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Lekoil secures $184m funding for OPL 310

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Africa-focused oil and gas exploration and production company, Lekoil Limited has secured $184 million credit to finance the appraisal drilling and initial development programme activities on the Ogo field within Oil Prospecting Lease, OPL 310 offshore Nigeria.

Lekoil 310 Limited, a wholly owned subsidiary of AIM-traded Lekoil, entered into a binding loan agreement with Qatar Investment Authority, the sovereign wealth fund of the state of Qatar (“QIA”) for $184 million.

According to a statement from the firm, “The Facility will be disbursed in five (5) tranches over eleven (11) months, with the first drawdown intended to occur in February 2020. The Company looks 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.

The Facility, which has a tenure of seven years from the date of first disbursement, is secured against, amongst other things, the shares and assets of Lekoil 310 Limited (“Lekoil 310”) and Mayfair Assets and Trust Limited (“Mayfair”) and includes a moratorium on both the interest and principal repayments commencing from the date of the Facility until six months after the commencement of commercial sale of production from the field. Repayment of the principal and interest will occur subsequently, in equal installments, on a semi-annual basis. LEKOIL holds its interest in OPL 310 through Mayfair and Lekoil 310.”

The statement further reveals that the facility is unsecured against the firm’s assets or interests, not excluding its interest in the producing Otakikpo marginal field.

The annual interest rate payable on the sums drawn under the credit facility is 3.72% with a 2.75% of the amount drawn under the facility charged as upfront fee, payable upon drawdown.

Lekoil disclosed that “A Debt Service Reserve Account will be established twelve months after the end of the moratorium period with a one-off amount equal to six (6) months of debt service standing to its credit. The Company will be required to meet a number of covenants on an ongoing basis in order for the Facility to remain in good standing, and adhere to QIA’s policies on procurement, environment and social responsibility and anti-corruption. The Facility is subject to event of default clauses, and a provision that the employment of the Company’s CEO cannot be terminated without good cause during the term of the Facility.

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The Facility was arranged by Seawave Invest Limited (“Seawave”), 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 as set out above, the net proceeds of the Facility available to the Company are approximately US$174.3 million.”

Lekoil said following the drilling of Ogo-1 and Ogo-1 ST in 2013, which encountered hydrocarbons within the SynRift and PostRift, Lekoil and Optimum Petroleum, the operator of the OPL 310 licence were envisioning a two-well programme aimed at procuring dynamic flow data from well test at the same time preserving the drilled wells as producers.

Lekoil assured that first well spud would occur in the second half of 2020.

Lekan Akinyanmi, the Chief Executive Officer, is pledging his entire holding of 39, 138,601 ordinary shares in Lekoil as part of the security package for the facility. Regarding the pledge, Akinyanmi would be compensated with a one-time fee of $1.84 million, expected to be offset against the existing director loan made by the company to the CEO in December 2014 of $1,704,000.

It means the CEO would be fully discharged and released from the obligation of repaying the director loan to the company with the balance paid to the CEO.

In case the pledged shares were foreclosed on, the firm promised to issue to the CEO a number of new ordinary shares of nominal value $0.00005 each in its capital, equal to the number of the pledged shares.

In his remark, Akinyanmi said “Following the recent achievements of the OPL 310 license extension and the securing of funding for the appraisal drilling and development programme, we are delighted to have made strong progress, as promised, towards the start of the appraisal drilling programme on Ogo. We will continue to work closely with our partner and the Operator of the OPL 310 License, Optimum Petroleum, as we pursue value for our shareholders.”

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