LEK.L Regulatory News (LEK)

6 December 2021

Lekoil Limited

("LEKOIL" or the "Company")

Corporate update

LEKOIL (AIM: LEK), the oil and gas exploration and production company with a focus on Nigeria and West Africa, notes the announcement by Lekoil Nigeria dated 3 December 2021 with respect to an indicative offer to acquire the ordinary shares in the Company (the "Lekoil Nigeria Announcement"). A copy of the Lekoil Nigeria Announcement can be found on the Company's website at www.lekoilplc.com.

The Company notes that it has had no approach from Lekoil Nigeria and has had no discussions with Lekoil Nigeria with respect to any offer to acquire the ordinary shares in the Company (the "Shares").

The Company will liaise with its Nominated Advisor, legal counsel and shareholders in the coming days to address the issues raised by the Lekoil Nigeria Announcement.

The Company notes that the Lekoil Nigeria Announcement is factually incorrect and/or misleading in several ways, as set out below.

In the interim, the Company encourages its shareholders to vote by way of proxy in the upcoming Annual General Meeting, set for 21 December 2021.

The Company notes the following with respect to the Lekoil Nigeria Announcement

1. Indicative offer: Whilst noting that a further "offer" will be made prior to 14 December 2021, the Company notes that the Lekoil Nigeria Announcement does not contain the level of detail on price, structure or proof of finance that would make it an offer capable of acceptance.

The Company notes that the mechanism by which Lekoil Nigeria proposes to purchase the Shares is not clear. The Company believes it is in the interest of shareholder for Lekoil Nigeria to work with the Company to have the Shares unsuspended so that any offer can be made to shareholders in a liquid market.

It is not clear to the Company how the issuance of shares in Lekoil Nigeria, in exchange for Shares in the Company, would benefit shareholders in terms of retaining liquidity in publicly traded shares, but we await further details from Lekoil Nigeria in this regard.

The Company notes that any offer to purchase Shares is not governed by the UK's Takeover Code. The Company's Articles of Association include an equivalent to Rule 9 of the Takeover Code, which would, in effect, require any shareholder who obtains 30% of the Shares to make an offer to purchase all the remaining Shares.

2. Dilution: As stated by the Company in its corporate update dated 27 October 2021, the use of the Contractor Shares Arrangement ("CSA") was authorised by shareholders at the 2020 Annual General Meeting. The use of the CSA and the entry into the Convertible Facility Agreement ("CFA") were in response to the fact that Lekoil Nigeria has, from mid-2021, refused to fund the Company. Historically, the costs of the Company have been paid by Lekoil Nigeria (or its subsidiaries) and set-off against the inter-company debt owing by the relevant subsidiary to the Company.

The Company is seeking authority at the 2021 Annual General Meeting ("2021 AGM") to continue the use of the CSA and will manage the implementation of the CSA in a prudent manner, balancing cash management with shareholder dilution. The Board currently expects that the issuance of Contractor Shares in 2021 will be circa 5% of the current issued share capital. The CFA, if fully repaid in Shares, would be circa 7.5% of the current issued share capital.

The actual use of the CSA in 2022 will depend, in part, on the other finance options available to the Company. The Company would, for example, be able to minimise the use of the CSA and repay the CFA (and therefore minimise dilution), if Lekoil Nigeria used its available cash (circa USD$3m at 1 September 2021) to repay part of the intercompany debt due from Lekoil Nigeria to the Company or repay receivables due and owing to the Company.

A further source of financing that would protect shareholders from dilution and incurring further expenses would be the repayment of Mr. Akinyanmi's loan.

As previously stated, the Company's intent was to conduct an open offer in Q4 2021, to help fund the business. The current suspension of the Company's shares impacts the ability to successfully implement the open offer at this time but the Company will seek to do so as soon as trading in the Shares is unsuspended.

The Company notes that the reference to 40% dilution will not be possible as, per Resolution 7 of the 2021 AGM, the maximum authority to allot Shares for all purposes (including the open offer and the implementation of the CSA), is circa 33%.

3. Re-admission to trading: It is factually incorrect for Lekoil Nigeria to say that the Company needs to "reapply to the London Stock Exchange for a new admission to listing". A "re-application" implies, for example, a new admission document. This is simply not the case. The Company is working with its Nominated Advisor on matters that are required for the Shares to be unsuspended and indeed has shared with Lekoil Nigeria the details of action items required to complete this process and asked for its assistance to complete the tasks. To date, the Company is still waiting on Lekoil Nigeria to complete these tasks.

4. Board of Directors: Lekoil Nigeria state that the cost of the current Board of Directors "is in excess of US$500,000 and up to $1,000,000 per year". This is factually incorrect. It is expected that the ongoing annual cost of the Board will be less than US$300,000, to be paid in Shares with the conversion price in excess of the current share price. This compares to a cash cost of USD$1.36m for 2020.

5. Governance and regulatory issues: The Lekoil Nigeria Announcement makes a number of statements and allegations about the governance of the Company, its Board composition and rationale. The Company sees no merit in responding in detail to these unsupported statements and allegations given the well documented actions of Lekoil Nigeria in seeking to take control of the assets of the Lekoil Cayman group despite the investment made in the Lekoil Cayman group by the Company's shareholders.

For further information, please visit www.lekoilplc.com or contact: