Lekoil Ltd at the weekend said it has put cost reduction measures in place and is in talks to restructure its existing loans.
The company also announced a renewed offtake agreement.
The offtake agreement with Shell Western Supply & Trading Ltd, part of Royal Dutch Shell Plc has been renewed for a year, having originally be set to expire in the second quarter. Another year-long renewal of the agreement, which concerns the Otakikpo field in Nigeria, is also possible.
Lekoil said operations at the Otakikpo joint venture are continuing to run effectively in spite of the Covid-19 pandemic, with production in the first five months of the year averaging 5.755 barrels of oil per day gross.
Lekoil Oil & Gas Investments Ltd, a member of the Lekoil Ltd group, reported revenue of USD13.9 million over the five month period and has lifted 372,136 barrels in equity crude so far this year, the third of which resulted in USD2.7 million of cash proceeds for Lekoil in line with the offtake agreement. A fourth lifting of similar quantity is expected to take place in mid-July.
In terms of cost-cutting measures, Lekoil has taken steps such as shrinking its headcount, reducing office space, and cutting down provider costs. Such cost cutting measures are to have an annual run rate of USD10.0 million from the second half of 2020.
As at May 31, Lekoil’s group borrowings totalled USD17.5 million and it had a USD700,000 cash balance. As of Thursday last week its cash balance had improved to USD3.4 million.
The firm is in “constructive discussions” to restructure its existing loans so as to reduce quarterly amortisation.
Concerning the OPL 310 licence in Nigeria, Lekoil said it has successfully completed a site survey, which was part of its two-well appraisal programme. With this done, Lekoil can move on to finalising selection of an appropriate rig for appraisal drilling.
Chief Executive Lekan Akinyanmi said: “Cashflows generated at Otakikpo in conjunction with our significant cost reduction initiatives have been key for us as we remain committed to creating value for our shareholders.
We will continue to proactively review options for further cost savings where appropriate. We are working closely with all our partners, including [Green Energy International Ltd] and [Optimum Petroleum Development Co] in these challenging times to deliver on our joint ambitions.
We thank all of our shareholders for their continued patience which we have every confidence will be justified, especially as the wider outlook improves.”
The company has also obtained a three-month extension to the filing deadline on its 2019 results, giving it until September 30 to publish. Lekoil expects to post its results before then, and is aiming for July.