Nigeria-Focused Lekoil Blames Advisor for Loan Scam

Nigeria-focused junior Lekoil has announced results from its investigation into a loan scam which led to the London-listed company suspending its shares in January.

Lekoil announced reaching a credit facility agreement on January 2 with the Qatar Investment Authority (QIA) worth $184mn, designed to cover the cost of appraisal and development work at the Ogo oil and gas discovery off Nigeria. Later that month it said it had been approached by QIA representatives "questioning the validity" of the agreement, prompting it to request that trading of its shares be suspended.

The facility had in fact been agreed with "individuals falsely purporting to represent the QIA," Lekoil later said.

An independent committee was set up to investigate the matter, with Kroll Associates UK acting as third-party forensic investigators and Herbert Smith Freehills providing Lekoil with legal counsel.

The probe found "no evidence of any complicity of any Lekoil director or employee in the fraud," the company said in a statement on March 2. It also concluded that Seawave Investment, which Lekoil paid $450,000 to in order to help arrange the loan had undertaken "inadequate" due diligence.

"The fraud, whilst relatively elaborate and sophisticated, should have been capable of being detected by parties engaged to advise on the facility agreement, internally or externally, prior to its execution," Lekoil said.

The company will seek to recover the $450,000 it paid to Seawave, but said there was no guarantee it would be successful.

"First of all, I would like to thank the committee for leading the review and the provision of the detailed findings to the board," Lekoil chairman Samuel Abegboyega said. "The board will seek, as a priority, to improve its standards of corporate governance and we welcome the recommendations received from the committee, which are in the process of being implemented."

The pressure is now on Lekoil to arrange alternative financing for its work at Ogo. The company reached a deal with project partner Optimum Petroleum Development to defer payment in late January. As a result, it now has until March 20 to pay $2mn to Optimum, followed by a further $7.6mn by May 2. It also has until July to demonstrate to Optimum that it can cover its 42.9% share of the cost of drilling a well at the site, estimated at a further $28mn.