San Leon, the independent oil and gas production, development and exploration company focused on Nigeria, announces a further update in relation to the proposed transactions with Midwestern Oil & Gas Company Limited ("Midwestern") and the Company's further conditional investments in Energy Link Infrastructure (Malta) Limited ("ELI") (together the "Proposed Transactions"). Details of the Proposed Transactions were announced by the Company on 8 July 2022 and set out in an admission document published by the Company on the same day (the "Admission Document").
The Company is also providing an update on its current refinancing discussions.
Update on the Proposed Transactions
All longstop dates in relation to the Proposed Transactions have, in agreement with Midwestern and the other relevant parties, now been extended to 31 July 2023. The longstop dates are in relation to the New Eroton Debt Facilities, the Sahara OML 18 Acquisition Agreement, the MLPL Reorganisation Agreement and the ELI Reorganisation Agreement (details of all of which are set out in the Admission Document).
Whilst the board of San Leon (the "Board") continues to believe that the Proposed Transactions have the potential to be transformational for the Company, the Board is mindful of the recent legal challenge by NNPC Limited and OML 18 Energy Resource Limited to the operatorship of Oil Mining License (OML) 18 ("OML 18") and the inevitable uncertainty that this will cause to certain components of the Proposed Transactions. The extension of the Proposed Transactions' longstop dates will enable the Board to continue to keep these developments under review. It is the Board's opinion that NNPC Limited's challenge has no bearing on the prospects of ELI and, consequently, it remains determined to complete the elements of the Proposed Transactions that relate to ELI as soon as its proposed refinancing will allow.
The position on the MLPL Reorganisation Agreement is currently less certain. Whilst San Leon's initial 10.58% indirect economic interest in OML 18 is not impacted by a possible change of operatorship of OML 18, the prospects of Eroton Exploration & Production Company Limited ("Eroton"), and therefore Midwestern Leon Petroleum Limited ("MLPL"), are self-evidently contingent in part on Eroton continuing as the operator of OML 18. Completion of the MLPL Reorganisation Agreement is predicated, inter alia, on the New Eroton Debt Facilities. The Board notes that Eroton is itself challenging NNPC Limited's challenge in the Nigerian Law courts and expects that the New Eroton Debt Facilities are unlikely to be completed whilst this legal action is ongoing. It remains the Company's current intention to complete the Proposed Transactions in full, but the Board will follow the developments at OML 18 before determining the right course of action for the Company.
Documentation in relation to the Proposed Transactions is developed given the foundation of work undertaken by the Company in this respect over 2021 and 2022, and San Leon therefore expects to be in a position to move to proceed once the Proposed Transactions' conditions allow. This will be based, inter alia, on the conclusion of its refinancing, as well as updated due diligence in relation to the Proposed Transactions.
Update on the refinancing discussions
Further to the update on refinancing discussions and outstanding creditors announced on 14 June 2023, the Company continues discussions in relation to securing an alternative US$50 million loan facility to be applied towards the Proposed Transactions and to satisfy the Company's working capital requirements and pay the Company's unpaid creditors. The Board remains optimistic that a conclusion will be reached and expects to provide an update to shareholders in due course.
Accounts for the year ended 31 December 2022 and suspension of trading on AIM
Further to the update provided in the Company's announcement of 14 June 2023 in relation to the Company's audited accounts for the year ended 31 December 2022 (the "2022 Accounts"), San Leon has not published its 2022 Accounts by 30 June 2023, as stipulated by Rule 19 of the AIM Rules for Companies. In addition to the delay in securing the Company's proposed refinancing, the delay in publishing the 2022 Accounts is due to San Leon not yet receiving the audited financial statements for the year ended 31 December 2022 of MLPL, which includes the consolidated results of both Martwestern Energy Limited and Eroton, as well as not yet receiving the audited financial statements of ELI for the same period. Each of these are independently run companies and so San Leon has no control over their respective audit and year end processes.
As a result, trading in the Company's ordinary shares on AIM will be suspended with effect from 7.30 a.m. today, pending publication of the 2022 Accounts.
Further updates in relation to progress with the 2022 Accounts will be provided as appropriate.
Unless otherwise defined herein, the capitalised defined terms used in this announcement have the same meaning as those used in the Admission Document.