KEYFACT Energy
ADM Energy has entered into a sale and purchase agreement with EER (Colobus) Nigeria Limited ("EER") to acquire, subject to satisfaction of certain conditions, a participating interest of 2.25% from EER in oil mining lease no. 113, which includes the Aje field, in which it already has an interest of 2.7%. Consideration for the acquisition is $3,000,000, to be satisfied by the issue of $2,000,000 of new ordinary shares at 7 pence per share and $1,000,000 in cash at the time of completion.
Map source: EER
Highlights of the Agreement
- ADM will acquire 25% of the interests, rights and obligations held by EER in the Block subject to conditions
- On completion, ADM's participating interest will increase to approximately 4.9%
- Corresponding revenue and cost bearing interests increasing to 9.2% and 12.3% respectively
- Upon completion, ADM's net 2P reserves will increase from 8.9 MMboe (as announced on 2 May 2019) to 16.4 MMboe
- Post completion, net daily production is expected to increase to approximately 273 bopd from 148 bopd
Background
OML 113 covers an area of 858km² in the western Nigeria offshore Dahomey basin, some 24km south of the coast and 64km from Lagos, in water depths ranging from 100 to 1,000 metres. The West African Gas Pipeline (WAGP) intersects the northwest part of the licence. There are currently five partners in the licence: Yinka Folawiyo Petroleum Company Limited, New Age Exploration Nigeria Limited, Pan Petroleum Aje Limited, EER and ADM.
Interest in OML 113
Since 2016, ADM has held a participating interest in the Block of 2.7% with corresponding revenue interest and cost bearing interest of 5.0% and 6.7% respectively. EER holds an undivided participating interest in the Block of 9.0% with a revenue interest of 16.8% and a cost bearing interest of 22.5%. On completion, ADM's interest will consolidate to a participating interest of 4.9% with corresponding revenue and cost bearing interests increasing to 9.2% and 12.3% respectively.
On completion, ADM's net attributable 2P reserves are estimated to increase to 16.4 MMboe. Based on the current average daily production for 2019 of 2,967 bopd, as announced on 23 January 2020, ADM's net daily production will increase from 148 bopd to 273 bopd on completion.
Osamede Okhomina, CEO of ADM, said:
"In keeping with our strategic development agenda, I am pleased to announce our first investment under the Company's new leadership. OML 113 is well known to us and it is a fantastic asset that covers the spectrum of field types from current oil production to several appraisal plays. It is also very wet-gas rich which provides the potential for the operator to be able to bring into the market, alongside dry gas, resources like condensate and LPG.
"As envisaged under the intended Strategic Alliance signed earlier this month, we have proposed this project as one Trafigura may consider investing in. We look forward to updating the market further in due course."
Yinka Ogundare, CEO of EER, commented:
"We are very pleased with this transaction that was structured to help further consolidate our working relationship with ADM. The transaction would result in deepening our collaborative relationship and help the partners and the operator develop the asset further."
Link to Nigeria country/company profiles: ADM Energy l EER