TIDMSLE
RNS Number : 7856J
San Leon Energy PLC
29 April 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.
29 April 2022
San Leon Energy plc
("San Leon" or the "Company")
Further update on the potential transaction
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 and existing
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 28 February 2022, the
Company now currently expects to publish an AIM admission document
(the "Admission Document") in respect of the Potential Transaction
by 24 June 2022 at the latest, following which point the Company
will seek the restoration of trading of its 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: i) agreeing documentation; ii)
finalising bank financing; and iii) receiving the 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 28 February
2022, completion of the Potential Transaction is 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. In that
regard, it was also announced on 28 February 2022 that Eroton have
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 ("Afrexim"). San Leon has been
provided with an update on the progress of the funding for the
Proposed Eroton Transaction and has been advised that significant
progress has been made with this financing syndicate, with key
milestones being achieved.
Further progress in relation to the Proposed Eroton Debt
Facilities remains subject to, amongst other matters, definitive
documentation and ELI successfully demonstrating 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-taker's satisfaction which is expected to be met in May
2022, following receipt of the necessary Nigerian regulatory
maritime approvals. Given the level of recent activity by ELI,
similar to the loan provided to ELI by San Leon as announced on 15
February 2022, the Board has made ELI aware that should it have
financing needs in coming months to progress critical steps in
relation to the ACOES project, then the Board are open to
considering SLE making additional loans to ELI. Should such loans
be required it is expected that these will be separate, distinct
and not conditional on the Potential Transaction.
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. San Leon
understands that the proposed binding conditional transaction
documentation is making progress toward being in agreed form.
Separate to the Proposed Eroton Debt Facilities, part of San
Leon's potential new debt and new equity investments in ELI are
expected to require financing, which the Board currently expects to
be provided by way of a new loan to San Leon (the " Proposed New
San Leon Loan Facility " ) . The Company is engaging with
prospective lenders in this respect.
Potential Transaction update
As previously announced 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, which is now in developed form, given that the
Potential Transaction will be classified as a reverse takeover
under the AIM Rules for Companies (the "AIM Rules"). The Company
intends for the Admission Document to include audited financial
information for the three years to 31 December 2021 in relation to
MLPL and ELI and the process for compiling this audited historical
financial information is now underway, as is the San Leon audit for
the same period.
The draft conditional reorganisation 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 Potential Transaction,
continue to remain, inter alia, subject to finalisation of the
precise position in relation to its conditions precedent in respect
of regulatory consents in Nigeria and San Leon obtaining the
requisite financing for the Potential Transaction, pursuant to the
Proposed New San Leon Loan Facility. The Company and Midwestern
continue to receive 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 the Admission Document is published or the
Company announces that the Potential Transaction is no longer
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
negotiation and the execution of binding contractual documentation,
including the Proposed New San Leon Loan Facility 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, including the proposed Eroton Debt
Facilities, a reorganisation of Midwestern's indirect equity and
debt interests in ELI and the approval of San Leon's shareholders.
Given the need for financing, binding contractual documentation and
applicable regulatory consents, it remains the case that there can
be no guarantee at this stage that the Potential Transaction or the
Proposed Eroton Transaction will be entered into or, if entered
into, will complete.
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 28 February 2022, San
Leon has agreed with MLPL, Midwestern and Martwestern (as defined
below) to a further extension of the Conditional Payment Waiver to
24 June 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 April 2022, the
Extended Conditional Payment Waiver relates to US$ 103.8 million,
being a principal amount due of US$ 82.2 million and total accrued
interest due of US$ 21.6 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.
Oisin Fanning, CEO of San Leon, commented:
"We believe that OML 18 is a world class oil and gas asset. Our
plans to further enhance our involvement in this asset, via the
Potential Transaction, have the potential to be very significant. A
huge amount of work has been carried out and a great deal has been
achieved to progress this transaction in the last few months. We
now currently expect to publish an admission document in respect of
our Potential Transaction in June 2022. This we believe will
deliver a transformational deal to the Company which will put San
Leon in a very strong position as a significant player in West
Africa with the potential to deliver considerable future value to
all our stakeholders. We look forward to providing further updates
in due course."
The Company will release further announcements as and when
appropriate.
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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