Nigerian Oil Firm Slumps 69% After Saying It Is An Apparent Victim Of Fraud

The shares of U.K.-listed Nigerian oil producer, Lekoil (LSE: LEK) slumped by 69% after falling victim to an alleged scam . The company said it appeared to have been defrauded by individuals who pretended to be representatives of the Qatar Investment Authority.

On the 2nd of January, 2020, Lekoil announced a $184 million loan from the QIA to fund  the drilling and development of a field at Ogo. Tension was further created on Jan. 12, when the QIA  told Lekoil's advisers that it was not the counterparty. The company said the loan deal struck at the beginning of the month was invalid as the individuals who claimed to from the QIA were fraudsters. The company has been given an ultimatum from now till February to raise money sufficient enough to cover its drilling operation at the Ogo field, or would risk losing all its entire asset.

On Monday (Jan 13), shares of Lekoil were temporarily suspended after questions concerning the validity of the loan was raised by the QIA. Following the suspension, On Tuesday, the shares plunged as trading commenced. The shares closed down 73% at 2.5 Pence, which is literally the lowest since the company made its debut in London in 2013.

Lekoil revealed on Monday (Jan 13), that it paid a $600,000 commission to consulting firm, Seawave Invest Ltd. who introduced the company to the people purportedly from the QIA, and  arranging for a $184 million loan for the development of the Ogo field. This means isn't a possibility of any funding coming soon.

Making reference to the absence of a permanent chief financial officer, Will Wallis, head of research at Numis Securities Ltd said,  “Lekoil has no funding for the Ogo appraisal on Block OPL 310, has most likely lost $600,000 in fees it paid related to securing the loan, and we think has serious question marks hanging over it.”

Figures from Bloomberg indicates that $12 million must be raised by the company to drill an appraisal well at Ogo, or risk seeking a buyer for its 17.14% stake in the block. The company is also required to pay its partner, Optimum Petroleum an estimated $10 million in sunk costs and fees by February, as its license expires on Aug. 2.

In a statement since released by the company, after the payment of the $600,000 to the consulting firm, Lekoil has $2.7 million in the bank and is expecting additional proceeds from the sale of its production in January.

Bloomberg further reports that Seawave Invest, according to its website, is based in Accra, Ghana, and also lists an office number in the Bahamas that goes to the voicemail of law firm, Holowesko Pyfro Fletcher.

In an emailed statement, the law firm said Seawave was incorporated on Oct. 28, 2016, and has always been inactive, and the company was struck off by the Registrar of Companies for default on Jan. 1, 2020. The mail said, "HPF is instructed by the company’s directors to state that whatever acts may have been done by persons purporting to represent the company neither the company nor any of its officers and directors have any knowledge or involvement in such acts.”

However, Lekoil has instructed two of its independent non-executive directors to investigate the origination and execution of the loan agreement and review whether any money paid in connection with the facility can be retrieved.