LEKOIL (AIM: LEK), the Africa focused oil and gas exploration and production company with interests in Nigeria, announces its final audited results for the year to 31 December 2018.
· Production levels averaged approximately gross 5,345 bopd, (2,076 bopd net to LEKOIL)
· Phase Two preparations for development commenced with acquisition of 3D seismic in February, with an updated CPR being finalised ahead of publication
· Subject to agreement on funding with one or more industry partners, plans underway for a three to five well drilling programme, targeting to increase production levels to approximately gross 15,000 to 20,000 bopd (6,000 – 8,000 bopd net to LEKOIL)
· Plans have advanced for the OGO appraisal drilling programme with well locations selected. Funding discussions are currently underway with certain industry partners.
· Despite this, the Federal High Court ruled that LEKOIL’s acquisition of Afren Oil and Gas (Nigeria) Limited (“AIOGNL”) (and its 22.86% interest in OPL 310) inchoate and invalid given the failure to obtain Ministerial consent.
· In response LEKOIL has withdrawn its lawsuit and continues engagement with its partner, Optimum Petroleum Development Limited (“Optimum”), and the regulator, to conclude agreements and resolve all outstanding issues
· The OPL 310 licence has lapsed, however Optimum in its capacity as Operator has begun the extension process and whereas there is no guarantee that the licence will be renewed, LEKOIL is hopeful for a favourable response from the regulators in this regard
· Technical Evaluation completed in January 2018 by consultants Lumina identified and reported on 11 prospects and leads which were estimated to contain potential gross aggregate Oil-in-Place volumes of over 5,700 mmbbls (un-risked, Best Estimate case)
· After finalising terms for a Production Sharing Contract on the block, LEKOIL intends to farm-down a portion of its 62 per cent. working interest following a detailed prospect/lead risking study
· Equity crude sales proceeds of US$48.7 million
· Total entitlement crude consisted of 1,346,525 total barrels net to LEKOIL
· The Group lifted 1,305,888 barrels of its entitlement, realising an average sales price of approximately US$66 per barrel
· Loss for the year of US$7.8 million (2017: profit of US$6.5 million)
· Cash and bank balances of US$10.4 million as at 31 December 2018 (31 December 2017: US$6.9 million, 30 June 2018: US$9.8 million). Cash at 31 May 2019: US$13.1 million
· As at 31 December 2018, total outstanding debt financing, net of cash, was US$10.1 million (2017: US$22.6 million)
· Target of 25% reduction of general and administrative costs annually, including Board remuneration.
LEKOIL’s annual report and accounts for the year ended 31 December 2018, together with the Notice of Annual General Meeting will be posted to shareholders shortly and a further announcement will be made as and when this has occurred. The Company also intends to publish an operational update and financial guidance for FY2019 in short order.
CEO, Olalekan Akinyanmi, said: “The priority for 2019 is to grow production volumes at Otakikpo through Phase Two development (subject to funding) to reach gross volumes of 15,000 to 20,000 bopd. The first step has already occurred, with 3D seismic data acquisition and interpretation now completed.
“We also continue to advance toward the start of the appraisal drilling programme on Ogo in OPL 310. We will work with our joint venture partner, Optimum to negotiate agreements that will allow us to make progress on the block, after securing all relevant regulatory extensions and approvals.
“In light of delays to key initiatives on assets, the Company is taking action on general and administrative costs with the aim of a reduction of 25% annually including a 25% cut in Board remuneration.
“The next year should therefore provide key catalysts for value appreciation for shareholders as we move forward in building a leading Africa-focused exploration and production business.”