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Lekoil in Trouble After Falling Victim to Suspected Scam

Jennifer Yusuf

After falling victim to an alleged scam, Lekoil Ltd. sank to a record low in London trading leaving the future of the Nigerian oil project in danger.

A loan deal concluded earlier this month is no longer valid, the company said, claiming individuals claiming to be from the Qatar Investment Authority were in fact fraudsters.

Lekoil now has to raise enough money before February to cover its drilling costs in the Ogo region, or risk losing the asset entirely.

Lekoil shares were temporarily suspended Monday after the loan’s validity was questioned by the QIA. 

The stock slumped 73 percent to 2.5 pence at the resumption of trading on Tuesday, the lowest since its London debut in 2013. The stock traded at 10:47 a.m., at 3 pence. 

The company paid a $600,000 commission to consulting firm Seawave Invest Ltd. for introducing it to people purportedly from the QIA, and for arranging a $184 million loan for the development of the Ogo field. It’s now likely that none of the funding will be forthcoming, Lekoil said Monday.

“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,” said Will Wallis, head of research at Numis Securities Ltd., citing the lack of a permanent chief financial officer and its due-diligence capacity.

The company must show it’s able to raise about $12 million to drill an appraisal well at Ogo. Failure to do so may force it to seek a buyer for its 17.14% stake in the block. It’s also required to pay partner Optimum Petroleum an estimated $10 million in sunk costs and fees by February. The license expires on Aug. 2.

Following payment of the $600,000, Lekoil has $2.7 million in the bank and is expecting additional proceeds from the sale of its production in January, it said in a statement.

Lekoil said two of its independent non-executive directors will investigate the origination and execution of the loan agreement and review whether any money paid in connection with the facility can be retrieved. However, it said there’s “no guarantee” that attempts to recover any fees will be successful.

Seawave Invest hasn’t responded to requests for comment. It’s based in Accra, Ghana, according to its website, which also lists an office number in the Bahamas that goes to the voicemail of law firm Holowesko Pyform Fletcher.

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