London-listed, Africa-focused oil producer Lekoil says that its wholly-owned subsidiary, Mayfair Assets and Trusts Limited (“Mayfair”) has received a letter from Optimum Petroleum Development Company (“Optimum”), the Operator of the OPL 310 Licence, communicating its enforcement of the default clause which specifies the conditions for establishing default contained within the Cost and Revenue Sharing Agreement (“CRSA”).
Optimum conveyed its enforcement of the default clause, as payments of US$6.6 million, to cover the portion of sunk costs and consent fees, have not been received by 30 November 2020. In addition to these fees, Optimum highlighted that Mayfair, has also not made payments in excess of US$1.0 million to cover general and administrative costs for the year as agreed within the CRSA. Pursuant to the CRSA, the default clause stipulates that, following a cure period, if a default has occurred, Optimum and Mayfair shall jointly seek and agree on a buyer to whom Mayfair’s 17.14% Participating Interest as well as all the financial obligations within OPL 310 will be transferred.
Lekoil said that it continues to discuss with Optimum, hoping to reach an agreement for the deferment of these payments as the company intends to focus its financial and other resources in support of securing funding for the second phase of the Otakikpo development as well as the Ogo appraisal programme. The Company, working with Optimum, has identified and engaged an appropriate rig for the appraisal drilling where the service provider has accepted the result of the early performed site survey.
Lekoil said it is banking on the good relationship between the two companies to secure an extension on outstanding payments and remains hopeful of a mutually acceptable solution being reached between the parties. To finance the appraisal programme, Lekoil has explored and is in constructive discussions with potential financiers to provide a combination of cost effective vendor and alternative financing solutions.
Lekoil acting alongside its partners – then consisting of Optimum, LEKOIL and Afren – on the Oil Prospecting Licence (OPL) 310 first drilled the Ogo-1 exploration well in 2013. The Ogo prospect was 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.
Lekoil has been hit with funding problems in the past year. The company made negative headlines after it revealed that it had been defrauded by a group of fake consultants who had been paid millions by the company to arrange a loan from the Qatar Investment Authority. Lekoil’s shares tanked as a result and the oil company has been hit with funding difficulties since then.