The weakness in oil markets has weighed on LekOil's (LEK) share price over the past 12 months. But shareholders can take encouragement from its latest half-year report, which confirmed that initial production from the Otakikpo field in Nigeria has exceeded expectations.
The West Africa-focused explorer acquired a 40 per cent stake in Otakikpo from Green Energy International last year. It now believes production from the site will substantially exceed original guidance of 6,000 barrels of oil per day (bopd). Management is looking at options to maximise cash flows from Otakikpo, which is predicted to have a break-even output cost of less than $40 a barrel. The positive news on flow rates should result in a reclassification of the site's contingent reserves into the proved and probable (2P) category. In addition, LekOil is appraising the significant Ogo find - around 774m barrels equivalent - on the separate OPL 310 licence, in which it bought an interest in 2013.
For the half year, Lekoil reported a net loss of $6.6m (£4.3m), against a loss of $5.3m a year ago. The driller is still in a transitional phase as it works towards full-scale production and is actively seeking off-take agreements and debt providers to secure "additional funding for growth and expansion".
| LEKOIL (LEK) | ||||
|---|---|---|---|---|
| ORD PRICE: | 22p | MARKET VALUE: | £80m | |
| TOUCH: | 21-22p | 12-MONTH HIGH: | 68p | LOW: 18p |
| DIVIDEND YIELD: | nil | PE RATIO: | na | |
| NET ASSET VALUE: | 52¢ | NET CASH: | $31m | |
| Half-year to 30 Jun | Turnover ($m) | Pre-tax profit ($m) | Earnings per share (¢) | Dividend per share (¢) |
|---|---|---|---|---|
| 2014 | nil | -11.9 | -1.0 | nil |
| 2015 | nil | -6.6 | -1.0 | nil |
| % change | - | - | - | - |
| £1=$1.52 | ||||
