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RNS Number : 3322S
San Leon Energy PLC
16 March 2021
16 March 2021
San Leon Energy plc
("San Leon" or the "Company")
Operational update
San Leon, the independent oil and gas production, development
and exploration company focused on Nigeria, provides the following
operational update.
OML 18
In common with many oil and gas projects, operational activity
on OML 18 remains low whilst OPEC quota restrictions are in place.
In addition, appropriate budget restrictions have been implemented
which are designed to preserve cash. Eroton, the operator of OML
18, anticipates the startup of the Alternative Crude Oil Evacuation
System ("ACOES") project, which is expected to positively impact
production, further details of which are set out below.
During the course of this year, San Leon is due to receive,
under the Loan Note instrument which governs the loan it made at
the time of its investment in OML 18, its final payments of over
US$98 million in three equal instalments, commencing in July 2021
and completing by December 2021 . Midwestern Oil & Gas Company
Limited ("Midwestern"), as the guarantor of the Loan Notes, has
confirmed to San Leon that it expects to make these payments on
schedule. However, there has been a delay to the interim repayment
due in the fourth quarter of last year. US$5.75 million has so far
been paid by Midwestern of the US$10 million due, of which US$5
million has been paid to Energy Link Infrastructure (Malta) Limited
("ELI"), in accordance with San Leon's investment agreement with
the balance of $750,000 having been paid to San Leon directly.
Midwestern has acknowledged that the outstanding payment of
US$4.25 million to San Leon is overdue and has explained that the
delay has been caused by the combined effects of Covid-19, OPEC
quota cuts and the fall in the oil price during 2020. However, with
these challenges having been addressed, Midwestern has confirmed
that the outstanding payment will be made in the coming months.
Relationships between the companies remain strong and San Leon's
management are in regular communication with Midwestern.
Consequently, the Company is confident that payments will be
brought up to date and that the remaining payment schedule under
the Loan Notes instrument will be delivered. As San Leon continues
to earn interest of 17% on all payments until such time as they are
made the delay to the payments has increased the Company's return
from this investment.
The Company's cash balance on 12 March 2021 was US$10.8 million
(not including the US$6.75 million already allocated to its
investment in the Oza oil field, further details of which are set
out below).
New oil export system from OML 18
Considerable progress has been made since San Leon invested $15
million in ELI, the company which owns the ACOES project :
-- ELI has received the Terminal Establishment Order approval
from the Nigerian Minister for Petroleum Resources for the floating
storage and offloading vessel, ELI Akaso, to be set up as an oil
terminal.
-- ELI Akaso is currently undergoing preparatory maintenance in
Ghana ahead of its expected arrival in Nigeria in the coming
months.
-- Several oil producers in the region have made enquiries to
ELI with regards to using the ELI Akaso for storage and export
operations. Some of these enquiries are based on delivering crude
oil to the oil terminal by barge, meaning that these storage and
export operations can potentially commence ahead of completion of
the pipeline.
-- Construction of the pipeline continues to progress and hook
up with ELI Akaso is expected to take place in the summer of
2021.
As previously announced, the ACOES is expected to significantly
reduce the pipeline losses and downtime currently applicable to OML
18 production.
Oza Oil Field
On 22 February 2021 Decklar Resources ("Decklar") reported that
the due diligence required to finalise the term debt arranged with
a Nigerian bank and the trading subsidiary of a large multinational
oil company active in Nigeria continued to progress. Decklar also
announced that the final report by the independent technical
consultant contracted to review reserve and production data and
financial projections had been issued.
The definitive loan documents and formal legal agreements
continue to be finalised and are nearing conclusion with the
Nigerian bank. As previously announced, the remaining US$6,750,000
for the subscription agreement with Decklar is in escrow and will
be released upon satisfaction (or waiver) of the final conditions
precedent which is anticipated in the near future.
Decklar also recently closed a CAD $4,722,400 financing which
will be used to immediately advance operational activities to
re-enter the Oza-1 well and to re-establish oil production at the
Oza Oil Field. This includes the mobilisation of the drilling rig
during April 2021 as well as all testing and completion equipment.
Various civil works have been completed around the Oza-1 well in
preparation for its workover. Immediately following the re-entry of
Oza-1, the rig will be skid on the same drilling pad and a new
horizontal well will be drilled on one of the three oil zones
anticipated to be tested at the Oza-1 well re-entry.
Barryroe
San Leon also notes the announcement by Providence Resources plc
earlier this month of the extension to the farm-out agreement for
the Barryroe licence, pending finalisation of the financing
structure. San Leon retains a 4.5% Net Profit Interest over the
Barryroe field, one of the largest undeveloped discoveries in
Western Europe, with independently audited 2C resources of 346
MMboe and significant further resource potential in additional
reservoirs. The Company continues to follow these negotiations with
interest.
Board appointments
Further to its announcement towards the end of last year of the
appointment of a consultant t o identify suitable non-executive
director candidates, that process is now well advanced with a
shortlist of candidates identified and final discussions underway.
San Leon expects to make a further update on board appointments in
due course.
Oisin Fanning, Chief Executive officer, commented:
" To date the Company has received US$196 million in Loan Notes
repayments from its 2016 investment of US$174.5 million into OML 18
and expects to receive over US$98 million during this year. As we
have announced in the past, our policy is to return 50% of our free
cashflow to shareholders by way of special dividends. In addition
to these Loan Notes repayments, San Leon also holds an indirect
equity interest of 10.58% in OML 18 as part of that
transaction.
" The ACOES project is expected to provide significant material
benefits both to the Company's OML 18 investment, and through
returns from its equity stake in ELI. I also anticipate near-term
operational activity on the Oza oil field, once the investment
paperwork from all parties is complete.
"I look forward to providing further updates on our operations
as they progress."
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
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
Plunkett Public Relations +353 1 230 3781
Sharon Plunkett
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