Eland Oil & Gas increases reserves for Gbetiokun’s early production phase

Gbetiokun will come online via an early production system in the second half of this year, and that phase is now estimated to be worth around US$43.8mln to Eland.
Oil well, representing the oil production planned at the Gbetiokun field, in OML: 40, Nigeria
Eland is keen to accelerate the Gbetiokun field development.

Eland Oil & Gas PLC (LON:ELA) has revealed an increase in oil reserves for the Gbetiokun field, in OML 40, Nigeria, which is expected to begin production in the second half of this year.

Gbetiokun will come online via an early production system, with the Gbetiokun-1 well, and that initial phase is estimated to be worth around US$43.8mln to Eland.

The Gbetiokun EPS has been estimated to have some 10.7mln barrels of proved and probable (2P) oil reserves before royalties, and 8.6mln barrels after.

Eland’s 45% interest in the asset (held via the Elcrest Exploration and Production Nigeria subsidiary) means its share of 2P reserves amounts to over 3.8mln barrels.

"Following the recent success of the Opuama-3 re-entry well on licence OML 40, we are now keen to accelerate the first phase of development of the Gbetiokun field with Gbetiokun-1 being an excellent candidate to continue our strategy of cased hole workovers,” said George Maxwell, Eland chief executive.

Maxwell highlighted that a competent persons report has estimated initial flow rates of around 7,800 barrels of oil per day (gross) from the EPS.

“We are highly encouraged that NSAI calculate a Present Worth net to Eland of almost $44 million for the first phase alone, from an investment of only $6.5 million,” he added.

“Alongside our recently announced CPR for the Ubima field, we believe we are well positioned to materially accelerate oil production and cash flows over the coming twelve months.”

Earlier this month the Ubima field, within OML 17, advanced with the release of that it would be suited to an early production phase, and subsequently has provided a further boost.

The Gbetiokun EPS reserves assessment was carried out by Netherland, Sewell & Associates Inc, and it was dated March 31 2016.

Before royalties NSAI estimated 7mln barrels of proved (1P) reserves for the Gbetiokun EPS, while the figure for proved, probable and possible (3P) reserves was 15.4mln barrels.

After royalties the 1P reserve for the EPS is seen at 5.6mln barrels, 2P was estimated at 8.6mln barrels and 3P was 12.35mln.

The March 31 report also outlines 25.87mln barrels of oil in place in the E2000 reservoir, up 73% from a prior estimate of 14.91mln barrels in June 2014, and the E6000 reservoir was estimated to host 12.77mln barrels of oil in place compared to 8.79mln barrels previously.

Eland expects both oil in place and reserves to increase when NSAI updates its assessment of the whole Gbetiokun field later this year.

NSAI previously estimated the total oil in place at Gbetiokun to be just over 81.16mln barrels – with 4.7mln barrels of 1P, 25.8mln of 2P and 32.3mln 3P.

In this morning Eland also confirmed its cash position - it had US$5.7mln at the end of March - and it revealed a positive outlook for its debt capabilities.

It told investors that it had drawn US$15mln under its facility with Standard Chartered Bank.

The borrowing base under the committed US$35mln facility currently stands at US$25.4mln, following the most recent determination which was decided when crude prices were lower, and the company expects the borrowing base to improve at the next redetermination which takes place in June.

Eland expects its ability to borrow will be further enhanced because of the higher flow rates seen after the Opuama 3 well work-over as well as the improved reserves base at Gbetiokun.

The company said that, once the next redetermination is done, it intends to proceed with Standard Chartered with efforts to syndicate a facility of up to US$75mln.

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