REG - San Leon Energy PLC - Update on proposed refinancing

San Leon EnergyAnnouncement

20/12/2022 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:20221220:nRST2928Ka&default-theme=true

RNS Number : 2928K  San Leon Energy PLC  20 December 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.

 

20 December 2022

San Leon Energy plc

("San Leon" or the "Company")

 

Update on proposed refinancing, balance sheet and working capital position

 

Potential disposal of Oza investments

 

San Leon, the independent oil and gas production, development and exploration
company focused on Nigeria, provides the following update in relation to the
Company's proposed refinancing discussions, its US$50 million loan facility
and its working capital position. The Company also announces the proposed sale
of its non-core investments relating to the Oza oil field.

 

As disclosed in the AIM Admission Document that was published on 8 July 2022
(the "Admission Document"), a loan facility of US$50 million has been made
available to the Company by MM Capital Holding Limited ("MM Capital") for the
purposes of funding the Company's working capital requirements and financing
the Further ELI Investments (the "MM Capital Facility").  Whilst the MM
Capital Facility is a legally binding facility agreement in place between the
Company and MM Capital, the Board of San Leon has delayed utilising the
facility as it believes that additional or alternative financing might be
available on terms that may be better aligned with the Company's overall
strategic and financing objectives.  Specifically, a prospective alternative
lender has also indicated that it may have an interest in taking an equity
position in San Leon by acquiring existing ordinary shares from certain
shareholders. As the Company seeks to diversify its shareholder base and build
long term support ahead of the planned expansion of its activities in Nigeria,
the Board considers that financing on this basis represents a substantial
improvement over the MM Capital Facility.

 

As previously announced, San Leon is in discussions with a prospective
alternative lender in this regard.  It is the Board's view that these two
financing sources are mutually exclusive and, noting what it believes to be
considerable advantages with the alternative counter party, the Board does not
consider it to be in the Company's or shareholders' best interests to draw
down the MM Capital Facility at this time.

 

On 1 December 2022, the Company announced that discussions on the alternative
financing were expected to be concluded by mid-December 2022. However, given
its more extensive terms, this process has since been proved to be more
complex than anticipated, and the timetable has become more protracted,
especially against the backdrop of the current macroeconomic environment.
Conversations remain very positive but, with the holiday period fast
approaching, the Board now expects this alternative facility to be finalised
and available for draw down early in the New Year and a further announcement
will be made at that time by the Company, as appropriate.

 

As a further source of near-term funding, the Board is also currently in
advanced negotiations in respect of the proposed sale of the Company's
non-core investments relating to the Oza oil field in Nigeria (the "Proposed
Non-core Investments Sale"), which had a book value of US$5.6 million in San
Leon's unaudited interim results for the six months ended 30 June 2022, to
generate working capital. All terms for the Proposed Non-core Investments Sale
are in agreed form, however, San Leon expects the transaction to formally be
entered into once the purchaser has finalised its own financing
arrangements.  It is San Leon's understanding that this could be imminent and
the Company is in daily contact with the prospective buyer in this regard.  A
further announcement will be made at that time by the Company, as appropriate.

 

Since the publication of the Admission Document, the Company has not received
any material cash inflows but, during that period, the Company has taken steps
to manage its overheads whilst it explores these alternative refinancing
options.  In addition, pending securing funding from one or both of these
sources, the Company has not yet been able to progress the Further ELI
Investments and several of the Company's trade creditors, predominantly
related to adviser and other fees incurred in relation to the proposed
Midwestern Reorganisation and the Proposed Further ELI Investments, remain
outstanding. San Leon is in regular dialogue with both its creditors and ELI
in respect of timing for settling these payments.

 

It is important to note that, notwithstanding this short term cashflow delay,
San Leon's balance sheet is robust with, in particular, US$112.6 million owed
to it by Midwestern Leon Petroleum Limited (the "MLPL Loan") and US$23.0
million owed to it by ELI.  The MLPL Loan will be extinguished following the
proposed Midwestern Reorganisation but, for the time being, remains a valid
obligation and therefore a significant asset of the Company's.  Aside from
Oza, the Company also holds non-core assets in other countries which may have
a meaningful value, such as the 4.5% net profit interest in the Barryroe
Field, which lies in shallow water of about 100m some 50km off the south coast
of Ireland.

 

For the time being the Board is satisfied that its alternative refinancing
options are progressing satisfactorily, even if slower than initially hoped,
and furthermore that conversations with those creditors who are due
outstanding payments are not producing any undue pressure on San Leon.
Nevertheless, the Board continues to keep these matters under review and will
take actions to protect the interests of both shareholders and creditors as
appropriate.  As set out in the Admission Document, the Further ELI
Investments are contingent on San Leon securing further funding, whether from
the MM Capital Facility or otherwise, and the Board are focused on finalising
this.

 

Unless otherwise defined herein, the capitalised defined terms used in this
announcement have the same meaning as those used in the Company's Admission
Document.

 

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)
 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

 

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  MSCEAKAEADAAFEA