London-listed and Nigeria-focused oil and gas investor, San Leon Energy has signed an agreement with Midwestern Oil & Gas Company Limitedwith the objective of increasing its interest in Oil Mining License (OML 18).
BusinessDay’s findings showed the agreement will result in San Leon’s economic interest in the asset increasing fourfold to 44.1 percent and at the same time, it will own 50 percent of Energy Link Infrastructure (Malta) Limited (ELI), which owns the Alternative Crude Oil Evacuation System (ACOES) project that will connect OML 18 to an export route.
ELI expects the pipeline component of ACOES to have a throughput capacity of approximately 100,000 barrels of oil per day, while the floating storage and offloading vessel has a storage capacity of 2 million barrels of oil.
“The transactions will not only increase our initial indirect economic interest in OML 18, a world-class asset with unrealised potential but also our interest in ELI and the new ACOES pipeline which we have long considered to be critical to the future success of OML 18 through the expected reduction of pipeline losses and increase in the uptime for export that it is expected to provide,” Oisin Fanning, CEO of San Leon said.
San Leon noted that its OML 18 asset has been reassessed through a new competent person’s report (CPR) which details some 323mln barrels of proved and probable (2P) reserves, net attributable to San Leon’s stake, which the company said would be valued at around $1.1bn.
It has also entered into a $50m loan facility with MM Capital and San Leon has granted further waivers to Midwestern against payments owed to San Leon.
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San Leon further proposes to restructure its capital, including an issue of preference shares to shareholders giving them preferential rights to the first $40m of future dividends.
“Going forward these transactions will pave the way for the Company to deliver its strategy of becoming a significant participant in the Nigerian oil and gas market, positioning San Leon to take advantage of further transactional opportunities to enhance and grow our business,” Fanning said.
In a separate statement, the company’s financial results for the 12 months ended 31 December 2021 confirmed that at the end of the period, San Leon had $7.6m of cash and equivalents.
It noted that $2.2m of payments, principal and interest were received during the period under the loan agreement with Midwestern and it stated that now some $105.6mln was owed by Midwestern and is subject to the waiver agreements, whilst transactions to increase San Leon’s interests in OML 18 is completed.
Operationally, San Leon noted that some 4,400 barrels of oil per day were delivered to the Bonny terminal in 2021, with volumes affected by losses and downtime plus the impact of the Organisation of the Petroleum Exporting Countries (OPEC) quotas.
Production downtime was stated at 9percent and was said to be caused by third-party terminal and gathering system issues.
“Historic issues with third-party export systems are expected to be substantially resolved by the implementation of the new ACOES route. Meanwhile, an oil barging operation is expected to begin later this month to move crude,” San Leon stated.
