LEKOIL has agreed to acquire, subject to the receipt of the required consents, via Lekoil 276, a 45 per cent participating interest in the Production Sharing Contract (‘PSC’) in relation to the Oil Prospecting Licence 276, covering a territory located onshore in the eastern Niger Delta basin.
The agreed acquisition, from Newcross Petroleum, is for a total staged consideration of US$5million, which is payable subject to the milestones listed in the highlights below.
Lekoil 276 will also enter into an Interim Governance Agreement with Newcross and Albright Waves Petroleum Development setting out the terms on which Lekoil 276 will provide technical support to the PSC.
The Acquisition is consistent with the Company’s continuing strategy to assemble a balanced portfolio of oil and gas interests, which already include production (Otakikpo), appraisal (OPL310) and high impact exploration assets in known basins (OPL325).
The Licence is covered by approximately 150 km2 of 3D seismic, shot in 2008 by BGP Inc., a subsidiary of China National Petroleum Company (CNPC), as well as various 2D seismic surveys. It is in close proximity to three existing producing fields, all less than 20 kilometers away.
Newcross has previously identified ten prospects and seven leads in the area covered by the Licence. Four wells have been drilled in the License area, resulting in four discoveries (two oil and two gas): Uda; drilled in 1972 (oil & gas discovery); Okposo-East; drilled in 1980 (oil & gas discovery); Mbo; drilled in 1990 (gas discovery); Davy Bank; drilled in 1986 (gas discovery).
Preliminary resource estimates by Newcross, based on data from these four wells, reported gross recoverable volumes of 29 million barrels of oil and 333 Bcf of gas, upside of 33 million barrels of oil and 476 Bcf of gas (recoverable).
LEKOIL has verified these estimates internally, but also intends to commission an independent Competent Persons Report in due course. LEKOIL sees a clear opportunity for re-entering one or more of these discovery wells, with the potential for rapid monetization of resources due to existing export facilities nearby.
The Company expects to finance the Acquisition and the costs of the future asset work programme with a combination of its existing financial resources and a financing solution with a strategic industry partner – discussions about which have already commenced.
Commenting, Lekan Akinyanmi, LEKOIL’s CEO, said: “The acquisition of an interest in the OPL276 PSC represents an excellent opportunity to further build our growing production base in line with our stated strategy to create a balanced portfolio of assets.
“With the completion of this, LEKOIL will have acquired a potential near-term producing asset with significant resource potential. We are optimistic about the prospects here, which have shallow reservoirs and are cost efficient to develop.
Our focus will now shift to moving plans quickly forward for oil and gas production. We look forward to working with our partners to unlock additional value for our investors.”