Decklar Resources today provided an update to operations at the Oza-1 well re-entry at the Oza Oil Field in Nigeria through the Company’s wholly-owned Nigeria-based subsidiary, Decklar Petroleum Limited.

Oza-1 Re-entry

Decklar continues to make considerable progress on the Oza-1 well re-entry with the camp and all associated infrastructure fully installed and operational. The major components of the drilling rig equipment are being transported to the field this week and it is anticipated the rig will be completely moved, installed and rigged-up within two weeks. Decklar will then commence the Oza-1 well re-entry operational activities including the initial work of pulling out the existing tubing, running a cement bond log and cased hole reservoir logs. The re-entry activities will then include the testing of three oil bearing zones (L2.2, L2.4 and L2.6) independently and then it is anticipated that a final dual-tubing string completion will be installed and the L2.2 and L2.6 zones placed into production upon successful testing. The drilling rig is expected to then be skidded on the same drill pad as Oza-1 to a new drilling slot and a horizontal development well will be drilled in the L2.4 zone and placed on production. The Oza-1 well and new horizontal development well are anticipated to generate significant production levels and cash flow in an abbreviated time frame due to the already existing infrastructure in place. The Oza development is anticipated to then continue with one or two more re-entries on existing wells and additional development drilling program with a potential of eight to ten wells being drilled for the full field development. Additional early production and central processing facilities will be added as required to accommodate additional production levels from field development activities.

The Oza Oil Field has significant export and production capacity through processing facilities and infrastructure already in place and operational, which will allow for the immediate export and sale of crude oil from the Oza-1 well.

The Oza Oil Field Summary

As previously announced, the Oza Oil Field was formerly operated by Shell Petroleum Development Company of Nigeria Ltd. (“Shell”). The field has three wells and one side track drilled between 1959 and 1974. During the period when Shell was the operator, there were two periods of extended production testing from the Oza-1, -2 & -4 wells. The field was however never tied into an export facility, nor was it fully developed by Shell and put into commercial production.

In 2003, the Oza Oil Field was awarded to Millenium Oil and Gas Company Limited (“Millenium”) having won the field during the 2003 Marginal Fields Licensing Round. Since Millenium’s acquisition of the Oza Oil Field, approximately US$50 million has been spent on infrastructure in support of a restart of production including an export pipeline to tie the Oza Oil Field production into the Trans Niger Pipeline (TNP) which goes to the Bonny Export Terminal, a lease automatic custody transfer (LACT) unit fiscal metering system, infield flow-lines, manifolds, and related production facilities.

The Risk Service Agreement (“RSA”) that Decklar and Millenium entered provides Decklar the majority share of production and associated cash flow from the Oza Oil Field in exchange for funding and technical assistance to restart commercial production and full field development; the RSA terms include a preferential return of Decklar’s costs plus a share of cash flow thereafter. In exchange, Decklar is entitled to priority recovery of its capital from 80% of distributable funds. After achieving cost recovery, Decklar’s profit share is based on a sliding scale starting at 80% and declining to 40% once cumulative production exceeds 10 million bbls.

Decklar continues to make good progress on evaluations and negotiations for additional proven undeveloped oil and gas fields in Nigeria that have significant reserves and near-term production potential.

Overview

The Oza Field is an onshore conventional oil field, on dry terrain, in the northwestern part of Oil Mining Lease (OML) 11, approximately 30 kilometres southwest of Port Harcourt which is part of the Abia State in Nigeria. The field was formerly operated by Shell Petroleum Development Company of Nigeria Ltd. (“Shell”), the local subsidiary of Royal Dutch Shell plc.

The 20 square kilometres concession was carved out of OML 11 in 2003 as part of the Government’s Marginal Field Development Program and was awarded to Millenium Oil and Gas Company Limited (“Millenium”) having won the bid during the 2003 Marginal Fields Licensing Round. Decklar Resources is developing the field through a Risk Service Agreement (RSA) with Millenium. The Oza Field is surrounded by producing fields operated by Shell, including Isirmi, Obeakpu, Afam, Obigbo and Umuosi.

The Oza Field has three wells and one side track drilled by Shell between 1959 and 1974. During the period when Shell was the operator, there were two periods of extended production testing from the Oza-1, -2 & -4 wells. ​Well tests on two wells estimated 2,000 boe/d at 35°/43° API gravity crude oil. More than one million barrels of oil were produced from three zones. The field was never tied into an export facility, nor was it fully developed by Shell and put into commercial production.

Since Millenium’s acquisition of the Oza Field, approximately US$50 million has been spent on infrastructure in support of a restart of production including an export pipeline to tie the Oza Field production into the Trans Niger Pipeline (TNP), which goes to the Bonny Export Terminal, a lease automatic custody transfer (LACT) unit fiscal metering system, infield flow-lines, manifolds and a rental 6,000 barrel per day early production facility (EPF).

Development Program

The Oza Field contains multiple zones (up to 12) of conventional stacked sands, allowing for vertical drilling, as well as horizontal development drilling. Field structure analysis has outlined several low-risk appraisal and exploration targets.

Decklar Resources intends to fast-track the initial development on the Oza Field including a re-entry on the existing Oza-1 well, anticipated to test three oil bearing zones and place the well into production from two of the three zones tested. The drilling rig is expected to then be skidded on the same location as Oza-1 to a new drilling slot and a development well will be drilled horizontal into the 3rd zone tested in the Oza-1 well re-entry. This Oza-1 well and new horizontal development well are anticipated to generate significant production levels and cash flow in an abbreviated time frame.

The Oza development is anticipated to then continue with one or two more re-entries on existing wells and additional development drilling with a potential of eight to ten wells being drilled for the full field development.

The Oza Field has significant export and production capacity through processing facilities and infrastructure already in-place and operational, including export pipeline access tied into the Trans Niger Pipeline (TNP), which flows to the Bonny Export Terminal on OML 11, the largest terminal on the African continent and is operated by Shell. This will allow for the immediate export and sale of crude oil from the Oza-1 well re-entry, the initial Oza horizontal development well and future wells.

Additional early production and central processing facilities will be added as required to accommodate additional production levels from field development activities.

KeyFacts Energy: Decklar Resources Nigeria country profile