TIDMLEK
RNS Number : 8789Q
Lekoil Limited
30 June 2022
30 June 2022
Lekoil Limited
("LEKOIL" or the "Company")
Annual Results for the year ended 31 December 2021 - Directorate
Change
LEKOIL (AQSE: LEK), the Cayman Islands litigation asset company
with an investment in oil & gas assets in Nigeria,
announces its final audited results for the year to 31 December
2021 (the "Accounts").
Following publication of the Accounts, the Company will liaise
with its Corporate Advisor and Aquis in respect of the suspension
of the Company's shares from trading and will update the market as
soon as practical.
As announced on 9 June 2022, the Company also announces that Mr.
Anthony Hawkins and Mr. Al Tindall will each cease being Directors
of the Company as of 30 June 2022.
A copy of the Accounts will shortly be available on the
Company's website: https://lekoilplc.com/corporate-documents
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:
First Sentinel Corporate Finance Ltd (AQSE
Corporate Adviser)
Brian Stockbridge +44 203 989 2200
Tennyson Securities (Broker)
Peter Krens +44 20 7186 9030
--------------------
Camarco (Financial PR Advisor)
Billy Clegg / Owen Roberts / Violet Wilson +44 20 3757 4983
--------------------
I hereby present the financial statements for the year to 31
December 2021 for Lekoil Limited and an update on its current
position.
2021 was a year of change for the Company, one in which the
integrity of the corporate structure established at the Company's
foundation and the integrity of those entrusted to implement it,
were tested and (in some cases) found wanting.
This Chairman's statement seeks to summarise the events that led
to the schism between the Company and Lekoil Nigeria, explain why
the Board has acted as it has and provide guidance as to how the
Company intends to uphold proper corporate governance in the face
of a determined action by Lekoil Nigeria to frustrate the proper
operations of the Company. These actions of the Board being
focussed towards allowing the Company to recover its investments
and protect its shareholders from further value destruction.
Summary of Events during 2021
2020 began with the QIA loan fraud and ended with the
shareholder triggered Extraordinary General Meeting ("EGM") in
January 2021, at which shareholders were asked to approve the
appointment of 3 new directors to the Board. This corporate
governance failure and shareholder activism, respectively, were a
precursor to the conscious decision by Lekoil Nigeria (in April
2021) to sever itself from the Lekoil Cayman group and for Mr.
Akinyanmi, the then CEO of the Company, to align himself with
Lekoil Nigeria.
An early manifestation of this split in the Group structure was
seen in the efforts by Mr. Akinyanmi and Ms. Aisha Muhammed Oyebode
(Non-executive director) to defeat the EGM resolutions, despite
clear indications that the Company's shareholders were going to
approve the resolutions by large majorities. Indeed, the EGM
resolutions were duly passed with large majorities.
In February 2021, the Company received notification from Optimum
Petroleum Development Company ("Optimum"), the operator of the OPL
310 Licence, that it has terminated the Cost and Revenue Sharing
Agreement ("CRSA") executed for OPL 310.
In March 2021, the Company's then CEO, Mr. Akinyanmi, defaulted
on a scheduled instalment payment of a loan that was sanctioned by
the Company to himself as CEO, (the "CEO Loan") (despite the CEO
Loan repayment date having been extended and rescheduled in
December 2020). Mr. Akinyanmi has defaulted on each subsequent
scheduled loan repayment.
The appointment of the new directors to the Board in early
January 2021 gave the Board a renewed focus on corporate governance
but this was met with resistance by the then current management of
the Company (led by Mr. Akinyanmi) and by Lekoil Nigeria.
In April 2021, the Company received a notification from Lekoil
Nigeria that it would no longer support the consolidated group
structure. In particular, it would no longer fund the operations of
the Company and would not act on decisions taken at the Company's
Board unless Lekoil Nigeria consented to the same. As previously
noted by the Company, the Shareholders Agreement between the
Company and Lekoil Nigeria, entered in to at IPO/Admission,
severely limits the ability of the Company's Board to implement its
strategy for the broader group if Lekoil Nigeria does not agree
with that strategy.
This action by Lekoil Nigeria led, in April 2021, to the
resignation of Mr. Michael Ajukwu (the then Chairman of the
Company) who considered that an enhanced governance and oversight
regime was not possible due to a fundamental misalignment of
objectives amongst the shareholders of Lekoil Nigeria (i.e.,
between the Company and the management of Lekoil Nigeria). The
Company's previous Chairman, Mr. Mark Simmonds, also resigned at
this time (having intended to step down at the Company's next
annual general meeting).
The importance of the actions of Lekoil Nigeria in April 2021
cannot be understated. It was not a foregone conclusion that Lekoil
Nigeria would act in the manner it did. The management of Lekoil
Nigeria could have accepted that in receiving the benefit of the
consolidated corporate structure (in essence, in benefiting from
the Company raising over US$260m in equity capital that was
subsequently lent to the Lekoil Nigeria group as inter-company
loans) it had a responsibility to accept the oversight of the
Company on group operations. Instead, the management of Lekoil
Nigeria chose to enforce a corporate structure that avoids any real
scrutiny of their activities and ignores the faith put in them by
the investors in the Company.
Earlier in April 2021, the Company reluctantly accepted the
resignation of Mr. George Maxwell from the Board given his
acceptance of a new executive role with another oil & gas
company.
As previously foreshadowed, one of the consequences of the
actions of Lekoil Nigeria in April 2021 is the need for the Company
to present standalone financial reporting. The financial accounts
presented in this Annual Report are the first set of standalone
financial accounts for the Company. In preparing standalone
financial accounts, there is a risk of false comparisons with prior
years given that financial statements of prior years' use
consolidated financial information. Shareholders and investors
should take this into account when comparing the financial report
for the year ended 2021 with prior years.
In June 2021, the Company terminated the employment contract of
its CEO, Mr. Olalekan Akinyanmi, due to corporate governance
breaches. One of those breaches involved Mr. Akinyanmi entering
into (in December 2020) a new employment contract with Lekoil
Nigeria (this constituted a conflict of interest under his
employment contract with the Company).
In June 2021, Ms. Aisha Muhammed-Oyebode resigned as a
Non-Executive Director of the Company and Mr Edward During resigned
as the CFO of the Company, each continuing to work for Lekoil
Nigeria.
In the second half of 2021, the Company had negligible cash
resources for its ongoing day to day administrative costs. This was
a consequence of the decision by Lekoil Nigeria not to fund the day
to day operations of the Company, as it had done in the past.
Therefore, in September 2021, the Company entered into a
Convertible Facility Agreement ("CFA") with various lenders that
allowed it to draw down up to GBP200,000, primarily to fund legal
costs and to cover ongoing operational costs. The CFA was intended
to provide bridge finance to the Company whilst it identified the
best path to monetize its assets and create shareholder value. It
was expected that the repayment of the CFA would come from either a
capital raise in Q4 2021 or the recovery of the CEO Loan from Mr.
Akinyamni.
In early September 2021, the Company commenced legal proceedings
to recover the repayment of the CEO Loan. In late September 2021,
Mr. Akinyanmi commenced proceeds in New Jersey claiming, amongst
other things, breach of contract in the termination his employment
contract.
On 1 October 2021, the Company's shares were suspended from
trading due to the late publication of the Company's Annual Report
and Accounts for the year ended 31 December 2020 (the "2020 Annual
Report"). The 2020 Annual Report was subsequently published on 18
October 2020 but the Company's shares remained suspended until such
time as it clarified, for the purposes of the AIM Rules, its
relationship with its operating subsidiary (i.e., with Lekoil
Nigeria). It became apparent to the Company during Q4 2021 and into
2022 that the actions of Lekoil Nigeria (including releasing RNS's
about the operations of the Lekoil Nigeria group without prior
notification to the Company) made it very difficult for the Company
to maintain its AIM listing. The Company formally wrote to Lekoil
Nigeria (in 2021 and 2022) asking for their co-operation so that
the Company could comply with its listing rules obligations and
advising them that their actions had the potential to jeopardise
the continued listing of the Company. Lekoil Nigeria declined to
provide the co-operation or provide the assurance required.
In October 2021, the Company implemented a Contractor Shares
Arrangement ("CSA"), whereby service providers and directors
("Contractors") who provide goods, services or loans to the Company
would be paid in the Company's ordinary shares (the "Contractor
Shares") rather than cash.
In November 2021, the Company was pleased to appoint Mr. Olapade
Durotoye and Dr. Adeoye Adefulu as Non-Executive Directors of the
Company.
In December 2021, the Company held its Annual General Meeting
with all resolutions of the AGM being duly passed.
In December 2021, the Company was the recipient of a number of
hostile actions by Mr. Akinyanmi and/or Lekoil Nigeria. Those
actions continued into 2022 and consist of: (i) an offer to
purchase the shares of the Company (December 2021), which the Board
recommended that shareholders not accept; (ii) litigation by Mr.
Akinyanmi in the Cayman Islands to stop: (a) the issuance of shares
pursuant to CFA 1 and the contractor shares scheme (January 2022);
and (b) the issuance of shares pursuant to CFA 2 and the option
agreement to sell the Mayfair Loan (March 2022); (iii) an offer by
Lekoil Nigeria to purchase the OPL 310 Loan (April 2022); (iv)
litigation by Lekoil Nigeria in Nigeria to stop the issuance of
shares pursuant to CFA 1 and CFA 2 and the sale of the OPL
310 Loan (April 2022). The Company will defend each of these claims.
In the course of the litigation it has become clear that Lekoil
Nigeria has been funding the private legal actions of Mr.
Akinyanmi, including the defence against the recovery of the CEO
Loan amount. The Company will seek to hold the board of Lekoil
Nigeria accountable for the use of company funds to fund the
private actions of Mr. Akinyanmi.
The financial information that the Company is presenting for the
year ended 31 December 2021 ("Annual Accounts") is the Company's
first set of standalone accounts, unconsolidated from the Lekoil
Nigeria group. Prior to these Annual Accounts, the Company
presented consolidated group accounts, including Lekoil Nigeria and
its subsidiaries. Further to the announcements made in September
2021, the Company does not currently have day-to-day operational
control over, nor access to the day-to-day entity-level financial
information relating to Lekoil Nigeria and its subsidiaries. As
such, it would be inappropriate to present consolidated accounts as
has been done in the past.
Summary of Events during 2022 (year to date)
In January 2022, Mr. Akinyanmi commenced a legal action in the
Cayman Islands, challenging the validity of two resolutions which
were duly passed at the Company's Annual General Meeting held on 21
December 2021.
In February 2022 the Company entered into a convertible facility
agreement with Savannah Energy Investments Limited ("CFA 2" and
"Savannah") whereby Savannah would support the Company by providing
a GBP0.9 million loan to the Company. The Company has also signed
an Option Agreement with Savannah granting it, subject to approval
of the Company's shareholders at an extraordinary general meeting
(the "Savannah EGM"), an option to be assigned the intercompany
debt owed to the Company by Mayfair Assets & Trusts Limited
(the "Mayfair Loan"). A US$1 million payment is payable by Savannah
to the Company upon such assignment.
Prior to agreeing the Savannah transaction, the Board was aware
that the transaction had received the support of the Company's
major institutional shareholders, representing approximately 42% of
the Company's then current issued share capital. This shareholder
support for the Savannah transaction puts into context the
subsequent actions of Mr. Akinyanmi and Lekoil Nigeria in seeking
to overturn the Savannah transaction and the CFA transaction.
In early March 2022, the Company was successful in discharging
the ex-parte injunction of Mr. Akinyanmi that sought to restrain
the issue of shares by the Company. The Company subsequently issued
the relevant shares under CFA 1 and CFA 2.
In April 2022, Lekoil Nigeria offered to purchase the Mayfair
Loan and to repay the outstanding amount under CFA 2. Neither offer
was capable of acceptance by the Company as it would have caused it
to be in breach of written legally binding obligations to Savannah.
The Company noted at the time of the offer that Lekoil Nigeria had
chosen to conduct the negotiation process by way of public
announcement rather than private dialogue with the Company and that
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 Savannah EGM. On 8 April 2022, at
the Savannah EGM, our shareholders duly approved the Option
Agreement entered into with Savannah and also authorised the
Directors to issue a certain number of additional ordinary shares
in the Company.
In Q1 2022, the Company continued its English court litigation
to recover the CEO Loan from Mr. Akinyanmi, with the outstanding
amount being circa US$1.5 million. Unfortunately, the Company was
denied jurisdiction to do so by the English court. Similarly, Mr.
Akinyanmi was denied jurisdiction in the New Jersey court to bring
a claim related to the termination of his employment by the
Company. The net result of these litigations is that the Company
expects to pursue the recovery of the CEO Loan via a debt recovery
procedure in New Jersey and the Company expects Mr. Akinyanmi to
commence arbitration in the UK related to the termination of his
employment contract.
On 15 March 2022, Lekoil Nigeria suspended its offer to purchase
shares in the Company. As at 28 February 2022, Lekoil Nigeria held
11.35% of the then issued share capital of the Company. As at the
date hereof, the Company has not received any more recent
notifications from Lekoil Nigeria as to its shareholding in the
Company.
In early April 2022, Lekoil Nigeria (along with various of its
subsidiaries) notified the Company of an ex-parte injunction
granted by the Federal Court of Nigeria, Lagos Division, to
restrain various actions of the Company. The Company has challenged
the jurisdiction of the Nigerian court to make such an order and
the matter is proceeding through the courts.
In April 2022, the Company noted that Lekoil Nigeria had
announced the spud of the Otakikpo-4 well as part of the Phase 2
development of Otakikpo. The Company received no further
information about this from Lekoil Nigeria.
On 18 May 2022, the Company's ordinary shares were admitted to
trading on the Access segment of the AQSE Growth Market operated by
the Aquis Stock Exchange (AQSE).
The Company noted at the time of the admission to AQSE that the
Board is of the view that the Company's primary activity now is the
recovery of its investment through litigation against the Lekoil
Nigeria group and Mr. Akinyanmi and that this characterisation will
allow the Company to fulfil its disclosure obligations to the AQSE
market, noting that a successful recovery of the intercompany debts
due to the Company will be the primary source of value for
shareholders (with minimal value attributable to the day-to-day
operational activities of Lekoil Nigeria).
This characterisation of the Company, as a litigation vehicle
with minimal value attributable to the shareholding in Lekoil
Nigeria, is implicit to and reflected in the financial accounts
presented for the year ended 31 December 2021.
On 27 May 2022, the Company held an extraordinary general
meeting at which shareholders approved the appointment of Bright
Grahame Murray as the Company's auditors.
On 9 June 2022, the Company announced that Mr. Olapade Durotoye
was the new Non-Executive Chairman of the Company, that Mr. Guy
Oxnard had become the Company's Executive Director and that Mr.
Dipo Sofola had been appointed a Non-Executive Director. The
Company expects that Mr. Anthony Hawkins and Mr. Al Tindall will
step down from the Board effective 30 June 2022.
Financial review
In 2021, the Company commenced a formal review of the various
intercompany and related party loan positions (noting that Lekoil
Nigeria may no longer qualify as a related party and that the term
"intercompany loans" refers to their historic characterisation). As
set out in the financial statements for the year ended 31 December
2021, the Company has impaired four of the intercompany loans (as
set out in the table below).
Debtor Amount due to Amount due to Reason for
the Company as the Company as impairment
at 30 June 2021 at 31 December or amendment
(unaudited) 2021
Lekoil Nigeria USD $41.6 million USD $49.3 million Not applicable
- across two loans
due by January
2026 and February
2029
------------------- ------------------ -------------------
Lekoil Oil & Gas USD $19.8 million USD $12.9 million Reflecting
Investments by repayments
February 2024 and/or the
(i.e. Otakikpo) likelihood
of recoverability
given the likely
need to litigate
to recover
the sums due
------------------- ------------------ -------------------
Mayfair Assets USD $253.0 million USD $1 million Reflecting
& Trust Limited Option Agreement
by May 2023 (i.e., with Savannah
OPL 310)
------------------- ------------------ -------------------
Ashbert Oil & USD $35.5 million USD $38.5 million Not applicable
Gas Limited by
September 2022
(i.e., OPL 325)
------------------- ------------------ -------------------
As previously stated by the Company, it is aware that Lekoil
Nigeria is unlikely to agree on the exact intercompany debt
position and the Company emphasises that it expects it will have to
commence litigation to recover the intercompany loans and that the
recovery of the intercompany loan amounts cannot be guaranteed to
be successful either due to a failure to win the relevant
litigation and/or an ability to effectively enforce a judgment.
As stated above, the Company attributes minimal value to the
day-to-day operational activities of Lekoil Nigeria and, as such,
has impaired its valuation of the equity investment in Lekoil
Nigeria to nil value.
Asset base
As stated above, the Company's asset base now primarily consists
of the intercompany receivables, the amount owing under the CEO
Loan and its rights under the Option Agreement.
Corporate Structure and Board and Management update
During 2021, the Company saw a significant change in the
composition of the Board, details of which are set out above. Most
notably, the Company terminated the employment contract with its
then CEO, Mr. Akinyanmi for corporate governance breaches.
In September 2021, the Company provided a corporate and
operational update and noted that it was in day-to-day dispute with
Lekoil Nigeria about the implementation of the Shareholders
Agreement. Those disputes continue to the date hereof, including
Lekoil Nigeria rejecting the appointment of the Company's nominees
to the board of Lekoil Nigeria. As the Company has stated
previously, the Shareholders Agreement limits the Company's control
over the day-to-day operations of Lekoil Nigeria and its
subsidiaries. Furthermore, pursuant to the Shareholders Agreement,
the Company has very little control over when distributions (if
any) are paid.
Outlook
The Company faced considerable challenges in 2021, largely
bought about by the actions of Lekoil Nigeria, but the Board was
committed to running the Company in an ethical, efficient and
cost-effective manner. The Company continues to focus on recovering
as much value as possible for shareholders from the assets of the
Company.
In face of the hostile litigation by Lekoil Nigeria and Mr.
Akinyanmi's refusal to repay the CEO loan, the financial position
of the Company remains fragile and depends on the receipt of the
monies under the Option Agreement, the recovery of the CEO Loan
and/or equity funding from shareholders.
Looking forward we will strive to ensuring that the Company is
fully financed so it can implement its plan in order to recover as
much value as possible for its shareholders from the investments
made to date.
We thank our shareholders for their support whilst we pursue
these objectives.
Anthony Hawkins Olapade Durotoye
Interim Executive Chairman Non-Executive Chairman
3 June 2021 to 9 June 2022 From 9 June 2022
30 June 2022
Strategic Report
PRINCIPAL ACTIVITY, FINANCIAL REVIEW, OPERATIONS REPORT AND
ASSET SUMMARY
PRINCIPAL ACTIVITY
The Company is an exempted limited liability company
incorporated and registered in the Cayman Islands on 3 December
2010.
The Company is an AQSE listed litigation company, seeking to
recover its equity and "inter-company" debt investments made in a
Nigerian company (Lekoil Nigeria Limited ("Lekoil Nigeria")) and a
loan made to its previous Chief Executive Officer. These accounts
are for the company only on the basis of the Principal accounting
policy for 'Consolidation' included in Note 1.
FINANCIAL REVIEW
Financial overview and performance
The Company reported a loss of $237,164,000 for the year ended
31 December 2021. The loss was primarily as a consequence of the
impairment of the Company's investment in subsidiaries (Note 11)
and intercompany receivables (Note 12).
Net assets of the Company at the year end were $133,699,000.
Cash balances as at the year end were $50,000.
OPERATIONS REPORT AND ASSET SUMMARY
As set out in the Chairman's statement, the actions of Lekoil
Nigeria in 2021 required the Company to move to acting as a
standalone entity. The Company operated with one interim Executive
Chairman from June 2021 to December 2021, with the main activities
of the Company being the establishment of standalone operations,
the raising of finance to fund the Company's day to day operations
and the commencement of litigation to recover the CEO Loan.
As a corollary of that, the financial accounts presented in this
Annual Report are the first set of standalone financial accounts
for the Company. In preparing standalone financial accounts, there
is a risk of false comparisons with prior years given that
financial statements of prior years' use consolidated financial
information. Shareholders and investors should take this into
account when comparing the financial report for the year ended 2021
with prior years.
Strategy
The Company's strategy is twofold: to pursue via litigation or
negotiated settlement the (i) recovery and/or monetisation of all
of the Company's existing assets, including its 40% legal and 90%
economic interest in Lekoil Nigeria , and (ii) the repayment or
recovery (via litigation or negotiated settlement) of loans made to
Lekoil Nigeria and its subsidiaries and a loan made to Mr. Lekan
Akinyanmi, in his capacity as the former CEO of the Company.
Portfolio Companies
As at 31 December 2021, the Company held an interest in the
following companies:
-- Lekoil Nigeria Limited (40% legal interest, 90% economic
interest) is a Nigeria incorporated oil and gas exploration and
production company with a focus on Nigeria and West Africa
-- Lekoil Management Corp (100%) is a Delaware incorporated
company that provides intra group banking services to the Company
but with no material activities
-- Lekoil Management Services Ltd (100%) is a Cayman Island
incorporated company with no material activities
-- Lekoil 310 Ltd (100%) is a Cayman Island incorporated company with no material activities
-- Princeton Assets and Trust Pte Limited (100%) is a Singapore
Island incorporated company with no material activities
-- Lekoil Exploration and Production (Pty) Limited (80%
interest) is a Namibia company with no material activities.
Strategic Report
Given: (i) the inability of the Company to control the
day-to-day operational activities of Lekoil Nigeria and/or the
distributions made by Lekoil Nigeria; and (ii) the current disputes
between the Company and Lekoil Nigeria, the Company sees little
likelihood of the Company realising its investment in Lekoil
Nigeria and as such, has impaired its valuation of the equity
investment in Lekoil Nigeria to nil value.
Assets
The Company's asset base now primarily consists of its 40%
non-controlling shareholding in Lekoil Nigeria, various
"intercompany" receivables, the amount owing to the Company under
the CEO Loan and its rights under the Option Agreement.
Intercompany receivables
Debtor Amount due Amount due to Reason for
to the Company the Company as impairment
as at 30 June at 31 December or amendment
2021 (unaudited) 2021
Lekoil Nigeria USD $41.6 million USD $49.3 million Not applicable
- across two
loans due by
January 2026
and February
2029
------------------ ------------------ -------------------
Lekoil Oil USD $19.8 million USD $12.9 million Reflecting
& Gas Investments the likelihood
by February of recoverability
2024 (i.e. given the
Otakikpo) likely need
to litigate
to recover
the sums due
------------------ ------------------ -------------------
Mayfair Assets USD $253.0 USD $1 million Reflecting
& Trust Limited million Option Agreement
by May 2023 with Savannah
(i.e., OPL
310)
------------------ ------------------ -------------------
Ashbert Oil USD $35.5 million USD $38.5 million Not applicable
& Gas Limited
by September
2022 (i.e.,
OPL 325)
------------------ ------------------ -------------------
The Company is aware that Lekoil Nigeria Limited is unlikely to
agree on the exact intercompany debt position and the Company
emphasises that it expects it will have to commence litigation to
recover the intercompany loans and that the recovery of the
intercompany loan amounts cannot be guaranteed to be successful
either due to a failure to win the relevant litigation and/or an
ability to effectively enforce a judgment or because the Company
does not have the financial resources to pursue the recovery of the
intercompany debts.
CEO Loan
On 9 December 2020, the Company extended the term of the loan
made to Mr. Akinyanmi until 9 December 2021 with the following
terms: immediate payment of US$0.4 million, with the balance on the
loan is settled by quarterly payments of interest and principal at
a revised interest rate of 10% plus 3 months LIBOR ("Amended Loan
Agreement"). The initial US$0.4 million was settled by Mr.
Akinyanmi. Mr. Akinyanmi was due to make the second instalment
payment of US$413,523 on or before 9 March 2021. As the Company had
not received this payment, actions under the terms of the amended
loan agreement were initiated such that a portion of the salary
payable to Mr. Akinyanmi was applied towards the outstanding CEO
Loan, as agreed in the Amended Loan Agreement as a method of
default recovery, until the repayment schedule is satisfied. As the
Company considers the CEO Loan to be in default, under the
agreement, an additional interest of 4% per annum was applied to
amounts in arrears under the agreed payment schedule. After the
termination of Mr.
Strategic Report
Akinyanmi's executive contract with the Company in June 2021,
those salary deductions ceased. Mr. Akinyamni was due to make the
third instalment payment (US$404,052) on 9 June 2021, the fourth
instalment payment (US$ 394,581) on
9 September 2021 and the fifth instalment payment (US$ 385,636)
on 9 December 2021. None of those payments were received and the
Company has commenced legal proceedings to recover the amounts
owed.
Option Agreement
In February 2022, the Company entered into a convertible
facility agreement with Savannah Energy Investments Limited ("CFA
2" and "Savannah") whereby Savannah would support the Company by
providing a GBP0.9 million loan to the Company. The Company has
also signed an Option Agreement with Savannah granting it, subject
to approval of the Company's shareholders at an extraordinary
general meeting (the "Savannah EGM"), an option to be assigned the
intercompany debt owed to the Company by Mayfair Assets &
Trusts Limited (the "Mayfair Loan"). A US$1 million payment is
payable by Savannah to the Company upon such assignment.
The Savannah EGM was held on 8 April 2022 and the Company's
shareholders approved the entry into of the Option Agreement.
The Company notes that there is no guarantee that Savannah will
exercise its rights under the Option Agreement nor that Lekoil
Nigeria (and/or Mr. Akinyanmi) will not seek to challenge or
injunct the operation of the Option Agreement (including by way of
a Court process in Nigeria).
Equity shareholding in Lekoil Nigeria
The Company holds a 40% ownership interest in Lekoil Nigeria and
is entitled to 90% of any distributions i.e. dividends, other
distributions and any return of capital (whether following
winding-up, reduction of capital or any other forms of return of
capital) from, Lekoil Nigeria. On 01 April 2021, the Directors of
Lekoil Nigeria informed the Company that its board would start
operating and making decisions related to its operations as
contained in the shareholders' agreement between, amongst others,
the Company and Lekoil Nigeria. The board of Lekoil Nigeria further
stated that it would no longer fund any of the costs of the Company
and its subsidiaries, thereby limiting the ability of the Company
to access operational funds.
Given: (i) the inability of the Company to control the
day-to-day operational activities of Lekoil Nigeria and/or the
distributions made by Lekoil Nigeria; and (ii) the current disputes
between the Company and Lekoil Nigeria (and its CEO), the Company
sees little likelihood of the Company realising its investment in
Lekoil Nigeria and as such, has impaired its valuation of the
equity investment in Lekoil Nigeria to nil value.
Principal risks and uncertainties
The management of the business and the nature of the Company's
strategy are subject to a number of risks. The directors have set
out below the principal risks facing the business.
Going concern
The assessment of the going concern risk has been detailed in
the Directors' Report.
Market risk
The success of the business is reliant on executing its strategy
and having sufficient resources (including management) to do so
effectively.
Strategic Report
Liquidity risk
The Company manages its cash requirements to ensure that it has
sufficient resources to meet the operating needs of the business.
Cash flow risk is managed by ensuring that sufficient funds are
available to meet obligations to required payments to
creditors.
Historically, the Company has either raised equity capital or
obtained debt finance (namely via Lekoil Oil & Gas Investments
Limited) to fund group activities. The latter option in no longer
available to the Company given Lekoil Nigeria's actions. More
recently, the Company has used convertible debt facilities, a
contractor
shares scheme and payment of directors' fees in shares to manage
its cash flow. Once the Company's shares are trading on AQSE, as is
the Board's expectation, the Company retains the ability to raise
capital by way of an open offer or rights issue. There is no
guarantee that these measures will be sufficient to ensure the
Company has the liquidity it needs to pursue its strategy, noting
the aggressive litigation strategy of Lekoil Nigeria, which
necessitates the Company having to spend its limited cash resources
defending what the Company believe are litigations with little
merit and/or an ulterior motive.
Credit risk
The Company's principal financial assets are bank balances, cash
and trade and other receivables.
The Company's credit risk is primarily attributable to
receivables. An allowance for impairment is made where there is an
identified loss event which, based on previous experience, is
evidence of a reduction in the recoverability of the cash flows.
The amounts presented in the statement of financial position are
net of these allowances for doubtful receivables.
The Company believes that the credit risk on its liquid funds is
limited because the financial institution with which the Company
banks holds the Company's money in 'safeguarded funds'.
This strategic report was approved by the board on 30 June 2022
and signed on its behalf.
Anthony Hawkins Olapade Durotoye
Interim Executive Chairman Non-Executive Chairman
3 June 2021 to 9 June 2022 From 9 June 2022
Report of the Directors
The Directors present their report and the audited financial
statements of the Company for the year ended 31 December 2021.
RESULTS FOR THE YEAR
The Company has made a loss of $237.1 million (2020: loss of
US$20.7 million).
DIVIDS
The Directors are unable to recommend the payment of a dividend
(2020: Nil).
ACCOUNTING POLICIES
The Company's accounting policies and details of the significant
judgments and critical accounting estimates are disclosed within
the notes to the financial statements.
DIRECTORS AND THEIR INTERESTS
The Directors who served during the year are listed below.
Name Period as a Director of the
Company
Mark Simmonds 1 January 2021 to 20 April 2021
--------------------------------
Ms. Aisha Muhammed-Oyebode 1 January 2021 to 18 June 2021
--------------------------------
Olalekan Akinyanmi 1 January 2021 to 18 June 2021
--------------------------------
Anthony Hawkins 1 January 2021 to 31 December
2021
--------------------------------
Tom Richardson 8 January 2021 to 31 December
2021
--------------------------------
George Maxwell 8 January 2021 to 15 April 2021
--------------------------------
Michael Ajukwu 8 January 2021 to 20 April 2021
--------------------------------
Marco D'Attanasio 21 April 2021 to 31 December
2021
--------------------------------
Al Tindall 21 April 2021 to 31 December
2021
--------------------------------
Olapade Durotoye 22 November 2021 to 31 December
2021
--------------------------------
Adeoye Adefulu 22 November 2021 to 31 December
2021
--------------------------------
As at 31 December 2021, none of the then current Directors of
the Company had any legal or bene cial interest in the share
capital of the Company other than as follows:
Director's Beneficial Number of ordinary Percentage of
Name Interest held shares held by Company's issued
via legal or beneficial share capital held
owner at 31 December by legal or beneficial
2021 owner at 31 December
2021
Hadron Master
Marco D'Attanasio Fund 25,025,000 4.6%
---------------- ---------------------- ------------------------
DIRECTORS' RESPONSIBILITIES STATEMENT
The directors are responsible for preparing the Strategic
Report, the Directors' Report and the financial statements in
accordance with applicable law and regulations.
Company law and the Company's Articles of Association require
the directors to prepare financial statements for each financial
year using International Financial Reporting Standards (as adopted
by the European Union (IFRSs)). Under company law the directors
must not approve the financial statements unless they are
satisfied
Report of the Directors
that they give a true and fair view of the state of affairs and
profit or loss of the company and Company for that period. In
preparing these financial statements, the directors are required
to:
select suitable accounting policies and then apply them
consistently;
make judgements and accounting estimates that are reasonable and
prudent;
state whether applicable IFRSs have been followed, subject to
any material departures disclosed and explained in the financial
statements;
prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the company will
continue in business.
The directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the company's
transactions and disclose with reasonable accuracy at any time the
financial position of the company. They are also responsible for
safeguarding the assets of the company and hence for taking
reasonable steps for the prevention and detection of fraud and
other irregularities.
The directors confirm that:
in so far as each of the directors is aware, there is no
relevant audit information of which the company's auditor is
unaware; and
the directors individually have taken all steps that they ought
to have taken to make themselves aware of any relevant audit
information and to establish that the auditor is aware of that
information.
GOING CONCERN
The Directors have assessed the ability of the Company to
continue as a going concern having prepared detailed cash, funding
and liquidity forecast through to December 2023. The Directors
believe that there is a material uncertainty that may cast
significant doubt on the Company's ability to continue as a going
concern, including the effect on the Company of the litigation
instigated by Lekoil Nigeria and Mr Akinyanmi. Notwithstanding the
material uncertainty, the Directors have prepared the financial
statements on a going concern basis. Details on the going concern
disclosure are shown in the financial statements.
CORPORATE ADVISORS
The Company's nominated adviser (and joint broker) during 2021
was SP Angel Corporate Finance LLP ("SP Angel"). From 13 January
2021, the Company also engaged Tennyson Securities as its joint
broker. In November 2021, the Company announced that it would be
appointing a new auditor for the financial year ended 31 December
2021 and subsequently it appointed Bright Grahame Murray.
DIRECTORS' INDEMNITY AND INSURANCE
The Group provides indemnity to Directors in respect of
liabilities incurred as a result of their office. However, neither
the indemnity nor the insurance provides cover if the Director is
proven to have acted dishonestly or fraudulently. The Company
provided directors and officers insurance for its directors for the
financial year ended 31 December 2021.
POST-REPORTING DATE EVENTS
All events that have occurred since the year end which require
reporting have been disclosed in the financial statements and/or
the Chairman's Statement.
HEALTH, SAFETY AND ENVIRONMENT
The Company is committed to fulfil its health, safety, and
environmental responsibility. The Company has limited operational
activities outside of office based activities. There have been no
known breaches of HSE or environmental laws during the reporting
period.
Report of the Directors
FINANCIAL INSTRUMENTS
Details of the use of any nancial instruments by the Company are
contained in the nancial statements.
The Company is aware that one of its subsidiaries, Lekoil
Management Corp, entered into a Covid related loan via Berkshire
Bank. The Company has not been able to verify the repayment of the
loan and continues to investigate the matter.
INDICATION OF FUTURE DEVELOPMENTS
The details of the future developments of the Company are given
in the Strategic Report.
FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES
The details of financial risk management are given in the
Strategic Report.
BOARD AND COMMITTEE MEETING ATTANCE DURING THE YEAR 2021*
Nominations Remuneration Audit
Attendance Board Committee Committee Committee
Mark Simmonds 10 - - 1
------ ------------ ------------- -----------
Ms. Aisha Muhammed-Oyebode 14 2 3 -
------ ------------ ------------- -----------
Olalekan Akinyanmi 12 - - -
------ ------------ ------------- -----------
Anthony Hawkins 32 3 4 7
------ ------------ ------------- -----------
Tom Richardson 29 3 4 7
------ ------------ ------------- -----------
George Maxwell 9 2 2 1
------ ------------ ------------- -----------
Michael Ajukwu - - - -
------ ------------ ------------- -----------
Marco D'Attanasio 20 1 1 5
------ ------------ ------------- -----------
Al Tindall 19 1 1 6
------ ------------ ------------- -----------
Olapade Durotoye - - - -
------ ------------ ------------- -----------
Adeoye Adefulu - - - -
------ ------------ ------------- -----------
Michael Ajukwu 10 - - -
------ ------------ ------------- -----------
* Includes written resolutions
BOARD MEMBERS
The current Board is constituted by the following members:
Mr. Olapade Durotoye, Non-Executive Chairman
Pade Durotoye is the Chief Executive Of cer and Founder of West
Titan Energy. He has over 32 years of management experience across
the value chain of the oil and gas Industry internationally.
He began his career with Schlumberger Oil eld Services where he
worked in various Management capacities in Field Operations,
Operations Management, Line (Country) Management, Human Resources
Management and Business Development for close to 20 years in 8
countries in Africa, Europe and Asia.
He served as the MD/CEO of Ocean and Oil Holdings Group, a
principal investment and advisory services group, where advised on
and in some cases led the company's Management and Technical
Services advisory contract with Oando. He was a core member of
Oando's Group Leadership Council and a key part of the company's
Upstream Diversi cation Strategy & Execution Team that acquired
oil eld assets and drilling rigs.
Report of the Directors
Pade served as Managing Director/CEO of Oando Energy Resources
(OER), a position he held for over 8 years. In his capacity as
MD/CEO, he led the team that delivered on the acquisition of the
Nigerian upstream
oil and gas business of ConocoPhillips in 2014, making OER
Nigeria's leading Indigenous Independent Oil Company by production
with over 40,000boepd of oil and gas and 16 participating Licenses
in Nigeria and the Gulf of Guinea. He proceeded to join Nigerdock
FZE as Managing Director/CEO, where he served for a year to
strategically direct the organization.
Pade has a deep knowledge of the oil and gas sector and is
passionate about resolving value traps in in the industry. He holds
a BSc. Electronics and Engineering from the University of Ife (now
Obafemi Awolowo University) and is a member of several professional
bodies and associations which include the Society of Petroleum
Engineers, the Nigeria Society of Engineers, and the Institute of
Directors.
Mr. Guy Oxnard, Executive Director
Mr Guy Oxnard is a common law qualified upstream and midstream
oil & gas lawyer with experience on four continents, including
Africa. As a General Counsel, Executive Manager, Company Secretary
and Head of Compliance he has specialised in the structuring,
financing and management of transborder pipeline projects, with
particular interest in joint venture governance. He also is
experienced in M&A and litigation management. Prior to joining
Lekoil, Mr Oxnard worked with Tullow Oil plc, Trans Adriatic
Pipeline AG, Apache Energy Corp and law firm Herbert Smith
Freehills.
Mr. Dipo Sofola, Non-Executive Director
Mr. Dipo Sofola is a senior oil and gas executive with over a
decade of energy experience, focused on energy commercialization
and business development in the Nigerian oil and gas sector. Mr.
Sofola is a Business Development Manager for Savannah Energy, where
he leads on significant strategic projects, in line with Savannah
Energy's objective of delivering impactful and transformative
energy projects on the African continent. Previously, Mr. Sofola
was a Senior Commercial Advisor at Seven Energy (now Savannah
Entergy), leading on commercial transactions. He has also
previously worked as a Business Development analyst with
multinational telecommunications group, Etisalat in Nigeria. Mr.
Sofola holds a BA (Hons) in Business Finance from University of
Durham and an MSc in Project and Enterprise Management from
University College London.
Mr. Anthony Hawkins, Non-Executive Director
Mr. Hawkins is an English and Australian qualified lawyer of
more than twenty years' experience, who has worked in both private
practice and corporate roles. He is a senior energy lawyer, asset
manager and commercial negotiator, predominately in oil and gas but
also in power, LNG and renewables. Previously, Mr. Hawkins was
Chief Executive Officer in addition to roles as Legal and M&A
Director at Columbus Energy Resources plc as well as owning a
consultancy firm. Mr. Hawkins is a member of the Association of
International Petroleum Negotiators and was previously a member of
the legal committee of Oil & Gas UK where he was instrumental
in helping to develop the standard DES LNG Master Sale Agreement
for the European Federation of Energy Traders.
Mr. Tom Richardson, Non-Executive Director
Mr. Richardson has over 20 years of experience across banking
and oil & gas. Mr Richardson served as CFO of Nostrum Oil &
Gas Plc a UK premium listed company. Prior to joining Nostrum in
2011, Mr Richardson has worked for ING, JP Morgan and NM Rothschild
covering investment banking, capital markets and credit.
Mr. Marco D'Attanasio, Non-Executive Director
Mr D'Attanasio is a senior banker and investment manager with
over 23 years of experience in banking, finance, technology and oil
& gas. He is the Founder and Portfolio Manager for Hadron
Capital LLP and Hadron Capital (Cayman) Limited, each company
managing numerous Alternative Investment Funds and being FCA and
CIMA regulated, respectively. With Hadron Capital LLP he is the
winner of multiple performance-based awards. He is the co-founder
of Cricklo Ltd, an online community of professionals active in
transforming their enterprises into sustainable businesses and a
NED with Argo Blockchain plc. Mr D'Attanasio has a degree in
physics ("Laurea") from Pisa University and a PhD in Theoretical
Physics from Parma University.
Report of the Directors
Mr. Alphonso Tindall, Non-Executive Director
Mr Tindall is a senior U.S. lawyer with over 40 years of
experience in banking, finance and project development. He is
currently Senior Counsel at Hardwick Law Firm, assisting in the
strategy and execution of the management and growth of the largest
minority owned law firm in the United States. He is admitted to
the
Bar in Connecticut and New York and a member of the American Bar
Association and holds various Board Memberships
BOARD COMMITTEES
As at 1 July 2022, the Audit & Risk, Nominations and
Remunerations Committees of the Board of Directors will have the
following directors as members and Chairperson:
Audit & Risk Committee
Name Position
Tom Richardson Member
---------
Marco D'Attanasio Member
---------
Dipo Sofola Member
---------
Remuneration Committee
Name Position
Pade Durotoye Chairperson
------------
Guy Oxnard Member
------------
Adeoye Adefulu Member
------------
Nomination Committee
Name Position
Pade Durotoye Chairman
---------
Tom Richardson Member
---------
Dipo Sofola Member
---------
Adeoye Adefulu Member
---------
This report was approved by the board on 30 June 2022 and signed
on its behalf.
Anthony Hawkins Olapade Durotoye
Interim Executive Chairman Non-Executive Chairman
3 June 2021 to 9 June 2022 From 9 June 2022
Corporate Governance Statement
The Company has formally adopted the Quoted Companies Alliance
Corporate Governance Code for Small and Mid-Size Quoted Companies
("QCA Code") and its replacement, the QCA Corporate Governance Code
that was published in April 2018. The Company's application of the
QCA Code is set out on its website ( www.lekoilplc.com ) and is
updated from time to time.
The Company recognises the importance of sound corporate
governance commensurate with the size, corporate structure and
nature of the Company, even though there is no applicable regime of
corporate governance to which Directors of a Cayman Islands company
must adhere to over and above the general fiduciary duties of care,
diligence and skill imposed on such Directors under Cayman Islands
law.
The Company updated its policies in line with the EU Market
Abuse Regulation ("MAR") with effect from 3 July 2016.
The Company will continue to implement the following internal
policies in order to provide guidance on Corporate Governance
issues. These policies as the same as those summarised in the
Company's Annual Report for the year ended 31 December 2020. The
Company notes that it has no control over whether Lekoil Nigeria
implements these policies. These policies are reviewed periodically
to ensure continued relevance:
-- Related Party Transactions Policy
-- Disclosure and Insider Trading Policy
-- Share Dealing Code
-- Whistleblowing Policy
-- Anti-Bribery Policy
-- Risk Management Policy
-- Gifts and Hospitality Policy
-- Code of Ethics
-- Safety, Health, Environment and Security Policy
From June 2021 onwards, the Company has implemented these
policies in a manner commensurate with the size and available
resources. In the course of preparing this Annual Report and
Accounts, the Board has noted the need to review the Corporate
Governance framework and its practical implementation given the
changes in 2021 and also the need to undertake, in due course, a
Board evaluation report. The Company will undertake that those
reviews in the second half of 2022.
Website publication
The Company's Corporate Governance statement is published on its
website. The Directors are responsible for ensuring the annual
report and the nancial statements are made available on a website.
Financial statements are published on the Company's website in
accordance with legislation in the United Kingdom governing the
preparation and dissemination of nancial statements, which may vary
from legislation in other jurisdictions. The maintenance and
integrity of the Company's website is the responsibility of the
Directors.
Auditor
All of the current Directors have taken all the steps that they
ought to have taken to make themselves aware of any information
needed by the Company's auditor for the purposes of their audit and
to establish that the auditor is aware of that information. The
Directors are not aware of any relevant audit information of which
the auditor is unaware.
Business model and strategy
Information on our strategy is included in the Strategic Report
set out above.
Obligations to our stakeholders
We are committed to communicating openly with our shareholders
and stakeholders to ensure that our strategy, our financial
position and the effects of those on our stakeholder is clearly
understood.
Review of risks
The Board is responsible for setting the Company's risk
philosophy and appetite and approving the overall risk management
policy. It is responsible for maintaining a sound system of
internal control that supports the achievement of its goals and
objectives.
The Board is also responsible for overseeing the establishment,
implementation and review of the Company's risk management systems
and, to this end, has delegated certain functions relating to risk
to the Audit and Risk Committee and to management.
The Company has adopted a Risk Management Policy appropriate for
a company of its size and resources.
Management framework
As at 31 December 2021, the Board comprised of an Executive
Chairman and five Non-Executive Directors (three of whom were
independent). In 2021, there was significant changes to the Board.
The Company believes that its current composition is appropriate
for the Company given its current corporate structure and financial
resources. Each Board member brings a wealth of business leadership
experience to foster the collective strength of the Board in
setting the strategic goals of the Company and overseeing the
effective performance of management in achieving these goals.
Under their appointment letters, the Company may call on the
Directors to spend at least 20 days per year on Company
business.
The attendance record of the Directors is set out above.
Directors
We believe that our Board has the appropriate balance of skills,
experience and capabilities required to direct the Company. These
include sector-specific experience in the oil and gas industry, as
well as more general finance, accounting and business management
skills.
The Board is supported by the Audit and Remuneration Committees,
the terms of reference of which can be found on our website.
Succession planning is managed through regular reviews and
management discussions. From June 2021 onwards, the composition of
the Board will reflect the size of the Company and the resources
available to it.
Reward
The Company manages its activities via the Board of Directors
and one executive director. The Company's non-excutive directors
have agreed to be paid in the Company's ordinary shares for their
remuneration
Further information
The Corporate Governance section of our website sets out our
approach to corporate governance, and the roles and
responsibilities of the Chairman, Chief Executive and any other
Directors who have specific individual responsibilities or remits
(e.g. for engagement with shareholders or other stakeholder groups)
are shown.
The roles and terms of reference of the Audit and Risk Committee
and Remuneration Committee, and a formal written schedule of
matters reserved for the Board are also shown on the Company's
website www.lekoilplc .com.
Previous annual reports and other corporate documents, including
notices of all general meetings held in the last five years, are
also available on the Company's website www.lekoilplc .com.
Audit and Risk Committee Report
Composition
As at 31 December 2021, the Committee was composed of Anthony
Hawkins as Chair, Tom Richardson, Al Tindall and Marco D'Attanasio,
with Mr Hawkins and Mr Tindall acting as independent directors. All
of the directors have relevant financial experience.
Role and Responsibilities
The Audit Committee's terms of reference designate the role and
responsibilities of the audit committee
These are available on the Company's website www.lekoilplc
.com
The Audit Committee met 7 times in the 2021 year.
2021 Financial reporting
The following are the main key judgements and new accounting
standards that were considered by the Committee in its review of
the 2021 full year Financial Statements:
-- Going Concern basis of accounting;
-- Assessment of impairment of its 40% equity investment in Lekoil Nigeria;
-- Assessment of impairment of the inter-company receivables
with Lekoil Nigeria and its subsidiaries and the CEO Loan;
-- Assessment of impairment of its equity investment in its
subsidiaries and any inter-company receivables due from those
subsidiaries;
-- Consolidation of Company accounts with the Lekoil Nigeria group; and
-- the impact of new accounting standards.
Internal Controls
The internal control framework is based on the Company's
assessment of the risks it faces. The effectiveness of the internal
control system is monitored by the Board, and material exceptions
are reported to the Committee. The Company does not consider it
appropriate, given its size and complexity, to have an internal
audit function.
External auditor
Bright Grahame Murray were appointed auditors of the Company's
in May 2021. The Committee has recommended to the Board that the
auditors are reappointed for the year ending 31 December 2022.
Bright Grahame Murray has expressed a willingness to continue in
office as auditor and a resolution to re-appoint them will be
proposed at the next Annual General Meeting of the company.
Remuneration report
Composition and Role
As at 31 December 2021, the remuneration committee (the
"Remuneration Committee") was composed of Al Tindall as Chair and
Thomas Richardson, Anthony Hawkins and Marco D'Attanasio.
Mr Tindall and Mr Hawkins are independent directors of the
Company, save that Anthony Hawkins is serving as Interim Executive
Chairman. The Remuneration Committee is responsible for determining
and reviewing the terms and conditions of service (including
remuneration) and termination of employment of Executive
Director(s), and the administration of the Company's share option
and share award schemes. It is responsible for determining
individual remuneration packages including, where appropriate,
bonuses, incentives and share options.
Remuneration Policy
The Remuneration Committee, in forming its policy on
remuneration has given due consideration to the needs of the
Company, Shareholders and best practice provisions set out in the
QCA Code.
Until June 2021, the Company had a pension scheme for the
Executive Director (Mr. Akinyanmi). There is no pension scheme for
Non-Executive Directors.
In the second half of 2021, the Company agreed with its then
current directors to pay all compensation due for services in 2021
in Company shares rather than cash, with the conversion price of
the compensation in excess of the Company's share price at the time
of its suspension in September 2021. Payment of that compensation
was deferred until the occurrence of certain events, with no
payments made in 2021.
Performance Share Plan
There were no share awards in 2021.
Options
There were no share awards in 2021.
The interests of the Directors, who were in office at the end of
the financial year, in options over the shares of the Company at 31
December 2021are:
Outstanding
Options
Grant at 31
Grant Price Vesting December Lapse
Director and Plan Date (GBP) End Date 2021 Date
------------------- ------------ ------- ------------- ------------ -----------
Anthony Hawkins
([1])
NED Share Plan 10/30/2020 0.2113 10/30/2023 250,000 10/30/2030
Grand Total 250,000
============
Independent auditor's report to the members of Lekoil
Limited
Disclaimer of opinion
We were engaged to audit the financial statements of Lekoil
Limited for the year ended 31 December 2021 which comprise of the
Statement of comprehensive income, the Statement of financial
position, the Statement of changes in equity, the Statement of cash
flows and the notes to the financial statements, including a
summary of significant accounting policies. The financial reporting
framework that has been applied in their preparation is applicable
law and United Kingdom International Financial Reporting Standards
(IFRSs).
We do not express an opinion on the accompanying financial
statements of the company Lekoil Limited. Because of the
significance of the matters described in the basis for disclaimer
of opinion section of our report, we have not been able to obtain
sufficient appropriate audit evidence to provide a basis for an
audit opinion on these financial statements.
Basis for disclaimer of opinion
Going concern
In April 2021, the Board of Lekoil Nigeria notified the Board of
Lekoil Limited that it will no longer fund the operations of the
company. In September 2021, in order to cover some ongoing
operational costs, the company entered into Convertible Facility
Agreement ("CFA") with Hadron Master Fund, TDR Enterprises Ltd and
a non-related third party amounting to US$237,000. Subsequent to
the year end, the company entered into another CFA with Savannah
Energy Investments Limited amounting to US$1.19 million with an
option to acquire by way of assignment a loan from Lekoil Cayman to
Mayfair Assets & Trust Limited. In March 2022, both loans were
converted into fully paid ordinary shares of the company.
Although cash flow forecasts prepared to 31 December 2023
indicate that the company will have adequate resources to continue
in operational existence for the next 12 months, there is no
certainty that Savannah Energy Investments Limited will exercise
the option and provide the company $1m by 31 December 2022. The
forecasts also assume that the loan from former CEO Mr Akinyanmi in
the sum of $1.65 million will be recovered in the next 12 months.
There is material uncertainty concerning recoverability of this
loan which is now subject to legal proceedings.
In the absence of any alternative evidence available to us, we
were unable to form a view as to whether it is appropriate to
prepare the financial statements using the going concern basis as
set out in note 2 to the financial statements.
Valuation and recoverability of intercompany receivable
As explained in note 12 to the financial statements, the company
conducted a formal review of various related intercompany loans and
a total of US$133.5 million is estimated to be due to the company.
We were unable to confirm or verify by alternative means the
intercompany receivable included in the statement of financial
position at a total amount of US$133.5 million as at 31 December
2021. Furthermore, we were unable to obtain evidence as to the
recoverability of these intercompany loans. As a result of these
matters, we were unable to determine whether any adjustments might
have been found necessary in respect of recorded or unrecorded
intercompany receivable, and the elements making up the statement
of comprehensive income and the statement of financial
position.
Independent auditor's report to the members of Lekoil
Limited
Recoverability of loan from former CEO
As set out in note 12 to the financial statements a balance
outstanding of US$1.65 million at 31 December 2021 is due to the
company from a former CEO and is now subject to litigation by both
parties. We were unable to obtain sufficient appropriate evidence
as to the recoverability of this balance and consequently, we were
unable to determine whether any adjustments might have been found
necessary in respect of this receivable, and the elements making up
the statement of comprehensive income and the statement of
financial position.
Comparative information
We were appointed as auditors to the company on 27 May 2022. We
were unable to satisfy ourselves by alternative means whether the
comparative information for the previous accounting period is
correctly stated and the potential impact on the corresponding
figures in the current financial year. Furthermore, certain
comparative information is not available and has not been disclosed
in the financial statements.
Share based payments
We have been unable to satisfy ourselves concerning the
disclosures in relation to long term incentive plan scheme, Share
option scheme and Non-Executive Director share plan as set out in
Note 16 of the financial statements. Furthermore, we were unable to
satisfy ourselves on the carrying value of the share based reserve
of US$10.25 million.
Exemption from preparing consolidated financial statements
These financial statements do not meet the criteria for
exemption from preparing consolidated financial statements and
therefore do not comply with requirements of IFRS 10 as set out in
note 1 c.
Responsibilities of Directors
As explained more fully in the Directors' Responsibilities
Statement, the Directors are responsible for the preparation of the
financial statements and for being satisfied that they give a true
and fair view, and for such internal control as the directors
determine is necessary to enable the preparation of financial
statements that are free from material misstatement, whether due to
fraud or error.
In preparing the financial statements, the directors are
responsible for assessing the company's ability to continue as a
going concern, disclosing, as applicable, matters related to going
concern and using going concern basis of accounting unless the
directors either intend to liquidate the company or to cease
operations, or have no realistic alternative to do so.
Auditor's responsibilities for the audit of the financial
statements
Our responsibility is to conduct an audit of the company's
financial statements in accordance with International Standards on
Auditing (UK) and to issue an auditor's report. However, because of
the matter described in the basis for disclaimer of opinion section
of our report, we were not able to obtain sufficient appropriate
audit evidence to provide a basis for an audit opinion on these
financial statements.
We are independent of the company in accordance with the ethical
requirements that are relevant to our audit of the financial
statements in the UK, including the FRC's Ethical Standard, and we
have fulfilled our other ethical responsibilities in accordance
with these requirements.
Independent auditor's report to the members of Lekoil
Limited
Use of our report
This report is made solely to the company's members, as a body.
Our audit work has been undertaken so that we might state to the
company's members those matters we are required to state to them in
an auditor's report and for no other purpose. To the fullest extent
permitted by law, we do not accept or assume responsibility to
anyone other than the company and the company's members as a body,
for our audit work, for this report, or for the opinions we have
formed.
Ahsan Miraj
Senior Statutory Auditor
For and on behalf of Bright Grahame Murray
Emperor's Gate
114a Cromwell Road
Kensington
London
SW7 4AG
Date: 30 June 2022
Statement of comprehensive income
2021 2021 2020 2020
Note $000 $000 $000 $000
Continuing Continuing
Operations Total Operations Total
OTHER OPERATING INCOME
Cost of sales - - - -
----------- ----------- ----------- ----------
Gross (loss) - - - -
----------- ----------- ----------- ----------
Impairment of investments 11 (7,396) (7,396) - -
Impairment of intercompany
receivables 12 (232,411) (232,411) - -
Administrative expenses
Recurring administrative
costs (418) (418) (47,371) (47,371)
OPERATING LOSS 3 (240,225) (240,225) (47,371) (47,371)
----------- ----------- ----------- ----------
Finance income 6 3,061 3,061 26,674 26,674
Finance cost 7 - - - -
----------- ----------- ----------- ----------
PROFIT/(LOSS) FROM CONTINUING
ACTIVITIES BEFORE TAXATION (237,164) (237,164) (20,697) (20,697)
Tax expense 8 - - - -
----------- ----------- ----------- ----------
LOSS FOR THE YEAR ATTRIBUTABLE
TO THE EQUITY HOLDERS
OF THE PARENT (237,164) (237,164) (20,697) (20,697)
=========== =========== =========== ==========
TOTAL COMPREHENSIVE LOSS
ATTRIBUTABLE TO THE EQUITY
HOLDERS OF THE PARENT (237,164) (237,164) (20,697) (20,697)
=========== =========== =========== ==========
Loss per share - basic 9 (0.44) (0.44) (0.038) (0.038)
Loss per share - diluted 9 (0.44) (0.44) (0.038) (0.038)
=========== =========== =========== ==========
2021 2020
Note $000 $000
NON CURRENT ASSETS
Investments 11 - 7,396
---------- --------
- 7,396
CURRENT ASSETS
Trade and other receivables 12 135,174 382,115
Cash and cash equivalents 50 -
---------- --------
TOTAL CURRENT ASSETS 135,224 382,115
TOTAL ASSETS 135,224 389,511
========== ========
EQUITY
Share capital 15 27 27
Share premium account 264,004 264,004
Share based payment reserve 10,259 10,173
Retained earnings (140,591) 96,573
---------- --------
TOTAL EQUITY 133,699 370,777
---------- --------
CURRENT LIABILITIES
Trade and other payables 13 1,525 18,734
---------- --------
TOTAL CURRENT LIABILITIES 1,525 18,734
TOTAL LIABILITIES 1,525 18,734
---------- --------
TOTAL EQUITY AND LIABILITIES 135,224 389,511
========== ========
Statement of financial position
These financial statements were approved by the directors on 30
June 2022 and are signed on their behalf by:
Anthony Hawkins Olapade Durotoye
Interim Executive Chairman Non-Executive Chairman
3 June 2021 to 9 June 2022 From 9 June 2022
Statement of changes in equity
Share capital Share Share based Retained Total
premium payment reserve earnings equity
account
$000 $000 $000 $000 $000
At 1 January 2021 27 264,004 10,173 96,573 370,777
Loss for the year - - - (237,164) (237,164)
Total comprehensive
income 27 264,004 10,173 (140,591) 133,613
Transactions with
owners: - - 86 - 86
Total transactions
with owners - - 86 - 86
At 31 December
2021 27 264,004 10,259 (140,591) 133,699
============= ======== ================ =========== =========
Share capital Share Share based Retained Total
premium payment reserve earnings equity
account
$000 $000 $000 $000 $000
At 1 January 2020 27 264,004 10,173 117,270 391,474
Loss for the year - - - (20,697) (20,697)
------------- -------- ---------------- --------- --------
Total comprehensive
income 27 264,004 10,173 96,573 370,777
Transactions with
owners:
Total transactions
with owners - - - - -
At 31 December
2020 27 264,004 10,173 96,573 370,777
============= ======== ================ ========= ========
CASH FLOWS USED IN OPERATING ACTIVITIES 17 (187) -
INVESTING ACTIVITIES
Loans received 237 -
CASH FLOWS FROM INVESTING ACTIVITIES 237 -
NET(DECREASE)/INCREASE IN CASH AND
CASH EQUIVALENTS 50 -
Cash and cash equivalents brought
forward - -
CASH AND CASH EQUIVALENTS CARRIED
FORWARD 19 50 -
=====
1. ACCOUNTING POLICIES
a. General Information
Lekoil Limited ("the Company") is a company incorporated and
domiciled in the Cayman Islands. The address of the registered
office is Intertrust Corporate Services (Cayman) Limited, 190 Elgin
Avenue, George Town,Grand Cayman KY1-9008,Cayman Islands , These
financial statements are prepared in US dollars, because that is
the currency of the primary economic environment in which the
Company operates. The review of the business is contained within
the Strategic Report on page 10.
b. Basis of preparation of financial statements
The financial statements have been prepared in accordance with
EU-endorsed International Financial Reporting Standards ('IFRSs'),
IFRIC interpretations as adopted by the EU.
The financial statements have been prepared under the historical
cost convention except for financial instruments and share based
payments which are measured at fair value. Monetary amounts in
these financial statements are rounded to the nearest $000.
As at 31 December 2021 the Company had cash balances of $50,000.
The Directors have prepared a cash flow forecast for the coming 12
months which demonstrates the ability for the Company to actively
pursue its stated strategy. Accordingly the Directors consider it
appropriate to continue to prepare the financial statements of the
Company on a going concern basis.
c. Basis of consolidation
The financial statements incorporate the financial statements of
the company made up to 31 December each year. Control is achieved
where the company has the power to govern the financial statements
and operating policies of an investee entity so as to obtain
benefits from its activities.
Consolidated financial statements for the entity have not been
prepared on the basis that the relevant accounting records for the
company's subsidiaries are not available without disproportionate
expense or undue delay, compared to the value to the members if the
subsidiaries were included. This is a permitted reason for
excluding subsidiaries results from group accounts.
This exemption is not permitted as a justification for excluding
subsidiaries from group accounts under IFRS 10. The company has
significantly reduced central overheads in the year and does not
have reliable information on the position to and at 31 December
2021 (for the subsidiaries noted above) and as a result do not have
the funds and time to correct this position and therefore
reluctantly has had to prepare accounts that do not comply with
IFRS 10.
Therefore there are no subsidiaries to include in the
consolidated accounts and these financial statements show only the
result of the company.
d. Segment reporting
In identifying its operating segments management generally
follows the Company's service lines, which represent the main
products and services provided by the Company.
Management consider that all activities undertaken by the
Company are from one operating segment. The on-going sole activity
of the Company, being the pursuit of acquisition opportunities have
been allocated to one continuing operating segment.
The measurement policies the Company uses for segment reporting
under IFRS 8 are the same asthose used in its financial
statements.
1. ACCOUNTING POLICIES (continued)
e. Taxation
Under current laws of the Cayman Islands, there is no income,
estate, transfer, sales or other Cayman Islands taxes payable by
the Company and management believes the Company is not liable for
tax in any other jurisdiction. Accordingly no tax charges or tax
liabilities are reflected in the financial statements.
f. Investments
Subsidiary Undertakings
Investments in subsidiaries are valued at cost less provision
for impairment.
g. Available-for-sale financial assets
Available-for-sale financial assets are non-derivative financial
assets that are either designated to this category or do not
qualify for inclusion in any of the other categories of financial
assets.
The equity investment is measured at fair value with gains and
losses recognised in other comprehensive income and reported within
the available for sale financial asset reserve within equity,
except for impairment losses, which are recognised in profit or
loss, An assessment for impairment is undertaken at least at each
balance sheet date. Reversals of impairment losses are not
recognised in profit or loss and any subsequent increase in fair
value is recognised in other comprehensive income.
When the asset is disposed of or determined to be impaired, the
cumulative gain or loss recognised in other comprehensive income is
reclassified from the equity reserve to profit or loss.
h. Impairment
An impairment test of assets is performed whenever events and
circumstances indicate that the carrying value of the asset may
exceed its recoverable amount. The carrying amounts of the
Company's assets, are reviewed at each reporting date to determine
whether there is any indication of impairment. If such indication
exists, the asset's recoverable amount is estimated. An impairment
loss is recognised whenever the carrying amount of an asset exceeds
its recoverable amount. Impairment losses are recognised in the
income statement.
i. Financial assets and liabilities
Financial assets and liabilities are recognised on the Company's
balance sheet when the Company
becomes a party to the contractual provisions of the
instrument.
(i) Trade and other receivables
Trade and other receivables are measured at initial recognition
at fair value plus transaction costs, and are subsequently measured
at amortised cost using the effective interest rate method, less
provision for impairment. Any change in their value through
impairment or reversal of impairment is recognised in the income
statement.
Provision against trade and other receivables is made when there
is objective evidence that the Company will not be able to collect
all amounts due to it in accordance with the original terms of
those receivables. The amount of the write-down is determined as
the difference between the asset's carrying amount and the present
value of estimated future cash flows.
1. ACCOUNTING POLICIES (continued)
(ii) Cash and cash equivalents
Cash and cash equivalents comprises cash on hand and demand
deposits, and other short term highly liquid investments that are
readily convertible to a known amount of cash and are subject to an
insignificant risk of changes in value.
(iii) Financial liabilities and equity
Financial liabilities and equity instruments are classified
according to the substance of the contractual arrangements entered
into. An equity instrument is any contract that evidences a
residual interest in the assets of the Company after deducting all
of its liabilities. A financial liability is any liability which
gives rise to a contractual obligation to deliver cash or another
financial asset to another entity.
(iv) Bank borrowings
Interest-bearing bank loans and overdrafts are initially
recorded at fair value, net of direct issue costs and subsequently
at amortised cost using the effective interest rate method. Finance
charges, including premiums payable on settlement or redemption and
direct issue costs, are accounted for on an accruals basis in the
income statement using the effective interest rate method.
(v) Convertible loan notes containing embedded derivatives
The Company may issue convertible loan notes which carry an
option for the issuer to convert the liability into a variable
number of equity shares.
Contracts which result in the entity delivering a variable
number of its own equity instruments are classed as financial
liabilities.
The conversion option is an embedded derivative and is carried
at fair value through profit and loss.
The convertible loan is also classified as a financial
liability. It is recorded initially at fair value and subsequently
measured at amortised cost using the effective interest rate
method.
When shares are issued in consideration for extinguishment of
debt any difference between the face value of the loan notes and
the fair value of shares issued is recognised in profit and
loss.
(vi) Convertible loan notes accounted for as compound
instruments
The Company may issue convertible loan notes which carry an
option for the issuer to convert the liability into a fixed number
of equity shares.
Contracts which result in the entity delivering a fixed number
of its own equity instruments are classed as compound instruments,
containing both a financial liability and an equity instrument.
Equity instruments are instruments that evidence a residual
interest in the assets of an entity after deducting all of its
liabilities. Therefore, when the initial carrying amount of the
compound financial instrument is allocated to its equity and
liability components, the equity component is assigned the residual
amount after deducting from the fair value of the instrument as a
whole the amount separately determined for the liability
component.
No gain or loss arises from initially recognising the components
of the instrument separately.
1. ACCOUNTING POLICIES (continued)
(vii) Trade and other payables
Trade payables are initially measured at fair value, and are
subsequently measured at amortised cost, using the effective
interest rate method.
(viii) Equity instruments
Equity instruments issued by the Company or company are recorded
at the proceeds received, net of direct issue costs.
Share warrants
The Company has issued share warrants which have been accounted
for as equity instruments as the substance of the contractual
arrangement is such that the warrants evidence a residual interest
in the assets of the Company after deducting all liabilities.
(ix) Held for trading financial assets
Assets held in this category are measured at fair value with
gains or losses recognised in profit or loss. The fair value of
financial assets in this category are determined with reference to
active market transactions.
j. Equity and reserves
(i) Share capital
Share capital represents the nominal value of shares that have
been issued.
(ii) Share premium
Share premium includes any premiums received on issue of share
capital. Any transaction costs associated with the issuing of
shares are deducted from share premium, to the extent there is a
premium on that issue, net of any related income tax benefits.
(iii) Equity-settled share based payment
All goods and services received in exchange for the grant of any
share-based payment are measured at their fair values. Where
employees are rewarded using share-based payments, the fair values
of employees' services are determined indirectly by reference to
the fair value of the instrument granted to the employee. This fair
value is appraised at the grant date and excludes the impact of
non-market vesting conditions (for example, profitability and sales
growth targets).
All equity-settled share-based payments are ultimately
recognised as an expense in profit and loss with a corresponding
credit to equity reserve.
If vesting periods or other non-market vesting conditions apply,
the expense is allocated over the vesting period, based on the best
available estimate of the number of share options expected to vest.
Estimates are revised subsequently if there is any indication that
the number of share options expected to vest differs from previous
estimates. Any cumulative adjustment prior to vesting is recognized
in the current period. No adjustment is made to any expense
recognised in prior periods if share options that have vested are
not exercised.
Upon exercise of share options, the proceeds received net of
attributable transaction costs are credited to share capital, and
where appropriate share premium.
1. ACCOUNTING POLICIES (continued)
k. Exceptional items
The Company identified and reports material, non-recurring costs
and income as exceptional items separately from underlying
operating expenses and income. Exceptional items may include
impairment charges and acquisition costs.
l. Key estimates and judgements
The directors have identified the following as key judgements in
the preparation of the Company accounts:
-- assessment of recoverability of intercompany receivables (Note 12 )
-- assessment of going concern (Note 2)
m. Standards, amendments and interpretations to existing
standards that are not yet effective and have not been adopted
early by the Company
The following new and amended Standards and Interpretations have
been issued and are effective for the current financial period of
the Company.
-- Other amendments
In the current year, the company has applied a number of
amendments to Standards and Interpretations issued by the IASB that
are effective for an annual period that begins on or after 1
January 2021. These have not had any material impact on the amounts
reported for the current and prior years.
Standards which are in issue but not yet effective
At the date of authorisation of these financial statements, the
company has not early adopted the following amendments to Standards
and Interpretations that have been issued but are not yet
effective:
-- Narrow scope amendments to IFRS3, IAS16 and IAS37 (effective
for periods commencing on or after 1 January 2022)
-- Annual improvements to IFRS standards 2018 -- 2020 (effective
for periods commencing on or after 1 January 2022)
-- Amendments to IAS 1: Classification of liabilities as current
or non -- current (effective for periods commencing on or after 1
January 2023)
-- Amendments to IAS 8: Definition of accounting estimates
(effective for periods commencing on or after 1 January 2023)
The Directors anticipate that the adoption of these standards
and interpretations in future periods will have no material impact
on the financial statements of the company. The company does not
intend to apply any of these pronouncements early.
2. GOING CONCERN
The Directors have assessed the ability of the Company to
continue as a going concern having prepared detailed cash, funding
and liquidity forecast through to December 2023. The Directors
believe that there is a material uncertainty that may cast
significant doubt on the Company's ability to continue as a going
concern, including the effect on the Company of the litigation
instigated by Lekoil Nigeria and Mr Akinyanmi. Notwithstanding the
material uncertainty, the Directors have prepared the financial
statements on a going concern basis.
3. OPERATING LOSS
Operating loss is stated after charging:
2021 2020
$000 $000
Impairment of investments 7,396 -
Impairment of intercompany receivables 232,411 -
Fees payable to the company's auditor 51 -
:
- for the audit of the financial statements
4. STAFF COSTS
Staff costs, being amounts payable to key management personnel,
were as follows:
2021 2020
$000 $000
Wages and salaries 295 555
295 555
====== ======
The average monthly number of employees during the year,
including directors was as follows:
No. No.
Directors 6 6
==== ====
5. DIRECTORS' REMUNERATION
Directors' emoluments were as follows:
2021 2020
Salary and Salary and
Director total emoluments total emoluments
$000 $000
T Hawkins 143 -
A Tindall 63 -
T Richardson 26 -
A Adefulu 4 -
M D'Attanasio 19 -
P Durotoye 4 -
A Oyebode* (resigned 18/6/21) 35 -
Total 295 -
================= =================
The directors agreed to accrue fees for the period from June
2021 to December 2021 .
No retirement benefits were accruing to directors at 31 December
2021 (2020: GBPnil).The directors received GBPnil (2020: GBPnil) in
respect of share based payments.
6. FINANCE INCOME
2021 2020
$000 $000
Interest on intercompany loan 3,061 26,674
3,061 26,674
====== =======
7. FINANCE COST
2021 2020
$000 $000
Total interest expense for financial liabilities - -
----- ------
- -
===== ======
8. TAX EXPENSE
As per accounting policy 1 (e) under current laws of the Cayman
Islands, there is no income, estate, transfer, sales or other
Cayman Islands taxes payable by the Company and management believes
the Company is not liable for tax in any other jurisdiction.
Accordingly no tax charges or tax liabilities are reflected in the
financial statements.
9. (LOSS)/EARNINGS PER SHARE
Basic earnings per ordinary share for the year is based on the
loss of $237,164,000 (2020: loss:$20,697,000) and a weighted
average of 536,779,983 (2020: 536,779,983) ordinary shares.
For diluted earnings per share, the weighted average number of
ordinary shares in issue is adjusted to assume conversion of all
potential dilutive ordinary shares. Items included in the
calculation are options and warrants for ordinary shares.
The effect of conversion of all potential dilutive ordinary
shares would have an anti-dilutive effect on earnings per share and
therefore they have not been incorporated in the diluted earnings
per share calculation. Potential ordinary shares are only treated
as dilutive when their conversion to ordinary shares would decrease
profit per share or increase loss per share.
10. SEGMENT REPORTING
Management currently considers that the Company has one
operating segment as described in accounting policy 1(c). Segment
information can be analysed as follows for the reporting periods
under review.
Investment Investment
strategy strategy
2021 Total 2021 2020 Total 2020
Continuing Continuing
operations operations
$000 $000 $000 $000
Segment
operating
profit/(loss) (237,164) (237,164) (20,697) (20,697)
------------ ------------- ------------ -------------
Segment
assets 135,224 135,224 389,511 389,511
------------ ------------- ------------ -------------
11. INVESTMENTS
Company investment in subsidiaries - Shares in Company
undertakings
2021 2020
Non-current $000 $000
At 1 January 7,396 7,396
Impairment (7,396) -
------- -----
At 31 December - 7,396
======= =====
Subsidiaries are listed in Note 21.
The Directors have assessed the carrying value of its
investments in its subsidiaries as part of its formal review of its
various intercompany and related party loan positions (Note 12). As
set out in the Chairman's Statement and Strategic Report the
Company has been moved to act as a standalone entity. Accordingly
it has written down the value of the shares in Company undertakings
to nil.
12. TRADE AND OTHER RECEIVABLES
2021 2020
$000 $000
Current
Other receivables 1,647 7,224
Intercompany receivable 133,527 374,891
135,174 382,115
======= =======
An unsecured loan of US$1,500,000 was granted to a Director on 9
December 2014. The loan had a three-year term and bore interest at
a rate of four per cent per annum. In September 2017, the loan's
maturity date was extended by 3 years to 9 December 2020 under the
same terms and conditions. On 9 December 2020, at the expiration of
the extension, the Board approved a final extension to loan for 12
months conditional on the adherence to the following repayment
terms: immediate payment of US$0.4 million, while the balance on
the loan is settled by quarterly payments of interest and principal
at a revised interest rate of 10% plus 3-month LIBOR. The initial
US$0.4 million was settled by the Director although no other
settlements were made and the loan is in default and accruing
interest at a rate of LIBOR plus 14 per cent on the default amount.
At year end, the balance outstanding was US$1,646,696.
In 2021, the Company commenced a formal review of all the
various intercompany and related party loan positions (noting in
particular that Lekoil Nigeria may no longer qualify as a related
party and that the term "intercompany loans" refers to their
historic characterisation). It is aware that Lekoil Nigeria is
unlikely to agree on the exact intercompany debt position and the
Company emphasise that it expects it will have to commence
litigation to recover the intercompany loans and that the recovery
of the intercompany loan amounts cannot be guaranteed to be
successful either due to a failure to win the relevant litigation
and/or an ability to effectively enforce a judgment. The Company
attributes minimal value to the day-to-day operational activities
of Lekoil Nigeria and, as such, has impaired its valuation of the
equity investment in Lekoil Nigeria to nil value.
13. TRADE AND OTHER PAYABLES
2021 2020
$000 $000
Current
Trade payables 1,019 502
Other payables 237 17,404
Accruals 269 828
----- ------
1,525 18,734
===== ======
The carrying values are considered to be a reasonable
approximation to fair value.
14. BORROWINGS
2021 2020
$000 $000
Current
Short term loans 237 -
---- ----
On 2nd September 2021, Lekoil Limited announced it entered into
a Convertible Facility Agreement ("CFA") with Hadron Master Fund,
TDR Enterprises Ltd (a company controlled by Tom Richardson) and a
non-related third party (together "the Lenders") to allow it access
GBP200,000 for working capital purposes for a 6-month period.
Hadron will provide GBP100,000 while TDR Enterprises Ltd and the
third party will provide up to GBP50,000 each. The purpose of the
facility is for the payment of corporate costs (regulatory and
compliance and legal fees) and for general corporate purposes as
approved by the Board of Directors. There is the option to convert
the facility in the event of non-payment and expiration of term to
ordinary shares of the Group at the conservation price of 0.5
pence. Interest rate as at 10% per annum.
15. SHARE CAPITAL
2021 2020
$ $
Authorised, Allotted, called up and
fully paid
Ordinary shares
Beginning of the year 26,839 26,839
New Shares issued - -
------- -------
As at 31 December (536,779,983) ordinary
shares of $0.00005 (2020: 536,779,583
ordinary shares of $0.00005 each) 26,839 26,839
The authorised share capital is 1,000,000,000 shares at par
value of $0.00005 each
16. SHARE-BASED PAYMENTS
At 31 December 2021, the Group had the following share-based
payment arrangements:
Long Term Incentive Plan scheme (equity-settled)
The long-term incentive plan ("LTIP") was approved on 19
November 2014 and amended on 21 December 2015. The Group awarded no
share options under the plan in the year (2020: 1,000,000 share
options issued on 30 October 2020 at 2.13pence).
The existing options have the following performance
conditions.
-- No shares may be acquired, and the option will lapse in full
if annual compound Total Shareholder Return ("TSR") is less than
10%
-- 30% of the shares subject to the option may be acquired by
exercise if annual compound TSR is 10%
-- 100% of the shares subject to the option may be acquired by
exercise if annual compound TSR is 20% or more
-- The number of shares subject to the option which may be
acquired on exercise will be determined on a straight-line basis
between 30% and 100% if annual compound TSR is between 10% and
20%
Weighted Weighted
average average
exercise Number of exercise Number of
price US$ options price US$ options
----------- ------------ ----------- ------------
2021 2020
------------------------- -------------------------
Outstanding at 1 January 0.32 30,099,000 0.33 31,221,750
Granted during the year - - 0.03 1,000,000
Forfeited during the year 0.33 (9,992,500) 0.33 (2,122,750)
----------- ------------ ----------- ------------
Outstanding at 31 December 0.32 20,106,500 0.32 30,099,000
----------- ------------ ----------- ------------
The options outstanding at 31 December 2021 had exercise prices
in the range of US$0.03 to US$0.4 and a weighted average
contractual life of 4.18 years (2020: 5.18 years).
Share option scheme (equity-settled)
The Group established a share option scheme available to
Directors, key management personnel, employees and consultants
providing employment-type services, which provides the opportunity
to purchase shares in the Group. In accordance with the scheme,
holders of vested options are entitled to purchase shares at prices
of the shares established at the date of grant, during a period
expiring on the tenth anniversary of the effective date i.e. grant
date. The grant dates for awards were 3 December 2010, 1 June 2011,
1 November 2011, 4 June 2012, 19 February 2013, 7 April 2013, 17
May 2013 and 26 March 2014 based upon a shared understanding of the
terms of the awards at that time. This share option scheme has been
replaced by the LTIP scheme described above. As such, no new
options were granted in 2021 under this scheme.
The number and weighted average exercise prices of share options
are as follows:
Weighted
average Weighted
exercise Number of average exercise Number of
price US$ options price US$ options
----------- ----------- ------------------ -----------
2021 2020
------------------------ -------------------------------
Outstanding at 1 January 0.46 16,358,125 0.46 16,555,000
Granted during the year - - - -
Forfeited during the year - 0.46 (196,875)
Exercised during the year - - - -
----------- ----------- ------------------ -----------
Outstanding at 31 December 0.46 16,358,125 0.46 16,358,125
----------- ----------- ------------------ -----------
Exercisable at 31 December 0.46 16,358,125 0.46 16,358,125
----------- ----------- ------------------ -----------
The options outstanding at 31 December 2021 have a weighted
average contractual life of 0.14 years (2019: 1.14 years).
Non-Executive Director Share Plan (equity-settled)
The Board established the Non-Executive Director share plan on
21 December 2015.
These stock options are not subject to any performance criteria
and vest three years from the grant date, subject to successful
completion of a 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.
The number and weighted average exercise prices of share options
are as follows:
Weighted
average Weighted
exercise Number of average exercise Number of
price US$ options price US$ options
----------- ------------ ------------------ ----------
2021 2020
------------------------- ------------------------------
Outstanding at 1 January 0.20 2,600,000 0.24 2,100,000
Granted during the year - - 0.03 500,000
Forfeited during the year - (2,350,000) - -
----------- ------------ ------------------ ----------
Outstanding at 31 December 0.03 250,000 0.20 2,600,000
----------- ------------ ------------------ ----------
The options outstanding at 31 December 2021 had a weighted
average exercise price of $0.03 and a weighted average contractual
life of 5.27 years (2020: 6.27 years).
Employee benefit expenses
2021 2020
US$'000 US$'000
--------- --------
Non-Executive Director Share Plan (equity-settled) - 37
Long Term Incentive Plan scheme (equity-settled) - 309
Total expense recognised as employee costs - 346
---------- --------
17. RECONCILIATION OF OPERATING LOSS TO NET CASH USED IN OPERATING ACTIVITIES
2021 2020
$000 $000
Loss for the year (237,164) (20,697)
Impairment 7,396 -
Decrease/(increase) in receivables 246,790 -
Increase/(decrease) in payables (17,209) 20,697
--------- --------
Net cash used in continuing operations (187) -
Net cash outflow used in operations (187) -
========= ========
18. FINANCIAL INSTRUMENTS
The carrying amounts presented in the statement of financial
position relate to the following categories of assets and
liabilities:
2021 2020
Company $000 $000
Financial assets
Loans and receivables:
Trade and other receivables 135,174 382,115
Cash and cash equivalents 50 -
------- -------
135,224 382,115
------- -------
Financial liabilities
Financial liabilities measured
at amortised cost:
Current:
Loans 237 -
Trade and other payables 1,288 18,734
1,525 18,734
------- -------
The carrying values of the Company's financial assets and
liabilities approximate to their fair values.
Financial assets comprise cash and cash equivalents, trade and
other receivables and exclude prepayments.
The financial liabilities are all short-term liabilities and due
on demand or within agreed contractual terms.
Risk management
The board is charged with managing the various risk exposures,
including those which arose through holding the following financial
instruments which apply to both the Company and the Company:
(a) Capital risk management
The Company manages its capital to ensure that all the companies
within the Company will be able to continue as a going concern
while maximising the return to equity holders, through optimisation
of debt equity balance. The capital structure of the Company
includes debt, consisting of borrowings, cash and cash equivalents
and equity attributable to the equity holders of the parent. Where
necessary additional loans are provided to the Company to ensure
liquidity at critical times.
Capital for the reporting period under review is summarised as
follows:
2021 2020
$000 $000
-------------------------- ------- -------
Total equity 133,699 370,777
-------------------------- ------- -------
Borrowings 237 -
-------------------------- ------- -------
Cash and cash equivalents 50 -
-------------------------- ------- -------
Capital 133,986 370,777
-------------------------- ------- -------
(b) Interest rate risk
The Company is exposed to interest rate risk as it has
borrowings and cash and cash equivalent balances that are subject
to variable interest rates. The Company does not enter into hedging
transactions for the purposes of minimising its exposure to
interest rate risk, but manages its exposure by monitoring the
levels of interest payable and receivable on a regular basis.
At 31 December 2021 amounts on short term deposits totalled
$50,000 (2020: $-). Loans receivables and loan notes are contracted
at a fixed rate of interest.
(c) Liquidity rate risk
The Company's approach to liquidity risk is to ensure that
sufficient liquidity is available to meet foreseeable requirements,
by having adequate reserves, banking and borrowing facilities and
by investing funds securely and profitably. The board further
manages its exposure to liquidity risk by ensuring that cash flow
forecasts and budgets are produced annually and monitored on a
regular basis. All trade payables and borrowings have a maturity
date of within one year.
(d) Credit rate risk
Credit risk refers to the risk that a third party will default
on its contractual obligations resulting in financial loss to the
Company. The Company manages the exposure to this risk by carrying
out credit verification procedures on all clients and monitoring
receivable balances on an ongoing basis. The Company's receivable
balance principally comprises amounts due from other Company
companies for financing purposes.
19. RELATED PARTY TRANSACTIONS
Transactions with key management personnel
Key management personnel are those persons having authority and
responsibility for planning, directing and controlling the
activities of the Company, directly or indirectly. These are the
Directors.
Loans and transactions with key management personnel
An unsecured loan of US$1,500,000 granted to a Director on 9
December 2014. The loan had a three-year term and bore interest at
a rate of four per cent per annum. In September 2017, the loan's
maturity date was extended by 3 years to 9 December 2020 under the
same terms and conditions. On 9 December 2020, at the expiration of
the extension, the Board approved a final extension to loan for 12
months conditional on the adherence to the following repayment
terms: immediate payment of US$0.4 million, while the balance on
the loan is settled by quarterly payments of interest and principal
at a revised interest rate of 10% plus 3-month LIBOR. The initial
US$0.4 million was settled by the Director although no other
settlements were made and the loan is in default and accruing
interest at a rate of LIBOR plus 14 per cent on the default amount.
At year end, the balance outstanding was US$1,646,696 and is
included in 'Other receivables'.
On 2 September 2021, the Company entered into a Convertible
Facility Agreement ("CFA") with Hadron Master Fund ("Hadron") (a
company associated with Marco D'Attanasio), TDR Enterprises Ltd (a
company controlled by Tom Richardson) and a non-related third party
(together "the Lenders") to allow it to access up to GBP200,000 for
working capital purposes. The key terms of the CFA were: (i)
Amount: an amount of 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; (ii) 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; (iii) Availability: GBP100,000 available
immediately, with GBP100,000 available after 1 October 2021. (iv)
Term: 6 months. (v) 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. (vi) Conversion
right: In the event of non-payment at the expiry of the Term,
Lenders have the option to convert the outstanding amounts into
ordinary shares of the Company at the Conversion Price of 0.5
pence. (vii) Interest Rate: 10% per annum. (viii) Shareholder
approval/Security for Repayment: Approval at Company's AGM. In the
event shareholder approval was not obtained, the Lenders would have
been be entitled to an assignment by way of security of the CEO
Loan.
Tom Richardson is a non-executive director of the Company,
controls TDR Enterprises Ltd and is 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. Given that Tom Richardson and
Marco D'Attansio were (at the time of entry into the CFA)
non-executive directors of the Company and given Hadron's
shareholding in the Company, the entry into the CFA with these
parties was deemed to be a related party transaction for the
purposes of Rule 13 of the AIM Rules for Companies ("AIM Rules").
For the purposes of the AIM Rules, the independent directors of the
Company, having consulted with the Company's Nominated Adviser, SP
Angel, considered that the terms of the transaction are fair and
reasonable insofar as its shareholders are concerned.
Anthony Hawkins, whilst the Interim Executive Chairman of the
Company, made a number of interest free loans to the Company to pay
its day to day administrative costs. Those loans have been repaid
by the Company.
20. ULTIMATE CONTROLLING PARTY
As at 31 December 2021 and 31 December 2020 there is no single
ultimate controlling party.
21. PRINCIPAL SUBSIDIARIES
Company name Country Ownership interest
Lekoil Nigeria Limited Nigeria 40%
Lekoil Exploration and
Production (Pty) Limited Namibia 80%
Lekoil Management Corporation USA 100%
Lekoil 310 Limited Cayman 100%
Princeton Assets and
Trust Pte Limited Singapore 100%
Lekoil Management Services Cayman 100%
22. POST BALANCE SHEET EVENTS
In January 2022, Mr. Akinyanmi commenced a legal action in the
Cayman Islands, challenging the validity of two resolutions which
were duly passed at the Company's Annual General Meeting held on 21
December 2021.
In February 2022 the Company entered into a convertible facility
agreement with Savannah Energy Investments Limited ("CFA 2" and
"Savannah") whereby Savannah would support the Company by providing
a GBP0.9 million loan to the Company. The Company has also signed
an Option Agreement with Savannah granting it, subject to approval
of the Company's shareholders at an extraordinary general meeting
(the "Savannah EGM"), an option to be assigned the intercompany
debt owed to the Company by Mayfair Assets & Trusts Limited
(the "Mayfair Loan"). A US$1 million payment is payable by Savannah
to the Company upon such assignment.
Prior to agreeing the Savannah transaction, the Board was aware
that the transaction had received the support of the Company's
major institutional shareholders, representing approximately 42% of
the Company's then current issued share capital. This shareholder
support for the Savannah transaction puts into context the
subsequent actions of Mr. Akinyanmi and Lekoil Nigeria in seeking
to overturn the Savannah transaction and the CFA transaction.
In early March 2022, the Company was successful in discharging
the ex-parte injunction of Mr. Akinyanmi that sought to restrain
the issue of shares by the Company. The Company subsequently issued
the relevant shares under CFA 1 and CFA 2.
In April 2022, Lekoil Nigeria offered to purchase the Mayfair
Loan and to repay the outstanding amount under CFA 2. Neither offer
was capable of acceptance by the Company as it would have caused it
to be in breach of written legally binding obligations to Savannah.
The Company noted at the time of the offer that Lekoil Nigeria had
chosen to conduct the negotiation process by way of public
announcement rather than private dialogue with the Company and that
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 Savannah EGM. On 8 April 2022, at
the Savannah EGM, our shareholders duly approved the Option
Agreement entered into with Savannah and also authorised the
Directors to issue a certain number of additional ordinary shares
in the Company.
In Q1 2022, the Company continued its English court litigation
to recover the CEO loan from Mr. Akinyanmi, with the outstanding
amount being circa US$1.5 million. Unfortunately, the Company was
denied jurisdiction to do so by the English court. Similarly, Mr.
Akinyanmi was denied jurisdiction in the New Jersey court to bring
a claim related to the termination of his employment by the
Company. The net result of these litigations is that the Company
expects to pursue the recovery of the CEO loan via a debt recovery
procedure in New Jersey and the Company expects Mr. Akinyanmi to
commence arbitration in the UK related to the termination of his
employment contract.
On 15 March 2022, Lekoil Nigeria suspended its offer to purchase
shares in the Company. As at 28 February 2022, Lekoil Nigeria held
11.35% of the then issued share capital of the Company. As at the
date hereof, the Company has not received any more recent
notifications from Lekoil Nigeria as to its shareholding in the
Company.
In early April 2022, Lekoil Nigeria (along with various of its
subsidiaries) notified the Company of an ex-parte injunction
granted by the Federal Court of Nigeria, Lagos Division, to
restrain various actions of the Company. The Company has challenged
the jurisdiction of the Nigerian court to make such an order and
the matter is proceeding through the courts.
In April 2022, the Company noted that Lekoil Nigeria had
announced the spud of the Otakikpo-4 well as part of the Phase 2
development of Otakikpo. The Company received no further
information about this from Lekoil Nigeria.
On 18 May 2022, the Company's ordinary shares were admitted to
trading on the Access segment of the AQSE Growth Market operated by
the Aquis Stock Exchange (AQSE).
The Company noted at the time of the admission to AQSE that the
Board is of the view that the Company's primary activity now is the
recovery of its investment through litigation against the Lekoil
Nigeria group and Mr. Akinyanmi and that this characterisation will
allow the Company to fulfil its disclosure obligations to the AQSE
market, noting that a successful recovery of the intercompany debts
due to the Company will be the primary source of value for
shareholders (with minimal value attributable to the day-to-day
operational activities of Lekoil Nigeria).
This characterisation of the Company, as a litigation vehicle
with minimal value attributable to the shareholding in Lekoil
Nigeria, is implicit to and reflected in the financial accounts
presented for the year ended 31 December 2021.
On 27 May 2022, the Company held an extraordinary general
meeting at which shareholders approved the appointment of Bright
Grahame Murray as the Company's auditors.
On 9 June 2022, the Company announced that Mr. Olapade Durotoye
was the new Non-Executive Chairman of the Company, that Mr. Guy
Oxnard had become the Company's Executive Director and that Mr.
Dipo Sofola had been appointed a Non-Executive Director. The
appointments are part of a managed succession planning in which Mr.
Anthony Hawkins and Mr. Al Tindall will each cease being Directors
of the Company as of 30 June 2022. Mr. Hawkins has served as a
Non-Executive Director of the Company since January 2020 and as the
Interim Executive Chairman since June 2021. Mr Tindall has been a
Non-Executive Director of the Company since April 2021.
[1] Anthony Hawkins was awarded 250,000 shares on the 30(th) of
October 2020 under the NED Share plan.
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END
NEXSDEFDSEESEIM
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