First oil from Otakikpo

RNS Number : 2052Y

Lekoil Limited

07 September 2015

 

7 September 2015

Lekoil Limited

("Lekoil" or the "Company")

First Oil from Otakikpo

Lekoil makes transition to producer, first string flow rate exceeds expectation

Lekoil (AIM: LEK), the oil and gas exploration and production company with a focus on Nigeria and West Africa more generally, announces the start of oil production from the Otakikpo Marginal Field ("Otakikpo") in oil mining lease (OML) 11 which is located on the shore line in the south-eastern part of the Niger Delta.

Following the successful re-entry of the Otakikpo-002 well, first oil flowed to surface late on 5 September 2015 with production testing being conducted over the weekend.  The Otakikpo-002 well produced from only the first of four planned production strings, and flowed oil at various choke sizes for over 24 hours at a peak rate of 5,703bopd at a 36/64 inch choke, significantly ahead of expectations.  The Addendum to the Competent Persons Report prepared by AGR TRACS International Ltd released by the Company on 21 January 2015 indicated that it expected to produce around 6,000bopd from the four strings at Otakikpo-002 and -003.  Based on these preliminary results, the Directors of Lekoil currently believe that this guidance is likely to be exceeded substantially, although further testing and analysis will be required before the Company is able to provide formal guidance.

It has taken just nine months for the Otakikpo Joint Venture (Lekoil as Financial and Technical Partner and Green Energy International ("Green Energy") as Operator) to bring the Otakikpo field into production since it began operations on the field in December 2014, and less than 16 months in total since Lekoil entered into a farm-in agreement with Green Energy.

Otakikpo-002 will now be temporarily suspended to allow completion and testing of the upper C5 zone following which an official well-test programme will commence and the rig will move to start re-entry operations on Otakikpo-003. During the well test, oil will flow into onshore storage tanks. The second production well, Otakikpo-003, is expected to come on stream around year end.

Further operational details will be made available at the time of the Company's forthcoming Half Year Results which will be published by 30 September 2015.

Lekan Akinyanmi, Lekoil's CEO, said, "We are delighted to announce that Lekoil is now an oil producer.  We always believed in the potential of Otakikpo but the production rate from the first re-entered well has exceeded our expectations.  This is a real achievement for the Otakikpo Joint Venture.  I would like to thank the entire team that has worked so hard to deliver this result, our partners Green Energy, investors and our host communities for their continued support."

"However, there is a lot more to be done. We expect to finalize the evacuation infrastructure during the official well test period and determine the optimal production rate that maximises value from the two wells."

"Production at Otakikpo represents the first major step in fulfilling our strategy to be the world's leading E&P company focused on Africa and maximising value for our stakeholders and host communities in a sustainable manner.  Safety remains our key priority and we will continue applying the highest standard to our operations as we grow production to, and now beyond, our initial Phase 1 target."

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 per cent. 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. The Company holds 90 per cent. of the economic interests in Lekoil Nigeria. Lekoil Limited's economic interest in Otakikpo therefore equates to 36 per cent. Ministerial consent was granted by the Honourable Minister of Petroleum Resources of Nigeria in June 2015.

The 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 6,000 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 seven new wells expected to come on stream during 2017.

Review by qualified person:

Samuel Olotu, Chief Technical Officer and expert for the Company, has reviewed and approved the technical information contained within this announcement in his capacity as a qualified person under the AIM Rules. Mr. Olotu holds a BSc degree in Geology and an MSc in Geophysics from the University of Ibadan, and has over 20 years' experience in the oil and gas industry (ranging from asset management, field development, reservoir management and seismic data processing and interpretation) in Nigeria, Europe, Middle-East and Asia. He is a member of the Society of Petroleum Engineers, Society of Exploration Geophysicists, the National Association of Petroleum Explorationists and the Nigerian Mining and Geosciences Society.

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

Lekoil Limited Hamilton Esi, Corporate Communications	[phone]
Strand Hanson Limited  (Financial & Nominated Adviser) James Harris / James Spinney / Ritchie Balmer	[phone]
Mirabaud Securities LLP (Joint Broker)	[phone]
Peter Krens / Edward Haig-Thomas	[phone]
BMO Capital Markets (Joint Broker)	[phone]
Rupert Newall / Neil Haycock / Thomas Rider
Ladenburg Thalmann & Co. Inc. (US Placing Agent) Jim Hansen / Barry Steiner	[phone] [phone]
Tavistock (Financial PR) Simon Hudson / Ed Portman	[phone]

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