Last updated on April 18, 2014 at 1:21 EDT

Oando Energy Resources Signs Agreements to Acquire ConocoPhillips Nigerian Assets for US$1.79 Billion

December 20, 2012

CALGARY, Alberta, December 20, 2012 /PRNewswire/ –

Oando Energy Resources Inc. (“OER” or the “Company”) (TSX: OER), a company focused on
oil exploration and production in Nigeria and the Gulf of Guinea is pleased to announce
that it has entered into an agreement with ConocoPhillips to acquire ConocoPhillips’
Nigerian businesses for a total cash consideration of approximately US$1.79 billion,
subject to customary adjustments (the “Proposed Acquisition”). ConocoPhillips’ Nigerian
businesses consist of:

a) The Onshore Business

        - Phillips Oil Company Nigeria Limited ("POCNL"), which holds a 20%
          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 partners are the Nigerian National
          Petroleum Corporation ("NNPC") with a 60% interest and NAOC (20% and operator); and
        - Phillips Brass Limited ("PBL"), which holds a 17% shareholding interest in
          Brass LNG Limited, which is developing the Brass LNG project, a Greenfield project to
          develop a two-train, 10 million ton per year, Liquefied Natural Gas ("LNG") facility
          in Bayelsa State, Nigeria. The other partners are NNPC (49%); Eni (17%) and Total

b) The Offshore Business

        - Conoco Exploration and Production Nigeria Limited ("CEPNL"), which holds a
          95% operating interest in OML 131. The other partner is Medal Oil (5%); and
        - Phillips Deepwater Exploration Nigeria Limited ("PDENL"), which holds a 20%
          non-operating interest in OPL 214. The other partners are ExxonMobil (20% and
          operator), Chevron (20%), Svenska (20%), Nigerian Petroleum Development Company (15%)
          and Sasol (5%).

Pursuant to the Proposed Acquisition, OER will indirectly purchase all of the issued
share capital of POCNL, PBL, CEPNL and PDENL. Upon closing, the effective date of the
Proposed Acquisition will be January 1, 2012.

In connection with the Proposed Acquisition, OER has retained The Petroleum and
Renewable Energy Company Limited (“Petrenel”), OER’s independent reserves evaluator, to
prepare a report on the reserves and resources of OMLs 60, 61, 62 and 63 (together, the
“Onshore Assets”) and OML 131 and OPL 214 (together, the “Offshore Assets”) proposed to be
acquired under the Proposed Acquisition. As at the date hereof, Petrenel has prepared
preliminary estimates of some of the reserves and resources to be acquired (the “Petrenel
Preliminary Estimates”). The Petrenel Preliminary Estimates have an effective date of
December 31, 2011 and have been prepared in accordance with National Instrument 51-101
standards and the guidelines set out in the Canadian Oil and Gas Evaluation Handbook. OER
expects an Independent Reserves Report to be completed and issued by Petrenel during the
first quarter of 2013.

All figures quoted below are gross to OER (i.e. before deduction of royalty and tax)
unless otherwise stated, assuming completion of the Proposed Acquisition.


        - OER believes that the Proposed Acquisition represents a significant
          opportunity for OER and its shareholders, adding:
             - A 20% working interest in the NAOC JV, which includes forty discovered oil
             and gas fields with remaining oil and gas recovery, approximately forty identified
             prospects and leads, twelve production stations, approximately 950 km of crude
             oil, natural gas liquids (NGL) and natural gas pipelines, two 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.
             - A significant share of six separate discovered fields and eight separate
             prospects in two offshore blocks.
             - Approximately 43,000 barrels of oil equivalent per day ("boe/d") based on
             average production between January and October 2012 (Source: ConocoPhillips).
             - According to Petrenel, a total of approximately 213 millions of barrels of
             oil equivalent ("MMboe") of Proved plus Probable Reserves, 198 MMboe of Best
             Estimate Economic Contingent Resources, and approximately 110 MMboe of Risked
             Prospective Resources are present in the Onshore Assets. Contingencies and
             significant negative and positive factors related to the Contingent Resources are
             further described below.
        - Upon closing, it is expected that the Proposed Acquisition will position
          OER as one of the leading E&P players in Nigeria, as measured by total reserves and
        - The Proposed Acquisition is expected to be financed with debt and equity.
        - POCNL is cash generative and is expected to contribute positively to the
          cashflow of the Company.
        - The Proposed Acquisition is anticipated to close during the first half of
          2013, following appropriate consultations with stakeholders.

“This potential transaction represents a transformational step 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,” said Pade Durotoye, CEO of Oando Energy Resources. “Our management team is
familiar with the assets contained in this proposed transaction and, we believe, possess
the regional experience and technical expertise necessary to capture and unlock their
future value for our shareholders.”

Also commenting, Mr. Wale Tinubu, Chairman, OER said “Upon closing, we expect that
this will be a transformational transaction for OER, as the company has only been listed
on the TSX for about 5 months and now has an opportunity to execute its strategy and
materially increase its production and reserves base. In our view, the combination of the
right timing, right assets and the right company can lead to significant value creation in
the Gulf of Guinea.

We expect that the closing of this transaction will position OER as a leading,
indigenous independent E&P player in Nigeria”.


OER will be hosting a conference call to discuss the transaction on Friday, December
21st, 2012 at 10:00 a.m. Eastern Standard Time. To access the conference call, please dial
1-888-231-8191. If dialing internationally (outside of North America) the conference call
can be accessed by calling 1-647-427-7450. Participants must request the Oando Energy
Resources Acquisition Conference Call.

A replay of the conference call will be available through December 28th, 2012. To
access the replay, dial 1-855-859-2056 (North America) or 1-416-849-0833 (International)
and enter reservation number 83403657 followed by the number sign.


Large oil and gas asset base with substantial production and resources

The Onshore Assets are currently producing substantial quantities of oil and gas. The
total oil and gas production from the Onshore Assets for the period from January 1, 2012
until October 31, 2012 averaged approximately 43,000 boe/d gross to OER (Source:

High oil and gas recovery factors are expected to be achieved with a focused and
committed development programme. OER believes there are many opportunities to further
develop the existing fields and increase production.

Petrenel has assigned preliminary estimates of Proved plus Probable Reserves of 213
MMboe and Best Estimate Economic Contingent Resources of 198 MMboe (OER gross share) to
the Onshore Assets. These Economic Contingent Resources have not been classified as
Reserves as either (i) oil and gas production associated with these Contingent Resources
is likely to start in more than five years, (ii) definition of development activities will
require more technical work; (iii) oil and gas will be produced after 2027 (the current
onshore license renewal date), or (iv) gas will be produced and sold after the end of the
current gas contract periods (2024-2026). It is expected that these economic Contingent
Resources will be progressively transferred to Reserves as development activity is matured
and the licenses and gas contracts are extended. Significant positive factors associated
with the estimates include (i) high probability that the licence and gas contracts will
get extended at current terms, (ii) possible financial investment decision of Brass LNG
could result in higher gas prices, (iii) further detailed technical studies are likely to
identify additional resources, and (iv) reducing bunkering will likely result in positive
upward revision in oil sales. Significant negative factors associated with the estimates
include (i) uncertainty over historical field production, technical recovery factors and
new well productivity, (ii) logistical and security difficulties may delay development,
and (iii) increased development and operating costs may reduce the economically
recoverable volume.

Significant exploration upside

OER believes that there is significant upside potential from an active exploration
program on OMLs 60 to 63 with a multi-year inventory of newly available oil and gas
drill-ready opportunities, including an opportunity to supply additional gas to potential
off takers including the Brass LNG project, the Nigeria (Bonny) LNG (“NLNG”) Train 7
project and other gas supply opportunities in the growing domestic market.

Petrenel has assigned Risked Prospective Resources in the Onshore Assets (gross to
ConocoPhillips) to be approximately 110 MMboe. In addition, OER expects that additional
Risked Prospective Resources will be assigned by Petrenel to the Offshore Assets after
Petrenel has completed its final report.

Ideal location with extensive production and infrastructure

OMLs 60 to 63 are located favorably, with a well developed network of facilities,
transportation and logistics infrastructure as well as localized processing facilities,
including an oil processing centre and two gas processing facilities, which can process up
to 125,000 barrels of oil per day (“bbls/d”) of oil and 1 billion cubic feet per day
(“Bcf/d”) of natural gas. Other facilities and infrastructure include 12 production
stations and about 950km of oil, NGL and natural gas pipelines, the Brass River Oil
Terminal which has a storage capacity of 3.6 millions of barrels of oil (“MMbbls”) and the
480 Megawatt Kwale-Okpai Independent Power Plant which accounts for 15% of Nigeria’s
current available national power grid capacity.

Nigeria has over 37 billion bbls of proved reserves, (Source: BP Statistical Review of
World Energy 2012), a large proportion of which is located in the Niger Delta Region.
Within this region, there are a large number of discovered but undeveloped fields with
significant upside potential. OER believes that the centrally located Brass River
Terminal, Obiafu-Obrikom (“Ob-Ob”) gas plant, and associated pipeline network offers a
significant opportunity to capture additional third partytransportation and processing

OER believes that the Proposed Acquisition will provide OER with a platform for future
growth in the region.

High quality crude oil production that trades at a premium to Brent Oil

The crude oil produced from these onshore fields is light and sweet with API gravities
ranging from 29 to 47 degrees and low sulfur contents of 0.05% to 0.3% and trades at a
premium to Brent.

Highly profitable and strong historical cash flow

The NAOC JV has yielded high drilling success rates, high production volumes and
premium pricing on crude oil and natural gas and NGLs. For the year ended December 31,
2011, ConocoPhillips reported revenue of US$1.0 billion, profit after tax of US$157.5
million and cashflow from operations of US$327.1 million (prepared in accordance with
Nigerian Generally Accepted Accounting Principles).


Onshore Assets:

        1) OMLs 60, 61, 62 and 63 are located in the onshore Niger Delta basin and
          have a long history of proven production. ConocoPhillips' share of production in 2011
          was 19,000 bbl/d of oil and 157 MMcf/d of gas (Source: ConocoPhillips).
             - Petrenel's preliminary estimates of Proved plus Probable reserves for the
             Onshore Assets are 94 MMbbls of oil & condensate and 0.7 Trillion Cubic Feet (Tcf)
             of sales gas (213 MMboe) (gross to OER). The economically recoverable Best
             Estimate Contingent Resources are estimated to be 73 MMbbls of oil and condensate
             and 0.75 Tcf of sales gas (198 MMboe) (gross to OER).
             - The NAOC JV supplies 19.72% of the feedgas utilized by the NLNG plant
             (Source: NLNG) or approximately 85% of the NAOC JV natural gas sales under a long
             term contract which is based on a net back pricing formula. The remainder of the
             gas is sold to a Petrochemical producer and an independent Power Producer under
             long term contracts. In addition, some of the gas is utilized as fuel gas in the
             Kwale-Okpai IPP. Finally, NGLs are sold to a petrochemical producer under a long
             term contract.
             - The Kwale-Okpai IPP plant supplies power under a long term contract to the
             Power Holding Company of Nigeria. (Source: ConocoPhillips)

The Brass LNG project is a large-scale Greenfield project which involves the
development of a two-train LNG facility in Bayelsa State in the Niger Delta. It is
expected that approximately 40% of the feed gas will be supplied by the NAOC JV. It is
expected that the total nominal plant capacity will be 10 million tons of LNG per year and
could be doubled in the future.

Offshore Assets:

        1) OML 131 is a large deep water offshore block located in a prolific area
          about 70km south of the Niger Delta coastline and covering 1,204km2 at water depths
          ranging between 500 and 1,200 meters. OML 131 has two oil and gas discoveries and six
          large untested prospects. It is expected that the Chota field in OML 131 will be
          unitized with the Bolia field in OML 135 that is operated by Shell.
        2) OPL 214 is a large deepwater offshore license covering 2,586km2 in the
          prolific central part of the offshore Niger Delta. The area is approximately 110km
          from the coastline at water depths ranging between 800 and 1,800 meters. OPL 214 is
          located close to large discoveries (Bonga, Nsiko, and Agbami). A commercial discovery
          has been made on this asset and all work obligations have been fulfilled. It is
          anticipated that OPL 214 will be converted into an Oil Mining Lease (OML) for an
          initial period of 20 years. OPL 214 holds four oil and gas discoveries including the
          Uge field, which was discovered in 2005.


The Company established four wholly owned subsidiaries which have entered into
agreements with ConocoPhillips for the Proposed Acquisition for a total cash consideration
of approximately US$1.79 billion, subject to customary adjustments.

Upon signing of the Sale and Purchase Agreements, the Company paid a cash deposit of
US$435 million (“Deposit”) to ConocoPhillips. The payment of the Deposit was financed by a
US$345 million loan (“Oando Loan”) from Oando Plc, a company which owns 94.6% of the
shares of OER (“Oando”), and US$90 million funded through secured bridge loans, each of
which is guaranteed by Oando, from local Nigerian banks. The Oando Loan has a maturity of
120 days (subject to extension in certain circumstances) and an annual interest rate of
LIBOR plus 10.5% (subject to increase in certain circumstances).

Pursuant to the Oando Loan, OER has agreed, provided that requisite shareholder
approval is obtained in accordance with Multilateral Instrument 61-101 – Protection of
Minority Securityholders in Special Transactions and Toronto Stock Exchange (“TSX”)
approval and shareholder approval is obtained in accordance with (but not limited to)
Section 501(c) of the TSX Company Manual, that the Oando Loan will be convertible, at
Oando’s option, into newly issued common shares of OER (“OER Shares”) at the lower of (i)
the 5 trading day volume-weighted average price (“5 day VWAP”) of an OER Share on the TSX
for the 5 trading days immediately following the date hereof; and (ii) the 5 day VWAP of
an OER Share on the TSX for the 5 trading days immediately preceding, but not including,
the date upon which Oando provides notice to OER that it wishes to convert the Oando Loan
into OER Shares. The issuance of any OER Shares pursuant to the exercise by Oando of the
conversion feature will be subject to TSX approval.

It is expected that the remainder of the Purchase Price for the Proposed Acquisition
(approximately US$1.355 billion) will be financed by way of equity and debt, including
private placements of equity-linked securities and a follow-on offering of OER shares. In
addition, it is expected that US$800 million of senior secured loans will be provided by a
syndicate of international and Nigeria banks.

Closing of the Proposed Acquisition is subject to customary conditions including the
receipt (or waiver, in accordance with the Sale and Purchase Agreements) of all approvals
or consents from any governmental authority; and the waiver or non-exercise of rights of
first refusal, if any with respect to the shares to be acquired by OER, and the assets
underlying such shares.

In the event that the Proposed Acquisition does not close, the Deposit is refundable
to OER (including where there is a breach by ConocoPhillips in any material respect of its
covenants under the Sale and Purchase Agreements) except in the following limited
circumstances: (i) a breach by OER in any material respect of its covenants under the Sale
and Purchase Agreements or (ii) if the closing does not occur because of failure for any
reason to obtain all approvals or consents required by law from any governmental authority
under applicable petroleum laws of Nigeria

About Oando Energy Resources Inc. (OER)

OER currently has a broad suite of producing, development and exploration assets in
the Gulf of Guinea (predominantly in Nigeria) with current production of approximately
3,300 barrels of oil per day from the Abo Field, (OML 125) and an additional 1,500 barrels
of oil per day from the Ebendo Field, (OML 56), once a damaged export pipe line has been
repaired or replaced (which is expected to be completed early 2013). OER has been
specifically structured to take advantage of current opportunities for indigenous
companies in Nigeria, which currently has the largest population in Africa, and one of the
largest oil and gas resources in Africa.

Forward Looking Statements:

This news release contains forward-looking statements and forward-looking information
within the meaning of applicable securities laws. The use of any of the words “expect,
“anticipate, “continue, “estimate, “objective, “ongoing”, “may, “will, “project, “should,
“believe, “plans, “intends” and similar expressions are intended to identify
forward-looking information or statements.

Although the Company believes that the expectations and assumptions on which such
forward-looking statements and information are reasonable, undue reliance should not be
placed on the forward-looking statements and information because the Company can give no
assurance that such statements and information will prove to be correct. Since
forward-looking statements and information address future events and conditions, by their
very nature they involve inherent risks and uncertainties.

Actual results could differ materially from those currently anticipated due to a
number of factors and risks. These include, but are not limited to: risks related to
international operations, risks related to funding the remainder of the purchase price for
the Proposed Acquisition, risks related to oil and gas recovery, risks relating to the
Petrenel Preliminary Estimates being confirmed in the final independent report to be
prepared by Petrenel, risks relating to receipt of all required approvals in Nigeria,
risks relating to Contingent Resources being classified as Reserves, risks relating to
loss of the deposit, risks relating to supply of feed gas risks relating to satisfaction
of all conditions precedent to closing of the Proposed Acquisition, the actual results of
exploration and drilling activities, changes in oil and gas production, changes in project
parameters and timing as plans continue to be refined and the future price of crude oil
and natural gas. Accordingly, readers should not place undue reliance on the
forward-looking statements. Readers are cautioned that the foregoing list of factors is
not exhaustive.

Additional information on these and other factors that could affect the Company’s
financial results are included in reports on file with applicable securities regulatory
authorities and may be accessed through the SEDAR website (http://www.sedar.com) for
the Company. The forward-looking statements and information contained in this news release
are made as of the date hereof and the Company undertakes no obligation to update publicly
or revise any forward-looking statements or information, whether as a result of new
information, future events or otherwise, unless so required by applicable securities laws.

Cautionary Statements

Production information is commonly reported in units of barrel of oil equivalent
(“boe” or “BOE”) or in units of natural gas equivalent (“Mcfe”). However, BOEs or Mcfes
may be misleading, particularly if used in isolation. A boe conversion ratio of 6 Mcf:1
barrel, or an Mcfe conversion ratio of 1 barrel:6 Mcf, is based on an energy equivalency
conversion method primarily applicable at the burner tip and does not represent a value
equivalency at the wellhead.

There is no certainty that it will be commercially viable to produce any portion of
the contingent resources.

There is no certainty that any portion of the prospective resources will be
discovered. If discovered, there is no certainty that it will be commercially viable to
produce any portion of the resources.

Defined Terms

“Reserves” are those quantities of petroleum anticipated to be commercially
recoverable by application of development projects to known accumulations from a given
date forward under defined conditions. Reserves must further satisfy four criteria: they
must be discovered, recoverable, commercial, and remaining (as of the evaluation date)
based on the development project(s) applied. Reserves are further categorized in
accordance with the level of certainty associated with the estimates and may be
subclassified based on project maturity and/or characterized by development and production

“Proved Reserves” are those quantities of petroleum, which by analysis of geosciences
and engineering data, can be estimated with reasonable certainty to be commercially
recoverable, from a given date forward, from known reservoirs and under defined economic
conditions, operating methods and government regulations.

“Probable Reserves” are those additional Reserves which analysis of geosciences and
engineering data indicate are less likely to be recovered than Proved Reserves but more
certain to be recovered than Possible Reserves.

“Contingent Resources” are those quantities of petroleum that are estimated, as of a
given date, to be potentially recoverable from known accumulations using established
technology or technology under development, but which are not yet considered mature enough
for commercial development because of one or more contingencies. Contingencies may include
factors such as economic, legal, environmental, political, and regulatory matters, or a
lack of markets. Contingent Resources are further categorized into low case (1C), best
case (2C) and high case (3C) according to the level of certainty associated with the
estimates and may be sub-classified based on economic viability.

“Prospective Resources” are those quantities of petroleum estimated, as of a given
date, to be potentially recoverable from undiscovered accumulations by application of
future development projects. Prospective Resources have both an associated chance of
discovery and a chance of development. Prospective Resources are further subdivided in
accordance with the level of certainty associated with recoverable estimates assuming
their discovery and development and may be sub-classified based on project maturity.

“Best Estimate” is considered to be the best estimate of the quantity that will
actually be recovered. It is likely that the actual remaining quantities recovered will be
greater or less than the best estimate. If probabilistic methods are used, there should be
a 50 percent probability that the quantities recovered will equal or exceed the best
estimate. For further information:

            Pade Durotoye
        Chief Executive Officer
        Oando Energy Resources Inc.

        Tokunboh Akindele
        Head, Investor Relations
        Oando Energy Resources Inc.
        Website: http://www.oandoenergyresources.com


SOURCE Oando Energy Resources Inc.

Source: PR Newswire