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Case Study Of NPDC Corporation

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NPDC
INTERNAL MEMORANDUM
________________________________________________________________________
To: MD, NPDC Ref: COO/UPSTREAM
From: GED/COO UPSTREAM Date: 20th July, 2017

NPDC SURVIVAL AND GROWTH STRATEGY: RETURNING OF 60% EQUITY ASSETS AND LIABILITIES IN NAOC JV (OMLs 60,61,62,63) TO NAPIMS

Please refer to the memo to the 123rd meeting of the NNPC Board on April 29, 2017 (copy attached) proffering strategies for the survival and growth of NPDC

1.0. In the bid to refocus NPDC for growth it, one of the proposals to the NNPC Board is the return of the 60% equity Assets and Liabilities in NAOC JV – OMLs 60, 61, 62 and 63 hereafter referred to as “OML 60 series” from NPDC NAPIMS.

1.1. The main thrust of the proposal is to reduce …show more content…

The economic return on OML 60 series is sub-marginal. For instance, in 2016, total revenue from the asset is ----- while cash call paid to NAOC for the same period is -----, leaving a cash surplus of ------- a return of investment of only -----. When corporate overhead allocation and statutory payments, tax and royalty are factored in, operating results from the asset returns negative.

7.3. There is no economic justification for retaining an asset with negative financial performance when the option of returning the assets is available. That way, NPDC can concentrate resources on the assets giving above-average rate of return. This is age-old investment wisdom especially in the capital intensive E & P business.

7.4. As time is critical and to compensate for the loss of volumes from the OML 60 series, it is being planned that the returning OML 60 series to NAPIMS coincide with expected first oil from OML 13s. Initial production from OML 13 is estimated to 50,000 bpd, 10,000 bpd above the 40,000 bpd from OML 60 series.

8.0. This memo is detail you on this proposal and to request that you please set machinery in motion for the orderly winding down and the return of OMLs 60 series to NAPIMS by December 2017.

Attached is a list of information and documentation to progress the process

Bello

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