CAMAC Energy Inc. (NYSE MKT: CAK) is a U.S. based oil and gas company engaged in the exploration of offshore oil and gas leases in deep water Nigeria. The Company was founded in 2005 and has offices in Houston, Texas, Nairobi, Kenya, Banjul, Gambia and Lagos, Nigeria.
Contracted an FPSO
On January 8, 2014, CAMAC Energy announced the signing of a five-year contract for the floating, production, storage and offloading system (FPSO) Armada Perdana. The contract has an effective date of January 1, 2014 with an automatic two year extension unless CAMAC decides to terminate the contract with proper notice. The two parties are aiming to reach an agreement on or before January 31, 2014.
The Armada Perdana is owned by Bumi Armada Berhad, a Malaysia-based international offshore oil field services provider. The company owns four FPSO vessels in addition to the Perdana, which has been assisting CAK in the development of the Oyo Field since its inception in 2009. The vessel can process 40 MBOPD, with a storage capacity of 1 MMBO. CAK management said the vessel’s high utilization rate will be instrumental in the development of the field.
At the time of the release, CAK was producing roughly 2 MBOPD and 40 MMcf/d from its Oyo field assets. The company is proposing a $300 million bond offering which will provide the capital to complete the Oyo-7 well, in addition to drilling and completing the Oyo-8 and Oyo-9 wells. The three wells are expected to bring online a total of 21 BOPD, or roughly 7 BOPD apiece, purely from the Pliocene formation. The company predicts $194 million in 2014 capital expenditures for Oyo operations on wells 7 and 8. An additional $87 million is estimated for the Oyo-9, which is spud and due for start-up in August 2015.
Infrastructure in Place for 2014
The FPSO will join a drillship in CAK’s contracted fleet. CAK reached a long-term agreement with Northern Offshore Ltd. (ticker: NOF.OL) on December 9, 2013 to retain the services of the Energy Searcher drillship for up to two years. The vessel is expected to be delivered to the Oyo field in H1’14 and has a drilling depth of 25,000 feet. It was constructed in 1982 and received upgrades in both 2011 and 2012. A full list of specifications on the rig can be found here.
Full Ownership Obtained
The vessels represent another chapter in CAMAC’s investment in the Oyo field. The company gained 100% working interest in the area on November 20, 2013 – roughly one week after the presence of hydrocarbons were confirmed in the Miocene formation of Block 120. The formation had not yet been discovered in the Block and is regarded as the most prolific play offshore Nigeria. Shell’s (ticker: RDS-B) nearby Miocene-producing Bonga field has produced 450 MMBO since being brought online in 2005.
CAK’s is currently focused on exploiting only the Pliocene, so the Miocene upside is an added bonus. Tests on the Oyo-7 ranging from October 2013 to November 2013 revealed 133 feet of pay in the Pliocene and approximately 65 feet of hydrocarbons in the Miocene. In its Q3’13 conference call, CAK mentioned the will to mitigate risk and it is actively searching for a financial partner to join in its deepwater projects.
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