Wrap Text
OER completes landmark acquisition of ConocoPhillips Nigerian Oil and Gas Business for US$1.5 billion
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: UNTP
ISIN: NGOANDO00002
(“Oando” or the “Company”)
OANDO ENERGY RESOURCES COMPLETES LANDMARK ACQUISITION
OF CONOCOPHILLIPS NIGERIAN OIL AND GAS BUSINESS FOR US$1.5
BILLION
Quote
CALGARY, ALBERTA July 30, 2014 – Oando Energy Resources Inc.
("OER" or the "Company") (TSX: OER), a company focused on oil and gas
exploration and production in Nigeria, today announced the completion of
its acquisition of the Nigerian Upstream Oil and Gas Business of
ConocoPhillips (NYSE: COP) for a total cash consideration of US$1.5 billion
after customary adjustments plus a deferred consideration of US$33 million
(the “Transaction”).
The Transaction entails the acquisition of ConocoPhillips’ Nigerian oil and
gas businesses consisting 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 coventurers are the Nigerian National Petroleum Corporation
(“NNPC”) with a 60% interest and NAOC (20% and operator).
1
b) The Offshore Business
- Conoco Exploration and Production Nigeria Limited (“CEPNL”), which
holds a 95% operating interest in OML 131 located 70 km offshore
in water depths of 500m to 1,200m.; and
- Phillips Deepwater Exploration Nigeria Limited (“PDENL”), which
holds a 20% non-operating interest in Oil Prospecting Licence
(“OPL”) 214 located 110 km offshore in water depths of 800m to
1,800m. The other coventurers are ExxonMobil (20% and operator),
Chevron (20%), Svenska (20%), Nigerian Petroleum Development
Company (15%) and Sasol (5%). In June 2014, the Honorable
Minister of Petroleum Resources for Nigeria approved the
conversion of OPL 214 to OML 145 for an initial period of 20 years.
Through this Transaction, OER will indirectly own all of the issued share
capital of POCNL, CEPNL and PDENL. The effective date of the transaction
is January 1, 2012.
In connection with this Transaction, OER retained The Petroleum and
Renewable Energy Company Limited (“Petrenel”) as Independent Reserves
Evaluator to report on the reserves and resources of the newly acquired
assets, OMLs 60, 61, 62 and 63 (together, the “Onshore Assets”) and
OMLs 131 and OPL 214 (OML 145, after conversion) (together, the
“Offshore Assets”).
The Independent Reserves Report has an effective date of December 31,
2013 and has been prepared in accordance with National Instrument 51-
101 standards and the guidelines set out in the Canadian Oil and Gas
Evaluation Handbook.
All figures quoted below are gross to OER (i.e. before deduction of royalty and
tax) unless otherwise stated. All reserves quoted below have an effective date of
December 31, 2013.
HIGHLIGHTS
OER believes that the Transaction represents a significant opportunity for
OER to create scale and significant value for its shareholders, adding:
- The total reserves and resources associated with this Transaction are;
Proved plus Probable Reserves of 211.6 million barrels oil equivalent
(“MMboe”); Best Estimate Contingent Resources of 498.6 MMboe;
Unrisked Best Prospective Resources of 656.9 MMboe.
- A 20% working interest in the NAOC JV, which includes forty
discovered oil and gas fields, of which twenty-four are currently
producing, approximately forty identified prospects and leads, twelve
production stations, approximately 1,490 km of pipelines, three 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.
- OER’s sales production from the onshore assets averaged 36,494
barrels of oil equivalent per day (“boe/d”) in 2013 and 39,266 boe/d
in H1 2014. The Onshore Assets contain 211.6 MMboe of Proved
plus Probable Reserves, 217.0 MMboe of Best Estimate Contingent
Resources and 333.6 MMboe of Unrisked Best Prospective
Resources, gross to OER.
- The Offshore Assets include a significant share of six separate
discovered fields and eight separate prospects and contain a total of
281.6 MMboe of Best Estimate Contingent Resources and 323.3
MMboe of Unrisked Best Prospective Resources, gross to OER.
- Upon completion of the Transaction, OER will be positioned as one
of the leading E&P players in the Nigerian Oil & Gas sector, as
measured by end-2013 Proved plus Probable Reserves of 230.6
MMboe, Best Estimate Contingent Resources of 536.8 MMboe,
Unrisked Best Prospective Resources of 2,051.8 MMboe and H1,
2014 production of 44,512 boe/d, all gross to OER.
- The Transaction was financed with an approximate 50/50 debt-
equity ratio. Half of the deferred consideration of US$33 million is
due six months after closing with the balance due 12 months after
closing.
- The Transaction is immediately cash generative and will contribute
significantly to the cashflows of the Company.
“This transaction represents a transformational leap 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,” said Pade Durotoye, CEO,
OER. “Our management team is familiar with these assets and possess the
managerial experience and technical expertise necessary to unlock their
value for our shareholders.”
Also commenting, Mr. Wale Tinubu, Chairman, OER said “we believe in the
significant potential that the Nigerian oil and gas industry holds and are
privileged to play a pivotal role in its consolidation, growth and
development. We will continue to seek strategic opportunities that provide
a platform for enhanced growth and value creation for our stakeholders”.
ANALYST CONFERENCE CALL
OER will be hosting a conference call to discuss the Transaction on Friday,
August 1, 2014 at 10:00 a.m. Eastern Standard Time. To access the
conference call, please dial 1-855-481-5362. If dialing internationally
(outside of North America) the conference call can be accessed by calling
any of the following numbers:
Country Access Number
Nigeria Local (*0 for Operator) +234-1903-0040
South Africa (Toll-Free) 0 800 200 648
South Africa - Johannesburg 011 535 3600
UK (Toll-Free) 0 808 162 4061
Other Countries +27 11 535 3600
+27 10 201 6800
Participants must request the Oando Energy Resources Acquisition
Conference Call.
A replay of the conference call will be available through August 6, 2014. To
access the replay, dial 1-855-481-5363 (North America) and enter playback
code 32145#.
Country Access Number
Other Countries +27 11 305 2030
South Africa 011 305 2030
UK (Toll-Free) 0 808 234 6771
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. OER’s sales production from the onshore assets averaged 36,494
boe/d in 2013 and 39,266 boe/d in H1 2014.
Higher oil and gas recovery factors are expected to be achieved with a
focused and committed development program. OER believes there are
many opportunities to further develop the existing fields and increase
production.
OER’s Independent Reserves and Resources Evaluation
Petrenel has assigned estimates of Proved plus Probable Reserves of 211.6
MMboe, Best Estimate Contingent Resources of 217.0 MMboe (OER gross
share) to the Onshore Assets. These Contingent Resources have not been
classified as Reserves as either (i) oil and gas production associated with
these Contingent Resources is not likely to start within five years, (ii)
definition of development activities will require more technical work; (iii)
gas will be produced and sold after expiration of gas sales contracts, or (iv)
oil and gas will be produced after expiration of license.
For the Offshore assets Petrenel has assigned Best Estimate Contingent
Resources of 281.6 MMboe, gross to OER. These Contingent Resources
have not been classified as Reserves due to the following reasons: (i) lack
of firm development plans, (ii) undemonstrated commerciality for any
development plan, (iii) undemonstrated commerciality of gas development
in Niger Delta deep-water, (iv) pending approval of development plans by
the Nigerian government (v) significant portion of oil and gas being
produced after license expiry.
It is expected that 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 license and gas contracts will
get extended at current terms, (ii) further detailed technical studies are
likely to identify additional resources, (iii) developing commercial plans for
exploitation of oil and gas for Offshore assets and (iii) reducing bunkering
in Onshore assets with likely result of 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, which may
delay development, and (iii) increased development and operating costs,
which may reduce the economically recoverable volume.
Significant exploitation and exploration upside
OER believes that there is significant upside potential from an active
exploitation and exploration program on the Onshore and Offshore assets,
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 and other gas supply opportunities in the growing
domestic market.
Petrenel has assigned a total Unrisked Best Prospective Resources of 656.9
MMboe (gross to OER), of which 333.6 MMboe is assigned to the Onshore
Assets and 323.3 MMboe to the Offshore Assets.
Ideal location with extensive production and infrastructure
The Onshore assets contained within 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 three gas processing facilities, which can process up
to 125,000 barrels of oil per day (“bbls/d”) of oil and over 1 billion cubic
feet per day (“Bcf/d”) of natural gas.
Other facilities and infrastructure include 12 production stations and about
1,490 km 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 approximately 15% of Nigeria’s current available national
power generation capacity.
Nigeria has 37.1 billion barrels of proved reserves, (Source: BP Statistical
Review of World Energy 2014), 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 production, transportation
and processing business.
OER believes that this Transaction will provide OER with a platform for
future growth in the region.
High quality crude oil production that trades at a premium to Brent
Crude 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 crude.
Highly profitable and strong historical cash flow
The NAOC JV has yielded high drilling success rates (89% over last 15
years), high production volumes and premium pricing on crude oil and
natural gas and NGLs. For the year ended December 31, 2013, the Onshore
Assets generated net revenues of US$ 620.9 million, profit after tax of
US$132.8 million and cashflow from operations of US$177.9 million
prepared in accordance with International Financial Reporting Standards.
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. OER’s share of
sales production in 2013 was 36,494 boe/d (10,579 bbls/d of oil and
condensate, 139 MMcf/d of sales gas and 2,556 boe/d of NGLs) and
in the first half of 2014 it was 39,266 boe/d (10,385 bbls/d of oil and
condensate, 161 MMcf/d of sales gas and 2,076 boe/d of NGLs).
- Petrenel’s estimates of Proved plus Probable reserves totaling
211.6 MMboe for the Onshore Assets consisting of 68.0
MMbbls of oil & condensate, 758.8 billion Cubic Feet (Bcf) of
sales gas (126.5 MMboe) and 17.2 MMboe of natural-gas-
liquids (gross to OER). The Best Estimate Contingent
Resources are 217.0 MMboe which consist of 97.4 MMbbls of
oil and condensate, 655.0 Bcf of sales gas (109.2 MMboe) and
10.4 MMboe of NGLs (gross to OER).
- The NAOC JV supplies approximately 20% of the feed gas
utilized by the NLNG plant (Source: Nigeria LNG Limited) 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.
Offshore Assets:
The Offshore Assets add 281.6 MMboe of 2C Contingent Resources and
323.3 MMboe of Unrisked Prospective Resources to the OER portfolio.
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, including the Chota field,
which was discovered in 1998. The Nigerian Department of
Petroleum Resources (DPR) has approved the unitization of the
Chota field in OML 131 with the Bolia field in OML 135 and Shell
has been appointed the operator of the unitized area
The Best Estimate Contingent Resources are estimated to be 101.2
MMbbls of oil and 592.5 Bcf of gas (98.7 MMboe) gross to OER.
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). In June 2014, the Honorable
Minister of Petroleum Resources for Nigeria approved the conversion
of OPL 214 into OML 145 for an initial period of 20 years. OML 145,
after conversion from OPL 214, will hold four oil and gas discoveries
including the Uge field, which was discovered in 2005.
The Best Estimate Contingent Resources are estimated to be 52.8
MMbbls of oil and 173.1 Bcf of gas (28.9 MMboe) gross to OER.
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
the completion of this transaction, OER’s sales production was 41,071
boe/d in 2013 and 44,512 boe/d in the first half of 2014.
With the completion of this transaction, reserves and resources attributable
to OER as of as of December 31, 2013 include Proved plus Probable
reserves of 230.6 MMboe and Best Estimate Contingent Resources of 536.8
MMboe
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.
Unquote
Lagos
30 July 2014
JSE Sponsor
Macquarie First South Capital Proprietary Limited
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. In particular, this news release contains
forward-looking statements relating to intended acquisitions.
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, the actual results of current exploration
and drilling activities, changes in project parameters as plans continue to
be refined and the future price of crude oil. 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 under the Company’s
profile on SEDAR website (www.sedar.com). 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.
For more information please contact:
Pade Durotoye, CEO
Oando Energy Resources Inc.
pdurotoye@oandoenergyresources.com
+1 403-561-1713
Tokunboh Akindele
Head Investor Relations
Oando Energy Resources Inc.
takindele@oandoenergyresources.com
+1 403-560-7450
Jeremy Dietz/David Feick
Investor Relations
+1 403-218-2833
jdietz@tmxequicom.com
dfeick@tmxequicom.com
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