21 September 2016, Sweetcrude, Lagos – Independent oil and gas exploration company and Europe’s leading shale gas company by acreage, San Leon Energy Plc, is set for completion of the agreement on its Oil Mining Lease, OML, 18, an onshore producing asset in Nigeria.
This follows its recent raising of $221.4 million from the capital market to finance its acquisition of an initial 9.72 per cent indirect interest in the asset.
According to the company, the net proceeds are being used to complete the OML 18 production agreement, which represents the entry by the company into the Nigerian onshore oil and gas production industry, one of the largest oil producing countries in the world.
The Dublin, Republic of Ireland based company, in a statement released to its investors, said the fund was raised through the placing of 378.4 million new ordinary shares, at a placing price of 45 pence per ordinary share with institutional and other investors.
The company disclosed that OML 18’s estimated gross proved and probable reserves are approximately 576 million barrels of oil and approximately 4.2 trillion cubic feet, TCF, of gas and its gross 2C contingent resources are approximately 203 million barrels of oil and approximately 1.6 TCF of gas.
San Leon noted that as of June 2016, OML 18 was producing at approximately 50,000 barrels of oil per day, b/d, and approximately 50 million SCF per day of gas.
Eroton, the operator of OML 18, the company said, has entered into an offtake agreement at a gross price of $95 for approximately 35 percent of the expected production to the end of 2017.
However, the company explained that the placing and the OML 18 production arrangement are conditional on the passing of various resolutions, which are being put to shareholders at an Extraordinary General Meeting.
Commenting on the development, Oisín Fanning, Executive Chairman of San Leon, explained that OML 18 is an onshore Nigerian oil and gas asset that is currently 45 per cent owned by Eroton and Sahara and 55 percent by NNPC, adding that Eroton completed the acquisition of its interest in OML 18 from Shell, Total and Agip in March 2015 and is the Operator of OML 18.
He noted that the OML 18 production arrangement, creating the enlarged group, is considered by the existing directors and the proposed directors to be a transformational transaction for the Company.
He said, “Under Eroton’s operatorship, the production wells at OML 18 have seen significant increases, rising from approximately 10,000 b/d of oil in March 2015 to approximately 50,000 b/d of oil and approximately 50 million SCF per day of gas in April 2016.
“In the development plans currently under discussion for OML 18, the intention is to increase production to approximately 115,000 b/d of oil and approximately 485 million SCF per day of gas by 2020. In addition, it is anticipated that the OML 18 Production Arrangement and the relationships established as part of the transaction will act as a platform for further similar transactions.”
OML 18 is located in the Southern Niger Delta and comprises a mangrove swamp area, covering 1,035 km2 (which is an area larger than the country of Bahrain). It is considered a world-class resource of oil, gas and condensate and is located close to the Bonny Terminal operated by Shell and near Port Harcourt.
Oil was first discovered on OML 18 in 1958 (on the Krakama Field) and production first commenced in 1970. There are nine discovered fields on OML 18, of which four are still producing, including the Awoba field, which straddles OML 18 and OML 24. To date, an estimated 1,002 MMstb of oil (including Alakari condensate) and 1,778 bcf of gas have been produced.