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Eland Oil & Gas announces OML 40 operational update …expects Gbetiokun field start

AIM-listed Eland Oil & Gas, an oil & gas production and development company operating in West Africa with an initial focus on Nigeria, has provided the following operational update.

2019 Production

Average net production for January to May 2019 increase by 32% to 9,880 barrels of oil per day (“bopd”) compared to 7,505 bopd for the same period in 2018. System uptime (including planned and unplanned outages) of 88% recorded for the period, up from an average of 84% for the same period in 2018.

Gbetiokun Early Production Facility

Field development activities in Gbetiokun, which include the utilisation of an early production facility (“EPF”) for production growth have progressed successfully. The EPF is expected to be mobilised to Gbetiokun field this week. The Company expects the field to come onstream in July with initial gross production of approximately 12,000 bopd (net: 5,400) from Gbetiokun-1 and Gbetiokun-3 wells.

Following successful re-entry operations in 2018 the Gbetiokun-1 well was completed as a dual completion to produce from the E2000 and E6000 reservoirs. Clean-up testing in Q1 2019 on the E2000 reservoir achieved choke-limited rates in line with expectations. For the deeper E6000 interval, testing during the 2018 completion operations had highlighted the potential for limited cement behind casing and clean up testing appears to confirm this. As a consequence, despite good well rates, the E6000 produced with limited water from a shallower water wet sand when opened to flow. Going forward this completion will be managed to maximise E6000 production whilst minimising water production.

Gbetiokun-3 was drilled as an appraisal well in Q4 2018 with the dual completion on D9000 and E4000 reservoirs being installed in Q1 2019. During pressure testing, a small leak was identified on the shallower D9000 completion string. Following further diagnostic logging, the leak was located and a remedial tubing patch is scheduled to be installed in the near future which will allow the string to be opened up to flow. The deeper E4000 interval was cleaned up in Q1 2019 and achieved choke-limited rates in line with pre-drill expectations.

The EPF will process all reservoir fluids produced under the initial phase of the Gbetiokun development and the facility has a nominal capacity of 22,000 bopd, which will allow for production from the additional Gbetiokun development wells being drilled in 2019 and 2020. A modular-concept approach has been adopted for the facilities, allowing for production growth beyond 22,000 bopd..

In line with the Company’s strategy of early monetisation, the EPF development will employ the Company’s approach of shuttling crude production in tankers between the Gbetiokun field and the main OML 40 export pipeline. Like the EPF, the facilities and process have been designed in a modular fashion allowing for the evacuation of increased levels of production over the coming 12 to 18 months while the permanent export solution is developed. Furthermore this evacuation process allows the company to export via an alternative export terminal should its primary export route be hindered.

Drilling operations

The OES Teamwork Rig has undergone an extensive and rigorous maintenance and refurbishment campaign during the past three months. The upgrade programme included the installation of new CAT engines, new mud pumps, new top drive, and a refurbished blow out preventer. It is disappointing that the refurbishment has taken longer than expected due to delays with the contractor carrying out the work but commissioning is expected to be completed in July.

Following the commissioning of the refurbished rig the OML 40 joint venture will continue with the Gbetiokun Phase I drilling programme as outlined in the field development plan (“FDP”), which covers the drilling of five additional production wells (Gbetiokun-4 to -8). The first two of these planned wells, Gbetiokun-4 and -5, will be drilled back-to-back by the OES Teamwork rig, commencing in July. It is expected that following completion of these two development wells production through the Gbetiokun EPF will be in the region of 20,000 bopd. Thereafter it is expected that the rig will move to the drilling of the 78 million barrel Amobe near-field exploration prospect and further infill wells on the Opuama field: Opuama-12 and -13. In early 2020 it will drill Opuama-13 and thereafter it is expected to return to Gbetiokun to complete the Phase 1 drilling.

Furthermore, the Company is exploring an opportunity for the possible procurement of a second drilling rig, potentially in Q4 2019. This can be fully funded with current cash and finance facilities and would allow for the potential early appraisal of Amobe, should the exploration well be successful alongside the acceleration of development drilling.

All of the above can be financed from our current financial resources and is expected to result in a 2019 net exit rate of 17,000 to 19,000 bopd, with further production increases expected in to 2020. However due to the delays with the Rig and the EPF, the material increase in production is likely be more second-half weighted than originally forecast. We now anticipate full year 2019 net production of 12,000 to 13,500 bopd , an increase of 50% over 2018, underlining the ongoing progress being made.

George Maxwell, CEO of Eland, commented:

‘Whilst any delays to development plans are frustrating, I am pleased that we will soon have production from our second oil field, Gbetiokun, marking a significant expansion and de-risking within our core OML 40 licence, and leading to increased production and cash-flow. We are extremely proud that from the point of re-entry of the Gbietiokun-1 well in November 2018, we will have achieved four producing strings with processing and full evacuation via shipping all within a period of 10 months. This also creates a fantastic foundation for the continued development of the license in early 2020 and beyond.

The prospect of procuring a second drilling rig to accelerate our busy 2019 drilling schedule is exciting, especially with the planned drilling of the 78 million barrel Amobe prospect later this year, which has been independently evaluated to have a certified 42% chance of success’.

SOURCE: Eland Oil & Gas