ADM Energy takes further interest in license offshore Nigeria

ADM Energy, an oil and gas investing company, has made an agreement to acquire a further interest in OML 113, located offshore Nigeria, from EER.

ADM Energy has entered into a sale and purchase agreement with EER (Colobus) Nigeria Limited to acquire a participating interest of 2.25% from EER in oil mining lease no. 113, which includes the Aje field.

It is worth reminding that ADM Energy, which already has an interest in the OML 113, said last January it was embarking on a strategy to expand its portfolio by investing in assets being made available across Nigeria and West Africa.

In a statement on Monday, ADM said that the completion of the agreement with EER is subject to satisfaction of certain conditions.

Consideration for the acquisition is $3 million to be satisfied by the issue of $2 million of new ordinary shares at 7 pence per share and $1 million in cash at the time of 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 license: 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.

Based on the current average daily production for 2019 of 2,967 bopd, ADM’s net daily production will increase from 148 bopd to 273 bopd on completion.


Details of the agreement


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.

Subject to completion, ADM will acquire 25% of the interests, rights, and obligations held by EER in the Block such that, on completion, ADM’s participating interest will increase to 4.9% with corresponding revenue and cost bearing interests increasing to 9.2% and 12.3% respectively.

Further, ADM will be responsible for a corresponding interest in EER’s alleged outstanding disputed unpaid cash calls with the operator of the Block which, for ADM as a purchaser of 1/4 of EER’s interest in the Block, represents approximately $1,500,000 plus applicable interest.

Subject to verification through audit, should it be determined that all or a portion of the outstanding cash calls are due, it is the intention that any sums deemed outstanding by the partners will continue to be settled from production revenue at the project level.

ADM is required to pay a refundable deposit of $250,000 within 90 days of signing the qgreement. Upon completion and following the issue of the Consideration Shares, EER and any connected person or other person to whom the Consideration Shares may be issued and their associates will enter into a relationship agreement, lock-in agreement and orderly market agreement with ADM.

Under the terms of the relationship agreement, the relevant shareholders will have the right to nominate a director to be appointed to the Board of ADM from completion, subject to normal regulatory approval, and such right shall continue until such time as the Relevant Shareholders cease to hold 20% or more of the entire issued share capital of the company.

It is expected that the requisite consents and authorizations may take a number of months to be received such that a long stop date of 180 days after signing of the Agreement has been agreed, following which either party is entitled to terminate the transaction.

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.”

Yinka Ogundare, CEO of EER, commented: “We are very pleased with this transaction that was structured to help further consolidate our working relationship with ADM. The transaction would result in deepening our collaborative relationship and help the partners and the operator develop the asset further.”

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