21st Jan 2015 10:02
LONDON (Alliance News) - Lekoil Ltd Wednesday said it has received an independent update on the Otakikpo Marginal field in Nigeria which has seen the resources at the project turned into reserves, significantly enhancing the economics of the project.
Lekoil Nigeria holds a 40% stake in the Otakikpo Marginal field, with the Nigerian government holding the balance. Lekoil Ltd holds a 90% stake in Lekoil Nigeria, giving it a 36% interest in the field.
The latest review and update, conducted by AGR TRACS International Ltd, has estimated that 2P proved and probable reserves in the field total 14.99 million barrels of oil and 2C unrisked gross contingent resources of 41.6 million barrels of oil.
Together, this creates a 2P Phase 1 reserve of 56.6 million barrels of oil, which is the equivalent of the resource announced in September 2014, said the company.
Of the new 2P reserve, 20.3 million barrels will be attributable to Lekoil.
The latest economic evaluations for the field have indicated the project is "robust" with a net present value of USD77.2 million under a USD40 per barrel environment, rising to USD365 million under an USD80 per barrel scenario. The project's net present value fluctuates on the tax status the company will hold, which it does not know yet.
"The accelerated work programme scenario may be the optimal route to production if the company secures Pioneer Tax status," said Lekoil.
Pioneer Status is a tax holiday granted to qualified or eligible industries anywhere in the country and a seven-year tax holiday in respect of industries located in economically disadvantaged areas. It is aimed at enabling companies to make a reasonable level of profit within its formative years to plough back into the business.
Four nearby exploration prospects were also identified within the Otakikpo acreage, which could potentially add a further 162.8 million barrels of oil to the project, with possible further extensions to the southern part of the field, Lekoil said.
"The Otakikpo project is robust and production, once commenced, will provide valuable cash flow from phase one that will enable us to develop additional resources in phase two," said Chief Executive Lekan Akinyanmi.
"2P reserves identification is one of the key criteria required by potential providers of debt financing and progress has been made to date with regards to securing a facility, the proceeds of which would be used to part or fully fund an accelerated work programme scenario," said Lekoil.
Lekoil shares rose 4.9% to 21.25 pence per share on Wednesday.
By Joshua Warner; [email protected]; @JoshAlliance
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