TIDMSLE
RNS Number : 6532B
San Leon Energy PLC
15 February 2022
The information communicated within this announcement is deemed
to constitute inside information as stipulated under the Market
Abuse (amendment) (EU Exit) Regulations 2019/310. Upon the
publication of this announcement, this inside information is now
considered to be in the public domain.
15 February 2022
San Leon Energy plc
("San Leon" or the "Company")
Further loan to, and acquisition of an equity interest in,
Nigerian Oil Export System
San Leon, the independent oil and gas production, development
and exploration company focused on Nigeria, is pleased to announce
that it has provided a further loan of US$2.0 million (the "Loan")
to Energy Link Infrastructure (Malta) Limited ("ELI"), the company
which owns the Alternative Crude Oil Evacuation System ("ACOES")
project. As previously announced, the ACOES is being constructed to
provide a dedicated oil export route from the OML 18 oil and gas
block located onshore in Nigeria ("OML 18"), comprising a new
pipeline from OML 18 and a floating storage and offloading vessel
("FSO"). Once commissioned, the system is expected by the operator
of OML 18, Eroton Exploration and Production Company Limited
("Eroton"), to reduce the downtime and allocated pipeline losses
currently associated with the Nembe Creek Trunk Line. In addition,
it is anticipated that the FSO project will improve overall well
uptime at OML 18.
Oil export barging operations from OML 18 commenced in late
September 2021 (while awaiting availability of the pipeline). To
date, oil volumes being barged have been small, reflecting lower
production at OML 18 and with the purpose of the barging being
primarily to test the new processes. Barging has been to smaller
storage vessels prior to offloading to the FSO. The full ACOES,
including the pipeline, is currently expected by Eroton to be fully
operational in the third quarter of 2022.
The Loan is a US$2.0 million shareholder loan at a coupon of 14%
per annum over four years which is repayable quarterly following a
one-year moratorium from the date of investment. The Loan will be
accompanied by a transfer to San Leon by Walstrand (Malta) Limited,
ELI's largest shareholder, of shares in ELI representing a 2.0%
equity interest (the "ELI Equity Interest"), which San Leon will
acquire at nominal value, representing a consideration payable of
approximately US$91.
The Loan will be used by ELI to facilitate a recent funding
requirement to allow for completion of the mooring for the floating
storage and offloading vessel, which the Board considers to be a
critical step in the progression of the ACOES project. Providing
loans to Nigerian oil and gas related projects, which are often
accompanied by associated equity interests, has been a key part of
San Leon's business and strategy in recent years. San Leon has had
debt and equity interests in ELI since August 2020 and, given the
longer-term ongoing strategic importance of ELI's ACOES project to
OML 18, the Board believes that it is important for San Leon to
assist ELI with the funding requirements for achieving its key
project milestones on a timely basis.
Accordingly, the Loan and the ELI Equity Interest are distinct
and separate to the proposed further debt and equity investments in
ELI that are connected to the transaction as originally described
by the Company in its announcement on 24 June 2021, the progress of
which was most recently described in the Company's announcement of
24 December 2021, being the proposed reorganisation to consolidate
Midwestern Oil and Gas Company Limited's ("Midwestern")
shareholdings in the Company and Midwestern Leon Petroleum Limited
("MLPL") into a single shareholding in the Company (the "Potential
Transaction"), which also comprises, inter alia, a proposed
consolidation of Midwestern's indirect debt and equity interests in
ELI with those of the Company, as well as further new debt and new
equity investments to be made by San Leon in ELI. Work on the
Potential Transaction, which will be classified as a reverse
takeover under the AIM Rules for Companies, is ongoing.
Taken together with San Leon's existing investment in ELI and
its conditional purchase of 1.323% of ELI (calculated prior to the
newly-issued shares of today's announcement), as announced last
year, following completion of the conditional purchase, San Leon's
holding in ELI will be 13.323%. Also as announced last year, San
Leon has an option to conditionally purchase a further 4.302% of
ELI for US$6.0 million. Furthermore, the effect of the Potential
Transaction will be to increase San Leon's interest in ELI further.
Consequently, the 2.0% ELI Equity Interest that San Leon is
receiving now in conjunction with the Loan is subject to
anti-dilutive protection, whereby San Leon will be issued with
further shares in ELI to maintain that percentage holding should
the effect of the Potential Transaction be to in any way dilute
this tranche of shares.
San Leon has now lent a total of US$17.0 million to ELI with a
coupon of 14% per annum and from which repayment installments
totaling US$6.0 million are now due . As announced on 9 August
2021, the Company has previously agreed with ELI that, should new
investments in ELI be made, then loan repayment installments would
be offset from any investment monies payable to ELI by San Leon
under these new arrangements. The Company has elected not to
enforce this provision on this occasion, in recognition of the fact
that ELI's development is critical to the success of OML 18 and
ELI's cash balances at this time are required to progress the
overall ACOES project. San Leon will continue to waive repayment
installments due on its loans until the ACOES project has been
further progressed and outstanding installments will continue to
accrue interest at 14% per annum.
Under the terms of ELI's senior debt facility, the lender has a
charge over all of ELI's assets and, as further security, each
shareholder (including San Leon) has pledged their shares to the
lender. The ELI shares comprising the ELI Equity Interest will be
subject to this pledge. The terms of the pledge are that the ELI
shares cannot be transferred or otherwise utilised without the
lender's consent.
ELI's audited accounts for the year ended 31 December 2020 state
that the company made a loss before tax of approximately US$4.4
million on revenue of approximately US$5.7 million and reported
total assets of approximately US$198.7 million. Two of San Leon's
directors are currently appointed to ELI's board.
Oisin Fanning, CEO of San Leon Energy, commented:
"As our shareholders know, we have long considered ELI and the
new ACOES pipeline to be critical to the success of OML 18 and so
it is pleasing to be able to provide this Loan to ELI to advance an
important stage of that key project. The fact that we have been
able to make this investment utilising cash received from our
settlement in the legal proceedings with TAQA Offshore BV is
particularly beneficial, both for our cash flows and for our risk
profile, as we seek to progress our reverse takeover
transaction."
Enquiries:
San Leon Energy plc +353 1291 6292
Oisin Fanning, Chief Executive
Julian Tedder, Chief Financial Officer
Allenby Capital Limited
(Nominated adviser and joint broker to the Company) +44 20 3328 5656
Nick Naylor
Alex Brearley
Vivek Bhardwaj
Panmure Gordon & Co
(Joint broker to the Company) +44 20 7886 2500
Nick Lovering
James Sinclair-Ford
Tavistock
(Financial Public Relations) +44 20 7920 3150
Nick Elwes
Simon Hudson
Plunkett Public Relations +353 1 230 3781
Sharon Plunkett
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