OANDO PLC - Oando PLC announces Oando Energy Resources Signs Agreements To Acquire ConocoPhillips Nigerian Assets

Oando PLC announces Oando Energy Resources Signs Agreements To Acquire ConocoPhillips Nigerian Assets

Oando PLC
(Incorporated in Nigeria and registered as an external company in South Africa) 
External Registration number: RC 6474
Company registration number: 2005/038824/10
Share Code on the JSE Limited: OAO 
Share Code on the Nigerian Stock Exchange: OANDO 
ISIN: NGOANDO00002 
(“Oando” or the “Company”)

Oando PLC announces Oando Energy Resources Signs Agreements To Acquire ConocoPhillips
Nigerian Assets For $1.79Billion

Lagos, Nigeria - Oando PLC (referred to as “Oando” or the “Group”), Nigeria’s leading indigenous
energy group listed on both the Nigerian Stock Exchange and the JSE Limited, yesterday, 20
December 2012, announced its affiliate Oando Energy Resources (“OER”) listed on the TSX, has
entered into agreements with ConocoPhillips (“COP”) to acquire its entire business interests in
Nigeria for a total cash consideration of ~ $1.79billion plus customary adjustments. This transaction
includes the intended purchase of:

a) The Onshore Business
   - Phillips Oil Company Nigeria Limited (“POCNL”), which holds a 20% non-operating
     interest in Oil Mining Leases (“OMLs”) 60, 61, 62, and 63 as well as related
     infrastructure and facilities in the Nigerian Agip Oil Company Limited (“NAOC”) Joint
     Venture (“NAOC JV”). The other partners are the Nigerian National Petroleum
     Corporation (“NNPC”) with a 60% interest and NAOC (20% and operator); and

   - Phillips Brass Limited (“PBL”), which holds a 17% shareholding interest in Brass LNG
     Limited, which is developing the Brass LNG project, a Greenfield project to develop a
     two-train, 10 million ton per year, Liquefied Natural Gas (“LNG”) facility in Bayelsa
     State, Nigeria. The other partners are NNPC (49%); Eni (17%) and Total (17%).

b) The Offshore Business

   - Conoco Exploration and Production Nigeria Limited (“CEPNL”), which holds a 95%
     operating interest in OML 131. The other partner is Medal Oil (5%); and

   - Phillips Deepwater Exploration Nigeria Limited (“PDENL”), which holds a 20% non-
     operating interest in OPL 214. The other partners are ExxonMobil (20% and
     operator), Chevron (20%), Svenska (20%), Nigerian Petroleum Development
     Company (15%) and Sasol (5%).

Pursuant to the Proposed Acquisition, OER will indirectly purchase all of the issued share
capital of POCNL, PBL, CEPNL and PDENL. Upon closing, the effective date of the
Proposed Acquisition will be January 1, 2012.

In connection with the Proposed Acquisition, OER has retained The Petroleum and
Renewable Energy Company Limited (“Petrenel”), OER’s independent reserves evaluator, to
prepare a report on the reserves and resources of OMLs 60, 61, 62 and 63 (together, the
“Onshore Assets”) and OML 131 and OPL 214 (together, the “Offshore Assets”) proposed to
be acquired under the Proposed Acquisition. As at the date hereof, Petrenel has prepared
preliminary estimates of some of the reserves and resources to be acquired (the “Petrenel
Preliminary Estimates”). The Petrenel Preliminary Estimates have an effective date of
December 31, 2011 and have been prepared in accordance with National Instrument 51-101
standards and the guidelines set out in the Canadian Oil and Gas Evaluation Handbook. OER
expects an Independent Reserves Report to be completed and issued by Petrenel during the
first quarter of 2013.

All figures quoted below are gross to OER (i.e. before deduction of royalty and tax) unless
otherwise stated, assuming completion of the Proposed Acquisition.

HIGHLIGHTS

- OER believes that the Proposed Acquisition represents a significant opportunity for
  OER and its shareholders, adding:

  - A 20% working interest in the NAOC JV, which includes forty discovered oil and
    gas fields with remaining oil and gas recovery, approximately forty identified
    prospects and leads, twelve production stations, approximately 950 km of crude
    oil, natural gas liquids (NGL) and natural gas pipelines, two gas processing
    plants, the Brass River Oil Terminal, the Kwale-Okpai 480 MW combined cycle
    gas-fired power plant (“Kwale-Okpai IPP”), and associated infrastructure.

  - A significant share of six separate discovered fields and eight separate prospects
    in two offshore blocks.

  - Approximately 43,000 barrels of oil equivalent per day (“boe/d”) based on
    average production between January and October 2012 (Source:
    ConocoPhillips).

  - According to Petrenel, a total of approximately 213 millions of barrels of oil
    equivalent (“MMboe”) of Proved plus Probable Reserves, 198 MMboe of Best
    Estimate Economic Contingent Resources, and approximately 110 MMboe of
    Risked Prospective Resources are present in the Onshore Assets.
    Contingencies and significant negative and positive factors related to the
    Contingent Resources are further described below.

- Upon closing, it is expected that the Proposed Acquisition will position OER as one of
  the leading E&P players in Nigeria, as measured by total reserves and production.

- The Proposed Acquisition is expected to be financed with debt and equity.

- POCNL is cash generative and is expected to contribute positively to the cashflow of
  the Company.

- The Proposed Acquisition is anticipated to close during the first half of 2013, following
  appropriate consultations with stakeholders.

Commenting, Mr. Wale Tinubu, Group Chief Executive, Oando PLC said “Upon closing, we
expect that this will be a transformational transaction for OER, as the company has only been
listed on the TSX for about 5 months and now has an opportunity to execute its strategy and
materially increase its production and reserves base. In our view, the combination of the right
timing, right assets and the right company can lead to significant value creation in the Gulf of
Guinea. We expect that the closing of this transaction will position OER as a leading,
indigenous independent E&P player in Nigeria”.

Also commenting Mr. Pade Durotoye, CEO of Oando Energy Resources said. “This potential
transaction represents a transformational step forward for our Company and is in keeping
with our overall strategy to grow our portfolio of Nigerian-based assets by focusing on those
opportunities that deliver high quality growth in reserves and production. Our management
team is familiar with the assets contained in this proposed transaction and, we believe,
possess the regional experience and technical expertise necessary to capture and unlock
their future value for our shareholders.”

RATIONALE FOR THE TRANSACTION

Large oil and gas asset base with substantial production and resources

The Onshore Assets are currently producing substantial quantities of oil and gas. The total oil
and gas production from the Onshore Assets for the period from January 1, 2012 until
October 31, 2012 averaged approximately 43,000 boe/d gross                 to OER (Source:
ConocoPhillips).

High oil and gas recovery factors are expected to be achieved with a focused and committed
development programme. OER believes there are many opportunities to further develop the
existing fields and increase production.

Petrenel has assigned preliminary estimates of Proved plus Probable Reserves of 213
MMboe and Best Estimate Economic Contingent Resources of 198 MMboe (OER gross
share) to the Onshore Assets. These Economic Contingent Resources have not been
classified as Reserves as either (i) oil and gas production associated with these Contingent
Resources is likely to start in more than five years, (ii) definition of development activities will
require more technical work; (iii) oil and gas will be produced after 2027 (the current onshore
license renewal date), or (iv) gas will be produced and sold after the end of the current gas
contract periods (2024-2026). It is expected that these economic Contingent Resources will
be progressively transferred to Reserves as development activity is matured and the licenses
and gas contracts are extended. Significant positive factors associated with the estimates
include (i) high probability that the licence and gas contracts will get extended at current
terms, (ii) possible financial investment decision of Brass LNG could result in higher gas
prices, (iii) further detailed technical studies are likely to identify additional resources, and (iv)
reducing bunkering will likely result in positive upward revision in oil sales. Significant
negative factors associated with the estimates include (i) uncertainty over historical field
production, technical recovery factors and new well productivity, (ii) logistical and security
difficulties may delay development, and (iii) increased development and operating costs may
reduce the economically recoverable volume.

Significant exploration upside

OER believes that there is significant upside potential from an active exploration program on
OMLs 60 to 63 with a multi-year inventory of newly available oil and gas drill-ready
opportunities, including an opportunity to supply additional gas to potential off takers including
the Brass LNG project, the Nigeria (Bonny) LNG (“NLNG”) Train 7 project and other gas
supply opportunities in the growing domestic market.

Petrenel has assigned Risked Prospective Resources in the Onshore Assets (gross to
ConocoPhillips) to be approximately 110 MMboe. In addition, OER expects that additional
Risked Prospective Resources will be assigned by Petrenel to the Offshore Assets after
Petrenel has completed its final report.

Ideal location with extensive production and infrastructure

OMLs 60 to 63 are located favorably, with a well developed network of facilities,
transportation and logistics infrastructure as well as localized processing facilities, including
an oil processing centre and two gas processing facilities, which can process up to 125,000
barrels of oil per day (“bbls/d”) of oil and 1 billion cubic feet per day (“Bcf/d”) of natural gas.
Other facilities and infrastructure include 12 production stations and about 950km of oil, NGL
and natural gas pipelines, the Brass River Oil Terminal which has a storage capacity of 3.6
millions of barrels of oil (“MMbbls”) and the 480 Megawatt Kwale-Okpai Independent Power
Plant which accounts for 15% of Nigeria’s current available national power grid capacity.

Nigeria has over 37 billion bbls of proved reserves, (Source: BP Statistical Review of World
Energy 2012), a large proportion of which is located in the Niger Delta Region. Within this
region, there are a large number of discovered but undeveloped fields with significant upside
potential. OER believes that the centrally located Brass River Terminal, Obiafu-Obrikom (“Ob-Ob”) 
gas plant, and associated pipeline network offers a significant opportunity to capture
additional third party transportation and processing business.

OER believes that the Proposed Acquisition will provide OER with a platform for future growth
in the region.

High quality crude oil production that trades at a premium to Brent Oil

The crude oil produced from these onshore fields is light and sweet with API gravities ranging
from 29 to 47 degrees and low sulfur contents of 0.05% to 0.3% and trades at a premium to
Brent.

Highly profitable and strong historical cash flow

The NAOC JV has yielded high drilling success rates, high production volumes and premium
pricing on crude oil and natural gas and NGLs. For the year ended December 31, 2011,
ConocoPhillips reported revenue of US$1.0 billion, profit after tax of US$157.5 million and
cashflow from operations of US$327.1 million (prepared in accordance with Nigerian
Generally Accepted Accounting Principles).

BUSINESS INFORMATION

Onshore Assets:

1. OMLs 60, 61, 62 and 63 are located in the onshore Niger Delta basin and have a
   long history of proven production. ConocoPhillips’ share of production in 2011 was
   19,000 bbl/d of oil and 157 MMcf/d of gas (Source: ConocoPhillips).

   - Petrenel’s preliminary estimates of Proved plus Probable reserves for the
     Onshore Assets are 94 MMbbls of oil & condensate and 0.7 Trillion Cubic
     Feet (Tcf) of sales gas (213 MMboe) (gross to OER). The economically
     recoverable Best Estimate Contingent Resources are estimated to be 73
     MMbbls of oil and condensate and 0.75 Tcf of sales gas (198 MMboe) (gross
     to OER).

   - The NAOC JV supplies 19.72% of the feedgas utilized by the NLNG plant
     (Source: NLNG) or approximately 85% of the NAOC JV natural gas sales
     under a long term contract which is based on a net back pricing formula. The
     remainder of the gas is sold to a Petrochemical producer and an independent
     Power Producer under long term contracts. In addition, some of the gas is
     utilized as fuel gas in the Kwale-Okpai IPP. Finally, NGLs are sold to a
     petrochemical producer under a long term contract.

   - The Kwale-Okpai IPP plant supplies power under a long term contract to the
     Power Holding Company of Nigeria. (Source: ConocoPhillips)

The Brass LNG project is a large-scale Greenfield project which involves the
development of a two-train LNG facility in Bayelsa State in the Niger Delta. It is
expected that approximately 40% of the feed gas will be supplied by the NAOC JV. It
is expected that the total nominal plant capacity will be 10 million tons of LNG per
year and could be doubled in the future.

Offshore Assets:

1. OML 131 is a large deep water offshore block located in a prolific area about 70km
   south of the Niger Delta coastline and covering 1,204km2 at water depths ranging
   between 500 and 1,200 meters. OML 131 has two oil and gas discoveries and six
   large untested prospects. It is expected that the Chota field in OML 131 will be
   unitized with the Bolia field in OML 135 that is operated by Shell.

2. OPL 214 is a large deepwater offshore license covering 2,586km2 in the prolific central
   part of the offshore Niger Delta. The area is approximately 110km from the coastline
   at water depths ranging between 800 and 1,800 meters. OPL 214 is located close to
   large discoveries (Bonga, Nsiko, and Agbami). A commercial discovery has been
   made on this asset and all work obligations have been fulfilled. It is anticipated that
   OPL 214 will be converted into an Oil Mining Lease (OML) for an initial period of 20
   years. OPL 214 holds four oil and gas discoveries including the Uge field, which was
   discovered in 2005.


STRUCTURE OF THE PROPOSED TRANSACTION

The Company established four wholly owned subsidiaries which have entered into
agreements with ConocoPhillips for the Proposed Acquisition for a total cash consideration of
approximately US$1.79 billion, subject to customary adjustments.

Upon signing of the Sale and Purchase Agreements, the Company paid a cash deposit of
US$435 million (“Deposit”) to ConocoPhillips. The payment of the Deposit was financed by a
US$345 million loan (“Oando Loan”) from Oando Plc, a company which owns 94.6% of the
shares of OER (“Oando”), and US$90 million funded through secured bridge loans, each of
which is guaranteed by Oando, from local Nigerian banks. The Oando Loan has a maturity of
120 days (subject to extension in certain circumstances) and an annual interest rate of LIBOR
plus 10.5% (subject to increase in certain circumstances).

Pursuant to the Oando Loan, OER has agreed, provided that requisite shareholder approval
is obtained in accordance with Multilateral Instrument 61-101 - Protection of Minority
Securityholders in Special Transactions and Toronto Stock Exchange (“TSX”) approval and
shareholder approval is obtained in accordance with (but not limited to) Section 501(c) of the
TSX Company Manual, that the Oando Loan will be convertible, at Oando’s option, into newly
issued common shares of OER (“OER Shares”) at the lower of (i) the 5 trading day volume-
weighted average price (“5 day VWAP”) of an OER Share on the TSX for the 5 trading days
immediately following the date hereof; and (ii) the 5 day VWAP of an OER Share on the TSX
for the 5 trading days immediately preceding, but not including, the date upon which Oando
provides notice to OER that it wishes to convert the Oando Loan into OER Shares. The
issuance of any OER Shares pursuant to the exercise by Oando of the conversion feature will
be subject to TSX approval.

It is expected that the remainder of the Purchase Price for the Proposed Acquisition
(approximately US$1.355 billion) will be financed by way of equity and debt, including private
placements of equity-linked securities and a follow-on offering of OER shares. In addition, it is
expected that US$800 million of senior secured loans will be provided by a syndicate of
international and Nigeria banks.

Closing of the Proposed Acquisition is subject to customary conditions including the receipt
(or waiver, in accordance with the Sale and Purchase Agreements) of all approvals or
consents from any governmental authority; and the waiver or non-exercise of rights of first
refusal, if any with respect to the shares to be acquired by OER, and the assets underlying
such shares.

In the event that the Proposed Acquisition does not close, the Deposit is refundable to OER
(including where there is a breach by ConocoPhillips in any material respect of its covenants
under the Sale and Purchase Agreements) except in the following limited circumstances: (i) a
breach by OER in any material respect of its covenants under the Sale and Purchase
Agreements or (ii) if the closing does not occur because of failure for any reason to obtain all
approvals or consents required by law from any governmental authority under applicable
petroleum laws of Nigeria

About Oando Energy Resources Inc. (OER)

OER currently has a broad suite of producing, development and exploration assets in the Gulf
of Guinea (predominantly in Nigeria) with current production of approximately 3,300 barrels of
oil per day from the Abo Field, (OML 125) and an additional 1,500 barrels of oil per day from
the Ebendo Field, (OML 56), once a damaged export pipe line has been repaired or replaced
(which is expected to be completed early 2013). OER has been specifically structured to take
advantage of current opportunities for indigenous companies in Nigeria, which currently has
the largest population in Africa, and one of the largest oil and gas resources in Africa.

Forward Looking Statements:

This news release contains forward-looking statements and forward-looking information within
the meaning of applicable securities laws. The use of any of the words “expect, “anticipate,
“continue, “estimate, “objective, “ongoing", “may, “will, “project, “should, “believe, “plans,
“intends” and similar expressions are intended to identify forward-looking information or
statements.

Although the Company believes that the expectations and assumptions on which such
forward-looking statements and information are reasonable, undue reliance should not be
placed on the forward-looking statements and information because the Company can give no
assurance that such statements and information will prove to be correct. Since forward-
looking statements and information address future events and conditions, by their very nature
they involve inherent risks and uncertainties.

Actual results could differ materially from those currently anticipated due to a number of
factors and risks. These include, but are not limited to: risks related to international
operations, risks related to funding the remainder of the purchase price for the Proposed
Acquisition, risks related to oil and gas recovery, risks relating to the Petrenel Preliminary
Estimates being confirmed in the final independent report to be prepared by Petrenel, risks
relating to receipt of all required approvals in Nigeria, risks relating to Contingent Resources
being classified as Reserves, risks relating to loss of the deposit, risks relating to supply of
feed gas risks relating to satisfaction of all conditions precedent to closing of the Proposed
Acquisition, the actual results of exploration and drilling activities, changes in oil and gas
production, changes in project parameters and timing as plans continue to be refined and the
future price of crude oil and natural gas. Accordingly, readers should not place undue reliance
on the forward-looking statements. Readers are cautioned that the foregoing list of factors is
not exhaustive.

Additional information on these and other factors that could affect the Company’s financial
results are included in reports on file with applicable securities regulatory authorities and may
be accessed through the SEDAR website (www.sedar.com) for the Company. The forward-
looking statements and information contained in this news release are made as of the date
hereof and the Company undertakes no obligation to update publicly or revise any forward-
looking statements or information, whether as a result of new information, future events or
otherwise, unless so required by applicable securities laws.

Cautionary Statements

Production information is commonly reported in units of barrel of oil equivalent (“boe” or
“BOE”) or in units of natural gas equivalent (“Mcfe”). However, BOEs or Mcfes may be
misleading, particularly if used in isolation. A boe conversion ratio of 6 Mcf:1 barrel, or an
Mcfe conversion ratio of 1 barrel:6 Mcf, is based on an energy equivalency conversion
method primarily applicable at the burner tip and does not represent a value equivalency at
the wellhead.

There is no certainty that it will be commercially viable to produce any portion of
the contingent resources.

There is no certainty that any portion of the prospective resources will be discovered. If
discovered, there is no certainty that it will be commercially viable to produce any portion of
the resources.

Defined Terms

“Reserves” are those quantities of petroleum anticipated to be commercially recoverable by
application of development projects to known accumulations from a given date forward under
defined conditions. Reserves must further satisfy four criteria: they must be discovered,
recoverable, commercial, and remaining (as of the evaluation date) based on the
development project(s) applied. Reserves are further categorized in accordance with the level
of certainty associated with the estimates and may be subclassified based on project maturity
and/or characterized by development and production status.

“Proved Reserves” are those quantities of petroleum, which by analysis of geosciences and
engineering data, can be estimated with reasonable certainty to be commercially recoverable,
from a given date forward, from known reservoirs and under defined economic conditions,
operating methods and government regulations.

“Probable Reserves” are those additional Reserves which analysis of geosciences and
engineering data indicate are less likely to be recovered than Proved Reserves but more
certain to be recovered than Possible Reserves.

“Contingent Resources” are those quantities of petroleum that are estimated, as of a given
date, to be potentially recoverable from known accumulations using established technology or
technology under development, but which are not yet considered mature enough for
commercial development because of one or more contingencies. Contingencies may include
factors such as economic, legal, environmental, political, and regulatory matters, or a lack of
markets. Contingent Resources are further categorized into low case (1C), best case (2C)
and high case (3C) according to the level of certainty associated with the estimates and may
be sub-classified based on economic viability.

“Prospective Resources” are those quantities of petroleum estimated, as 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 discovery
and a chance of development. Prospective Resources are further subdivided in accordance
with the level of certainty associated with recoverable estimates assuming their discovery and
development and may be sub-classified based on project maturity.

“Best Estimate” is considered to be the best estimate of the quantity that will actually be
recovered. It is likely that the actual remaining quantities recovered will be greater or less
than the best estimate. If probabilistic methods are used, there should be a 50 percent
probability that the quantities recovered will equal or exceed the best estimate.

21 December 2012
Sandton

JSE Sponsor
Macquarie First South Capital (Proprietary) Limited

For more information please contact:

Tokunboh Akindele
Head, Investor Relations
aakindele@oandoplc.com

Oando PLC
10th Floor
2, Ajose Adeogun Street
Victoria Island
Lagos, Nigeria
Tel: +234 (1) 2601290-9, Ext 6396
DL: +234 (1) 2702496
Fax: +234 (1) 2611366
Website: www.oandoplc.com




                            
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