San Leon Energy PLC Acquires Interest In Nigerian Oil Export System (8456U)
August 03 2020 - 1:00AM
UK Regulatory
TIDMSLE
RNS Number : 8456U
San Leon Energy PLC
03 August 2020
The information communicated within this announcement is deemed
to constitute inside information as stipulated under the Market
Abuse Regulations (EU) No. 596/2014. Upon the publication of this
announcement, this inside information is now considered to be in
the public domain.
3 August 2020
San Leon Energy plc
("San Leon" or the "Company")
San Leon Acquires 10% Interest In New Nigerian Oil Export
System
San Leon, the independent oil and gas production, development
and exploration company focused on Nigeria, announces that it is
investing US$15 million in Energy Link Infrastructure (Malta)
Limited ("ELI"), the company which owns the Alternative Crude Oil
Evacuation System ("ACOES") project. As previously announced, the
ACOES is being constructed to provide a dedicated oil export route
from the OML 18 asset, comprising a new pipeline from OML 18 and a
floating storage and offloading vessel ("FSO"). Once commissioned,
the system is expected by Eroton to reduce the downtime and
allocated pipeline losses currently associated with the Nembe Creek
Trunk Line ("NCTL"), to below 10%. In addition, it is anticipated
that the FSO project will improve overall well uptime.
The investment comprises a 10% equity interest in ELI together
with a US$15 million shareholder loan at a coupon of 14% per annum
over 4 years, and repayable quarterly following a one-year
moratorium from the date of investment. Funds will be provided to
ELI in two tranches with the first US$10 million tranche being made
by San Leon this week. The second tranche of US$5 million is
expected to be made in Q4 2020 following receipt from Midwestern
Leon Petroleum Limited of the next repayment of Loan Notes that is
due then.
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 earn fees for transporting
and storing crude oil from OML 18 and potential third parties. As a
shareholder in ELI, San Leon stands to benefit from what the Board
considers can be a very profitable operation in the medium to long
term.
Information about ELI and ACOES
ELI is incorporated in Malta but operates in Nigeria through its
subsidiary, Energy Link Infrastructure Limited, owning both the new
pipeline as well as the floating storage and offloading vessel,
which together comprise the ACOES. Pending commencement of
operations, which is expected in the coming quarters, the company
is yet to report meaningful financial information and the last
audited accounts for the period from 6 September 2017 to 31
December 2018 state that the company made a loss of EUR13,668 and
reported total assets of EUR8,699.
San Leon does not consider these figures to be representative of
the scale of the opportunity that ELI has pending development of
the ACOES, as those figures are prior to commissioning of the
ACOES. However, as described above, the entire investment of US$15
million is repayable, with interest, as a shareholder loan. In
addition, San Leon will retain a 10% equity interest in ELI going
forward.
In its due diligence, the Board has been encouraged by the
quality and commitment of ELI's existing shareholders which
include, through a minority indirect stake, Midwestern Oil &
Gas Company Limited, one of San Leon's largest shareholders.
San Leon will also receive one seat on the board of ELI pursuant
to its investment.
The pipeline component of the ACOES is expected by ELI to have a
throughput capability of around 100,000 barrels of oil per day,
while the FSO has a storage capacity of 2 million barrels of oil.
Once commissioned, ELI's charges are expected to be comparable to
current NCTL handling fees.
Oisin Fanning, Chief Executive officer, commented :
"We are delighted to make this investment, which is in line with
our strategy of investing in assets with near-term cash flow, where
the initial investment is considered to be of limited risk and
where there is material upside. The ACOES is expected to generate
regular cash flow once commissioned in the coming quarters, whilst
also providing the significant benefits to downtime and losses
reduction for OML 18 which we have previously described.
"The structure of the transaction, which combines an equity
investment in the project together with a loan, gives us the
opportunity to generate a meaningful return from loan repayments in
the coming years as well as looking forward to a longer-term
dividend return from our shareholding in ELI. Following the recent
maiden special dividend paid to San Leon shareholders, the Company
anticipates that equity income from the ELI shareholding will
contribute to further future dividends to San Leon
shareholders."
Enquiries:
San Leon Energy plc +353 1291 6292
Oisin Fanning, Chief Executive
Allenby Capital Limited
(Nominated adviser and joint broker to the Company) +44 20 3328 5656
Nick Naylor
Alex Brearley
Asha Chotai
Panmure Gordon & Co (Joint broker to the Company) +44 20 7886 2500
Nick Lovering
Brandon Hill Capital Limited
(Joint broker to the Company) +44 20 3463 5000
Oliver Stansfield
Jonathan Evans
Tavistock
(Financial Public Relations) +44 20 7920 3150
Nick Elwes
Simon Hudson
Barnaby Hayward
Plunkett Public Relations +353 1 230 3781
Sharon Plunkett
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END
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