Reports on Prospective Resources
The Company on Thursday announced the release of reports on prospective resources for JDZ Block 2 and OPL 321 and OPL 323, offshore Nigeria. These reports have been prepared by Netherland, Sewell & Associates, Inc. Reports for OML 122 are awaiting the results of the Bilabri D4 well which is currently under operations; the Company intends to release that report once final results for the Bilabri D4 well have been incorporated.
Equator's net interest in the prospective resources as stated in the reports and this announcement is based on Equator's full participating interest of 9% in the PSC relating to JDZ Block 2 and 30% in the PSCs relating to OPL 321 and 323. It does not take account of the economic interests of third parties referred to below, which have the effect of reducing Equator's net economic interests to 8.75% in respect of JDZ Block 2 and to 26% in respect of OPL 321 and 323, or the terms of the relevant PSCs.
(See the accompanying tables for best estimates of prospective resources.)
Clarification regarding the interests in JDZ Block 2 and OPL 321 and 323
Prior to bidding for and acquiring the interests in JDZ Block 2 and OPL 321 and 323, the Company had entered into evaluation and bidding agreements with its bidding partners. These arrangements envisaged that the bidding partners would be entitled to direct and/or indirect interests. In settlement of various outstanding commitments under these arrangements, the Company agreed to make cash payments and provide economic interests as more fully described below.
JDZ Block 2
Equator acquired the 9% participating interest in JDZ Block 2 at an entry cost of US$ 9.05 million. This sum includes a settlement payment of US$ 750,000 to one of its bidding partners, under the terms of a settlement agreement entered into in June 2006. A total of US$7.1 million of the total entry cost referred to above had been paid at 30 June 2006, and this amount is included in the interim financial statements published on 26 September 2006. The balance of US$1.95 million has been paid since 30 June 2006 and will be reflected in the annual financial statements for 2006 to be published in 2007.
Under the settlement, Equator has also:
After taking account of these arrangements Equator has a net economic interest, after recovery of costs of 8.75% in JDZ Block 2.
Under the arrangements relating to the settlement with its partners in JDZ Block 2, deferred consideration payments may become due upon approval of commercial field development programs. The amount of any deferred consideration payable would depend upon the level of proved reserves in the field area and would be capped at a maximum amount of US$ 6 million.
OPL 321 and 323
Equator acquired the 30% participating interests in OPL 321 and 323 at a cost of US$ 168.2 million. This sum includes settlement payments of US$ 6.5 million in total to its bidding partners, under the terms of settlement agreements entered into in March 2006. All of the US$ 168.2 million cost referred to above has been paid and this amount is reflected in the interim financial statements published on 26 September 2006.
Under the settlements, Equator has also:
Equator will fund 100% of all financial obligations arising in respect of the interests granted to its partners, up to the first lifting of crude oil. Equator will be entitled to recover the full amount of such costs through a right of first recovery against 80% of the oil and gas allocated to its partners, respectively, in respect of their interests.
After taking account of these arrangements Equator has a net economic interest, after recovery of costs, of 26% in OPL 321 and 323.
Equator engages in the exploration and development of oil and gas projects in highly prospective West Africa. Equator's objective is to build a diversified portfolio of exploration, appraisal and production assets in the region. The Company has exploration interests in the territorial waters of Nigeria and of Sao Tome & Príncipe as well as in the Joint Development Zone between the two countries.
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