Nigerian oil exploration and production firm, Lekoil Ltd has revealed that it needs to raise about $100 million before it can commence drilling activities in its Ogo oilfield.
The disclosure was made by Lekoil’s Chief Executive Officer (CEO), Lekan Akinyanmi, during a chat with Reuters.
Lekoil which is listed on the London Stock Exchange agreed to a deferred payment deal earlier in the year to keep its stake in OML 310, where Ogo sits, after it found out that a $184 million loan it wanted to use for the acquisition was a fraudulent one.
Lekan Akinyami disclosed that most of the preparatory work for the Ogo Oilfield was financed from funds from its Otakikpo producing field and will start drilling immediately once it raises the funds.
The oil firm’s CEO said that they are currently holding discussions for a combination of direct investment into the asset and vendor financing, an option he considers the most cost-effective way to raise funds for drilling. He also expects an expenditure of $1 billion to develop Ogo Oilfield throughout its life cycle.
Akinyami said, ‘’We want Ogo to raise its own capital so that we can actually start to build cash…and maybe in a few years start to pay dividends.’’ He added that Otakikpo, which produced an average of 5,305 barrels per day (BPD) last year, yielded $15-$16 million in free cash.
It can be recalled that the shares of Lekoil Ltd plunged more than 70% in January following the suspension of trading after a fraud was discovered. It found out that the $184 million loan it had announced from the Qatar Investment Authority was a complex deception by some individuals pretending to represent the Authority.
In the result that was just released last week, Lekoil recorded a loss of $12 million in 2019 as against the $7.8 million loss that it recorded in 2018. It had a reduced cash balance from $10.4 million to $2.7 million.
Lekoil also wants to reduce its annual general and administrative costs by 40% to reflect the new business environment due to the crash of oil prices.