Africa and Europe-focused San Leon Energy Plc, a partner of the Erotron consortium that acquired Oil Mining Lease (OML) 18 from Shell Petroleum Development Company (SPDC), has stated that production from the Nigerian oilfield has been encouraging.
Under the Master Services Agreement between the two firms, San Leon provides services to Eroton in OML18, through its oilfield services subsidiary.
According to the work programme, numerous wells have been identified which require re-entry for recompletions in new zones using a service rig and San Leon expects to provide workover rig, drilling rig and production facility construction services to Eroton starting in 2017.
In an operational and cash flow receipts update relating to its indirect interest in the onshore field, which was released at the weekend, San Leon noted that it has seen an encouraging performance from OML 18.
The firm said that reperforation operations on a well on the field had proved successful, with gross OML 18 production increasing to approximately 61,000 barrels of oil per day.
According to the company, the well has now been temporarily shut in to allow minor production upgrades and additional work-over operations and current gross production on the field currently around 53,000 bopd.
San Leon said the reperforation programme would continue to be implemented across a number of wells on the OML 18 field in the coming months.
San Leon also reported that wells on its Krakama field are now ready to produce and that production here is expected to come online during the first two months of 2017. The firm also expects production to start on the Buguma field in March 2017.
San Leon also reported that it has been informed by its partner, Eroton, that compliance with all financial covenants and rations stipulated in their Reserve Bank Lending (RBL) facility agreement have been met.
Commenting on the status of the field, the Chief Executive Officer of San Leon, Oisin Fanning stated that: “We are encouraged by the performance of the OML 18 field to date, including the approximate doubling of production over what was expected when the RBL was first put in place. We are confident, and fully supportive of Eroton in its attempts to satisfy all the conditions of the RBL facility in order to declare dividends in order for San Leon to receive its first cashflow from OML 18.”
The company, however, identified two conditions that have not been met to include: reservation of nine months’ worth of upcoming debt repayments due in the debt service reserve account, as well as the submission of audited financial statements by Eroton whereby 60 per cent of audited net profits can be paid to dividends account.
The company stated that it has been informed by Eroton that the timing for the satisfaction of these conditions is also influenced by the receipt by Eroton of the outstanding balance of historic cash calls from the Nigerian National Petroleum Corporation (NNPC), which was expected during 2016 but did not occur.
“Only once all the RBL debt service reserve account conditions have been fulfilled will Eroton be in a position to complete its audited financial statements for the year ended 31 December 2016, whereupon the Eroton Board will be in a position to declare and pay dividends to its shareholders,” the company added.
The company added that it would continue to work with Eroton to explore other interim mechanisms to enable cash distributions to be made to San Leon, pending satisfaction of all of the RBL debt service reserve account conditions.