Operational & Trading Update

RNS Number : 4564F

Lekoil Limited

15 July 2019

 

15 July 2019

LEKOIL Limited 

("LEKOIL" or the "Company")

Operational & Trading Update

LEKOIL (AIM: LEK), the oil and gas exploration and development company with a focus on Nigeria and West Africa more generally, provides the following operational and trading update.

Highlights

• H1 2019 average production was 5,822 barrels of oil per day ("bopd"), with 2,329 bopd net to LEKOIL Nigeria, compared to 2,042 bopd for the same period in 2018

• Downtime was zero days since the beginning of the calendar year 2019

• The Joint Venture partners remain focused on Phase Two of the Otakikpo Field Development Plan

Outlook

• Production rates are expected to remain steady through 2019, with H2 2019 average production expected to be circa 5,800 bopd, with 2,324 bopd net to LEKOIL Nigeria

• One lifting is scheduled from the FSO Ailsa Craig in July of circa 350,000 barrels of oil

• Plans underway, subject to finalisation of funding, for a multi-well drilling programme

Financial

• 2019 full year costs, comprising of operating expenses and general administrative costs is expected to be in line with current market expectations; the Company remains focused on decreasing general and administrative costs by 25%

• Phase One capital expenditure for the full year is currently expected to be US$5.1 million, largely attributed to minor infrastructure upgrades at Otakikpo, which is in line with current market expectations.  Approximately US$2.7 million of this was spent in H1 2019.

• Outstanding debt financing, less cash is expected to be US$4.5 million at year end

Otakikpo

The Joint Venture partners remain focused on Phase Two of the Otakikpo Field Development Plan, with a Schlumberger-led consortium aiming to reach gross volumes of up to approximately 15,000 bopd to 20,000 bopd.  The plan involves drilling up to five wells as well as expanding processing infrastructure.  Site mobilisations are tentatively scheduled to begin in Q3 of 2019. Please refer to the Company's announcement dated 1 July 2019 for further information on the Otatikpo MoU.

The information contained within this announcement is deemed by the Company to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014 ("MAR").

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

Lekoil Limited Alfred Castaneda, Investor Relations	[phone]
Strand Hanson Limited (Financial & Nominated Adviser) James Spinney / Ritchie Balmer / Eric Allan	[phone]
Mirabaud Securities Limited (Joint Broker) Peter Krens / Edward Haig-Thomas	[phone] / [phone]
Numis Securities (Joint Broker) John Prior / Emily Morris	[phone]
Tavistock (Financial PR) Simon Hudson / Barney Hayward / Charles Vivian	[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 Operator.

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 began operations in December 2014. Ministerial consent was granted by the Honourable Minister of Petroleum Resources of Nigeria in June 2015.  Commercial production started in February 2017.

An updated CPR from McDaniel Associates & Consultants Ltd. released in June 2019 showed a significant upgrade to 2P reserves and resources, with 48.6 million barrels of Gross 2P reserves and an associated NPV10 of $226 million after income taxes to LEKOIL Nigeria.  This report also showed 331.6 million barrels of Gross aggregate stock tank oil in place (STOIIP) prospective volumes (P50, unrisked).

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