REG - Lekoil Limited - Proposed settlement of litigation and name change

Blue EnergyAnnouncement

07/12/2022 16:30

For best results when printing this announcement, please click on link below:
http://newsfile.refinitiv.com/getnewsfile/v1/story?guid=urn:newsml:reuters.com:20221207:nRSG9589Ia&default-theme=true

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 £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 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 £100,000 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 Ordinary Shares  Holding of Existing Ordinary Shares  Ordinary Shares following Completion  Holding of Ordinary Shares 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
(http://www.lekoilplc.com/)  or contact:

 First Sentinel Corporate Finance Ltd (AQSE Corporate Adviser)

 Brian Stockbridge                                              +44 203 989 2200
 Tennyson Securities (Broker)                                   +44 20 7186 9030

 Peter Krens

 

 

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact
rns@lseg.com (mailto:rns@lseg.com)
 or visit
www.rns.com (http://www.rns.com/)
.

RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our
Privacy Policy (https://www.lseg.com/privacy-and-cookie-policy)
.   END  NEXFSEFIWEESEEE