LEK.L Regulatory News (LEK)

21 January 2015

Lekoil Limited

("Lekoil" or the "Company")

Resource to Reserve Conversion at Otakikpo

Lekoil (AIM: LEK), the oil and gas exploration and development company with a focus on Nigeria and West Africa more generally, announces the completion of an Addendum to the Competent Persons Report ("CPR") on the Otakikpo Marginal Field ("Otakikpo") by AGR TRACS International Ltd ("AGR TRACS") (the "Addendum"), the authors of the original CPR in September 2014. The Addendum to the September 2014 CPR covers the recent progress on the project following approval, in early December 2014, by the Nigerian Ministry of Petroleum of the planned recompletions of the 002 and 003 wells on Otakikpo. Lekoil Nigeria holds a 40 per cent. economic interest in Otakikpo which is located within oil mining lease (OML) 11, offshore Nigeria, adjacent to the shoreline in the eastern part of the Niger Delta. The Company holds 90 per cent. of the economic interests in Lekoil Nigeria. Lekoil Limited's economic interest in Otakikpo therefore equates to 36 per cent.

Highlights

· Phase 1 gross 1P Proved Reserves of 8.43 mmbbls (net to Lekoil: 3.03 mmbbls)

· Phase 1 gross 2P Proved and Probable Reserves of 14.99 mmbbls (net to Lekoil: 5.40 mmbbls)

· Phase 2 gross 2C unrisked Contingent Resources of 41.61 mmbbls (net to Lekoil: 14.98 mmbbls)

· Economic evaluations, in respect of Lekoil's 2P reserves and 2C contingent resources indicate that the development of Otakikpo is a robust project with an NPV (10%) of $77.2 million under a $40 oil price scenario on Marginal Field Terms, increasing to $85.2 million under Provisional Pioneer Status and $260.8 million (Marginal Field Terms) rising to $365.3 million (Provisional Pioneer Status) under a $80 oil price scenario

The Project

The Field Development Plan now consists of two phases: Phase 1 comprises the recompletions of the 002 and 003 wells with the installation of an Early Production Facility ("EPF") of 6,000 bbls/d capacity and export via shuttle tanker, expected to commence in the first half of 2015; Phase 2 covers the subsequent incremental development of the rest of the field with a new Central Processing Facility and seven new wells coming on stream from early 2017. Because the Phase 1 recompletions have been formally approved and the tendering and site preparation for the EPF are in progress, anticipated production volumes from the two recompleted wells are now reclassified as 'Reserves - Approved for Development' while the future production volumes expected from the seven new wells in Phase 2 remain as Contingent Resources (but with an improved Chance of Commercial Success of 80 per cent. due to the progress of Phase 1).

The consideration for the acquisition of Lekoil's interest in Otakikpo comprised a signature bonus of US$7 million, which was paid back in 2014, and, contingent on production and ministerial consent, a production bonus of US$4 million, which will be paid on commencement of production. In addition, Lekoil will fund costs to first oil and be entitled to recover this expenditure preferentially from 88 per cent. of production cash flow from Otakikpo.

Reserves and Resources

In the latest review for the Addendum, AGR TRACS reports that Phase 1 gross, 1P Proved Reserves for Otakikpo are 8.43 mmbbls and that gross 2P Proved and Probable Reserves are 14.99 mmbbls. Phase 2 2C unrisked gross Contingent Resources are 41.61 mmbbls, which together with the 2P Phase 1 reserves makes a total of 56.6 mmbbls (i.e. equivalent to the 2C Contingent Resources reported in the September 2014 CPR). Reserves and Contingent Resources attributable to the Company are therefore 3.03 mmbbls of 1P Proved Reserves and 5.40 MMbbls of 2P Proved and Probable Reserves (Phase 1) and 14.98 mmbbls of unrisked 2C Contingent Resources (Phase 2).

Economic evaluations were also carried out by AGR TRACS in its latest review, in respect of Lekoil's estimated net 2P and 2C reserves and contingent resources. These indicate that the developmentof Otakikpo is a robust project with an NPV (10%) of $77.2 million under a $40 oil price scenario on Marginal Field Terms, increasing to $85.2 million under Provisional Pioneer Status and $260.8 million (Marginal Field Terms) rising to $365.3 million (Provisional Pioneer Status) under a $80 oil price scenario.

2P reserves identification is one of the key criteria required by potential providers of debt financing and progress has been made to date with regards to securing a facility, the proceeds of which would be used to part or fully fund an accelerated work programme scenario. The accelerated work programme scenario may be the optimal route to production if the Company secures Pioneer Tax status.

In addition, Stock Tank Oil Initially In Place (STOIIP) ranges were estimated by AGR TRACS in the September 2014 CPR for the four exploration prospects within the onshore part of the Otakikpo acreage and, in total, these were estimated (on a P50, unrisked basis) to contain potential gross aggregate Oil in Place volumes of 162.8 mmbbls. The Company also believes that additional prospectivity exists in the southern (shallow water) portion of the acreage which will be defined by further studies and appraisal in due course.

Lekan Akinyanmi, Lekoil's CEO, said, "The Otakikpo project is robust and production, once commenced, will provide valuable cash flow from Phase 1 that will enable us to develop additional resources in Phase 2. We look forward to commencing production and to exploring the exciting prospects already identified onshore together with those offshore in shallow water."

The full Addendum to the CPR is available on the Company's web site.

Review by qualified person:

Samuel Olotu, Executive Vice President, Technical and technical 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.comor contact:

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