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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Lekoil Limited | LSE:LEK | London | Ordinary Share | KYG5462G1073 | ORD USD0.00005 (DI) |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 0.95 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
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LEKOIL LIMITED (LEK)
LEKOIL LIMITED: Half Year Results for the Six Months to 30 June 2017
28-Sep-2017 / 07:00 GMT/BST
Dissemination of a Regulatory Announcement that contains inside information
according to REGULATION (EU) No 596/2014 (MAR), transmitted by EQS Group.
The issuer is solely responsible for the content of this announcement.
28 September 2017
Lekoil Limited
**************
("LEKOIL" or the "Company" or the "Group")
Half Year Results for the Six Months to 30 June 2017
****************************************************
LEKOIL (AIM: LEK), the oil and gas exploration and development company with
a focus on Nigeria and West Africa, reports half year results for the six
months to 30 June 2017.
Highlights
**********
Operational
? Continuous commercial production and cash flow generation at Otakikpo;
? Otakikpo production now increased from 6,000 bopd at period end to 7,000
bopd;
? Some 1 million barrels of oil produced from Otakikpo to date;
? The Otakikpo project has now recorded over one million hours with no
lost time injuries;
? Planning for appraisal drilling of Ogo underway, with a prospective spud
date in 1Q 2018, subject to agreement with potential financing partners;
? MoU signed with GE Oil & Gas for the development of a work programme for
the Ogo field, and;
? Receipt of Ministerial Consent for the transfer of initial 17.14%
participating interest on OPL310 farm-in.
Financial
*********
? Operating loss of US$13.72 million;
? Period end cash of $6.4m, an increase of $2m.
Outlook
*******
? Otakikpo production to progress towards steady-state Phase 1 target of
10,000 bopd around 2017 year-end, and;
? Plans progressing to finance and appraise Ogo discovery in OPL 310.
Lekan Akinyanmi, LEKOIL' S CEO, commented, "We have a high quality producing
asset in Otakikpo where we are ramping up production and a very exciting
discovery to appraise and develop in OPL 310. We believe that we have the
technical and commercial teams to be able to achieve both these objectives
to generate significant value for our shareholders, partners and
communities."
For further information, please visit www.lekoil.com [1] or contact:
LEKOIL Limited
Alfred Castaneda, Investor +44 20 7920 3150
Relations
+44 20 7920 3150
Hamilton Esi, Corporate
Communications
Strand Hanson Limited (Financial
& Nominated Adviser)
+44 20 7409 3494
James Harris / James Spinney /
Ritchie Balmer
Mirabaud Securities LLP
(Joint Broker)
+44 20 7878 3362 / +44 20 7878
Peter Krens / Edward 3447
Haig-Thomas
BMO Capital Markets (Joint
Broker)
+44 20 7236 1010
Jeremy Low / Neil Haycock /
Thomas Rider
Tavistock (Financial PR)
Simon Hudson / Barney Hayward +44 20 7920 3150
The information contained within this announcement is deemed by the Company
to constitute inside information as stipulated under the Market Abuse
Regulations (EU) No. 596/2014 ("MAR").
Chairman's and CEO's Statement
Introduction
The first half of 2017 was another period of considerable development for
LEKOIL. A number of important milestones were reached that position the
Company well for further growth. Most importantly, first commercial
production was achieved from Otakikpo, confirming LEKOIL's producer status.
We achieved an initial rate of 5,000 bopd from Otakikpo and can now report
that as the Phase 1 development plan continues to ramp up, production is
currently approx. 7,000 bopd.
Strategy
LEKOIL aims to build a diversified, self-funded African exploration and
production business.
There are two key components to this strategy: first, ramping up to our
Phase 1 production target of 10,000 bopd at Otakikpo, our producing asset,
situated in oil mining lease (OML) 11 in the south eastern coastal swamp of
the Niger Delta; and second, executing the planned appraisal program at OPL
310, which will be instrumental in unlocking the value potential of this
world class discovery.
The Company's significant and strategic portfolio of assets is positioned to
benefit LEKOIL and all of its stakeholders.
Otakikpo
Our producing asset, the Otakikpo Marginal Field, has undergone substantial
levels of development during the period.
In February of this year, we announced that we had started continuous
production and were in the process of ramping up to 10,000 bopd. Initial
production rates were of 5,000 bopd.
As part of the development of Otakikpo, we built an eight kilometre (six
kilometres being offshore) pipeline leading from the storage tanks to the
tanker offloading manifold, which we also completed in February of this
year. The completion of this pipeline marked an important milestone for the
Company and, our team delivered all of this in under two years with, most
importantly, approximately 915,000 hours at the period end without any lost
time injuries.
Once becoming a fully producing company, we announced in May 2017 our First
Cargo Lifted from FSO Ailsa Craig. Selling our first oil marked another
major milestone for the company, our first revenue. The monies received from
commercial production will contribute to the funding of the Phase 2
expansion.
In June of this year, we received both our first crude revenue payment from
Otakikpo and achieved our second export from Otakikpo, of approximately
250,000 barrels of gross production. This highlights what a transformational
period this has been for both Otakikpo and LEKOIL.
During September 2017, we have succeeded in ramping up production to 7,000
bopd. The Company continues to focus on increasing production in accordance
with the Phase 1 target of 10,000 bopd, which is estimated for around
year-end 2017. To date we have produced a total of approximately one million
barrels.
OPL 310
In OPL 310 we and our operating partner, Optimum Petroleum, haves a world
class asset, . We continue to plan the options for the appraisal of the Ogo
discovery.
In April, we announced the signing of a Memorandum of Understanding ("MOU")
with General Electric ("GE") for the development of the Ogo discovery. The
MOU is a cornerstone for the development of OPL310 and we aim to leverage GE
Oil & Gas's equipment and technical expertise in order to execute the
development post any successful appraisal.
In June, LEKOIL received Ministerial Consent for the first portion of the
Company's interest OPL310. The Honorable Minister of Petroleum Resources of
Nigeria granted consent to complete the transfer of the original 17.14%
participating interest that LEKOIL acquired in OPL 310 in February 2011.
LEKOIL's acquisition of Afren PLC's then remaining 22.86% participating
interest in OPL 310 (through LEKOIL 310 Limited, a wholly owned subsidiary
of LEKOIL) remains conditional upon receiving Ministerial Consent, which we
expect to receive in due course.
We continue our discussions with other potential partners for the financing
of the OPL310 appraisal programme as we look to deliver the potential of
this world class field.
Exploration assets
OPL325
LEKOIL holds a 62 per cent. indirect equity interest in this exciting block,
on trend to the Ogo discovery in OPL 310. We continue to make steps towards
creating a production sharing contract with the NNPC and look towards the
next phase of development for OPL 325.
Namibia
We continue to work on identifying and quantifying the resources within our
Namibian block and to date we have completed the acquisition of the block we
currently hold and have made the requisite government payments.
Financial
As part of the continued development at Otakikpo, we were pleased to
announce that LEKOIL Oil and Gas Investments Limited ("LOGL"), had secured
an advance payment facility with Shell Western Supply and Trading Limited to
provide LOGL with a facility of US$15 million. This facility is a strong
endorsement of our commercial production and secured further funding which
is non-dilutive to our shareholders.
In the six months ended 30 June 2017, the Group recorded an operating loss
of US$13.72 million and ended the period with cash and cash equivalents of
US$6.4 million (being an increase of $2 million during the period).
Outlook
Otakikpo is now producing at approximately 7,000 bopd, and we continue the
process of ramping up towards the Phase 1 target of 10,000 bopd.
We continue to look forward to receiving ministerial consent for the
remaining 22.86% interest in OPL 310, acquired in December 2015, as,
alongside our partners, we seek to develop this world class asset.
On behalf of the Board, we would like to again thank all of our stakeholders
for their continued hard work and support as we build an exciting future for
the Company.
Samuel Adegboyega Lekan Akinyanmi
Non-Executive Chairman Chief Executive Officer
27 September 2016 27 September 2016
Financial Review
Overview
For the six months ended 30 June 2017, the Group recorded an operating loss
of $13.72 million and ended the period with cash and cash equivalents of
$6.39 million, an increase of $2 million in the six months period.
Following commencement of commercial oil production in February 2017, the
Group has continued to build its reputation as a competent operator, by
sustaining consistent production from the Otakikpo marginal field. The Group
has also demonstrated its capability of managing a portfolio of assets,
including exploration, appraisal and production assets. This capability has
been achieved through focus, professionalism and rigorous execution of work
programmes across its licences.
The underlying running costs of the Group are broadly in line with the same
period last year, and are being successfully optimized. As the Company
grows, we have established structures to cost efficiently manage and expand
the Group's interests.
Interim results
The Group recorded a total comprehensive loss of $14.02 million for the six
months ended 30 June 2017 compared to a loss of $8.1 million for the same
period in 2016.
Revenue
With commercial production from Otakikpo commencing in February 2017, the
Group has recorded its first revenue, totalling $6.946 million from the sale
of a total of 369,732 gross (304,121 net) barrels of crude oil. Total
production for the period was , 727,723 gross barrels and the balance of
barrels not sold in the period were held and recorded as inventory.
Cost of sales, operating expenses and administrative expenses
Cost of sales was $6.08 million compared to nil for the same period in 2016,
a function of production commencement in 2017 and sales of crude oil during
the period. Operating expenses, production bonus (a one off obligation
arising from the terms of the licence farm-In agreement) and general &
administrative expenses were $1.56 million, $4 million and $9.02 million
respectively compared to nil (operating expenses and production bonus) and
$10.5 million (administrative expenses) for the same period in 2016. The
increases in operating expenses and production bonus were due to
commencement of production at Otakikpo field with its associated costs;
while administrative expenses decreased largely due to: some costs, most
notably community related costs at Otakikpo, being recorded as operating
costs post production commencement; the devaluation of the Naira to the
dollar during the period and cost optimisation initiatives.
Given the period under review is the first to report production and sales of
oil from Otakikpo, operationally and commercially the project has been and
will continue through 2017 in a ramp-up phase. Per barrel operating cost
analysis for the period will therefore not be meaningful. This is because of
the combined effect of: production commencing at 5,000 bopd for reservoir
management purposes and ramping-up progressively to the first phase target
production rate of 10,000 bopd; the significant majority of field related
operating costs being essentially fixed in nature and therefore sensitive to
per barrel analysis; and one-off project commencement related costs
(including at the operating cost level the $4.0 million in production
related bonus payable to our partner in Otakikpo, Green Energy, in
accordance with our farm-in agreement.
Income tax
Income tax payable for the six months ended 30 June 2017 amounted to $0.42
million (30 June 2016: nil).
Capital expenditure
The Group's capital expenditure including intangible assets during the six
months ended 30 June 2017 amounted to $0.23 million compared to $11.4
million for the corresponding period in 2016. This significant reduction is
a function of the vast majority of the Otakikpo Phase 1 work programme
having been executed in 2016. The majority of the 2017 expenditure relates
to construction of additional storage tanks for crude oil production at the
Otakikpo field and geological and geophysical expenditure on OPL 310.
Cash and cash equivalents
The Group had cash and cash equivalents of $6.39 million as at 30 June 2017,
an increase of $2.01 million on the $4.38 million at 31 December 2016.
Included in the cash and cash equivalents is cash funding of the debt
service reserve accounts of FBN Capital Notes repayment.
Loans and borrowings
In addition to the loan facilities with FBN Capital and Sterling Bank drawn
in 2016, in March 2017, the Group drew down a $15 million Advance Payment
Facility from Shell Western and a 350 million Naira Short Term Loan from
Cardinal Stone Partners. The $15 million Facility from Shell Western has a
maturity of three years and is repayable quarterly following a six-month
moratorium with a market margin over LIBOR.
The Cardinal Stone Partners Facility was secured via a tripartite agreement
with Sterling Bank, wherein Cardinal Stone Partners advanced 350 million
Naira backed by a guarantee under the 5 billion Naira facility from Sterling
bank. 50 million Naira out of the principal was repaid on the facility
during the period.
Principal repayments of $2 million and 450 million Naira were made on the
FBN Capital facilities during the period.
The balance on the loan facilities as at 30 June 2017 is the equivalent of
$39.79 million (31 December 2016: $27.39 million).
Summary statement of financial position
The Group's non-current assets decreased slightly from $227.15 million as at
31 December 2016 to $204.41 million as at 30 June 2017, largely due to
depreciation, depletion and amortisation of property, plant and equipment,
in spite of expenditure on Otakikpo and OPL 310 during the period. Current
assets, which represent the Group's cash resources, other assets and other
receivables, increased from $40.23 million as at 31 December 2016 to $69.76
million as at 30 June 2017, mainly reflecting the increase in cash and cash
equivalents from crude oil sales, additional prepaid development costs
incurred on behalf of Green Energy International Limited ("GEIL") and a cash
call receivable from GEIL during the period.
Current liabilities consists of the portion of the loan facilities due
within twelve months, amounting to $17.91 million (31 December 2016: $10.37
million), trade and other payables amounting to $35.34 million (31 December
2016: $31.35 million), and deferred income amounting to $10.04 million (31
December 2016: $7.43 million).
Non-current liabilities consists mainly of the long term portion of the loan
facilities amounting to $21.88 million (31 December 2016: $17.02 million),
and deferred income amounting to $4.39 million (31 December 2016: $3.03
million).
Dividend
The Directors do not recommend the payment of a dividend for the period
ended 30 June 2017.
Accounting policies
The Group's significant accounting policies and details of the significant
judgments and critical accounting estimates are consistent with those used
in the 2016 annual financial statements
Liquidity risk management and going concern
The Group closely monitors and manages its liquidity risk. Cash forecasts
are regularly produced and sensitivities run for different scenarios
including changes in timing of production and cost overruns of development
and exploration activity. At 30 June 2017, the Group had liquid resources of
approximately $6.39 million, in the form of cash and cash equivalents. $5.29
million out of the cash and cash equivalent balance are available to meet
capital, operating and administrative expenditure, while $1.10 million is
restricted cash funding of the debt service reserve account. The Group's
forecasts, taking into account reasonably possible changes as described
above, show that the Group expects to have sufficient financial resources
for the 12 months from the date of approval of these condensed consolidated
financial statements.
These interim condensed consolidated financial statements have been prepared
on the going concern basis of accounting, which assumes the Group will
continue in operation for the foreseeable future and be able to realise its
assets and discharge its liabilities and commitments in the normal course of
business. As discussed in note 2 (b) to these condensed consolidated
financial statements, the ability of the Group to continue as a going
concern is dependent on the continuous commercial production, sales and
receipts of crude proceeds from Otakikpo field and continued availability of
existing debt finance.
Bruce Burrows
Chief Financial Officer
27]September 2017
INDEPENT AUDITOR'S REPORT ON REVIEW OF CONDENSED INTERIM FINANCIAL
INFORMATION
TO THE MEMEBERS OF LEKOIL LIMITED
Introduction
We have reviewed the accompanying condensed consolidated statement of
financial position of Lekoil Limited ("the Company") and its subsidiaries
(together referred to as 'the Group') as at 30 June 2017, and the condensed
consolidated statements of profit or loss and other comprehensive income,
changes in equity and cash flows for the six-month period then ended, and
notes to the interim financial information ("the condensed consolidated
interim financial information"). The directors are responsible for the
preparation and presentation of these condensed consolidated interim
financial information in accordance with International Accounting Standards
(IAS) 34 Interim Financial Reporting as adopted by the European Union (EU).
Our responsibility is to express a conclusion on this condensed consolidated
interim financial information based on our review.
Scope of Review
We conducted our review in accordance with the International Standard on
Review Engagements 2410, "Review of Interim Financial Information Performed
by the Independent Auditor of the Entity". A review of interim financial
information consists of making inquiries, primarily of persons responsible
for financial and accounting matters, and applying analytical and other
review procedures. A review is substantially less in scope than an audit
conducted in accordance with International Standards on Auditing and
consequently does not enable us to obtain assurance that we would become
aware of all significant matters that might be identified in an audit.
Accordingly, we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to
believe that the accompanying condensed consolidated interim financial
information as at 30 June 2017 is not prepared in all material respects, in
accordance with IAS 34 Interim Financial Reporting as adopted by the EU.
Emphasis of matter
We draw attention to Note 2(b) in the condensed consolidated financial
statements which indicates that the Group incurred a loss of US$14 million
during the period ended 30 June 2017 and of that date, the Group's
accumulated deficits amounts to US$79.9 million. As stated in note 2(b),
these events or conditions, along with other matters as set forth in Note
2(b), indicate that a material uncertainty exists that may cast significant
doubt on the Group's ability to continue as a going concern. Our conclusion
is not modified in respect of this matter.
Olufemi Abegunde FCA-FRC/2013/ICAN/000000004507
For: Akintola Williams Deloitte
Chartered Accountants
Lagos, Nigeria
27 September 2017
Condensed consolidated statement of financial position
In US Dollars
(Unaudited) (Audited)
Notes 30 June 2017 31 Dec 2016
Assets
Property, plant and equipment 6 37,503,042 39,625,376
Exploration and evaluation 7 112,777,276 112,651,963
assets
Intangible assets 8 7,364,309 8,237,415
Other receivables 11 795,851 795,851
Other assets 12 33,186,234 32,325,773
Pre-paid development costs 13 12,785,925 33,517,533
Total non-current assets 204,412,637 227,153,911
Inventories 9 1,005,422 671,666
Trade receivables 10 1,135,760 -
Other receivables 11 3,943,489 1,682,839
Other assets 12 1,439,535 186,454
Pre-paid development costs 13 55,844,400 33,307,187
Cash and cash equivalents 14 6,391,819 4,384,738
Total current assets 69,760,425 40,232,884
Total assets 274,173,062 267,386,795
Equity
Share capital 15(a) 26,828 26,828
Share premium 15(b) 264,004,066 264,004,066
Accumulated deficit (79,888,419) (66,973,567)
Share based payment reserve 6,914,103 6,478,650
Equity attributable to owners of 191,056,578 203,535,977
the Company
Non-controlling interests 16 (6,540,428) (5,436,258)
Total equity 184,516,150 198,099,719
Liabilities
Provision for asset retirement 18 98,951 91,199
obligation
Deferred income 19 4,392,088 3,032,803
Loans and borrowings 20 21,883,330 17,024,335
Non-current liabilities 26,374,369 20,148,337
Trade and other payables 17 35,336,539 31,346,552
Deferred income 19 10,039,706 7,426,486
Loans and borrowings 20 18,258,126 10,365,701
Current liabilities 63,282,543 49,138,739
Total liabilities 89,656,912 69,287,076
Total equity and liabilities 274,173,062 267,386,795
These ?nancial statements were approved by the Board of Directors on 27
September 2017 and signed on its behalf by:
Olalekan Akinyanmi - Chief Bruce Burrows - Chief
Executive Officer. Financial Officer
The notes are an integral part of these consolidated interim ?nancial
statements.
Consolidated statement of pro?t or loss and other comprehensive income
For the six months ended 30 June
In US Dollars
(Unaudited) (Unaudited)
6 months to 6 months to
Notes 30 June 2017 30 June 2016
Revenue 21 6,946,444 -
Cost of sales 22 (6,082,577) -
Gross profit 863,867 -
Operating expenses 23 (1,559,612) -
Production bonus 24 (4,000,000) -
General & administrative 25 (9,022,996) (10,524,583)
expenses
Loss from operating activities (13,718,741) (10,524,583)
Finance income 26 3,725,302 2,628,060
Finance costs 26 (3,600,815) (251,008)
Net finance income 124,487 2,377,052
Loss before income tax (13,594,254) (8,147,531)
Income tax expense 29 (424,768) -
Loss for the period (14,019,022) (8,147,531)
Other comprehensive income - -
Total comprehensive loss for the (14,019,022) (8,147,531)
period
Total comprehensive loss
attributable to:
Owners of the Company (12,914,852) (5,384,626)
Non-controlling interests (1,104,170) (2,762,905)
(14,019,022) (8,147,531)
Loss per share:
Basic loss per share ($) 28(a) (0.02) (0.01)
Diluted loss per share ($) 28(b) (0.02) (0.01)
The notes are an integral part of these consolidated interim ?nancial
statements.
Condensed consolidated statement of changes in equity
For the six months ended 30 June 2017
In US Dollars
Share Share Accumulated Share-based Total Non-controlling Total
capit premi deficit payments interests equit
al um reserve y
Balance at 1 26,82 264,0 (66,973,567 6,478,650 203,5 (5,436,258) 198,0
January 2017 8 04,06 ) 35,97 99,71
(audited) 6 7 9
Total
comprehensiv
e income for
the period
Loss for the - - (12,914,852 - (12,9 (1,104,170) (14,0
period ) 14,85 19,02
2) 2)
Total - - (12,914,852 - (12,9 (1,104,170) (14,0
comprehensiv ) 14,85 19,02
e income for 2) 2)
the period
Transactions
with owners
of the
Company
Share-based - - - 435,453 435,4 - 435,4
payment- 53 53
personnel
expenses
Total - - - 435,453 435,4 - 435,4
transactions 53 53
with owners
of the
Company
Balance at 26,82 264,0 (79,888,419 6,914,103 191,0 (6,540,428) 184,5
30 June 2017 8 04,06 ) 56,57 16,15
(unaudited) 6 8 0
For the six
months ended
30 June 2016
In US
Dollars
Balance at 1 24,41 252,2 (29,916,203 5,173,698 227,4 (26,728,751) 200,7
January 2016 2 07,65 ) 89,55 60,80
(audited) 1 8 7
Total
comprehensiv
e income for
the period
Loss for the - - (5,384,626) - (5,38 (2,762,905) (8,14
period 4,626 7,531
) )
Total - - (5,384,626) - (5,38 (2,762,905) (8,14
comprehensiv 4,626 7,531
e income for ) )
the period
Transactions
with owners
of the
Company
Share-based - - - 828,929 828,9 - 828,9
payment- 29 29
personnel
expenses
Total - - - 828,929 828,9 - 828,9
transactions 29 29
with owners
of the
Company
Balance at 24,41 252,2 (35,300,829 6,002,627 222,9 (29,491,656) 193,4
30 June 2016 2 07,65 ) 33,86 42,20
(unaudited) 1 1 5
The notes are an integral part of these consolidated interim ?nancial
statements.
Condensed consolidated statement of cash flows
For the six months ended 30 June
In US Dollars
Notes (Unaudited) (Unaudited)
6 months to 6 months to
30 June 2017 30 June 2015
Cash Flows from Operating
Activities
Loss for the period (14,019,022) (8,147,531)
Adjustments for:
- Equity-settled share-based 435,453 828,929
payment
- Foreign exchange rate changes (487,438) -
in loans and borrowing
- Finance income (3,884,796) (1,145,971)
- Property, plant and equipment 23,528 -
adjustment
- Intangible cost adjustment 290,623 -
- Finance cost 3,600,815 -
- Depreciation and amortisation 6,8 2,788,883 519,043
(11,251,954) (7,945,530)
Changes in:
Inventory (333,756) -
Deferred income 3,972,505 2,660,918
Trade and other payables 3,989,987 2,088,545
Trade receivables (1,135,760) -
Other assets (2,113,542) 243,014
Other receivables (2,260,650) (269,954)
Net cash used in operating (9,133,170) (3,223,007)
activities
Cash Flows from Investing
Activities
Acquisition of property, plant 6 (107,594) (10,743,366)
and equipment
Prepaid development costs 13 (5,444,076) (14,234,963)
Recoveries from prepaid 7,523,267 -
development costs
Acquisition of exploration and 7 (125,313) (292,309)
evaluation assets
Acquisition of intangible assets 8 - (381,462)
Net cash generated from/(used 1,846,284 (25,652,100)
in) investing activities
Cash Flows from Financing
Activities
Draw down of loan facilities 20 16,137,176 20,106,114
Repayment of loan 20 (3,594,542) (8,000,000)
Interest and transaction costs 20 (3,248,667) (1,624,048)
related to loan
Net cash generated from 9,293,967 10,482,066
financing activities
Net increase/(decrease) in cash 2,007,081 (18,393,041)
and cash equivalents
Cash and cash equivalents at 1 4,384,738 26,016,194
January
Cash and cash equivalents at end 6,391,819 7,623,153
of period
The notes are an integral part of these consolidated interim ?nancial
statements.
Notes to the condensed consolidated interim financial statements
1 Reporting entity
Lekoil Limited (the "Company" or "Lekoil") is a company domiciled in the
Cayman Islands. The address of the Company's registered office is Intertrust
Group, 190 Elgin Avenue, Georgetown, Grand Cayman, Cayman Islands. These
condensed consolidated financial statements (interim financial statements)
as at and for the six months ended 30 June 2017 comprise the Company and its
subsidiaries (together referred to as the "Group" and individually as "Group
entities"). The Group's principal activity is exploration and production of
oil and gas.
2 Basis of preparation
(a) Statement of compliance
These interim financial statements have been prepared in accordance with IAS
34 Interim Financial Reporting as adopted by the EU. They do not include all
the information required for a complete set of IFRS financial statements.
However, selected explanatory notes are included to explain events and
transactions that are significant to an understanding of the changes in the
Group's financial position and performance since the last annual
consolidated financial statements as at and for the year ended 31 December
2016.
These interim financial statements were authorised for issue by the
Company's Board of Directors on 27 September 2017
(b) Going concern basis of accounting
These interim financial statements have been prepared on the going concern
basis of accounting, which assumes that the Group will continue in operation
for the foreseeable future and be able to realize its assets and discharge
its liabilities and commitments in the normal course of business.
The Group incurred a total comprehensive loss of $14.02 million for the
period ended 30 June 2017 (30 June 2016: loss $8.2 million), and has had
negative cash flows from operations in previous years.
The ability of the Group to continue to operate as a going concern is
dependent on a number of factors considered by the Directors as disclosed
below:
- The ability of the group to maintain steady state production and lifting
from its activities on the Otakikpo marginal field in order to generate
sufficient cash inflows to fund the cash outflows of the Group;
- The availability of sufficient funds to meet its obligations relating to
production activities on Otakikpo marginal field as well as execution of the
work program on OPL 310 and 325;
- The ability of the Group to successfully raise additional funding if
required for the operational activities and other cash outflows of the
Group; and
- Satisfactory execution of the work program on OPL 310 and 325 or
successful negotiation of the work programmes to later years if the cash
inflow from Otakikpo field production and additional third party funding
will not be sufficient to fund further exploration and development
activities of OPL 310 and 325 in the short term.
The Directors, having evaluated these factors, believe the use of the going
concern assumption is appropriate for the preparation of the interim
financial statements as at 30 June 2017, for the following reasons:
- The Group raised sufficient funds through debt finance, completed the
development activities on Otakikpo field, brought Otakikpo field to
commercial production and is receiving proceeds from crude sales at good
intervals.
- The current average production from Otakikpo field is approximately 7,000
bopd and the Group is targeting production of 10,000 bopd by year end 2017.
- In June 2017, the Group received Ministerial consent to the complete
transfer of the original 17.14% participating interest that the Group
acquired in OPL 310 in February 2013. The Group continues to pursue the
Ministerial consent of its additional 22.86% interest on OPL 310 consequent
upon its acquisition of Afren Investment Oil & Gas (Nigeria) Limited. The
Group has begun negotiation of a new joint venture agreement on OPL 310 with
the Operator. The Directors are optimistic of a positive outcome for the
Group in the final agreement.
- Apart of the conditions in approving the extension on Namibia licence, the
Ministry of Mines and Energy of Namibia, approved a working as program to be
executed till 27 July 2019. The Company will raising the required funds and
execute the approved work program within the period of the extension.
Having considered and taking into account the material uncertainties that
may occur with respect to the above matters, the Directors believe that the
Group will achieve adequate resources to continue operations into the
foreseeable future and the Group will be able to realise their assets and
discharge their liabilities in the normal course of business. The Directors
therefore adopt and approve the going concern basis in the preparation of
the condensed consolidated financial statements.
3 Use of estimates and judgments
In preparing these interim financial statements, management has made
judgements, estimates and assumptions that affect the application of
accounting policies and the reported amounts of assets and liabilities,
income and expense. Actual results may differ from these estimates.
In preparing these interim financial statements, the significant judgements
made by management in applying the Group's accounting policies and the key
sources of estimation uncertainty that were applied in preparing the
consolidated financial statements as at and for the year ended 31 December
2016, were considered to be applicable for these interim financial
statements. The assumptions are as follows;
a) Note 2(b) - Going Concern. Key assumptions made and judgment exercised by
the Directors in preparing the Group's cash forecast.
b) Note 7(b) - Carrying value of Exploration and Evaluation assets. Basis
for the conclusion that the carrying value of E&E assets do not exceed their
recoverable amount.
c) Note 12 - Carrying value of other assets. Basis for the conclusion that
the carrying value of other assets do not exceed their recoverable amount.
d) Note 13 - Carrying value of prepaid development costs. Basis for the
conclusion that the carrying value of prepaid development costs do not
exceed their recoverable amount.
e) Note 18 - Provisions. Key assumptions underlying the obligation as at
period end.
f) Note 27 - Share Based Payment Arrangements. Key assumptions made in
measuring fair values.
g) Note 32 - Financial Commitments and Contingencies. Key assumptions about
the likelihood and magnitude of an outflow of economic resources.
4 Significant accounting policies
(a) Revenue Recognition
Revenue arises from the sale of crude oil. Revenue comprises the realized
value of crude oil lifted by the buyer(offtaker). Revenue is recognized when
crude products are lifted by a third party (buyer) Free on Board ('FOB') at
the Group's lifting terminal. At the point of lifting, all risks and rewards
are transferred to the buyer.
(b) Over lift and under lift
Lifting or offtake arrangements for oil produced in certain of the Group's
jointly owned operations are such that each participant may not receive and
sell its precise share of the overall production in each period. The
resulting imbalance between cumulative entitlement and cumulative production
less stock is underlift or overlift. Underlift and overlift are valued at
market value and included within receivables and payables respectively.
Movements during an accounting period are adjusted through cost of sales
such that gross profit is recognised on an entitlements basis.
(c) All other accounting policies and methods of computation applied in
these condensed consolidated interim financial statements are the same as
those applied in the Group's consolidated financial statements as at and for
the year ended 31 December 2016.
5 Operating segments
The Group has a single class of business which is exploration, development
and production of petroleum oil and natural gas. The geographical areas are
defined by the Group as operating segments in accordance with IFRS 8-
Operating Segments. As at the period end, the Group had operational
activities mainly in one geographical segment, Nigeria.
Geographical information
In presenting information on the basis of geographical segments, segment
assets are based on the geographical location of the assets.
Non-current assets
30 June 2017 31 Dec 2016
Nigeria 203,843,508 226,648,524
Namibia 538,940 465,108
USA 30,189 40,279
204,412,637 227,153,911
Non-current assets presented consists of property, plant & equipment,
intangible assets, long term prepayment, other receivables and exploration
and evaluation (E&E) assets.
Profit and loss
In US Dollars
(Unaudited)
30 June 2017
Nigeria Namibia USA Cayman Others Total
Islands
Revenue 6,946,44 - - - - 6,946,444
4
Loss from (10,521, (85,166 (1,738,2 (987,670) (386,521 (13,718,7
operating 163) ) 21) ) 41)
activitie
s
Net 84,325 (4,884) 14 46,643 (1,611) 124,487
finance
income/
(costs)
Tax (424,768 - - - - (424,768)
expense )
Total (10,861, (90,050 (1,738,2 (941,027) (388,132 (14,019,0
comprehen 606) ) 07) ) ) 22)
sive loss
for the
period
(Unaudited)
30 June 2016
Nigeria Namibia USA Cayman Others Total
Islands
Revenue - - - - - -
Loss from (6,924,9 (57,400 (2,237,6 (912,813) (391,790 (10,524,5
operating 21) ) 58) ) 82)
activitie
s
Net 2,339,99 (2,352) 231 34,867 4,308 2,377,051
finance 7
income/
(costs)
Total (4,584,9 (59,752 (2,237,4 (877,946) (387,482 (8,147,53
comprehen 24) ) 27) ) 1)
sive loss
for the
period
6 Property, Plant and Equipment
In US Dollars
(a) The movement on this account was as follows:
Oil Motor Furniture Computers Leasehold Plant Total
and Vehic & , Improveme ,
Gas les Fittings Communica nt Machi
Ass tion & nery,
ets Household Stora
Equipment ge
Tank
&
Other
s
Cost:
Balance at 38, 295,5 409,653 748,655 1,222,914 125,9 41,24
1 January 440 24 63 2,971
2017 ,26
2
Additions 84, - 7,346 15,413 - - 107,5
835 94**
Adjustments - - - - (23,528)* - (23,5
28)
Balance at 38, 295,5 416,999 764,068 1,199,386 125,9 41,32
30 June 525 24 63 7,037
2017 ,09
7
Accumulated depreciation and impairment losses:
Balance at 136 161,3 170,571 331,502 807,787 10,39 1,617
1 January ,03 06 3 ,595
2017 6
Additions 1,9 21,01 39,220 91,920 130,544 10,75 2,206
12, 7 8 ,400
941
Balance at 2,0 182,3 209,791 423,422 938,331 21,15 3,823
30 June 48, 23 1 ,995
2017 977
Carrying
amounts:
At 30 June 36, 113,2 207,208 340,646 261,055 104,8 37,50
2017 476 01 12 3,042
(Unaudited) ,12
0
At 31 38, 134,2 239,082 417,153 415,127 115,5 39,62
December 304 18 70 5,376
2016 ,22
(Audited) 6
* Adjustment in leasehold improvement variation contract for office space.
** The addition of $0.11 million during the period is mainly in respect of
the additional production facilities at Otakikpo marginal field.
7 Exploration and Evaluation (E &E) assets
In US Dollars
E & E assets represent the Group's oil mineral rights acquisition and
exploration costs.
(a) The movement on the E&E assets account was as follows:
(Unaudited) (Audited)
30 June 2017 31 Dec 2016
Balance at 1 January 112,651,963 111,976,751
Additions during the year (see (b) 125,313 675,212
below)
Balance at end of period 112,777,276 112,651,963
(b) The additions during the six month period ended 30 June 2017 mainly
consists of the Group's share of expenditure on OPL 310 amounting to $0.13
million. Total expenditure incurred on OPL 310 from inception of farm-in
agreement to 30 June 2017 and expected to be recovered in oil amounts to
$112.3 million.
(c) The unexpired lease term on OPL310 is 1.5 years. The Company has
commenced the renewal process of OPL 310 licence. Based on the usual
practice within the oil and gas industry in Nigeria and level of interaction
with the appropriate government agencies in respect of this, the Directors
are confident that the license will be renewed before expiration date for an
additional year. This renewal or conversion is a critical factor in
recovering the value of these asset. The Group in June 2017, received the
consent of the Honourable Minister of Petroleum for the complete transfer of
the original 17.14% participating interest acquired on OPL310 in February
2013 by Mayfair Assets and Trust Limited, a subsidiary of the Group.
(e) Exploratory, geological and geophysical activities continued on OPL 310
during the period. On the basis of the expert's evaluation of the resource
capability of OPL 310 carried out in 2016, which is believed to be
significantly higher than the results of the Competent Persons Report of
2013, the Directors are of the opinion that the investment in OPL 310 is not
impaired.
8 Intangible assets
In US Dollars
The movement on the intangible assets account was as follows:
Mineral Geological Accounting Total
Rights and Software
Acquisition Geophysical
Costs** Software
Costs
Balance at 1 7,000,000 2,078,393 104,056 9,182,449
January 2017
Additions - - - -
during the
period
Adjustment - (290,623)* - (290,623)
Balance at 30 7,000,000 1,787,770 104,056 8,891,826
June 2017
Accumulated
amortisation
Balance at 1 25,746 878,810 40,478 945,034
January 2017
Additions 361,255 204,208 17,020 582,483
during the
period
Adjustment - - - -
Balance at 30 387,001 1,083,018 57,498 1,527,517
June 2017
Carrying
amounts
At 30 June 6,612,999 704,752 46,558 7,364,309
2017
(Unaudited)
At 31 December 6,974,254 1,199,583 63,578 8,237,415
2016 (Audited)
* Adjustment to geophysical maintenance and training software.
** Mineral rights acquisition costs represents the signature bonus for the
Otakikpo marginal field amounts to $7.0 million
9 Inventories
Inventories consist of the Group's share of crude stock of $1,005,422 as at
30 June 2017 (31 December 2016: $671,666).
10 Trade receivables
In US Dollars
Trade receivables comprise: (Unaudited) (Audited)
30 June 2017 31 Dec 2016
Sales proceeds receivables (a) 988,413 -
Underlift 147,347 -
1,135,760 -
(a) Trade receivables consist of balance due from the crude offtaker from
the proceeds of the second lifting.
11 Other receivables
In US Dollars
Other receivables comprise:
(Unaudited) (Audited)
30 June 2017 31 Dec 2016
Director's loan (b) 1,658,493 1,626,312
Employee loans and advances 142,373 20,963
Cash call receivable from joint venture 2,094,845 -
partner
Due from Afren Investment Oil & Gas 795,851 795,851
(Nigeria) Limited (a)
Other receivables 47,779 35,564
4,739,340 2,478,690
Non-current 795,851 795,851
Current 3,943,489 1,682,839
4,739,340 2,478,690
(a) The amount due from Afren Investment Oil & Gas (Nigeria) Limited (Afren)
represents Afren's share of Optimum's overheads paid by the Company on
Afren's behalf.
(b) Director's loan represents the balance due on an unsecured loan of
$1,500,000 granted to a Director on 9 December 2014. The loan had a three
year term and bears interest at a rate of four per cent per annum.
Subsequent to period end, the loan was extended for another 3 years till 9
December 2020 under the same terms and conditions.
12. Other assets
In US Dollars
Other assets comprises:
(Unaudited) (Audited)
30 June 2017 31 Dec 2016
Due from Ashbert Oil and Gas Limited 20,526,167 19,119,201
(a)
Deposit for investments in Afren 12,000,000 12,000,000
Investments Oil & Gas (Nigeria) Limited
Prepaid rent 285,072 399,242
Deposit for investments in Ashbert Oil 240,000 240,000
and Gas Limited
Deposit DRSA Fund - Shell Western 420,067 -
Prepaid insurance 133,526 209,442
Others 1,020,937 544,342
34,625,769 32,512,227
Current 1,439,535 186,454
Non-current 33,186,234 32,325,773
34,625,769 32,512,227
(a) On 1 September 2015, the Group entered into a loan agreement with
Ashbert Oil and Gas Limited ("the Borrower"). In accordance with the loan
agreement, the Group will lend an aggregate sum of $40,200,000 for the
payment of the signature bonus on OPL 325 in three tranches of $16,080,000,
$12,060,000 and $12,060,000 (Note 12(b)). On 4 September 2015, the Group
paid the first tranche of $16,080,000.
The total commitment plus interest, fees, commissions and accessories due in
respect thereof shall be repaid in the equivalent of barrels of crude oil
from the Borrower's share of crude oil produced from the licence, subject to
any existing agreements between the Borrower and the Lender regarding the
allocation of crude oil entitlements; converted at the crude oil barrel
price prevailing on the open market. The loan bears interest at a rate
referencing 90-day LIBOR plus 12.5% per annum. The principal and accrued
interest as at 30 June 2017 is $20.53 million (31 December 2016: $19.12
million).
13. Pre-paid development costs
In US Dollars
(Unaudited) (Audited)
30 June 2017 31 Dec 2016
Balance at 1 January 66,824,720 28,807,397
Additions during the period 5,444,076 32,959,378
Recoveries during the period (7,523,267) -
Interest for the period 3,884,796 5,057,945
Balance at 30 June 2017 68,630,325 66,824,720
Non-current 55,844,400 33,307,187
Current 12,785,925 33,517,533
68,630,325 66,824,720
(a) Prepaid development costs represents Green Energy International Limited
("GEIL") share of costs (60% of joint operations' costs) in the Otakikpo
marginal field. Under the terms of the farm-in agreement, Lekoil Oil and Gas
Investment Limited undertakes to fund GEIL participating interest share of
all costs relating to the Otakikpo marginal field, until the completion of
the Initial Work Program. The Group will recover costs at a rate of LIBOR
plus a margin of 10% through crude oil lifting when the field commences
production. However, for expenditure above $70 million, the recovery rate
increases to LIBOR plus a margin of 13%. The interest on carried cost has
been included as part of the prepaid development costs.
14. Cash and cash equivalents
In US Dollars
(Unaudited) (Audited)
30 June 2017 31 Dec 2016
Cash at hand 9,837 -
Bank balances 5,280,088 3,283,327
Restricted cash (a) 1,101,894 1,101,411
Cash and cash equivalents 6,391,819 4,384,738
(a) Restricted cash represents cash funding of the debt service reserve
accounts for two quarters of FBN Capital Notes repayment.
15. Capital and reserves
(a) Share capital
In US Dollars
(Unaudited)
30 June 2017
Authorised 50,000
Total issued and called up share capital 26,828
30 June 2017
In issue at 1 January 26,828
Issued for cash -
In issue and fully paid, end of period 26,828
Authorised - par value $0.00005 (2016: $0.00005) 1,000,000,000
(b) Share premium
In US Dollars
Share premium represents the excess of amount received over the nominal
value of the total issued share capital as at the reporting date. The
analysis of this account is as follows:
(Unaudited)
30 June 2017
Balance at 1 January 264,004,066
Additional issue of shares during the period -
Balance at end of period 264,004,066
16. Non-controlling interest
In US Dollars
(Unaudited) (Audited)
30 June 2017 31 Dec 2016
Lekoil Nigeria Limited 6,382,886 5,296,726
Lekoil Exploration and Production (Pty) 157,542 139,532
Limited (Namibia)
6,540,428 5,436,258
17. Trade and other payables
In US Dollars
(Unaudited) (Audited)
30 June 2017 31 Dec 2016
Accounts payable 20,078,055 18,314,337
Accrued expenses 9,725,843 10,512,541
Royalty payable 996,016 -
Income tax payable 424,768 -
Payroll liabilities 36,392 5,435
Foreign exchange payable 820,793 -
Other statutory deductions 3,102,375 2,372,721
Other payables 152,297 141,5185
35,336,539 31,346,552
18. Provision for asset retirement obligation
The Group has recognised a provision for asset retirement obligation ("ARO")
which represents the estimated present value of the amount the Group will
incur to plug, abandon and remediate Otakikpo operation at the end of the
productive lives, in accordance with applicable legislations.
(a) The movement in Provision for asset retirement obligation account was as
follows:
(Unaudited) (Audited)
30 June 2017 31 Dec 2016
Balance at 1 January 91,199 176,621
Unwinding of discount 7,752 19,994
Effect of changes to decommissioning - (105,416)
estimates
Balance at end of period 98,951 91,199
The Group has recognised provision for asset retirement obligation ("ARO")
which represents the estimated present value of the amount the Group will
incur to plug, abandon and remediate Otakikpo operation at the end of the
productive lives, in accordance with applicable legislations. These costs
are expected to be incurred in the year 2040 dependent on government and
future production profiles of the project. The provision has been estimated
at a US inflation rate of 2% and discounted to present value at 17%. The
provision recognised represents 40% of the net present value of the
estimated total future costs as the Company's partner, GEIL is expected to
bear 60% of the cost.
A corresponding amount equivalent to the provision is recognised as part of
the cost of the related property, plant and equipment. The amount recognised
is the estimated cost of decommissioning discounted to its net present
value, and is reassessed each year in accordance with local conditions and
requirements, reflecting management's best estimates.
The unwinding of the discount on the decommissioning is included as a
finance cost.
Changes in the estimated timing of decommissioning or decommissioning cost
estimates are dealt with prospectively by recording an adjustment to the
provision and a corresponding adjustment to property, plant and equipment.
19. Deferred income
In US Dollars
Deferred income comprises:
(Unaudited) (Audited)
30 June 2017 31 Dec 2016
Interest on prepaid development costs 10,039,706 7,426,486
(Note 13 (a))
Interest on loan due from Ashbert Oil 4,392,088 3,032,803
and Gas Limited
14,431,794 10,459,289
Non-current 4,392,088 3,032,803
Current 10,039,706 7,426,486
14,431,794 10,459,289
20. Loans and borrowings
In US Dollars
The movement in the loan account was as follows:
(Unaudited) (Audited)
30 June 2017 31 Dec 2016
Balance at 1 January 27,390,036 8,246,746
Draw-down during the period 16,137,176 28,028,149
Effective interest during the year 3,593,063 2,943,291
Interest and fees paid during the year (3,248,667) (3,828,150)
Foreign exchange rate changes (487,438) -
Principal repayment during the period (3,594,542) (8,000,000)
Balance at end of period 39,789,628 27,390,036
Non-current 21,883,330 17,024,335
Current 17,906,298 10,365,701
39,789,628 27,390,036
In March 2017, subsequent to the initial drawdown of 1 billion Naira from
the 5 billion Naira Sterling Bank facility, Lekoil Oil and GAs Investments
Limited ("LOGL") drew down additional 350 million Naira via a tripartite
agreement with Sterling Bank and Cardinal Stone Partners ("Cardinal Stone),
wherein Cardinal Stone advanced the same sum backed by a guarantee under the
5 billion Naira facility. The facility had a maturity of 3 months with
monthly interest payments and full principal repayment at maturity. In June
2017, 200 million Naira out of the facility was refinanced for another three
months on the same terms as the initial facility and 100 million Naira was
repaid.
Also in March 2017, the Group received $15 million advance payment facility
from Shell Western Supply and Trading Limited ("Shell Western"), a member of
the Royal Dutch Shell group of companies (LSE: RDSA, RDSB). The facility has
a maturity of three years and is repayable quarterly following a six-month
moratorium with a market margin over LIBOR.
The principal and accrued interest as at 30 June 2017 is $39.79 million (31
December 2016: $27.39 million).
21. Revenue
In US Dollars
(Unaudited) (Unaudited)
30 June 2017 30 June 2016
Crude proceeds 6,946,444 -
Revenue represents the Group's share of crude sales from Otakikpo operation
during the period (31 December 2016: nil). The Group lifted 304,121 barrels
of crude comprising of cost oil recovery crude and entitlement crude during
the period (31 December 2016: nil).
22. Cost of sales
In US Dollars
(Unaudited) (Unaudited)
30 June 2017 30 June 2016
Depreciation and amortisation 2,274,196 -
Production operation costs 928,810 -
Evacuation & Related Expenses 1,052,994 -
Crude handling and lifting expenses 1,173,122 -
Royalty expenses 938,924 -
Closing stock adjustments (333,757) -
Other expenses 48,288 -
6,082,577 -
23. Operating expenses
In US Dollars
(Unaudited) (Unaudited)
30 June 2017 30 June 2016
Field support costs 490,532 -
Community and security expenses (a) 1,069,080 -
1,559,612 -
(a) As of January 2017, community and security expenses are recorded as
operating expenses whereas in 2016, they were classified as administrative
expenses. See note 25 below.
24 Production bonus
Under the farm-in agreement with Green Energy International Limited (GEIL),
LOGL is liable to $4 million production bonus upon commencement of
commercial production above 2,000 bopd. $4 million has been recognised as
production bonus during the period (2016: nil) in line with the farm-in
agreement. $1 million of this amount was paid as at 30 June 2017.
25. General & administrative expenses
In US Dollars
(Unaudited) (Unaudited)
30 June 2017 30 June 2016
Personnel expenses 4,365,558 5,069,709
Corporate services and consultancy 941,841 712,297
expenses
Travel and hotel expenses 751,999 790,915
Insurance 206,625 235,003
Rent expenses 708,986 832,641
Depreciation and amortisation 514,687 519,043
Directors' fees 270,000 135,000
Community and security expenses 28,864 1,380,689
Other expenses 1,234,434 849,286
9,022,996 10,524,583
26. Finance income and costs
In US Dollars
Finance income (Unaudited) (Unaudited)
30 June 2017 30 June 2016
Joint venture partner carry interest 1,271,576 -
income (a)
Other interest income (b) 45,566 35,186
Net foreign exchange gains (c) 2,408,160 2,592,874
3,725,302 2,628,060
Finance costs (d) 3,600,815 251,008
(a) Joint venture partner carry interest income
Following the commencement of production and sale of crude, the Group
commenced recoveries from the prepaid development costs. Consequently, the
group reclassifies the interest portion of the prepaid development costs to
finance income (see note 13) proportionately over the period over which the
cost recovery occurs by reference to cost recoveries in each period as a
percentage of the total capital and operating costs incurred to date in the
development of the field.
(b) Other interest income
Other interest income consists mainly of interests on an unsecured loan of
$1,500,000 granted to a Director on 9 December 2014 with a three year
maturity, at an interest rate of four percent per annum; and the income
earned from investments of the Group's cash resources in fixed deposit and
call accounts.
(c) Net foreign exchange gain
Foreign exchange gains represent currency exchange difference gains
resulting from the conversion of US dollar amounts to Nigerian Naira
amounts; to meet obligations settled in Nigerian Naira. The significant
devaluation of Nigeria Naira to the US dollars during the period and large
exchange rates disparity between the official exchange rate and the parallel
market exchange rate accounted for the significant foreign exchange gain.
(d) Finance costs
Finance costs consist largely of interest costs on third party loans during
the period. The interest costs are no longer capitalised following the
completion of development works for which the loans were procured.
27. Share-based payment arrangements
At 30 June 2017, the Group had the following share-based payment
arrangements:
Share option scheme (equity-settled)
The Group established a share option scheme that entitles employees, key
management personnel and consultants providing employment-type services to
purchase shares in the Group. In accordance with the scheme, holders of
vested options are entitled to purchase shares at established prices of the
shares at the date of grant during a period expiring on the tenth
anniversary of the effective date i.e. grant date. The grant dates for
awards were 3 December 2010, 1 June 2011, 1 November 2011, 3 June 2012, 19
February 2013, 5 April 2013, 17 May 2013, 26 March 2014, 1 July 2015 and 23
December 2015 based upon a shared understanding of the terms of the awards
at that time.
Long-term incentive plan scheme (equity-settled)
Awards were made under the Group's Long Term Incentive Plan (LTIP) which was
approved on 19 November 2014 and amended on 21 December 2015. The Board
approved the grant of 7,895,000 stock options to employees of the Group on
26 June 2015 and 3,143,000 stock options to the CEO, Olalekan Akinyanmi on
23 December 2015. In October 2016, 9,800,000 stock options were awarded to
employees.
The options vest three years from the grant date subject to meeting the
performance criteria. If they vest, they will remain exercisable for one
year after the vesting date. The granted share options are subject to
market-based vesting conditions.
Non-Executive Director Share Plan (equity-settled)
On 21 December 2015 the Board adopted the Group's Non-Executive Director
Share Plan designed to provide incentives to Non-Executive Directors. The
Committee awarded 500,000 stock options to the Non-Executive Directors under
this plan on 23 December 2015 and awarded another 500,000 stock options to
Non-Executive Directors in December 2016.
The NED stock options are not subject to any performance criteria and vest
three years from the grant date, subject to successful completion of the
three year service period starting on the grant date. The options can be
exercised over a seven year period beginning on the expiry of the service
period.
28. Loss per share
(a) The calculation of basic loss per share has been based on the following
loss attributable to ordinary shareholders and weighted-average number of
ordinary shares outstanding.
(i) Loss attributable to ordinary shareholders (basic)
In US Dollars (Unaudited) (Unaudited)
30 June 2017 30 June 2016
Loss for the period attributable to (12,914,852) (5,384,626)
owners of the Group
(ii) Weighted-average number of
ordinary shares (diluted)
In US Dollars Unaudited) (Unaudited)
30 June 2017 30 June 2016
Issued ordinary shares at I January 536,529,893 488,199,983
E?ect of share options - -
Weighted-average number of ordinary 536,529,893 488,199,983
shares (diluted) at period end
29. Taxes
(a) Petroleum profit tax
The Group with its principal assets and operations in Nigeria is subject to
the Petroleum Profit Tax Act of Nigeria(PPTA). The Group's Petroleum Profit
Tax charge for the period is summarised below:
(Unaudited) (Unaudited)
30 June 2017 30 June 2016
Balance at 1 January - -
Charge for the period 17,864 -
Payment in the period - -
Balance at end of period 17,864 -
(b) Company income tax
Interest on recovered carried cost and technical fee earned on Otakikpo
operations of the group is subject to Company Income Tax Act of
Nigeria(CITA).The Group's Company Income Tax charge for the period is
summarised below:
(Unaudited) (Unaudited)
30 June 2017 30 June 2016
Balance at 1 January - -
Charge for the period 406,905 -
Payment in the period - -
Balance at end of period 406,905 -
(c) Unrecognised deferred tax assets
The Group has an estimated deferred tax asset of $43.25 million (31 December
2016: $57.01 million) primarily relating to unutilised capital allowances
and tax losses. The Directors have not recognised this asset as it is not
certain when the Group will make sufficient taxable profit and the period in
which this timing difference will reverse.
30. Related party transactions
The Group had transactions during the period with the following related
parties:
(a) Transactions with key management personnel
Key management personnel are those persons having authority and
responsibility for planning, directing and controlling the activities of the
Group, directly or indirectly. These are the directors of the Group.
(i) Loans to key management personnel
An unsecured loan of $1,500,000 was granted to a Director on 9 December
2014. The loan has a three year term and bears interest at a rate of four
per cent per annum. Repayment is due at the end of the term. At 30 June
2017, the balance outstanding was $1,658,493 (2016: $1,626,312) and is
included in 'trade and other receivables'.
(ii) Key management personnel transactions
There were no transactions during the period witho key management personnel
and entities over which they have significant influence. However, there is
an outstanding balance of $1.72 million due to an entity which a key
management personnel has significant influence, from transactions initiated
in prior periods. In 2015, LOGL entered into a contract with SOWSCO Wells
Services Nigeria Limited, a company controlled by a director, for the
provision of well completion services.
Key management personnel compensation
In addition to their salaries, the Group also provides non-cash benefits to
key management personnel, in form of share based payments.
Key management personnel compensation
comprised the following:
(Unaudited) (Unaudited)
In US Dollars
30 June 2017 30 June 2016
Short-term benefits 732,921 685,969
Share-based payments 99,706 55,133
832,627 741,102
Details of directors' remuneration (including fair value of share based
payments) earned by each director of the Company during the period are as
follows:
(Unaudited) 30 June 2017 (Unaudited) 30 June 2016
Short-term Share-based Short-term Share-based
benefits payments benefits payments
Lekan 462,921 78,146 415,969 42,507
Akinyanmi
Samuel 70,000 4,312 70,000 2,223
Adegboyeg
a
Aisha 50,000 4,312 50,000 2,601
Muhammed-
Oyebode
Greg 50,000 4,312 50,000 2,223
Eckersley
John van 50,000 4,312 50,000 3,356
der Welle
Hezekiah 50,000 4,312 50,000 2,223
Adesola
Oyinlola
732,921 99,706 685,969 55,133
(iii) Key management personnel and director transactions
Directors of the Company control 8.26% of the voting shares of the Company
as at 30 June 2017 (31 December 2016 is 8.73%).
(b) Lekoil Limited, Cayman Islands has a Management & Technical Services
Agreement with Lekoil Management Corporation (LMC) a wholly owned
subsidiary, under the terms of which LMC was appointed to provide
management, corporate support and technical services. The remuneration to
LMC includes reimbursement for charges and operating costs incurred by LMC.
31. Events after the reporting date
Subsequent to period end, the Group paid additional $1.5 million in August
to GEIL for production bonus, bringing the total payment made on production
bonus to $2.5 million of the $4 million due.
The Group has obtained further two years extension of its petroleum
exploration licence on Namibian BLOCKS 2514A&B - EPL 059 .
Other than the matters disclosed above, there are no other events between
the reporting date and the date of authorising these financial statements
that have not been adjusted for or disclosed in these condensed consolidated
financial statements.
32. Financial commitments and contingencies
(a) Lekoil Limited, Namibia is bound to the licence renewal offer from the
Ministry of Mines and Energy, with respect to its 77.5% participating
interest in the Production Sharing Agreement (PSA) and operatorship in
respect of Namibia Blocks 2514A and 2514B. The work programme for the
licence include; acquisition of 2D seismic data over an area covering at
least 1000 sq. km, acquisition of new CSEM (Control Source Electromagnetic/
Hydroscan data over an area covering at least 200 km or acquisition of new
3D over an area of at least 200 sq.km, data integration and interpretation,
lead identification and portfolio inventorisation, lead de-risking and
portfolio analysis and ranking, and minimum exploration expenditure of $2
million.
The renewed licence expires in July 2019.
(b) LOGL is bound to pay $4 million to Green Energy International Limited
(GEIL) for production bonus under the terms in a farm-in agreement with
GEIL. In this respect, LOGL paid $1 million during the period and subsequent
to period end, the Group paid additional $1.5 million in August 2017 to GEIL
for production bonus, bringing the total payment made on production bonus to
$2.5 million of the $4 million due.
(c) On 5 December 2014, the joint venture signed a Memorandum of
Understanding (MoU) with its host community, Ikuru with respect to the
Otakikpo Marginal Field area. The key items of the MoU include the
following:
- The joint venture will allocate 3% of its revenue from the Liquefied
Petroleum Gas (LPG) produced from the field to Ikuru Community in each
financial year;
- The joint venture will allocate the sum of $0.53 million (NGN 148.32
million) annually for sustainable community development activities.
(d) In May 2015, the Company provided a corporate guarantee in favour of FBN
Capital for loan notes issued by Lekoil Oil and Gas Investment Limited, a
sub-subsidiary of the Company for the sum of US$10 million and NGN 2
billion.
(e) Litigation and claims
There are no litigations or claims involving the Group as at 30 June 2017
(31 December 2016 is Nil).
33. These condensed consolidated financial statements will be available from
the Company's web site shortly.
-ends-
ISIN: KYG5462G1073
Category Code: IR
TIDM: LEK
Sequence No.: 4660
End of Announcement EQS News Service
613773 28-Sep-2017
1: http://public-cockpit.eqs.com/cgi-bin/fncls.ssp?fn=redirect&url=524bf3f76e0f421770279a5e67ce69b5&application_id=613773&site_id=vwd_london&application_name=news
(END) Dow Jones Newswires
September 28, 2017 02:04 ET (06:04 GMT)
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