OML 40 reserves soars as Eland Oil & Gas secures new loan facility

Eland Oil & Gas, an Alternative Investment Market (AIM) listed oil and gas firm has recorded an 8 percent upgrade to the value of its reserves at OML 40 according to a report Netherland Sewell & Associates

Following 2018’s oil production of 6.5 million barrels of oil, there have being around 8percent higher than previous estimates as the license holds proven reserves of 42.9 million barrels, based on the recent estimates, the report said.

“By value, Eland’s entitlement soared by 68percent to $474 million due to a much higher oil price,  a lower tax rate than expected for the next five years and the utilisation of start-up losses at its joint venture Elcrest,” Netherland Sewell said in its report.

OML 40’s 2P resources were valued at $569million while increase at 40 percent-owned Ubima field, also on the Niger Delta, were even more eye-catching albeit from a lower base.

Proven or 1P reserves at Ubima rose 634percent to 6.2million barrels, while 2P estimate rose 285percent to 9.3mln barrels, up 200 percent while 1P and 2P Reserves Replacement Ratios were 233 percent and 188 percent respectively.

Concerning, oil reserves the term 1P is frequently used to denote proven reserves, 2P is the sum of proved and probable reserves while 3P is the sum of proved, probable and possible reserves.

Also, Eland Oil & Gas announced that following a redetermination, the borrowing base amount has increased from $103 million to $134 million and an initial accordion increase of $50 million is being underwritten by The Standard Bank of South Africa Limited and Stanbic IBTC Bank PLC, resulting in the commitments under the facility increasing from $75 million to $125 million. Of the commitments, $50 milliony is currently drawn.

“I am pleased to announce the large increase in borrowing base on our Reserve-Based Lending (RBL) facility which demonstrates the hugely accretive quality of the new wells drilled on the OML 40 asset and the growth in value they bring to our shareholders,” Ron Bain, Chief Financial Officer at Eland Oil & Gas said on its website.

The CFO said since refinancing the RBL in 2018 into a longer-term facility, Eland Oil & Gas now has the flexibility to diversify the capital structure of the company leveraging its position comfortably within its debt parameters and lowering the overall cost of capital.

Standard Advisory London Limited and Stanbic IBTC Capital Limited (as Bookrunners) have been mandated to manage the primary syndication of the initial accordion increase. Principal repayments will commence Q4 2019 (consistent with the statement in the November RNS that there is a one-year grace period on principal repayments from execution of the facility which occurred in November 2018).

Through its joint venture company Elcrest, Eland’s core asset is a 45percent interest in OML 40 which is in the Northwest Niger Delta and a 40 percent interest in the Ubima Field, onshore Niger Delta, in the northern part of Rivers State.

The OML 40 license holds gross 2P reserves of 82.2 million barrels, gross 2C contingent resources of 50.7 million barrels and a best estimate of 252.1 million barrels of gross un-risked prospective resource while the Ubima field holds gross 2P reserves of 9.3 million barrels of oil and gross 2C resource estimates of 4.2 million barrels.

In November 2018, Eland Oil & Gas announced it had successfully refinanced its existing reserve-based lending facility (the ‘RBL Facility’) with a new 5-year syndicated RBL facility in an amount of $75 million, with the option to increase it to up to $200m via an accordion, subject to incremental production and reserves.

Over the years, Eland Oil & Gas operations are focused on production and development in West Africa, particularly the highly prolific Niger Delta region of Nigeria.

DIPO OLADEHINDE