CAMAC Energy to Accelerate Exploration and Development of its Blocks Offshore Nigeria

  • Business & Finance

CAMAC Energy Inc. , a U.S.-based energy company engaged in the exploration, development and production of oil and gas, announced a net loss of $28.2 million, or $0.18 per diluted share for the quarter ended March 31, 2011.

This loss includes the remaining estimated Oyo well #5 intervention expenses of $24.4 million, or $0.16 per diluted share. For the same period in 2010, CAMAC Energy reported a net loss of $3.2 million, or $0.07 per diluted share.

Chief Executive Officer Dr. Kase Lawal said, “It is a time of great opportunity for CAMAC Energy, with the completion of the OML 120/121 transaction and I am extremely confident about the future of this Company. Nigeria is an established oil and gas province of increasing importance in a high oil price environment, and energy demand in China continues to grow. We believe CAMAC Energy’s current asset portfolio has high potential and is well-positioned for the future, and we look forward to continuing to develop those assets to deliver value to shareholders.”

Update on Cash and Liquidity

Cash and cash equivalents at the end of the first quarter of 2011 decreased to $20.6 million from $28.9 million at the end of the fourth quarter of 2010. In addition to $3.2 million used in operating activities, the Company paid $5.0 million to Allied Energy Plc in connection with the OML 120/121 transaction that closed in the first quarter. As disclosed previously, CAMAC Energy intends to utilize a term credit facility from its affiliate, Allied Energy, of $25 million in order to partially satisfy its expense incurred in connection with the Oyo #5 well intervention.

Executive Vice President and Chief Financial Officer Abiola Lawal said, “In addition to securing the credit facility from Allied Energy, we ended the Technical Services Agreement (TSA) between Allied Energy and CAMAC Energy as well as consolidated all U.S. operations in our Houston office at the end of March. We expect that both actions will result in future cost savings to CAMAC Energy.”

Update on OML 120/121

Management is currently in the process of evaluating its options to accelerate the exploration and development of blocks OML 120/121. Together with partner and technical operator Nigerian Agip Exploration Limited, NAE, a subsidiary of the Italian oil company Eni, the Company is working to expedite a drilling program. The OML 120 block is located directly east of OML 133, which contains the giant 500 million barrel Erha Field, and north of OML 121. OML 120 covers an area of 916.6 sq km in water depths ranging from 150 to 1,000 meters, and contains the Oyo Field. The OML 121 block covers an area of 887 sq km in water depths ranging from 150 to 1000 meters and is located directly south of OML 120. Both OML 120 and OML 121 are covered entirely by over 2,000 square kilometers of 3D seismic. According to a recently announced resource estimate by Netherland Sewell & Associates, the OML 120/121 blocks contain a high estimate of over 2 billion barrels of gross unrisked recoverable oil resources and a best estimate of 627 million barrels in sixteen seismically-defined prospects and leads.

Update on Zijinshan Asset

Drilling of the ZJS-3 exploratory well was completed on May 1 with a total depth of 1598 meters. The Company encountered encouraging gas readings and submitted the data to a third party data processing firm. We will provide further update as soon as the data has been processed. During the first quarter of 2011, CAMAC Energy capitalized $424,000 as exploratory drilling costs related to ZJS-3.

Update on Production

During the quarter ended March 31, the average gross daily production from the Oyo Field was 4,017 barrels per day which was a decrease of 20% from the fourth quarter of 2010. NAE, the operator of the Oyo Field, continues to test the flow rates to evaluate the ultimate outcome of the workover on well #5. The Company’s share of average daily net production in the first quarter was 217 barrels per day, excluding royalty barrels. There were no liftings in the quarter ended March 31, 2011, partially due to the shut-in of Oyo well #5 related to the gas intervention, and accordingly no revenue was recorded.

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Source:Camac Energy , May 4, 2011;

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