Lekoil Renews Offtake Agreement with Shell

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LEKOIL, an exploration and production company has confirmed that it has requested, and received, from AIM Regulation a three-month extension to the filing deadline for its audited financial results for the year ended 31 December 2019.

The extension allows the company until 30 September 2020 to finalise and publish its 2019 audited annual results. The extension was sought due to the disruptions of working practices, particularly for the company’s auditors, caused by the pandemic.

The company said yesterday that it is publishing its 2019 audited annual results in advance of 30 September 2020, with the current target of July 2020. In the highlights of the audited report, Lekoil said it provided the following trading and operational update: Implemented general and administrative (G&A”) cost reduction measures (including reduced headcount, office space and provider costs) with annual run rate of $10.0 million from the second half of this year.

According to the statement from the group, as at 31 May 2020, the Group’s borrowings stood at $17.5 million, with cash balance of US$0.7 million. As at 25 June 2020, the Group had a cash balance of US$3.4 million.

Also, constructive discussions regarding restructuring of current loans to reduce quarterly amortization are ongoing. There is renewed offtake agreement with Shell Western Supply and Trading Limited for at least another year with potential to extend for a further year following the provision of a prepayment facility.

Average production for the first five months of the year was 5,755 bopd gross with 2,302 bopd net to LEKOIL Investments Limited (“LOGL”), the company said.

LOGL is a wholly owned subsidiary of Lekoil Limited, which the Company has a 90% economic interest. LOGL lifted 372,136 barrels in equity crude this year through its nominated offtaker, Shell Western Supply and Trading Limited.

The last lifting occurred on 25 May 2020 with cash proceeds of $2.7 million received by the Company on 25 June 2020. The next lifting, of a similar quantity, is expected to occur in mid July 2020.

On OPL 310, the company announced that it has renewed its offtake agreement with Shell Western Supply and Trading Limited which was due to expire in the second quarter of this year. The offtake agreement has been renewed for a year with the possibility to renew for a further additional year following the provision of a prepayment facility.

Following the approval from the Board for an immediate and accelerated implementation of the Company’s general and administrative cost reduction initiatives as announced on 3 April 2020, the company has significantly reduced staff numbers, office space and provider costs. With the implementation of these initiatives, the Company expects an annual run rate G&A of $10.0 million from the second half of this year.

The company said it will continue to work with its key partners to explore cost reduction initiatives within operations such that during this reduced oil price environment, further flexibility in liquidity is achieved without disrupting production performance.

Chibisi Ohakah, Abuja

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