Oando Energy Resources announces first quarter results

CALGARY, May 16, 2014 /CNW/ - Oando Energy Resources Inc. ("OER" or the "Company") (TSX:OER), a company focused on oil and gas exploration and production in Nigeria, today announced financial and operating results for the quarter ended March 31, 2014. The unaudited financial statements, notes and management's discussion and analysis pertaining to the period are available on the System for Electronic Document Analysis and Retrieval ("SEDAR") at www.sedar.com and by visiting www.oandoenergyresources.com. All monetary figures reported herein are U.S. dollars unless otherwise stated.

Acquisition Highlights

  • OER is in the final stages of acquiring ConocoPhillips' Nigerian upstream oil and gas business (the "COP Acquisition");

  • It is expected that the Proposed Acquisition will position OER as one of the leading E&P players in Nigeria, as measured by total reserves and production;

  • OER believes that the COP Acquisition represents a "game changing" opportunity for OER and its shareholders, adding:
    • a 20% working interest in the NAOC JV, which includes forty-one discovered oil and gas fields with remaining oil and gas recovery, approximately forty identified prospects and leads, twelve production stations, approximately 1,490 km of crude oil, natural gas liquids and natural gas pipelines, three gas processing plants, the Brass River Oil Terminal, the Kwale-Okpai 480 MW combined cycle gas-fired power plant, and associated infrastructure;

    • approximately 36,000 barrels of oil equivalent per day ("boe/d") based on average production between January and December 2013, according to ConocoPhillips;

    • approximately 211 millions of barrels of oil equivalent ("MMboe") of Proved plus Probable Reserves, 484 MMboe of Best Estimate Economic Contingent Resources, and approximately 239 MMboe of Risked Prospective Resources, according to a report dated 31st December, 2013, prepared by OER's independent resource and reserve auditors, Petrenel (The Petroleum and Renewable Energy Company Limited).  Contingencies and significant negative and positive factors related to the Contingent Resources are further described below.

    • the Proposed Acquisition is expected to be financed with already secured debt and equity;

    • POCNL is cash generative and is expected to contribute positively to the cashflow of the Company;

    • the Proposed Acquisition is anticipated to close during the first half of 2014, to enable the companies to satisfy all closing conditions including the anticipated consent of the Honourable Minister of Petroleum Resources in Nigeria.

    • In February 2014, OER completed a $50 million private placement offering and issued 35,070,063 common shares and 17,535,032 common shares purchase warrant at a price of C$1.57 per unit. Each whole warrant entitles the holder to acquire one common share of the Group at a price of C$2.00 per common share for a period of 24 months from the closing of the COP Acquisition;

    • In February 2014, OER converted certain amounts outstanding under the Oando PLC ($601 million in principal and accrued interest of $11.7 million) into equity, resulting in the issuance of 432,565,768 common shares in OER and 216,282,884 common shares purchase warrants with identical terms to the $50 million private placement; and
  • Entered into an amendment agreement with ConocoPhillips (NYSE: COP) to extend the long stop date for completion of the COP Acquisition to June 30, 2014.

Operational Highlights

  • 4,531 bbl/d average oil production for the quarter ended March 31, 2014. This represented a 22% increase over the same period last year. The increase in production was a result of reduced shut-in periods on OML 56 (Ebendo Field) resulting in a 110% production increase over same period in 2013;

  • Average gross sales price realized per barrel of oil produced was $111.40 for the quarter ended March 31, 2014 compared to $114.00 for the same period in 2013;

  • Progressed construction of the 45,000 bbls/d Umuginni pipeline, designed as an alternative evacuation route for the OML 56 (Ebendo Field) asset, with a target completion date of H2, 2014; and

  • $42.6 million in capital expenditures for the quarter ended March 31, 2014 compared to $8.3 million for comparative prior year period. The majority of these expenditures was on drilling and completion activities.

Financial Highlights

  • $32.2 million in revenue for the quarter ended March 31, 2014. This represented a 5% increase from the same period last year;

  • $(32.9) million in net income for the quarter ended March 31, 2014. The net loss was as primarily as a result of financing expenses relating to  the COP Acquisition;

  • $10.3 million in cash flow from operating activities, compared to cash outflow of $18.0 million from the same period last year;

  • $300.6 million in cash and cash equivalents for the quarter ended March 31, 2014; and

  • $354.3 million in borrowings as at March 31, 2014, comprising of convertible loans and acquisition loans to the tune of $233.3 million and operational loans of $121.0 million.

"Our first quarter was highlighted by positive operational results that saw us increase our year on year oil production by 22%," said OER CEO, Pade Durotoye. "This increase in quarterly production from the Ebendo Field was as a result of a higher production uptime experienced due to reduced shut-in's on the Agip trunkline evacuation route".

Selected Quarterly Results

    For the three months ended
(US$ '000, except production and per share data)   March 31
2014
December 31
2013
September 30
2013
June 30
2013
Production (bbls)   407,802 406,029 363,032 353,145
Total Revenue   32,163 23,976 37,461 36,072
Net Income for the Year   (39,881) (41,008) 11,645 (1,167)
Earnings Per Share   (0.14) (0.32) 0.12 (0.01)
Diluted Earnings Per Share   (0.14) (0.32) 0.12 (0.01)
Capital Expenditures   42,550 45,573 29,684 36,353
Total Assets   1,689,937 1,299,422 1,223,808 1,193,585
Total Non-Current Liabilities   274,812 275,195 206,150 207,981

OPERATIONAL UPDATE

OML 125 (Abo Field)

Budgeted capital expenditures for OML 125 were set at $37.5 million for 2014.  In the three months ended March 31, 2014, OER incurred $26.0 million on Abo 8 re-entering and completions and Abo 12 drilling activities. Production from Abo-8 has not commenced as the required flow line is a long lead item, delivery of which is expected to be in the third quarter of 2014; the budgeted expenditure for the flow line is $5.1 million. Abo-12 well has been temporarily plugged after lower completion work was performed with tie-in planned for 2015.

OML 56 (Ebendo Field)

Budgeted capital expenditures for OML 56 were set at $22.7 million for 2014.  In the three months ended March 31, 2014, OER incurred $3.5 million on the drilling and ongoing completion works on Ebendo Well 7. This well, in addition to Ebendo 5 and Ebendo 6 (both completed wells), have been suspended pending the completion of the Umuginni pipeline.

OML 13 (Qua Ibo Field)

Budgeted capital expenditures for OML 13 - Qua Ibo Field were set at $40.6 million for 2014.  In the three months ended March 31, 2014, OER incurred capital expenditures of $6.0 million on pipeline and facility costs as well as flow station construction. Oil production from the Qua Ibo field's is expected to commence in the fourth quarter of 2014 after the commissioning of the OER/Network Exploration and Production crude oil processing facility which is currently under construction and should be completed in the third quarter of 2014. Production is expected to commence in the first quarter of 2015.

OML 134 (Oberan Field)

Budgeted capital expenditures for OML 134 were set at $7.4 million for 2014.  In the three months ended March 31, 2014, OER incurred $6.8 million on exploratory activities related to the Mindiogboro prospect. Based on results from the drilling of the exploration well into the Minidiogboro prospect (suspended as a gas discovery), OER plans to continue geological, geophysical, and environmental studies.

About Oando Energy Resources Inc. (OER)

OER currently has a broad suite of producing, development and exploration properties in the Gulf of Guinea (predominantly in Nigeria) with current production of approximately 4,531 barrels of oil per day. OER has been specifically structured to take advantage of current opportunities for indigenous companies in Nigeria, which currently has the largest population in Africa, and one of the largest oil and gas resources in Africa.

Cautionary Statements

See the Company's Form 51-101F1 filed under the Company's profile on SEDAR at www.sedar.com on April 1, 2013.

Oil and Gas Equivalents

Production information is commonly reported in units of barrel of oil equivalent ("boe" or "Mboe" or "MMboe") or in units of natural gas equivalent ("Mcfe" or "MMcfe" or Bcfe"). However, boe's or Mcfe's may be misleading, particularly if used in isolation. A boe conversion ratio of 6 Mcf = 1 barrel, or a Mcfe conversion ratio of 1 barrel = 6 Mcf, is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. Readers are cautioned that boe may be misleading, particularly if used in isolation.

Forward Looking Statements:

This news release contains forward-looking statements and forward-looking information within the meaning of applicable securities laws.  The use of any of the words "expect", "anticipate", "continue", "estimate", "objective", "ongoing", "may", "will", "project", "should", "believe", "plans", "intends" and similar expressions are intended to identify forward-looking information or statements.  In particular, this news release contains forward-looking statements relating to intended acquisitions.

Although the Company believes that the expectations and assumptions on which such forward-looking statements and information are reasonable, undue reliance should not be placed on the forward-looking statements and information because the Company can give no assurance that such statements and information will prove to be correct. Since forward-looking statements and information address future events and conditions, by their very nature they involve inherent risks and uncertainties.

Actual results could differ materially from those currently anticipated due to a number of factors and risks. These include, but are not limited to: risks related to international operations, the actual results of current exploration and drilling activities, changes in project parameters as plans continue to be refined and the future price of crude oil. Accordingly, readers should not place undue reliance on the forward-looking statements. Readers are cautioned that the foregoing list of factors is not exhaustive.

Additional information on these and other factors that could affect the Company's financial results are included in reports on file with applicable securities regulatory authorities and may be accessed through the SEDAR website (www.sedar.com) for the Company. The forward-looking statements and information contained in this news release are made as of the date hereof and the Company undertakes no obligation to update publicly or revise any forward-looking statements or information, whether as a result of new information, future events or otherwise, unless so required by applicable securities laws.

SOURCE Oando Energy Resources Inc.

For further information:

Pade Durotoye, CEO
Oando Energy Resources Inc.
pdurotoye@oandoenergyresources.com
+1 403-561-1713

Tokunboh Akindele
Head Investor Relations
Oando Energy Resources Inc.
takindele@oandoenergyresources.com
+1 403-560-7450

Jeremy Dietz/David Feick
Investor Relations
+1 403-218-2833
jdietz@tmxequicom.com
dfeick@tmxequicom.com