A slower cash-burn reduced LekOil’s (LEK) loss at the half-year mark to $5.3m (£3.3m). But the financial returns are largely irrelevant at this point, as the West African oil company moves ahead with the appraisal of its Ogo discovery and the development of the Otakikpo field.
In May, LekOil acquired a 40 per cent interest in the Otakikpo field from Green Energy International. Located in a shallow offshore licence in the eastern part of the Niger Delta, the field was initially drilled by Shell during the 1980s. According to a competent person's report (CPR) published by consultant AGR TRACS a week prior to these results, Otakikpo holds a contingent resource of 56.7m barrels of oil – a 58 per cent increase on the estimate at the time of the acquisition. That’s good news for LekOil, particularly as it is in talks with banks over the field development plan. Given existing infrastructure in place, the Otakikpo partners anticipate bringing the field into production by the end of next year.
May also marked the completion of a 3D seismic programme at the Ogo discovery, the results of which are now being analysed. Initial details should be published during the final quarter of this year, while engineering studies are currently underway to support an appraisal drilling programme.
Westhouse gives a risked book value of 86p a share, factoring in a 40 per cent chance of success for oil drilling at the Ogo-1 well.
| LEKOIL (LEK) | ||||
|---|---|---|---|---|
| ORD PRICE: | 68p | MARKET VALUE: | £247m | |
| TOUCH: | 68-69p | 12-MONTH HIGH: | 81p | LOW: 40p |
| DIVIDEND YIELD: | NIL | PE RATIO: | NA | |
| NET ASSET VALUE: | 52¢ | NET CASH: | $61.7m | |
| Half-year to 30 June | Turnover ($m) | Pre-tax profit ($m) | Earnings per share (¢) | Dividend per share (p) |
|---|---|---|---|---|
| 2013 | nil | -8.8 | -6 | nil |
| 2014 | nil | -5.3 | -1 | nil |
| % change | - | -40 | - | - |
£1 = $1.62 | ||||
