LEK.L Regulatory News (LEK)

20 June 2016

Lekoil Limited

("Lekoil" or the "Company")

FBN Capital Re-Financing and Operations Update

Lekoil (AIM: LEK), the oil and gas exploration and development company with a focus on West Africa, announces today the refinancing of an existing debt facility and the completion of a new debt facility raising, in aggregate, US$20 million and provides an operation update for Otakikpo.

Otakikpo Operational Update

Otakikpo-002 has been completed, evacuation facilities are nearing completion and the rig has been mobilised to Otakikpo-003. The Company is nearing commercial production and first cargoes are expected to be lifted in Q3 2016. The Company is targeting production of 10,000 bopd by year-end 2016 and will then proceed to phase two of the Otakikpo Field Development Plan, with new wells planned to bring aggregate production to a target of 20,000 bopd by the end of 2017, subject to requisite approvals.

Debt Financing Update

Lekoil has refinanced its existing US$10 million Notes Issuance Agreement ("NIA") with FBN Capital Limited ("FBN") and has secured a new 2 billion Naira (approximately US$10 million at the Central Bank of Nigeria exchange rate of 199NGN:1USD at time of execution) facility from FBN.

Further details on the funding are as follows:

A two-tranche facility arrangement for US$10 million and 2 billion Naira (approximately US$10 million).

• The US$10 million facility has a maturity of three years and is repayable quarterly after a six-month moratorium with a margin of 11.25% over LIBOR. The existing NIA bridge facility, of which US$5 million was due May 2016, has been extended to August 2016 and subsequently refinanced into the new USD facility.

• 2 billion Naira (US$10 million). This new facility has a maturity of three years, is repayable quarterly with ten quarterly instalments after a six-month moratorium. The notes have an interest rate referencing the higher of the 30-day average of 90 day NIBOR + 6% or 20%.

Following the successful drill stem tests at Otakikpo which produced oil flows in excess of Company expectations, the Company reconfirms that it is on track to complete Otakikpo within the original US$82 million capital expenditure budget that was estimated in 2014. 

As an indigenous Nigerian E&P company, Lekoil is pleased to secure funding from one of the key local lenders, FBN. The Company has the flexibility to pay a portion of its costs in Naira, and expects to draw down on the Naira facility as needed. The facility has no pre-payment penalty. 

Lekan Akinyanmi, Lekoil's CEO, said, "I am delighted that we have secured this facility with local lender FBN. This funding represents a strong endorsement of our asset's value in this market environment and provides validation of our strategy to secure non-dilutive funding from near term commercial production. We appreciate FBN's support, and look forward to building a long-term relationship with them." 

For further information, please visit www.lekoil.com or contact:

Background to Otakikpo

Otakikpo is sited in a coastal swamp location in oil mining lease (OML) 11, adjacent to the shoreline in the south-eastern part of the Niger Delta. Lekoil Nigeria exercises the rights and benefits of its 40% Participating and Economic interest in Otakikpo via the Farm-in Agreement and Joint Operating Agreement signed on 17 May 2014 with Green Energy International Limited ("GEIL").

The Company holds 90% of the economic interests in Lekoil Nigeria. Lekoil Limited's economic interest in Otakikpo therefore equates to 36%. The Otakikpo Joint Venture (Lekoil as Financial and Technical Partner to GEIL) began operations in December 2014. Ministerial consent was granted by the Honourable Minister of Petroleum Resources of Nigeria in June 2015.

The Otakikpo Field Development Plan consists of two phases. Phase 1 comprises the recompletions of two wells, Otakikpo-002 and Otakikpo-003, with the installation of an Early Production Facility of 10,000 bopd capacity and export via shuttle tanker. Phase 2 covers the subsequent incremental development of the rest of the field with a new Central Processing Facility and seven new wells expected to come on stream during 2017.

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