TIDMLEK
RNS Number : 9589I
Lekoil Limited
07 December 2022
Lekoil Limited
Proposed settlement of litigation and name change
7 December 2022: LEKOIL (AQSE: LEK) (the "Company"), the Cayman
Islands litigation asset company with an investment in oil &
gas assets in Nigeria, announces that it has reached agreement
with, among others, Lekoil Nigeria Limited and Olalekan Akinyanmi,
the former CEO of the Company, to terminate all legal proceedings
and settle all claims made by or between the relevant
participants.
Summary
As previously announced, certain disputes have arisen between,
among others, the Company, Lekoil Nigeria Limited ("Lekoil
Nigeria") and Mr Akinyanmi concerning the management of the
Company, Lekoil Nigeria and related entities and the related
proprietary interests, liabilities and contractual and
non-contractual rights and obligations of the Company, Lekoil
Nigeria and Mr Akinyanmi (as relevant). In order to resolve these
differences, and with no admission of liability, the Company,
Lekoil Nigeria and Mr Akinyanmi, among others, have entered into a
settlement deed on 7 December 2022 (the "Deed") to agree to, among
other things, the release and discharge of all relevant claims, the
withdrawal of legal proceedings, surrenders of certain shares and
other transactions, a new framework for their future relationship
and fully and finally to resolve their differences, dispose of
ongoing litigation and agree certain ancillary matters (the "LNL
Arrangements").
The LNL Arrangements include:
-- the Company agreeing to surrender all of its shares in Lekoil
Nigeria and transfer those of its subsidiaries involved in the
operations of the Lekoil Nigeria group to Lekoil Nigeria;
-- Lekoil Nigeria agreeing to surrender all of its ordinary shares in the Company;
-- the Company waiving all rights to repayment in respect of any
and all existing indebtedness due from Lekoil Nigeria, its
subsidiaries or from Mr Akinyanmi under various loans;
-- the Company granting a new loan of approximately US$51.9
million to Lekoil Oil and Gas Investments Limited ("LOGI") (the
"LOGI Loan") in consideration for the transfer of certain loans
granted to Lekoil Nigeria and its related entities to LOGI, the
release of security related to such loans and the waiver of any
repayment of amounts due under such loans;
-- the stay and subsequent discontinuance and/or withdrawal of
all claims and legal proceedings between the Company, Lekoil
Nigeria and Mr Akinyanmi (and others); and
-- an agreement that Lekoil Nigeria and its associates will not
purchase shares in the Company while the LOGI Loan is
outstanding.
In addition, the Company has agreed to change its name to
Fenikso Ltd and to cease using the "Lekoil" name or brand in
connection with its continuing business.
In connection with the LNL Arrangements and on the terms of the
Deed, the Company has also agreed with Savannah Energy Investments
Limited ("Savannah Energy") to terminate the option agreement
pursuant to which Savannah Energy has the option to take an
assignment of a US$135 million loan between the Company and Mayfair
Assets & Trust Limited ("Mayfair") (a subsidiary of Lekoil
Nigeria) (the "Mayfair Loan").
The Company and Savannah Energy have also separately entered
into an agreement on 7 December 2022 (the "SEIL Agreement")
pursuant to which Savannah Energy will release its security
interests over OPL 310 and Savannah Energy will surrender all of
its shares in the Company, with the consideration for such share
surrender, release of security and the termination of the Option
Agreement being the payment of certain sums by the Company to
Savannah Energy (including a portion of all amounts received by the
Company pursuant to the LOGI Loan) (together, the "SEIL
Arrangements" and with the LNL Arrangements, the
"Transactions").
In view of the surrender of the Company's interests in shares in
Lekoil Nigeria, the transfer of those of its subsidiaries involved
in the operations of the Lekoil Nigeria group to Lekoil Nigeria and
the transfer of certain loans granted to Lekoil Nigeria and its
related entities to LOGI (such interests in the Lekoil Nigeria
group being the "LNL Interests") and the size of the LNL Interests
relative to the Company, the LNL Arrangements will result in a
fundamental change in the business of the Company for the purpose
of Rule 3.7 of the AQSE Rules and they are therefore conditional
upon the approval of Shareholders, amongst other matters. That
approval will be sought at an Extraordinary General Meeting of the
Company which is expected to be held in late December 2022, details
of which shall be notified in a circular to Shareholders to be
issued on or around 9 December 2022. In accordance with the AQSE
Rules, the Company's shares will be suspended from trading on AQSE
until completion of the Transactions, which (subject to approval by
Shareholders at the Extraordinary General Meeting) is expected to
occur in late December 2022.
Background to and reasons for the Transactions
Background
The Company holds a 40% legal interest and a 90% economic
interest in Lekoil Nigeria. Via its subsidiaries, Lekoil Nigeria
has, among other interests, a 40% participating interest in the
Otakikpo producing oil field and a 17.14% participating interest in
exploration licence OPL 310. Following various equity capital
raises since 2013, the Company has provided a number of
inter-company loans to fund Lekoil Nigeria's operations.
The Company has been in dispute since early 2020 with Lekoil
Nigeria in connection with a number of matters including the rights
of the Company under the shareholders agreement in respect of
Lekoil Nigeria and the various loans granted to Lekoil Nigeria and
its related entities. As result of the disputes and the likelihood
of recovery of the amounts due under such loans, the Company
impaired its carrying value of such loans to approximately US$103.3
million as at 30 June 2022.
On 2 September 2021, the Company announced that it had entered
into a convertible facility agreement (the "CFA1") with Hadron
Master Fund (whose principal is Marco D'Attanasio), TDR Enterprises
Ltd (a company controlled by Tom Richardson) and a non-related
third party (together the "CFA1 Parties") to allow it to access up
to GBP200,000 for working capital purposes. On 28 February 2022,
the Company announced that Savannah Energy had entered into a
convertible facility agreement (the "CFA2") and option agreement
(the "Option Agreement") with the Company, together with the grant
of certain related security by the Company over the loans owed by
the Lekoil Nigeria group, in order to support the Company's
restructuring.
Lekoil Nigeria brought legal proceedings against the Company
seeking (among other remedies) orders to set aside CFA1, CFA2 and
the Option Agreement with Savannah Energy and to set aside the
issue of shares to the CFA1 Parties and Savannah Energy pursuant to
those agreements. Additionally, the Company and Mr Akinyanmi have
been in dispute regarding his termination as CEO of the Company and
whether any amounts remain payable under a loan provided to him by
the Company.
In order to resolve these differences, and with no admission of
liability, the Company, Lekoil Nigeria, Mr Akinyanmi, Savannah
Energy, the CFA1 Parties and the other shareholders of Lekoil
Nigeria have entered into the Deed to agree to, among other things,
the release and discharge of all relevant claims, the withdrawal of
legal proceedings, surrenders of certain shares and other
transactions, a new framework for their future relationship and
fully and finally to resolve their differences, dispose of ongoing
litigation and agree certain ancillary matters.
In connection with the resolution of such differences, the
Company has also agreed with Savannah Energy to cancel the Option
Agreement, whereby Savannah Energy had an option to take an
assignment of the Mayfair Loan from the Company, and for Savannah
Energy to surrender its entire shareholding in the Company (and
release its security over certain assets of the Company), in
consideration for the payment of approximately US$16.3 million to
Savannah Energy.
The directors of the Company (the "Directors") consider that the
proposed Transactions will allow the Company to move forwards
without the additional costs of further legal proceedings in a
highly uncertain funding environment. In addition, it will allow
the Company to repay over US$2 million of liabilities that are due
while allowing the Company to implement a new strategy for the
benefit of shareholders. The Directors believe that the proposed
terms of settlement are commercially advantageous, as they provide
the Company with access to future cash-flow payments related to
production from Otakikpo while also ending the costly disputes
between the Company and Lekoil Nigeria. Additionally, the Company
will be able to re-shape its shareholder base and reduce its
expenses while it seeks to develop a new strategy in consultation
with its remaining shareholders.
The implementation of these arrangements require the approval of
Shareholders. If shareholders do not approve the relevant
resolution at the Extraordinary General Meeting and completion of
the Transactions does not occur, the Deed and the SEIL Agreement
will be terminated and each party shall be entitled to reinstate
and/or continue all relevant legal proceedings, while the Company
will continue to incur significant costs with very limited
assurance of being able to fund such proceedings, the risk of
future insolvency and the possibility even in the event of success
to recover any payments under the various loans owed by the Lekoil
Nigeria group. Accordingly, the Directors believe that the proposed
arrangements will provide greater certainty to the new direction of
the Company and recommend that all Shareholders support the
proposals.
Summary terms of the Transactions
Pursuant to the terms of the Deed, the Company has agreed to the
following arrangements, subject to (among other matters) the
passing of the Settlement Resolution at the Extraordinary General
Meeting.
LNL Arrangements
Lekoil Nigeria has agreed to acquire the Ordinary Shares held by
Mr Akinyanmi and certain persons associated with Lekoil Nigeria or
Mr Akinyanmi, so as to increase its interest in the Company from
66,580,736 Ordinary Shares to 107,658,847 Ordinary Shares.
At Completion:
-- The Company shall surrender all of its shares in Lekoil
Nigeria and transfer those of its subsidiaries involved in the
operations of the Lekoil Nigeria group to Lekoil Nigeria;
-- Lekoil Nigeria shall surrender all of its shares in the
Company, comprising 107,658,847 Ordinary Shares (the "LNL
Settlement Shares"), representing approximately 14.2% of the issued
shares in the Company;
-- LOGI shall enter into the LOGI Loan with the Company (in the
amount of approximately US$51.9 million payable to the Company) in
consideration for the Company transferring in part certain loans
granted to Lekoil Nigeria and its related entities to LOGI,
releasing any related security in respect of such transferred loans
and waiving repayment of all remaining amounts due under such
transferred loans;
-- Any and all amounts outstanding under any loan by the Company
to Mr Akinyanmi shall be released in full;
-- The Company, Lekoil Nigeria, Mr Akinyanmi and Savannah Energy
shall take all steps as may be necessary to discontinue or withdraw
the various disputes between the parties, release and discharge any
claims arising out of the various disputes and undertake not to
commence any new claims in respect of the underlying matters;
-- The Company shall assign certain intellectual property rights
to Lekoil Nigeria and shall cease to use the "Lekoil" name or brand
(or any variation thereof) in its business or to hold out as having
any interest in OPL 310, OPL 325, OPL 276 or Otakikpo following
Completion; and
-- The Lekoil Nigeria shareholders' agreement shall be terminated.
The LNL Settlement Shares include certain shares held by those
employees holding shares in the Company, including Mr Akinyanmi,
which will be acquired by Lekoil Nigeria prior to Completion.
Lekoil Nigeria and its associates, together with Mr Akinyanmi, have
also undertaken not to purchase any shares in the Company from the
date of the Deed until the LOGI Loan has been repaid in full.
The LOGI Loan shall be repaid by LOGI out of the proceeds of the
liftings made under the offtake agreement with Shell Western (or
any replacement offtake agreement), with the Company being entitled
to receive approximately 8.65% of all such proceeds until the LOGI
Loan has been repaid in full. Lekoil Nigeria and LOGI have agreed
to grant certain security in respect of the repayment obligations
under the LOGI Loan. The Company notes that current production at
Otakikpo is approximately 7,000 barrels of oil per day, meaning
that it would receive approximately 8.65% of the lifting proceeds
of approximately one million barrels of oil per annum based on
current production levels.
SEIL Arrangements
The Company entered into the Option Agreement with Savannah
Energy granting it an option to be assigned the intercompany debt
owed to the Company by Mayfair, its associated security related to
OPL 310 and all rights and benefits of the Company with respect to
the Mayfair Loan. A US$1 million payment is payable by Savannah
Energy to the Company upon such exercise and assignment (which has
not currently been exercised). Pursuant to the Option Agreement,
the Company would be paid deferred consideration in the event that
Savannah Energy obtains a working interest in OPL 310 (for example,
upon enforcement of security for repayment of the Mayfair Loan) and
OPL 310 is developed. Such deferred consideration (capped at US$50
million) is structured as a royalty of 0.5% on crude oil sales
attributable to Mayfair's actual participating interest in OPL 310
(being a 17.14% participating interest).
Pursuant to the Deed, the Company has agreed to terminate the
Option Agreement (and the associated security related to OPL
310).
Under the terms of a separate agreement with Savannah Energy,
which is conditional upon the Settlement Resolution being approved
by Shareholders, Savannah Energy shall surrender all of its shares
in the Company (the "SEIL Shares"). Savannah Energy currently holds
179,997,756 Ordinary Shares. Savannah Energy has elected to convert
GBP100,000 of the outstanding amount due under the CFA2 into
Ordinary Shares, resulting in the issue of a further 20,000,000
Ordinary Shares to Savannah Energy at or prior to Completion in
respect of such repayment and conversion.
In consideration for the surrender of Savannah Energy's
interests in the existing and to be issued Ordinary Shares
(representing approximately 25% of the issued and to be issued
shares in the Company immediately prior to Completion), the
termination of the Option Agreement, the release by Savannah Energy
of any security interests in favour of it in respect of the Mayfair
Loan and the release of all remaining amounts due under the CFA2,
the Company shall enter into a loan agreement at or prior to
Completion with Savannah Energy pursuant to which the Company shall
agree to pay Savannah Energy certain upfront payments together with
25% of all amounts received by the Company from LOGI pursuant to
the LOGI Loan, subject to a maximum total payment of approximately
US$16.3 million. Savannah Energy has also undertaken not to
exercise the Option Agreement prior to Completion (or the
termination of the Deed, whichever is the earlier).
Other terms
It is expected that completion of the arrangements under the
Deed will occur shortly following the receipt of the necessary
approval of Shareholders at the Extraordinary General Meeting. The
Deed is conditional upon (i) the relevant resolution being passed
by Shareholders and (ii) the termination of the Option Agreement
and release and discharge of certain security interests held by
Savannah Energy over the Mayfair Loan (and certain other
indebtedness), in each case by no later than 21 January 2023 (the
"Long Stop Date") (or, at the discretion of Lekoil Nigeria, by no
later than 30 business days after the Long Stop Date).
Issued Share Capital
In connection with the entry into the Deed and the SEIL
Agreement and in satisfaction of certain outstanding directors'
fees to Thomas Richardson and Marco D'Attanasio, the Company has
agreed to issue a total of 10,616,438 Ordinary Shares prior to
Completion to Thomas Richardson and Marco D'Attanasio. The Company
has also agreed to issue a further 10,000,000 Ordinary Shares is
satisfaction of other outstanding debts (including to one of the
CFA1 Parties). Following the issue of such shares and the
20,000,000 Ordinary Shares to Savannah Energy noted above, the
issued share capital of the Company shall comprise 799,394,177
Ordinary Shares immediately prior to Completion.
Following Completion and the surrender of the SEIL Shares and
the LNL Settlement Shares, the issued share capital of the Company
is expected to comprise 491,737,574 Ordinary Shares.
Based on the disclosures provided to the Company as at 5
December 2022 (the latest practicable date prior to the date of
this announcement), the interests of the existing significant
shareholders of the Company immediately following Completion are
expected to be as follows:
Shareholder Existing Holding of Ordinary Holding of
Ordinary Shares Existing Ordinary Shares following Ordinary Shares
Shares Completion following
Completion
Savannah Energy
Investments
Limited(1) 179,997,756 23.72% 0 0%
----------------- ------------------- ------------------ -----------------
Lekoil Nigeria
Limited(2) 107,658,847 14.19% 0 0%
----------------- ------------------- ------------------ -----------------
Zion SPC -
Access Fund
SP 74,377,015 9.80% 74,377,015 15.16%
----------------- ------------------- ------------------ -----------------
Allan Gray
Investment
Management 48,947,756 6.45% 48,947,756 9.98%
----------------- ------------------- ------------------ -----------------
Hadron Master
Fund 46,025,000 6.06% 46,025,000 9.38%
----------------- ------------------- ------------------ -----------------
IFM Independent
Fund Management 26,987,000 3.56% 26,987,000 5.50%
----------------- ------------------- ------------------ -----------------
(1) Excluding 20,000,000 Ordinary Shares to be issued to
Savannah Energy prior to Completion.
(2) Including 41,078,111 Ordinary Shares acquired from Olalekan
Akinyanmi and others.
Strategy in respect of the remaining Company in the event of the
disposal of the LNL Interests
In the event that the disposal of the LNL Interests completes,
the Company will comprise only of non-operating assets and will,
under the AQSE Rules, be considered an enterprise company. The
board of Directors (the "Board") expects to announce its revised
strategy following Completion and having consulted with
shareholders.
Use of Proceeds
The cash proceeds from the LOGI Loan will be used to pay certain
creditors of the Company and the Company's payment obligations
under the SEIL Arrangements. The balance will be used to pursue any
future business opportunities to be determined by the Board or
failing which the remaining funds shall be returned to
Shareholders.
Change of Name
In connection with the LNL Arrangements, the Company has agreed
to change its name and has agreed with Lekoil Nigeria that the
Company's name will be changed to Fenikso Ltd, conditional on
Shareholders' approval at the Extraordinary General Meeting (the
"Change of Name").
If approved the Company's TIDM will change to "FNK" with effect
from Completion.
Composition of the Board
To reflect the reduced operations of the Company following
Completion, the Directors have determined to reduce the size of the
Board while it considers the new strategy for the Company. The
Directors expect that, following Completion, Guy Oxnard, Dipo
Sofola and Adeoye Adefulu will resign from office as directors. It
is also expected that Thomas Richardson will be appointed as
interim Chairman with Pade Durotoye remaining as a non-executive
director.
Further announcements regarding the proposed Board changes will
be made as appropriate.
AQSE Rule 3.7
In accordance with AQSE Rule 3.7, the Transactions constitute a
fundamental change of business of the Company. Following
Completion, the Company would cease to own, control or conduct all
or substantially all, of its existing business and will hold an
interest in a loan due from LOGI.
Following completion of the Transactions the Company will become
an enterprise company (for the purposes of the AQSE Rules) and as
such will be required to make an acquisition or acquisitions which
constitutes a reverse takeover under AQSE Rule 3.6 on or before the
date falling two years from completion of the Transactions, failing
which the Company's Ordinary Shares would then be suspended from
trading on AQSE pursuant to AQSE Rule 5.1. Admission to trading on
AQSE would be cancelled six months from the date of suspension
should the reason for the suspension not have been rectified.
AQSE Rule 4.6
In accordance with AQSE Rule 4.6, the LNL Arrangements
constitute a related party transaction with Lekoil Nigeria.
-- The Directors consider that, having exercised reasonable
care, skill and diligence, the LNL Arrangements are fair and
reasonable as far as the shareholders of the Company are concerned;
and
In addition, in accordance with AQSE Rule 4.6, the SEIL
Arrangements constitute a related party transaction with Savannah
Energy.
-- The Directors consider that, having exercised reasonable
care, skill and diligence, the SEIL Arrangements are fair and
reasonable as far as the shareholders of the Company are
concerned.
In accordance with AQSE Rule 4.6, the issue of 5,607,151
Ordinary Shares to Thomas Richardson in settlement of outstanding
director's fees constitutes a related party transaction with such
Director.
-- The Directors (excluding Thomas Richardson) consider that,
having exercised reasonable care, skill and diligence, the issue of
Ordinary Shares to Thomas Richardson is fair and reasonable as far
as the shareholders of the Company are concerned; and
In addition, in accordance with AQSE Rule 4.6, the issue of
5,009,287 Ordinary Shares to Marco D'Attanasio in settlement of
outstanding director's fees constitutes a related party transaction
with such Director.
-- The Directors (excluding Marco D'Attanasio) consider that,
having exercised reasonable care, skill and diligence, the issue of
Ordinary Shares to Marco D'Attanasio is fair and reasonable as far
as the shareholders of the Company are concerned.
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
--------------------
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END
NEXFSEFIWEESEEE
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