London listed and Nigeria-focused oil and gas investor, San Leon Energy seeks to lengthen the investment window for Oza oil field till 31 October in order to finalise certain conditions precedent in the subscription agreement.
San Leon said it was invest $7.5million into the Oza oil field a few weeks ago, through a loan agreement with Decklar, a subsidiary of Asian Mineral Resources.
“All other terms of the transaction remain unchanged,” said the San Leon Energy board concerning the extension.
Decklar owns a majority interest in production and cash flow rights for the Oza oil field which was historically operated by Shell, between 1959 and 1974, but has never reached commercial-scale production.
Decklar plans to use the funds to fast-track the initial redevelopment of the Oza oil field. It intends to re-enter the existing Oza-1 well to test three oil-bearing zones, two of which are expected to be put into production. After that, from the same location, the rig will drill a new horizontal well.
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The same time it is entering into the subscription agreement, San Leon Energy has paid $750,000 as initial deposit out of $7.5 million subject to the satisfaction (or waiver) of the conditions precedent contained in the subscription agreement.
If the transaction contemplated by the subscription agreement are not completed by October 30, Decklar will be required to repay the deposit to San Leon Energy within three months of that date.
Oza Oil Field which was awarded to Millennium Oil and Gas Company during the 2003 bid round is expected to begin first production three to four months following the drawdown of the financing, as it already has access to significant export and production processing facilities.
Oisin Fanning, CEO of San Leon Energy, earlier this month said the deal is part of the company’s strategy to invest in assets with expected near-term cash flow through low-risk lending-based model.
“The option to scale up our investment following receipt of the result of the new drill proof-of-concept well on equivalent terms to the initial investment also provides San Leon with valuable informed optionality,” Fanning said.
San Leon also gains the right to subscribe for another $7.5million of notes, including another 2.5million shares subject to results from a planned well.
The agreement sees San Leon take a 15percent interest in Decklar initially, potentially rising to 30percent with a further subscription alongside the subsequent funding. San Leon will be allocated one seat on the board of Decklar.
Millennium OIl and Gas Company has also entered into a non-binding term sheet with a local Nigerian bank and the trading subsidiary of a major oil company for up to $33 million on a five-year term debt that provides a use of proceeds of $22 million to refinance existing debt of the company and $11 million for the development activities on the Oza Oil Field, based on entering into a crude sales and purchase contract.
