NIGERIA: Lekoil Nigeria Changes Name to Fenikso Ltd

Lekoil has agreed to change its name and has agreed with Lekoil Nigeria that the Company’s name will be changed to Fenikso Ltd following shareholders’ approval at the Extraordinary General Meeting on 29th December 2022.

The Change comes days after the company announced that it has reached an 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.

Lekoil, Lekoil Nigeria and Mr Akinyanmi, among others, have entered into a settlement deed on 7 December 2022 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 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.

Lekoil Nigeria also 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 (a subsidiary of Lekoil Nigeria).

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.

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 £200,000 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 the 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.