London-listed ADM Energy, an oil and gas investing company formerly known as MX Oil has unveiled its 2020 investments plans and strategy to expand its portfolio across Nigeria and West Africa.
The company’s new primary approach to investments will be to “option” appraisal assets where oil and gas have already been discovered, conduct a detailed evaluation, and then make debt or equity contribution to access future upside.
The benefit of this approach is that the company raises equity only after the asset has been secured.
“Nigeria represents a compelling value proposition for investors. It is a buyer’s market, with many of the oil majors embarking on significant divestment programmes, this opens up an opportunity for companies that have the local contacts, experience and financing options to acquire assets at very attractive prices,” Osamede Okhomina, CEO of ADM Energy said.
ADM believes that international oil companies have divestment programs planned and management estimates that up to 500,000 barrels per day could be sold to independent operators.
“Consequently, we are very much looking forward to an exciting 2020 for ADM and hope to have an active deal flow to accelerate our growth,” Okhomina said.
In addition to the IOCs, there are several local companies looking for financing. In this instance, ADM intends to use its local experience and trusted relationships of its leadership team to invest in such companies willing to do part-cash and part-equity deals.
It noted that large oil trading firms have become defacto financiers of many asset acquisitions, but said such buyers often struggle to find partners with the necessary credibility. Through its expansion plan, ADM also seeks to gain financial support with debt financing, and use its equity as a transaction currency.
Consequently, the company no longer expects to be cash-flow positive and profitable in 2020 as previously anticipated on the current asset portfolio.
“For these deals to be financed, they will require local expertise, close relationships and experience of operating in the region,” ADM said.
The new initiative is in line significant changes ADM board made last year, which includes the appointment of Nigerian oil specialist Osamede Okhomina, a specialist in the Nigerian Oil & Gas sector with deep-rooted connections in the country and across West Africa, as its Chief Executive Officer.
Okhomina has 18 years’ experience in the upstream oil & gas sector, originating and completing multiple transactions in Nigeria as well as Equatorial Guinea, Libya and Mauritania, including joint ventures with ExxonMobil and Chevron.
As a result, he has extensive industry contacts within Nigeria and with IOCs. He also has considerable familiarity with how the Nigerian government works through his personal business dealings with several federal ministries
Additionally, the board appointed Peter Francis as Non-Executive Chairman, who is bringing over 35 years of experience working with major international oil companies including ExxonMobil.
Since August 2019, ADM has raised approximately £1.32 million in two fundraises to help strengthen its balance sheet. In doing so, it has brought in new long-term investors which have helped to build up the Company’s supportive shareholder base.
The investment company holds 5percent of Aje, one part of the OML 113 licence area, where venture partners had aimed in 2020 to complete debt repayment and become both cash flow positive and profitable.
The slippage in the repayment schedule comes amid weaker crude pricing and operational delays in 2019, which reduced output.
ADM noted that the Aje-5 well produced 890,203 barrels of oil in 2019, down from 1.2 million in 2018, due to downtime caused by routine maintenance of the floating production facility and also the need to upgrade significant equipment.
Production averaged 2,967 bopd, down from 3,100 bopd in 2018, and ADM’s share amounted to 148 barrels per day net.
