Yemisi Izuora
ELAND Oil & Gas has said that investing in Nigeria still has some commercial prospects and therefore would increase its production in Nigeria in spite of the plunge in crude prices.
The Aberdeen-based Eland said it plans to drill two wells in the second half of the year that it expects will deliver a significant increase in production from the Opuama field.
“These wells are commercially robust at current oil prices,” the Aim-listed company told investors, citing a price of $50 per barrel.
It said the wells should repay the investment they will require within six months at expected production rates, of between 4,500 and 5,500 barrels oil each per day.
Eland has secured a $35 million credit facility from Standard Chartered Bank and expects to have a further $40m debt commitments by end April. It could draw on these to fund drilling.
The comments may help reassure investors that Eland’s growth plans remain achievable in spite of the slump in oil prices since June.
Eland got an average $103.77 for the crude oil it sold last year.
Chief executive George Maxwell said that 2015 will be a transformational year for the company with material increases in production and revenues.
Eland also expects to restart production from two wells on the Opuama field that are currently shut in.
The company brought the Opuama field back into production in February last year, but it had been shut in by Royal Dutch Shell in 2006 amid security concerns.
Eland suffered a number of interruptions to production from Opuama last year, reflecting factors including theft from pipelines through illegal bunkering. Availability increased during the year.
While production was stopped in January during planned pipeline maintenance work, the field has been onstream an average 85 per cent of the time in the first quarter to date.
Output has averaged 3,100 barrels oil per day for those days it has been in production to date, with Eland’s share worth 1,395 barrels.
Mr Maxwell said the company continues with a cost reduction program to reduce operating expenses as far as possible and maximise the return on capital expenditure.