San Leon Energy : 2. Interim results

San Leon, the AIM listed company focused on oil and gas development and appraisal in Africa, today announces its unaudited interim results for the six months ended 30 June 2019, and provides an update on its indirect interest in OML 18, a world-class oil and gas block located in onshore Nigeria.

To view the full press release, please click here.

Highlights

Financial

• Loss from continuing operations for the period ended 30 June 2019 was US$6.8 million (30 June 2018: profit of US$7.6 million (restated)~)
• Cash and cash equivalents as at 30 June 2019 of US$12.2 million (30 June 2018: US$26.3 million (restated)~) following the successful tender for and purchase of US$30.5 million of its own ordinary shares
• Cash as at 27 September 2019 was US$36.8 million
• During 2019 to date US$37.8 million (30 June 2018: US$37.7 million) has been received in relation to payments due to San Leon under the US$174.5 million Loan Notes
• The Company is scheduled to continue to be repaid against the Loan Notes, the balance of which is currently US$133.8 million, on a cash receipts basis
• The Company anticipates announcing its first dividend in due course, as part of its shareholder distribution policy
• Carrying value of Barryroe has been impaired by US$17.9 million to US$33.2 million to reflect delays in the operator completing the farm out
• Functional currency change to US Dollars (US$)

Operational

An update on OML 18 activity during the first six months of 2019 is provided below.

• The first of Eroton's (the operator of OML 18) newly-drilled wells came onto production at a combined rate of approximately 4,800 barrels of oil per day ('bopd') from its two separate production strings. Eroton has advised that its latest tested rate is approximately 5,200 bopd.
• Oil sales were approximately 32,000 bopd in H1 2019 (26,003 bopd in H1 2018), and continues to be affected by losses and downtime of approximately 32%.
• Gas sales averaged 34.3 million standard cubic feet per day ('mmscf/d') in H1 2019 after downtime.
• 18% of the production downtime in H1 2019 was caused by third party terminal and gathering system issues. The poor third party performance in the export system is expected to be resolved by the implementation of the new alternative crude oil evacuation and storage system ('ACOES') for the purpose of transporting, storing and evacuating crude oil from OML 18 export pipeline ('Pipeline') running from within the OML 18 acreage and down to the open sea to a dedicated Floating Storage and Offloading ('FSO') vessel.
• Eroton informs the Company that it has concluded and executed an agreement with Energy Link Infrastructure (Malta) Limited ('ELI'), for ELI to finance and construct the ACOES. The FSO ('ELI Akaso') has been procured and the required conversion works completed, and is currently being fitted with a LACT unit in Malaysia while awaiting final certification by the Nigerian Department of Petroleum Resources. The FSO is expected to set sail for Nigeria in November 2019. Work on the pipeline system is ongoing and the expectation is that the completed ACOES system will be commissioned in the second quarter of 2020. Once commissioned, the system is expected by Eroton to reduce the downtime and allocated pipeline losses currently associated with the Nembe Creek Trunk Line ('NCTL'), which were responsible for the majority of the 15,000 bopd difference between gross production when the pipeline is running, and average sales oil. In addition, it is anticipated that the FSO project will improve overall well uptime.
• Year on year reduction in pipeline losses by the Bonny Terminal operator partially due to the installation of Lease Automatic Custody Transfer ('LACT') units to ensure that the OML 18 partners have fiscal metering of the oil prior to export into the gathering system (2019: 30 June 18%; 2018: 30 June 33%). Eroton has advised that it is the only supplier of oil into NCTL with functional LACT units, meaning that pipeline losses allocated to Eroton are materially lower than allocated to other NCTL users. In the longer term, the export pipeline and FSO system mentioned above will provide additional control.
• Completion of Eroton's second newly-drilled well, Akaso-16, took significantly longer than expected. This in turn has delayed the move of the rig to the next well, MTMY-1. The rig is arriving at that location imminently. MTMY-1 is expected to be the last well drilled using the current rig contract, and Eroton expects to continue the drilling programme in early Q2 2020. Akaso-16 is being connected to the production system, and is expected to begin well testing in the coming weeks.
• In January 2019, San Leon announced that Eroton had successfully restructured its RBL facility.
• In July 2019 the Company announced that Eroton had received a 20-year licence renewal for OML 18, which now expires in 2039.

Corporate

• The Company completed the planned capital reorganisation in early 2019. This enabled the Company to successfully tender for and purchase US$30.5 million of its own ordinary shares, at a price of 46 pence per share in March 2019.
• The Company notes the press releases from Providence Resources Plc ('Providence') from September 2018 onwards, confirming a binding drilling farm-out agreement for Standard Exploration Licence 1/11 containing the Barryroe field, offshore Ireland. San Leon holds a 4.5% Net Profit Interest ('NPI') in Barryroe. As of 10 September 2019, Providence had provided additional time for the farminee to pay initial amounts as part of the transaction and extended the deadline to 30 September 2019. Due to the delay in payment as described above, the Directors have decided to impair the Barryroe carrying value by US$17.9 million to US$33.2 million to reflect their estimate of the impact of risks to the future cash flows on the value of the asset.
• Ewen Ainsworth resigned as Finance Director on 30 June 2019 and Lisa Mitchell joined the Company as Chief Financial Officer and Executive Director on the same date.
• During August 2019, the Company completed the sale of interests in four Polish concessions to Horizon Petroleum Ltd as part of the Company's strategy to monetise non-core assets.
• In June 2019, San Leon announced that it and SunTrust had signed binding agreements terminating all litigation against San Leon, and precluding any future such litigation. The Company also announced that Midwestern had increased its shareholding in San Leon to 13.01%, following its purchase of all of SunTrust's remaining shares in San Leon.

Chief Executive Officer of San Leon, Oisin Fanning, commented:

'The Company's finances and outlook have been transformed with seven quarters of payments to satisfy the principle and accrued interest due from the US$174.5 million MLPL Loan Notes. Eroton continues to progress operationally to target delivering returns from OML 18. Following the March 2019 share repurchase, the Company anticipates distributing cash to shareholders in the form of dividends, and expects to announce its first dividend in due course.

To view the full press release, please click here.

Enquiries:

San Leon Energy plc
Oisin Fanning, Chief Executive (+ 353 1291 6292)

Cantor Fitzgerald Europe (Nominated adviser, financial adviser and joint broker to the Company)
David Porter ([phone])
Rick Thompson ([phone])

Whitman Howard Limited (Financial adviser and joint broker to the Company)
Nick Lovering ([phone])

Brandon Hill Capital Limited (Joint broker to the Company)
Oliver Stansfield ([phone])
Jonathan Evans ([phone])

Vigo Communications (Financial Public Relations)
Chris McMahon ([phone])
Simon Woods ([phone])

Plunkett Public Relations
Sharon Plunkett ([phone])