Oando Energy Resources signs agreements to acquire ConocoPhillips Nigerian assets for US$1.79 billion

Oando Energy Resources signs agreements to acquire ConocoPhillips Nigerian 
assets for US$1.79 billion 
CALGARY, Dec. 20, 2012 /CNW/ - Oando Energy Resources Inc. ("OER" or the 
"Company") (TSX: OER), a company focused on oil exploration and production in 
Nigeria and the Gulf of Guinea is pleased to announce that it has entered into 
an agreement with ConocoPhillips to acquire ConocoPhillips' Nigerian 
businesses for a total cash consideration of approximately US$1.79 billion, 
subject to customary adjustments (the "Proposed Acquisition"). ConocoPhillips' 
Nigerian businesses consist of: 
a)The Onshore Business 

    --  Phillips Oil Company Nigeria Limited ("POCNL"), which holds a
        20% non-operating interest in Oil Mining Leases ("OMLs") 60,
        61, 62, and 63 as well as related infrastructure and facilities
        in the Nigerian Agip Oil Company Limited ("NAOC") Joint Venture
        ("NAOC JV").  The other partners are the Nigerian National
        Petroleum Corporation ("NNPC") with a 60% interest and NAOC
        (20% and operator); and
    --  Phillips Brass Limited ("PBL"), which holds a 17% shareholding
        interest in Brass LNG Limited, which is developing the Brass
        LNG project, a Greenfield project to develop a two-train, 10
        million ton per year, Liquefied Natural Gas ("LNG") facility in
        Bayelsa State, Nigeria. The other partners are NNPC (49%); Eni
        (17%) and Total (17%).

b)The Offshore Business
    --  Conoco Exploration and Production Nigeria Limited ("CEPNL"),
        which holds a 95% operating interest in OML 131.  The other
        partner is Medal Oil (5%); and
    --  Phillips Deepwater Exploration Nigeria Limited ("PDENL"), which
        holds a 20% non-operating interest in OPL 214.  The other
        partners are ExxonMobil (20% and operator), Chevron (20%),
        Svenska (20%), Nigerian Petroleum Development Company (15%) and
        Sasol (5%).

Pursuant to the Proposed Acquisition, OER will indirectly purchase all of the 
issued share capital of POCNL, PBL, CEPNL and PDENL. Upon closing, the 
effective date of the Proposed Acquisition will be January1,2012.

In connection with the Proposed Acquisition, OER has retained The Petroleum 
and Renewable Energy Company Limited ("Petrenel"), OER's independent reserves 
evaluator, to prepare a report on the reserves and resources of OMLs 60, 61, 
62 and 63 (together, the "Onshore Assets") and OML131 and OPL 214 (together, 
the "Offshore Assets") proposed to be acquired under the Proposed 
Acquisition. As at the date hereof, Petrenel has prepared preliminary 
estimates of some of the reserves and resources to be acquired (the "Petrenel 
Preliminary Estimates"). The Petrenel Preliminary Estimates have an effective 
date of December 31, 2011 and have been prepared in accordance with National 
Instrument 51-101 standards and the guidelines set out in the Canadian Oil and 
Gas Evaluation Handbook. OER expects an Independent Reserves Report to be 
completed and issued by Petrenel during the first quarter of 2013.

All figures quoted below are gross to OER (i.e. before deduction of royalty 
and tax) unless otherwise stated, assuming completion of the Proposed 

    --  OER believes that the Proposed Acquisition represents a

    significant opportunity for OER and its shareholders, adding:
  o A 20% working interest in the NAOC JV, which includes forty 

    discovered oil and gas fields with remaining oil and gas recovery,
    approximately forty identified prospects and leads, twelve
    production stations, approximately 950 km of crude oil, natural gas
    liquids (NGL) and natural gas pipelines, two gas processing plants,
    the Brass River Oil Terminal, the Kwale-Okpai 480 MW combined cycle
    gas-fired power plant ("Kwale-Okpai IPP"), and associated

  o A significant share of six separate discovered fields and eight 
separate prospects in two offshore blocks.
  o Approximately 43,000 barrels of oil equivalent per day ("boe/d") 
based on average production between January and October 2012 
(Source: ConocoPhillips).
  o According to Petrenel, a total of approximately 213 millions of 

    barrels of oil equivalent ("MMboe") of Proved plus Probable
    Reserves, 198 MMboe of Best Estimate Economic Contingent Resources,
    and approximately 110 MMboe of Risked Prospective Resources are
    present in the Onshore Assets.  Contingencies and significant
    negative and positive factors related to the Contingent Resources
    are further described below.
    --  Upon closing, it is expected that the Proposed Acquisition will
        position OER as one of the leading E&P players in Nigeria, as
        measured by total reserves and production.
    --  The Proposed Acquisition is expected to be financed with debt
        and equity.
    --  POCNL is cash generative and is expected to contribute
        positively to the cashflow of the Company.
    --  The Proposed Acquisition is anticipated to close during the
        first half of 2013, following appropriate consultations with

"This potential transaction represents a transformational step forward for our 
Company and is in keeping with our overall strategy to grow our portfolio of 
Nigerian-based assets by focusing on those opportunities that deliver high 
quality growth in reserves and production," said Pade Durotoye, CEO of Oando 
Energy Resources. "Our management team is familiar with the assets contained 
in this proposed transaction and, we believe, possess the regional experience 
and technical expertise necessary to capture and unlock their future value for 
our shareholders."

Also commenting, Mr. Wale Tinubu, Chairman, OER said "Upon closing, we expect 
that this will be a transformational transaction for OER, as the company has 
only been listed on the TSX for about 5 months and now has an opportunity to 
execute its strategy and materially increase its production and reserves 
base. In our view, the combination of the right timing, right assets and the 
right company can lead to significant value creation in the Gulf of Guinea.

We expect that the closing of this transaction will position OER as a leading, 
indigenous independent E&P player in Nigeria".


OER will be hosting a conference call to discuss the transaction on Friday, 
December 21(st), 2012 at 10:00 a.m. Eastern Standard Time. To access the 
conference call, please dial 1-888-231-8191. If dialing internationally 
(outside of North America) the conference call can be accessed by calling 
1-647-427-7450. Participants must request the Oando Energy Resources 
Acquisition Conference Call.

A replay of the conference call will be available through December 28(th), 
2012. To access the replay, dial 1-855-859-2056 (North America) or 
1-416-849-0833 (International) and enter reservation number 83403657 followed 
by the number sign.


Large oil and gas asset base with substantial production and resources

The Onshore Assets are currently producing substantial quantities of oil and 
gas. The total oil and gas production from the Onshore Assets for the period 
from January 1, 2012 until October 31, 2012 averaged approximately 43,000 
boe/d gross to OER (Source: ConocoPhillips).

High oil and gas recovery factors are expected to be achieved with a focused 
and committed development programme. OER believes there are many opportunities 
to further develop the existing fields and increase production.

Petrenel has assigned preliminary estimates of Proved plus Probable Reserves 
of 213 MMboe and Best Estimate Economic Contingent Resources of 198 MMboe (OER 
gross share) to the Onshore Assets. These Economic Contingent Resources have 
not been classified as Reserves as either (i) oil and gas production 
associated with these Contingent Resources is likely to start in more than 
five years, (ii) definition of development activities will require more 
technical work; (iii) oil and gas will be produced after 2027 (the current 
onshore license renewal date), or (iv) gas will be produced and sold after the 
end of the current gas contract periods (2024-2026). It is expected that these 
economic Contingent Resources will be progressively transferred to Reserves as 
development activity is matured and the licenses and gas contracts are 
extended. Significant positive factors associated with the estimates include 
(i)high probability that the licence and gas contracts will get extended at 
current terms, (ii)possible financial investment decision of Brass LNG could 
result in higher gas prices, (iii) further detailed technical studies are 
likely to identify additional resources, and (iv) reducing bunkering will 
likely result in positive upward revision in oil sales. Significant negative 
factors associated with the estimates include (i) uncertainty over historical 
field production, technical recovery factors and new well productivity, (ii) 
logistical and security difficulties may delay development, and (iii) 
increased development and operating costs may reduce the economically 
recoverable volume.

Significant exploration upside

OER believes that there is significant upside potential from an active 
exploration program on OMLs 60 to 63 with a multi-year inventory of newly 
available oil and gas drill-ready opportunities, including an opportunity to 
supply additional gas to potential off takers including the Brass LNG project, 
the Nigeria (Bonny) LNG ("NLNG") Train 7 project and other gas supply 
opportunities in the growing domestic market.

Petrenel has assigned Risked Prospective Resources in the Onshore Assets 
(gross to ConocoPhillips) to be approximately 110 MMboe. In addition, OER 
expects that additional Risked Prospective Resources will be assigned by 
Petrenel to the Offshore Assets after Petrenel has completed its final report.

Ideal location with extensive production and infrastructure

OMLs 60 to 63 are located favorably, with a well developed network of 
facilities, transportation and logistics infrastructure as well as localized 
processing facilities, including an oil processing centre and two gas 
processing facilities, which can process up to 125,000 barrels of oil per day 
("bbls/d") of oil and 1 billion cubic feet per day ("Bcf/d") of natural gas. 
Other facilities and infrastructure include 12 production stations and about 
950km of oil, NGL and natural gas pipelines, the Brass River Oil Terminal 
which has a storage capacity of 3.6 millions of barrels of oil ("MMbbls") and 
the 480 Megawatt Kwale-Okpai Independent Power Plant which accounts for 15% of 
Nigeria's current available national power grid capacity.

Nigeria has over 37 billion bbls of proved reserves, (Source: BP Statistical 
Review of World Energy 2012), a large proportion of which is located in the 
Niger Delta Region. Within this region, there are a large number of 
discovered but undeveloped fields with significant upside potential. OER 
believes that the centrally located Brass River Terminal, Obiafu-Obrikom 
("Ob-Ob") gas plant, and associated pipeline network offers a significant 
opportunity to capture additional third party( )transportation and processing 

OER believes that the Proposed Acquisition will provide OER with a platform 
for future growth in the region.

High quality crude oil production that trades at a premium to Brent Oil

The crude oil produced from these onshore fields is light and sweet with API 
gravities ranging from 29 to 47 degrees and low sulfur contents of 0.05% to 
0.3% and trades at a premium to Brent.

Highly profitable and strong historical cash flow

The NAOC JV has yielded high drilling success rates, high production volumes 
and premium pricing on crude oil and natural gas and NGLs. For the year ended 
December 31, 2011, ConocoPhillips reported revenue of US$1.0 billion, profit 
after tax of US$157.5 million and cashflow from operations of US$327.1 million 
(prepared in accordance with Nigerian Generally Accepted Accounting 


Onshore Assets:

  1. OMLs 60, 61, 62 and 63 are located in the onshore Niger Delta
     basin and have a long history of proven production. 
     ConocoPhillips' share of production in 2011 was 19,000 bbl/d of
     oil and 157 MMcf/d of gas (Source:  ConocoPhillips).
     o Petrenel's preliminary estimates of Proved plus Probable
       reserves for the Onshore Assets are 94 MMbbls of oil &
       condensate and 0.7 Trillion Cubic Feet (Tcf) of sales gas (213
       MMboe) (gross to OER). The economically recoverable Best
       Estimate Contingent Resources are estimated to be 73 MMbbls of
       oil and condensate and 0.75 Tcf of sales gas (198 MMboe) (gross
       to OER).
     o The NAOC JV supplies 19.72% of the feedgas utilized by the NLNG 
       plant (Source: NLNG) or approximately 85% of the NAOC JV natural
       gas sales under a long term contract which is based on  a net
       back pricing formula. The remainder of the gas is sold to a
       Petrochemical producer and an independent Power Producer under
       long term contracts. In addition, some of the gas is utilized as
       fuel gas in the Kwale-Okpai IPP.  Finally, NGLs are sold to a
       petrochemical producer under a long term contract.
     o The Kwale-Okpai IPP plant supplies power under a long term
       contract to the Power Holding Company of Nigeria. (Source:

The Brass LNG project is a large-scale Greenfield project which involves the 
development of a two-train LNG facility in Bayelsa State in the Niger Delta. 
It is expected that approximately 40% of the feed gas will be supplied by the 
NAOC JV. It is expected that the total nominal plant capacity will be 10 
million tons of LNG per year and could be doubled in the future.

Offshore Assets:

  1. OML 131 is a large deep water offshore block located in a prolific
     area about 70km south of the Niger Delta coastline and covering
     1,204km(2) at  water depths ranging between 500 and 1,200 meters. 
     OML 131 has two oil and gas discoveries and six large untested
     prospects. It is expected that the Chota field in OML 131 will be
     unitized with the Bolia field in OML 135 that is operated by

  2. OPL 214 is a large deepwater offshore license covering 2,586km(2) 

     in the prolific central part of the offshore Niger Delta. The area
     is approximately 110km from the coastline at water depths ranging
     between 800 and 1,800 meters.  OPL 214 is located close to large
     discoveries (Bonga, Nsiko, and Agbami). A commercial discovery has
     been made on this asset and all work obligations have been
     fulfilled. It is anticipated that OPL 214 will be converted into
     an Oil Mining Lease (OML) for an initial period of 20 years. OPL
     214 holds four oil and gas discoveries including the Uge field,
     which was discovered in 2005.


The Company established four wholly owned subsidiaries which have entered into 
agreements with ConocoPhillips for the Proposed Acquisition for a total cash 
consideration of approximately US$1.79 billion, subject to customary 

Upon signing of the Sale and Purchase Agreements, the Company paid a cash 
deposit of US$435 million ("Deposit") to ConocoPhillips. The payment of the 
Deposit was financed by a US$345 million loan ("Oando Loan") from Oando Plc, a 
company which owns 94.6% of the  shares of OER ("Oando"), and US$90 million 
funded through secured bridge loans, each of which is guaranteed by Oando, 
from local Nigerian banks. The Oando Loan has a maturity of 120 days 
(subject to extension in certain circumstances) and an annual interest rate of 
LIBOR plus 10.5% (subject to increase in certain circumstances).

Pursuant to the Oando Loan, OER has agreed, provided that requisite 
shareholder approval is obtained in accordance with Multilateral Instrument 
61-101 - Protection of Minority Securityholders in Special Transactions and 
Toronto Stock Exchange ("TSX") approval and shareholder approval is obtained 
in accordance with (but not limited to) Section 501(c) of the TSX Company 
Manual, that the Oando Loan will be convertible, at Oando's option, into newly 
issued common shares of OER ("OER Shares") at the lower of (i) the 5 trading 
day volume-weighted average price ("5 day VWAP") of an OER Share on the TSX 
for the 5 trading days immediately following the date hereof; and (ii) the 5 
day VWAP of an OER Share on the TSX for the 5 trading days immediately 
preceding, but not including, the date upon which Oando provides notice to OER 
that it wishes to convert the Oando Loan into OER Shares. The issuance of 
any OER Shares pursuant to the exercise by Oando of the conversion feature 
will be subject to TSX approval.

It is expected that the remainder of the Purchase Price for the Proposed 
Acquisition (approximately US$1.355 billion) will be financed by way of equity 
and debt, including private placements of equity-linked securities and a 
follow-on offering of OER shares. In addition, it is expected that US$800 
million of senior secured loans will be provided by a syndicate of 
international and Nigeria banks.

Closing of the Proposed Acquisition is subject to customary conditions 
including the receipt (or waiver, in accordance with the Sale and Purchase 
Agreements) of all approvals or consents from any governmental authority; and 
the waiver or non-exercise of rights of first refusal, if any with respect to 
the shares to be acquired by OER, and the assets underlying such shares.

In the event that the Proposed Acquisition does not close, the Deposit is 
refundable to OER (including where there is a breach by ConocoPhillips in any 
material respect of its covenants under the Sale and Purchase Agreements) 
except in the following limited circumstances: (i) a breach by OER in any 
material respect of its covenants under the Sale and Purchase Agreements or 
(ii) if the closing does not occur because of failure for any reason to obtain 
all approvals or consents required by law from any governmental authority 
under applicable petroleum laws of Nigeria

About Oando Energy Resources Inc. (OER)

OER currently has a broad suite of producing, development and exploration 
assets in the Gulf of Guinea (predominantly in Nigeria) with current 
production of approximately 3,300 barrels of oil per day from the Abo Field, 
(OML 125) and an additional 1,500 barrels of oil per day from the Ebendo 
Field, (OML 56), once a damaged export pipe line has been repaired or replaced 
(which is expected to be completed early 2013). OER has been specifically 
structured to take advantage of current opportunities for indigenous companies 
in Nigeria, which currently has the largest population in Africa, and one of 
the largest oil and gas resources in Africa.

Forward Looking Statements:

This news release contains forward-looking statements and forward-looking 
information within the meaning of applicable securities laws. The use of any 
of the words "expect, "anticipate, "continue, "estimate, "objective, 
"ongoing", "may, "will, "project, "should, "believe, "plans, "intends" and 
similar expressions are intended to identify forward-looking information or 

Although the Company believes that the expectations and assumptions on which 
such forward-looking statements and information are reasonable, undue reliance 
should not be placed on the forward-looking statements and information because 
the Company can give no assurance that such statements and information will 
prove to be correct. Since forward-looking statements and information address 
future events and conditions, by their very nature they involve inherent risks 
and uncertainties.

Actual results could differ materially from those currently anticipated due to 
a number of factors and risks. These include, but are not limited to: risks 
related to international operations, risks related to funding the remainder of 
the purchase price for the Proposed Acquisition, risks related to oil and gas 
recovery, risks relating to the Petrenel Preliminary Estimates being confirmed 
in the final independent report to be prepared by Petrenel, risks relating to 
receipt of all required approvals in Nigeria, risks relating to Contingent 
Resources being classified as Reserves, risks relating to loss of the deposit, 
risks relating to supply of feed gas risks relating to satisfaction of all 
conditions precedent to closing of the Proposed Acquisition, the actual 
results of exploration and drilling activities, changes in oil and gas 
production, changes in project parameters and timing as plans continue to be 
refined and the future price of crude oil and natural gas. Accordingly, 
readers should not place undue reliance on the forward-looking statements. 
Readers are cautioned that the foregoing list of factors is not exhaustive.

Additional information on these and other factors that could affect the 
Company's financial results are included in reports on file with applicable 
securities regulatory authorities and may be accessed through the SEDAR 
website (www.sedar.com) for the Company. The forward-looking statements and 
information contained in this news release are made as of the date hereof and 
the Company undertakes no obligation to update publicly or revise any 
forward-looking statements or information, whether as a result of new 
information, future events or otherwise, unless so required by applicable 
securities laws.

Cautionary Statements

Production information is commonly reported in units of barrel of oil 
equivalent ("boe" or "BOE") or in units of natural gas equivalent ("Mcfe"). 
However, BOEs or Mcfes may be misleading, particularly if used in isolation. 
A boe conversion ratio of 6 Mcf:1 barrel, or an Mcfe conversion ratio of 1 
barrel:6 Mcf, is based on an energy equivalency conversion method primarily 
applicable at the burner tip and does not represent a value equivalency at the 

There is no certainty that it will be commercially viable to produce any 
portion of thecontingent resources.

There is no certainty that any portion of theprospective resources will be 
discovered. If discovered, there is no certainty that it will be commercially 
viable to produce any portion of the resources.

Defined Terms

"Reserves" are those quantities of petroleum anticipated to be commercially 
recoverable by application of development projects to known accumulations from 
a given date forward under defined conditions. Reserves must further satisfy 
four criteria: they must be discovered, recoverable, commercial, and remaining 
(as of the evaluation date) based on the development project(s) applied. 
Reserves are further categorized in accordance with the level of certainty 
associated with the estimates and may be subclassified based on project 
maturity and/or characterized by development and production status.

"Proved Reserves" are those quantities of petroleum, which by analysis of 
geosciences and engineering data, can be estimated with reasonable certainty 
to be commercially recoverable, from a given date forward, from known 
reservoirs and under defined economic conditions, operating methods and 
government regulations.

"Probable Reserves" are those additional Reserves which analysis of 
geosciences and engineering data indicate are less likely to be recovered than 
Proved Reserves but more certain to be recovered than Possible Reserves.

"Contingent Resources" are those quantities of petroleum that are estimated, 
as of a given date, to be potentially recoverable from known accumulations 
using established technology or technology under development, but which are 
not yet considered mature enough for commercial development because of one or 
more contingencies. Contingencies may include factors such as economic, legal, 
environmental, political, and regulatory matters, or a lack of markets. 
Contingent Resources are further categorized into low case (1C), best case 
(2C) and high case (3C) according to the level of certainty associated with 
the estimates and may be sub-classified based on economic viability.

"Prospective Resources" are those quantities of petroleum estimated, as of a 
given date, to be potentially recoverable from undiscovered accumulations by 
application of future development projects. Prospective Resources have both an 
associated chance of discovery and a chance of development. Prospective 
Resources are further subdivided in accordance with the level of certainty 
associated with recoverable estimates assuming their discovery and development 
and may be sub-classified based on project maturity.

"Best Estimate" is considered to be the best estimate of the quantity that 
will actually be recovered. It is likely that the actual remaining quantities 
recovered will be greater or less than the best estimate. If probabilistic 
methods are used, there should be a 50 percent probability that the quantities 
recovered will equal or exceed the best estimate. 

Pade Durotoye Chief Executive Officer Oando Energy Resources Inc. 
pdurotoye@oandoenergyresources.com +1 403 561 1713 +44 7515 053 795

Tokunboh Akindele Head, Investor Relations Oando Energy Resources Inc. 
takindele@oandoenergyresources.com +1 403 560 7450 +44 7957 154 659 

SOURCE: Oando Energy Resources Inc.

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CO: Oando Energy Resources Inc.
ST: Alberta

-0- Dec/20/2012 21:30 GMT

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