LEKOIL the oil and gas exploration and production company with a focus on Nigeria and West Africa, has shown an  Intention to enter into Convertible Facility Agreement (“CFA”), allowing the Company to draw down up to £200,000, 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 noted 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 disclosed that it has received notification from Lekoil Nigeria of its intention 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 has also 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.

  It further said it 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.   

Oilfield Developments Update

Otakikpo:

• 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.
• 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.
• Ongoing subsurface studies for drilling additional production wells. 
• No material progress/update on financing required to drill additional production wells.

OPL 310 (Ogo):

• Ongoing commercial discussions for drilling and financing of appraisal well.
• OPL 310 expires in August 2022 if the appraisal well is not drilled.

   OPL 325:

 No material progress/update.

OPL 276

• Ongoing technical work to optimize appraisal well locations.
• Developing non-associated gas plans.