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Our strategy

Our strategy

Eland delivers shareholder value by maintaining production and cash flow, delivering further accretive development projects and executing successful exploration campaigns, ensuring we are suitably financed through a mix of diverse funding options and portfolio management.

Eland's strategy is measured by its Key Performance Objectives (KPIs). The Board agrees KPIs at the start of every year which are targeted to deliver short-to-medium-term objectives. 

 

Strategic Objectives

For the Company, the safety of our staff and contractors is an overriding principle for us. Where company activities and safety might conflict, safety will always take precedence.

2018 progress

- There were two recordable incidents in the year from 1,800,582 hours; neither incident was of a serious nature.

- 2018 Total Recordable Incident frequency (TRIFR) of 0.22.

Looking forward

- Further improve on current performance.

- Educate and reinforce to prevent complacency.

Key Risks

- Complacency.

- Non-compliance with procedure.

Key metrics

- Safety – TRIFR
- Reputation

Progress execution of identified drilling opportunities and maintain operational facilities uptime improvements.

2018 progress

- Four additional infill wells (Opuama-8 to -11) successfully drilled on Opuama Field.

- Utilising 16” pipeline from Opuama to Otumara which has been commissioned.

- Opuama 2018 flowstation uptime > 90%.

- New LACT unit installed and commissioned to reduce 3rd party allocation losses.

- Production more than doubled, from an average of 3,934 bopd in 2017 to 8,000 bopd in 2018 (net to Elcrest).

Looking forward

- Following completion of Gbetiokun-3 well, four further infill wells to be drilled on OML 40 in 2019. Gbetiokun-4 & -5 wells, to increase total Gbetiokun production and optimise operating cost on a per barrel basis, and Opuama-12 & -13 wells to continue the production plateau from Opuama field.

- Ubima Early Production System to produce over 2,200 barrels of oil per day (net) from H1 2019.

Key risks

- Expanding too quickly can apply undue pressure on group liquidity and availability of working capital to fund growth.

- Increasing production may lead to capacity constraints within existing infrastructure.

- Increased production levels could lead to a greater threat of infrastructure downtime and outages.

- Higher capital spend funded by the Company requires greater engagement with partner and the potential delayin receiving partner funding.

- Swamp rig availability.

Key metrics

- EBITDA
- Capital efficiency
- Opex per barrel
- Safety – TRIFR
- Partner funding

Ensure capital project delivery efficiency is maximised and establish appropriate reservoir management procedures to ensure economic field recovery is optimal.

2018 progress

- Manning of subsurface, operations and project teams materially increased to support improvements in reservoir characterisation, FDP drafting and reservoir management delivery.

- Comprehensive Gbetiokun FDP drafted and provided to NPDC to support government approvals.

- Commenced substantial update to reservoir model for Opuama field, following drilling of recent infill wells, to provide optimal reservoir management tool.

- Surveillance activities conducted in Opuama, e.g. Opuama-7 production logging tools.

Looking forward

- Complete Gbetiokun FDP approvals with authorities and progress remaining project activities as per programme.

- Use improved manning to ensure 2020 projects are progressed promptly to provide optionality.

- Complete update of Opuama subsurface model and start to actively use as optimisation and opportunity identification tool.

- Undertake identified reservoir management operations on Opuama-1, -7 and -9.

Key risks

- The development phase in the E&P Lifecyle has been routinely beset by project delays and overruns. The operational phase in the E&P Lifecyle is often a balance between maximising short-term value through minimising opex versus longer-term recovery by well and facilities interventions.

- Developments and operations are cash intensive which could lead to allocation clashes with other business areas.

- Misalignment of partner and wider stakeholder objectives can delay ability to execute projects in planned time frame.

- Export infrastructure availability. 

Key metrics

- Capital efficiency
- Meeting project timelines
- JV partner funding

Convert OML 40 leads and prospective resources in to contingent resources and reserves through detailed studies and appropriate data acquisition including drilling exploration/ appraisal wells and seismic acquisition/reprocessing. 

2018 progress

- Amobe will be the first exploration well in Eland’s history, targeting gross resources of 78 mmbbls* on a best estimate (P50) basis, with a 42% possibility of success.

- Significant progress achieved in getting Amobe to a drill-ready point.

- Amobe is located six kilometres from the Opuama Flow-station and is currently expected to spud in H2 2019.

- Studies conducted on the Abiala discovery, located in the east of OML 40, to assess uncertainties and optimise appraisal drilling location.

Looking forward

- The Amobe prospect will be drilled in H2 2019 and has the potential to more than double the Company’s reserves base.

- Abiala studies to be finalised and progress appraisal well to be made drillready, potentially for a 2020 operation.

- Reprocessing of full OML 40 3D seismic dataset is planned for 2019 to improve description of subsurface opportunities. Initial planning studies commenced for further 3D acquisition in centre of OML 40 initiated. 3D acquisition potentially in 2021.

Key risks

- Access to drill site requires dredging to clear access for drilling rig; potential for cost overruns, land access, and right of way issues which could defer drilling timescales.

- With any exploration activity there is a risk that no hydrocarbons are discovered.

- Drilling in frontier areas will involve first-time engagement with host communities.

- Remote drilling location and proposed seismic area will present logistical challenges.

Key metrics

- Reserve replacement ratio
- Capital efficiency
- Safety – TRIFR
- JV partner funding

Structured to secure assets with a low entry cost and enhance value through expert knowledge and development.

2018 progress

- Established a business development team with dedicated technical and financial leadership.

- Established screening criteria to focus M&A strategy. 

Looking forward

- The Company is in a strong position to seek acquisitions enabling a further step-change in growth.

- Further diversify concentration risk with quality asset base.

- Stay Nigeria-focused but screen wider opportunities.

Key risks

- Ability to raise finance to fund new opportunities and develop alongside existing portfolio.

- Access to manpower and expertise to execute new opportunities.

- Whether new opportunities can compete with portfolio of existing Eland opportunities.

- Ability to find attractive opportunities that meet screening criteria.

Key metrics

- Complete M&A transaction
- Achieve rate of return in excess of cost of capital

Continuous investment in our assets, people and relationships to create value for shareholders and wider stakeholder interests.

2018 progress

- Increased loan facility from $35 million to $75 million.

- Funded OML 40 20-year licence extension.

- Opuama operating cash flows reinvested in drilling campaign.

- Significantly increased employment of local staff in Lagos and awarded contracts to indigenous contractors at each operating site.

Looking forward

- Increase borrowing base and loan facility further from $75 million to $125 million in 2019.

- Future cash flow ramp up expected as two new fields come on stream in 2019: Gbetiokun and Ubima.

- Funds in place to drill first near-field exploration well in Company’s history.

Key risks

- In time organic opportunities will decline as fields are exploited and as we mature and drill out our prospects and leads.

- Increase in geopolitical and Niger delta stability risk could deter lenders.

- JV Partner payment.

Key metrics

- Increased borrowing base
- Capital efficiency
- Opex per barrel

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