csl/fcmb 2011 investor conference date: 28 … · elcrest exploration and production nigeria ......

Date: May 2011

Elcrest Exploration and Production Nigeria Limited Operator of OML40, Onshore Nigeria

1 Elcrest Board Meeting May 31, 2011

CSL/FCMB 2011 Investor Conference Date: 28 September 2011

Elcrest Exploration and Production Nigeria Ltd OML 40, Onshore Nigeria

1 CSL/FCMB Investor Conference 28 09 2011

WELCOME AND INTRODUCTION

CSL/FCMB conference Sept 28, 2011

Welcome and Introduction

1. Nigeria Oil Sector - Potential

2. Shell Total ENI Divestment

3. Elcrest E&P Nigeria Ltd

4. OML 40 Geography and History of Underdevelopment

5. Elcrest OML 40 Acquisition Story

OML 40 Development

1. Community Development

2. OML 40 Asset Overview

3. Opuama Start Up

4. Drilling Planning

5. Outline Work Programme 2011 - 2012

Conclusions Q&A

Slide 3 CSL/FCMB conference Sept 28, 2011

Agenda

West Africa is one of the most accessible areas for new upstream entrants and Nigeria in particular holds a large number of discovered fields with low technical risk which have not been developed

Today, oil producing countries have moved to repatriate control of their petroleum assets and they have a strong willingness to hand these assets to local indigenous companies

The large International Oil Companies (IOCs) are being obliged to relinquish undeveloped fields and license areas to local companies. At the same time indigenous companies require technical and financial support.

Technically, Nigeria is low risk with enormous development and exploration potential, there are hundreds of undeveloped discoveries and literally thousands of prospects identified in the onshore Niger Delta by 2D and 3 D seismic that have not been drilled

However the success rate for recent new entrants has been low with the notable exception of Addax Petroleum who in the period 1998 to 2009 increased reserves from 60 to 324 MMbbls (P1+P2) and production from 8,000 to 112,000 bopd in Nigeria prior to the sale of the company to Sinopec in September 2009 for approximately $10 Billion (including debt)

Map of Nigeria

Nigeria is a giant economy (circa 150 Million), it is the largest country and potentially the largest economy in sub saharan Africa , it remains underperforming but it has a large and growing middle class, high literacy rate and a thriving banking and telecoms sector. Politically it is growing in stability.


Nigeria Oil Sector

• Divesting undeveloped or under-developed licenses onshore Niger Delta

• Realizing that in the Oil Business you “Use it or Lose it”

• Divesting to indigenous companies that have demonstrable Technical and Financial capability


Shell Total ENI are leading the change

The first divestment is fast becoming a Nigerian success story because of the companies Technical and Financial capability

Elcrest Exploration and Production Nigeria Limited is a special purpose vehicle made up of Starcrest Energy Nigeria Limited 55% and Eland Oil and Gas Limited 45%.

Starcrest Nigeria Energy Limited is an oil and gas exploration and production company with major oil and gas interests in Nigeria, and is part of the Chrome Group of companies.

Eland Oil and Gas Limited is a UK based West Africa focused upstream oil and gas company. Management team largely drawn from Addax Petroleum and have significant Nigeria experience.

Elcrest was formed for the specific purpose of acquiring an onshore asset from the SPDC JV divestment process. Elcrest targeted OML 40 as a cornerstone asset for the company.

Elcrest has the Financial and Technical capability and management team that have a superb track record in Nigeria


Who is Elcrest

Proposed OML 40 Shareholder Structure

Eland Oil & Gas Ltd Starcrest Energy Nigeria Ltd

(Chrome Group)

OML 40 SPV Eland 45%

Starcrest 55%

OML 40 JOA OML 40 SPV 45%

NNPC 55%

Nigerian National Petroleum Corporation

(“NNPC”)


55% 45%

55% 45%


OML40 Geography and History


OML 40 North West Niger Delta

Manifolds

Flow Station F

Terminal


OML 40 Export Route

• OML 40 a history of underdevelopment

• OML 40 lease agreement was signed between the Federal Republic of Nigeria and Shell-BP on the 6th of March 1964

• NNPC and Shell have conducted operations under a joint venture from April 1973

• The OML 40 lease was renewed for a further term of 30 years in July 1989

• NNPC assigned interest to AGIP and ELF in 1989

• Opuama Field drilled in 1975, Peak production 11,000 bopd in 1976

• 43 million bbls of oil produced from the block all from the Opuama field

• 4 other fields discovered but not developed and multiple prospects have been mapped

• Opuama Field shut in since 2006 at a production average of 2,500 bopd production

• NNS Reported Reserves P1+P2 is 182 million bbls of oil

• Elcrest estimate there is up to 500 million Boe in 15 prospects

• This means less than 1/10th of the potential of the block has been realized in 47 years


OML 40 History

• Only one developed field, Opuama - shut-in by Shell in March 2006

• Production of 2,500+ bbl/d production at time of controlled shutdown

• Four discovered but undeveloped fields in OML 40 (Gbetiokun, Abiala, Ugbo and Adagbassa Creek)

• Shell drilled 18 wells over 20 years on 2D seismic data

• Shell mapped fifteen exploration prospects based on 3D seismic data, (Exploration License)

• Opuama flow-station is fully connected to the Trans Escravos Pipeline, but the OML 40 section has been vandalized in several places ( 30,000 blpd capacity )


OML 40

• On March 31st 2011, at the conclusion of an open, transparent and hotly contested auction process, Elcrest was successful in winning the divestment of the 45% equity interest held by Shell, Total and ENI in OML 40, a non producing licence area

• On July 26th 2011, NNPC waived their pre-emption rights, and requested SPDC to proceed with the assignment

• Elcrest had already placed the full purchase price on deposit in an escrow account in London where Elcrest has been fully funded for the acquisition. This funding came principally from the UK Capital market including commitments from many of the largest oil and gas investment funds such as Fidelity Investments, JP Morgan, Artemis and Hendersons in addition to private investors

• Elcrest has the financial capability to raise the funds required to carry out the full licence development and intends to do so from both the local and international capital markets

• In the period October 1 2010 to date, Elcrest have carried out an extensive technical and operational evaluation of the licence area and have prepared a draft work programme and budget for its development over the next five years


Elcrest OML40 Acquisition story

Summary of the OML 40 Acquisition

May 2010 Eland Oil & Gas formed by Les Blair & George Maxwell (ex Addax senior management)

August 2010 Seed Funding in place for evaluation and data purchase

September 2010 Elcrest E&P Nigeria Ltd an Eland/Starcrest SPV was selected by Shell to participate in bid process for OML 40

October 2010 Elcrest performed technical evaluation based on online data room

November 5 2010 Physical data room opened in Rijswijk and attended by Elcrest with Panterra and McDaniel

November 30 2010 Competent Person’s Report (“CPR”) completed by McDaniel & Associates (“McDaniel”)

January 5 2011 Raised Deposit Financing for deposit on bid price

January 12 2011 Submitted bid to SPDC

February 9 2011 Notification of preferred bidders status (by SPDC)

February 10-22 2011 Bid clarification Meetings with SPDC and clarifications requested

February 23 2011 Submitted clarifications to SPDC

March 3 2011 Notification of selection as exclusive bidder

March 10 2011 Raised Purchase and Development Financing

March 31 2011 Elcrest signed Sale and Purchase Agreement with the Sellers

April/May 2011 Satisfactory completion of due diligence by Elcrest on OML 40 Deal Documentation

July 26 2011 NNPC waived their pre-emption rights, and requested SPDC to proceed with the assignment


OML 40 DEVELOPMENT



Community Development

Employment

• Economic Activities-Lumber, Canoe Carving, Fishing

• High Unemployment

• No upstream activity for many years

• Great opportunity through OML 40 development to make a significant employment impact through local contractor support

Development

• Processing of timber and seafood products

• Create standing ground for fixed structures

• Create vocational skills centre’s

• Create access to capital



Electricity

• PHCN is not present in OML 40

• Electricity is provided by diesel generators if available

• Cooking is largely by firewood

• Lighting is largely by kerosene lamps

Water

• Pipe borne water system non functional

• Water collected by canoe



Education

• Schools are in place but lacking required support

• Lack of teachers, quarters and modern structures

• No basic amenities such as water and electricity

• No science laboratory or library

• No internet or reliable communications

• High truancy rates – parent & pupil induced

Health Care

• Opuama Hospital built by NDDC - locked and empty

• No clinic, nurse or doctor

• Poor sanitation

• Waste disposal in the bush

• Drinking water supply is from Chevron Flow Station

• No food market present in most communities

Slide 19


Real Oilfield Development

Community Engagement

Interdependency

Mutual Benefit

Peaceful co-existence

Increased Safety for All

+ =



Access channel

Flowstation

Flare pit

Comms. tower

Export Line

Field base

Helipad



• Dredging of access slots and flow station area

• Repair, flush and retest the pipeline

• Replace and test the flow lines

• Re-commissioning work within the flow station

• Upgrade the CRUDE metering CAPABILITY

Major Work Components to Re-start

STATUS:

• Pipeline consists of 3 segments of 8”, 10” & 12” diameters, totalling 36 km in length. All have pigging facilities.

• No known leaks on the 8” section, although we would like to cut out one section at the FS where an earlier leak was clamped.

• One known leak on the 10” section. Leak was never repaired by Shell, but a spill containment boom is in place.

• On the 12”, one area has been sabotaged and about 30m of pipe cut out. Another 3 places are said to be leaking.


Re-start Pipeline

OPUAMA FLOWSTATION from INLET MANIFOLD SIDE

• Flowstation is fully intact and has not been vandalised while shut down for the last 5 years

• Nominal capacity is 30,000 BPD

• Elcrest has evaluated work required for start up

• Elcrest has prepared a Project Execution Plan for re-entry


Flow Station Work

• There was never any ‘Custody Transfer’ level of metering of the Opuama crude

• A Lease Automatic Custody Transfer (LACT) metering system needs to be specified, bought and installed at Otumara to provide full, DPR-approved metering accuracy.


Metering

DRILLING PLANNING


Inland Drilling Barge

• Elcrest requires a 2000 HP swamp barge rig to develop OML 40

• The Elcrest drilling budget is expected to be up to 80% of the Capex budget

• Drilling is the only way to develop OML 40 which is essentially an appraisal and exploration license

• Elcrest has inspected swamp rigs in and outside Nigeria

• Elcrest will be using a local drilling company in Nigeria

• Sustained 3-5 year drilling activity will be a boost for local content development and create numerous jobs

Elcrest Requires a Swamp Barge for Drilling in OML 40


Drilling - Planning

OUTLINE WORK PROGRAMME for 2011 & 2012


• Improve the lives of our host community stakeholders

• Near term reactivation of the Opuama Field, Opuama 1 and 3, 2,500 bopd, 4 MMbbls reserves

• Opuama FS re-commissioning, Opuama to Otumara Pipeline repair

• Medium term production increase with the drilling and development of the Opuama and Gbetiokun Fields

• Longer term production growth, (after 3D reprocessing & interpretation):

− Near field appraisal – potential upside

− Abiala, Ugbo Creek development

− Abiala Prospects, Exploration upside


OML40 Outline Work Programme

2011 – 2012 Re-entry and Start up Programme

ASSET FIELD 2011 2012 £

million ACTIVE SUMMARY

Q3 Q4 Q1 Q2 Q3 Q4

OML 40

Opuama Rehabilitate the Flow-station & install metering

Opuama Repair pipeline & flow lines

SUB-TOTAL FIRM

OML 40

Opuama Drill Opuama 8 Max 9000ft TVD. Target 6.5 MMbbls



SUB TOTAL DRILLING FIRM

OML 40 All Rig Mob

OML 40 Gbetiokun Gbetiokun floating EPF and export pipeline

SUB TOTAL DISCRETIONARY CAPEX

OVERHEADS/GENERAL CORPORATE PURPOSES

IPO COSTS

TOTAL

Facilities New Drill Swamp Rig



Opuama Flowstation showing extent of siltation

• Elcrest has demonstrated the ability to raise significant funding from institutions and private investors prior to conclusion of the transaction and has the capability of raising further funding with a 5 year work program estimated to cost $800 million

• OML 40 has been underdeveloped since 1964 and shut in for the last 6 years, however the Elcrest/NPDC JV has the experience to develop the asset and consider that production can be brought on stream in the near future and then substantially grow the production and reserves over the next 5 year period

• The early and comprehensive development of OML 40 will considerably benefit all stakeholders

− Government, (Royalties, PPT, NDDC levy, Education Tax, VAT)

− NPDC (Production increase, 55% interest)

− Elcrest (return to investors , encouragement for further investment in upstream and Nigeria)

− Community (Employment, Infrastructure, Basic Amenities, Education, Social development)


Conclusion

Excerpt from former British Prime Minister, Tony Blair’s Speech at the UN Summit

Former British Prime Minister, Mr Tony Blair, who also addressed the summit, described Jonathan’s victory at the 2011 polls as a ray of great hope to the country and the world at large.

While maintaining that the toughest thing for leaders today was translating ideas to reality, he said he was passionate about Nigerian and African issues because without a strong Nigeria, Africa would find it difficult to achieve its potentials.

The former Prime Minister called for the creation of jobs, stressing that countries needed to have an open economy and predictable rules in order to grow. Jonathan Okays 10-year Visa for Investors – the Leadership 20110924


Q&A


Export Pipeline – at Adagbassa Manifold



Export Pipeline – at Opuama Manifold

csl/fcmb 2011 investor conference date: 28 … · elcrest exploration and production nigeria ......

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