South Africa’s SacOil is exiting Nigeria oil and gas while Eland endured and now benefiting from their investments and toil, Sacoil ended its joint venture with Nigeria’s Nigdel United Oil Company and abandoned its oil licence due to softer oil prices forcing the firm to cut costs.
Global oil prices have dropped by about 40 percent over the last year on oversupply concerns, forcing many companies to avoid risky exploration. Chief executive Thabo Kgogo said in a statement the termination of the joint venture improves the company’s financial position and will reduce future financial exposure emanating from such higher risk assets, SacOil August acquired 20 percent in a prospective Nigerian oil licence, and later said in November it had completed research of the site.
Sacoil said it would be refunded by Nigdel for all costs it spent on the project.
While Sacoil is running Away Eland Gains.
While Sacoil may not endure as much as Eland oil and gas (LON:ELA) JV venture in Nigeria, whose strategy entails first applying for a five-year tax exemptions for investments and development of their OML 40 licence, in a report last year June the OML 40 asset was currently producing at 3,500 barrels per day, CEO Les blair planned to double that production if their strategy goes as planned, going forward Eland saw incredible growth opportunities in their Nigeria asset, giving them a production boost of 115,722 barrels of oil in year 2014 ending december 31, and since then Eland reported loading and sale of 95,290 barrels in the four months to April 30.
Elands revenue amounted to US$11.7mln for 2014, and as a result the group’s consolidated loss reduced significantly to US$16.3mln from US$26.1mln in the prior year. Eland ended the year with US$15mln of cash and equivalent.
Elcrest Gets nod as OML40 Operator from NNPC’s DPR
Elcrest is Eland’s 45% owned associate and Elcrest is to be formally confirmed as the operator of OML 40 for at least ten years.
The company has received confirmation from Nigeria’s Department of Petroleum Resources (DPR) that Elcrest has fulfilled its obligations, which included a US$2.3mln payment to the DPR.
The Nigerian National Petroleum Corporation (NNPC) has now been advised to proceed with the finalisation of a joint operator model agreement.
Eland said that the agreement has been fully drafted and is currently under review, by all parties, and signing is expected in the coming weeks.
Subsequently Eland is now rated “BUY”
Eland had its stock rating noted as ‘Retains’ with the recommendation being set at ‘BUY’ this morning by analysts at Cantor Fitzgerald. Eland Oil & Gas PLC .
On the final analysis, is it wise for any company to abandon any Nigeria oil and gas asset as a result of low oil price just like Sacoil did? strategy differs, but initial planning and all budget line should not exceed $50 per barrel and even at that the current price is edging up to some reasonable expectation at least above $55, this may likely fulfil investors expectations.