First Oil update
Lekoil prepares for production at Otakikpo
Lekoil (AIM: LEK), the oil and gas exploration and development company with a focus on Nigeria and West Africa more generally, is set to commence production at the Otakikpo Marginal Field, offshore Nigeria. As final preparations are underway, the company’s aim of ‘shaping the future of oil exploration in Africa’ moves one step closer. Yet it is only one step of many for this innovative, ambitious company.
When Lekoil acquired a 40 per cent participating and economic interest in the Otakikpo Marginal Field in 2014, the gross unrisked Contingent Resources (2C) were estimated to be 36 mmbbls. Today, on the brink of production and following an AGR TRACS report in September 2014, those resources are now estimated at 56.5mmbbls, over 50% up on initial figures.
It is an outcome that bears testament to Lekoil’s strategy of applying experience and innovation to unlocking opportunity. Now production at the Otakikpo field - sited in a coastal location in OML 11, adjacent to the shoreline in the south-eastern part of the Niger Delta – is starting materially ahead of schedule.
Watching the vision take root
Mr Hamilton Esi, Lekoil’s Head of Corporate Communications explains how production status has been reached ahead of target: “It has been a combination of front-loading the project and making full use of our creativity, as well as deploying effective project managers at all levels. We have also focused on quick wins and ensured we have a solid plan B.”
He is delighted to have reached this point: “It feels fulfilling, a lot like watching the vision take root and grow into a reality. It’s a proud achievement for a young company and is testament to the strength and capability of our technical team to deliver on the right deal, on budget and on time.”
Break even under $30 per barrel
Mr Esi gave an insight into the final preparatory work now underway: “We’re currently making a lot of pre-startup checks on site across a wide range of services, from the rig mobilization to the Early Production Facility and pipeline preparations.”
Once live, production will break even at under $30. In a market that has punished high production costs over the past 18 months, Mr Esi confirms that Lekoil’s “out-of-the-box thinking and the ability to capitalize on the impact of the low oil price environment on service vendors” has enabled the company to keep costs low.
Shaping the future of oil exploration in Africa
Otakikpo is just the start of Lekoil’s production plans. “We aim to continue the development of Lekoil’s portfolio through further acquisitions of assets divested by both international and national oil companies, or by farm-ins to under-producing assets from indigenous owners,” says Lekoil Chairman, Mr Samuel Adegboyega. “Geologically and technically, we remain attracted to the Atlantic Transform Margin offshore Africa’s west coast and commercially we are attracted by the opportunities we believe will continue to emerge from Nigeria’s policy to indigenise its oil and gas industry.”
“Given the low oil price environment and capital constraints for many smaller E&P companies, we expect to see many more opportunities over the course of the next 12 months. However, our main focus during 2015 will be on enhancing shareholder value through the development and monetisation of Otakikpo, while continuing to de-risk our other interests.”
“We remain committed to being a global influence in oil and gas,” explains Mr Esi. “One of the ways we achieve that is by holding true to our goal of shaping the future of oil exploration in Africa. That is why we continue to grow a portfolio aligned with our corporate strategy. And it is why we continue to focus on our people - our most valuable resources.”
Lekoil and Otakikpo
Lekoil enters into a farm-in agreement with Green Energy to acquire a 40 per cent participating interest and economic interest in the Otakikpo Marginal Field.
AGR TRACS reports in that the gross unrisked Contingent Resources (2C) for Otakikpo are estimated to be 56.74 mmbbls Field Development Plan approved by the Nigerian Ministry of Petroleum.
Lekoil announces an update to the September 2014 CPR on Otakikpo by AGR TRACS, converting Resources into Reserves.
Lekoil anticipates the completion of Phase 1 of the FDP, the re-entry of the 002 and 003 wells and the implementation of an early production facility and export facilities.