Business Times<\/em> report, this followed clashes between him and Matjila, \u201cin particular\u201d over Camac.<\/p>\nOyo turned out not to be as productive as Erin had forecast, and Erin shareholders sued its directors over the deal. They argued that Erin had paid Lawal far too much and that the directors were culpable. Their arguments were heard by a Delaware court, which dismissed them as there was not enough evidence to prove culpability.<\/p>\n
However, the judge reserved devastating criticism for Lawal.<\/p>\n
\u201cLawal appeared on all three sides of the transaction: as sole point of contact for [the] PIC, as controller of [Allied Energy, from which Erin bought the oil rights], and as controller of Erin,\u201d she wrote. \u201cIn practice, his behaviour gave rise to a very real appearance that, by seeming to speak for all three counterparties in the transactions, Lawal really was negotiating with himself in shifting around assets for his own benefit.\u201d<\/p>\n
But it was worse than that.<\/p>\n
Lawal\u2019s Allied Energy had in 2012 bought 40% of the oil rights from a subsidiary of Italian oil major ENI \u2013 but Allied only paid $100-million of a $270-million purchase price, according to court records.<\/p>\n
Obviously, this posed a risk to Erin, which relied almost entirely on its ability to pump and sell the Nigerian oil, but it never disclosed this to investors.<\/p>\n
Did the PIC know about ENI\u2019s dispute with Lawal when it invested in Erin? It did not answer our question about this.<\/p>\n
ENI\u2019s subsidiary fought for its money, and in February 2017 the London Court of International Arbitration found in its favour, ordering that Lawal\u2019s Cayman Islands-registered holding company Camac International owed ENI $200-million.<\/p>\n
This finding was recognised and enforced by Nigeria\u2019s courts (leading to the oil seizure this January) and a Cayman Islands court issued a winding up order for Lawal\u2019s Camac International.<\/p>\n
But Lawal had by then sold the \u201ceconomic rights\u201d, so ENI\u2019s dispute had nothing to do with Erin or the PIC, right? Apparently not.<\/p>\n
Last month, Erin coyly described a previously undisclosed problem in its annual report. While it had bought the \u201ceconomic rights\u201d to the oil license in 2014, the oil license was actually still formally assigned to the seller, Camac. Erin disclosed that it had \u201cno control\u201d over Camac\u2019s \u201cability to retain the [oil] rights\u201d.<\/p>\n
Erin said: \u201cIf [Camac] is unable to retain and hold rights to [the Nigerian oil license], \u2026 it could have a material adverse effect on our results of operations and financial condition and the value of our securities.\u201d<\/p>\n
What Erin did not disclose was that this was its only cash-generating asset and ENI was busy liquidating the company that owned it, Camac.<\/p>\n
We wrote to the PIC earlier this month to ask if it was aware of the problem. Its response appeared to be a long way of accusing Erin of securities fraud.<\/p>\n
It said: \u201cIt is a requirement of [the New York and Johannesburg stock] exchanges that companies listed on their platforms should disclose information that is necessary for the shareholders to make informed investment decisions. This requirement extends to information that could have a material impact on the company and for the shareholders.<\/p>\n
\u201cTo the contrary, [Erin] did not disclose the issue of the [Nigerian oil] contract in its [Johannesburg] pre\u00adlisting statement and prior to PIC acquiring its shares. This disclosure was only made public in Erin Energy\u2019s annual report for the financial year ending 31 December 2017.<\/p>\n
\u201cAs a matter of fact, the company and its management did not disclose this issue to its board members. PIC\u2019s representatives on the Erin Energy board became aware of the production sharing contract matter about the same time when the disclosure was made public.\u201d<\/p>\n
A financial analyst (wishing to remain anonymous) summarised this for us as \u201can implausible \u2018mushroom defence\u2019; meaning: \u2018Erin fed us shit and kept us in the dark.\u2019\u201d<\/p>\n
We pressed PIC to explain how its due diligence had failed so badly. How did it not know precisely how Erin owned its single cash-generating asset?<\/p>\n
PIC said: \u201cRegarding whether the PIC has conducted due diligence before investing in Erin Energy, please note that due diligence is a prerequisite for all investments that the PIC undertakes. Internal documents and discussions that inform investment decisions are confidential.\u201d<\/p>\n
But it was even worse.<\/p>\n
In 2016, as ENI was suing Lawal\u2019s Camac, the PIC\u2019s investment committee agreed to secure a $100-million bank guarantee so that Erin could borrow for drilling and other expenses at the Oyo oil field.<\/p>\n
Erin\u2019s loan was finalised in January 2017, and it pledged its assets as security \u2013 essentially the oil rights that were ultimately owned by Camac.<\/p>\n
Should Erin not be able to repay the loan, and should the oil well happen to be locked up, the banks could ultimately turn to the PIC for the cash.<\/p>\n
As it happened, just days after Erin finalised its loan, the London arbitration court found that Camac must pay ENI $200-million, leading through various courts to the day in January this year, when the helicopter landed on Erin\u2019s ship.<\/p>\n
According to Erin: \u201cOn January 31, 2018, [the ENI subsidiary], in conjunction with armed personnel from the Nigerian navy and police force, and sheriffs of the court, and under the guise of a routine naval inspection, landed a helicopter on the [floating production storage and offloading vessel (FPSO)] Armada Perdana.<\/p>\n
\u201cOnce on board, [ENI\u2019s] entourage, including armed personnel with weapons drawn, forced their way into safety restricted areas of the FPSO and chained and counter-locked the vessel\u2019s main export valve.<\/p>\n
\u201c[ENI\u2019s] use of weapons and flash photography in this area was a significant violation of industry safety procedures.<\/p>\n
\u201c[ENI] asserted that the [Erin] crude oil stored on the FPSO was being seized pursuant to the [Nigerian court] writ.\u201d<\/p>\n
Erin sought an order setting aside the writ. It said: \u201c[Erin] is the owner of the crude oil on the FPSO, the writ did not authorize [ENI] to attach [Erin\u2019s] crude oil, and the attachment of Erin\u2019s crude oil interfered with its constitutionally protected property rights, among other things.\u201d<\/p>\n
Erin did not describe the outcome of its court application, but it said Nigeria\u2019s department of petroleum resources had declined to give it a permit for its scheduled oil offtake at the end of March. According to Erin, this was \u201cdue to [ENI\u2019s] improper use of the writ and its interference with [Erin] operations, as well as its court proceedings\u201d.<\/p>\n
It said the government then suspended Erin\u2019s oil processing indefinitely and, as of Tuesday, \u201cthe first quarter crude oil offtake is still delayed, the Oyo field production operations, including the FPSO, are still suspended and [Erin] is continuing to work to resolve these matters\u201d.<\/p>\n
Last night, Erin filed its voluntary petitions with the US bankruptcy court.<\/p>\n
Considering the PIC\u2019s $270-million equity investment and the fact that Erin had drawn $65.6-million against the $100-million PIC-backed loan but held $9.1-million in cash security, we calculate that the PIC could lose roughly R4-billion.<\/p>\n
The PIC was not immediately available for comment.<\/p>\n","protected":false},"excerpt":{"rendered":"
A R4-billion Public Investment Corporation investment could be wiped out as Texan oil firm files for bankruptcy.<\/p>\n","protected":false},"author":2,"featured_media":22054,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[2],"tags":[48,49],"class_list":["post-5140","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-stories","tag-oil","tag-pic"],"acf":[],"_links":{"self":[{"href":"https:\/\/further.co.za\/amabwp\/wp-json\/wp\/v2\/posts\/5140","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/further.co.za\/amabwp\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/further.co.za\/amabwp\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/further.co.za\/amabwp\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/further.co.za\/amabwp\/wp-json\/wp\/v2\/comments?post=5140"}],"version-history":[{"count":1,"href":"https:\/\/further.co.za\/amabwp\/wp-json\/wp\/v2\/posts\/5140\/revisions"}],"predecessor-version":[{"id":30466,"href":"https:\/\/further.co.za\/amabwp\/wp-json\/wp\/v2\/posts\/5140\/revisions\/30466"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/further.co.za\/amabwp\/wp-json\/wp\/v2\/media\/22054"}],"wp:attachment":[{"href":"https:\/\/further.co.za\/amabwp\/wp-json\/wp\/v2\/media?parent=5140"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/further.co.za\/amabwp\/wp-json\/wp\/v2\/categories?post=5140"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/further.co.za\/amabwp\/wp-json\/wp\/v2\/tags?post=5140"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}