Richard Ginika Izuora
San Leon Energy has released details of a new set of agreements with Midwestern Oil & Gas to see the company’s interests in the OML 18 asset consolidated and simplified.
A set of agreements will result in San Leon’s economic interest in the asset increasing fourfold to 44.1 per cent and at the same time it will own 50 per cent of ELI, which is advancing the ACOES pipeline project that will connect OML 18 to an export route.
OML 18 has, meanwhile, been reassessed through a new competent person’s report (CPR) which details some 323 million barrels of proved and probable (2P) reserves, net attributable to San Leon’s stake, which the company said would be valued at around US$1.1bn.
It has also entered into a US$50 million loan facility with MM Capital and San Leon has granted further waivers to Midwestern against payments owed to San Leon.
San Leon further proposes to restructure its capital, including an issue of preference shares to shareholders giving them preferential rights to the first US$40mln of future dividends.
“We are delighted to have entered into these agreements to effect the proposed transactions,” said San Leon chief executive Oisin Fanning.
“We believe that this series of transactions, when completed, will be truly transformational for the company and will deliver value to our shareholders.
“The transactions will not only increase our initial indirect economic interest in OML 18, a world class asset with unrealised potential, but also our interest in ELI and the new ACOES pipeline which we have long considered to be critical to the future success of OML 18 through the expected reduction of pipeline losses and increase in the uptime for export that it is expected to provide.”
Fanning added: “Going forward these transactions will pave the way for the company to deliver its strategy of becoming a significant participant in the Nigerian oil and gas market, positioning San Leon to take advantage of further transactional opportunities to enhance and grow our business.”
In a separate statement, the company’s financial results for the 12 months ended 31 December 2021 confirmed that at the end of the period, San Leon had US$7.6mln of cash and equivalents.
It noted that US$2.2mln of payments, principal and interest were received during the period under the loan agreement with Midwestern and it stated that now some US$105.6mln was owed by Midwestern and is subject to the waiver agreements, whilst transactions to increase San Leon’s interests in OML 18 is completed.
Operationally, San Leon noted that some 4,400 barrels of oil per day was delivered to the Bonny terminal in 2021, with volumes affected by losses and downtime plus the impact of OPEC quotas.
Production downtime was stated at 9% and was said to be caused by third-party terminal and gathering system issues.
Historic issues with third-party export systems are expected to be substantially resolved by the implementation of the new ACOES route. Meanwhile, an oil barging operation is expected to begin later this month to move crude.
In its outlook statement, San Leon said that fuller barging operations from OML 18 to the FSO will commence soon and the proposed transactions are expected to complete later this year.
Further anticipated potential catalysts in 2022 include the commissioning of the ACOES pipeline, the restart of field operations at OML 18 and oil exports from the Oza field.
Recapping the year, Fanning added: “The last year has been the most significant year in the company’s development.
“We embarked upon and announced today a transaction which we believe will create a significant West African oil and gas entity which is ideally placed to take advantage of the opportunities available to it and to deliver considerable future value to all our shareholders.”