Eland Announces Near-Term Reserves Update on Opuama, Gbetiokun Wells

Eland Oil & Gas PLC (AIM: ELA), an oil & gas production and development company operating in West Africa with an initial focus on Nigeria, today makes the following announcement.

The Company is pleased to announce the results of a Reserves and Resources evaluation on Opuama-1, Opuama-3, Opuama-7 and Gbetiokun-1, all contained within OML 40, (“Op-1”, “Op-3”, “Op-7” and “Gb-1” respectively) provided by Netherland, Sewell & Associates Inc. (“NSAI”) as at 31 March 2017 (collectively, the “NSAI Report” or the “Report”).

Following the successful re-entry of Opuama-3 announced on 25 April 2016, Eland, through its joint-venture subsidiary Elcrest Exploration and Production Nigeria Ltd, together with NPDC, its co-venture on OML 40, intend next to initiate production by means of a side track on the Opuama-7 well in Q2 2017 followed by an Early Production System (EPS) on the Gbetiokun Field in the second half of 2017. This is the initial stage of a planned phased development of the Opuama and Gbetiokun fields. The remaining capex associated with Op-7 is $7m (Net: $3.15m) and the Gb-1 of $16m (Net: $7.2m). Eland’s joint-venture subsidiary Elcrest Exploration and Production Nigeria Ltd holds 45% equity in the OML 40 license. Opuama fields total reserves previously reported in the NSAI 30 June 2015 CPR remain unchanged. However, the significant increase in oil recovery from the existing well inventory (Op-1, Op-3, Op-7 and Gb-1) are expected to lead to less infill wells being required to access the remaining reserves on OML 40 and therefore reducing future total Capex spend.

The oil reserves and future net revenue to Eland allocated to Op-1, Op-3 and Op-7 as of March 31, 2017 with a flat $55/bbl price deck and Eland cost parameters, are as follows:

Opuama-1, Opuama-3 and Opuama-7 wells

Oil Reserves (MB)

Eland Future Net Revenue(1) (2)

Gross (100%)

Net Entitlement

 (M$)

Category

Before Royalties

After Royalties

After Royalties

Total

Present Worth at 10%

1P

16,606.2

13,284.9

5,696.1

130,937.5

118,469.3

2P

22,755.2

18,204.1

7,799.2

160,584.6

142,618.0

3P

28,814.0

23,051.2

9,871.5

198,623.3

174,334.8

 

(1)    Net Entitlement is based on treating Eland funding of the Starcrest Nigeria Energy Limited (Starcrest) share of Elcrest E&P Nigeria Limited (Elcrest) as a carried working interest, resulting in an Eland participating interest of 45.00 percent and considering no payout of the Starcrest loans resulting from the Opuama field redevelopment project.

(2)    The economics above are point forward from 31 March 2017 and do not include any Elcrest tax losses or capital allowances to that date. The economics above assume five years of Pioneer Tax Status, up to 1 May 2019.

The oil reserves and future net revenue to Eland allocated to Op-1, Op-3, Op-7 and Gb-1 as of March 31, 2017 with a flat $55/bbl price deck, are as follows:

Opuama-1, Opuama-3, Opuama-7 and Gbetiokun-1 wells

Oil Reserves (MB)

Eland Future Net Revenue(1) (2)

Gross (100%)

Net Entitlement

 (M$)

Category

Before Royalties

After Royalties

After Royalties

Total

Present Worth at 10%

1P

23,400.0

18,720.0

8,019.6

163,450.5

146,109.3

2P

33,519.1

26,815.3

11,480.5

212,949.1

186,788.7

3P

44,185.5

35,348.4

15,128.5

281,693.4

243,818.8

 

(1)    Net Entitlement is based on treating Eland funding of the Starcrest Nigeria Energy Limited (Starcrest) share of Elcrest E&P Nigeria Limited (Elcrest) as a carried working interest, resulting in an Eland participating interest of 45.00 percentand considering no payout of the Starcrest loans resulting from the Opuama Field redevelopment project and Gbetiokun EPS.

(2)    The economics above are point forward from 31 March 2017 and do not include any Elcrest tax losses or capital allowances to that date. The economics above assume five years of Pioneer Tax Status, up to 1 May 2019.

(3)    All production and cost assumptions used for the Gbetioken-1 EPS are the same as those used in the NSAI 31 March 2016 CPR, as announced by the Company on 27 April 2016.

George Maxwell, CEO of Eland, commented:

“The confirmation of an additional gross 22.6 million barrels from our existing well re-entry strategy is very exciting. The level of capex investment required to produce this incremental volume is less than a dollar fifty per barrel, contributing to the significant NPV of $186.8 million from the four wells.

This programme will put the Company in a very strong position to move forward with the Opuama infill drilling and the full development of the Gbetiokun and Ubima fields, creating greater value for all our stakeholders.”

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