Oil discovery and extraction company Lekoil has resumed trading on the London Stock Exchange this morning, after losing $600,000 in an alleged scam deal.

On 2 January, the company announced it would receive $174.3 million of funding from the Qatari Investment Authority (QIA) to begin appraisal drilling on its stake in the Ogo field, off the coast of Nigeria.

It said it would use the money for two wells in the OPL 310 area near Lagos. These would initially be used to test flow in the latter half of 2020 and then for future extraction.

Cross-border transaction consultancy Seawave Invest acted as a deal broker with the QIA, but the QIA was unaware of its actions.

On 12 January the QIA contacted Lekoil “questioning the validity” of the announced agreement. The company had paid $600,000 to Seawave Invest “in good faith” as an arrangement fee.

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By GlobalData

The company suspended share trading on Monday morning after it became clear the negotiated deal was fraudulent.

In a statement, Lekoil said it had entered into the agreement with “individuals who have constructed a complex facade in order to masquerade as representatives of the QIA.”

Lekoil is seeking new funding for the drilling of OPL 310. A company spokesperson told Power Technology: “Lekoil will seek alternative funding for the future development of OPL 310 as a priority, including reactivating other existing funding discussions.

“It will update the market on its drilling programme in due course; however it is worth noting that the tenure of the OPL 310 licence expires on 2 August 2022 and that the drilling of an appraisal well is still expected to occur before then.”

Before announcing the funding, Lekoil’s shares closed at 4.65 pence per share on the London Stock Exchange. The day after the announcement, the share price closed at 9.45, more than double its previous price.

Today, trading reopened at 2.97 pence per share and fell to 2.2 within four minutes.

In February, Lekoil is expected to pay around $10m  in sunk costs and consent fees to Optimum Petroleum Development, the operator of the drilling licence. It must also prove its ability to raise around $28mto cover the costs for drilling one appraisal well or lose its interest in the site.

A spokesperson said: “One of the immediate priorities is to ensure we are in a strong position to effect the payment to Optimum, and we will update the market accordingly.

“The company expects to receive cash proceeds from an oil lifting which was expected to occur in December 2019 and has now been scheduled to be included as part of the liftings for January 2020. It is expected that this will bolster cash resources.”