A subsidiary of Seplat Petroleum Development Company Plc, Newton Energy Limited, has reached a pact with a Canadian firm, Crestar Natural Resources Limited, on a protracted dispute in connection with the acquisition of Oil Mining Lease (OML) 25 from Anglo-Dutch multinational, Shell.
Seplat is a leading Nigerian independent oil and gas company listed on both the Nigerian and London Stock Exchanges.
Crestar, which is owned by James Bay Resources Limited, together with its Nigerian partners, was the winning bidder in May 2014 for Shell’s 45 per cent participating interest in Oil Mining Lease (OML) 25.
The settlement between Crestar and Newton has to do with proceedings in the English High Court on the deposit of $20.5 million currently held in an escrow account.
In a filing at the Nigerian Stock Exchange in January last year, Seplat announced that proceedings had commenced at the English High Court against its wholly-owned subsidiary, Newton Energy, by Crestar in connection with the said deposit.
The escrowed money was for the purpose of acquiring an interest in OML 25 by Crestar, which Newton had an option to invest in, but put in escrow in July 2015, pursuant to the agreement reached with Crestar and the vendor on the final terms of the potential transaction.
The potential acquisition of an interest in OML 25 was initially identified in 2014 at which time the group placed the sum of $453 million as a deposit towards the potential investment.
But after considerable delays, $368 million was returned to the group in July 2015.
Seplat said certain events then led to renewed efforts by the consortium to secure the asset and to the group providing the escrowed funds.
According to Seplat the group paid $11 million to Crestar for past costs while a $45 million deposit remained with the potential vendor of the asset.
The company vowed to defend the claim vigorously in an English court.
But when the case came up Thursday last week, March 28, the chief financial officer of Seplat, Roger Brown, told the court the litigation had been substantially settled between the parties.
Brown said: “Under the terms of the settlement the escrow monies will be split as follows: $10.0 million to Seplat and $10.5 million to Crestar. A provision equal to the share of escrow monies due to Crestar was already provided for in Seplat’s audited 2017 annual accounts.”
After it won the bid for the acquisition of OML 25 from Shell and its partners, Crestar had deposited 100 per cent of the bid price into an escrow account with JP Morgan in London.
However, after NNPC attempted to block the sale and acquire the interest for itself under a 30-day contractual right of first refusal that had expired months earlier, Crestar commenced injunction proceedings in January 2015 at the Federal High Court, Abuja, to prevent the Shell from effecting the transfer to NNPC or anyone else.
Shell sought to discharge the injunction, but the Abuja court dismissed its application on March 6, 2015.
Crestar had also delivered a 30-day pre-action notice to NNPC, as required by Nigerian law in advance of any legal proceedings against the state-owned oil firm.
The Canadian firm had argued that the wrongful exercise of an expired pre-emptive right by the NNPC was the corporation’s first-ever exercise of preemption rights in the history of Shell’s divestment programme in Nigeria.
In addition to this unprecedented attempt to exercise an expired pre-emptive right, Crestar also alleged that the NNPC was attempting to fund its own acquisition with monies obtained from private third parties in exchange for lucrative interests in OML 25.
It also stressed that this arrangement would almost certainly violate several Nigerian laws regulating government borrowing.