*Highlights how FBN moved from loss position of N302bn to N151bn profit following oil coy’s intervention
*Says without fulfilling existing pre-conditions, can bank truly keep its accounts?
*Queries if deal was disclosed to investors in rights issue?
*GHL reiterates capacity to meet any obligation that may fall due
General Hydrocarbons Limited (GHL), operators of Oil Mining Lease (OML) 120, yesterday reacted to the business disagreement with First Bank of Nigeria Limited (FBN), noting that having rescued the bank at its lowest, it won’t be a party to destroying the relationship the parties enjoy.
The wholly-owned Nigeria company in deep offshore Nigeria, in a statement signed by its Chairman, Nduka Obaigbena, reaffirmed its commitment to resolving its ongoing dispute with the bank, highlighting the successes achieved through the partnership.
GHL emphasised its role in saving First Bank from financial distress while simultaneously discovering crude oil, a development capable of raising Nigeria’s crude production profile.
The management of the oil and gas company reiterated that the agreement signed with GHL enabled FBN to return to good standing, noting that, instead if declaring a loss of N302 billion ($755 million) in 2021, the signing of the Tripartite agreement with GHL enabled FBN to declare a profit of N151 billion ($377.5 billion) for the year ending December 31, 2021. It queried that without the bank fulfilling the pre-conditions in the agreement if it could truly keep its accounts without providing the loss and if FBN disclosed the deal to investors in its recent rights issue.
The oil firm said: “We willingly rescued First Bank of Nigeria Limited (FBN) from the abyss and are not about to throw away the baby with the bathwater. Through our collaboration, we have resolved FBN’s financial challenges and discovered crude oil to the glory of Nigeria.”
The GHL-FBN partnership, which began under a subrogation agreement, allowed oil companies to assist in financing FBN’s operations and addressing its Non-Performing Loans (NPLs).
According to the Obaigbena-led company, this effort restored FBN to profitability and laid the groundwork for the exploration and development of OML 120.
But the company said FBN routinely breached its obligations under the subrogation and tripartite agreements, resulting in a legal dispute that is currently being addressed through court proceedings and arbitration.
However, despite a court judgment in GHL’s favour, which restrained the bank from taking further action, in breach of that order the bank, without making the court aware of the pending order, sought the order of another court to freeze GHL funds.
It reassured its stakeholders that the company remains financially strong and committed to its operations, further highlighting its achievements in discovering oil and gas reserves. GHL credited Nigerian-born engineers and global technical partners such as Schlumberger (SLB), Baker Hughes, and Century Group for their contributions.
The oil company added: “We are in court and arbitration to resolve our differences and have obtained a court order securing our operations pending determination. We hope for a favourable outcome under our system of justice.
“Unfortunately, First Bank continues to disregard and disobey a subsisting court judgment in favour of GHL and instead has chosen to mislead the public. Our lawyers are addressing this flagrant breach in the right forum. There is no cause for alarm.
“As a going concern and as the one and only wholly-owned Nigeria company in Deep Offshore Nigeria (75km at Sea and over 850-1000 meters water depth), our oil and gas campaign has discovered Oil and Gas to the glory of Nigeria, thanks to the ingenuity of our Nigerian-born engineers and technical partners including Messrs Schlumberger (SLB), Baker Hughes, Century Group, etc.
“With its strong assets base, GHL is in good standing to meet any obligation that may fall due. We call on our valued partners to remain calm as we work through the courts, arbitration or mediation to seek solutions to our differences in strategy, not in form or substance.”
Expressing confidence in Nigeria’s legal system to resolve the matter fairly, GHL expressed the belief that justice and reason will prevail, sooner or later, underscoring the importance of its collaboration with FBN.
It said the kind of partnership was pivotal to addressing systemic financial risks in the Nigerian oil and gas sector.
Also, in a separate note titled: “FBN – The Case By GHL,” the management of the oil and gas company stated that the agreement signed with GHL enabled FBN to return to good standing, noting that, “instead if declaring a loss of N302 billion ($755 million) in 2021, the signing of the Tripartite agreement with GHL enabled FBN to declare a profit of N151 billion ($377.5 billion) for the year ending December 31, 2021.
“GHL signed the agreement believing that FBN will comply and continue to comply with its obligation to fund OML 120, but has clearly not done so. FBN market capitalisation before the agreement was N256.6 billion. Had it declared a loss of N302 billion, the bank will have had a negative capital of N46 billion. FBN then immediately realised profitability from GHL’s agreement.
“Following the agreements with GHL, FBN’s market capitalisation which was N256.6 billion rose to N900 billion as at November 30, 2024, more than tripling its financial position before the GHL agreements,” it stated.
Due to FBN’s very tardy manner in disbursing the payments, the bank, GHL said did not make the $25 million out of the agreed $50 million for drilling available until three to four months later, in January/February 2024, causing more losses to GHL’s drilling operations.
“Even if FBN had disbursed $185 million, the way and manner of the disbursement which was agreed to be five days after funding request become up to 70 days after request, such that service providers led by Schlumberger and Baker Hughes who are supposed to be paid at the same time for various interventions, were paid sporadically at different times, resulting in massive loses in day rates and downtimes, leading to inefficiencies and losses of over $47 million non-productive timing.
“Clearly, FBN was either illiquid, unable or unwilling to fund the project as agreed after they had made profit upfront. GHL is seeking to exercise its options under the agreement to find a new lender that can be efficient and cost-effective so as to save the project, payoff the lender and then meet its commitment to FBN under the agreements.
“The MoU contains a clause that allows GHL to seek for alternative financing should FBN is unable to provide such financing. Repayment of the outstanding exposure is to come from profits (net cashflows as of the commercial production and optimum exploration of the asset – OML 120, which is yet to occur due to FBN’s non-performance,” it added. (Thisday)
