CALGARY, Nov. 2, 2012 /CNW/ - Oando Energy Resources Inc. ("OER" or the "Company") (TSX:OER), a company focused on oil exploration and production in Nigeria, today announced financial and operating results for the nine months and three months ended September 30, 2012. All monetary figures reported herein are U.S. dollars unless otherwise stated.
- Gross Revenue from operating activities of $104.8 million for the nine months ended September 30, 2012. This represented a 2% decrease from the same period last year. These gross revenue figures are net of royalties (8% on OML 125 (Abo) and 5% on OML 56 (Ebendo)), Nigerian Government profit share on the production sharing contract in respect of OML 125 (Abo), and pipeline losses charged by the pipeline operator on OML 56 (Ebendo).
- Cash and cash equivalents decreased by $13.3 million to $19.2 million for the nine months ended September 30, 2012. The 40% decrease was a result of the repayment of $16 million in loans and increased capital expenditures.
- Total comprehensive income increased by 43% to $12.6 million for the nine months ended September 30, 2012 from $8.8 million for the same period last year.
- Earnings growth per share to $0.12 for the nine months ended September 30, 2012 from $0.07 per share for the same period last year.
- Average net production from the Company's two producing assets (OML 125 (Abo) and OML 56 (Ebendo)) for the nine months ended September 30, 2012 was 4,233 barrels of oil per day ("bopd") as compared to 5,019 bopd for the same period last year. The decrease is due to natural reservoir decline in the Abo field and a shut-in in August 2012 of the Ebendo Field EB -1 well for scheduled pipeline maintenance.
- Entered into non-binding Heads of Agreement dated September 17, 2012 to acquire a 40% working interest in the Qua Ibo field, a Marginal Field within OML 13, located onshore Nigeria, from Oando Plc, which owns 94.6% of the common shares of the Company. The acquisition is subject to regulatory approval and has yet to close. There can be no assurance that the acquisition will be completed as proposed or at all.
- For the nine months ended September 30, 2012, the average sales price realized per barrel of oil produced was $106.43 as compared to an average sales price realized per barrel of oil produced in the same period in 2011 of $100.34.
- Capital Expenditures for the nine months ended September 30, 2012 were $25.3 million compared to $36.4 million for the same period last year.
"The third quarter was a pivotal one for our company and was highlighted by the closing of the reverse takeover with Exile Resources Inc." said OER CEO, Pade Durotoye. "Achieving the status of a publicly traded company on the Toronto Stock Exchange allows us the opportunity to pursue our plan for growth by accessing capital from a base of investors that understand the E&P sector. We plan to grow shareholder value by acquiring working interests in Nigeria's significant inventory of proven undeveloped fields - an area in which we believe we have specific technical expertise and where we believe can benefit from our status as an indigenous company that qualifies for preferential lease bidding and optimal fiscal terms."
Third Quarter Highlights
OML 125 (Abo)
The average net production to OER from OML 125 for the nine months ended September 30, 2012 was 3,625 bopd. Nigeria Agip Energy Oil Company Limited ("NAE"), the operator of OML 125, together with the Company, commenced the work-over of the Abo-9 well during the course of this quarter. Abo-9 is a gas injector well and the purpose of the work-over was to restore impaired injectivity. Work-over operations commenced on August 2, 2012 and are projected to be completed by the end of November 2012. Further significant operations on the Abo field are the hull inspection on the Abo floating, production, storage and offloading unit.
OML 56 (Ebendo)
The average net production to OER from the Ebendo field in OML 56 for the nine months ended September 30, 2012 was 608 bopd. This average number covers the 37 day period during which production and injection were deferred as a result of the scheduled pipeline maintenance operation which commenced on July 25 and ended on August 30, 2012.
During the three months ended September 30, 2012, Nigeria Agip Oil Company ("NAOC"), the pipeline and terminal operator, charged a pro rata 17% of the Company's produced crude to account for theft crude on the trunk line. This amounted to $2.7 million.
Energia Limited ("Energia"), operator of the Ebendo field in OML 56, together with the Company, drilled and completed the Ebendo-4 well during the report period. The well was spudded on March 24, 2012, and drilled to a total depth of 12,120 feet Measured Depth ("MD") (3697 m MD) which was reached on June 10, 2012. The well encountered 10 separate reservoir sands, tagged XV -XXb, with a gross pay thickness of 116 m (preliminary figures). Individual thicknesses range from 3.6m in the XXb to about 31 m in the XIX (main reservoir sand). The XIX sand has been the sole producer on the field since inception of production in December 2009, and had produced approximately 1.2 mmbls as at the end of September 2012.
Currently, the Ebendo-4 well is being completed in the XIX and the XXa reservoirs. The well was tested from July 29 to August 28, 2012. The tests results are not necessarily indicative of long-term performance or of ultimate recovery.
The rig moved off the well location on September 28 and skidded to the Ebendo-5 location. Rig maintenance was ongoing at September 30, 2012.
Other operations of note within the period were the commencement of contract for the purchase of pipes for the Umugini pipeline, which is planned as an alternative evacuation route to the current routing through the Kwale Flowstation operated by NAOC. The planned pipeline is 53 km long, of which Energia and OER jointly own 25%. The contract sum to be paid by OER is approximately US$8.87 million.
The Company, with its partner Sogenal Limited (as operator), successfully re-entered and tested the suspended Akepo-1 ST well. The drilling rig, Noble Lloyd Noble, was demobilized on January 5, 2010 after a 50-day well testing and completion program on the Akepo field. Drill Stem Tests (DST) proved flowing hydrocarbons in all the three targeted reservoirs. The test results are not necessarily indicative of long-term performance or of ultimate recovery.
The Akepo-1 ST was completed as a two-string multiple completions to produce on two strings from two of the three zones, with the third zone selective on one of the strings. With the success of the well test and completion, the partnership is now expecting to move towards first oil. The partnership has awarded a contract to lay a 15 km pipeline from the Akepo facility to a nearby facility, as well as negotiating crude handling and sales agreements with the facility owners. Due to the earlier than expected onset of the rainy season which has delayed pipe lay, first oil is now expected to occur during the second quarter of the 2013 calendar year. There is no certainty that first oil will occur within the expected timeline.
It is expected that financing costs may decline on a go-forward basis. Following the completion of the reverse take-over with Exile Resources Inc., the only loan currently outstanding is the First Bank of Nigeria (FBN) loan of $52 million as of September 30, 2012. On October 2, 2012, the Company repaid $4 million and, as of the date hereof, has an outstanding balance of $48 million owing under the FBN loan. The Company may take additional loans in the future if business needs require such and may incur additional finance cost.
The Company's drilling campaign continues on OML 56 (Ebendo). The rig moved off the Ebendo-4 well location on September 28 and skidded to the Ebendo -5 location. Rig maintenance was ongoing at the end of September 30, 2012. The plan is to drill the Ebendo-5 well in order to target the XV - XVIII reservoirs.
The Company and its partners have requested more data from NAOC, the pipeline operator at Ebendo. This is to determine the accuracy of the pipeline losses being charged to the Company by NAOC. The Company is making provision of 17% for such losses and is seeking ways to reduce it. The plan the Company has includes volume reconciliation, verification of meters accuracy and renegotiation of the crude handling contracts. The success of this plan is dependent on the cooperation of NAOC and the other cluster members.
The Company, through its partner, is currently involved in the construction of the Umugini pipeline to a different export terminal for Ebendo crude. The completion of this alternate pipeline is not expected to be until 2013. A new purchase agreement may then need to be signed with another party for the purchase of Ebendo crude.
In respect of OML125 (Abo), work-over operations commenced on August 2, 2012 and are projected to be completed by the end of November 2012. Successful completion of the work-over is expected to result in the re-establishment of injection into Abo-10 and 11. It is also expected to also result in zero gas being flared on the field. Lastly, it will also slow down the rate of advance of the oil-water contact in the block.
The Company is seeking a buyer for the purchase of its assets in Turkey and Zambia and the divestment from these assets is expected to be concluded by end of the year.
The unaudited financial statements, notes and management's discussion and analysis ("MD&A") pertaining to the period are available on the System for Electronic Document Analysis and Retrieval ("SEDAR") at www.sedar.com and are available at www.oandoenergyresources.com.
Refiling of Audited Financial Statements and MD&A of the Oando E&P Division for the year ended December 31, 2011
OER has filed amended and restated audited financial statements and management's discussion and analysis of the Oando E&P Division for the year ended December 31, 2011 (the "2011 Refiling"). As a result of new information received, OER determined that the balance sheet for December 31, 2011 required adjustments.
The following restatements have an impact on the financial statements:
i. Reclassification of the underlift due to Oando OML 125 and 134 Limited from NNPC
Oando Plc acquired a 15% stake in two oil and gas fields- OMLs 125 and 134 from Shell Nigeria Exploration and Production Company Limited (SNEPCO) in 2008. The other parties to the Production Sharing Contract are NAE and Nigerian National Petroleum Company (NNPC). OML 125 is a producing field which had an underlift position with other partners upon acquisition by Oando Plc.
In October 2011, Oando OML 125 & 134 Limited, an affiliate of the Company, in conjunction with Nigerian Agip Exploration Limited, won arbitration against the Federal Government of Nigeria (FGN) on the long overdue underlift position. The judgement mandated the FGN to settle the outstanding underlift amount in US Dollar terms. As at December 31, 2011, the timing of the settlement was uncertain but subsequently in 2012, it was estimated by management, due to lifting patterns, that the annual recovery would be in the range of US$8 - 12 million. The balance estimated to be outstanding for more than a year is US$42,725,000 The impact is as follows:
|Decrease in current trade receivables||(US$42,725,000)|
|Increase in other long term receivables||US$42,725,000|
ii. Reclassification of Exploration and Evaluation (E & E) assets relating to OML 125 and OML 134
Since the acquisition of interests in OMLs 125 and 134 from SNEPCO in 2008, the Oando E&P Division had recognized the two assets as property, plant and equipment in its audited financial statements. No split was carried out by management to separately recognise the E & E portion of the assets (the whole of OML 134 and the undeveloped portion of OML 125).
However, IFRS 6 requires that an entity disclose information that identifies and explains the amounts recognized in its financial statements arising from the exploration for and evaluation of mineral resources.
Consequently, the impact of the reclassification of the Oando E&P Division's E & E balances is as follows:
|(US$'000)||December 31, 2011||December 31, 2010||December 31, 2009|
|Increase in Exploration and evaluation assets||299,263||236,441||243,782|
|Decrease in property plant and equipment||(299,263)||(236,441)||(243,782)|
iii. Recognition of crude losses
For the year ended December 31, 2011, US$2 million relating to oil sales was incorrectly recognized as revenue from crude oil production OML 56. This was as a result of subsequent reconciliations carried out with the third party buyer of the Oando E&P Division's crude in 2012 which revealed that crude oil was short - delivered to the buyer by US$2 million.
The financial statements for the year ended December 31, 2011 have been restated to correct this error. The impact of the restatement has been summarized below:
|Decrease in revenue||($2,000)|
|Decrease in net income before tax||($2,000)|
|Increase in accounts payable||$2,000|
Please refer to Note 1(b) of the amended and restated audited financial statements of the Oando E&P Division for the year ended December 31, 2011 for a detailed breakdown of the adjustments associated with the foregoing items, available at www.sedar.com.
OER intends to file the amended and restated unaudited financial statements of the Oando E&P Division for the first two quarters of 2012 and associated management's discussion and analysis reflecting the changes to the balance sheet of the Oando E&P Division as at December 31, 2011 in the next few days.
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 4,500 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.
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 the intended Acquisition.
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.
There is no certainty that any portion of the resources referred to herein will be discovered and, if discovered, there is no certainty that it will be commercially viable to produce any portion of the resources.
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.
+1403 561 1713
Head Investor Relations
Oando Energy Resources Inc.
+1403 560 7450