The Opuama oilfield, which was shut in by Shell, will be redeveloped by Elcrest
UK junior Eland Oil & Gas has more asset disposals by the likes of Shell in its sights after completing the acquisition of a Nigeria block as its flotation on London’s secondary stockmarket on Monday generated strong investor interest.
The Aberdeen-based company is looking to restart production from OML 40 within six months, with a pair of exploration wells also lined up for next year, having picked up a 45% stake in the onshore block from Shell, Total and Eni for a total consideration of $154 million through its Nigerian joint venture Elcrest.
The transaction with Shell to acquire the latter’s 30% share for $102 million has now been finalised after gaining the approval of the Abuja government.
Having acquired its first asset, Eland is now looking to build on its position by acquiring underexploited onshore and shallow-water assets in Nigeria, as well as the wider West African region, from bigger players such as Shell that are shedding marginal acreage to streamline their portfolios and focus on major projects.
The company raised £118 million ($187.4 million) in the initial public offering on London’s Alternative Investment Market, which had been hanging on official Nigerian approval for the block deal.
An Eland spokesman informed Upstream: “The offering was oversubscribed and investor interest is enthusiastic with shares trading at a 10% premium.”
The company is expected to have a market capitalisation of about £134.9 million based on the offer price of 100pence per share.
It has also secured a bank facility of $22 million and equity option agreements with two key investors of £10 million each.
Proceeds from the offering and other financing will be used partly to fund the acquisition of OML 40, where state-owned Nigerian National Petroleum Corporation owns the remaining 55% with its subsidiary NPDC to take over operating rights from Shell.
The rest of the cash will be ploughed into redevelopment of the 498 square-kilometre block, which has been shut in for more than five years due to militant activity in the strife-torn Niger Delta oil producing region.
It is estimated to hold 71.5 million barrels of proven and probable resources and also has “significant exploration upside”, according to Eland.
While Shell has struggled to effectively produce the block, the Eland spokesman said the Elcrest joint venture “will be able to bring focus to the development”.
Elcrest aims to restart output at the block’s Opuama oilfield in six months’ time at an initial rate of 2500 barrels per day, with a goal of ramping up to 50,000 bpd through appraisal and exploration drilling within four years.
This will require recommissioning existing infrastructure, including repairs to pipelines that have been damaged both by sabotage and oil theft, and restarting shut-in wells.
The field had produced 43 million barrels before being shut in by Shell in 2006. The block also hosts the Gbetiokun, Abiala and Ugbo fields.
Questioned about security concerns, the Eland spokesman said the company’s team “managed such issues very successfully while they were with Addax Petroleum”, adding that both the operational management and chief executive Blair would be based in Nigeria.
Blair was formerly managing director of Nigeria operations with Addax, with chief financial officer George Maxwell a veteran of the same company.
Eland’s flotation document stated the company considers the security issues that led to the Shell shutdown of the block to be “regional and not specific to the licence area”.
Shell has also earlier identified from seismic an inventory of 15 prospects and leads at the block with unrisked mean prospective resources of 356 million barrels.
The joint venture intends to drill two exploration wells next year on Abiala prospects targeting prospective resources of 113 million barrels.
Nigerian player Starcrest is the dominant partner in Elcrest, with Eland currently holding a stake of 45% that is set to rise to 49% within 30 days of completion of the block acquisition..
Source: Anonymous
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