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Eland acquires Ubima Field acreage onshore Nigeria

15th August 2014

Eland has announced that Wester Ord Oil & Gas Limited (Wester Ord), a wholly owned subsidiary of Eland, has agreed to acquire a 40 per cent participating interest in the Ubima Field in Nigeria from Allgrace Energy Limited

Eland acquires Ubima Field acreage onshore Nigeria
The Ubima 1 well was suspended and identified for completion and production by the previous operator, but this programme was not executed and Wester Ord is planning to re-enter this well and perform an extended production test

Ubima lies onshore in the northern part of Rivers State and has been carved out of Oil Mining Lease (OML) 17, which is held by Nigerian National Petroleum Corporation, Shell Petroleum Development Company of Nigeria Limited, Total E&P Nigeria Limited and Nigerian Agip Oil Company Limited.

The most recent independent 2C resources estimate for Ubima is 34 MMbbl of oil (independent report prepared by AGR TRACS). There is also a significant upside 3C resource estimate of 66.9 MMbbl of oil with an extra 2C resource estimate of 97 Bcf of non-associated gas in two reservoirs.

Ubima has 3D seismic coverage and four wells have been drilled in the field between the 1960s and 1981 with hydrocarbons being encountered in all four wells in multiple stacked reservoirs.

The Ubima 1 well was suspended and identified for completion and production by the previous operator, but this programme was not executed and Wester Ord is planning to re-enter this well and perform an extended production test, oil produced will then be trucked to the nearest sales point prior to the Ubima export pipeline being in place.

"The acquisition of Ubima is a very attractive and accretive deal for Eland on very positive terms,” said Leslie Blair, CEO of Eland. “As the technical and financial partner we will be able to lead the development and move quickly to bring these assets into early production generating strong cash flow for the benefit of all stakeholders."

The company believes that subsequently, an initial four development wells can be drilled and put into production 9 to 12 months from commencement of the full work programme. The full work programme is estimated to require development capital expenditure of USD 125m, however a proportion of this is anticipated to be met from early cash flows from the extended production test

Wester Ord entered into a farm-in agreement with the Allgrace for a 40 per cent interest and as consideration for the assignment, will pay a signature bonus of USD 7m to Allgrace and, contingent on production and receipt of ministerial consent to the transfer of the participating interest, a production bonus of USD 3m.

Wester Ord also entered into a separate commercial agreement to fund the initial work programme. The terms of this agreement entitle Wester Ord to 88 per cent of production cash flow from Ubima until the costs have been recovered.

The Ubima Field was awarded to the Allgrace by the Department of Petroleum Resources in 2011. The award also included a commitment to develop viable small scale gas utilisation projects within 30 months of commencement of production. This could include a small scale power generation project where the availability of electricity in rural areas is severely restricted.

The field is close to existing infrastructure for the delivery of crude to market and Wester Ord are currently in discussions with Shell Petroleum Development Company regarding the crude export tie in point.

As a designated marginal field, Ubima will benefit from attractive fiscal terms available in Nigeria as part of the government indigenisation programme.

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