REG - San Leon Energy PLC - Corporate update

San Leon EnergyAnnouncement

11/03/2024 07:00

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RNS Number : 2481G  San Leon Energy PLC  11 March 2024

 

 

 

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.

 

11 March 2024

San Leon Energy plc

("San Leon" or the "Company")

 

Corporate update

 

San Leon, the independent oil and gas production, development and exploration
company focused on Nigeria, provides the following corporate update.

 

Refinancing update

 

On 8 January 2024, San Leon announced that, following delays to Tri Ri Asset
Management Corp. ("TRAM") delivering funds pursuant to the terms of its
contractual arrangements with San Leon, the Company was in discussions with a
new potential financing partner. These discussions have continued and the
Company has also engaged with other prospective funders.  Over the last two
months the Company has received acceptable commercial terms from two
prospective funders and the Company is now in the final stages of negotiation
and hopes to sign full documentation with one of these funders in the
relatively short-term.  Should loan documentation be signed in the near
future the Company expects funds to be received by the end of March 2024 (the
"Refinancing"). Receipt of funds will allow the Company to: i) undertake its
further investment in Energy Link Infrastructure (Malta) Limited ("ELI"), as
detailed in the announcement made on 10 October 2023; and ii) settle, in full,
the Company's outstanding creditors. San Leon notes that Since October 2023,
ELI's funding requirements have increased and the Refinancing has been
negotiated with that in mind.

 

The Company has now concluded that funds will not be forthcoming from TRAM
(details of which were announced on 10 October 2023) and it is considering its
options in relation to its contractual position with TRAM.  Importantly, the
Refinancing, if completed, is expected to enable San Leon to effect all of the
actions previously contemplated following the announcement of the proposed
TRAM investment.

 

Operations update

 

Production at OML18 has improved since last year's difficulties with the Nembe
Creek Trunk Line ("NCTL") and production recently has been in the region of
10,000 barrels of oil per day (bopd) alongside gas production. Should the
Refinancing complete and the Company makes its planned investments in ELI, the
Alternative Crude Oil Evacuation System's ("ACOES") infrastructure (which
comprises a 47-kilometre secure undersea pipeline from OML 18 to the floating
storage and offloading unit ("FSO") ELI Akaso terminal) is expected to bring
a material increase to OML 18's production.  With a throughput capability of
200,000 bopd (ACOES pipeline plus barging combined) and a storage capacity of
two million barrels of oil in the FSO ELI Akaso terminal, the ACOES will
enhance crude oil commercialisation for OML 18 and other regional producers,
primarily through the reduction of downtime and crude losses associated with
the existing export routes.  Completion of the ACOES is anticipated to be
around four months following the Company completing its further investments in
ELI (which is conditional on the Refinancing completing), although barging of
oil to the FSO ELI Akaso terminal could be commenced within weeks of San Leon
making its further investments in ELI.

 

Creditor update

 

With the ongoing delay in obtaining new funds, the Company has numerous
outstanding trade creditors (around US$25 million in aggregate) and these
creditors have been exerting increasing pressure on the Company including, in
some cases, sending legal letters before action.  San Leon continues to
liaise with its creditors and the expectation of funds from the Refinancing is
providing some reassurance to a number of its creditors.

 

A significant constituent of the overall creditors' position is comprised by a
confidential settlement agreement with the Minister for the Environment,
Climate and Communications in Ireland (the "Minister") that has been recently
signed by the Company. The settlement agreement relates to certain
decommissioning liabilities of Island (Seven Heads) Limited ("Island")  for
the Seven Heads gas field disposed of by the Company in 2014, which have not
been settled by Island.  Consequently, a guarantee signed by the Company at
that time has now been called upon by the Minister. The settlement totals
c.US$7.7 million and is payable in instalments over the next eight months,
with an initial installment of c.US$3.3 million due this month. The payment of
the settlement over this period of time has been agreed with the Minister to
enable San Leon to attempt to recover the entire settlement from Island, as it
is entitled to do under the terms of the applicable disposal agreement.

 

Pending conclusion of the Refinancing, the US$5.0 million loan from funds
managed by Toscafund Asset Management LLP ("Toscafund"), which was announced
by San Leon on 8 August 2023, also remains outstanding and continues to accrue
interest at 10 per cent. per annum. San Leon is in regular correspondence with
Toscafund in relation to the timing of repayment of this loan and Toscafund
continues to be supportive of the Company's progress.  Release of the
security held by Toscafund, that comprises 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, will be effected once the Refinancing has
been completed.

 

The outstanding creditor position equates to around twenty per cent. of the
unaudited book value of San Leon's financial assets, the principal amounts
being US$126 million due from Midwestern Leon Petroleum Limited (guaranteed by
Midwestern Oil & Gas Company Limited), US$32 million due from ELI and US$7
million due from Decklar Petroleum Limited.  Notwithstanding this material
asset base, the Board believes that, should the Refinancing not be completed
this month, the Company's cashflow and creditor position will become
increasingly unstable and, to protect the interests of its creditors, the
Company continues to manage its cost base tightly and, with the exception of
efforts being made on the Refinancing, is not undertaking any new projects or
incurring any new costs (aside from general running costs).

 

Ongoing suspension

 

The Company's Ordinary Shares of €0.01 each (the "Ordinary Shares")
remain suspended from trading on AIM, pending San Leon publishing: i)
its audited accounts for the year ended 31 December 2022 (the "2022
Accounts"), as required by Rule 19 of the AIM Rules for Companies; ii)
its unaudited interim results for the six months ended 30 June 2023
(the "2023 Interim Accounts"), as stipulated by Rule 18 of the AIM Rules for
Companies; and iii) an AIM admission document in relation to the further
investment in ELI (the "Admission Document"), details of which were announced
by San Leon on 10 October 2023.

 

If, as expected, the Refinancing completes by the end of March 2024, the
Company expects to publish the 2022 Accounts and the 2023 Interim Accounts
around two months after receiving funds and the Admission Document around a
month following the publication of these accounts.  The Company has already
put plans in place to progress all of these requirements following the
conclusion of the Refinancing.

 

Oisin Fanning, Chief Executive Officer of San Leon, commented: "The delays in
receiving funds from TRAM have been a frustration for all of us at San Leon,
but it is another reminder of the underlying quality of our assets that, in
spite of this setback, we have continued to attract further prospective
funding partners.  I am confident that the difficulties of this past year
will soon be behind us as our forthcoming Refinancing will enable us to fulfil
our long-held strategy of becoming the majority shareholder in ELI. I have
said it before but the commissioning of the FSO Akaso Terminal will be a game
changer, not only for OML 18 but for the entire industry in that region. We
are confident that the ACOES (comprising the FSO and the pipeline) will be a
significantly 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                               +44 20 3328 5656

 (Nominated adviser and joint broker to the Company)
 Nick Naylor

 Alex Brearley

 Vivek Bhardwaj
 Panmure Gordon & Co                                   +44 20 7886 2500

 (Joint broker to the Company)
 James Sinclair-Ford

 John Prior
 Fortified Securities                                  +44 7493989014

 (Joint broker to the Company)
 Guy Wheatley
 Tavistock                                             +44 20 7920 3150

 (Financial Public Relations)
 Nick Elwes

 Simon Hudson
 Plunkett Public Relations                             +353 1 230 3781
 Sharon Plunkett

 

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