Photo by: Bloomberg
TSX-listed Oando Energy Resources (OER) announced a $238-million prepayment of certain loan facilities, which it used for the $1.5-billion acquisition of the ConocoPhillips Nigerian Oil & Gas Business in July 2014.
The company, which is focused on oil and gas exploration and production in Nigeria, successfully realised $234-million by resetting its crude oil hedge floor price from an average of $95.35/bl to $65/bl on 10 615 bbl/d for the next 18 months and another 1 553 bbl/d for a further 18 months until January 2019.
The proceeds from the hedge unwind/reset were applied to prepay certain loan facilities, which included $188-million that was applied to the $415-million in the reserves base lending facility, resulting in a balance of $227-million.
Further, $51-million was applied to the $338-million in its corporate facility, resulting in a balance of $287-million.
“The decline in global crude oil prices led to a substantial gain for our company and we have 10 832 bbl/d average production hedged for the balance of this year and 8 000 bbl/d for 2016,” OER CEO Pade Durotoye advised in a statement to shareholders on Wednesday.
“Cashing out some value from this hedge will enable us to reduce our outstanding loans and leverage by $238-million, saving the company $65-million in interest payments over the remaining term of the loan facilities, while preserving a floor of $65/bl,” he added.
Further, Durotoye noted that 50% of its oil production was hedged and 65% of its production was gas committed to stable long-term priced contracts, and the company was well positioned with strong cash flow to meet its obligations and aspirations through this current oil price down-cycle.
As at July last year, OER had a debt of $900-million, but after taking account of previous amortisations and the hedge-related prepayment, this debt of stood at $615-million.