San Leon Energy unveils OML 18 production arrangement and placing

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San Leon Energy has conditionally raised approx. £170.3 million (US$221.4 million) through an issue of 378,400,000 new ordinary shares at a placing price of 45 pence per Ordinary Share with institutional and other investors. The net proceeds are being used to complete the OML 18 Production Agreement, which will result in the Company securing an initial 9.72 per cent. indirect economic interest in OML 18, the world-class Nigerian onshore oil and gas asset, and for general corporate purposes.

Highlights

PLACING:

  • Conditionally raised approx. £170.3 million (US$221.4 million) through an issue of 378,400,000 new ordinary shares by way of a placing at a placing price of 45 pence per Ordinary Share, a 54.5% premium to the last traded price of 29.125p on 21 January 2016.

OML 18 PRODUCTION ARRANGEMENT:

  • The OML 18 Production Arrangement represents the entry by the Company into the Nigerian onshore oil and gas production industry, one of the largest oil producing countries in the world.
  • San Leon will secure an initial 9.72 per cent. indirect economic interest in OML 18, a world-class onshore producing asset.
  • OML 18’s estimated gross 2P reserves are approximately 576 MMbbl of oil and approximately 4.2 Tcf of gas and its gross 2C contingent resources are approximately 203 MMbbls of oil and approximately 1.6 Tcf of gas.
  • As of June 2016 OML 18 was producing at approximately 50,000 bopd of oil and approximately 50 MMscfpd of gas.
  • Eroton, the Operator of OML 18, has entered into an Offtake Agreement at a gross price of US$95 (US$91.5 net) for approximately 35% of the expected 2P production to the end of 2017.
  • San Leon has the right to provide oilfield services to Eroton.

The Placing and the OML 18 Production Arrangement are conditional on the passing of various resolutions, which are being put to Shareholders at an Extraordinary General Meeting.

Oisin Fanning, Executive Chairman of San Leon said: 

‘This is a transformational transaction representing the progress that we have made in delivering against our strategy of securing production and near-term operational cash flow. The OML 18 field in Nigeria is a world class asset currently producing more than 50,000 barrels of oil per day and 50MMscfpd of gas and containing substantial 2P reserves. San Leon’s interest in OML 18, secured through an initial 9.72% indirect holding, provides material production, cash flow and significant expected returns to our Shareholders. Cash flow is expected from three different sources: repayment of loan and interest provided by the Company to BidCo* (with preferential repayment terms); dividends as a shareholder of BidCo; and income from the provision of rig and workover services.

Our Board will be further strengthened through the appointment of several new Non-Executive Directors. In particular I would like to highlight the appointment of Mr Mutiu Sunmonu, a former managing director of Shell and country chairman for Shell’s operations in Nigeria, to Non-Executive Chairman. Mr Sunmonu brings a wealth of knowledge of the Nigerian oil and gas industry and his addition to the Board allows me to take the role of CEO to focus on the day to day running of the enlarged company. All Board changes are conditional upon Admission.

Finally, we are extremely grateful to our shareholders for their continued patience and support. This has been a long transaction, reflecting its scale and ambition. In particular, we would like to thank Toscafund which has demonstrated its continued commitment to the Company and to our future growth prospects. We believe that the OML 18 Production Arrangement represents a huge opportunity for the Company and its shareholders, providing a platform for significant growth and the creation of shareholder value.’

*BidCo is a Mauritian incorporated special purpose vehicle, established for the purpose of holding the San Leon’s OML 18 interest. San Leon will hold 40% of BidCo following Admission.

Brandon Hill Capital, SP Angel and Whitman Howard are acting as agents to the Placing.

 

Source: Press Release