Malcom Graham-Wood is joined by Oisin Fanning, CEO of San Leon Energy, to discuss how the company has been growing over the past few years, as well as their upcoming plans.
Final results for 2019 for San Leon this morning, much is historical but it is worth noting that Eroton Exploration, the operator of OML 18 received a 20 year lease renewal which will expire in 2039. Production capacity has been around 39,000 bopd due to various nefarious reasons but the completion of the pipeline in the coming months should increase production to 50,000 bopd with no ‘downtime’. (See Malcy’s interview)
Financially $43.2m was received in 2019 via the loan notes mechanism which strengthened the company’s financial position and ‘enabled the company to start to deliver its shareholder return commitment and that to date the company has received just over $190m in total loans payments’.
So far this year a further $41.5m has been received with an expected $10m to come in Q4, in addition a further c.$103.9m is expected in interest and loan note repayments by end 2021. CEO Oisin Fanning says that ‘The current environment generates challenges which Eroton is addressing well, but at the same time it provides a huge opportunity for our Company to initiate its next stage of growth. We have the cash resources, technical and managerial capability, and established relations to select our next projects’.
Much has been going on at San Leon in recent months mostly to do with its stated commitment to shareholder returns. It has completed a tender offer and repurchased $30.5m of shares early in 2019, repurchased $2m worth of stock in Q4 2019 and Q1 2020 and declared a $33m special dividend in May 2020. At that time the dividend yield of 30% and right now the company has a cash balance of $36.5m which looks good to me.
It is clear that the model at San Leon is working well and assuming operating stability, which one cannot doubt in any current scenario, cash is continuing to come in. In my interview this morning CEO Oisin Fanning reminded me that almost everything has been written down in the books including Barryroe which should ensure the absence of any nasty shocks.
Indeed it is clear that the team, with the senior appointment last year of Lisa Mitchell as CFO, is not only looking to make shareholder returns but is also looking at accretive acquisition opportunities in country.
Putting all this together it seems to me that this is an investment that warrants investigation especially from retail investors. Back to CEO Fanning, “Our robust financial position, additional significant funds expected to be received in the in the next 18 months, existing and anticipated new projects, are planned to continue to provide continued shareholder returns. We are proud to have distributed US$66.0 million to shareholders in the past 15 months”.
Sane Leon is in a very strong financial position, has a world class asset in Nigeria with probably more to come and of course that friendly distribution policy. I would conservatively put a target price of 50p on the company based on yield, reserves and acquisition opportunities.
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Disclaimer: Malcy’s Blog is provided for general information about the international oil and gas industry and the companies that operate within it. It does not constitute investment advice and Malcy does not buy or sell shares, warrants or bonds in any company written about within the blog. Information is taken from publicly available sources and any comment is that of the author who does not take any third party comment in the publication.
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