LEKOIL (AIM: LEK), the oil and gas exploration and production company with a focus on Nigeria and West Africa, announces its results for the six-month period ended 30 June 2021 (the “Half Year Report”) and a corporate and operational update.
Operational and Corporate Summary
· On 18 October 2021, the Company released its Annual Report and Accounts for the year ended 31 December 2020 (“Annual Report”).
· To assist the Company to conserve its cash resources, it will commence implementation of a Contractor Shares Arrangement (“CSA”), whereby service providers and directors (“Contractors”) who provide goods, services or loans to the Company will be paid in the Company’s ordinary shares (the “Contractor Shares”) rather than cash. The use of the CSA was authorised at the 2020 Annual General Meeting, is consistent with the Company’s cash management strategy and will align the interests of the Company with the Contractors who are helping it achieve its objectives. The Board currently expects that the issuance of Contractor Shares in 2021 will be circa 5% of the current issued share capital.
· Noting that the Company’s shares are currently suspended from trading, the Company is in the process of clarifying, for the purposes of the AIM Rules, its relationship with its operating subsidiary. It is doing this as a matter of urgency and will provide updates on the suspension when it has further information.
· The Company continues to pursue the repayment of the CEO Loan from Mr. Olalekan Akinyanmi, with an application for summary judgement in the United Kingdom. The Company is also challenging a claim bought by Mr. Akinyanmi in the United States and will update the market as necessary.
Financial Summary
· The Company’s review of the intercompany and related party debt position between Lekoil Cayman Group and Lekoil Nigeria (and its subsidiaries) shows that the par value of amounts (including accrued interest) which were owing to Lekoil Limited at 30 June 2021 exceeds USD $350 million. As a part the Company’s annual reporting procedures, an assessment of impairment indicators on the Company’s loans will be undertaken. As at 30 June 2021, amounts owing comprise:
o USD $41.6 million across two loans due from Lekoil Nigeria by January 2026 and February 2029 respectively;
o USD $19.8 million due from Lekoil Oil & Gas Investments by February 2024 (i.e. Otakikpo);
o USD $253.0 million due from Mayfair Assets & Trust Limited by May 2023 (i.e., OPL 310);
o USD $35.5 million due from Ashbert Oil & Gas Limited by September 2022 (i.e., OPL 325);
These loan amounts are in addition to the c. USD $1.6 million (which includes default interest) owing from Mr Akinyanmi as at 30 June 2021.
These interim results have been presented on a group consolidated basis, in line with the previous practice of the Company. The current Board of Directors note that given Lekoil Nigeria’s commitment to adhere to the terms of the Shareholders Agreement, investors and shareholders should consider all relevant factors including those noted above and those noted in the Chairman’s statement in the recently published Annual Report, when making an investment decision and not place undue reliance only on the “consolidated” accounts.
Market Abuse Regulation Disclosure
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.
Interim Chairman’s Statement
On 18 October 2021, the Company released its Annual Report and Accounts for the year ended 31 December 2020 (“Annual Report”), which also included material updates and information with respect to the first six months of 2021. The Company encourages shareholders to read the Annual Report as it contains important information.
Consistent with the Annual Report, the financial information that the Company is presenting today reflects a picture of the wider Lekoil Group consistent with past presentations. Further to the statement in the Annual Report, 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 a result, I would like to stress that this Half-Year Report needs to be read in that context. Notwithstanding that, the Company is currently working to present a standalone financial position of the Company (and its wholly owned subsidiaries) and in that light has set out below, in the notes to the Accounts, the intercompany debt position vis-Ã -vis Lekoil Nigeria and its subsidiaries.
The Company is currently in the process of implementing a Contractor Shares Arrangement (“CSA”) whereby certain service providers and directors (“Contractors”) who provide goods, services or loans to the Company will be paid in the Company’s ordinary shares (the “Contractor Shares”) rather than cash. The use of the CSA was authorised at the 2020 Annual General Meeting and is consistent with the Company’s cash management strategy. In general, the CSA will allow the Contractors to sell Contractor Shares in an orderly manner so as to be re-imbursed for the amounts owing to them. Where applicable, the Contractors will be subject to suitable lock in periods and orderly sale requirements. The CSA will have an important role in aligning the interests of the Company with the Contractors who are helping it achieve its objectives. The Board currently expects that the issuance of Contractor Shares in 2021 will be circa 5% of the current issued share capital.
The Board continues to work towards:
· Presenting a clear and accurate picture of the financial current position of the Company and its wholly owned subsidiaries, as distinct from the wider Lekoil Group;
· Ensuring that the Company is fully financed so it can recover as much value as possible for its shareholders from the investments made to date; and
· Ensuring that the Company enforces its rights under the Shareholders Agreement, including the Company being represented on the Lekoil Nigeria board. That board representation will be with the aim of assisting in the efficient management of Lekoil Nigeria, streamlining the company to become a low-cost producer without the drag of large exploration assets that the Group has been unable to fund.
Anthony Hawkins, Interim Executive Chairman
27 October 2021
