ADM Energy, an AIM-quoted oil and gas investing company formerly known as MX Oil, will increase its interest in the offshore block in Nigeria containing the Aje oil field.
ADM said Monday it had agreed with EER, a partner in the block to acquire a participating interest of 2.25% from EER in oil mining lease no. 113, in which it already has an interest of 2.7%.
Consideration for the acquisition is $3,000,000, to be satisfied by the issue of $2,000,000 of new ordinary shares at 7 pence per share and $1,000,000 in cash at the time of completion.
On completion, ADM's participating interest will increase to approximately 4.9%. Upon completion, ADM's net 2P reserves will increase from 8.9 MMboe (as announced on 2 May 2019) to 16.4 MMboe.
Based on the current average daily production for 2019 of 2,967 bopd, as announced on 23 January 2020, ADM's net daily production will increase from 148 bopd to 273 bopd on completion.
OML 113 covers an area of 858km² in the western Nigeria offshore Dahomey basin, some 24km south of the coast and 64km from Lagos, in water depths ranging from 100 to 1,000 meters. The West African Gas Pipeline (WAGP) intersects the northwest part of the license.
There are currently five partners in the licence: Yinka Folawiyo Petroleum Company Limited, New Age Exploration Nigeria Limited, Pan Petroleum Aje Limited, EER, and ADM.
Since 2016, ADM has held a participating interest in the Block of 2.7% with corresponding revenue interest and cost bearing interest of 5.0% and 6.7% respectively. EER holds an undivided participating interest in the Block of 9.0% with a revenue interest of 16.8% and a cost bearing interest of 22.5%.
On completion, ADM's interest will consolidate to a participating interest of 4.9% with corresponding revenue and cost bearing interests increasing to 9.2% and 12.3% respectively.
Completion of the transaction is conditional upon the consent of the Nigerian Minister of Petroleum Resources for the transfer of the interest from EER to ADM.
Osamede Okhomina, CEO of ADM, said: "In keeping with our strategic development agenda, I am pleased to announce our first investment under the Company's new leadership. OML 113 is well known to us and it is a fantastic asset that covers the spectrum of field types from current oil production to several appraisal plays. It is also very wet-gas rich which provides the potential for the operator to be able to bring into the market, alongside dry gas, resources like condensate and LPG.
"As envisaged under the intended Strategic Alliance signed earlier this month, we have proposed this project as one Trafigura may consider investing in. We look forward to updating the market further in due course."
The Aje field started production in April 2016 from two wells in the Cenomanian reservoir, Aje-4 and Aje-5, with oil processed and exported from a leased FPSO, the Front Puffin.