TIDMLEK
RNS Number : 9983J
Lekoil Limited
23 August 2019
23 August 2019
LEKOIL Limited
("LEKOIL" or the "Company")
Acquisition of Participating Interest in OPL276
LEKOIL (AIM: LEK), the oil and gas exploration and development
company with a focus on Nigeria and West Africa more generally, has
agreed to acquire, subject to the receipt of the required consents,
via Lekoil 276 Limited ("Lekoil 276" which is a 100 per cent. owned
subsidiary of Lekoil Nigeria), a 45 per cent. participating
interest in the Production Sharing Contract ("PSC") in relation to
the Oil Prospecting Licence 276, covering a territory located
onshore in the eastern Niger Delta basin (the "Licence"). The
agreed acquisition, from Newcross Petroleum Limited ("Newcross"),
is for a total staged consideration of US$5million (the
"Consideration"), which is payable subject to the milestones listed
in the highlights below (the "Acquisition"). Lekoil 276 will also
enter into an Interim Governance Agreement with Newcross and
Albright Waves Petroleum Development Limited ("Albright") setting
out the terms on which Lekoil 276 will provide technical support to
the PSC.
The Acquisition is consistent with the Company's continuing
strategy to assemble a balanced portfolio of oil and gas interests,
which already include production (Otakikpo), appraisal (OPL310) and
high impact exploration assets in known basins (OPL325).
The Licence is covered by approximately 150 sq. km of 3D
seismic, shot in 2008 by BGP Inc., a subsidiary of China National
Petroleum Company (CNPC), as well as various 2D seismic surveys. It
is in close proximity to three existing producing fields, all less
than 20 kilometres away:
-- Effiat-Abana in OML114
-- Stubb Creek straddling OML13 and the Licence
-- Uquo in OML67
Newcross has previously identified ten prospects and seven leads
in the area covered by the Licence. Four wells have been drilled in
the License area, resulting in four discoveries (two oil and two
gas):
-- Uda; drilled in 1972 (oil & gas discovery)
-- Okposo-East; drilled in 1980 (oil & gas discovery)
-- Mbo; drilled in 1990 (gas discovery)
-- Davy Bank; drilled in 1986 (gas discovery)
Preliminary resource estimates by Newcross, based on data from
these four wells, reported gross recoverable volumes of 29 million
barrels of oil and 333 Bcf of gas, upside of 33 million barrels of
oil and 476 Bcf of gas (recoverable). LEKOIL has verified these
estimates internally, but also intends to commission an independent
Competent Persons Report in due course. LEKOIL sees a clear
opportunity for re-entering one or more of these discovery wells,
with the potential for rapid monetization of resources due to
existing export facilities nearby.
The Company expects to finance the Acquisition and the costs of
the future asset work programme (the "Programme") with a
combination of its existing financial resources and a financing
solution with a strategic industry partner - discussions about
which have already commenced.
Further Detail on the Acquisition
-- Lekoil 276 Limited to acquire, subject to the receipt of the
required consents, a 45 per cent. participating interest in the PSC
from Newcross and to serve as Technical Partner; other holders of
participating interests in the PSC are Newcross holding 45 per
cent. participating interest (and Newcross is also the current
operator) and Albright holding the remaining 10 per cent.
-- Four wells have been previously drilled leading to existing
discoveries and three existing producing fields are less than 20
kilometres away with proven export options.
-- The Acquisition is conditional upon, among other things, the
extension of the term of the Licence and the PSC, obtaining the
consent of the Nigerian National Petroleum Corporation ("NNPC") and
obtaining the approval of the Minister of Petroleum Resources of
the Federal Republic of Nigeria (the "Ministerial Approval").
-- The application for extension has been filed with NNPC and
awaits approval from both NNPC and ultimately the Minister of
Petroleum Resources
-- The Consideration is payable as follows:
o US$750,000 to be held in escrow starting from the extension of
the term of the Licence and to be released upon receipt of the
Ministerial Approval;
o US$2.75 million to be paid after the Ministerial Approval is
obtained and upon occurrence of the conversion of the Licence to
Oil Mining Lease ("OML"); and
o US$1.5 million, to be paid within three months after the
receipt of first crude oil sale proceeds from continuous commercial
production from the PSC.
-- Lekoil 276 has also agreed to fund the costs of the Programme
attributable to Newcross and Albright and expects to recover all
such carried costs ("Cost Recovery"), more specifically:
o exact capital requirements for the Programme will be finalised
once the extension for the Licence is received;
o the Company does not anticipate any substantial capital
expenditure to be required for the Programme for the remainder of
2019; and
o Cost Recovery will be from crude oil sale proceeds structured
as follows:
Ø 80 per cent. of Newcross and Albright Cost Oil; and
Ø 70 per cent. of Newcross and Albright Profit Oil.
Commenting, Lekan Akinyanmi, LEKOIL's CEO, said, "The
acquisition of an interest in the OPL276 PSC represents an
excellent opportunity to further build our growing production base
in line with our stated strategy to create a balanced portfolio of
assets. With the completion of this, LEKOIL will have acquired a
potential near-term producing asset with significant resource
potential. We are optimistic about the prospects here, which have
shallow reservoirs and are cost efficient to develop. Our focus
will now shift to moving plans quickly forward for oil and gas
production. We look forward to working with our partners to unlock
additional value for our investors."
The Licence Background
The Licence was formerly operated by Shell Petroleum Development
Corporation (SPDC) as OML 14 until 2004. It is located in the
eastern Niger Delta basin at the estuary of the Calabar River,
within a transition zone, which consists of dry, flat land, fresh
water rain forest swamps, mangrove swamps and beaches in Akwa Ibom
State. The asset is partly onshore (land and swamp) and partly
shallow marine (tidal river estuary) block, comprising 524 sq. km,
of which around 250 sq.km is located offshore and 274 sq.km is
located onshore. Discoveries have previously been made in the
Licence (Uda, Okposo East, Mbo and Davy Bank Fields). The Licence
is in the PSC signed in 2006, with Nigerian National Petroleum
Corporation as the Licence holder and, prior to the Acquisition,
Newcross (90 per cent., Operator) and Albright (10 per cent., Local
Content Vehicle) as the contractor parties. As per unaudited
management accounts prepared by Newcross, as at 31 July 2019, the
Licence reported total assets of US$55 million.
Review by qualified person
Samuel Olotu, Executive Vice President, Technical and technical
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.
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 +44 20 7920 3150
Strand Hanson Limited (Financial &
Nominated Adviser)
James Spinney / Ritchie Balmer / Eric
Allan +44 20 7409 3494
Mirabaud Securities Limited (Joint
Broker) +44 20 7878 3362 / +44 20 7878
Peter Krens / Edward Haig-Thomas 3447
Numis Securities Limited (Joint Broker)
John Prior / Emily Morris +44 20 7260 1000
Tavistock (Financial PR)
Simon Hudson / Barney Hayward +44 20 7920 3150
-ends-
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END
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