Lekoil Announce Otakikpo Marginal Field Project Update
Lekoil (AIM: LEK), the oil and gas exploration and development company with a focus on Nigeria and West Africa, provides an update on its progress on the Otakikpo Marginal Field (“Otakikpo”) in oil mining lease (OML) 11, offshore Nigeria, adjacent to shoreline in the eastern part of the Niger Delta.
Lekoil, the Technical and Financial Partner in the Otakikpo project (Lekoil: 40 per cent. participating and economic interest) and its partner Green Energy, have secured approvals for the well re-entry plan. The Company has also commenced a phased re-entry plan, fully funded with cash on hand, to reach production. Earlier in the year, the Company had announced that it expected to begin production in the second half of 2015. Based on the updated phased approach, we are pleased to announce that production is now expected in the first half of 2015, six months ahead of the previous schedule. Under the terms of the acquisition of the interest in Otakikpo, Lekoil will fund costs to first oil and be entitled to recover this expenditure preferentially.
Based on our internal analysis and assumptions, which incorporate the AGR Tracs CPR data, the Company will breakeven at an oil price of less than $30 per bbl (life of field basis) with the lifetime unit costs being in the mid to low double digits. This analysis does not include the potentially positive impact of the Pioneer Tax status which is currently being applied for. The indicative costs to first oil are substantially lower than expected due to more favourable service costs in the tenders received so far. Contracting has commenced for the rig, well services and production facilities construction. Rig mobilisation is initially expected within the first quarter of 2015 at the same time as construction and the subsequent commissioning of production facilities.