Camac Energy had cash, cash equivalents and short-term investments of US$22.2 million.

Camac Energy looks to consolidate position in Nigeria’s offshore oil exploration sector

11th Aug 2010, 9:28 pm

Africa and China focused Camac Energy (NYSE AMEX:CAK) announced another development in its ambition to expand its presence in Nigeria’s highly prospective offshore oil and gas exploration scene.

The US listed group has entered into a memorandum of understanding (“MOU”) with Allied Energy, Camac International and Camac Energy Holdings Limited to acquire their interests in oil mining leases (OML) 120 and 121, offshore Nigeria.  Financial terms were not disclosed, but Camac Energy did confirm that the goal was to enter into a definitive agreement by October 15th.

Camac Energy's only other current interest in Nigeria is a 2.5% interest in the producing Oyu Field, where Italy’s ENI is operator and holds a 57.5% stake with Allied Energy retaining the remaining 40%.  The Oyu Field is currently producing in the region of 17-18,000 barrels of oil equivalent per day (BOEPD) from two wells and is due to have two additional development wells drilled in 2011 to lift the field to full production.

Both OML 120, which is east of the 500 million barrel Erha Field, and OML 121 which is directly to the south, come with significant data.

Extensive 3D seismic has already been acquired over OML 120, which covers 916 square kilometers in water depths ranging from 150 meters to 1000 meters, and contains the Oyu Field (the MOU does not include Allied’s 40% interest in the field).   In addition to the seismic data, one well was drilled previously in the block, but outside of the Oyu Field, and hit an oil column in the upper Miocene.

Meanwhile, in OML 121, 3D seismic has identified eight prospects which are estimated to contain a combined 500 million barrels of oil (gross, unrisked). The OML 121 Lease covers an area of 887 sq km in water depths ranging from 150 to 1000 meters.  OML 121 has also been the subject of drilling before, with one exploration well in 2008 hitting 90 feet of net gas in two reservoirs.

As of June 30, 2010, Camac Energy had cash, cash equivalents and short-term investments of US$22.2 million. To finance the current transaction, Camac said it was considering a number of options, including debt.

 “This potential acquisition builds on our strategy to add assets with multiple development prospects that offer potential for the addition of significant oil and gas reserves to the Company,”  Interim CEO Bill Dozier stated. “Assuming confirmation of the significant oil and gas reserve potential, we plan to aggressively move forward with finalizing and signing definitive documentation and consummating this acquisition.”

Camac Energy also has plans to drill at least two wells at its Zijinshan production sharing contract (PSC) in partnership with PetroChina CBM in the third quarter 2010.