Lekoil: Otakikpo field 2C reserves ‘significantly’ upgraded

The Otakikpo is a marginal Field in the oil mining lease (OML) 11, offshore Nigeria, adjacent to the shoreline in the eastern part of the Niger Delta. Lekoil Nigeria holds 90 per cent. of the economic interests in Lekoil Nigeria.

AGR TRACS International Ltd (“AGR TRACS”) carried out a comprehensive review of the surface and subsurface data provided by Lekoil. Following the review, AGR TRACS reported that the gross unrisked 2C Contingent Resources for Otakikpo were estimated to be 56.75 mmbbl.

This compares to the 36 mmbbl of gross oil resources in the most recent 2C resource estimates available at the time of the Company’s acquisition of the interest in Otakikpo in May 2014 through Lekoil Nigeria’s wholly owned subsidiary Lekoil Oil and Gas Investments Limited.Economic evaluations were also carried out by AGR TRACS, in respect of Lekoil’s estimated net resources, under US$80, US$100 and US$120 oil price scenarios for the economic life of the field, which indicate that the planned development of Otakikpo is a robust project under all three oil price scenarios, Lekoil has explained.In addition, Stock Tank Oil Initially In Place (STOIIP) ranges have been estimated by AGR TRACS for four exploration prospects within the onshore part of the Otakikpo acreage and, in total, these are estimated (on a P50, unrisked basis) to contain potential gross aggregate Oil in Place volumes of 162.8 mmbbl. The Company also believes that additional prospectivity exists in the southern (shallow water) portion of the acreage which will be defined by further studies and appraisal in due course.The consideration for the acquisition of Lekoil’s interest in Otakikpo comprised a signature bonus of US$7 million and, contingent on production and ministerial consent, a production bonus of US$4 million. In addition, Lekoil will fund costs to first oil and be entitled to recover this expenditure preferentially from 88 per cent. of production cash flow from Otakikpo.

Lekan Akinyanmi, Lekoil’s CEO, said, “As the Technical & Financial Partner, we are very pleased that AGR TRAC’s review has confirmed our initial view of the attractiveness of the Otakikpo project. This CPR increases estimated unrisked oil resources net to Lekoil by over 45% and has reinforced the economics of the development. This is a robust project that will provide us with near term production, cash flow and exploration upside as we continue to pursue our wider goal of becoming a much larger, Africa-focused E&P company.”