Eland, the oil and gas exploration and development company with a focus on Nigeria and West Africa, is pleased to announce that Wester Ord Oil & Gas Limited, a wholly owned subsidiary of Eland, has agreed to acquire a 40%. participating interest in the Ubima Field from Allgrace Energy Limited.
The most recent independent 2C resources estimate for Ubima is 34 million bbls of oil (independent report prepared by AGR TRACS). There is also a significant upside 3C resource estimate of 66.9 million bbls of oil with an extra 2C resource estimate of 97 billion ft3 of non-associated gas in two reservoirs.
Ubima lies onshore in the northern part of Rivers State and has been carved out of Oil Mining Lease (OML) 17, which is held by Nigerian National Petroleum Corporation, The Shell Petroleum Development Company of Nigeria Limited, Total E&P Nigeria Limited and Nigerian Agip Oil Company Limited.
Ubima has 3D seismic coverage and four wells have been drilled in the field between the 1960s and 1981 with hydrocarbons being encountered in all four wells in multiple stacked reservoirs.
The Ubima 1 well was suspended and identified for completion and production by the previous operator, but this programme was not executed and Wester Ord is planning to re-enter this well and perform an extended production test, oil produced will then be trucked to the nearest sales point prior to the Ubima export pipeline being in place. The Company believes that subsequently an initial four development wells can be drilled and put into production 9 to 12 months from commencement of the full work programme. The full work programme is estimated to require development capital expenditure of US$ 125 million, however a proportion of this is anticipated to be met from early cashflows from the extended production test.
Wester Ord entered into a farm-in agreement with the Farmor for a 40% interest and as consideration for the assignment, will pay a signature bonus of US$ 7 million to the Farmor and, contingent on production and receipt of Ministerial Consent to the transfer of the participating interest, a production bonus of US$ 3 million.
Wester Ord also entered into a separate commercial agreement to fund the initial work programme. The terms of this agreement entitle Wester Ord to 88%. of production cash flow from Ubima until the costs have been recovered. The Company will guarantee the obligations of Wester Ord under the farm-in agreement and the signature bonus will be paid from existing cash resources. The Company is currently in discussions to increase the existing debt facilities to fund the Ubima development.
The completion of the transfer of the 40%. participating interest from the Farmor to Wester Ord is contingent on the approval of the Head-Farmors and the Nigerian Minister of Petroleum Resources. Pending receipt of Ministerial Consent to the transfer of the 40 per cent. participating interest, Wester Ord will exercise the rights and benefits of its 40%. interest in Ubima via the Financial and Technical Services Agreement which takes effect from completion.
The Ubima Field was awarded to the Farmor by the Department of Petroleum Resources in 2011. The award also included a commitment to develop viable small scale gas utilisation projects within 30 months of commencement of production. This could include a small scale power generation project where the availability of electricity in rural areas is severely restricted. The Farmor since the award of the Ubima Field has to date not conducted any work on the Ubima Field and therefore there are currently no profits/losses attributable to Western Ords acquisition of 40% of the field.
The field is close to existing infrastructure for the delivery of crude to market and Wester Ord are currently in discussions with The Shell Petroleum Development Company regarding the crude export tie in point.
As a designated marginal field, Ubima will benefit from attractive fiscal terms available in Nigeria as part of the government indigenisation programme.
Leslie Blair, Chief Executive Officer of Eland, commented: "The acquisition of Ubima is a very attractive and accretive deal for Eland on very positive terms. As the Technical and Financial Partner we will be able to lead the development and move quickly to bring these assets into early production generating strong cashflow for the benefit of all stakeholders."
Adapted from press release by Hannah Priestley-Eaton
Read the article online at: https://www.oilfieldtechnology.com/drilling-and-production/15082014/eland-farms-into-ubima-field/