The AIM-quoted firm is acquiring 25% of the interests, rights and obligations held by EER.
In effect, it sees ADM pick up an additional 2.25% participating interest taking its total stake in the asset to 4.9% – correspondingly, its separate revenue and cost bearing interests in the asset will be 9.2% and 12.3% respectively.
The transaction sees ADM’s net proved and probable reserves increase to 16.4mln barrels from 8.9mln barrels. Net production will accordingly increase to 273 barrels of oil per day from 148 bopd.
ADM is paying US$3mln of which US$2mln will be shares, priced at 7p each – and, the first US$250,000 of cash will be paid as deposit.
“In keeping with our strategic development agenda, I am pleased to announce our first investment under the company’s new leadership,” said Osamede Okhomina, ADM chief executive.
“OML 113 is well known to us and it is a fantastic asset that covers the spectrum of field types from current oil production to several appraisal plays. It is also very wet-gas rich which provides the potential for the operator to be able to bring into the market, alongside dry gas, resources like condensate and LPG.”
Okhomina added: “As envisaged under the intended strategic alliance signed earlier this month, we have proposed this project as one Trafigura may consider investing in. We look forward to updating the market further in due course.”
EER chief executive Yinka Ogundare, meanwhile, said: “We are very pleased with this transaction that was structured to help further consolidate our working relationship with ADM.
“The transaction would result in deepening our collaborative relationship and help the partners and the operator develop the asset further.”ADM’s Osamede Okhomina is a non-executive director of EER.
Deal ‘hugely value accretive’ suggests broker
Broker Fox-Davies estimates that the price paid compares favourably to the recent deal between PetroNor E&P and Panoro Energy at US$1.6/boe, and with a peer group average of US$1.4/boe from similar publicly listed companies.
“We estimate that the transaction creates US$6.3-50.2mln of additional value, depending on the development scenario considered, for a cost of US$3.0 million and is therefore hugely value accretive.
“The recent MOU signed by ADME with Trafigura provides the financial muscle to underpin further consolidation opportunities by ADME within the Aje partnership, as well as domestically in Nigeria or even in the wider region.
Shares were unchanged at 4.5p.
–adds broker comment, share price —