Okwok

*  Share of Profit Oil after cost recovery

Okwok (OML 67)

Background
Afren has extended its indigenous partnership in Nigeria with Oriental and formed its first Nigerian partnership with Addax, having agreed to farm-in to and jointly develop the Okwok Field (“Okwok”).  

In 2001, Mobil Producing Nigeria Limited (“Mobil”) contributed Okwok to Nigeria’s Marginal Field Program, which was established by the Nigerian government to encourage greater indigenous participation in the oil and gas sector.  Pursuant to this program, Oriental completed a farm-in agreement for Okwok with Mobil and the Nigerian National Petroleum Corporation (“NNPC”) in June 2006. Addax subsequently entered into a Joint Venture Agreement (“JVA”) with Oriental, acquiring a 40 per cent. interest in Okwok and assumed the role of Technical Advisor.  The field benefits from the Nigerian Marginal Field Fiscal and Tax Regime.  

Okwok is an undeveloped oil field located in OML 67, 50 km offshore in 132 ft of water and 15 km East of the Afren/Oriental owned Ebok development. The field was discovered by the ExxonMobil / NNPC JV in 1967 (Okwok-1), and two subsequent appraisal wells were drilled in 1968 (Okwok-2 and Okwok-3) but not production tested.  The wells encountered oil in the LD1and D2 series of reservoirs with over 100 ft of oil pay logged in the Okwok-2 well at the D2 level plus multiple 50 ft oil bearing sections in the LD1 in Okwok-1 and Okwok-2.

Through the Company’s enhanced technical understanding of the area based on detailed work and appraisal drilling at Ebok, Afren estimates:

– That the field has STOIIP of 225 mmbbls in the D2 and LD1c, LD1d and
LD1e reservoirs;

– Assuming a 32 per cent. recovery factor, 70 mmbbls of oil in place could
potentially be produced; and

– Upside exploration potential at the deeper Qua Iboe level could add significantly to the reserves base. Two prospects have been identified and are estimated to each contain circa 200 mmbbls STOIIP.

Synergies with the Ebok development
Following recent appraisal success on the Ebok field, Afren has confirmed a 53 mmbbls development with upside to 152 mmbbls.  Ebok offers significant synergies that will provide an optimal development solution for Okwok, providing scope for cost reduction and savings at both fields.  Joint storage and export operations together with shared services are expected to result in reduced costs for the development of both fields.  

Commercial terms
The joint venture agreement signed between Afren, Oriental and Addax Petroleum defines the commercial terms under which Afren will participate in the development of Okwok, and provides for Afren to acquire a 28 per cent. legal interest in Okwok (subject to requisite approvals).  Under this agreement, Afren will fund 100 per cent. of the costs of an exploration or appraisal well (to a minimum depth of the Lower D2 horizon), after which Afren and Addax Petroleum will be required to fund all capital and operating costs for development of the field on a pro-rata basis (70 per cent. and 30 per cent. respectively).  Afren will be entitled to 70 per cent. of net field revenues (pre cost recovery), reverting to 56 per cent. (post cost recovery), subject to gross volumes lifted.

Forward work programme
The near-term work programme includes detailed sub-surface technical studies to determine an optimum exploration or appraisal well location, after which work will focus on the definition of an appropriate field development concept.  It is envisaged that appraisal drilling will take place in Q3 2010, or earlier depending on rig availability.