Exploration & Production | Quarterly / Earnings Reports | Second Quarter (2Q) Update

Oando Ramping Up Production With ConocoPhillips Acquisition

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Oando Energy Resources Inc. has announced financial and operating results for the six month period ended June 30, 2014.

Operational Highlights

• Production from existing assets for the six months ended June 30, 2014 was 821,786 bbls (an average of 4,540 barrels per day) compared to 687,757 bbls (an average of 3,800 barrels per day) for the comparative period primarily as a result of improved well optimization at OML 125;
• The average net sales price of $76.18/bbl for the six months ended June 30, 2014 declined by 20.3% from $95.64/bbl in the comparative period;
• Progressed construction of the 45,000 bbls/d Umugini pipeline, designed as an alternative evacuation route for the OML 56 (Ebendo Field) asset, with a target completion date of Q4, 2014; and
• Completion of the $1.5 Billion acquisition of ConocoPhillips' Nigeria Business Unit (the COP Acquisition).
• Capital expenditures for the six months ended June 30, 2014 were $66.9 million, compared to $44.7 million for comparative period.

Subsequent Events

On July 30, 2014, the Corporation completed the acquisition of ConocoPhillips Nigerian business unit, with an effective date of January 1, 2012. The final purchase consideration for the Acquisition transferred on July 30, 2014, net of working capital adjustments, transaction costs, purchase price adjustments was $1.5 Billion. The total reserves and resources associated with this transaction are; Proved plus Probable Reserves of 211.6 million barrels oil equivalent (MMboe); Best Estimate Contingent Resources of 498.6 MMboe; Unrisked Best Prospective Resources of 656.9 MMboe.

CEO, Pade Durotoye said: "This half year we have witnessed a 20% growth in production against last year, due to optimization processes on our current producing assets.

We are truly excited at the 9 fold ramp up in production that we are experiencing in H2, 2014 as well as a much larger corporation, as a result of our completion of the acquisition of the ConocoPhillips Nigeria business unit, our immediate outlook will be to integrate the systems, processes and people towards growing the business and creating true value for our shareholders."

Operational Update

OML 125 (Abo Field)

Budgeted capital expenditures for OML 125 for the six months ended June 30, 2014 was $26.6 million. The Corporation incurred expenditures of $40.7 million during the first six months of the year on Abo 8 and Abo 12 drilling and completion activities, FPSO revamp and Abo 3 flow line de-sanding.

Abo 8 re-entry and completion was budgeted at $9.1 million with actual expenditure incurred to date being $5.8 million with remedial works still ongoing to put the well back on stream. Abo 12 drilling and completion was budgeted at $12.9 million for the first half of the year. Actual expenditure to date of $20 million has been incurred. The increase in expenditure was as a result of a delay in completion costs. The well is temporarily plugged pending planned hook up in 2015.

Abo 3 flow line de-sanding costs of $5.5 million was incurred during the first six months of the year but was not budgeted for in 2014. This expenditure was incurred as a result of plugged flow lines from sand production. Remedial works are ongoing to put well back on stream.

FPSO revamp activities were planned for the fourth quarter of 2014 at a budget of $4.5 million. However, this expenditure was incurred during the first six months of the year at a cost of $5.6 million.

OML 56 (Ebendo Field)

Budgeted capital expenditures for OML 56 for the six months ended June 30, 2014 was $11 million. The Corporation spent $9.2 on Umugini pipeline construction and Ebendo Well 7 drilling and completion activities and flow station de-bottlenecking.

The Umugini pipeline project over the course of the year has achieved completion milestones around fiber optic cable laying and pipeline works and projected delivery date remain to be completed during the fourth quarter of 2014. Ebedo Well 7 was successfully drilled and completed on the 1st of April 2014. The well has since been shut in pending completion of Umugini pipeline. The Akri-Kwale flow lines were also de-bottlenecked during the first six months of the year to increase crude production capacity for the field. The cost of de-bottlenecking was $1.1 million.

OML 13 (Qua Ibo Field)

Budgeted capital expenditures for OML 13 - Qua Ibo field were set at $40.6 million for 2014. In the six months ended June 30, 2014, the Corporation incurred capital expenditures of about $9.4 million on pipeline and facility costs as well as flow station construction. Oil production from the Qua Ibo field's D5 reservoir is expected to commence in the fourth quarter of 2014 after the commissioning of a crude processing facility which is currently under construction and should be finalized in the third quarter of 2014. Production from the C4 reservoir of the Qua Ibo is expected to commence in the first quarter of 2015.

OML 134 (Oberan Field)

Budgeted capital expenditures for OML 134 were set at $7.4 million for 2014. In the six months ended June 30, 2014, the Corporation paid $7 million of the costs incurred on exploratory activities related to the Mindiogboro prospect. Based on results from the drilling of the exploration well into the Mindiogboro prospect, the Corporation plans to continue geological, geophysical, and environmental studies in 2015.

OML 90 (Akepo Field) and Blocks 5 & 12, EEZ of São Tomé & Príncipe

Budgeted capital expenditures for OML 90 and Block 5 and 12, EEZ of Sao Tome & Principe were set at $2.0 million and $5.2 million, respectively, for 2014. No significant capital expenditures were incurred in these fields in the six months ended June 30, 2014. For OML 90, planned capital expenditures to develop an evacuation route for crude production remain. For Blocks 5 & 12, planned capital expenditures related to a four year work programme of 2D and 3D seismic acquisition and studies remains.

Overview:

OER currently has a broad suite of producing, development and exploration assets in the Gulf of Guinea (predominantly in Nigeria). OER's sales production was 41,071 boe/d in 2013 and 44,512 boe/d in the first half of 2014.

Reserves and resources attributable to OER as of July 31, 2014 include Proved plus Probable reserves of 230.6 MMboe, Best Estimate Contingent Resources of 547.3 MMboe and Risked Best Prospective Resources of 525.2 MMboe.

OER has been specifically structured to take advantage of current opportunities for indigenous companies in Nigeria, which currently has the largest population in Africa, and one of the largest oil and gas resources in Africa.