REG - San Leon Energy PLC - Update on potential transaction

San Leon EnergyAnnouncement

28/02/2022 07:00

For best results when printing this announcement, please click on link below:
http://newsfile.refinitiv.com/getnewsfile/v1/story?guid=urn:newsml:reuters.com:20220228:nRSb9428Ca&default-theme=true

RNS Number : 9428C  San Leon Energy PLC  28 February 2022

 

 

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.

 

28 February 2022

San Leon Energy plc

("San Leon" or the "Company")

 

Update on potential transaction and extension of conditional payment waiver

 

San Leon, the independent oil and gas production, development and exploration
company focused on Nigeria, provides the following update on the
proposed reorganisation to consolidate Midwestern Oil and Gas Company
Limited's ("Midwestern") shareholdings in: i) the Company; and ii)
Midwestern Leon Petroleum Limited ("MLPL") into a single shareholding in the
Company (the "Potential Transaction"). The Potential Transaction also
comprises, inter alia, a proposed consolidation of Midwestern's indirect debt
and equity interests in Energy Link Infrastructure (Malta) Limited ("ELI")
with those of the Company, as well as further new debt and new equity
investments to be made by San Leon in ELI. The Potential Transaction, if
concluded, would be classified as a reverse takeover under the AIM Rules for
Companies (the "AIM Rules").

 

AIM admission document update

 

Further to the Company's announcement on 24 December 2021, the Company now
currently expects to publish an AIM admission document (the "Admission
Document") in respect of the Potential Transaction by the end of April 2022,
following which point the Company will seek the restoration of trading of the
Company's ordinary shares on AIM.

 

Proposed Eroton Transaction

 

On 29 November 2021, San Leon announced that, inter alia, it had been informed
that the operator of the OML 18 oil and gas block located onshore in Nigeria
("OML 18"), Eroton Exploration and Production Company Limited ("Eroton"), is
seeking to acquire an additional 18% interest in OML 18 from two of the other
partners in OML 18, subject, inter alia, to agreeing documentation, finalising
bank financing and relevant regulatory consents in Nigeria, thereby taking
Eroton's interest in OML 18 to 45% (the "Proposed Eroton Transaction").

 

As previously noted in the Company's announcement of 24 December 2021,
completion of the Potential Transaction will be conditional upon completion of
the Proposed Eroton Transaction. The entering into binding conditional
transaction documentation in relation to the Proposed Eroton Transaction is
contingent, inter alia, on Eroton's financing of this transaction which is
expected to form part of a refinancing of OML 18's reserve-based lending
facilities. San Leon has recently been provided with updates on the progress
of the funding for the Proposed Eroton Transaction, which includes Eroton
having received a term sheet in relation to a reserve-based lending facility,
totaling US$750,000,000 (the "Proposed Eroton Debt Facilities"), which is
proposed to be lent by a financing syndicate led by African Export-Import
Bank.

 

San Leon has also been informed that:

i)           updated OML 18 off-take agreements will be entered
into by Eroton in order for the financing syndicate to finalise the Proposed
Eroton Debt Facilities; and

ii)          in order for the current off-taker (which is also a
lender within the financing syndicate) to enter into a new off-take agreement,
ELI will need to have successfully demonstrated the barging of oil to the
floating storage and offloading vessel ("FSO") through part of the Alternative
Crude Oil Evacuation System ("ACOES") project, to the off-takers'
satisfaction.

 

The loan of US$2.0 million provided to ELI by San Leon, as announced on 15
February 2022, is expected to assist with advancing this process, although the
barging of oil to the FSO through part of the ACOES will also be subject to,
amongst other matters, receipt of the necessary Nigerian regulatory maritime
approvals.  San Leon has been informed that ELI is likely to have
demonstrated the barging of oil to the FSO to the off-takers' satisfaction
during March 2022, and following this, San Leon understands that Eroton and
the financing syndicate intend to seek to finalise the Proposed Eroton Debt
Facilities in order to allow for binding conditional transaction documentation
in relation to the Proposed Eroton Transaction to be concluded as soon as may
be practicable.

 

Potential Transaction update

 

In relation to the Potential Transaction, progress has been made by the
Company and its advisers in preparing the necessary transaction documentation
in relation to the Potential Transaction, including work on progressing the
Admission Document, given that the Potential Transaction will be classified as
a reverse takeover under the AIM Rules for Companies (the "AIM Rules").

 

The draft conditional agreement to be entered into between: (i) the Company;
(ii) Midwestern; and (iii) MLPL, to effect the acquisition of the outstanding
shares not already owned by San Leon in relation to MLPL and Midwestern's
indirect debt and equity interests in ELI, as part of the Proposed
Transaction, currently remains subject to finalisation of the precise position
in relation to its conditions precedent in respect of regulatory consents in
Nigeria.  The Company and Midwestern are receiving advice in relation to the
relevant process here, in order to best reflect this in a finalised version of
this agreement.

 

As previously announced, as part of the Potential Transaction, San Leon would
increase its indirect economic interest in Eroton from 39.2% to 98.0% and,
taking into account the completion of the Proposed Eroton Transaction, San
Leon's initial indirect economic interest in OML 18 would increase from the
current 10.58% to 44.1%.

 

In accordance with Rule 14 of the AIM Rules, the Company's ordinary shares
will remain suspended from trading on AIM until such time as either an AIM
admission document is published or an announcement is released in the event
that the reverse takeover in contemplation is not proceeding.

The announcement of binding agreements in relation to the Potential
Transaction remains subject to a number of factors, including, inter alia, the
completion of due diligence, the further negotiation and the execution of
binding contractual documentation and would be accompanied by the publication
of the Admission Document.  Among other things, completion of the Potential
Transaction is expected to be subject to various regulatory consents,
completion of the Proposed Eroton Transaction, a reorganisation of
Midwestern's indirect equity and debt interests in ELI and the approval of San
Leon's shareholders. Given the need for binding contractual documentation and
applicable regulatory consents, it remains the case that there can be no
guarantee at this stage that the Potential Transaction (including the proposed
debt and equity investments by San Leon in ELI) or the Proposed Eroton
Transaction will complete.

The Company will release further announcements as and when appropriate.

 

Further extension of the Conditional Payment Waiver in relation to the MLPL
Loan Notes

In relation to the outstanding loan notes due from MLPL (the "Loan Notes"),
further to the announcement on 1 February 2022, San Leon has agreed with MLPL,
Midwestern and Martwestern (as defined below) to a further extension of the
Conditional Payment Waiver to the end of April 2022 or, if sooner, the
termination of discussions or the signing of an agreement to effect the
Potential Transaction (but otherwise on the same terms as the waiver announced
on 7 July 2021), in relation to three instalments that were originally due to
be repaid on 5 July 2021, 30 September 2021 and 31 December 2021 (the
"Extended Conditional Payment Waiver"). Interest continues to accrue on the
principal amounts waived whilst the Extended Conditional Payment Waiver is in
effect.  As at 28 February 2022, the Extended Conditional Payment Waiver
relates to US$101.5 million, being a principal amount due of US$82.2 million
and total accrued interest due of US$19.3 million, which will be payable 90
days after such expiry, save for, inter alia, if there is an event of default.

 

MLPL is part of the structure through which San Leon holds its current 10.58%
indirect economic interest in OML 18.  San Leon currently has a 40% equity
interest in MLPL with the remaining interest in MLPL currently being owned by
Midwestern. Midwestern is also the guarantor of the Loan Notes.  MLPL has a
100% equity investment in Martwestern Energy Limited ("Martwestern"), which in
turn has a 98% economic interest in Eroton, which currently holds a 27%
working interest in OML 18 and is its operator.

 

As previously announced, it is expected that, inter alia, as part of the
Potential Transaction, the amounts owed to San Leon by MLPL pursuant to the
Loan Notes will be taken into account in the overall structure and eliminated
from the resulting structure.

 

Related party transaction disclosure

 

Midwestern and MLPL are related parties of the Company for the purposes of the
AIM Rules by virtue of Midwestern holding more than 10% of the existing
Ordinary Shares in the Company and the level of Midwestern's current interest
in MLPL. The Extended Conditional Payment Waiver is therefore a related party
transaction under the AIM Rules. The Directors of San Leon (excluding
Adekolapo Ademola who is not considered to be independent as he is a
representative of Midwestern on the Company's board) consider, having
consulted with the Company's nominated adviser, Allenby Capital Limited, that
the terms of the Extended Conditional Payment Waiver are fair and reasonable
insofar as the Company's shareholders are concerned.

 

 

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)
 Nick Lovering

 James Sinclair-Ford
 Tavistock                                             +44 20 7920 3150

 (Financial Public Relations)
 Nick Elwes

 Simon Hudson
 Plunkett Public Relations                             +353 1 230 3781
 Sharon Plunkett

 

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact
rns@lseg.com (mailto:rns@lseg.com)
 or visit
www.rns.com (http://www.rns.com/)
.

RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our
Privacy Policy (https://www.lseg.com/privacy-and-cookie-policy)
.   END  UPDUBSKRURUUUAR