TIDMSLE
RNS Number : 5728I
San Leon Energy PLC
08 August 2023
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.
8 August 2023
San Leon Energy plc
(" San Leon " or the " Company ")
Further investment in ELI and loan from the Company's largest
shareholder
San Leon, the independent oil and gas production, development
and exploration company focused on Nigeria, is pleased to announce
a further investment of US$5.0 million in Energy Link
Infrastructure (Malta) Limited ("ELI"), which owns the new pipeline
and the floating storage and offloading vessel for the OML 18 oil
and gas field in Nigeria ("OML 18"). This further investment in ELI
is being funded by the issue of a secured US$5.0 million loan by
the Company's largest shareholders, certain funds managed by
Toscafund Asset Management LLP.
Terms of the further investment in ELI
The Company has provided a US$5.0 million shareholder loan to
ELI. The loan carries a coupon of 17 per cent. per annum over 4
years and is repayable quarterly following a one-year moratorium
from the date of the loan being advanced. In addition, the loan
entitles San Leon to purchase a further 4.2 per cent. of ELI's
equity at nominal value in furtherance of the Company's objectives
of becoming ELI's largest shareholder. Together with San Leon's
existing shareholding in ELI and, taking account of certain
anti-dilution provisions relating to the Company's previous
investments as well as other pending purchases, San Leon expects to
increase its ownership of ELI to approximately 16.2 per cent.
following the loan being made to ELI.
In addition to this investment, San Leon has agreed a period of
exclusivity with ELI through to the end of August 2023 to make
further investments, of up to US$37.0 million, in ELI. These
further investments, which may be made via a combination of cash
and issuing new shares in San Leon, which would be on the same
terms as described above, and, if made, would entitle San Leon to
up to a further 30.8 per cent. of ELI, thereby becoming the largest
shareholder of ELI with approximately 46 per cent. (excluding the
impact of further proposed investments in ELI as previously
announced by the Company) . If completed in full, these further
investments, which are conditional, inter alia, on San Leon
completing its alternative US$50.0 million loan financing, would
also give San Leon an aggregate shareholder loan to ELI of US$59.0
million, of which US$42.0 million would carry a 17 per cent. coupon
and US$17 million would carry a 14 per cent. coupon. As outlined by
the Company on 15 February 2022, loan repayments from ELI to the
Company have, to date, been waived but interest has continued to
accrue on the outstanding balance.
Pursuant to the construction of the Alternative Crude Oil
Evacuation System ("ACOES"), as described below, ELI has incurred a
number of outstanding obligations to contractors, including a
payment of US$5.0 million that is required to be made immediately
to its main pipeline contractor as part of a series of stage
payments. The further investment now being made by San Leon is
therefore critical to the ongoing operations of ELI and, therefore,
the commissioning of the ACOES as well as preserving the value of
San Leon's investment in ELI.
Financing the further investment in ELI
The further investment in ELI is being funded by the Company
taking a US$5.0 million loan (the "Loan") from funds managed by
Toscafund Asset Management LLP ("Toscafund"). The Loan is available
to the Company now, unlike the other financing options being
pursued by the Company (details of which are set out below). The
Loan is repayable by no later than 7 September 2023 and carries a
coupon of 10 per cent. per annum. Subject to drawing down the Loan,
San Leon has entered into security arrangements with funds managed
by Toscafund that comprise both a debenture issued by the Company
as well as assignments and pledges over all of its group companies'
loan and equity interests in ELI. The security will be released on
full repayment of the Loan. It is an express term of the Loan that
funds advanced to the Company pursuant to it must be fully utilised
to only make the Company's further investment in ELI.
Under the terms of ELI's senior debt facility, ELI's senior
lender has a charge over all of ELI's assets and, as further
security, each ELI shareholder (including San Leon) has pledged
their shares in ELI to the senior lender. As the terms of the
pledge are that the Company's shares in ELI cannot be transferred
or otherwise utilised without the lender's consent, the Company has
given security to the funds managed by Toscafund over the shares in
San Leon ELI Limited, the group company which holds San Leon's
shares in ELI.
San Leon remains in advanced discussions with a third party in
relation to securing an alternative loan facility of US$50.0
million. This proposed alternative loan facility was reconfirmed
verbally last week to the Company's Chief Executive and the Company
expects negotiations on finalising the legal documentation to take
place in the near term. Once concluded, this facility will, amongst
other things, be utilised by the Company to: (i) repay the Loan;
(ii) fund San Leon's further investments in ELI, as described
above; (iii) pay the Company's unpaid creditors (which currently
stand at approximately US$13.0 million); and (iv) satisfy the
Company's ongoing working capital requirements. The Board remains
optimistic that a conclusion on the alternative loan facility will
be reached and will provide an update to shareholders at that
time.
The admission document published by the Company on 8 July 2022
(the "Admission Document") included, amongst other things, details
of an agreed $50.0 million loan facility that has been made
available to the Company by MM Capital Holding Limited ("MM
Capital") for the purposes of funding the Company's working capital
requirements and financing further investments in ELI (the "MM
Capital Facility"). The Board of San Leon (the "Board") has
consciously delayed drawing down on the MM Capital Facility as it
believes that alternative financing, including the proposed
alternative loan facility described above, might be available on
terms that may be better aligned with the Company's overall
strategic and financing objectives. Specifically, discussions with
prospective alternative lenders have included larger facilities,
convertible loan note facilities and the possibility of direct
equity investments in San Leon. Furthermore, it is the Board's view
that drawing down on the MM Capital Facility may preclude
alternative financing options and, consequently, no draw down
notice has yet been submitted to MM Capital. The MM Capital
Facility is available until the end of this year.
Although the Board is cognisant of the Company's numerous
outstanding creditors and the increasing pressure a number of these
creditors are applying to the Company (including sending letters
before action), it continues to believe that the prospects of
obtaining long term financing from a supportive partner, and
therefore the opportunities that this creates for San Leon,
outweighs the benefits of drawing down on the MM Capital Facility
at this time. In light of the recent discussions with its
prospective new financing partner the Board anticipates settling
all the Company's outstanding creditors shortly upon completion of
the proposed alternative $50.0 million loan facility, as well as
repaying the Loan and, as a result, releasing the security it has
granted funds managed by Toscafund over its interests in ELI and
other assets.
Further information on ELI
ELI owns the ACOES project. As previously announced, the ACOES
will provide a dedicated oil export route from the OML 18 oil and
gas field and is a new 47-kilometre secure undersea pipeline from
OML 18 to the FSO ELI Akaso terminal. The ACOES pipeline component
is expected to have a throughput capability of 100,000 barrels per
day (b/d) of oil, while the FSO ELI Akaso has a storage capacity of
2 million barrels of oil. Once commissioned, the system is expected
to reduce the downtime and allocated pipeline losses currently
associated with the Nembe Creek Trunk Line ("NCTL"), to below 10
per cent. The ACOES pipeline is expected to be completed in the
second half of 2023.
ELI's accounts for the year ended 31 December 2021 state that
the company made a loss before tax of approximately US$10.5 million
and reported total assets of approximately US$226.9 million. Two of
San Leon's directors are currently appointed to ELI's board.
The Board believes that the ACOES will have a significant effect
on the operation of OML 18, primarily through the reduction of
downtime and losses associated with the existing export route. ELI,
through its Nigerian subsidiary, will also earn fees for
transporting and storing crude oil from OML 18 and potential third
parties.
Related party transaction
The issue of the Loan by funds managed by Toscafund (which owns
over 75 per cent. of San Leon's issued shares) is classed as a
transaction with a related party under the AIM Rules for Companies.
The Board (with the exception of Kolapo Ademola and Joel Price who
are both directors of ELI), having consulted with the Company's
nominated adviser, Allenby Capital Limited, considers that the
terms of the transaction are fair and reasonable insofar as the
Company's shareholders are concerned.
Oisin Fanning, Chief Executive officer, commented: "This new
investment is an important step for both San Leon and ELI. For us,
it marks the next step in our further investment in that company,
as originally outlined in our admission document last July but
subsequently adjusted to address developments over the past year,
and protects our position and past investment in ELI. Our agreement
with ELI to provide further financial support should soon see San
Leon become ELI's largest shareholder. For ELI, our support enables
it to address its financial obligations and continue the process of
commissioning the ACOES - once operational, this is anticipated to
be a profitable and cash-generative project from which San Leon
expects substantial upside."
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
James Sinclair-Ford
John Prior
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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END
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