Lagos — The embattled indigenous oil and gas firm, Lekoil is looking for a way out of its huge debt by hunting for a third party to fund the development of the Oil Prospecting License, OPL 310 in Ogo field containing an equivalent of 750 million barrels of oil.
According to findings, there is already an agreement with its partner, Optimum to sell its 22.86 percent shares in the oil block to any willing buyer to get funds for the block.
The firm has a 17% equity on the lease but is currently lobbying to get an approval for another 22.86% equity which it purchased with $13 million from Afren in 2015.
The 22.86 percent stake was sold to Lekoil by Afren who bought it from Optimum, the holder of the license. Lekoil’s inability to get approval for the new stake was due to a disagreement with Optimum, delaying the development of the block.
Already, the firm lost out after it sued the Minister of Petroleum who is also Nigeria’s president, Muhammadu Buhari last year, for not approving the buy for four years.
Now, both Optimum and Lekoil have agreed that a third party should be brought in to raise funds.
Earlier this year, a Federal High Court sitting in Lagos, and presided by Justice Sule Hassan ruled that Lekoil’s acquisition of an interest in the OPL 310 block still requires consent from the then Minister of Petroleum Resources, Dr. Ibe Kachikwu.
Justice Hassan stated that the Executive Order issued by the Nigerian Acting President, Prof. Yemi Osinbajo in 2017, which should have deemed the Consent to have been granted, could not supersede the powers of the Minister of Petroleum Resources to grant such Consent.
More specifically, the Judge disagreed that the Consent could be deemed granted and obtained in default which Lekoil believes is contrary to the provisions of the Executive Order.
The Judge further noted that the Executive Order was signed in 2017, while Lekoil’s application for the Consent to acquire the 22.86% participating interest in the block was made in 2016 and so could not be applied retroactively.
Based on the judgment, the OPL 310 interest is still held by the seller, Afren Investments Oil and Gas Nigeria Ltd although Afren had confirmed its sale. Lekoil still holds a 17.14% participating interest in the block which received ministerial consent back in 2017.
Lekoil’s 2018 financial results showed that it had lost significant ground in terms of profit, compared to 2017 when the young company’s profit stood tall at US$6.5 million.
It, however, indicated that its strategic investments this year could lead to an additional 15,000-20,000bopd increase in national oil production in 2019.
Lekoil to farm down part of 62 interest in OPL 325
The company has also said it intends to farm-down a portion of its 62 percent working interest in Oil Production License, OPL 325.
The management of the company made this disclosure in a statement that accompanied its 2018 financial report, adding that the step will be taken after a detailed prospect/lead risking study on the block.
It said technical evaluation on OPL325 has been completed with 11 prospects and leads estimated to contain potential gross aggregate Oil-in-Place volumes of over 5,700 mmbbls (un-risked, Best Estimate case) identified.
Production at the Otakikpo marginal field averaged approximately 5,345 bopd, adding that strategic decisions and steps towards increasing production has commenced, the report said.
At the Otakikpo marginal field, Phase Two preparations for development has commenced with the acquisition of 3D seismic data acquisition and interpretation, while an updated Competent Person’s Report, CPR has nearly been completed.
Though it posted a loss of $7.8 million in the 2018 financial year, as against profit of $6.5 million in 2017, there are plans to ramp up production at the Otakipko marginal fields to approximately 15,000 to 20,000 bopd. Subject to agreement on funding with partners, plans are underway for a three to five well drilling programme with the aim of meeting the production target.