Trouble brewing as SAC oil announces exit from OPL 223
This announcement completes its exit from Nigeria after reaching arrangements in April with Transcorp to exit OPL 281. The company says it is now focusing on African oil and gas opportunities with short-term production opportunities.
They expect any exploration assets to be in proven areas of discovery with above average upside potential.
OPL 233 was granted to Nigdel United Oil Company Ltd under a production sharing contract (PSC) with the Nigerian National Petroleum Corporation (NNPC) in 2006 in a mini bid round. AIM listed Energy Equity Resources (EER) acquired a 20 per cent interest in the block from Nigdel.
That acquisition, which was financed by SacOil in a complicated arrangement that SacOil says gave it a 20 per cent interest, received Ministerial Consent in August 2014 leaving the parties ready to move into the appraisal stage in its work programme after awarding the seismic acquisition contract to Verity Geosolutions earlier in the year.
Unfortunately, the arrangement for SacOil’s participation in OPL 233 has now unravelled after SacOil, which listed on the JSE and AIM, decided to pull out of Nigeria, citing a new portfolio rationalisation strategy. SacOil reached agreement in April with EER, which restructured EER’s debt obligations to SacOil in exchange for SacOil’s waiver of certain rights and interests emanating from the loans. However, SacOil said, it retains the existing security over EER’s 20% interest in OPL 233. Selling the deal to its shareholders, SacOil said that the settlement would enhance its ability to recover the sums owed to the company and its shareholders.
Following the completion of the arrangement with EER, Sacoil announced that it had terminated its joint venture with Nigdel, and consequently its participation in OPL 233. SacOil claims it has the right to be refunded by Nigdel for all costs expensed to date on OPL 233. As a result, the company says, it has no future commitments and obligations associated with the appraisal of OPL 233.
Following this revelation, Dr Thabo Kgogo, CEO of SacOil, commented, “The termination of the joint venture in respect of OPL 233 is in line with the strategy communicated to shareholders previously, improves the Company’s financial position and will reduce future financial exposure emanating from such higher risk assets.”
Dr Kgogo optimistically continued: “With the expected return of capital from OPL 233 and OPL 281, combined with SacOil’s existing cash resources, the Company will be in a far stronger position to pursue its strategy of increasing production and focusing on cash generative assets”.
Things might not go quite as smoothly on OPL 233 with regards to the monies it is expecting back, however, as Nigdel has taken a different position on the issue of the funding. Nigdel claims that has defaulted in the delivery of its financial obligations under the joint operating agreement (JOA) relating to OPL 233. In a statement by Nigdel’s CEO, Chief Joseph Penawou, the company said: ”SacOil has consistently and continually failed to fulfil its financial obligations under the Agreements between the parties.”
OPL Nigdel says that following the “prolonged and cumulative failure” by SacOil, it opened discussions with the company aimed at remedying the situation. The indigenous operator says it proferred various alternatives to SacOil, eventually issuing a default notice to SacOil, which expired on 18 April 2015. Nigdel said that under the JOA, it has the right to require that SacOil completely withdraw from the JOA and the contract in OPL 233 thereby resulting in Sacoil’s loss of its title, rights and beneficial interest in the OPL 233.
Nigdel has come out to speak openly on this issue following SacOil’s announcement of its withdrawal from OPL 233. According to Nigdel, accuses SacOil of intending to misinform its shareholders, saying that SacOil cannot validly withdraw from OPL 233 under the provisions of the Farm In Agreement, without remedying its existing default first.
A competent persons report (CPR) done by AGR TRACS found 50.5ft of gas pay and 106.5ft of oil pay across 5 reservoir zones in the well. AGR TRACS estimated the gross 2C unrisked contingent resources at 19 MMboe (P50) with peak production estimated at14,335 boepd.
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