San Leon Awaits Eroton Dividends But Encouraging Nigeria Progress

LONDON (Alliance News) - San Leon Energy PLC on Friday said it has been encouraged by the ...

Alliance News 30 December, 2016 | 8:57AM
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LONDON (Alliance News) - San Leon Energy PLC on Friday said it has been encouraged by the performance of the OML 18 field to date, but has still not received its first cash flow from the project.

San Leon currently holds a 9.72% initial indirect interest in the OML 18 project located in onshore Nigeria, which is operated by Eroton.

San Leon said the electric line operations at the project have acquired water saturation logs within a group of wells, and perforation of new producing intervals has commenced based on that data.

Reperforation operations on the first of the wells at the OML 18 block were "successful" and gross OML 18 production has increased to around 61,000 barrels of oil per day, though the well has temporarily been shut in to allow minor production upgrades. Current gross OML 18 production, therefore, stands at around 53,000 barrels of oil per day.

Also at the project, within the Krakama field, the wells are now ready to produce and production is expected during the first two months of 2017. At the Buguma field, a scoping study has been undertaken ahead of operations to bring the field into production. Following completion of the study, equipment has been identified and a procurement process is currently underway. Production is expected to commence in March.

San Leon expects to provide workover rig, drilling rig and production facility construction services to Eroton starting in 2017, under its master services agreement for the OML 18 project.

In line with the terms of the USD173.1 million loan notes which San Leon holds relating to the OML 18 project, around USD20.0 million of loan principal and interest repayments became payable on October 1, and an additional amount of around USD19.0 million will become payable on January 1. The loan notes were purchased following a USD221.4 million fundraise in August.

San Leon said amounts will be payable by Midwestern Leon Petroleum Ltd, which it owns a 40% stake in, and which has a 50% shareholding and an initial effective 90% economic interest in Eroton.

Eroton is currently in the process of meeting all the conditions for its reserve based lending debt service reserve account and, once these have been fulfilled, Eroton will be in a position to declare and pay dividends.

"San Leon has been working, and continues to work, with Eroton to explore other interim mechanisms to enable cash distributions to be made to San Leon, pending satisfaction of all of the RBL debt service reserve account conditions," the group said.

Any delays in dividend payments do not, in themselves, "adversely affect" the amounts of interest and principal due and payable by MidWestern Leon on the loan notes held by San Leon, the group said.

"We are encouraged by the performance of the OML 18 field to date, including the approximate doubling of production over what was expected when the RBL was first put in place," CEO Oisin Fanning said.

"We are confident, and fully supportive of Eroton in its attempts to satisfy all the conditions of the RBL facility in order to declare dividends in order for San Leon to receive its first cashflow from OML 18," Fanning added.

Shares in San Leon were down 2.5% at 53.15 pence on Friday morning.

By Hannah Boland; hannahboland@alliancenews.com; @Hannaheboland

Copyright 2016 Alliance News Limited. All Rights Reserved.

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Securities Mentioned in Article
Security Name Price Change (%) Morningstar
Rating
San Leon Energy PLC 25.50 GBX -1.73 -
San Leon Energy PLC 0.30 USD 0.00 -
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