Ophir Energy plc (Ophir) announces its Results for the year ended 31 December 2011. Nick Cooper, CEO, Ophir Energy Said: “2011 was a transformational year for Ophir. The Group successfully completed a $384mm IPO during a period of difficult market volatility. The Group has since joined the FTSE 250 and has commenced the busiest operational program in its history with a nine well program in 2012.
After the acquisition of Dominion Petroleum Ltd, Ophir’s East African portfolio position has grown such that the Group is now the largest acreage holder in the fast evolving offshore East African play. This compliments the Group’s extensive portfolio of interest in West Africa and enables Ophir to be an active driller on both sides of the continent in 2012 and beyond. Looking into 2013, early stage preparations are already underway for a further twelve wells across our core countries.The Board looks to the future with confidence and excitement.”
Chairman’s and Chief Executive Officer’s Joint Review
2011 saw Ophir successfully list on the main board of the London Stock Exchange. Ophir joined the FTSE 250 in November 2012. The IPO was set against a backdrop of turbulent capital markets and relatively low levels of new equity issuance and Ophir ended the year as the best performing IPO stock for 2011.
In October 2011 Ophir announced a proposal to acquire the share capital of AIM-listed Dominion Petroleum Ltd in an all-stock transaction. The acquisition closed in February 2012 and expanded the Group’s portfolio in East Africa via the addition of five exploration licences, with three being complementary to Ophir’s existing deepwater portfolio. As a result Ophir now has one of the largest portfolio’s of operated and non-operated acreage in the exciting emerging offshore East African play.
Operationally, 2011 saw two wells completed. The Chewa-1 well in Tanzania was the third in a series of back-to-back gas discoveries in Tanzania. The Kora-1 well in the AGC joint development area was unsuccessful but costs were mitigated through a series of farmout agreements. In 2012 the Group is undertaking the busiest drilling program in its history, with drilling underway in Tanzania, a rig procured for an imminent program in Equatorial Guinea and nine wells expected to be spudded by the end of the year. Preparations are also underway for a twelve well program in 2013, contingent on additional financing . Ophir ended 2011 with net contingent (2C) resources of 210 mmbboe and netrisked prospective resources of 1,882 mmboe.
Ophir continues to actively manage its portfolio to best deploy its capital resources against the most prospective acreage and plays. In 2011 the Group farmed out interests in the Mbeli and Ntsina licenses in Gabon to Petrobras and an interest in the AGC Profond license to Noble Energy. The Group acquired interests in the East Pande license in Tanzania by way of a farm-in agreement with RAKGas and acquired five further exploration interests via the Dominion transaction in Block 7 (Tanzania), Blocks L9 and L15 (Kenya), Area 4B (Uganda) and Block 5 (DRC). Ophir currently has interests in 22 licences in 11 countries and jurisdictions, 14 of which are operated, 18 of which are offshore and 4 of which are onshore.
Corporate Responsibility forms a key part of Ophir’s operating culture. The Group strives to make a positive impact in the development of the countries in which it operates. Ophir’s goal is to establish a sustainable, balanced approach to its business which includes assisting local communities wherever possible through such initiatives as education, protection of the environment and the creation of broad, lasting economic development. We understand that by taking a pragmatic, long term, positive approach to corporate responsibility it will provide lasting dividends to the Group and the countries in which we operate.
In Tanzania, Ophir has continued to be actively involved in the development of Mtwara port (and its attendant services). Ophir was responsible for the initial development of this facility in partnership with the Tanzanian authorities. In 2011 the port development scheme expanded rapidly as more oil and gas operating companies joined Ophir, resulting in the transformation of a previously underutilised port into a thriving operations base, which has subsequently received ‘Duty Free’ status to underscore its importance to the development of the Mtwara region. There has been a large positive impact in the local economy as the community shares in this development through training, employment and improved infrastructure. In December 2011, parts of the main city of Dar es Salaam suffered severe flooding, making many citizens homeless. Ophir assisted relocation efforts by swiftly donating 30 large water storage tanks to the victim’s resettlement site. This initiative secured adequate sanitation and was vital to reduce disease risk for the flood victims whilst in in their temporary accommodation.
In Equatorial Guinea, Ophir continued its support of a nursery school in the village of Ebein Yenkeng. The Group also donated funding for a training seminar on social content which was provided to members of the Ministry (MMIE) in Malabo. In addition, Ophir contributes to the Equatorial Guinean Hydrocarbon Technological Institute Educational Programme ("ITNHGE"), a collaborative educational initiative run for the benefit of adult students in Equatorial Guinea.
The oil and gas industry’s focus on African exploration has risen dramatically in 2011 and early 2012. The pace of activity on both the East African offshore gas play and the West African pre-salt play have increased as major oil companies have entered the region and made significant discoveries. This has had important implications for Ophir’s portfolio.
In the East African gas play Anadarko, and ENI are reported to have discovered more than 40 TCF of gas in Mozambique with the majority being found in extensive basin floor fans. This play has not yet been tested in Ophir’s Tanzanian acreage but it is thought to potentially extend into Block 1 and possibly Block 3. A new 3D seismic survey is currently being acquired in Block 1 to test this concept and initial results are anticipated mid-year.
In the adjacent Tanzania Block 2 Statoil’s recent Zafarani-1 discovery appears to have de-risked elements of the deeper Cretaceous play potential within Ophir’s acreage. Some of the wells in Ophir’s 2012 drilling program will also test these deeper plays.
The industry’s appetite for the East African offshore gas play has been clearly demonstrated by the competitive bidding to acquire AIM-listed Cove Energy which has an 8.5% stake in the Anadarko operated block in Mozambique, to the south of BG / Ophir’s Block 1. If this appetite is sustained then it affords Ophir a degree of flexibility both in the way that it finances its exploration and appraisal activities in the play, and in the way that it secures value for shareholders.
The Group now has one of the largest acreage footprints in East Africa. In addition to the wells currently being drilled by the Ophir/BG joint venture in Blocks 1,3 and 4, offset wells with relevance to Ophir acreage will be drilled in the next few months by Petrobras and Statoil in Tanzania, Anadarko and ENI in Mozambique and Apache in Kenya.
In West Africa, considerable recent success has occurred in the deepwater pre-salt play with notable successes by both Cobalt and Maersk in Angola. Ophir has a strong acreage position in this deepwater play, with four licenses in Gabon and one in Congo-Brazzavile. In Gabon, the Group has recently completed two seismic programs that will support both a pre-salt well with Petrobras in late 2012 on the Mbeli and Ntsina licences and also potential farmouts of the Manga and Gnondo licences.
In 2012 Q2, the Group will commence a three well program in Equatorial Guinea targeting further gas discoveries to aggregate into an LNG development. Already the Group is planning for a further twelve well program in 2013 contingent on additional financing.
The outlook for Ophir in 2012 is promising. The Group enters 2012 with an extensive portfolio of interests across some of the most interesting exploration plays in Africa. The Group will continue to fund its activities through a combination of portfolio management and the capital markets.
Review of Operations
2011 was another strong year for Ophir’s Operations team with the completion of a successful, operated drilling campaign in Tanzania and the completion of a well drilled in the AGC. To date Ophir has now operated nine deepwater wells in four countries with five of them resulting in commercial discoveries.
The process of replenishing the portfolio of drilling targets continues through the acquisition of a series of 3D seismic programs. At year end acquisition had commenced in both Tanzania (East Pande) and Gabon (Mbeli and Ntsina) with preparations under way for further seismic acquisition in Gabon (Manga and Gnondo). These programs will allow additional prospects to be matured for future drilling campaigns during 2012 and 2013.
In addition, planning and contracting had commenced for the second Equatorial Guinea drilling campaign which is currently due to commence in Q2 2012. This program, which will include a well in the expanded Block R area, will be designed to prove sufficient gas volumes to underpin an LNG development.
Tanzania (Blocks 1, 3 and 4)
The Ophir-operated three well program which commenced in 2010 and was completed in 2011 has confirmed the prospectivity of the Ruvuma and Mafia Deep basins and has proven the presence of potential reservoir facies in both the Tertiary and Cretaceous stratigraphic sequences. The success in Blocks 1, 3 and 4 has, together with the discoveries by other Operators in adjacent acreage, opened up the East African play system and focussed industry attention on the area. Ophir has a significant acreage position in the play and a significant inventory of prospects which will underpin future exploration and appraisal campaigns. At the end of 2011, these are believed to contain more than 30 TCF(1) in gross un-risked prospective resources.
Each of the three Tanzanian deepwater wells have demonstrated the presence of multiple play systems, all with significant follow-up potential. Although each has encountered gas, the Group believes that, based upon detailed technical studies, liquids are also possible in the future. These studies have characterised a number of potential hydrocarbon source rocks, ranging in age from Permo-Triassic to Eocene. The three wells drilled to date have targeted the centre of the basin, where the main source intervals have been buried to a sufficient depth to generate gas (the “gas window”). To the east and west of this, the Group believes that the source intervals are less deeply buried and thus cooler. In these areas (the so-called “oil window”) the organic rich material (kerogens) in the rock may have generated liquids.
The Ophir-operated “Deepsea Stavanger” drilling campaign, which had commenced in 2010, continued into 2011 with further success at Chaza-1 in Block 1. The well was drilled in 982m of water, reached a TD at a depth of 4,933m and was completed as the third consecutive successful gas discovery in the program. Chaza-1 encountered a gross 27m gas column in a Miocene channel system and, together with the discoveries at Pweza-1 and Chaza-1, takes the total contingent resources discovered in Blocks 1, 3 and 4 to 2.4TCF with a further 1.6TCF of low risk prospective resources.
Each of the three discoveries had an associated amplitude seismic anomaly which was interpreted to be a Direct Hydrocarbon indicator (DHI). Data from the wells has now been used to further calibrate the seismic attributes. This analysis will be used to further de-risk the exploration portfolio and focus the future drilling program.
Blocks 1, 3 and 4 are large, with a combined area of more than 20,000 km2 after the statutory relinquishments. The original 3D Kusini and Mafia 3D seismic program covered 3,500 km2 and delineate only a small portion of the possible play types. As a consequence a further seismic acquisition program was planned outboard of the Mafia survey in Blocks 3 and 4 across the “Seagap Ridge”, a long-lived feature within the basin which it is believed could be the focus of both oil and gas generation and migration. A further survey was also planned northwest of the Kusini survey in Block 1 to test the extension of the play system proven by Chaza-1. The second seismic program operated by Ophir, which utilised the Fugro “GeoCaspian” vessel, commenced during January 2011 with acquisition of the Mafia East seismic survey in Blocks 3 and 4 where 3,250 km2 of data were acquired in 44 days. The vessel subsequently moved to Block 1 where it acquired 1,900km2 of data in 35 days on the Kusini extension survey. The program was completed on 8th April 2011 and the GeoCaspian released with no LTI’s or security-related incidents. Pre-stack Depth Migration processing of these surveys was completed during the year and the data has been used to mature additional exploration prospects for inclusion in future drilling campaigns. Even after these new surveys, less than half the area of the 3 PSAs has been covered with 3D data and further seismic acquisition is anticipated during 2012.
The Group was originally awarded a 100% interest in Block 1 on 29th October 2005. Blocks 3 and 4 were subsequently awarded on 19th June 2006, again on 100% basis. TPDC has back-in rights of 12% in Block 1 and 15% in Blocks 3 and 4.
In April 2010 the Group entered into a farm-out agreement with BG Group for 60% interest in each Block, with Ophir retaining the remaining 40%. Under the terms of the farm-out agreement BG had the right to take over Operatorship after the completion of the first three wells and the Mafia East/Kusini Extension 3D seismic acquisition program and consequently on July 1st 2011 operatorship of all three Blocks was formally transferred to BG. As part of this arrangement BG also took over operatorship of the Mtwara port facility on behalf of the other participating operators (Ophir, Petrobras and Statoil). During 2011 the base has been upgraded to accommodate multiple operators working simultaneously.
Ophir shares BG’s optimism about the commerciality of the discoveries and the Joint Venture has commenced development planning for a two train onshore LNG facility In Tanzania. Screening work has begun to identify a potential site for an onshore LNG export facility and environmental assessments will commence during 2012.
Further drilling is required to quantify the scale of the hydrocarbon resource and the dynamically positioned dual derrick semisubmersible rig “Metro-1”, which is owned and operated by Odfjell Drilling, was consequently secured for an extendable 12 month contract for a second drilling campaign. The rig was mobilised from Singapore on 8th December 2011 to commence the 2012 drilling program. The initial program is designed to test new play systems in the basin. The initial program consists of three wells; Jodari-1 (formerly named 1V), Mzia-1 (formerly 1W), and Papa-1 (formerly 3A). A further two wells are expected to be spud during 2012 and the program will continue into 2013.
Tanzania (East Pande)
Ophir completed its farm-in to the 7,500 km2 East Pande Block on 29th March 2011. The Group now holds 70% equity, with Rakgas holding the remaining 30%, and Ophir has assumed operatorship of the Block. East Pande lies to the west of Blocks 1, 3 and 4 and is believed to contain the up-dip extension of the currently identified Tertiary and Cretaceous intraslope play systems, some of which have been proven in the deep water. Regional geoseismic studies suggest that the East Pande Block’s location towards the rim of the basin may to be mature for liquids and gas generation.
The 2D seismic data coverage in the Block is sparse at present although a number of potentially attractive leads have been identified at different stratigraphic levels. These leads are potentially large with volume estimates in excess of 500mmbbls but are currently high risk due to the limited data coverage. A 12-month extension to the permit term was granted to allow Ophir sufficient time to acquire, process and interpret a 3D seismic survey with a view to entering the next PSA term and a future drilling program.
At year end the contracting process was completed and Fugro were mobilising the MV “Geo Caribbean” to acquire a 2,100km2 3D survey. Data from this survey should be available in the first half of 2012 to facilitate a drilling campaign late in 2012 or early in 2013. Any discoveries in East Pande are likely to be close to the export pipeline, which will be used to transport gas to any future onshore LNG plant supplied from Blocks 1, 3 and 4.
Tanzania (Block 7)
Block 7 is a 8,475 km2 block located on the continental slope of the Indian Ocean immediately east of Dar es Salaam. Water depths in Block 7 range from less than 400m to more than 2,500m.
During June 2010, a competent persons report was prepared by Energy Resource Consultants Ltd. (ERC) on Block 7, which included the Alpha prospect. The report concluded that the Alpha prospect has a mean prospective unrisked resource of 1.104 Bbbl of oil or 7.069TCF of gas. ERC have risked the prospect with a CoS of 12% as a whole. Net risked mean resource: 134MMboe or 848Bcf. Ophir is now operator and with an 80% participating interest in the block. Further potential identified outside of 3D has led to infill 2D acquisition in early 2012 with potential drilling planned for 1H 2013.