LEK.L Regulatory News (LEK)

18 June 2013

Lekoil Limited

("Lekoil" or the "Company")

Proposed Acquisition of Interest in OML113, Offshore Nigeria

Highlights

·; Proposed acquisition from a subsidiary of Panoro Energy ASA of a 6.502 per cent. participating interest (representing c. 16.3 per cent.cost interest and c. 12.2 per cent. revenue interest) in OML113 offshore Nigeria for a consideration of US$30 million:

o Located in the Benin Embayment along the West African Transform Margin adjacent to OPL310, in which Lekoil Nigeria, has an ultimate 30 per cent. economic interest

o Contains the Aje oil and gas field, for which AGR TRACS International Ltd, in its recently updated CPR, estimated the unrisked 2C Contingent Resources to be 198.7 mmboe, comprising gas, gas liquids and condensate, as well as a significant oil leg in one of the reservoirs. Around 50 per cent of the 2C Contingent Resources in the Aje field are liquid hydrocarbons, comprising oil, gas liquids, and condensate.

o Net unrisked 2C Contingent Resources attributable to Lekoil Nigeria will be approximately 25.3 mmboe.

·; Based on discussions to date, Lekoil is confident that it will be able to access capital to fund the acquisition and associated capital expenditure.

Commenting on the announcement, Lekan Akinyanmi, Lekoil's CEO, commented, "The acquisition of an interest in the Aje field, adjacent to our existing interest in OPL310, is exactly in line with our strategy to focus on assets in corridors of interest identified in our detailed evaluation programme when we established Lekoil. It also brings us potential near term production in line with our ambition to create a producing business with higher upside appraisal and exploration assets. In addition, we continue to assess further opportunities.

"This acquisition sees us well on our way to realising our vision for Lekoil and its shareholders, following our Admission to AIM last month."

Enquiries

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

Proposed acquisition of 6.502 per cent. participating interest in OML113

(Representing a 16.255 per cent. cost interest and 12.1913per cent. revenue interest in OML113)

Lekoil, the AIM listed oil and gas exploration and development company focused on West Africa, is pleased to announce that Lekoil 113 Nigeria Limited ("Lekoil 113"), a wholly owned subsidiary of Lekoil (Nigeria) Limited ("Lekoil Nigeria"), has agreed to acquire a 6.502 per cent. participating interest in Oil Mining Lease 113 ("OML113") offshore Nigeria from Pan Petroleum Aje Limited ("PPAL"), a wholly owned subsidiary of Panoro Energy ASA ("Panoro"), for a consideration of US$30 million.

OML113 is located offshore Nigeria in the Benin Embayment along the West African Transform Margin adjacent to Oil Prospecting Lease 310 ("OPL310"), in which Mayfair Assets & Trusts Limited, a subsidiary of Lekoil Nigeria, has an ultimate 30 per cent. economic interest. The OML113 licence area contains the Aje oil and gas field ("Aje"), for which AGR TRACS International Ltd, in its recently updated Competent Persons Report ("CPR"), estimated Contingent Resources of 198.7 mmboe (2C or "Best Estimate", un-risked gross recoverable resources).

The net unrisked 2C Contingent Resources in OML113 attributable to Lekoil Nigeria will be approximately 25.3 mmboe. Around 50 per cent. of the 2C Contingent Resources in the Aje field are liquid hydrocarbons, comprising gas, gas liquids and condensate as well as a significant oil leg in one of the reservoirs.

OML113 Acquisition Process and Funding

On 17 June 2013, Lekoil 113 entered into a binding conditional Sale and Purchase Agreement (the "SPA") with PPAL, Pan-Petroleum Nigeria Holding BV ("PPNH") and Pan-Petroleum (Holding) Cyprus Limited to acquire a 6.502 per cent. participating interest in OML113 representing cost bearing participation and revenue participation that range from 16.255 per cent. to 12.1913 per cent. for activities in the Aje Field depending on the extent of cost recovery; 6.502 per cent. to 8.6693 per cent. for activities in the deep water area; and 6.502 per cent. for certain activities in the shallow water area. The other OML113 licence interest holders include Yinka Folawiyo Petroleum (Operator), Vitol Exploration Nigeria, Chevron and P.R Oil and Gas (together the "OML113 Partners"). Lekoil expects significant partner optimisation benefits to arise from the new ownership structure of OML113 and welcomes the renewed oil-focused development of the Aje field.

The transfer of the 6.502 per cent. participating interest from PPAL to Lekoil 113 is conditional upon, among other things, the delivery of a bid bond of US$3 million (the "Bid Bond") and payment of the consideration, which is US$30 million as adjusted including in respect of any cash calls made between 1st January 2013 and completion, and certain other additional amounts. If Lekoil 113 does not deliver the Bid Bond, the seller may terminate the SPA and if Lekoil 113 does not pay the consideration into escrow within 90 days of the SPA, PPAL may demand payment under the Bid Bond and either terminate the SPA or give Lekoil 113 additional time to meet its funding obligations. In those latter circumstances the seller also reserves its right to terminate the SPA.

Based on discussions to date, Lekoil is confident that it will be able to access capital to fund the acquisition and associated capital expenditure. Further, Lekoil has secured the Bid Bond for the acquisition and will be issuing the Bid Bond to Panoro in the next few days.

The transfer of the participating interest is also conditional on the consent of the Minister of Petroleum Resources in Nigeria (the "Minister"), the consent of each of the other parties to the Joint Operating Agreement in respect of OML113 (the "JOA") and the execution by each of those parties of the deeds of novation for the Farm-in Agreement in respect of OML113 dated 21st September 2007 and the JOA and the Technical Support Services Agreement. Should the consent of the Minister not however be obtained within 60 days of the full consideration being transferred into escrow, Lekoil 113 and PPAL have agreed to execute a financial and technical services agreement (the "FTSA"), according to which PPAL will continue to hold title to the 6.502 per cent participating interest in OML113 and Lekoil 113 would obtain the benefit of the economic, legal and commercial rights enjoyed by PPAL in respect of OML113. Lekoil 113 and PPAL have agreed that the FTSA will remain in place until transfer of the participating interest is finalised.

PPNH has also granted an option to Lekoil 113 at any time exercisable after the date of the SPA, and after Lekoil 113 has paid the consideration into escrow, to call for the transfer of the shares in PPAL. The shareholders in PPAL have also been granted an option to put their shares in PPAL onto Lekoil 113, subject to the approval of the Minister, if consent of the Minister has not been received within 180 days of the FTSA taking effect. The FTSA and the call option are intended to be alternatives: the exercise by Lekoil 113 of its call option will mean that the FTSA does not come into effect. Funds will be released from escrow to PPAL following completion of the transfer of the participating interest in OML113, completion of the transfer of the shares in PPAL or the taking effect of the FTSA, whichever is earliest.

The Company guarantees the obligations of Lekoil 113 under the SPA.

Under the terms of the SPA, PPAL is liable for all obligations in respect of its 6.502% participating interest in OML113 and the JOA and its cost bearing participation and revenue participation under the JOA and is entitled to all benefits in respect of those assets for any period up to 1st January 2013 and Lekoil 113 is liable for all such obligations and entitled to all such benefits after that date. Lekoil 113 is also liable for all environmental liabilities and decommissioning liabilities after completion of the transfer of the participating interest, completion of the transfer of the shares and the FTSA coming into effect, whichever occurs first.

The Company is entitled to 90 per cent. of the dividends distributed from Lekoil Nigeria and therefore will have an indirect 5.852 per cent. participating interest, 16.630 per cent. cost bearing interest and 10.9722 per cent. revenue interest in OML113. Accordingly, the net 2C Best Estimate unrisked resources attributable to the Company will be c. 22.8 mmboe.

Pursuant to the disclosure requirements of Schedule Four of the AIM Rules, the Company notes that there are currently no profits attributable to OML113.

Aje and OML113

The Aje discovery lies offshore in OML113, within the Benin Basin, about 24 km from the coast of Nigeria, close to the route of the West Africa Gas Pipeline ("WAGP") and 64 km from Lagos. The licence covers an area of c. 960 km2 with water depths ranging from 100 to 1,500 metres. Aje is primarily a Turonian gas and gas condensate discovery, but also contains a thin oil leg below the main Turonian gas reservoirs, an oil bearing reservoir in the underlying Cenomanian, and a gas condensate interval in the deeper Albian section. "Best Estimate" gross unrisked Contingent Resources (2C) have been estimated by TRACS International to be 198.7 mmboe, with around 25.3 mmboe net unrisked 2C Contingent Resources to Lekoil Nigeria on completion.

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The field was discovered in 1996 by well Aje-1, with an appraisal well (Aje-2) drilled the following year. A third well, Aje-3, confirmed the structural interpretation and resolved fluid distribution while the most recent appraisal well, Aje-4, drilled in 2008, confirmed the Turonian and Cenomanian reservoirs, and encountered a gas-condensate bearing interval in the deeper Albian interval.

The Aje field is currently in the development planning stage, with first production expected in late 2015. The partners plan to drill a well within the next 6-12 months.

Competent Persons Report

The Competent Persons Report ("CPR"), as prepared by AGR TRACS International Ltd, on the Aje field, OML113, Nigeria for Lekoil will shortly be available on the Company's website, www.lekoil.com.

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