REG - San Leon Energy PLC - Update on operatorship of OML 18

San Leon EnergyAnnouncement

13/03/2023 10:15

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RNS Number : 7463S  San Leon Energy PLC  13 March 2023

 

13 March 2023

San Leon Energy plc

("San Leon" or the "Company")

 

Update on operatorship of OML 18

 

San Leon, the independent oil and gas production, development and exploration
company focused on Nigeria, notes the press release published in Nigeria by
Eroton Exploration & Production Company Limited ("Eroton") on 13 March
2023 about its ongoing operation of the Oil Mining License (OML) 18 ("OML
18").  This press release in in response to press speculation in Nigeria last
week.  San Leon's economic interest in OML 18 is not impacted by a possible
change of operatorship of OML 18.

 

In its press release, Eroton has emphasised that it remains the operator of
OML 18 in line with the provisions of the Joint Operating Agreement governing
OML 18 ("JOA") and has made the following points:

 

1.    The purported attempt by the non-operators of OML-18; NNPC Limited
("NNPC") and Sahara Field Production Limited ("Sahara") (now known as OML 18
Energy Resource Limited) to appoint NNPC Eighteen Operating Limited as
operator of OML 18 is a breach of the JOA as any dispute whatsoever between
the parties must be addressed by the dispute resolution provisions of the JOA.
There can be no removal of an operator without following these procedures and
the process is designed in such a way that notice requirements cannot be
waived, and the removal of an operatorship can therefore not be carried out,
without following the process provided in the JOA.

 

2.    Eroton has issued a notice of arbitration to NNPC and Sahara in
accordance with the terms contained in the JOA to defend its legal rights.
Furthermore, Eroton has received a legal opinion that it continues to remain
as operator pending such resolution and that this will be upheld by the courts
of Nigeria. Eroton further notes that the action taken by NNPC and Sahara sets
a damaging precedent in the oil & gas industry in Nigeria because due
process has not been followed.

 

3.    Eroton took over operatorship of OML 18 in 2015 with a production of
6,000 bbls/d and increased production to over 50,000 bbls/d of dry crude
(75,000 bbls/d of gross liquids) in less than 24 months.  Eroton was also
recognized by NNPC as being one of the two operators with the lowest technical
cost per barrel in the industry over that time period. This performance
continued until the wider industry became severely impacted firstly by
COVID-19, and then by the unprecedented level of crude theft and sabotage
plaguing the Niger Delta area since 2020.

 

4.    Since Q4, 2021, the Government of Nigeria has received virtually zero
crude oil from any company utilising the Nembe Creek Trunk Line ("NCTL"), a
pipeline that is partially owned by NNPC, owing to the force majeure declared
by the NCTL operator and the widespread vandalism and crude oil theft recorded
in the region. These criminal activities in the Niger Delta are well known and
continue to adversely affect the entire region. For example, Eroton's crude
oil receipts dropped steadily in 2021, culminating in zero receipt in November
2021 at Bonny Terminal. This was despite efficient wellhead production data
showing produced volumes of over 500,000 barrels of oil for the same month.
Consequently, and in agreement with its partners in OML 18, Eroton shut in the
wells.

 

5.    Eroton subsequently undertook an alternative means of evacuating its
crude oil from OML 18 using barges, a project funded entirely by Eroton and
with no financial support from its partners.

 

6.    Eroton further states that the allegations of improper actions by it
are baseless and unfounded and categorically denies any fraudulent acts as
stated in the in certain press reports.

 

 Further announcements will be made as appropriate.

 

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 San Leon)
 Nick Naylor

 Alex Brearley

 Vivek Bhardwaj
 Panmure Gordon & Co                                +44 20 7886 2500

 (Joint broker to San Leon)
 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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