Resource World Magazine

56 www.resourceworld.com o c t o b e r / n o v e m b e r 2 0 1 4 the oil patch report J o e l C h u r y E mbroiled in a serious fight against an Ebola outbreak, Nigeria is currently in the news as are other African coun- tries with the same problem. Along with the outbreak, there is an economic shift underway as major oil companies (known as International Oil Companies or IOCs) are divesting their Nigerian interests due to regulatory changes that heavily favour local indigenous companies. With a potential for 35 billion barrels of oil and over 600 trillion cubic feet of gas, there is much at stake. Despite what appears to be a major shift, subsequently, an investment oppor- tunity in Nigeria is coming into view. So far, only 1,400 wells have been drilled in the country, with hundreds of still unde- veloped discoveries left to be developed. Thus the departure of some of the majors creates more opportunities for others and opportunistic juniors are at the ready. One is junior company Oracle Energy Corp. [OEC-TSXV]. With a market cap of under $6 million, Oracle is a miniscule com- pared to the behemoth companies that are pulling out. However, with a management team that averages more than 25 years per officer in the industry, many of which were directly in employed in Western Africa, Oracle could be a breakout star. Where Oracle holds an advantage (even over some majors) within Nigeria is in its relationships with indigenous companies already on the ground. With the coun- try's upcoming changes in its Petroleum Industry Bill (PIB), Nigeria's oil industry is going to focus more on giving incentives to indigenous companies, as noted above. Since Oracle is already aligned with two indigenous companies (Greenacres Energy and Bolad Energy), the changes will more than likely help rather than hinder the company's plans. Many within Nigeria are not wor- ried about the departure of some of the larger players. According to Wumi Iledare, President of International Association for Energy Economics (IAEE), there are benefits to this. "It is an opportunity for indigenous players," says Iledare. "As the IOCs go to more difficult terrain like deep offshore [projects], then it is left for the indigenous companies to take over the onshore assets." Late this August, Royal Dutch Shell announced its intention to sell four onshore oil fields and a pipeline in Nigeria for approximately CDN $5.5 billion. The giant has been at the forefront of the Nigeria oil story, and is now starting to back away, citing a rising concern of oil spills, sabotage and oil theft. Oil theft is a problem in this industry. Oil theft can theoretically be avoided from an onshore location. However, indigenous companies may have better methods and protection from such losses. Peter Graves, CEO of Oracle Energy, commented, "Nigeria is heavily promoting indigenous companies to fill the space left by the IOCs." Over the course of the last two years, Graves and Oracle have secured MOUs with Greenacres and Bolad with the intention of securing proven but undevel- oped assets. Oracle brings the knowhow and capital, while the partners bring the local protections necessary to succeed. Graves and his Nigeria-specialized team see massive potential for land-based petro- leum assets. Given the country's history for auctioning marginal round (sale) fields at a more than fair price, Oracle could stand to gain interest in some very attractive real estate. "The attraction is these Nigerian fields we're looking at all have discoveries," said Graves. "They have wells drilled and plenty of data, all with a very low entry cost. It gives the opportunity to basi- cally grow from just a discovery to put the equipment into place into existing infrastructure. We could feasibly get on production within a period of something like 12-18 months." Canadian-based companies have had success in Nigeria in the past. Mart Resources Inc. [MMT-TSX] was a part of the last round of marginal round field auc- tions, getting in on the action in 2003. The $440 million market cap company went on to have huge success with its Umusadege operation, which grew to production of approximately 12,000 bbls/d (based on average production days) after a discovery was made in 2007. Mart remains in Nigeria, despite oil losses of its own, and is looking to boost its efforts into the future. As for Oracle, the opportunity to accumulate key acreage in Nigeria is on the horizon, as they eye additional land parcels in the upcoming marginal round (the date of which is yet to be announced), and other properties that are being let go by ExxonMobil. "We're obviously following very closely with the IOCs," says Graves. "We know Shell will have further onshore divestments. We're also looking at secondary transac- tions because I think the market in Nigeria is now maturing and there are other assets which might be coming available." n oracle energy picking up nigerian petroleum assets …there is an economic shift underway as major oil companies (known as International Oil Companies or IOCs) are divesting their Nigerian interests due to regulatory changes that heavily favour local indigenous companies.

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