Oando Energy Resources Announces First Quarter Results
CALGARY, May 16, 2013 /PRNewswire/ --
Oando Energy Resources Inc. ("OER" or the "Company") (TSX:OER), a company focused on oil exploration and production in Nigeria, today announced financial and operating results for the quarter ended March 31, 2013. The unaudited financial statements, notes and management's discussion and analysis (MD&A) pertaining to the period are available on the System for Electronic Document Analysis and Retrieval ("SEDAR") at http://www.sedar.com and by visiting http://www.oandoenergyresources.com. All monetary figures reported herein are U.S. dollars unless otherwise stated.
Operational Highlights
Acquired, effective April 30, 2013, a 40% working interest in the Qua Ibo Marginal Field within OML 13, located onshore Nigeria. The asset was evaluated with an effective date of December 31, 2012 and the acquisition added 1.04 million barrels ("MMbbls") of Proved plus Probable (2P) Reserves (oil) and 2.37 MMbbls of Best Estimate (2C) Contingent Resources (oil) (net to OER, before deduction of royalties). See the Company's press releases dated March 27, 2013 and April 30, 2013 and the Company's material change report dated April 8, 2013 for further information regarding this acquisition and the Contingent Resources.
- Resumed full production from the Ebendo Field of 1368 barrels of oil per day ("bbl/day") (net to OER) following the full repair of the Kwale-Akri pipeline;
- 3,637 bbl/day in average net production for the quarter ended March 31, 2013. This represented a 17% decrease from the same period last year;
- $29.7 million in revenue from the sale of crude for the quarter ended March 31, 2013. This represented a 16% decrease from the same period last year and was attributable to the natural decline in producing reservoirs and shut-in production at the Ebendo Field, as was previously announced; and
- Average gross sales price realized per barrel of oil produced was $114 for the quarter ended March 31, 2013.
Financial Highlights
- $(3.1) million in cash flow from operating activities for the quarter ended March 31, 2013. This represented a decrease of 115% from the same period last year;
- $10.1 million in capital expenditures for the quarter ended March 31, 2013. This represented a decrease of 22% from the same period last year;
- $232 million in cash and cash equivalents for the quarter ended March 31, 2013; and
- $480 million in borrowings as at March 31, 2013. These borrowings consisted of a US$345 loan from Oando PLC and US$135 million of bridge loans from a syndicate of Nigerian banks. These funds were used to finance a cash deposit required to be paid pursuant to the sale and purchase agreements executed in connection with the proposed acquisition of Nigerian oil and gas assets from ConocoPhillips.
"The past several months were highlighted by the resumption of full production from our Ebendo asset as well as the closing of the Qua Ibo acquisition, which will add 1.04 million barrels of Proved plus Probable (2P) Reserves and 2.37 million barrels of Best Estimate Contingent Resources to our growing portfolio of Nigerian assets," said OER CEO, Pade Durotoye. "From a transactional standpoint, we continue to progress our proposed acquisition of ConocoPhillips' Nigerian assets and remain on track to close the transaction by the September deadline. This acquisition will, we expect, be a transformational one for our company and it is our plan to update the market in the months to come."
Selected First Quarter Results
$ Change
(US$'000s,
Three months Three months except as % Change
ended March ended March otherwise
31, 2013 31, 2012 indicated)
US$'000s, 2013/2012 2013/2012
except as otherwise indicated
Total Revenue 29,702 35,436 (5,734) -16%
Barrels of oil
equivalent produced (boe) 334,612 396,747 (62,135) -16%
Average sales price
per barrel (US$) (Gross) 114 91 23 25%
Average sales price
per barrel (US$) (Net)(1) 95.85 89.32 6.53 7%
Cashflow from operations (3,125) 6,229 (10,301) -115%
Total Comprehensive Income (7,699) 12,430 (20,129) -162%
Total Comprehensive Income
on a per-share basis (0.07) 0.12 (0.19) -158%
Total Assets 1,080,109 1,068,008 12,101 1%
Total non-current
financial liabilities 156,462 153,402 3,060 2%
(1) Price excludes royalties (8% on OML 125 (Abo) and 5% on Ebendo), Nigerian Government profit share of profit oil on the production sharing contract in respect of OML 125 (Abo).
OPERATIONAL UPDATE OML 125
Nigerian Agip Energy ("NAE"), the operator of OML 125, together with the Company, completed the work over of Abo-9 well that started in 2012, during the three months ended March 31, 2013. The partners also completed the drilling of Abo 4ST during the quarter.
Ebendo Marginal Field
Energia Limited ("Energia"), operator of the Ebendo field in OML 56, along with Oando Production and Development Company (of which the Company has a 42.75% economic interest), drilled and completed the Ebendo-4 well during the report period. The well was spudded on March 24, 2012, and drilled to a total depth of 12,120 feet MD (3697 m MD) which was reached on June 10, 2012. The well encountered 10 separate reservoir sands, tagged XV -XXb, with a gross pay thickness of 116 m (preliminary figures). Individual thicknesses range from 3.6m in the XXb to about 31 m in the XIX (main reservoir sand).
Currently, the Ebendo-4 well was completed in the XIX and the XXa reservoirs. The well was tested from July 29 to August 28, 2012. The tests results are not necessarily indicative of long-term performance or of ultimate recovery.
The rig moved off the well location on September 28 and skidded to the Ebendo-5 location. Drilling of well 5 commenced in the fourth quarter of 2012 and was completed early in the first quarter of 2013. Well 6 drilling has commenced and the expected completion date is the third quarter of 2013.
Other operations of note within the period were the commencement of contract for the purchase of pipes for the Umugini pipeline, which is planned as an alternative evacuation route to the current routing through the Kwale Flowstation operated by Agip Oil Company Limited ("NAOC") . The planned pipeline is 53 km long, of which Energia and OER jointly own 25%. The planned pipeline is 53 km long. The contract sum to be paid by OER is approximately US$8.87 million.
The Ebendo marginal field was shut in as a result of damages to the Kwale-Akri oil delivery pipeline that is operated by NAOC. This pipeline connects the Ebendo field to the Brass export terminal. The pipeline, which went down on November 1, 2012, was repaired and production commenced thereafter on December 27, 2012. However, a requirement for further repairs resulted in another production shut-in from February 13, 2013. Production subsequently resumed April 24, 2013.
Akepo Marginal Field
The Company, with its partner Sogenal Limited (as operator), successfully re-entered and tested the suspended Akepo-1st well. The drilling rig, Noble Lloyd Noble, was demobilized on January 5, 2010 after a 50-day well testing and completion program on the Akepo field. Drill Stem Tests (DST) proved flowing hydrocarbons in all the three targeted reservoirs.
The test results are not necessarily indicative of long-term performance or of ultimate recovery.
The Akepo-1 ST was completed as a two-string multiple completions to produce on two strings from two of the three zones, with the third zone selective on one of the strings. Following the completion, the Akepo-1 ST was successfully flow tested from the D6 sand with good flowing wellhead pressures. There was insufficient tank capacity available to further test the D1 or C1 sands. With the success of the well test and completion, the partnership is now expecting to move towards first oil. The partnership has awarded a contract to build a wellhead jacket facility over the well location and lay a 15km pipeline from the Akepo Wellhead facility to a nearby crude processing facility, as well as negotiating crude handling and sales agreements with the facility owners. Due to the earlier than expected onset of the rainy season which has delayed pipe lay, first oil is now expected to occur during the fourth quarter of 2013. There is no certainty that first oil will occur within the expected timeline.
OUTLOOK
The Company and its partners have requested more data from NAOC, the pipeline operator, at Ebendo. This is to determine the accuracy of the pipeline losses being charged to the Company and its partners by NAE. The Company is making provision of 17% for such losses and is seeking ways to reduce it. The plan the Company has includes volume reconciliation, verification of meters accuracy and renegotiation of the crude handling contracts. The success of this plan is dependent on the cooperation of NAOC and the other cluster members.
The Company, through its partner, is currently involved in the construction of the Umugini pipeline to a different export terminal for Ebendo crude. The completion of this alternate pipeline is not expected to be until the third quarter of 2013. A new purchase agreement may then have to be signed with another party for the purchase of Ebendo crude.
About Oando Energy Resources Inc. (OER)
OER currently has a broad suite of producing, development and exploration properties in the Gulf of Guinea (predominantly in Nigeria) with current production of approximately 5,205 bopd from the Abo Field in OML 125 and the Ebendo Field in OML 56. 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.
Cautionary Statements
There is no certainty that it will be commercially viable to produce any portion of the Contingent Resources.
The estimates of reserves and future net revenue for individual properties may not reflect the same confidence level as estimates of reserves and future net revenue for all properties, due to the effects of aggregation.
There is no certainty that any portion of the resources referred to herein will be discovered and, if discovered, there is no certainty that it will be commercially viable to produce any portion of the resources.
Oil and Gas Equivalents
Production information is commonly reported in units of barrel of oil equivalent ("boe" or "Mboe" or "MMboe") or in units of natural gas equivalent ("Mcfe" or "MMcfe" or Bcfe"). However, boe's or Mcfe's may be misleading, particularly if used in isolation. A boe conversion ratio of 6 Mcf = 1 barrel, or a Mcfe conversion ratio of 1 barrel = 6 Mcf, is based on an energy equivalency conversion method primarily applicable at the bumer tip and does not represent a value equivalency at the wellhead.
Definitions
"Reserves" are estimated remaining quantities of oil and natural gas and related substances anticipated to be recoverable from known accumulations, as of a given date, based on analysis of drilling, geological, geophysical, and engineering data; the use of established technology; specified economic conditions, which are generally accepted as being reasonable, and shall be disclosed. Reserves are classified according to the degree of certainty associated with the estimates.
"Proved Reserves" are those Reserves that can be estimated with a high degree of certainty to be recoverable. It is likely that the actual remaining quantities recovered will exceed the estimated Proved Reserves.
"Probable Reserves" are those additional Reserves that are less certain to be recovered than Proved Reserves. It is equally likely that the actual remaining quantities recovered will be greater or less than the sum of the estimated Proved plus Probable Reserves.
"Contingent Resources" are those quantities of petroleum estimated, as of a given date, to be potentially recoverable from known accumulations using established technology or technology under development, but which are not currently considered to be recoverable due to one or more contingencies. Contingencies may include factors such as economic, legal, environmental, political and regulatory matters or lack of infrastructure or markets. It is also appropriate to classify as contingent resources the estimated discovered recoverable quantities associated with a project in the early evaluation stage. Contingent resources are further classified in accordance with the level of certainty associated with the estimates and may be sub-classified based on project maturity and/or characterized by their economic status.
"Best Estimate" is considered to be the best estimate of the quantity of resources that will actually be recovered. It is equally likely that the actual remaining quantities recovered will be greater or less than the best estimate. Those resources that fall within the best estimate have a 50% confidence level that the actual quantities recovered will equal or exceed the estimate.
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 through the SEDAR website (http://www.sedar.com) for the Company. 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.
For further information:
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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