LEKOIL (AIM: LEK), the oil and gas exploration and production company with a focus on Nigeria and West Africa, announces that it has requested, and received, from AIM Regulation (further to guidance provided by it in Inside AIM on 26 March 2020) a three-month extension to the filing deadline for its audited financial results for the year ended 31 December 2019. The extension, which allows the Company until 30 September 2020 to finalise and publish its 2019 Audited Annual Results, was sought due to the disruptions of working practices, particularly for the Company’s auditors, caused by the COVID-19 pandemic.

The Company intends to publish its 2019 Audited Annual Results in advance of 30 September 2020, with the current target of July 2020. In the meantime, the Company is pleased to provide the following trading and operational update.

 

Key summary

·      Implemented general and administrative (G&A”) cost reduction measures (including reduced headcount, office space and service provider costs) with annual run rate of US$10.0 million from the second half of this year

·      As at 31 May 2020, Group borrowings of US$17.5 million, with cash balance of US$0.7 million. As at 25 June 2020, the Group had a cash balance of US$3.4 million

·      Constructive discussions regarding restructuring of current loans to reduce quarterly amortisation ongoing

·      Renewed offtake agreement with Shell Western Supply and Trading Limited for at least another year with potential to extend for a further year following the provision of a prepayment facility

·      Average production for the first five months of the year was 5,755 bopd gross with 2,302 bopd net to LEKOIL Oil and Gas Investments Limited (“LOGL”). LOGL is a wholly owned subsidiary of Lekoil Nigeria Limited, which the Company has a 90 per cent. economic interest

·      LOGL lifted 372,136 barrels in equity crude this year through its nominated offtaker, Shell Western Supply and Trading Limited. The last lifting occurred on 25 May 2020 with cash proceeds of US$2.7 million received by the Company on 25 June 2020. The next lifting, of a similar quantity, is expected to occur in mid July 2020.

·      Successful completion of site survey on OPL 310

 

Corporate Update

The Company is pleased to announce that it has renewed its offtake agreement with Shell Western Supply and Trading Limited which was due to expire in the second quarter of this year. The offtake agreement has been renewed for a year with the possibility to renew for a further additional year following the provision of a prepayment facility.

Following the approval from the Board for an immediate and accelerated implementation of the Company’s general and administrative (“G&A”) cost reduction initiatives as announced on 3 April 2020, the Company has significantly reduced staff numbers, office space and service provider costs. With the implementation of these initiatives, the Company expects an annual run rate G&A of US$10.0 million from the second half of this year. The Company continues to work with its key partners to explore cost reduction initiatives within operations such that during this reduced oil price environment, further flexibility in liquidity is achieved without disrupting production performance.

As at 31 May 2020, the Group had cash and bank balance of US$0.7 million, and debt of US$17.5 million. As at 25 June 2022, the Group had cash and bank balance of US$3.4 million.

 

Portfolio Update

Otakikpo

On behalf of the Otakikpo Joint Venture (“Otakikpo JV”) which is made up of Green Energy International Limited (“GEIL”), the Operator of the Otakikpo Marginal Field, and the Technical Partner, LEKOIL Oil and Gas Investments Limited (“LOGL”), a member of the LEKOIL Limited group, an update on operational performance for the Otakikpo Marginal Field (“Otakikpo”) in OML 11 is as follows:

·      Despite the wider impact of COVID-19, operations continue to run effectively. For the first five months of the year, production at Otakikpo averaged 5,755 bopd gross with 2,302 bopd net to LOGL

·      LOGL reported revenue of US$13.9 million over the same period, which represents LOGL’s share of crude oil sales from its Otakikpo operation during the period (“equity crude”)

·      LOGL lifted 372,136 barrels in equity crude this year in three liftings through its nominated offtaker, Shell Western Supply and Trading Limited (“SWST”) (a member of the Royal Dutch Shell plc group of companies)

·      The third lifting for the year occurred on 25 May 2020, with cash proceeds of US$2.7 million received by the Company on 25 June 2020 in line with the offtake agreement

·      The next lifting, of a similar quantity, is expected to occur in mid July

·      As at 31 May 2020, LOGL had 75,604 barrels of equity crude stored as inventory

As at 31 May 2020, LOGL has an outstanding balance (including accrued interest) of interest-bearing term loans of US$17.5 million. This outstanding balance is detailed in the table below:

Lender

Facility Type

Pricing

Maturity Date

Outstanding Balance

FBNQuest Capital Limited

Term loan with quarterly repayment

LIBOR + 10.00%

30-Jun-21

US$2.5 million

FBNQuest Merchant Bank Limited

Term loan with quarterly repayment

LIBOR + 10.00%

30-Jun-21

US$4.3 million

FBNQuest Merchant Bank Limited

Term loan with quarterly repayment

LIBOR + 10.00%

24-Oct-23

US$10.7 million

Total debt outstanding

US$17.5 million

 

LOGL is in discussions with its existing lenders to restructure its current loans with a view to reducing quarterly amortisations following the extension of the loans. It is expected that these discussions will be completed before servicing of the next quarterly payments.

 

OPL 310

The Company, on behalf of the Optimum Petroleum Development Company (“Optimum”), the Operator of the OPL 310 License, and LEKOIL Nigeria Limited, a member of the LEKOIL Limited group, announces the successful completion of the site survey on OPL 310.

As part of the two-well appraisal programme, the site survey required to evaluate top-hole drilling, jack-up rig and potential platform foundation hazards and any seabed obstructions was successfully completed in the first quarter of this year without any reported personnel injuries or damage to the environment. All data acquisition objectives were met during the operations which were completed before the scheduled expiration of the approval received to undertake the site survey from the Department of Petroleum Resources (“DPR”). With the site survey completed, Optimum and LEKOIL can finalise the selection of the appropriate rig to commence appraisal drilling.

 

Lekan Akinyanmi, LEKOIL’s CEO, commented, “Cashflows generated at Otakikpo in conjunction with our significant cost reduction initiatives have been key for us as we remain committed to creating value for our shareholders. We will continue to proactively review options for further cost savings where appropriate. We are working closely with all our partners, including GEIL and Optimum, in these challenging times to deliver on our joint ambitions. We thank all of our shareholders for their continued patience which we have every confidence will be justified, especially as the wider outlook improves.”

The information contained within this announcement is deemed by the Company to constitute inside information stipulated under the Market Abuse Regulation (EU) No. 596/2014.  Upon the publication of this announcement via the Regulatory Information Service, this inside information is now considered to be in the public domain.

 

Source: Lekoil

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