Bramlin Limited announced that its wholly owned subsidiary, Rodeo Development Limited (RDL), has entered into additional natural gas sales contracts and letters of intent with industrial customers. Taken together with previously announced contracts, initial contracted volumes now exceed the investment economics threshold required to develop the Logbaba gas field project.
While individual contract details are confidential, RDL's target market comprises large industrial energy users in the Douala area. These include the local subsidiaries of global corporations, such as Lafarge, Isenbeck, Nestle, Guinness, and AES. Currently Douala industries are paying $30-35 per MMBtu for their energy; switching to natural gas under the terms of the gas sales contracts with RDL will provide typical energy cost savings of approximately 50%, providing an incentive to local industry to make the conversion and benefiting the Cameroonian economy as a whole. The exclusive gas sales agreements, which commit the customer to buy any natural gas they use from RDL, have a term of 20 years, with provisions for price escalation. Negotiations with other prospective customers continue.
Bramlin is well positioned geographically to become a key supplier of natural gas, and will continue to work closely with local marketing and distribution companies including Tradex, a state owned marketing company, to secure RDL's position in the emerging natural gas market.
Bramlin has commissioned independent reservoir engineers, RPS Energy, to update its Competent Person's Report calculations to incorporate new price assumptions for natural gas and gas liquids/condensates and the latest field development and operating cost estimates. The new price assumptions reflect the actual gas sales contracts agreed to date and recent NGLs market experience. The new cost estimates allow for higher rig rates and other key drilling and field development cost components, such as steel. The impact of these new price assumptions and cost estimates on the RPS recoverable reserves volumes is minimal, but the calculations of net present value ("NPV") of future field net cash flows have increased sharply compared with the values in Bramlin's AIM re-admission document in November 2007. Based on a 10% discount rate (NPV10), the valuation has increased from $12m to $18m for proven reserves (1P), an increase of 50%, and from $117m to $169m for proven plus probable reserves (2P), an increase of 44%.
RDL was notified recently by the Ministry of Industry and Mines (MINMIDT) of an extension of the third exploration period of the Logbaba Permit. The exploration term is now effective until February 29, 2009.
Jim Ford, CEO of Bramlin, said, "These are very important developments in our objective to turn Logbaba into a producing, cash-generating field. The first crucial step of demonstrating the viability of the market for natural gas has been achieved and we are confident that we will secure additional market share with more sales agreements over the coming weeks. In addition, we have been advancing the other key steps - finalizing the Environmental & Social Impact Analysis, surface use and Rights of Way studies, contracting for drilling the wells and planning the funding of the field development costs through to cash generation. We will provide regular progress updates to shareholders as each of these milestones is achieved."
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