Continental Focus, International Reach

Otakikpo JV Enters MoU

Tuesday, July 2, 2019

Lekoil’s Otakikpo JV with Green Energy International Ltd. (GEIL) entered into a MoU with Schlumberger and a subsidiary of an unnamed major international oil company operating in Nigeria.

The MoU covers a comprehensive infrastructure sharing and drilling program greared around a group of marginal field assets in OML 11.

Standard Chartered Bank (SCB) is to act as the lead financial advisor for the project and perform financial advisory, security and banking services required for the project.

The phased development plan of the project consists of drilling up to five new wells in Otakikpo, expanding processing infrastructure to comprise an onshore terminal to be located outside the Otakikpo field operations area, construction of an export pipeline connecting the onshore terminal to an offshore buoy to handle Otakikpo and other fields in OML11. The Otakikpo JV will partake in the costs of its field development with funds provided for such participation by the development consortium. Project management and associated asset management costs provided by Schlumberger will be shared between the Otakikpo JV and the operators and owners of other marginal fields participating in the project.

Capital expenditure to be incurred by the Otakikpo JV is expected to be approx. $170 million covering new wells and processing infrastructure, of which LEKOIL is expected to fund $68 million.   The anticipated costs consist of debt repayment to financing parties, including the major oil firm, in addition to a project implementation fee paid to Schlumberger. Repayment of the facilities anticipated to be provided to the Otakikpo JV pursuant to the project will be made from production revenues from Otakikpo, in priority to any existing lending facilities (subject to agreement with existing lenders), future CAPEX and returns to equity holders.

Under the terms of the MOU, the Major Oil Company will provide funding to the Otakikpo Joint Venture alongside the other funding partners, subject to due diligence, project economics, entry into definitive documentation and final investment decision.  The Otakikpo Joint Venture will enter into an exclusive offtake agreement with the Major Oil Company for the sale of crude produced pursuant to this project. Schlumberger will act as technical and project execution partner to provide oilfield services and project management services to assist in ramping up production and long-term field management. The Consortium will also form multidisciplinary project management teams from LEKOIL and GEIL.

Due diligence will be undertaken and the financial terms and cost of capital will be finalized following final investment decision.  The final investment decision is subject to the satisfaction of customary conditions precedents, including the credit committee approval of financing parties and the execution of definitive project agreements. Site mobilizations are tentatively scheduled for late Q3 2019.