OPL 310 - Legal Update
28 March 2019
LEKOIL Limited
("LEKOIL" or the "Company")
OPL 310 - Update Re: Application for a Declaration regarding Ministerial Consent
LEKOIL (AIM: LEK), the oil and gas exploration, development and production company with a focus on Africa, provides an update on OPL310 (the "Block") with reference to the Company's Application for a Declaration regarding Ministerial Consent ("Consent") filed at the Federal High Court, Lagos on March 26, 2018.
Further to LEKOIL's announcement on 8 February 2019, a Federal High Court sat in Ikoyi, Lagos State, Nigeria, on 28 March 2019.
The Honourable Justice Muslim S. Hassan ruled that the Company's acquisition (through its wholly owned subsidiary Lekoil 310 Limited) of Afren Investments Oil and Gas Nigeria Limited ("AIOGL"), the holder of the 22.86 per cent. participating interest in OPL 310, requires Consent. As previously announced, the Company sought this Consent from the Minister in 2016, but as yet it has not been forthcoming.
The Judge further stated that the Executive Order issued by the Nigerian Acting President in 2017, which should have deemed the Consent to have been granted, could not supersede the powers of the Minister to grant such Consent. More specifically, the Judge disagreed that the Consent could be deemed granted and obtained in default which the Company believes is contrary to the provisions of the Executive Order. The Judge further noted that the Executive Order was signed in 2017, while Lekoil's application for the Consent was made in 2016 and so could not be applied retroactively. The Judge stated that due process for the Consent application would have to be followed prior to any Consent being deemed.
The Judge further ruled that the Sale and Purchase Agreement executed by and amongst Lekoil 310 Limited, Afren Nigeria Holdings and the administrators for the purchase of AIOGL was inchoate based on the fact that Consent is pending. The Judge also ruled that pursuant to Articles 13.1.4 and 13.1.5 of the JOA between Optimum and AIOGL, Optimum's consent was required to complete the assignment of Consent.
The implication of this judgment is that the 22.86 per cent participating interest in OPL 310 is still held by AIOGL until Consent is granted. The Company still holds a 17.14 per cent participating interest in OPL 310, via its wholly owned subsidiary Mayfair Assets and Trust Limited, the acquisition of which received Ministerial Consent in June 2017.
The Company is yet to receive the judgement in writing, and believes it has strong grounds to appeal against this judgment by the Federal High Court; and intends to file a notice of appeal, and a stay of execution of this judgment with the Court of Appeal within a week. The Company will take all necessary action to preserve its right to the 22.86 per cent interest in OPL 310.
Licence Extension
LEKOIL had previously requested that the Federal Ministry of Petroleum Resources grant an extension of the OPL 310 license beyond February 2019 in order to recover over three years lost due to regulatory delays beyond the Company's control. The Company understands that the Department for Petroleum Resources has made its recommendation for an extension to the Honourable Minister of Petroleum Resources and is currently awaiting final approval of such extension by the President of Nigeria. Whilst the Company is hopeful that such extension will be granted, there can be no guarantee that it will be granted or the period of such extension.
The Company believes that the OPL 310 license is still in good standing given that the extension is in process and there has been no communication from the regulators to indicate that an extension will not be granted.
LEKOIL continues to make progress with partner Optimum towards resolving the remaining issues regarding this matter in the interest of moving forward and beginning appraisal activities on OPL 310.
The Company will provide further updates as appropriate. The Company is represented by Fidelis Oditah QC, SAN.
For further information, please visit www.lekoil.com or contact:
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LEKOIL Limited Alfred Castaneda, Investor Relations Lisa Mitchell, Chief Financial Officer
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+44 20 7920 3150
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Strand Hanson Limited (Financial & Nominated Adviser) James Harris / James Spinney / Ritchie Balmer
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+44 20 7409 3494
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Mirabaud Securities Limited (Joint Broker) Peter Krens / Edward Haig-Thomas
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+44 20 7878 3362 / +44 20 7878 3447 |
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Numis Securities (Joint Broker) John Prior / Ben Stoop
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+44 20 7260 1000 |
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Tavistock (Financial PR) Simon Hudson / Nick Elwes / Barney Hayward |
+44 20 7920 3150 |
The information contained within this announcement is deemed by the Company to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014 ("MAR").
Technical Background on OPL310
In 2013, the first exploration well (Ogo-1) drilled by the OPL 310 partners - then consisting of Optimum, LEKOIL and Afren - was the Ogo prospect, a four-way dip-closed structure in the Turonian to Albian sandstone reservoirs. The drilling programme included a planned side-track well (Ogo-1 ST) which aimed to test a new play of stratigraphically trapped sediments at the basement of the Ogo prospect. The Ogo-1 well encountered a gross hydrocarbon section of 524ft, with 216ft of net stacked pay whilst the Ogo-1 ST well encountered the same reservoirs as Ogo-1 in addition to the syn-rift section which encountered a 280 ft vertical section gross hydrocarbon interval. Owing to well data collected from the two wells, the partners estimated P50 gross recoverable resources to be at 774 mmboe across the Ogo prospect four-way dip-closed and syn-rift structure.
On 25 November 2015, the Company entered into an agreement with the administrator of Afren and Afren Nigeria Holding Limited to acquire the shares of AIOGNL, which held a 22.86% participating interest in OPL 310 for a total consideration of US$13 million, subject to Ministerial Consent. Post acquisition, the Company holds a 40% working interest and 70% economic interest in the block, with AIOGL's 22.86% working interest and 40% economic interest subject to Ministerial Consent.
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