By Teddy Nwanunobi
ADM Energy has completed its acquisition of a controlling interest in a Risk Sharing Agreement for the development of the large-scale Barracuda field in OML 141, it announced on Wednesday.
Valuechain reports that OML 141 is an existing discovery and near-term production asset in swamp/shallow waters of the Niger Delta.
It would be recalled that ADM Energy, on March 23, announced that it has conditionally agreed to acquire a stake in the Barracuda oil field.
The company, in the announcement, revealed that it would acquire a 51 per cent stake in KONH UK, which in turn, owns a 70 per cent indirect stake in a risk-sharing agreement (RSA) on the Barracuda field via Noble Hill – Network.
For the field development, ADM would pay up to $1.3 million, which includes $250,000 in cash payment on completion of the deal, and the remainder in equity, on completion and at certain project milestones.
It further announced that the deal was planned to be completed in the second quarter of this year.
Highlights of the deal include that: ADM will provide technical and financial support to the RSA Consortium in return for favourable accelerated economics and a 15 per cent net profit interest (NPI) in the field, new work programme would be produced by the RSA Consortium and joint operators, new CPR on the field expected to be completed in the coming months, ADM’s internal estimate suggests that first oil of 4,000 barrels of oil per day (‘bopd’) may be possible in H2 2021, and ADM considered that there may be an opportunity to further increase field productivity from further drilling.
“Following the receipt of the CPR and further technical appraisal work, it may be possible to: increase production to ca.23,000 bopd by drilling six wells by 2026, and developing a 12-kilometre (km) pipeline to Brass Export Terminal, reducing operating expenditure to US$12/bbl (from US$20/bbl),” it added.
ADM further gave details of the payment.
“Following completion of the Investment, ADM has paid US$0.25 million (approx. £180,000) in cash and US$0.55 million (approx. £395,000) in ordinary sharesat the price of 7 pence. As a result, ADM has issued 5,657,912 in ordinary shares of 1 pence, each, at 7 pence per share. The new ordinary shares (NOS) are being issued to Calabar Capital which, on admission of the NOS to trading on AIM, will hold 5,657,912 ordinary shares, representing 3.59 per cent of the issued share capital of the company.
“Calabar Capital has entered into a lock-in agreement with the company not to dispose of any shares issued to it in consideration for the investment for 12 months after the issue of any such consideration shares, save for in certain limited circumstances or upon the prior written consent of the company. The overall consideration for the investment may total up to US$1.3 million payable in cash and equity.
“The remainder of the consideration is contingent on demonstrating commercial flow rates from the first new well, and payable as follows: US$0.1 million in ordinary shares of ADM issued at the higher of 7p and the five-day average of the then prevailing share price upon signing of drilling contract for the Barracuda-5 well, and US$0.4 million in ordinary shares of ADM issued at the higher of 7 pence and the five-day average of the then prevailing share price on completion of a successful flow test in respect of the Barracuda-5 well,” it said.
ADM Chief Executive Officer, Osamede Okhomina, spoke further of the deal.
“We are delighted to complete our investment and acquire a controlling interest in a risk sharing agreement for the development of the Barracuda Field. The expectation is for Barracuda Field to come on stream later this year following the drilling of a new well, which, if successful, should give ADM a considerable increase in production volumes and cash flows. With the potential for several new wells in the coming years, we believe this investment and the Barracuda Field represents a compelling opportunity to add significant value to ADM,” he said.