Fresh Facts Emerge on AMCON, Shebah E&P Legal Tussle

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Fresh Facts Emerge on AMCON, Shebah E&P Legal Tussle

Fresh Facts Emerge on AMCON, Shebah E&P Legal Tussle
September 09
11:52 2019
  • Indicate court may have been misled  
  • Parties explore out-of-court settlement

Following recent media reports on an interim ex-parte order obtained by Asset Management Corporation of Nigeria (AMCON) to appoint a receiver for Shebah E&P’s assets and attach Dr. Bryant Orjiako’s properties, as well as Allene BVI Limited, fresh information made available to THISDAY suggests that the court might have been misled into making the order.

The newspaper, however, gathered that the estranged parties are already making efforts to settle the matter despite the outbreak of legal hostilities.

According to findings by THISDAY, the matter arose from a 2012 transaction in which Shebah E&P obtained a $150 million loan facility from a consortium of banks – the defunct Diamond, now Access Bank, as well as the defunct Skye Bank, now Polaris Bank, led by Afreximbank.

It was gathered that the facility was meant for work and drilling campaign at the Ukpokiti field (OML 108) operated by Shebah E&P.

Shebah was said to have drilled a successful horizontal well, the first of its kind in the offshore Niger Delta and tested 4000 barrels per day of oil and condensate production but encountered large gas reserves.

The company then decided to find a solution to the huge associated gas based on professional oil field best practices before continuation of the oil/ condensate production.

A report by Shebah sighted by THISDAY explained that the company required more funds to commercialise the gas to avoid excessive flaring while producing the discovered oil but found that the Afrexim-led consortium of lenders, could not provide further facilities to Shebah to conclude the operations.

It, therefore, in 2014 approached Zenith Bank, which appraised the situation and provided a $200 million loan facility fully approved by its board to salvage the situation.

It said Zenith proposed to pay the consortium of banks $50 million to reduce their collective exposure, enhance the facility to $300 million, provide Shebah with additional funds to monetise the gas and produce the discovered oil.

It pointed out that the enhanced facility would have had Zenith Bank join and lead the syndicate with $200 million, while the consortium of existing lenders would have reduced their exposure and stay at $100 million(about $33 million each).

“Zenith further requested (in line with Shebah’s need) to have a moratorium period of nine months to conclude the projects and extend the facility tenure to five years,” it stated, adding: “This was meant to spread the cash flow and enable easy repayment of the enhanced facility.”

The report said the Afrexim consortium surprisingly rejected the $50 million offered by Zenith on the grounds that Zenith should not lead the syndicate and they were not willing to extend the tenure of the facility which was remaining about two and half years as at the time of Zenith’s offer.

A separate document also showed that preparatory to monetising the discovered gas, Shebah negotiated and executed a GSPA of $2.5 billion for 20 years’ gas sale on a take or pay basis with the Nigerian Gas Company (NGC) as the gas off-taker supported by a payment bank guarantee in the sum of $70 million from Zenith Bank.

It stated that the Afrexim consortium rejected all efforts made by Shebah and proceeded to file an action to call the facility in 2014, just two years after final draw down.

“The call of facility ahead of the maturity triggered the default on the loan,” it insisted, adding that on 19 February 2016, Justice Phillips of the London High Court delivered a judgement in favour of the Afrexim consortium for the repayment of the $150 million loan facility.

According to the document, “The judgement creditors then registered the judgement in Federal High Court in Lagos and applied for enforcement of the judgement.

“The defendants immediately opposed the registration and the enforcement of the judgement based on their convictions on rule of law and on the fact that they would like to negotiate an out of court settlement and pay back the loan under a restructured arrangement.

“This case is still life before an Honorable Justice of the Federal High Court Lagos. The next hearing date is in October, 2019.”

It said contrary to the syndication agreement by the Afrexim consortium, Polaris Bank unilaterally transferred its share of the judgement facility to AMCON, explaining that notwithstanding the unilateral action by Polaris Bank, AMCON should have joined the existing court case in the Federal High Court in Lagos, but instead initiated a fresh action in Federal High Court Abuja.

It said AMCON took this course of action not minding that the same case had already got a ruling in London and subject to a contested enforcement proceeding in the Federal High Court Lagos.

It pointed out that it was by the fresh case that AMCON obtained the ex-parte order, which was reported recently in the media.

“This is not a fresh case but the same case that has been reported variously in the media since last year,” it added.

All efforts to reach operators of Shebah E& P and other defendants failed.

However, a source disclosed that Shebah would appeal the interim order, even as THISDAY gathered that efforts were also being made to take the matter out the courts for settlement.

Another source claimed that Orjiako, the loan guarantor, had provided about $68 million to Shebah to pay the Afrexim consortium.

He further claimed that the order listed several assets not owned by Shebah or Orjiako, suggesting that this gave a strong impression that it was a smear campaign.

“Seplat, where ABC Orjiako is the chairman, is not involved in this matter whatsoever contrary to the nuances in the media report,” adding: “The Seplat board of directors being very strong in corporate governance had activated all governance and compliance processes and procedures to ensure that there are no breaches of any aspect of regulatory compliance or its governance policies.”

He explained that the company being a regulated entity would await the outcome of the judicial processes and would be guided accordingly whenever the cases in court were finalised.

He confirmed that the parties might be considering out-of-court settlement of the commercial dispute.

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