Adewale Sanyaolu
Less than two weeks after securing $184 million funding for the appraisal drilling and initial development programme activities on the Ogo field within OPL 310 from Qatar Investment Authority (QIA), indications have emerged that the funding plan has been suspended forthwith.
Following announcement by Lekoil on January 2, 2020, representatives of QIA approached Lekoil’s advisers, questioning the validity of the agreement.
The company is currently seeking to establish, alongside its legal counsel and nominated adviser, the full facts of the matter, and pending this clarification, the company’s ordinary shares were suspended from trading on AIM at 7.37am on January 13, 2020. However, the release of this announcement facilitates lifting of the suspension and trading is expected to recommence.
With this development, the facility agreement can no longer be considered to be legally binding or enforceable and it should therefore be assumed that none of the funding, as set out in the announcement of January 2, 2020, will be forthcoming.
Lekoil disclosed that it continues to generate positive cash flows at the operational and corporate level and would seek alternative funding for the future development of OPL 310 as a priority.
‘‘As previously announced on August 30, 2019, Lekoil is required to provide 42.86 per cent of the cost of drilling and pay Optimum Petroleum Development Company Limited sunk costs and consent fees by February 2020 – a payment estimated at $38 million.
Failure to make this payment on time may result in Lekoil and Optimum jointly seeking, and agreeing on, a willing buyer to whom the transfer of Lekoil’s 17.14 per cent participating interest in OPL 310, as well as all the financial obligations related to OPL 310, can be made.
The company explained that no capital commitments have been made based on anticipated drawdowns, and that the company would cover the cost of the site survey (estimated at $4 million) on OPL 310 as announced on January 10, 2020 from a mixture of existing cash resources and income from operations at Otakikpo.
Lekoil, had in the January 2, 2020 statement announcing the funding deal by QIA, said it has entered into a binding loan agreement with the Qatar Investment Authority, the sovereign wealth fund of the State of Qatar for $184 million.
According to the company, the facility will be disbursed in five tranches over 11 months, with the first drawdown intended to occur in February 2020.
Lekoil said it would be looking forward to providing further details on the intended work programme in short order.
‘‘The tranching of the drawdown of funds under the terms of the facility is expected to enable Lekoil to meet the costs commitments under the envisioned work programme as and when they arise.