Erin Energy Corporation (NYSE MKT:ERN) (JSE:ERN) announced today financial and operational results for the quarter ended June 30, 2016. The Company also provided an update on its upstream operations in Africa.

Second Quarter 2016 and Current Highlights:

  • Successfully re-established production from the Oyo-8 well;
  • Achieved net average daily production of 5,400 barrels of oil per day (bbls/d);
  • Lifted and sold 508,000 barrels of oil;
  • Realized revenues of $23.2 million;
  • Successfully restructured Zenith term loan facility.

Segun Omidele, Chief Executive Officer commented:

‘We continue to make progress with our balance sheet restructuring and debt reduction initiatives, with our debt-to-equity conversion strategy receiving positive responses from some of our vendors. Various cost reduction measures that were initiated in the first-quarter 2016 are now becoming deeply embedded into our operations, even as new ways of managing costs are continually being assessed for implementation. In addition to these initiatives, management has made the tactical decision to explore acquisition opportunities created by the current upstream environment and to look for accretive, inorganic ways to grow our business.’


During the quarter the Company successfully brought back online the Oyo-8 well using a deepwater light intervention vessel and achieved net average daily oil production of 5,400 barrels per day compared to 1,800 barrels per day in Q1, 2016. Currently, Oyo-8 is producing more than 7,000 barrels of oil per day. The Oyo-7 well could not come back on production naturally, after an emergency shut down that occurred on July 1, 2016. This is due to high water production from the well and this has resulted in a temporary production loss of about 1,400 barrels of oil per day.

Plans are currently being made to attempt to bring the Oyo-7 well back by introducing nitrogen from the production facilities via subsea infrastructure to the well. The Company intends to carry out this nitrogen lift after its next crude lifting scheduled for the week of August 15, 2016.The Company continues to make progress in preparations for the next drilling campaign, which is planned to commence in the fourth-quarter of this year. Both the identification of a drilling rig and the procurement of long-lead well and subsea equipment are progressing well.

The Oyo-9 production well is planned as an additional development well within the central area of the Oyo field in Oil Mining Lease 120 and will be tied into the existing production facilities to increase the Company’s production by approximately 6,000 – 7,000 barrels of oil per day.


The Ghana government has recently approved the extension of the Initial Exploration Period for the Expanded Shallow Water Tano (ESWT) block operated by Erin Energy by 18 months, to July 2018. The government also made some adjustments to the commercial terms of the petroleum agreement to enable the early realization of the Tano development project when the oil price recovers.

Geological and reservoir studies are ongoing with the existing 2-D and 3-D seismic datasets to evaluate the various possible development options and the exploration potential of the block. New 3-D marine seismic data acquisition over the entire block is in the execution planning phase. The new seismic data will enable the high-grading of the exploration prospects as well as firm-up the drilling candidates. Actual field operations await the resolution of the Ghana-Cote d’Ivoire maritime border dispute arbitration in mid-2017.

The Gambia

The Company is currently awaiting the completion of the processing of the recently acquired 3-D seismic data, expected to be completed in the third-quarter of 2016. Erin Energy expects to resume talks with potential farm-out partners once the data is in-house. The Company’s A2 and A5 blocks are located in the same prolific offshore geological basin as the recent world-class discoveries by Cairn Energy in its offshore Senegal blocks.


Erin Energy is currently interpreting 2-D seismic data on its onshore blocks, L1B and L16. Based on the interpretation of this 2-D data, the Company plans to design and acquire additional seismic data in 2017 on blocks L1B and L16. The Company is actively marketing both its onshore and offshore Kenya blocks to potential farm-out partners as part of our growth strategy.

Balance Sheet Strengthening and Cost Reduction Efforts

The Company has actively been working with its creditors and vendors to restructure its debt facilities, finalize negotiations of payment agreements with vendors and to lower some of its current outstanding accounts payable balance.

Erin Energy announced it has successfully completed the restructuring of its term loan facility with Zenith Bank (Zenith). Under the new terms of the credit facility, the Company will only make interest payments to Zenith until June 2017, with principal repayment beginning in June of 2017 on a sculpted basis to align with Company cash flows and allowing the facility to be fully paid off at year-end 2021. The Company has received favorable response from some of its vendors to convert outstanding payables to company equity.

In line with the Company’s stated goal of increasing production and reserves with a three-part strategy of development, exploration and accretive production and reserves acquisitions, Erin Energy has begun looking at strategic production asset acquisitions to help grow the Company’s production and reserves. Erin Energy’s management team believes that focusing on potential asset acquisitions in West Africa will allow the Company to leverage its strengths and focus to increase revenue, corporate cash flows, and ultimately, shareholder value.

Financial Summary

For the second quarter 2016, Erin Energy reported revenues of $23.2 million, compared to nil revenue during the second-quarter 2015. In the second-quarter, the Company lifted and sold approximately 508,000 net barrels of oil at an average price of $45.58 per barrel, compared to no liftings during the same period 2015. When compared to the first-quarter 2016, second-quarter revenues were up 370% driven by increase in production from Oyo-8 being back online.

For the second quarter of 2016, the Company reported a net loss of $22.6 million, or $(0.11) per basic and diluted share, compared to a net loss of $9.2 million, or $(0.04) per basic and diluted share for the same period in 2015 and a first-quarter 2016 loss of $32.4 million, or $(0.15) per basic and diluted share.

Average net daily production for the quarter was approximately 5,400 barrels of oil per day, compared to 4,400 barrels oil per day for the same period 2015; and 1,800 barrels of oil per day during the first-quarter 2016.

This article is for information and discussion purposes only and does not form a recommendation
to invest or otherwise. The value of an investment may fall. The investments referred to in this
article may not be suitable for all investors, and if in doubt, an investor should seek advice from
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