Eland Oil & Gas PLC (LON:ELA) told investors it has restarted drilling at the Opuama-9 well, while also providing a reserves update for the whole Opuama field and releasing a financial results statement.
At Opuama-9, the company has remedied a problem with the rig’s engines by bringing in back-ups and the well is again progressing. The company now expects to reach target depth of 9,000 feet by the end of April.
The well is expected to deliver between 4,000 and 6,000 barrels of oil production per day, giving Eland’s Elcrest subsidiary 1,800 to 2,700 bopd of additional net production.
"It is encouraging to see progress on the Opuama-9 well following the mechanical issues experienced with the engines on the rig,” said George Maxwell, Eland chief executive.
“We now anticipate quick progress to completing the well and hooking it up as another producer on the field. Thereafter drilling operations on Opuama-10 will commence."
The Nigeria-focused oil firm has a 45% working interest in OML 40 which hosts the Opuama and Gbetiokun fields.
OML 40 reserves rise
Eland, separately, released its reserves update as at December 31. The report detailed gross proved reserves (1P) of 39.5mln barrels, marking a 20% increase from the prior report.
Proved and probable reserves (2P) increased only slightly, to 83.4mln barrels. Meanwhile, the proved, probable and possible reserves (3P) increased 11% to 117.9mln barrels.
Eland’s Elcrest had some 13.5mln barrels of net 1P reserves, 26.3mln barrels of 2P and 30.3mln barrels of 3P reserves - for these reserves the company ascribed values of US$281.8mln, US$419.2mln, and US$484.4mln respectively.
“Although the Opuama field has seen a decline in 2P reserves, the Eland technical team is confident that the results of the recent drilling programme and the increase in Opuama oil production will see a reversal of this once the logging results have been fully appraised.
“Moreover, I am delighted that the increase in 2P reserves from the Gbetiokun field more than offsets the Opuama decline,” Maxwell said.
He added: “I sincerely believe that this updated CPR highlights the significant upside that we still see within our flagship licence OML 40."
Revenue and cash flow rise, loss narrows
In the separate final results statement, for the year ended December 31, Maxwell described 2017 as the company’s “most successful year”.
“This is primarily due to the growth in oil production from OML 40, from an average of 1,500 bopd during 2015 and 2016 (and zero at the start of 2017) to 18,500 bopd gross at year end,” he told investors.
With operations continuing at Opuama, the Opuama-10 well will be drilled once Opuama-9 has been completed, the company and its partners are targeting mid-2018 production of 30,000 bopd, meaning Elcrest will benefit from 13,,500 bopd.
In the second half, the company is expected to start up the Gbetiokun field’s early production system, in OML 40, which is initially expected to add 8,000 bopd gross, or 3,600 bopd gross to Elcrest.
The financial highlights included strong growth in cash flow, up to US$13mln from a US$5mln deficit in the preceding year. The company ended the year with a cash balance of US$36.7mln.
Revenue rose significantly to US$68.91mln, from US$2.37mln in 2016, although cost of sales increased to US$77.27mln and the company made a US$12.85mln operating loss and a US$8.77mln loss after tax.
Direct field operating costs amounted to US$10.33mln for the year, while transportation costs totalled US$23.42mln while it had to pay US$16.34mln of royalties and taxes.
Chief financial officer Ron Bain highlighted that the company will continue to retain a cost focus over discretionary spending, monitor and manage working capital position, debt service obligations and focus on investment opportunities.