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Aberdeen-based Eland aims to raise £15m after tough year

Eland Oil & Gas
The Opuama oil field in Nigeria, which is being redeveloped by Eland Oil and Gas.

Aberdeen-based Eland Oil & Gas this morning confirmed plans to raise between $14.5million and $19.5million through a proposed placing of new voting ordinary shares of 10 pence each in the company.

The firm, which focuses on exploration in West Africa with an initial focus on Nigeria, posted a loss of$31.4million before tax for the year. The firm’s operations were blighted by militant activity in the Niger Delta.

Chief executive George Maxwell said: “Over the last 18 months we have significantly grown our production base, made substantial progress de-risking our highly attractive development projects, diversified our export routes and materially increased our recoverable reserves from our current well inventory, identifying further meaningful upside.

“Today’s proposed placing will allow us to capitalise on these achievements and accelerate our workover program, in particular the side-tracking of Opuama-7 followed by the re-entry, completion and production of the Gbetiokun-1, in the most capital efficient manner. OP-7 and GB-1 combined are capable of delivering c.13,900 bopd (gross), a near trebling of recent production rates, and will therefore significantly increase cashflows which in turn will be used towards funding the development of our valuable asset base”

A spokesperson said a certain number of the company’s “major shareholders as well as certain directors have indicated a willingness to participate in the placing”.

The raised funds will be used to accelerate the commencement of the workover and side-track of the Opuama-7 well and fund the installation of a Lease Automatic Custody Transfer unit (“LACT unit”) at OML 40’s custody transfer point with the Trans Escravos Pipeline.

The cash injection will also be used to accelerate the commencement of the re-entry, completion and production of the Gbetiokun-1 well via an Early Production System (EPS), including dredging and the ordering of long-lead items, to allow, assuming the larger quantum fundraise, contiguous development with the Op-7 side-track and for working capital and contingency purposes.

Following the successful workover of Op-7 and the re-opening of Op-1 current gross production stands at 11,5000 bopd. The Ccmpany has modelled that at conservative production levels of 15,500bopd netbacks of c. $24.74/bbl will be achieved when exporting through shipping, as previously employed. However, it is anticipated that the equivalent netback under the current export route is c. $31.32/bbl.

It is further anticipated by the company that the workover of Gbetiokun-1 will deliver at least a further 8,000 bopd (gross) to OML 40 production, bringing the company’s anticipated total initial gross production to 25,400bopd (net: 11,430 bopd).

Eland currently has $6.3million cash with approximately $8.1million outstanding from its shipping offtake partner. From the amounts due from its offtaker approximately $6million will be used to settle amounts owing to its shipping contractor and FPSO provider.

The placing will be managed on the company’s behalf by Panmure Gordon, Canaccord and Pareto.

The placing, which has been launched immediately, is being conducted through a bookbuilding process and will be made available to new and existing eligible institutional investors and the books are expected to close no later than 7am tomorrow.

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