Canadian Overseas Petroleum Limited (COPL) and its partners have made a step forward in their pursuit to develop the Noa-1 discovery, in OPL226 block offshore Nigeria.
The OPL 226 sits 50 km offshore the central delta region of Nigeria in water depths ranging from 40 to 180 meters and has a one-well drilling commitment linked to it.
COPL on Monday said its 50% owned subsidiary in Nigeria – Shorecan – had received and agreed to a project financing and offtake agreement term sheet, providing for a minimum $30 million to a maximum of $50 million Senior Secured Facility.
Shorecan would invest the cash into its 80% owned affiliate Essar Exploration and Production Limited. The loan would be given by The Mauritius Commercial Bank Limited (“MCB”) and Trafigura.
Loan for production testing
According to COPL, the loan, subject to certain terms, would provide funding for all production related expenditures following the drilling and testing of the initial production well to be drilled by Essar Nigeria on its 100% contracted interest in OPL226, which is located in shallow to mid-water offshore Nigeria.
Other terms for the loan include a two-year term to maturity and a grant to the lenders of US$3 million worth of warrants to purchase COPL common shares for two years with an exercise price equal to the market price of the COPL common shares on the date of closing of the loan.
Drawing of the cash in is contingent on an additional $20 million to $33 million of funding from ShoreCan; A $100 million funding from an offshore oil services group (“Service Provider”) to deliver the project; a minimum of 6,000 bbl./d production rate averaged over 20 days; The execution of a formal definitive binding agreement between the parties.
Field Development Plan ‘soon’
The project as planned involves the drilling and completion of a horizontal oil production well offsetting the 2001 NOA#1 oil discovery well and the drilling and completion of two (2) to three (3) additional high angle oil production wells in the adjacent NOA East fault block from a common wellhead platform, and placing these wells on production in an approved early production scheme.
Essar Nigeria has prepared a work program for this initial campaign on OPL226 in the form of a field development plan (“FDP”) for submission to the Concessionaire, NNPC. COPL on Monday said it expected the presentation of the FDP to NNPC to occur in the near term.
Talks with service providers
Furthermore, COPL said that ShoreCan was in late-stage discussions with “the Service Provider,” which involve the provision of drilling services, the supply of a mobile production unit and a storage vessel for a deferred fee.
As part of the transaction, the Term Sheet provides for Essar Nigeria to enter into a crude oil offtake arrangement with Trafigura.
Arthur Millholland, President and CEO, said: “The company and Shoreline through our jointly held affiliate have worked hard to achieve this first step in the unlocking of the resource within OPL 226. We are confident that we will complete the process to enable Essar Nigeria to commence this first phase of development operations.”