San Leon, the independent oil and gas production, development and exploration company focused on Nigeria, is pleased to announce its audited final results for the year ended 31 December 2021. The full annual report for the year to 31 December 2021 is available on the Company's website (www.sanleonenergy.com) and will be posted to shareholders in the coming days.
Corporate and financial highlights
Negotiated and announced on 24 June 2021 the proposed Midwestern Reorganisation, which is described in full in the Company's Admission Document, which is being published later today.
On 24 June 2021 announced the conditional purchase from Walstrand (Malta) Ltd of 1.323% of ELI shares for US$2 million, together with an option to purchase a further 4.302% in ELI for an additional US$6.5 million.
On 7 July 2021 announced conditional payment waivers (subsequently extended) regarding the approximately US$99.3 million (par value) of payments due from Midwestern Leon Petroleum Limited ("MLPL") to San Leon during the second half of 2021, since the repayable amounts form part of the proposed Midwestern Reorganisation. Payment waivers remain in place at the date of this announcement pending completion of the transactions.
In January 2022, the Company announced that some of its subsidiaries had successfully concluded their ongoing legal proceedings with TAQA Offshore BV ("TAQA") in relation to San Leon's legacy interests in two royalties on Block Q13A, which is located offshore the Netherlands (the "Amstel Oil Field"). Payments totaling more than 5.9 million for royalties receivable up to November 2021 including a payment in respect of its legal costs, have been received in 2022. From December 2021, the royalties will continue to be payable in accordance with the terms and conditions of the Royalty Agreements, and payments and are not expected to be material.
On 15 February 2022, the Company announced a further loan of US$2 million to ELI, also enabling the Company to conditionally purchase a further 2% shareholding of ELI for a nominal sum.
In February 2022, the Company completed its US$5.5 million investment in Decklar Petroleum Limited ("Decklar"), related to the Oza field onshore Nigeria, repayable to the Company as a loan through a cash sweep. The Company also holds 11% equity stake in Decklar.
Board appointment process previously announced completed with appointment of John Brown as Independent Non-Executive Director and Chair of the Audit and Risk Committee. Alan Campbell resigned from the Board in 2021 as part of a board restructure. Lisa Mitchell left the Company as CFO and Executive Director in October 2021 and Julian Tedder was appointed as CFO and Executive Director in December 2021.
Included within the basis of preparation note of the financial statements and Independent Auditor's report are details regarding material uncertainty related to going concern. This is uncertainty is mitigated by the transactions announced today. Cash and cash equivalents as at 31 December 2021 were US$7.6 million (includes US$6.8 million restricted and held in escrow for the Oza transaction) (31 December 2020: US$18.5 million including US$6.8 million restricted and held in escrow for the Oza transaction).
In 2021, US$2.2 million (31 December 2020: US$46.5 million) in principal and interest payments has been received under the MLPL Loan Notes.
Outstanding amounts due under the MLPL Loan Notes are now approximately US$105.6 million (par value), which are subject to current repayment waivers pending the completion of the proposed Midwestern Reorganisation, and would be extinguished as part of the consideration if the transaction were to complete.
An update on OML 18 activity during 2021 is provided below:
Oil delivered to the Bonny terminal for sales was approximately 4,400 barrels of oil per day ("bopd") in 2021 (21,100 bopd in 2020) and has been affected by combined losses and downtime of approximately 79%. The 2021 figure has also been affected by OPEC oil production quota restrictions, and some Covid-related delays. Field operations to boost production were largely put on hold, pending the start-up of the ACOES barging system. Together, the losses, downtime, OPEC restrictions and Covid-related delays have caused the majority of the difference between gross production when there is minimal disruption to production, and oil is received at Bonny terminal for sales.
Gas sales averaged 29.6 million standard cubic feet per day ("mmscf/d") in 2021 after downtime (32.7 mmscf/d in 2020).
Production downtime of 9% in 2021 was caused by third party terminal and gathering system issues. This relates to days when oil production was entirely shut down at OML 18. Historical issues in the third-party export system are expected to be substantially resolved by the implementation of the new ACOES for the purpose of transporting, storing and evacuating crude oil from OML 18 export Pipeline. The pipeline will run from within the OML 18 acreage to a dedicated FSO vessel in the open sea, approximately 50 kilometres offshore. Barging of oil from OML 18 to the FSO is expected to commence in July 2022, with trials already having been completed. Expected timing for the completion of the pipeline component of ACOES is late 2022.
Pipeline losses by the Bonny Terminal operator have increased markedly over the past year (31 December 2021: 70%; 31 December 2020: 28%), largely due to lower pipeline throughput as a result of OPEC quota restrictions and Covid-related issues. In the medium term, the ACOES is expected to reduce losses significantly.
Eroton has taken all appropriate precautions for its operations and people, with regards to Covid-19.
· An update on ELI is as follows:
o Whilst there have been some delays to ACOES principally due to Covid, barging operations from OML 18 to the ELI Akaso FSO are now expected by ELI to commence during July 2022.
o ELI is in advanced negotiations with other third-party injectors for use of its pipeline and terminalling facilities.
o Construction of the pipeline continues to progress and hook up with ELI Akaso is expected to take place in late 2022.
Outlook for 2022
Fuller barging operations from OML 18 to the FSO to commence in July2022.
Completion of the proposed transactions with Midwestern and ELI expected later in 2022.
The commissioning of the ACOES pipeline.
Restarting of field operations on OML 18.
Export of oil from Oza.
Continuing to position the Company for further transactions.
On 8 July 2022, the Company entered into the new facility for the purposes of funding its working capital requirements and for financing the Further ELI Investments, details of which can be found in the Admission Document. The new facility is for US$50 million.
Oisin Fanning, CEO of San Leon, Commented:
"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."