ADM Energy PLC (LON:ADME) announced it conditionally agreed to invest in the development of the Barracuda oil field.
It is located in OML 141, an existing discovery and near-term production asset in swamp/shallow waters offshore Nigeria.
READ: ADM Energy mulls fundraising, investment in Nigerian discovery
The investment will be by way of an acquisition of a 51% interest in KONH, which holds an indirect interest in a Risk Sharing Agreement (RSA) for the field. It is expected to complete in the second quarter this year.
KONH holds, through its subsidiary Noble Hill – Network Limited (NHNL), a 70% indirect interest in the rights, benefits and obligations under the RSA relating to the Barracuda area of OML 141.
The RSA represents a type of service contract commonly used in the Nigerian oil and gas industry by which NHNL will be compensated in cash out of profits (calculated based on agreed-upon measures and outcomes) generated from development of the field.
ADM will provide technical and financial support to the investors in NHNL, while the RSA consortium will provide funding for all upcoming capital expenditure and a Competent Person’s Report (CPR).
A CPR released in 2016 indicated 1.3bn barrels of oil in place from two sand reservoir intervals, similar to the ones located in the nearby Nembe Creek field.
Barracuda field has four existing wells drilled and it is intended that a fifth well will be drilled in the fourth quarter this year, with financing partner Dubai Bridge potentially providing some investment.
ADM’s internal estimate suggests that first oil of 4,000 barrels of oil per day may be possible in the second half this year.
The investing company said the consideration may total up to US$1.3mln, of which US$250,000 is to be settled in cash on completion and the balance is to be settled in equity, at the higher of 7p and the then prevailing share price, on completion and on satisfaction of certain project milestones.
The AIM-listed firm plans to raise US$500,000 in cash via a subscription for new ordinary shares to provide extra funding for the investment.
The subscription will be carried out through an accelerated bookbuild, at a price of 4.25p per new ordinary share, which opens on Tuesday morning.
ADM said it intends to enter into subscription agreements with investors and certain of its directors and other senior managers for new ordinary shares.