Savannah Energy has agreed to provide a convertible installation agreement to Lekoil, which intends to redouble its efforts to regain control of its Nigerian subsidiary.

Savannah, acting through its Savannah Energy Investments unit, will provide a loan of £900,000 to Lekoil. This is reimbursable on March 2, 2022.

Lekoil’s interim executive chairman, Tony Hawkins, welcomed Savannah’s deal. The loan will provide the company with its needs for the year, he said, asking shareholders to back the deal at the EGM.

“The early stages of the planned restructuring should see Lekoil enforce our legal rights with respect to our 40% legal and 90% economic ownership, the recovery of intercompany debt investments in the Lekoil Nigeria Group and the 1.6 million US dollars owed by Mr. Akinyanmi to Lekoil, and engage directly with those parties on this,” Hawkins said.

Lekoil Nigeria took steps, he continued, to “starve our company for working capital to force a sale of the company to Lekoil Nigeria at a valuation that does not reflect the underlying value”.

Eyes on Ogo

If Lekoil does not repay the amount, Savannah can exchange the loan for 177.1 million new shares of Lekoil. There are currently approximately 536 million shares in Lekoil.

Savannah also supported a Lekoil deal with some of its service providers. They agreed to accept 22.9 million new Lekoil shares to cover unpaid fees. If Savannah owns both sets of shares, she will control 25.2% of Lekoil.

Additionally, Lekoil has signed an option with Savannah granting an option on inter-company debt. This is owed to Lekoil by Mayfair Assets & Trusts, with an associated title on OPL 310. This license holds the Ogo discovery, one of the world’s largest discoveries in 2013, but which has become mired in various difficulties.

The deal potentially paves the way for Savannah to develop the block, with a royalty due to Lekoil.

Lekoil claims that related companies and subsidiaries owe it more than $350 million. He reported the Mayfair loan was $253 million of that. However, the company reduced the value of this loan to $1 million.

It’s time to vote

The main shareholders of Lekoil, representing 42% of the company, approve the Savannah plan. He will hold an EGM in March. Its shareholders have not always supported its plans.

Lekoil holds a 40% stake and a 90% economic interest in Lekoil Nigeria. The latter holds 40% of the Otakikpo field and 17.14% of OPL 310.

Lekoil Nigeria executives launched a plan late last year to take control of the London-based company.

Lekoil said the Savannah deal offered an alternative to that. Among various disputes, Lekoil seeks repayment of an $803,000 loan from Lekan Akinyanmi, the CEO. A UK court ruled against continuing the loan in January this year.

One shareholder, Allan Gray Investment Management, came out in favor of the deal. The investor’s portfolio management, Rory Kutisker-Jacobson, said that “events that have taken place over the past year are totally unsatisfactory. We see Lekoil Nigeria’s attempts to acquire its parent company, Lekoil, using Lekoil Nigeria’s cash flow, in a gloomy light.

Savannah’s director, Oge Peters, described his company as a “long-term support investor with significant experience in corporate restructuring and turnarounds.”

Another Savannah official, Chief Financial Officer Funmilola Ogunmekan, cited the company’s work to turn around Seven Energy in Nigeria. Seven has gone “from the brink of bankruptcy to becoming Nigeria’s most trusted gas supplier”, she said.