Lekoil Ltd (LON: LEK) is an Africa focused Oil and gas exploration and production company. The company has three principal exploration assets, all located in the territory and territorial waters of Nigeria. They are; Otakikpo marginal field (LEKOIL: 40 per cent working interest) which is currently producing 10,000 barrels of oil per day, Ogo discovery and OPL 310 (LEKOIL: 17.14 per cent working interest) which is currently in the appraisal stage with the company estimating approximately 774 million barrels of oil from this prospect and OPL 325 (LEKOIL: 62 per cent working interest) in which the company expects 2 Billion barrels of recoverable oil. The company has two subsidiaries, Lekoil Nigeria and Lekgas, with the latter engaged in monetising the gas equity of the company for gas to power opportunities in Nigeria.
The company was incorporated in 2010, and became a public limited company in 2013, when it came out with an IPO (Initial Public Offering) on the London Stock Exchange. Through the IPO, the company raised US$50 million to invest in the opportunities it had identified with a follow-on of US$200 million for further development of these assets. The shares of the company are listed for trading on the Alternative Investment Market (AIM); they are identified and traded with the ticker name LEK. The shares of the company also have a listing on the Nigerian Stock Exchange.
Source – Company Website
The company on 2 January 2020, released an update on the funding agreement it has reached with the Quarter Development Authority, for its OPL 310 prospect which is now a wholly owned subsidiary of Lekoil Ltd called Lekoil 310 Limited.
- The said subsidiary has entered into a binding loan agreement with the Qatar Investment Authority to raise an amount to the tune of US$184.0 million disbursable in five trenches over an eleven-month period, with the first instalment to be received in February 2020.
- The facility extended, has a tenure of seven years and is secured against the assets of Lekoil 310 Limited. The interest to be paid under the loan agreement would be 3.72 per cent, with an upfront fee payment of 2.75 per cent of the amount drawn which is payable at the time of drawdown.
The company on 27 September 2019, came out with its interim results for the six-month period ending on 30 June 2019.
- The operating profit of the company for the period was US$0.5 million, whereas, for the corresponding period in 2018, the operating profit of the company was US$3.0 million.
- The production at Otakikpo field averaged 5,822 bopd gross with 2,329 bopd attributable to LEKOIL without any day of downtime.
Source – Company’s result publication
Stock Performance at The London Stock Exchange
Source – Thomson Reuters
At the time of writing of this report at 11.46 AM GMT on 03 January 2020, the shares of the company were trading on the London Stock Exchange at GBX 9.79. During the past 52 weeks of trading at the London Stock Exchange, the shares of the company have registered a 52-week high of GBX 13.00, while registering a 52-week low of GBX 2.76. As at the time of writing of this report, the company has a total market capitalisation value of £39.49 million on the London Stock Exchange. In the last one month, the shares have generated a return of +34.19 % and a return of +56.99% on year to date basis.
Company’s shareholding pattern
As on 12 July 2019, the below are the significant shareholders of the company holding more than three per cent shares of the company.
Source – Company website
Other than Mr Olalekan Akinyanmi all other shareholders of the company are institutional shareholders, holding 50.77 per cent of its total shares, thereby providing significant stability to the company.
The company in 2019, had been embroiled in a legal tussle with the Nigerian government over the OPL 310 prospect. On 6 September 2019, the company announced that it had reached a settlement and informed that it has received an extension on its exploration license for the OPL 310 field from the Nigerian government for a license extension fees of $7.5 million dated 4 September 2019. This brought about an end to a dispute which had been restricting the company from raising further funding for the development of the asset while also forcing it to incur significant legal costs. Post this event the company floated the OPL 310 asset as a separate legal entity, as wholly owned subsidiary named Lekoil 310 Limited. This move is strategic and will protect the company against any such legal troubles that the company had faced in the past with the Nigerian government.
The present fund-raising exercise initiated by Lekoil 310 Limited, with the Qatar Development Authority will provide the company a much-needed lifeline. The company can now continue its drilling exercise at the OPL 310 prospect that had turned stagnant for the past few years because of the legal entanglement with the Nigerian government.
In August of 2019, the company announced that it had acquired an additional prospect called OPL 276 with an expected recoverable volume of 29 million barrels of oil and 333 Bcf of gas, with an upside of 33 million barrels of oil and 476 Bcf of gas.
The company, despite its legal troubles of the past year, had managed to report operating profits in the first half of the year. In the new year, when the momentum in its operations increases, a significant jump in its revenues can be expected. The company, in the year 2020, is likely to perform well because of the changed business scenario.
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