Leadership (Abuja)

31 July 2014

Nigeria: Oando Completes U.S.$1.5 Billion Conocophillips Acquisition

Oando Energy Resources Inc. (OER), a company focused on oil and gas exploration and production in Nigeria, has announced the completion of its acquisition of the Nigerian upstream oil and gas business of ConocoPhillips (NYSE: COP) for a total cash consideration of $1.5 billion after customary adjustments plus a deferred consideration of $33 million (the transaction). The transaction entails the acquisition of ConocoPhillips' Nigerian oil and gas businesses consisting of both onshore and offshore business activities.

A press release by OER said Phillips Oil Company Nigeria Limited (POCNL) holds a 20 per cent non-operating interest in Oil Mining Leases ("OMLs") 60, 61, 62, and 63 as well as related infrastructure and facilities in the Nigerian Agip Oil Company Limited (NAOC) joint venture (NAOC JV). The other co-venture partners are the Nigerian National Petroleum Corporation (NNPC) with a 60 per cent interest and NAOC (20 per cent and operator).

Also included in the transaction are Conoco Exploration and Production Nigeria Limited (CEPNL) that holds a 95 per cent operating interest in OML 131 located 70 km offshore in water depths of 500m to 1,200m and Phillips Deepwater Exploration Nigeria Limited (PDENL) that holds a 20 per cent non-operating interest in Oil Prospecting Licence (OPL) 214 located 110 km offshore in water depths of 800m to 1,800m. The other co-venture partners are ExxonMobil (20 percent and operator), Chevron (20 per cent), Svenska (20 per cent), Nigerian Petroleum Development Company (15 per cent) and Sasol (5 per cent). In June 2014, Nigeria's petroleum resources minister approved the conversion of OPL 214 to OML 145 for an initial period of 20 years.

Through this transaction, OER will indirectly own all of the issued share capital of POCNL, CEPNL and PDENL. The effective date of the transaction is January 1, 2012. In connection with this transaction, OER retained the Petroleum and Renewable Energy Company Limited (Petrenel) as Independent Reserves Evaluator to report on the reserves and resources of the newly acquired assets, OMLs 60, 61, 62 and 63 (together, the "Onshore).

Commenting on the transaction, an elated OER's CEO, Pade Durotoye, said: "This transaction represents a transformational leap forward for our company and is in keeping with our overall strategy to grow our portfolio of Nigerian-based assets by focusing on those opportunities that deliver high-quality growth in reserves and production. He added: "Our management team is familiar with these assets and possesses the managerial experience and technical expertise necessary to unlock their value for our shareholders." Also commenting, chairman of OER Mr Wale Tinubu said "we believe in the significant potential that the Nigerian oil and gas industry holds and are privileged to play a pivotal role in its consolidation, growth and development. We will continue to seek strategic opportunities that provide a platform for enhanced growth and value creation for our stakeholders".

The independent reserves report has an effective date of December 31, 2013, and has been prepared in accordance with National Instrument 51-101 standards and the guidelines set out in the Canadian Oil and Gas Evaluation Handbook while all figures quoted are gross to OER (i.e. before deduction of royalty and tax) unless otherwise stated.

OER believes that the transaction represents a significant opportunity for OER to create scale and significant value for its shareholders, adding:

- The total reserves and resources associated with this Transaction are: Proved plus Probable Reserves of 211.6 million barrels oil equivalent ("MMboe"); Best Estimate Contingent Resources of 498.6 MMboe; Unrisked Best Prospective Resources of 656.9 MMboe.

A 20 per cent working interest in the NAOC JV, which includes 40 discovered oil and gas fields, of which 24 are currently producing approximately 40 identified prospects and leads, 12 production stations, approximately 1,490 km of pipelines, three gas processing plants, the Brass River Oil Terminal, the Kwale-Okpai 480 MW combined cycle gas-fired power plant ("Kwale-Okpai IPP"), and associated infrastructure.

- OER's sales production from the onshore assets averaged 36,494 barrels of oil equivalent per day ("boe/d") in 2013 and 39,266 boe/d in H1 2014. The Onshore Assets contain 211.6 MMboe of Proved plus Probable Reserves, 217.0 MMboe of Best Estimate Contingent Resources and 333.6 MMboe of Unrisked Best Prospective Resources, gross to OER.

- The Offshore Assets include a significant share of six separate discovered fields and eight separate prospects and contain a total of 281.6 MMboe of Best Estimate Contingent Resources and 323.3 MMboe of Unrisked Best Prospective Resources, gross to OER.

- Upon completion of the Transaction, OER will be positioned as one of the leading E&P players in the Nigerian oil & gas sector, as measured by end-2013 Proved plus Probable Reserves of 230.6 MMboe, Best Estimate Contingent Resources of 536.8 MMboe, Unrisked Best Prospective Resources of 2,051.8 MMboe and H1, 2014 production of 44,512 boe/d, all gross to OER.

The transaction was financed with an approximate 50/50 debt-equity ratio. Half of the deferred consideration of US$33 million is due six months after closing with the balance due 12 months after closing. It is immediately cash-generative and will contribute significantly to the cash flows of the company.

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