San Leon, the independent oil and gas production, development and exploration company focused on Nigeria, today announces its unaudited interim results for the six months ended 30 June 2020, and provides an update on its indirect interest in OML 18, a world-class oil and gas block located onshore in Nigeria.
· Completed the return of approximately US$35.3 million to shareholders during the first half of 2020 delivering on the Company’s commitment to shareholder returns.
· Oisin Fanning, CEO, purchased 98 million shares in the Company, taking his interest to approximately 24%, on 7 May 2020.
· Adekolapo Ademola joined the Company as Non-Executive Director on 7 April 2020 as a designate of Midwestern Oil & Gas Company Ltd. Bill Higgs and Mark Phillips resigned as Non-Executive Directors in May and June 2020 respectively.
· The Company entered into an agreement dated 6 April 2020 amending the existing Loan Notes Instrument (the “Amendment”) between San Leon and Midwestern Leon Petroleum Limited (“MLPL”). Under the terms of the Amendment, US$40.0 million was received immediately by San Leon, with the remaining balance payable being approximately US$82.2 million plus interest. A further US$10.0 million is expected to be settled on or before 6 October 2020, with the balance of the Loan Notes receivable to be paid in three quarterly instalments, commencing July 2021 and completing by December 2021.
Corporate – Post balance sheet
· On 3 August 2020 the Company provided a US$15.0 million loan and acquired a 10% interest in Energy Link Infrastructure (Malta) Ltd (“ELI”). ELI’s sole asset is the proposed new Alternative Crude Oil Evacuation System (“ACOES”) constructed to provide a dedicated oil export route from the OML 18 asset. Once commissioned, the system is expected by Eroton to reduce the downtime and allocated pipeline (“Pipeline”) losses to below 10%.
· On 1 September 2020, the Company announced that it had conditionally agreed to invest US$7.5 million by way of a loan to Decklar Petroleum Limited (“Decklar”), who is the holder of a Risk Service Agreement (“RSA”) with Millenium Oil and Gas Company Limited (“Millenium”) on the Oza field, onshore Nigeria. Under the agreements, once completed, the Company will also receive a 15% interest in Decklar for a nominal amount paid.
· Allenby Capital Limited was appointed as Nominated Adviser and Joint Broker on 31 July 2020, after the reporting period.
· Cash and cash equivalents as at 30 June 2020 of US$35.6 million (30 June 2019: US$12.2 million).
· Cash and cash equivalents as at 18 September 2020 was US$22.6 million (US$6.8 million is restricted and held in escrow for the Oza transaction).
· During 2020 to date US$41.5 million (30 June 2019: US$10.7 million) has been received in relation to payments due to San Leon under the Loan Notes.
· The Company is scheduled to continue to be repaid against the Loan Notes, the balance of which is currently US$88.7 million, on a cash receipts basis.
· A share repurchase of US$2.0 million of Company shares was completed between October 2019 and January 2020.
· A special dividend of US$33.3 million was declared in May 2020, giving a dividend yield of approximately 30% as at the date of dividend announcement.
· Loss from continuing operations for the period ended 30 June 2020 was US$20.3 million (30 June 2019: loss of US$6.8 million). For clarity, this figure does not reflect Loan Notes cash received.
An update on OML 18 activity during the first six months of 2020 is provided below.
· Eroton completed its three well drilling programme in early 2020, with the final completion and flow of these wells impacted by Covid-19. The recent lower oil price has led Eroton to improve capital discipline and the prudent deferral of the next drilling campaign, now expected to commence towards the end of 2021.
· Eroton informs the Company that it has taken all appropriate precautions for its operations and people, with regards to Covid-19.
· Oil delivered to Bonny terminal for sales was approximately 25,200 barrels of oil per day (“bopd”) in H1 2020 (32,000 bopd in H1 2019) and continues to be affected by combined losses and downtime of approximately 32%. The 2020 figure has also been affected by OPEC oil production quota restrictions. Together, the losses, downtime and OPEC restrictions cause the majority of the difference between gross production when there is no disruption to production, and oil is received at Bonny terminal for sales.
· Gas sales averaged 39.1 million standard cubic feet per day (“mmscf/d”) in H1 2020 after downtime (34.3 mmscf/d in H1 2019).
· Production downtime of 15% in H1 2020 was caused by third party terminal and gathering system issues. Such 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 Floating Storage and Offloading (“FSO”) vessel in the open sea, approximately 50 kilometres offshore. Expected timing for the commencement of operations is in the coming quarters.
· Pipeline losses by the Bonny Terminal operator have been relatively stable over the past year (30 June 2020: 20%; 30 June 2019: 18%). In the longer term, the export Pipeline and FSO system mentioned above are expected to reduce losses significantly.
Chief Executive Officer of San Leon, Oisín Fanning, commented:
“The Company’s position and outlook remains strong.
“Whilst the world and the industry has been through turbulent times, we have taken advantage of the opportunities presented by this as well as utilising our cash position to further build our portfolio in Nigeria in line with our strategy. Our investment in ELI will support the reduction in pipeline losses and downtime at OML 18 whilst also providing loan note repayments as well as equity returns.
Our strong position is expected to continue in the year ahead as we receive further Loan Note payments and deliver upon our strategy.”
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