Commercial Offtake Agreement

RNS Number : 9827A

Lekoil Limited

30 March 2017

 

30 March 2017

LEKOIL Limited 

("LEKOIL" or the "Company")

 Commercial Offtake Agreement with Shell for Otakikpo

LAGOS, NIGERIA - LEKOIL (AIM: LEK), the oil and gas exploration, development and production company with a focus on Africa, announces a commercial offtake agreement with Shell Western Supply and Trading Limited, a subsidiary of Royal Dutch Shell (LSE: RDSA, RDSB, "Shell").

The Company has executed an offtake agreement in respect to the sales of its crude entitlement from the Otakikpo marginal field.  Pricing will be determined at future spot market prices, net of marketing costs.

The offtake contract allows Shell to undertake the lifting of Otakikpo crude from the FSO Ailsa Craig.    All crude sales will be done at the prevailing market price.

The Company expects the first lifting from the IMA Terminal to commence early in Q2.

For further information, please visit www.lekoil.com or contact:

LEKOIL Limited Alfred Castaneda, Investor Relations Hamilton Esi, Corporate Communications	[phone] [phone]
Strand Hanson Limited (Financial & Nominated Adviser) James Harris / James Spinney / Ritchie Balmer	[phone]
Mirabaud Securities LLP (Joint Broker) Peter Krens / Edward Haig-Thomas	[phone] / [phone]
BMO Capital Markets (Joint Broker) Vicary Gibbs / Neil Haycock / Thomas Rider	[phone]
Tavistock (Financial PR) Simon Hudson / Barnaby Hayward / Merlin Marr-Johnson	[phone]

Background to Otakikpo

Otakikpo is sited in a coastal swamp location in oil mining lease (OML) 11, adjacent to the shoreline in the south-eastern part of the Niger Delta. LEKOIL Nigeria exercises the rights and benefits of its 40% Participating and Economic interest in Otakikpo via the Farm-in Agreement and Joint Operating Agreement signed on 17 May 2014 with Green Energy International Limited ("GEIL").

The Company holds 90% of the economic interests in LEKOIL Nigeria. LEKOIL Limited's economic interest in Otakikpo therefore equates to 36%.  The Otakikpo Joint Venture (LEKOIL as Financial and Technical Partner to GEIL) began operations in December 2014. Ministerial consent was granted by the Honourable Minister of Petroleum Resources of Nigeria in June 2015. LEKOIL funded the costs of development and is entitled to recover this expenditure preferentially from 88 per cent. of production cash flow from Otakikpo.

The Otakikpo Field Development Plan consists of two phases.  Phase 1 comprises the recompletions of two wells, Otakikpo-002 and Otakikpo-003, with the installation of an Early Production Facility of 10,000 bopd capacity and export via shuttle tanker. Phase 2 covers the subsequent incremental development of the rest of the field with a new Central Processing Facility and new wells expected.

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