LEK.L Regulatory News (LEK)

13 April 2016

Lekoil Limited

("Lekoil" or the "Company")

Otakikpo Operations Update

Successful well tests of C5 and C6 zones at rates of 6,404 bopd and 5,684 bopd

LAGOS, NIGERIA - Lekoil (AIM: LEK), the oil and gas exploration and development company with a focus on Africa, announces an update on operations from the Otakikpo Marginal Field ("Otakikpo").

The Otakikpo-002 well flowed oil from two upper zones during two production tests concluded on 10 April 2016. The C5 zone flowed at a peak rate of 6,404 bopd at a 36/64 choke while the C6 zone successfully flowed oil at a peak rate of 5,684 bopd at a 36/64 inch choke, for over 24 hours. Production testing at the well was curtailed due to storage capacity limits on well-testing equipment. The Company expects to start commercial production by the end of Q2 2016.

As previously announced on 7 September 2015, the lower E1 zone produced from the first of four planned production tests, flowing oil at various choke sizes for over 24 hours at a peak rate of 5,703 bopd at a 36/64 inch choke. However, during completion operations the well encountered cementing issues resulting in the temporary suspension of the E1 zone to allow remedial work to take place. To keep Phase 1 of the Field Development Plan ("FDP") on track and under budget, the Company prioritised production from the second and third planned production zones, in the C5 and C6 reservoirs, and will pursue development options for the E1 zone in the future. The encouraging flow tests of upper zones, C5 and C6, reconfirm the sizeable potential of the oil field. 

Following the completion of Otakikpo-002, well re-entry operations on Otakikpo-003 are expected to begin later in Q2 and will target the E1 and C5 zones. The Company expects to commence commercial production from Otakikpo-003 in Q3 2016 and expects to be producing 10,000 bopd by year-end 2016. The facilities construction and permits are at an advanced stage to meet the Company's timeline for commercial production.

As previously announced, the Addendum to the Competent Persons Report prepared by AGR TRACS International Ltd indicated Lekoil expected to produce a total of 6,000 bopd from four production strings at Otakikpo-002 and -003. Based on combined preliminary results from testing in three zones, the Company reconfirms that it expects this production estimate is likely to be significantly exceeded.

Following the conclusion of Phase 1 of the FDP, which is expected by the end of 2016, the Company will then proceed to Phase 2 with new wells planned to bring aggregate production to a targeted estimated 20,000 bopd by the end of 2017. 

Lekan Akinyanmi, Lekoil's CEO, said, "In about a year and half, Lekoil and its partner GEIL have managed to bring to life a marginal oil field which is expected to produce 10,000 bopd by year-end demonstrating its technical and financial strengths as well as illustrating the fast-track approach by the Department of Petroleum Resources to developing previously marginal fields and unlocking value for the benefit of Nigeria. Lekoil as a Financial and Technical partner also commends the support of its stakeholders and host communities whose people and services stand to realise sustainable value. These successful tests represent another major step towards continuous production and are the most significant accomplishment since operations began - demonstrating our disciplined approach to developing an asset efficiently. Safety remains our key priority and we will continue applying the highest standard to our operations as we grow production to, and beyond, our initial Phase 1 target."

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.

Review by qualified person

Samuel Olotu, Chief Technical Officer and expert for the Company, has reviewed and approved the technical information contained within this announcement in his capacity as a qualified person under the AIM Rules. Mr. Olotu holds a BSc degree in Geology and an MSc in Geophysics from the University of Ibadan, and has over 20 years' experience in the oil and gas industry (ranging from asset management, field development, reservoir management and seismic data processing and interpretation) in Nigeria, Europe, Middle-East and Asia. He is a member of the Society of Petroleum Engineers, Society of Exploration Geophysicists, the National Association of Petroleum Explorationists and the Nigerian Mining and Geosciences Society.

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

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