General Hydrocarbons Limited (GHL) on Friday rubbished attempts by the First Bank of Nigeria (FBN) to muddle up the issues relating to its commercial relationship with the bank on Oil Mining Lease (OML) 120, which is now a subject of disagreement.
Breaking down the deal with FBN, the oil firm in a statement, explained that it never took the so-called loan from the bank, stressing that what it had with the financial institution was a project finance relationship.
In the matter which is now before the courts, GHL claimed that First Bank breached their subrogation agreement, which led to a loss of trust. A Federal High Court in Lagos recently set aside a Mareva order, wherein the bank attempted to freeze the accounts of GHL. This was seen as a major victory for the oil company.
But GHL in a statement, insisted that First Bank failed to meet its commitment under the Tripartite Agreement to fully finance and make the payments required for the optimal exploration and development of OML 120.
It explained: “Is GHL’s liability to First Bank a loan? The simple answer is NO, as it is not a normal commercial loan: it is a Project Finance relationship. Here is how:
“GHL is the awardee and licenced operator of OML 120. FBN approached GHL to finance the exploration, development and production of OML 120 and share profit 50:50, while paying FBN cost of finance.”
“The FBN 50 per cent share is dedicated to paydown its non-performing loan of $600 million, discounted from $718 million from the Asset Management Corporation of Nigeria (AMCON) Eligible Bank Asset in order to resolve FBN’s solvency issues.
“In doing that, GHL guaranteed FBN’s liability to AMCON, through a Tripartite Agreement between GHL, FBN and AMCON. The result of the Tripartite Agreement was that FBN became immediately profitable and moved from a loss of N302 billion to a profit of N151 billion for 2021 Fiscal Year End (FYE),” GHL contended.
However, in return, the oil company stated that FBN failed to meet its commitment under the Tripartite Agreement to fully finance and make the payments required for the optimal exploration and development of OML 120 as agreed.
According to GHL, this resulted in losses in day rates and downtimes of $47 million, which has snowballed into the current impasse, as FBN has failed to make further required payments for the drilling and exploration of OML 120.
Essentially, it stated that FBN failed to fulfill its condition precedent to profitability in failing to finance OML 120 as agreed, leaving its financial statements open to challenge.
“Meanwhile the FBN’s claim of $225 million loan is not due as it is still covered by moratorium, given that the project has not achieved commercial production. So, at best FBN’s claim is premature,” GHL contended.
The oil firm said it has now gone for Arbitration which is ongoing and FBN has gone to court with a series of Exparte (temporary) Mareva measures, the first of which has been vacated and the case is now being heard on its merit.
Besides, GHL stated that the second temporary Mareva was pending at the Federal High Court in Port-Harcourt, Rivers State, both supported by “wild, unfounded and unproven allegations of dissipation of assets.”
It argued: “Did GHL dissipate any asset? The answer is NO, as all payments were made by First Bank DIRECTLY to 3rd parties after due diligence and verifications by FBN, and the 3rd parties are mainly global, world class, reputable companies with strict compliance regimes.”
GHL pointed out that it was filing a claim of over $1 billion in various courts, while FBN was claiming $225 million debt which it never complied with in line with the agreements.
“GHL will continue to fight for justice and damages whilst it remains open for mediation and resolution,” the oil firm stated.
General Hydrocarbons Limited Vs FBN: The Explainer
GHL vs FBN: The Facts, The Half-Truths and The Fiction
Is GHL’s liability to First Bank a loan? The simple answer is NO, as it is not a normal commercial loan: it is a Project Finance relationship.
Here is how:
GHL is the awardee and licenced operator of OML 120. FBN approached GHL to finance the exploration, development and production of OML 120 and share profit 50:50, while paying FBN cost of finance. The FBN 50%share is dedicated to paydown its non-performing loan of $600million (discounted from $718million from AMCON’s Eligible Bank Asset) in order to resolve FBN’s solvency issues.
In doing that, GHL guaranteed FBN’s liability to AMCON, through a Tripartite Agreement between GHL, FBN and AMCON.
The result of the Tripartite Agreement was that FBN became immediately profitable and moved from a loss of N302Billion to a profit of N151Bn for 2021 FYE. However, in return, it has failed to meet its commitment under the Tripartite Agreement to fully finance and make the payments required for the optimal exploration and development of OML 120 as agreed in the Tripartite Agreement, resulting in losses in day rates and downtimes of $47million, which has snowballed into the current impasse as FBN has failed to make further required payments for the drilling and exploration of OML 120. Essentially, FBN failed to fulfil its condition precedent to profitability in failing to finance OML 120 as agreed, leaving its financial statements open to challenge. Meanwhile the FBN’s claim of$225Million loan is not due as it is still covered by moratorium, given that the project has not achieved commercial production. So, at best FBN’s claim is premature.
GHL has now gone for Arbitration which is ongoing and FBN has gone to court with a series of Exparte (temporary) Mareva measures, the first of which has been vacated and the case is now being heard on the merit, whilst the second temporary Mareva is pending at the Federal High Court in Port-Harcourt, Rivers State, both supported by” wild, unfounded and unproven allegations of dissipation of assets.”
5.Did GHL dissipate any asset? The answer is no as all payments were made by First Bank DIRECTLY to 3rd parties after due diligence and verifications by FBN, and the 3rd parties are mainly global, world class, reputable companies with strict compliance regimes.
GHL is filing a claim of over $1Billion in various courts, while FBN is claiming $225million debt which it never complied with in line with the agreements.
GHL will continue to fight for justice and damages whilst it remains open for mediation and resolution.
