Lekan Akinyanmi, CEO of LEKOIL said, “This MOU is a significant milestone for LEKOIL and the Otakikpo JV.
It secures the necessary funding, subject to the various conditions being satisfied, to drill additional wells and unlock further value at Otakikpo. We are pleased to be working with Schlumberger (who brings world class implementation) and other members of the consortium. We look forward to the transformation of operations infrastructure and an opportunity to earning revenue along the value chain”.
LEKOIL (AIM: LEK), the oil and gas exploration and development company with a focus on Nigeria and West Africa more generally, is pleased to announce the Otakikpo Joint Venture (JV) between Green Energy International Limited (“GEIL”) and LEKOIL (with LEKOIL as Technical Partner). The JV has signed a Memorandum of Understanding (“MOU”) with Schlumberger and a subsidiary of a major international oil company which has been operating in Nigeria for more than half a century (“Major Oil Company”).
The MOU covers a comprehensive infrastructure sharing and drilling programme around a group of marginal field assets in OML 11. Standard Chartered Bank (“SCB”) is to act as the lead financial advisor for the Project and perform financial advisory, security and banking services required for the Project.
The phased development plan of the project consists of drilling up to five new wells in Otakikpo, expanding processing infrastructure to comprise an onshore terminal to be located outside the Otakikpo field operations area, construction of an export pipeline connecting the onshore terminal to an offshore buoy to handle Otakikpo and other fields in OML11.
The Otakikpo Joint Venture will partake in the costs of its field development with funds provided for such participation by the development consortium (“Consortium”) (see below for further details). Project management and associated asset management costs provided by Schlumberger will be shared between the Otakikpo Joint Venture and the operators and owners of other marginal fields participating in the Project.
Capital expenditure to be incurred by the Otakikpo Joint Venture is expected to be approximately US$170 million covering new wells and processing infrastructure, of which LEKOIL is expected to fund US $68 million. The anticipated costs consist of debt repayment to financing parties, including the Major Oil Company, in addition to a project implementation fee paid to Schlumberger. Repayment of the facilities anticipated to be provided to the Otakikpo Joint Venture pursuant to the project will be made from production revenues from Otakikpo, in priority to any existing lending facilities (subject to agreement with existing lenders), future CAPEX and returns to equity holders.
Under the terms of the MOU, the Major Oil Company will provide funding to the Otakikpo Joint Venture alongside the other funding partners, subject to due diligence, project economics, entry into definitive documentation and final investment decision. The Otakikpo Joint Venture will enter into an exclusive offtake agreement with the Major Oil Company for the sale of crude produced pursuant to this project. Schlumberger will act as technical and project execution partner to provide oilfield services and project management services to assist in ramping up production and long-term field management. The Consortium will also form multidisciplinary project management teams from LEKOIL and GEIL.
Due diligence will be undertaken and the financial terms and cost of capital will be finalized following final investment decision. The final investment decision is subject to the satisfaction of customary conditions precedents, including the credit committee approval of financing parties and the execution of definitive project agreements. Site mobilisations are tentatively scheduled for late Q3 2019.
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