REG - San Leon Energy PLC - Proposed refinancing and cashflow update

San Leon EnergyAnnouncement

14/06/2023 07:00

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RNS Number : 6150C  San Leon Energy PLC  14 June 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.

 

14 June 2023

San Leon Energy plc

("San Leon" or the "Company")

 

Proposed refinancing and cashflow update

Expected delay in publication of the Company's results for the year ended 31
December 2022

 

San Leon, the independent oil and gas production, development and exploration
company focused on Nigeria, announces a further update in relation to its
proposed refinancing and its current financial situation.

 

Update on refinancing discussions and outstanding creditors

 

Since the announcement by the Company on 8 July 2022 of the proposed
transactions with Midwestern Oil & Gas Company Limited ("Midwestern") and
the Company's further conditional investments in Energy Link Infrastructure
(Malta) Limited ("ELI") (together the "Proposed Transactions") the Company has
had continuing discussions in relation to securing an alternative US$50
million loan facility to be applied towards the Proposed Transactions and to
satisfy the Company's working capital requirements.  Details of the Proposed
Transactions were announced by the Company on 8 July 2022 and set out in the
Admission Document published by the Company on 8 July 2022 (the "Admission
Document").

 

As previously announced, the proposed refinancing discussions have not
progressed as fast as the Board expected and, although the discussions are now
at a very advanced stage, the Company has not yet been able to access the
funding from such an alternative loan facility.  However, with significant
progress having been made in the past weeks, the Board is still optimistic
that a conclusion will be reached and expects to provide an update to
shareholders in due course.

 

As announced on 24 March 2023 (and previously), pending completion of the
proposed refinancing, the Company has received only very limited cash
inflows.  The Company currently has approximately US$10.5 million of unpaid
creditors, including directors, employees, professional advisers and tax
authorities.  San Leon has sought to maintain a regular dialogue with both
its creditors and major shareholders and keep them informed of the status of
the proposed refinancing, but there is understandably some pressure from
creditors for settlement of amounts due to them and the continuing support of
creditors cannot be guaranteed indefinitely.  However, the Board is confident
that, following the proposed refinancing being successfully concluded, all
creditors will be settled in full shortly afterwards.

 

Assets update

 

Further to the announcement by the Company on 3 April 2023, the spread mooring
of the FSO (floating storage and offloading) vessel for ELI has been completed
(spread mooring is a multi-point mooring system that moors vessels to the
seabed using multiple mooring lines).  ELI is now in the process of
finalising the renewal of necessary administrative regulatory permits to
commence full terminal operations.  The importance of this milestone is that
it places ELI, once it receives the funds from the Further ELI Investments
from the Company (details of which are set out in the Admission Document), in
a position to export crude oil and thereby generate near-term cashflows which,
in turn, will enable it in time to repay San Leon's investment and loans.

 

San Leon reminds shareholders and investors that, notwithstanding its short
term cashflow constraints, the Company's current unaudited balance sheet has a
significant asset base with, inter alia, over US$115 million and US$20 million
owed by Midwestern Leon Petroleum Limited (the "MLPL Loan") and ELI
respectively.  Although the MLPL Loan would be extinguished as part of the
Proposed Transactions (and is currently subject to a conditional payment
waiver with Midwestern until the sooner of completion of the MLPL
Reorganisation) it otherwise remains a valid obligation, with interest
continuing to accrue on the principal amounts waived pending completion of the
MLPL Reorganisation, and therefore a significant asset of the Company.

 

Furthermore, the Board remains in negotiations for the proposed sale of the
Company's non-core investment in the Oza oil field in Nigeria, which had a
current book value of US$5.6 million in San Leon's unaudited interim results
for the six months ended 30 June 2022, to generate near-term funding.
Disappointingly the prospective buyer's own funding has taken longer than
expected to conclude, but this potential transaction remains live with
discussions ongoing.

 

Accounts for the year ended 31 December 2022

 

In light of the delay in securing the proposed refinancing referred to above,
the Board has concluded that the Company will not be in a position to publish
its audited accounts for the year ended 31 December 2022 before 30 June
2023.  The delay is due to San Leon not yet receiving the audited financial
statements for the year ended 31 December 2022 of Midwestern Leon Petroleum
Limited ("MLPL"), which includes the consolidated results of both Martwestern
Energy Limited and Eroton Exploration & Production Company Limited (the
operator of OML 18), as well as not yet receiving the audited financial
statements of ELI for the same period.  Each of these are independently run
companies and so San Leon has no control over their respective audit and year
end processes.

 

This process also involves several jurisdictions, and when completed, it will
be followed by a number of normal audit confirmatory and technical review
matters, which when completed (following the completion of the Company's
refinancing) will then put the Company in a position to finalise and publish
its audited accounts for the year ended 31 December 2022.

Although it is the Board's intention and expectation that work will continue
expeditiously on finalising its accounts, the Board expects that the Company's
shares will be suspended from trading on AIM with effect from 3 July 2023,
pending publication of the Company's accounts for the year ended 31 December
2022.

 

Further announcements will be made as and when appropriate.

 

 

Oisin Fanning, CEO of San Leon, commented:

 

"I recognise that shareholders will be disappointed with the delays to our
refinancing and publication of accounts and I, and all of the San Leon board,
share that frustration.  However, based on our most recent discussions with
our proposed funding partners, there is good reason to be optimistic that we
are nearing a satisfactory conclusion. Once funding has been secured, we
expect to progress quickly towards making our further investments in ELI and
finalising our accounts.  In the meantime, San Leon's asset base, including
our investment in the OML 18 oil & gas field and its prospects in the
second half of this calendar year, particularly through ELI's activities, is
looking exciting."

 

 

Unless otherwise defined herein, the capitalised defined terms used in this
announcement have the same meaning as those used in the Company's announcement
of 8 July 2022 and the Admission Document published on the same date.

 

 

 

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
 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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