AIM listed LEKOIL has secured close to $200Million loan for appraisal drilling and possible development of the Ogo field offshore Lagos, Nigeria.
The company says it has signed a binding loan agreement with the Qatar Investment Authority QIA, the sovereign wealth fund of the State of Qatar, in the amount of $184Million. The Facility will be disbursed in five (5) tranches over eleven (11) months, with the first drawdown intended to occur in February 2020.
Lekoil holds 17% in the Oil Prospecting Lease (OPL) 310 in which Ogo is located, but it is the funding and technical partner to Optimum, the rentier Nigerian company which holds 60%, has held the acreage since 1991 and will be carried in any funding arrangement.
Ogo was discovered in 2013 by Afren, working in partnership with LEKOIL which had just bought into the asset. LEKOIL’s IPO of that year was used to part fund the Ogo discovery well. The partners claimed, at the time, that the oil and gas in place could be up to 750Million barrels of oil and gas equivalent. The appraisal drilling that will be funded by the loan from Qatar will provide clarity about recoverable reserves, as the discovery well and the ensuing sidetrack were not tested.
Less than two years after that discovery, Afren ceased to be a going concern. LEKOIL paid $13Million to Afren’s owners to secure the 22.8% that Afren held on the lease, but Optimum, the licence holder, refused to recognize that payment. The Nigerian state, apparently preferring to believe Optimum’s claim over that of LEKOIL, also refused to grant official consent for LEKOIL to take the 22.8%.
What will the $184Million Loan Do?
LEKOIL says it will advise the market about the work programme for appraisal and possible development of the Ogo field, in short order, but the following is what it had said before the loan was secured:
There’s a plan to drill two wells in the next 12 months, and depending on results from the initial wells and planned extended well tests, two additional appraisal-development wells could follow.
All the wells will be designed to be compatible with an early production scheme.
The tranching of the draw down of funds under the terms of the Facility is expected to enable LEKOIL to meet the costs commitments under the envisioned work programme as and when they arise.
The Facility, which has a tenure of seven years from the date of first disbursement, is secured against, amongst other things, the shares and assets of LEKOIL 310 Limited and Mayfair Assets and Trust Limited and includes a moratorium on both the interest and principal repayments commencing from the date of the Facility until six months after the commencement of commercial sale of production from the field.
The annual interest rate payable on amounts drawn under the Facility is 3.72%, with an upfront fee of 2.75% of the amount drawn under the Facility which is payable upon drawdown of the Facility.