REG - San Leon Energy PLC - Corporate update

San Leon EnergyAnnouncement

05/06/2024 07:00

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RNS Number : 1271R  San Leon Energy PLC  05 June 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.

 

5 June 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

 

The Company is pleased to announce that it has been made a beneficiary of a
€500 million German government bond (the "Bond").  Under the proposed terms
of the agreement with the legal owners of the Bond, San Leon will be able to
utilise the Bond for a period of three years by applying it as security to
obtain finance from a third party, although the legal ownership of the Bond
will remain with the owners.  In this regard, the Company is now in
negotiations in respect of the terms of such a third-party finance arrangement
(the "Expected Refinancing") with a well-known international financial
services institution and expects to announce further details within the next
two weeks.  This further announcement is anticipated to include both the
contractual terms for San Leon receiving such finance, as well as the terms
for San Leon utilising the Bond as security for such financing.

 

Should documentation in relation to this Expected Refinancing be agreed within
the next two weeks, as anticipated by the board of San Leon (the "Board"),
then the Company expects funds to be received during June 2024. Receipt of
funds pursuant to the Expected Refinancing 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. Importantly, the
Expected Refinancing, if completed, is expected to enable San Leon to use the
funds received towards all of the proposed actions originally contemplated
within the announcement of the proposed funding from Tri Ri Asset Management
Corp. ("TRAM") on 10 October 2023.  Furthermore, San Leon notes that, since
October 2023, ELI's funding requirements have increased, and the Expected
Refinancing has been negotiated with that in mind.  At this time there can be
no certainty that Expected Refinancing will be concluded or as to its final
terms.

San Leon also previously announced that it was in discussions with other
potential financing partners and had received acceptable commercial terms from
two of these prospective funders.  Although negotiations remain ongoing, it
is apparent that the timetable to completion of either fundraising is far
longer than the Company had previously expected. Consequently, the Board
considers the Expected Refinancing, supported by the Bond, to be the most
likely outcome now.

 

As announced on 11 March 2024, the Company also concluded that funds will not
be forthcoming from TRAM (details of which were announced on 10 October 2023)
and, following completion of the Expected Refinancing, San Leon will explore
its options in relation to TRAM's breach of contract.

 

Possible revised transactions with Midwestern Oil &Gas Company Limited

 

On 9 October 2023, San Leon announced the termination of its proposed
transactions with Midwestern Oil & Gas Company Limited ("Midwestern") and
the Company's further conditional investments in ELI (together the "Proposed
Transactions").  The Proposed Transactions were announced by the Company on
8 July 2022 and full details were set out in an admission document published
by the Company on the same date. The Company also announced on 9 October 2023
that, notwithstanding this termination, it remained in discussions with
Midwestern regarding a revised transaction in relation to Midwestern Leon
Petroleum Limited ("MLPL") and Midwestern's indirect shareholding in ELI.
The Company currently owns 40% of MLPL's issued shares with Midwestern owning
the remaining 60%.  Since 9 October 2023 the Company and Midwestern have
sought to align their interests, noting the approximate US$140 million of
outstanding loan notes (the "MLPL Loan Notes") due from MLPL to San Leon
(which are guaranteed by Midwestern).  San Leon has agreed a number of
conditional payment waivers with Midwestern which expire on 30 June 2024. The
Board does not currently intend to extend these conditional payment waivers
beyond 30 June 2024.

 

San Leon announces that these discussions with Midwestern are at an advanced
stage.  The Company anticipates that a revised agreement with Midwestern will
involve swapping a proportion of the MLPL Loan Notes for a cash payment,
the Company receiving a greater holding in MLPL and the Company receiving
certain of Midwestern's interests in ELI.  At this time the Company
anticipates that the revised agreement with Midwestern would have two stages:

1.    Stage 1 would involve Midwestern reorganising parts of its holding in
MLPL and paying San Leon a cash deposit, pending full completion of the
Expected Refinancing.  Stage 1, if entered into, would enable San Leon to
receive funding in the short term which, should the Expected Refinancing not
complete, would be utilised to prepare the Company's outstanding accounts (of
which further details are outlined below) as part of the process to restore
trading in the Company's ordinary shares of €0.01 each ("Ordinary Shares")
on AIM.

2.    Stage 2 (which would be anticipated to occur in the following months)
would allow Midwestern to transfer certain of its interests in ELI to the
Company, subject to any regulatory requirements (including any obligations
that the Company has under the AIM Rules for Companies).

 

At this time there can be no certainty that any such agreement will be
concluded with Midwestern.  Should no agreement be reached on a revised
transaction with Midwestern, San Leon will seek the repayment of the
outstanding approximate US$140 million of outstanding loan notes from
MLPL (which, as stated above, have been guaranteed by Midwestern) in full.

 

Creditor update

 

With the ongoing delay in obtaining funding, the Company has numerous
outstanding trade creditors (around US$25 million in aggregate) and these
creditors have continued to exert increasing pressure on the Company which
includes, in some cases, sending legal letters before action and, as announced
in respect of Ocean Pearl Maritime SA on 11 April 2024 and 23 May 2024,
commencing a petition to wind up one of the Company's subsidiaries, San Leon
ELI Limited (which has since been adjourned to take place in July 2024 or
shortly thereafter).  San Leon continues to liaise with its creditors,
especially given the anticipation of funds from the Expected Refinancing.

 

Pending conclusion of the Expected Refinancing, the US$5.0 million loan to the
Company 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, which own 75% of the Ordinary Shares, continues to be
supportive of the Company's progress.

 

If, as expected, the Expected Refinancing is completed then as outlined above,
the Company will settle, in full, the amounts owed to its outstanding
creditors.

 

Ongoing suspension

 

The Company's Ordinary Shares remain suspended from trading on AIM, pending
San Leon publishing, inter alia: 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.  The Company intends to pursue
all of these requirements following the conclusion of its Expected
Refinancing.

 

If, as expected, the Expected Refinancing completes during June 2024, the
Company expects to publish the 2022 Accounts and the 2023 Interim Accounts
around two months after receiving funds and the AIM 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 Expected Refinancing.

 

The Company will make further announcements as required.

 

Enquiries:

 

 San Leon Energy plc                                   +353 1291 6292
 Oisin Fanning, Chief Executive
 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

 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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