With oil prices plummeting by nearly 60%, the domino effect of the global slump has seen Nigeria’s indigenous firms scale back on proposed Joint Ventures with IOCs, deeper cuts to capital spending, and higher lending local terms due to a weakened Naira.
However, in spite of global crude price fluctuation and uncertainty, the economic value of the Nigerian Proved and Probable Reserves (2P) of Oando Energy Resources (OER), the Upstream subsidiary of energy giant Oando PLC, has risen by a further $545 Million to $1.8 billion.
Renowned global petroleum consulting group DeGolyer and MacNaughton conducted an annual independent reserves and resources evaluation which saw OER significantly increase its reserves’ value, both Proved (1P) and Proved and Probable (2P) Reserves by 44%, as a result of technical revisions and its landmark acquisition of the Nigerian upstream oil and gas business of ConocoPhillips.
Proved net reserves (1P) increased by 78% to 288.5 MMboe, while Proved and Probable net reserves (2P) increased by 82% to 420.3 MMboe. The increase was largely due to the recognition of the precedence of license renewals under the Nigerian Petroleum Act, which is the basis of the extension of the reserves beyond the current license limit.
Highlighting the surge in the reserves, Pade Durotoye, CEO, Oando Energy Resources said, “The 2014 Reserves figures confirm our thesis at the juncture we embarked on the transformative COP acquisition,” said Pade Durotoye. “Subsequently, we’ve thrived in our operational achievements with a five-fold increase in total production from 4,500 boepd to circa 56,000 boepd, and this large Reserves base gives us significant scope and opportunity to further enhance production over the coming years and pursue in-field exploration opportunities that will further increase our Resource Base.”
Recently, OER also completed its 45,000bbls/day throughput volume, 52km Umugini alternate evacuation pipeline for the Ebendo Field, and has underlined its forward approach in the new normal of low prices to reflect the implementation of effective costcutting initiatives, disciplined capex investments while optimising production levels via rigless activities, and inorganic growth through M&A deals that provide long term value.
However, Oando is looking to raise $402 million through a rights issue and will be looking for shareholder approval for its plan at its next meeting. The company will also seek to spin off its power and gas subsidiaries to keep itself liquid.
In addition to the rights issue and the spin off the company will seek approval in December to issue 40 billion naira of shares from its unissued share capital to swap debt for equity under agreements it has with two shareholders, Ocean and Oil Development Partners and QPR Ltd.