LEKOIL - Capital Network: Flash Report

Written by Lionel Therond

Lekoil is an AIM-listed indigenous Nigerian oil producer with assets in the onshore and offshore Niger Delta as well as a non-core position in Namibia. Production from its Otakikpo marginal field has now started at a rate of 5,000bbl/d and management is guiding for an exit rate of 10,000bopd for this year. The share price has risen +70% in the past 12 months in anticipation of this achievement. However, the company seems confident to be able to pursue the appraisal of the Ogo discovery during 2017, which we believe could be taken positively by the market. We note that reserves and resources upgrades for Otakikpo are also possible when a new CPR is issued later this year. We value Lekoil at 36p per share on a risked basis.

Management intends to pursue non-dilutive financing options in order to fund the appraisal of the Ogo discovery and is confident to finalise a commercial agreement by the end of this year. However, the company has no immediate plans for OPL 325, which remains more of an asset play at this stage.



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