Canadian Overseas Petroleum narrows loss as it moves towards production

The London-listed firm, which is still pre-revenue, noted that during the year ended 31 December ot secured a term sheet of up to $50m into its subsidiary ShoreCan from the Mauritius Commercial Bank and Trafigura.

It also completed financing in London, which raised gross proceeds of £3m.

On the operational front, it submitted its work programme for the drilling of no less than three appraisal wells in the NOA #1 area of its key Nigeria offshore oil asset, OPL 226.

The company and its ShoreCan joint venture partner continued discussions with potential contractors and suppliers regarding the appraisal wells and several other wells, the board said, with a “large international offshore service provider” approaching it to bid for the appraisal wells, and discussions said to be ongoing.

During the fourth quarter, the NNPC granted conditional approval of a 24-month extension for the Phase-1 PSC, subject to certain conditions including the submission of a performance bond of $7m.

Canadian Overseas Petroleum said it was on track to bring four appraisal wells onto production, at a forecast initial production rate of between 6,000 and 10,000 barrels per day per well, by the end of 2020.

Netherland Sewell and Associates had evaluated the company’s contingent resources and prospective resources on OPL 226, and produced a report as at 31 December.

Canadian Overseas Petroleum said the report, dated 15 March, highlighted the “inherent value” in the asset and underpinned the firm’s ultimate potential.

Looking at the first quarter of the current year, the company said its Nigerian affiliate had accepted a term sheet from a recognized Nigerian bank for the provision of a $7m performance bond, which would meet the principal condition of the 24-month extension of phase 1 of the OPL 226 PSC, which runs until October 2020.

Security for the performance bond was being provided by COPL's affiliate ShoreCan.

The company said it expected the performance bond to be in place to the satisfaction of the regulatory authorities in the coming weeks, at which point activities on OPL 226 could be commenced in earnest.

In March, the firm’s Nigerian affiliate signed a non-binding letter of intent with an offshore drilling contractor for a new build high spec jack-up drilling rig.

The rig was currently undergoing testing and final inspections before its acceptance by the contractor.

Successful completion of those tests was one of the affiliate’s conditions in moving forward in the contracting process.

“We are now well placed in the development of our strategically important Nigerian asset as we look to commence drilling of the appraisal wells later this year,” said Canadian Overseas Petroleum president and chief executive officer Arthur Millholland.

“This is a key step to enable COPL to become a successful mid-tier oil and gas company.”

Over the last year, Mulholland said the company had been focused on securing the required contracts and regulatory approvals for OPL 226, raising the necessary funds for the expanded and accelerated program of the asset, while at the same time sourcing contractors and suppliers to perform the drilling, logistics and supplies needed to enable production.

“We look to the future with confidence given the imminent commencement of operations and the recent evaluation of our Nigerian asset's resources.”