Equator Exploration - West African Oil/Gas Giant in the Making

Full details of EEL's projects:

(1) Nigeria Oil Mining Lease (OML) 122

JV to develop OML 122 off-shore Nigeria:

- Two discoveries, Bilabri-1 production tested at 5175bopd and Orobiri. Bilbari has 25-45mmbbls OIP and 1.2Tcf GIP with Orobiri holding 25-35mmbbls OIP and 0.3Tcf GIP.

- Owanare prospect with 350mmbbls OIP / 1.3Tcf GIP.

- Other deepwater exploration prospects - the field lies on trend with Shell's giant Bonga field to the west, which has 1.4 billion bbls OIP.

EEL have drilled the B-1 DX appraisal well on the Bilabri field and interested an oil reservoir and multiple gas reservoirs, including a deep reservoir with pressure too high for testing. EEL will earn 40% WI in Bilabri field for drilling 2 wells. Estimated over 900bcf GIP (flow tested 4,400 boepd gas and 477 bopd condensate from one perforated zone) and 130mmbbls OIP (flowed 4,000 bopd).

Will then spud the Owanare explo well in Mar '06. The aim of the initial two wells is to prove-up significant volumes of gas as potential supply for gas-utilisation projects currently underway or in planning stages in close proximity to OML 122 (Brass LNG plant and the Chevron/Sasol GTL plant). The secondary objective is to find commercial volumes of oil on the block.

Rig is contracted for a 5 well slot with contract value US$43M. A picture of it:

(2) Joint Development Zone (JDZ)

The JDZ is the boundary between Sao Tome and Principe and Nigeria, divided into Blocks. EEL/ONGC JV awarded 15% of Block 2 (EEL effective interest 6%, cost US$4.3M). Potential 1 billion barrels recoverable reserves, giving EEL 60mmbbls potential reserves for US$4.3M. Sinopec is the operator.

It appears that only politics kept the EEL/ONGC JV from being operator of Block 2, proviso being that EEL now have more cash than originally planned (EEL's share could have been up to US$28.4M if EEL/ONGC won 100% of Block 2, rather than the US$4.3M paid):
Noble originally only bid $57 million for Block 4 but was asked to match Anadarko's $90 million bid while the Devon-led group was asked to match $71 million offered by ONGC and Equator for Block 2.

Timetable for signing of PSC for JDZ Block 2 on JDA website (PSC supposedly to be signed on 14 Mar '06):

(3) Sao Tome Exclusive Economic Zone (EEZ)

Exclusive Economic Zone (EEZ) of the rest of Sao Tome and Principe waters - EEL can acquire 100% interest in 2 blocks of its choice in EEZ, plus can take 15% of government interest in any further Blocks in the EEZ. Note that US group ERHC have a similar option, but EEL have first rights.

Has 8000km 2D seismic data and is acquiring another approx 5000km (April-June 2005). Will use this to select its 2 blocks, then perform 3D seismic. There is various evidence for significant hydrocarbons in the EEZ.

Initial cost of 2 EEZ blocks will be US$2M and US$2.5M licence fees, with EEL stating they plan to spend US$23M in the EEZ in first 15 months. Further "signature bonuses" are payable upon commercial discoveries and production, with aggregate not to exceed US$77M for each Block. Blocks will be held by wholly-owned subsidiary Aqua Exploration Ltd, EEL acquired Aqua for total cost of approx US$3.2M. They also state The Group intends to seek farm-in partners to reduce the Group’s financial exposure to the cost of initial exploration drilling on its prospects - possibly ONGC.

(4) Nigeria 2005 Bid Round

EEL stated intent to bid for deepwater blocks in a JV with ONGC (65:35 basis) in their Annual Report. Map of those 12 offshore blocks and lots of detailed info is available here (download the "Blocks on Offer" pdf doc):

Note that PGS (EEL's partner for region seismic) did the seismic on some of the offshore blocks. Live bidding for blocks took place on 26th August. ONGC bid for 2 deepwater blocks (321 and 323), but Nigeria preferentially offered the blocks to KNOC in return for investment in Nigeria infrastructure:

KNOC matched winning bids for Blocks 321 and 323 for which ONGC had bid $175M and $310M respectively. ONGC/EEL JV was initially offered 25% of each block, but Indian govt effectively blocked ONGC's involvement in the bid. Blocks have now had PSC signed with KNOC being operator with 60% and EEL getting 30% (cost of US$145.5M).

Article in next paragraph estimates reserves as 1,540 to 3,600 mnbbls recoverable for OPL 321 and 1,730 to 3,950 mnbbls recoverable for OPL 323.