Lekoil Turns Down Offer By Nigerian Partner to Purchase OPL 310 Loan

Emmanuel Addeh

Lekoil Cayman has rejected an offer by its Nigerian partner, Lekoil Nigeria, to buy the company’s $110 million loan owed by Mayfair Assets & Trust Limited.

Lekoil Nigeria had announced that it approached Lekoil Cayman, the oil and gas exploration and production company with a focus on Nigeria and West Africa, with an offer of, “an initial purchase price of $1.5 million.”

This, it noted, represented 50 per cent more than what the board of directors of the company had agreed to sell the Mayfair loan to Savannah Energy Investments Limited pursuant to an Option Agreement.

This it further stated included, “a deferred payment of $110 million being more than twice the deferred consideration proposed to be paid by Savannah pursuant to the Option Agreement.”

Lekoil Cayman has a 40 per cent equity interest in Lekoil Nigeria.

The Nigerian unit maintained that if it successfully carried out the deal, it would not only prevent the loss of Oil Prospecting Licence (OPL) 310, but would also have a neutral effect on the value of the shareholders’ stocks.

It was learnt that the licence was due to expire in August 2022, as a result of inactivity, after much delay occasioned by the company’s internal crisis which has dampened plans to begin production.

Lekoil Nigeria, called on the board of directors of the company to act in the best interest of shareholders by calling off the extraordinary general meeting slated for today.

It added that this was especially because upon the offer to acquire the Mayfair loan, there would no longer be any commercial reason for its parent company to consummate the, “Option Agreement” with Savannah.

According to Lekoil Nigeria, any contractual issues arising from the cancellation of the extraordinary general meeting could be managed with limited impact on the company.

It further urged shareholders to vote against the approval of the option agreement at the extraordinary general meeting if the offer was refused.

However, the position of Lekoil Nigeria appeared to have thrown the company into further problems as Lekoil Cayman in a note published April 1, said the offer cannot be accepted without breaching its legally binding obligations to Savannah.

“The offer by Lekoil Nigeria to purchase the OPL 310 loan and the outstanding amount under the Savannah Convertible Facility Agreement is not capable of acceptance as it would put the company in breach of its legally binding contractual obligations to Savannah,” the Company’s Interim Executive Chairman, Anthony Hawkins said.

He noted that if the offer was capable of acceptance, it was not clear that it would be a superior one, adding that Lekoil Nigeria had not demonstrated the capability to fund the offer.

According to the Cayman-based organisation, Lekoil Nigeria  has not, since 2013, shown any evidence of the ability to fund the appraisal and/or development of OPL 310, the licence for which is due to expire in August 2022 due to inactivity.

It argued that the Nigerian unit would be using the group’s cash to which the shareholders already have an entitlement to; and it has chosen to conduct the negotiation process by way of public announcement rather than private dialogue with the company.

It added that for these reasons, the offer should not be seen as a serious attempt to provide an alternative to the company and its shareholders but as an attempt to muddy the waters prior to the extraordinary general meeting

“Furthermore, even if the offer was capable of acceptance, it is not clear that it would be a superior offer for the following reasons:  Lekoil Nigeria has not demonstrated the capability to fund the offer.

 “It has not, since 2013, shown any evidence of the ability to fund the appraisal and/or development of OPL 310 (the licence for which is due to expire in August 2022 due to inactivity).

 “It would be using group cash to which the shareholders already have an entitlement to; and it has chosen to conduct the negotiation process by way of public announcement rather than private dialogue with the company.

“For these reasons, the offer should not be seen as a serious attempt to provide an alternative to the company and its shareholders but as an attempt to muddy the waters prior to the Extraordinary General Meeting.

“I would encourage shareholders to vote by way of proxy at the EGM in favour of the resolutions,” Hawkins insisted.

Meanwhile, Lekoil said yesterday that it had been notified of an ex parte injunction granted by the Federal Court of Nigeria, Lagos Division, to restrain: “The transfer of interests in the plaintiffs; altering the beneficial and/or equity rights of the company in the plaintiffs; and altering or taking steps to alter the company’s ownership, equity, share capital structure, rights or interest in the assets of the plaintiffs.”

“The company will take appropriate legal advice so it can assess its position and notes that the application was made, and the order was granted, without the company having the opportunity to state its position. Further announcements will be made as appropriate,” it stated on its website.