Shares in AIM-listed Lekoil (LSE:LEK) were suspended on Monday 13 January after the company revealed problems with an early January loan from the Qatari Investment Authority (“QIA”).
The QIA, Qatar’s sovereign wealth investment fund, has stakes in numerous FTSE-listed mining ventures, including owning 3.3% of Yorkshire polyhalite mine operator Sirius Minerals (LSE:SXX).
Lekoil is an oil and gas explorer with its main interests in Namibia and Nigeria. RNS updates from the firm in the early stages of 2020 had been extremely positive. Shares closed 43% higher at 7.3p on 2 January as it announced it had secured hundreds of millions of pounds in funding from the QIA for the appraisal drilling and initial development on the Ogo field in Nigeria. Ogo (OPL 310) is a large oil and gas discovery off the Nigerian coast, close to the capital Lagos. It was discovered in 2013.
The 2 January announcement from Lekoil said it had entered into a binding loan agreement with the QIA for $184m. Shares had rocketed 125% from 4.65p on 31 December 2019 to a high of 10.5p on 6 January 2020.
But a Monday 13 January RNS from the company said its advisers were approached by QIA representatives “questioning the validity of the loan agreement” that was announced on 2 January.
It noted: “Lekoil is urgently seeking to establish, alongside its legal counsel and Nominated Adviser, the full facts of this matter, and pending this clarification, the Company has requested that its ordinary shares be suspended from trading on AIM with immediate effect, and this took place at 7.37 a.m. today.”
Lekoil said that its financial exposure to the loan stood at $600,000 “being the amounts paid in good faith as an initial arrangement fee to Seawave Invest Limited, in its capacity as introducer to those purporting to be the QIA”.
In the 2 January RNS, Seawave Invest was announced as “an independent consultancy firm specialising in cross-border transactions with an exclusive focus on Africa”.
“After deducting the commission payable to Seawave by Lekoil for arranging the facility, and the upfront fee payable by Lekoil to the QIA, the net proceeds of the facility available to the company totalled around $174.3m,” the company said.
Lekoil had said the loan would be repaid over the course of seven years, with money distributed to the company in five tranches over 11 months. The first payment was due to be drawn down in February 2020.
The loan was secured against the shares and assets of Lekoil 310 and Mayfair Assets and Trust and included a stay on both interest and principal repayments until six months after the company could make its first commercial sales from drilling in the Ogo field.
At first glance, the loan appeared to have a series of complex conditions attached to it. Lekoil chief executive Lekan Akinyanmi pledged his entire shareholding of 39,138,601 shares on the firm to back the loan, for which he would receive a one-off fee of $1.84m, offset against an existing director loan made by the company in December 2014 of $1.7m.
Meawnhile, Akinyanmi also said he would be awarded 30 million new ordinary shares at no cost in association with the loan, “if and when the ordinary share price reached a number of hurdles, being 20p, 25p, 30p, 35p an 40p per share.”
Lekoil had suggested the first well spud from Ogo could have occurred in the second half of 2020.