REG - San Leon Energy PLC - Termination of the proposed transactions

San Leon EnergyAnnouncement

09/10/2023 17:00

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RNS Number : 4648P  San Leon Energy PLC  09 October 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.

 

9 October 2023

San Leon Energy plc

("San Leon" or the "Company")

 

Termination of the proposed transactions with Midwestern

 

San Leon, the independent oil and gas production, development and exploration
company focused on Nigeria, announces the termination of its 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 Proposed
Transactions were announced by the Company on 8 July 2022 and set out in an
admission document published by the Company on the same date (the "Admission
Document"). The Company remains in early-stage discussions with Midwestern
regarding a revised transaction in relation to Midwestern Leon Petroleum
Limited ("MLPL") and Midwestern's indirect shareholding in ELI.

 

Termination of the Proposed Transactions and a new strategic direction for San
Leon

 

As previously announced, the board of San Leon (the "Board") has, in recent
weeks, been considering the Proposed Transactions and the Board has now
concluded that it is no longer in the Company's best interest to proceed with
the MLPL Reorganisation Agreement and ELI Reorganisation Agreement (both as
defined in the Admission Document).  The Company has, with the consent of
Midwestern, terminated both these agreements and as a consequence the Proposed
Transactions will now not proceed.

 

The Board's reasons for terminating the Proposed Transactions are as follows:
i) the New Eroton Debt Facilities and the Sahara OML 18 Acquisition (both as
defined in the Admission Document) continue to be delayed for reasons outside
of the Company's control; and ii) the legal challenges in Nigeria to Eroton
Exploration & Production Company Limited's ("Eroton") ongoing operation of
the Oil Mining License (OML) 18 ("OML 18") in Nigeria, which the Board believe
will not be resolved in the short term.   Details of these legal challenges
were announced by San Leon on 7 March 2023 and 13 March 2023.

 

In light of the Proposed Transactions being terminated the Company and
Midwestern are discussing suitable alternative transaction structures to align
the interests of Midwestern, San Leon and Eroton, noting the US$120 million of
outstanding loan notes (the "MLPL Loan Notes") due from Midwestern Leon
Petroleum Limited to San Leon (the "Potential Transaction").  Although the
discussions are at an early stage at this time the Board anticipates that the
Potential Transaction may involve swapping a proportion of the MLPL Loan Notes
into new assets in MLPL.  In addition, San Leon remains interested in
acquiring Midwestern's indirect interests in ELI. The Board believe that, due
to the amount outstanding on the MLPL Loan Notes, the Potential Transaction,
as with the previous agreements with Midwestern, would constitute a reverse
takeover under Rule 14 of the AIM Rules for Companies and will therefore be
subject, inter alia, to the publication of a new AIM admission document by the
Company and the approval of San Leon's shareholders before binding contracts
are entered into.  At this time there can be no certainty that any agreement
will be reached with Midwestern in relation to the Potential Transaction.
Should no agreement be reached on the Potential Transaction San Leon will seek
the repayment of the outstanding US$120 million of loans from MLPL (which have
been guaranteed by Midwestern). A further announcement in this regard will be
made in due course.

 

The Company's ordinary shares of €0.005 each in the Company (the "Ordinary
Shares") are currently suspended from trading on AIM because the Company has
not published: 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;
and 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.

 

San Leon remains committed to publishing the 2022 Accounts and the 2023
Interim Accounts as soon as it is able to do so and the Board believes that
the investments being made in ELI, and described below, will enable this
process to be accelerated.  The Board currently expects that, following the
publication of the 2022 Accounts and the 2023 Interim Accounts, trading in the
Ordinary Shares on AIM will remain suspended until such time as either a new
AIM admission document in connection with the Potential Transaction is
published or an announcement is released confirming that the Potential
Transaction is not being progressed and the Company is no longer contemplating
undertaking a reverse takeover.

 

Discussions with the Company's major shareholders

 

Over the last couple of months, the Board has reappraised the strategic
opportunities for the Company.  This exercise has resulted in the Company
terminating the Proposed Transactions and entering to discussion with
Midwestern on the Potential Transaction.  The Board believe that the
Company's existing and proposed further investment in ELI has potential to
generate significant value for shareholders, as announced on 8 August 2023,
but it will only do so once ELI is refinanced.  This will be achieved by
using the proceeds of an alternative loan facility which, as announced earlier
this morning, the Company is putting in place and is now at a very advanced
stage.

 

The Board has engaged with the Company's three largest shareholders, being: i)
funds managed by Toscafund Asset Management LLP (75.00 per cent. shareholding
in the Company); ii) Midwestern (13.18 per cent. shareholding); and iii) Oisin
Fanning, the Company's Chief Executive Officer (2.11 per cent.
shareholding).  All three shareholders (who together own 90.29 per cent. of
the Company's issued shares) have confirmed in writing that they are
supportive of the Company's revised strategy, and they support the
renegotiation of the transaction with Midwestern, including the termination of
the Proposed Transactions and the Company exploring the Potential Transaction
with Midwestern.

 

The Company will make further announcements as required.

 

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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