Page 4 - AfrOil Week 25

AfrOil InvEstmEnt AfrOil
Lekoil drops Ogo suit on renewal hopes
nIgERIa
LONDON-LIStED Lekoil continues to strug- gle with the acquisition of a stake in OPL 310, o shore Nigeria. e company has been forced to drop its legal appeal against the government on the licence, while rising costs – particularly for administration – led it to post a loss for 2019.
Announcing its nal results on June 19, the Nigerian company said the Federal High Court had found its acquisition of Afren Oil and Gas (Nigeria) to be invalid, given the lack of minis- terial consent. is company had a 22.86% stake in OPL 310. Afren went into administration in mid-2015.
e company’s CEO, Olalekan Akinyanmi, said Lekoil continued to make progress on appraisal drilling plans for OPL 310, which holds the Ogo eld. “We will work with our joint venture partner, Optimum [Petroleum Develop- ment] to negotiate agreements that will allow us to make progress on the block, a er securing all relevant regulatory extensions and approvals,” he said.
e court ruled, in March, that the acquisi- tion required ministerial consent. Lekoil had planned to appeal but opted to drop the issue instead. e Ministry of Petroleum Resources had told the company that an extension on the licence – or re-award – would not be considered until the suit was withdrawn. Lekoil also holds a 17.14% stake in the licence, via Mayfair Assets & trust.
e legal action was dropped in mid-May. e 10-year licence lapsed in February. Lekoil said its partner on the block, Optimum, had begun the extension process.
A well drilled on the licence in 2013 found a gross recoverable resource of 774
million barrels of oil equivalent,
with a number of promising signs
of further potential discovered. OPL 310 is in the Dahomey Basin, around 50 km from OPL 325. Lekoil has a 62% stake in OPL 325, with the company planning to farm out some of its stake in this block, following a detailed pros- pect study. A process to identify partners should begin by the end of this year. A study from early 2018 put potential gross aggregate oil in place volumes at more than 5.7 bil- lion barrels, in 11 prospects. Lekoil agged up the deepwater turbidite
fan play in this licence.
otakikpo
e sale of crude from its Otakikpo eld provided the company with US$48.7 million. Of its total allo- cation of 1.35 million barrels, the
company lifted 1.31 million barrels, with an average sales price of US$66 per barrel.
Despite this, the company posted a loss for the year of US$7.8 million, versus a 2017 pro t of US$6.5 million. While the company waits for progress, it aims to reduce spending on administration costs by 25% – with board remuneration down by 25%. As of the end of May, it had US$13.1 million in cash. e eld is in the swampy OML 11, in the Niger Delta’s southeast, and it began producing in February 2017.
Underlying cost of sales accounted for US$18.1 million in 2018, from US$15.9 mil- lion in 2017. Operating expenses were US$7.9 million, down from US$11.32 million in the previous year. e largest share of costs went on administration, which reached US$19.1 million, up from US$17 million in 2017.
Seismic was acquired in November on the eld, which will provide a new competent per- son’s report (CPR). Lekoil is the technical part- ner on the development, while Green Energy International is the operator.
Under the terms of its entry into the Otakikpo eld, Lekoil paid for work to rst oil, in return gaining 88% of production cash ow. e cost recovery phase has now ended, reducing the company’s share to 40%.
Production has declined over 2018, to 5,345 barrels per day (bpd), of which 2,076 bpd was net to Lekoil. In December 2017, it reached 7,600 bpd gross. e eld plan had predicted volumes to reach 10,000 bpd but this was not achieved, with Lekoil blaming compartmental- isation issues.™
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Week 25 25•June•2019