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Eland Oil & Gas PLC: DEEP DIVE
OVERVIEW

Eland Oil & Gas hits the production accelerator in Nigeria

Gross production might hit 45,000 barrels per day by end 2019
oil rig
OVERVIEW: ELA The Big Picture
Production at OML 40 is rising rapidly

 

  • Eland Oil and Gas owns substantial production and exploration assets in Nigeria

  • Production profile rising strongly through OML 40 ramp-up at Opuama and further developments in Nigeria  

  • They include Gbetiokun, also on OML licence, and Ubima, which was part of OML 17 in Rivers State.

  • Gross production might hit 45,000 barrels per day by end 2019

  • Eland posted first profit in 2018 and expects to pay a first dividend in 2019

  • One broker's target price is 160p

 

How it is going

Last year, 2018, was the most active development period in Eland Oil & Gas PLC's (LON:ELA)  history with seven wells drilled, re-entered and completed on the Opuama, Gbetiokun and Ubima fields.

Production for 2019 is anticipated at between 14,000 and 17,000 barrels per day (bopd) net to Eland’s joint venture Elcrest. Eland owns 45% of Elcrest, with 55% held by Starcrest Energy Nigeria

Elcrest has a 45% stake in OML 40, located in the north-west Niger Delta.

A development well programme is set to get underway at Gbetiokun comprising two wells that can add a further 15,000 barrels per day gross.

Eland also has a 40% interest in the Ubima field, located onshore Niger Delta just north of Port Harcourt.

Ubima has tested at 3,500 bopd gross or 1,400 net to Eland.

 

What the boss says: George Maxwell, chief executive

 “Our cash generative business ensures we are fully funded for future growth and will underpin our dividend going forward.”

 “Gbetiokun will also provide a step-change in production as we forecast over 6,700 bopd net to the company following commencement of the extended well test in Q1 2019.”

 

What the brokers say

Peel Hunt: “Expectations for a combined gross initial production rate on start-up during 1Q 2019 from Gbetiokun-1 and 3 stand at 15,000bbl/d, which would take overall gross production to c45,000bbl/d.

The broker has a ‘buy’ rating and 160p target price on Eland O&G shares.

SP Angel: “2019 will be a year of consolidation as the company sets the foundations for what we believe will be further growth in 2020.”

 

Inflexion points

Four new development wells are slated for 2019  across the Opuama and Gbetiokun fields.

The second quarter will also see the group’s first ‘pure’ exploration well with a test of the Amobe prospect.

A best case estimate puts the potential resources here at 78mln barrels, with a 42% chance of success.

2019 capex guidance of US$80 - 90mln net to Elcrest

After the end of 2018, two liftings were scheduled from Forcados Oil Terminal for January and February totalling 678,000 barrels of oil, which will provide a material boost to the company’s short-term cash position.

Eland ended 2018 with cash of US$42.6mln and a net debt position of US$4.7 mln.

In November, the company refinanced its existing reserve-based lending facility with a new 5-year RBL facility currently syndicated to US$75 million, with the ability to grow this to US$200m.

Eland anticipates a dividend yield of 2 to 2.5% when it pays its first dividend.

A £3mln share buyback was announced in November

 

Blue sky

The OML 40 licence holds gross 2P reserves of 83.4 mmbbls (million barrels) and gross 2C contingent resources of 40.4 mmbbls.

The Ubima field holds gross 2P reserves of 2.4 mmbbls of oil and gross 2C resource estimates of 31.1 mmbbl.

Both prospects offer substantial upside from further exploration and development.

At 124p, Eland is valued at £270mln.

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Eland Oil & Gas PLC Timeline

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