Eland Oil & Gas (LSE: ELA) raises funds to buy Nigerian assets from Royal Dutch Shell.
Many oil explorers are struggling to raise cash right now, but that doesn't seem to be a problem that's affecting Eland Oil & Gas (LSE: ELA). It joined AIM today, some three years after the company was founded, raising funds of £118m in order to buy a holding in the OML 40 licence in Nigeria.
The stake in OML 40 was previously held by Royal Dutch Shell (LSE: RDSB), Total (NYSE: TOT.US) and Eni (NYSE: E.US). Eland will own an initial 20.25%, with 24.75% held by its Nigerian joint venture partner. The remaining 55% is held by the Nigerian government. In some ways, this deal that mirrors another recent acquisition by Heritage Oil (LSE: HOIL) from the same group of partners, although that cost considerably more at $850m.
OML 40 covers some 500 square kilometres and is located onshore in the Niger Delta and contains light 'sweet' oil. Since 1964, 18 wells have been drilled there, with 15 finding hydrocarbons. One field, Opuama, was formerly in production for over 30 years, from 1975 to 2006.
In the next six months, Eland is targeting production from existing wells at Opuama that will be restarted at an expected initial gross rate of at least 2,500 barrels of oil per day (bopd).
Eland describes OML 40 as "an asset with production and exploration potential and with independently certified gross recoverable 2P Reserves of 71.5 million barrels, 3P Reserves of 117 million barrels in the Opuama and Gbetiokun Fields and Mean Contingent Resources of a further 16.7 million barrels in the Abiala and Ugbo Fields".
Looking further ahead, two exploration wells, targeting 113 million barrels of oil, are planned for late 2013. Within four years, it is hoped total gross production will rise to 50,000bopd, while Eland will also seek to acquire and develop underexploited upstream assets in Nigeria.
Les Blair, CEO of Eland Oil & Gas, commented:
"I am extremely grateful to the shareholders of the Company who have supported us to complete this milestone transaction. The fundraising of £118 million is the largest on an AIM IPO for over three years and highlights the exciting prospects for OML 40 and Nigeria as a whole."
In early trading, Eland shares were trading at 114p, well ahead of the 100p placing price. At the current share price, the company is valued at £154m.
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> Stuart doesn't own any of the shares mentioned in this article.
