Scotland (Aberdeen) and U.A.E. (Sharjah).
The Company has assembled an experienced board and management team with established and successful track records in acquiring and developing oil and gas interests. The Company’s founders, Les Blair and George Maxwell, previously held senior management positions with Addax Petroleum Corp. (“Addax”) and played a significant role in developing Addax into a highly successful independent oil company focused on upstream operations in Nigeria prior to its sale to the Sinopec Group in 2009. In 2010, Harry Wilson joined the Company in order to facilitate the development of the Company’s strategy which, at the time, was principally the evaluation of acquisition opportunities.
In line with the Company’s focus on Nigeria, the Directors believe, given the importance of alignment with the Nigerian Government’s indigenisation programme, that there are significant benefits in working closely with a Nigerian partner (for example, indigenous companies in Nigeria will benefit from preferential treatment in the award of further licence areas). The Company has therefore established a joint venture company, Elcrest Exploration and Production (Nigeria) Limited, in which the Company currently holds 45 per cent. of the shares. The balance of the shares in Elcrest are held by a subsidiary of the Chrome Group of companies, Starcrest Nigeria Energy Limited (“Starcrest”). The Chrome Group was founded by Emeka Offor in 1994 and is regarded by the Directors as a major Nigerian indigenous group. The Company has agreed with Starcrest to acquire an additional four per cent of the shares in Elcrest held by Starcrest. Also, the Company has an option to acquire a further 10 per cent. of the shares in Elcrest from Starcrest.
Elcrest has executed a binding Acquisition Agreement to acquire a 45 per cent participating interest in an onshore mining lease in Nigeria known as OML 40 from Shell Petroleum Development Company of Nigeria Limited (“SPDC”), Total E&P Nigeria Limited and Nigerian Agip Oil Company Limited (the “Acquisition”). SPDC has held a participating interest in OML 40 since 1964 and has since then acted as its operator. The Directors believe that the Acquisition represents a solid foundation on which to grow the Group in Nigeria. OML 40 has production history, booked developed and undeveloped reserves, infrastructure for production and oil export for 30,000 bopd comprising a flowstation and an export pipeline, and the Directors believe that there is low risk appraisal upside and substantial exploration potential. The licence area covers 498 sq.km with gross lease 2P Reserves of 71.5 MMbbls, gross lease 3P Reserves of 117 MMbbls and gross lease 2C Contingent Resources of 15.5 MMbbls, as estimated by McDaniel. In addition, SPDC carried an exploration portfolio of 15 prospects and leads within OML 40 with total unrisked mean crude oil Prospective Resources of 356 MMbbls which have not been audited by McDaniel.
The Directors intend to re-commission existing infrastructure and restart existing wells to re-commence production at an initial gross rate of 2,500 bopd with a target to grow gross production to 50,000 bopd within four years. Nigerian crude is a high quality, light oil grade referred to as “sweet”, which trades at a premium to Brent because of its high gasoline content and relatively low processing costs.
Key Strengths and Investment Proposition
The key strengths of the Company are as follows:
Nigeria holds the largest oil and gas reserves in Sub-Saharan Africa and is the region’s largest producer of oil. Since 1956, substantial activity has been undertaken in the upstream oil sector by a number of international oil companies and, as a consequence, there is a long history of discovering and producing oil from the Niger Delta and an extensive pipeline network infrastructure and a number of export terminals are already in place;
the Federal Government of Nigeria has stated that it intends to increase the participation of indigenous companies in the development and operation of oil and gas projects in Nigeria. The Company, due to its relationships, in particular with the Chrome Group, is well positioned to develop its strategy alongside indigenous partners;
the Group has an established management team with extensive oil and gas industry experience, with significant experience of operations in Nigeria, and a broad range of technical, operational and financial skills. Management has a successful track record of identifying and exploiting commercial discoveries as well as operating and creating shareholder value from Nigerian assets; OML 40 represents an asset with 71.5 MMbbls of gross lease 2P Reserves, gross lease 3P Reserves of 117 MMbbls and gross lease 2C Contingent Resources of 15.5 MMbbls as estimated by McDaniel. In addition, SPDC carried an exploration portfolio of 15 prospects and leads within OML 40 with total unrisked mean crude oil Prospective Resources of 356 MMbbls which have not been estimated or audited by McDaniel. It is anticipated that existing wells, facilities and an export pipeline will allow for early production and cash flow. The Directors expect production and development to be resumed at OML 40 within approximately six months following Admission. The Directors expect that the Group will re-commission existing infrastructure (including making repairs to the pipeline) and restart existing wells to re-commence production at an initial gross rate of 2,500 bopd with a target to grow gross production to 50,000 bopd through appraisal and exploration drilling within four years following Admission;
the Directors believe that there is significant exploration upside on the OML 40 block. Specifically, the Group is scheduled to drill two exploration wells on the Abiala prospect in 2013 which, according to data provided by SPDC, will target gross prospective resource of 102 MMbbls. According to the McDaniel CPR the Abiala prospects are attributed 45 MMbbls gross prospective resource with the Abiala field attributed gross contingent resource of 11 MMbbls. There exist a further 13 other prospects which were identified by SPDC as result of the 3D Seismic acquired between 1991 and 1994; and
the Group intends to enhance Shareholder value through: (i) the re-commissioning of previously shut in production on OML 40; (ii) developing reserves within the OML 40 Lease; (iii) through further exploration and appraisal convert resources to reserves within the OML 40 Lease; and (iv) further acquisitions focused on West Africa and Nigeria.