TIDMLEK
RNS Number : 4661K
Lekoil Limited
02 September 2021
2 September 2021
Lekoil Limited
("LEKOIL" or the "Company")
Corporate & Operational Update
LEKOIL (AIM: LEK), the oil and gas exploration and production
company with a focus on Nigeria and West Africa, is pleased to
provide the following corporate and operational update:
Corporate Developments
-- Intention to enter into Convertible Facility Agreement
("CFA"), allowing the Company to draw down up to GBP200,000,
primarily to fund legal costs for the protection of shareholder
value as well as to cover some ongoing operational costs. The CFA
will provide bridge financing to the Company whilst it identifies
the best path to monetizing its assets and creating shareholder
value. It is expected that the repayment of the CFA will come from
either a capital raise in Q4 2021 or the CEO loan recovery.
-- The Company notes that it is in dispute with Lekoil Nigeria
about the day-to-day control of the Lekoil Group. The Company has
received legal advice that states that the Company (in accordance
with the Shareholder Agreement that was entered into in 2013 at the
time of Admission) has limited control over the day-to-day
operations of Lekoil Nigeria and its subsidiaries. The Company has
received notification from Lekoil Nigeria that it intends to abide
by the Shareholders Agreement but that governance decisions,
including decisions related to budgets, financial, operational and
business plans, shall be made by Lekoil Nigeria. In addition,
Lekoil Nigeria has stated it will no longer fund any of the costs
of the Company from the cash flow generated from its producing
asset, Otakikpo. The Company intends to enforce its rights under
the Shareholders Agreement between the Company and Lekoil Nigeria
and is taking the appropriate legal advice.
-- The Company provided the majority of funding for the
acquisition of the Lekoil Nigeria assets, as well as working
capital for a period of time. The Company raised over US$260m of
equity on the London Stock Exchange. The majority of these funds
were invested into Nigeria and the Company will take the
appropriate legal advice to recover as much value from its assets
as possible in order to create value for its shareholders.
-- The Company has appointed legal counsel to recover the CEO
loan to Lekan Akinyanmi and will provide further information as
this process moves forward. The Company will utilize a Conditional
Fee Agreement to minimise the upfront costs to the Company and
provide an incentive to quickly recover the amounts due. The
Company has claimed circa US$800,000 as being immediately due and
payable, with circa US$400,000 being due and payable on 9 September
2021 and circa US$385,000 being due and payable on or before 9
December 2021. The repayments due in September 2021 and December
2021 are consistent with the repayment terms announced on 18
December 2020. As a result of trying to recover the CEO loan the
Company expects to be served with a number of claims by Lekan
Akinyanmi including unfair dismissal. The Company intends to defend
any claims and the legal advice received so far doesn't see any
grounds for any claims to be successful.
-- The Company notes that whilst it plans to enter into the CFA
it remains in need of further funding and is looking at all
possible options to achieve this. The Company expects to release
its 2020 Annual Report and Accounts by 30 September 2021.
Operational Developments taken from information provided by
Lekoil Nigeria
-- Otakikpo:
o Oil production for the six months to 30 June 2021 averaged
circa 5,200 bopd (gross)/2,080 bopd (net), generating unaudited
revenue for the six-month period to 30 June 2021 of approximately
$24m (H1 2020, c$14m) reflecting the higher oil pricing
environment.
o Gross Oil production for July 2021 was 3,012 bopd (c 1.200
bopd net), which has been negatively impacted by oil evacuation
issues affecting the FSO and the export terminal.
o Ongoing subsurface studies for drilling additional production
wells.
o No material progress/update on financing required to drill
additional production wells.
-- OPL 310 (Ogo):
o Ongoing commercial discussions for drilling and financing of
appraisal well.
o OPL 310 expires in August 2022 if the appraisal well is not
drilled.
-- OPL 325:
o No material progress/update.
-- OPL 276
o Ongoing technical work to optimize appraisal well
locations.
o Developing non-associated gas plans.
Convertible Facility Agreement ("CFA")
The Company intends to enter into the CFA of up to GBP200,000.
The CFA funds are being provided by Hadron Master Fund ("Hadron"),
TDR Enterprises Ltd (a company controlled by Tom Richardson) and a
non-related third party (together the "Lenders"). Tom Richardson is
a non-executive director of the Company and the CEO of Metallon
Corporation. Metallon was previously the Company's largest
shareholder but no longer owns any of the ordinary shares of the
Company. Hadron Master Fund is an affiliate of Hadron Capital,
which owns 4.66% of the ordinary shares of the Company. Marco
D'Attansio is a non-executive director of the Company and the Chief
Investment Officer of Hadron Capital.
The expected key terms of the CFA are:
Amount: Up to GBP200,000 in total, with Hadron
providing up to GBP100,000 and each of
TDR Enterprises Ltd and the third party
providing up to GBP50,000 each.
Use of proceeds: For payment of corporate costs (regulatory
and compliance and legal fees) and for
general corporate purposes as approved
by the Board and the Lenders.
Availability: GBP100,000 available immediately, with
GBP100,000 available after 1 October
2021.
Term: 6 months.
Repayment: Principal and interest to be repaid from
proceeds of capital raise and/or monies
recovered from CEO Loan. Repayment immediately
due on a change of control of the Company.
No conversion before expiry of the Term.
Conversion right: In the event of non-payment at the expiry
of the Term, t he Lenders have the option
to convert the outstanding amounts into
ordinary shares of the Company at the
Conversion Price.
Conversion Price: 0.5 pence.
Interest Rate: 10% per annum.
Shareholder approval/Security At the Company's AGM, the Company will
for Repayment: seek shareholder approval for the issuance
of the shares pursuant to the Conversion
(if required). In the event shareholder
approval is not obtained, the Lenders
will be entitled to an assignment by
way of security of the CEO Loan.
It is intended that the CFA will be refinanced by a possible
future equity issue which the Company is currently intended to be
structured by way of an open offer in order to allow as many
shareholders as possible to participate. Further details will be
provided in due course.
The background information on the Company's investment in Lekoil
Nigeria can be found in an updated Investor Presentation, available
on the Company's website.
https://lekoilplc.com/investor-presentations
Anthony Hawkins, Interim Executive Chairman, commented:
"I am pleased to announce the proposed entry into the CFA as it
provides the financial platform to allow the Company to move
forward and start the process to recover value for shareholders.
The Company will be seeking further support from its shareholders
to ensure that it can pursue all necessary routes to recover as
much value for shareholders as possible from the investments into
Lekoil Nigeria."
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 as it forms part of
UK domestic law by virtue of the European Union (Withdrawal) Act
2018 ('MAR'). Upon the publication of this announcement via
Regulatory Information Service ('RIS'), this inside information is
now considered to be in the public domain.
For further information, please visit www.lekoilplc.com or
contact:
SP Angel Corporate Finance LLP (Nominated
Adviser and Joint Broker)
John Mackay / Jeff Keating / Stuart Gledhill
/ Richard Hail +44 20 3470 0470
Tennyson Securities (Joint Broker)
Peter Krens / Edward Haig-Thomas +44 20 7186 9030
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END
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September 02, 2021 02:00 ET (06:00 GMT)
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