They did well for themselves Attractiveness of the deal to the company
Unlike other divestments by IOCs in Nigeria, OML18 is unique in that the critical infrastructure is in place, is operational and has spare capacity. The development program (which has already seen success from well reactivations) will consist of workovers, equipment refurbishment and simple infill drilling. The Company therefore regards the technical and operational risks to be low.
A material part of current and future field production to the end of 2017 is covered by an oil price hedge at $95 per barrel. The hedge is paid on approximately 40% of the production for 2016 and 2017. Additionally, while the Company is paying back its transaction debt, it will receive an enhanced cash sweep of a minimum of 65% from Martwestern’s share of OML 18 production to ensure a particular minimum level of investment return. Together, these factors significantly de-risk project performance for San Leon and creditors, and incentivise the development of OML 18.
Additional income is expected to be generated by the right of San Leon to provide oilfield services, such as workover and drilling rigs, to the OML 18 Operator.