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Arthur Millholland, at Canadian Overseas talks to Proactive Investors about the acquisition of 80% of the share capital of Essar Exploration and Production Limited in Nigeria, which gives COPL 100% interest and operatorship of OPL 226, a block 50 kilometres offshore in the central area of the Niger Delta.

" This is an opportunity that does not come along very often" he notes.

"We have been working on this transaction for 2-1/2 years and (...) this allows us to get access to high-quality light crude oil reserves in shallow to medium waters that we can get on to production fairly quickly" he says. "It gives our shareholders a very good buffer" he adds.

Essar Nigeria's sole asset is a 100% interest and operatorship of OPL 226, which is 50 kilometres offshore in the central area of the Niger Delta. The block is situated along a large growth fault-controlled structural complex, which the company refers to as the "Noa Complex".

Under the terms of the production sharing contract (PSC) governing OPL 226, Essar Nigeria is required to seek ministerial consent for the transaction, Canadian Overseas (COPL) said.

Application has been made and the parties to the transaction are awaiting its approval. Under the terms of the acquisition, which was actually executed by COPL’s 50%-owned affiliate Shoreline Canadian Overseas Petroleum Limited, ShoreCan will take over management and have a majority of directors on the board of the Essar Nigeria immediately.

An extension to the first phase of the PSC to December 31, 2017 was recently granted to Essar Nigeria. The remaining commitment on the first phase of the PSC is the drilling of one well. COPL's technical team has identified a drilling location, which will be an offset to an oil discovery made in 2001 by a previous contract holder, it revealed.

COPL commissioned an independent report on OPL 226 to evaluate the contingent and prospective resources, as at March 1, 2016.

In the report, the gross unrisked contingent oil resources recoverable for the primary Noa West oil discovery are estimated to be the following: low estimate (1C), 11.5 million barrels; best estimate (2C), 16.1 million barrels; and high estimate (3C), 20.7 million barrels.

The gross unrisked prospective oil resources recoverable for 15 additional undrilled areas on the Noa Complex in the report are estimated to be the following: low estimate, 259 million barrels; best estimate, 461 million barrels; and high estimate, 808 million barrels.

In addition to the oil resources identified, the report has estimated significant volumes of unrisked prospective gas resources on the block totalling, on a best estimate basis, over 1.7 trillion cubic feet.

"This is a great opportunity for our company,” said Arthur Millholland, president and chief executive officer of COPL.

“It is a result of our efforts and of our partner in ShoreCan; the Nigeria-based Shoreline Energy International. It allows the company to leverage its in-house technical expertise and expand its regional footprint to acquire a high quality oil appraisal and development asset offshore Nigeria. It will be an excellent complement to our current West African portfolio," Millholland added.

“We’ve got 3D seismic all over it,” McLean said, referring to 2012 studies done by the block’s previous owners.

Historically, five wells have been drilled, with the first oil discovery on the block made in 2001in the fifth well after earlier drilling intersected predominantly gas-bearing sands.

“There’s great correlation between the existing well data and that seismic [data], so the work programme we’re going to purse here is its gonna be an early production well. That’s the plan,” McLean said.

“We’ve already received an extension on the licence, so that’s good; so, the first appraisal well becomes an appraisal/development well and creates revenue for the special purpose vehicle [SPV, i.e. ShoreCan], which we’re 50% owner of.”

McLean said the idea behind the ownership structure is that the SPV will do the funding, probably a mixture of debt and equity, which will ensure that COPL does not get loaded down with debt.

It’s fair to say that the gestation period of this deal has been on the long side, “but all these things take time”, McLean said. All the while, COPL’s highly experienced technical team has been working diligently in the background, and the plan remains as outlined in the interview McLean gave to Proactive Investors last year, which is for the ShoreCan SPV to build a portfolio of exploration and development assets in sub-Saharan African, leveraging COPL’s technical expertise – honed in the North Sea in the previous decade – and Shoreline’s local knowledge and connections.

“From a company-building perspective, we know there’s oil on this block. It’s just a case of getting our nose down and our ass up, and getting on with it,” McLean said.

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