TIDMSLE
RNS Number : 9428C
San Leon Energy PLC
28 February 2022
Prior to publication, the information contained within this
announcement was deemed by the Company to constitute inside
information for the purposes of Regulation 11 of the Market Abuse
(Amendment) (EU Exit) Regulations 2019/310. With the publication of
this announcement, this information is now considered to be in the
public domain.
28 February 2022
San Leon Energy plc
("San Leon" or the "Company")
Update on potential transaction and extension of conditional
payment waiver
San Leon, the independent oil and gas production, development
and exploration company focused on Nigeria, provides the following
update on the proposed reorganisation to consolidate Midwestern Oil
and Gas Company Limited's ("Midwestern") shareholdings in: i) the
Company; and ii) Midwestern Leon Petroleum Limited ("MLPL") into a
single shareholding in the Company (the "Potential Transaction").
The Potential Transaction also comprises, inter alia, a proposed
consolidation of Midwestern's indirect debt and equity interests in
Energy Link Infrastructure (Malta) Limited ("ELI") with those of
the Company, as well as further new debt and new equity investments
to be made by San Leon in ELI. The Potential Transaction, if
concluded, would be classified as a reverse takeover under the AIM
Rules for Companies (the "AIM Rules").
AIM admission document update
Further to the Company's announcement on 24 December 2021, the
Company now currently expects to publish an AIM admission document
(the "Admission Document") in respect of the Potential Transaction
by the end of April 2022, following which point the Company will
seek the restoration of trading of the Company's ordinary shares on
AIM.
Proposed Eroton Transaction
On 29 November 2021, San Leon announced that, inter alia, it had
been informed that the operator of the OML 18 oil and gas block
located onshore in Nigeria ("OML 18"), Eroton Exploration and
Production Company Limited ("Eroton"), is seeking to acquire an
additional 18% interest in OML 18 from two of the other partners in
OML 18, subject, inter alia, to agreeing documentation, finalising
bank financing and relevant regulatory consents in Nigeria, thereby
taking Eroton's interest in OML 18 to 45% (the "Proposed Eroton
Transaction").
As previously noted in the Company's announcement of 24 December
2021, completion of the Potential Transaction will be conditional
upon completion of the Proposed Eroton Transaction. The entering
into binding conditional transaction documentation in relation to
the Proposed Eroton Transaction is contingent, inter alia, on
Eroton's financing of this transaction which is expected to form
part of a refinancing of OML 18's reserve-based lending facilities.
San Leon has recently been provided with updates on the progress of
the funding for the Proposed Eroton Transaction, which includes
Eroton having received a term sheet in relation to a reserve-based
lending facility, totaling US$750,000,000 (the "Proposed Eroton
Debt Facilities"), which is proposed to be lent by a financing
syndicate led by African Export-Import Bank .
San Leon has also been informed that:
i) updated OML 18 off-take agreements will be entered into by
Eroton in order for the financing syndicate to finalise the
Proposed Eroton Debt Facilities ; and
ii) in order for the current off-taker (which is also a lender
within the financing syndicate) to enter into a new off-take
agreement, ELI will need to have successfully demonstrated the
barging of oil to the floating storage and offloading vessel
("FSO") through part of the Alternative Crude Oil Evacuation System
("ACOES") project, to the off-takers' satisfaction.
The loan of US$2.0 million provided to ELI by San Leon, as
announced on 15 February 2022, is expected to assist with advancing
this process, although the barging of oil to the FSO through part
of the ACOES will also be subject to, amongst other matters,
receipt of the necessary Nigerian regulatory maritime approvals.
San Leon has been informed that ELI is likely to have demonstrated
the barging of oil to the FSO to the off-takers' satisfaction
during March 2022, and following this, San Leon understands that
Eroton and the financing syndicate intend to seek to finalise the
Proposed Eroton Debt Facilities in order to allow for binding
conditional transaction documentation in relation to the Proposed
Eroton Transaction to be concluded as soon as may be
practicable.
Potential Transaction update
In relation to the Potential Transaction, progress has been made
by the Company and its advisers in preparing the necessary
transaction documentation in relation to the Potential Transaction,
including work on progressing the Admission Document, given that
the Potential Transaction will be classified as a reverse takeover
under the AIM Rules for Companies (the "AIM Rules").
The draft conditional agreement to be entered into between: (i)
the Company; (ii) Midwestern; and (iii) MLPL, to effect the
acquisition of the outstanding shares not already owned by San Leon
in relation to MLPL and Midwestern's indirect debt and equity
interests in ELI, as part of the Proposed Transaction, currently
remains subject to finalisation of the precise position in relation
to its conditions precedent in respect of regulatory consents in
Nigeria. The Company and Midwestern are receiving advice in
relation to the relevant process here, in order to best reflect
this in a finalised version of this agreement.
As previously announced, as part of the Potential Transaction,
San Leon would increase its indirect economic interest in Eroton
from 39.2% to 98.0% and, taking into account the completion of the
Proposed Eroton Transaction, San Leon's initial indirect economic
interest in OML 18 would increase from the current 10.58% to
44.1%.
In accordance with Rule 14 of the AIM Rules, the Company's
ordinary shares will remain suspended from trading on AIM until
such time as either an AIM admission document is published or an
announcement is released in the event that the reverse takeover in
contemplation is not proceeding.
The announcement of binding agreements in relation to the
Potential Transaction remains subject to a number of factors,
including, inter alia, the completion of due diligence, the further
negotiation and the execution of binding contractual documentation
and would be accompanied by the publication of the Admission
Document. Among other things, completion of the Potential
Transaction is expected to be subject to various regulatory
consents, completion of the Proposed Eroton Transaction, a
reorganisation of Midwestern's indirect equity and debt interests
in ELI and the approval of San Leon's shareholders. Given the need
for binding contractual documentation and applicable regulatory
consents, it remains the case that there can be no guarantee at
this stage that the Potential Transaction (including the proposed
debt and equity investments by San Leon in ELI) or the Proposed
Eroton Transaction will complete.
The Company will release further announcements as and when
appropriate.
Further extension of the Conditional Payment Waiver in relation
to the MLPL Loan Notes
In relation to the outstanding loan notes due from MLPL (the
"Loan Notes"), further to the announcement on 1 February 2022, San
Leon has agreed with MLPL, Midwestern and Martwestern (as defined
below) to a further extension of the Conditional Payment Waiver to
the end of April 2022 or, if sooner, the termination of discussions
or the signing of an agreement to effect the Potential Transaction
(but otherwise on the same terms as the waiver announced on 7 July
20 21), in relation to three instalments that were originally due
to be repaid on 5 July 2021, 30 September 2021 and 31 December 2021
(the "Extended Conditional Payment Waiver") . Interest continues to
accrue on the principal amounts waived whilst the Extended
Conditional Payment Waiver is in effect. As at 28 February 2022,
the Extended Conditional Payment Waiver relates to US$101.5
million, being a principal amount due of US$82.2 million and total
accrued interest due of US$19.3 million, which will be payable 90
days after such expiry, save for, inter alia, if there is an event
of default.
MLPL is part of the structure through which San Leon holds its
current 10.58% indirect economic interest in OML 18. San Leon
currently has a 40% equity interest in MLPL with the remaining
interest in MLPL currently being owned by Midwestern. Midwestern is
also the guarantor of the Loan Notes. MLPL has a 100% equity
investment in Martwestern Energy Limited ("Martwestern"), which in
turn has a 98% economic interest in Eroton, which currently holds a
27% working interest in OML 18 and is its operator.
As previously announced, it is expected that, inter alia, as
part of the Potential Transaction, the amounts owed to San Leon by
MLPL pursuant to the Loan Notes will be taken into account in the
overall structure and eliminated from the resulting structure.
Related party transaction disclosure
Midwestern and MLPL are related parties of the Company for the
purposes of the AIM Rules by virtue of Midwestern holding more than
10% of the existing Ordinary Shares in the Company and the level of
Midwestern's current interest in MLPL. The Extended Conditional
Payment Waiver is therefore a related party transaction under the
AIM Rules. The Directors of San Leon (excluding Adekolapo Ademola
who is not considered to be independent as he is a representative
of Midwestern on the Company's board) consider, having consulted
with the Company's nominated adviser, Allenby Capital Limited, that
the terms of the Extended Conditional Payment Waiver are fair and
reasonable insofar as the Company's shareholders are concerned.
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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