Final Results

27 June 2019

San Leon Energy plc (“San Leon” or the “Company”), the AIM listed oil and gas production and appraisal company focused on Africa, today announces its audited final results for the year ended 31 December 2018.

Download the full release here.


  • Revenue for 2018 was €0.2 million (2017: €0.3 million). Net Cash flow of €26.8 million (2017 net cash flow of €7.9 million)
  • 2018 was the second full year of the Company’s involvement in OML 18, onshore Nigeria, and saw continued cash flow from that investment. €56.4 million ($66.2 million) was received by the Company in 2018, with an additional €9.4 million ($10.7 million) received in H1 2019 up to 26 June, bringing the total received to date from the Company’s OML 18 investment to €100.1 million ($116.5 million).
  • The Company’s cash position remains strong and enabled the repurchase of approximately €26.8 million ($30.5 million) of the Company’s shares after the reporting period in March 2019. At 24 June 2019 the Company held €11.5 million in cash.
  • As of June 2019, the Company anticipates future cash flow primarily from:
    1. Principal and interest repayments to the Company from its $174.5 million Midwestern Leon Petroleum Limited (“MLPL”) Loan Notes which were issued as part of the Company’s OML 18 investment (remaining principal plus interest balance as of 26 June 2019 of €141.1 million ($159.7 million) up to maturity on a cash receipt basis).
    2. Dividend payments generated by the Company holding an initial indirect 10.58% economic interest in OML 18. Delays in dividend payments to date are discussed below.
    3. Income from the provision of rig-based drilling, workover services and production services to the operator of OML 18 under a Master Services Agreement (“MSA”).
    4. The Company’s 4.5% Net Profit Interest in the Barryroe oil field, offshore Ireland, through potential income or a potential sale.

OML 18, Nigeria Operational Highlights

  • The first of Eroton’s newly-drilled wells was spudded in December 2018, and came onto production after the reporting period at a combined rate of approximately 4,800 barrels of oil per day (“bopd”) from its two separate production strings.
  • Non-rig workovers have continued, including the installation of gas lift on 11 wells.
  • Underlying oil production for OML 18 plus its 50% share of the Awoba field, was approximately 45,000 bopd in 2018 before downtime and allocated pipeline losses – a figure which was also affected by issues bringing wells back onto production after pipeline downtime. Including the effects of losses and downtime, oil sales were approximately 30,000 bopd in 2018. Current oil production before losses and downtime is approximately 49,000 bopd.
  • Gas sales averaged 33.3 million standard cubic feet per day (“mmscf/d”) in 2018 after downtime.
  • Certain operational and financial issues affected production and sales of oil, although significant progress was made towards the end of 2018 and into 2019 to address these: well drilling began; NNPC paid a significant amount of additional cash call arrears; Eroton’s Reserves Based Lending (“RBL”) facility was restructured; and progress was made on the new export pipeline planning.
  • 12% production downtime in 2018, primarily caused by third party terminal and gathering system issues, impacted annual production. This issue is being addressed by the planned implementation of the new export pipeline and Floating Storage and Offloading (“FSO”) project, and is also expected to improve overall well performance by removing the requirement to restart wells following any shut downs.
  • The 26% pipeline losses allocated to all operators by the Bonny Terminal operator are higher than was anticipated in the 2016 Admission Document. However that figure is markedly below the 35% figure in 2017, at least partially due to the installation of Lease Automatic Custody Transfer (“LACT”) units to ensure that the OML 18 partners have fiscal metering of the oil prior to export into the gathering system. In the longer term, the export pipeline and FSO system mentioned above will provide additional control. In 2019 to the end of April, with the final LACT units being commissioned, pipeline losses have decreased further to 18%.
  • The Nigerian National Petroleum Corporation (“NNPC”) made substantial further repayments to Eroton for 2015 and 2016 joint venture cash call arrears, helping to fund the start of the new well drilling activity.
  • Just after the reporting period, in January 2019, San Leon announced that Eroton had successfully restructured its RBL facility, providing a material boost to cash availability for operations.
  • Planning for the new export system, comprising a dedicated OML 18 export pipeline running to an FSO offshore, progressed significantly. Once commissioned, the system is expected by Eroton to reduce the downtime and allocated pipeline losses currently associated with the Nembe Creek Trunk Line (“NCTL”), which were responsible for the majority of the 15,000 bopd difference between gross production when the pipeline is running, and average sales oil.

Corporate Highlights

  • The Company continued to proceed with the planned capital reorganisation, which was completed after the reporting period, in early 2019. This enabled the Company to successfully tender for and purchase €26.8 million ($30.5 million) of its own ordinary shares, at a price of 46 pence per share in March 2019.
  • The Company continued its policy of reducing costs outside Nigeria and focussing on its Nigerian assets. The Company’s offshore Albania asset, Durresi, has been fully impaired to reflect the time taken to farm it out. The Company is still in the process of finalising negotiations with the Moroccan government regarding its exit from the country. As reported previously, all Moroccan assets have been fully impaired, and the Company now reports that it no longer has an interest in any Morocco concession.
  • In November 2017, San Leon confirmed that it had received a letter from Midwestern Oil and Gas Company Limited (“Midwestern”) with an indicative proposal that included San Leon acquiring Midwestern’s 60% shareholding in MLPL (the “Proposal”). San Leon holds the remaining 40% of MLPL. Since the Proposal could have resulted in a transaction being characterised as a “reverse takeover”, the Company’s shares were temporarily suspended. In late April 2018, the Company announced that its board had elected not to accept Midwestern’s proposal, and the Company’s shares recommenced trading.
  • The Company notes the press releases from Providence Resources from September 2018 onwards, confirming a binding drilling farm-out agreement for Standard Exploration Licence 1/11 containing the Barryroe field, offshore Ireland. San Leon holds a 4.5% Net Profit Interest (“NPI”) in Barryroe. As of 26 June 2019, Providence had provided additional time for the farminee to pay initial amounts as part of the transaction.
  • The Company appointed Linda Beal as a non-executive director and chair of the Audit Committee in January 2018, and in May 2018, the Company appointed Bill Higgs as a nonexecutive director. Mr. Higgs is now chair of the Risk and Safety Committee.
  • The Company announced, after the reporting period, that Ewen Ainsworth would resign as Finance Director on 30 June 2019, and Lisa Mitchell would join the Company as Chief Financial Officer and Executive Director on the same date.


  • Total comprehensive profit for the year of €9.7 million (2017: loss of €87.1 million).
  • Total assets of €247.3 million at 31 December 2018 (2017: €255.8 million).
  • At year end the Group had cash and cash equivalents of €35.6 million (2017: €8.1 million).
  • In 2018 the Company received a total of €56.4 million ($66.2 million, $10 million of which was an advance payment on amounts due on 01 January 2019) of Loan Notes repayments under the Loan Notes agreements entered into in September 2016 with MLPL, with a further €9.4 million ($10.7 million) being received in H1 2019 up to 26 June 2019. As of 26 June 2019, $16.5 million of principal and interest remains outstanding and payable on the amount due as of 01 April 2019. Receipts to date have been paid on behalf of MLPL due to the existence of guarantees to the Company under the Loan Notes instruments, as dividends have yet to be received by MLPL. The Company has a future receivable profile of €46.7 million ($52.9 million) for the remainder of 2019, with further quarterly payments through 2020.
  • San Leon has various guarantees and a share pledge in place which provide some security for payments due to the Company under the Loan Notes.
  • San Leon income from its initial 10.58% indirect economic interest in OML 18 has been delayed because asset performance has not been as expected. As mentioned above, efforts are underway to address underlying issues.
  • During 2018 San Leon entered into an agreement with Eroton for the provision of drilling technical and management services with estimated consideration for the services of $6 million until the end of 2020.


The Company’s finances and outlook have been transformed with income from the Loan Notes, while progress in late 2018 into 2019 on the operational and financial challenges faced by Eroton on OML 18, augur well for San Leon’s future.

The Annual Report and Accounts are available on the Company’s website at and will be posted to shareholders.

Market Abuse Regulation (MAR) Disclosure

Certain information contained in this announcement would have been deemed inside information for the purposes of Article 7 of Regulation (EU) No 596/2014 until the release of this announcement.

Download the full release here.

San Leon Energy plc
Oisin Fanning, Chief Executive (+ 353 1291 6292)

Cantor Fitzgerald Europe (Nominated adviser, financial adviser and joint broker to the Company)
David Porter (+44 207 894 7000)
Rick Thompson (+44 207 894 7000)

Whitman Howard Limited (Financial adviser and joint broker to the Company)
Nick Lovering (+44 20 7659 1234)

Brandon Hill Capital Limited (Joint broker to the Company)
Oliver Stansfield (+44 203 463 5000)
Jonathan Evans (+44 203 463 5016)

Vigo Communications (Financial Public Relations)
Chris McMahon (+44 207 390 0236)
Simon Woods (+44 207 390 0236)

Plunkett Public Relations
Sharon Plunkett
(+353 1 280 7873)


The Company received €56.4 million (US$66.2 million) in cash from its OML 18 investment in 2018, which transformed its financial position and outlook.

I am pleased to report that significant progress was made to address the operational and financial challenges with the Company’s involvement in OML 18, onshore Nigeria, which I described last year. The December start-up of Eroton’s new well drilling activity, planning progress on the new oil export facility, the receipt of cash call arrears payments by Eroton from the Nigerian National Petroleum Corporation (“NNPC”) and (announced post reporting period) the restructuring of the Reserves Based Lending (“RBL”) facility held by Eroton which frees up near-term cash resources for operations, are all very welcome.

The Company now has a very clear focus on its Nigerian interests and growth strategy, the structure of which is described in the group overview section, and has continued its strategy of reducing noncore costs outside Nigeria. The completion of the transfer of various Polish assets to Gemini Resources Limited ("Gemini"), and the abandonment and land rehabilitation of four other wells in Poland after the reporting period is consistent with this strategy.

The two non-Nigerian assets which are being retained are the Durresi block offshore Albania, for which a farm out is sought, and the Net Profit Interest (“NPI”) in Barryroe, the Irish asset operated by Providence Resources Inc, who recently secured a farm-out deal for appraisal / development drilling.

In November 2017 San Leon confirmed that it had received a letter from Midwestern Oil and Gas Company Limited (“Midwestern”) with an indicative proposal that included San Leon acquiring Midwestern’s 60% shareholding in MLPL (the “Proposal”). Through MLPL, Midwestern and San Leon are both indirect shareholders in Eroton, the operator of OML 18. Since the Proposal could have resulted in a transaction being characterised as a “reverse takeover”, the Company’s shares were temporarily suspended. In late April 2018, the Company announced that its Board had elected not to accept Midwestern’s proposal, as it was not in the best interests of San Leon’s shareholders since it did not provide a sufficient balance of added value for shareholders and certainty of near-term cash flow, and the Company’s shares recommenced trading.

The Company fulfilled its pledge to begin returning value to shareholders, repurchasing €26.8 million (US$30.5 million) of its own shares through a tender offer in March 2019, after the reporting period.

The Company bolstered its board in finance and operations through the appointment in January 2018 of Linda Beal as a non-executive Director and chair of the Audit Committee, and in May 2018 of Bill Higgs as a non-executive Director and subsequently chair of the Risk and Safety Committee.

This year we will be welcoming Lisa Mitchell as Chief Financial Officer and Executive Director. We continue to work to increase the diversity of the board as this enhances independent thinking and healthy challenge.

Linda has extensive experience of working with African oil and gas groups, African-based advisers, and corporate and asset transactions.

Bill has considerable operational experience, including in Africa, with companies ranging from a major to smaller independents. Lisa brings substantial levels of financial expertise and local Nigerian experience to the Company, as we continue to seek growth in San Leon’s value in Africa. The Company bade grateful farewell to Director Ray King in his retirement. Ray had served since San Leon’s inception. This year we will also see the departure of Ewen Ainsworth, who has decided to move on after two-and-a-half years of service as our Finance Director. On behalf of the board I thank Ray and Ewen for the contribution that they have made to all our work.

The Company’s financial position has gone from strength to strength since this time last year. Income from the Loan Notes is continuing, and the start of full drilling activity on OML 18 augurs well for income under the Master Services Agreement with Eroton. Financial strength was clearly demonstrated by the Company's share repurchase. This formed the beginning of the fulfilment of the Company's capital distribution policy.

The catch-up of NNPC’s arrears, beginning of new well drilling, and restructuring of the OML 18 RBL, all move Eroton closer to being able to distribute dividends to its shareholders, of which San Leon is indirectly one. I look forward with confidence to the Company's future development and growth.

Mr Mutiu Sunmonu
Non-Executive Chairman



OML 18 is seeing significant progress where Eroton is overcoming operational and financial hurdles as it seeks to reap rewards for shareholders, including San Leon.

The issues with Nembe Creek Trunk Line (“NCTL”) downtime and allocated pipeline losses, together with delayed new well drilling have meant that both gross production at the wellhead, and sales oil volumes, were significantly lower than expected. Gross oil production, taking out the effect of NCTL downtime, was 45,008 bopd. Sales oil, including the effects of downtime and allocated losses, was 30,069 bopd.

However a number of successes in the latter part of 2018 have gone a long way to position OML 18 very well. In H2 2018, Eroton installed the much anticipated Lease Automatic Custody Transfer (“LACT”) units on most of its production helping to reduce allocated losses to Eroton’s production using the NCTL and therefore to increase sales oil volumes.

In December 2018 Eroton reached a landmark and began drilling the first new well under its operatorship, with the target of increasing gross oil production. Later that month, the Company announced that NNPC had paid the large majority of its 2015-2016 cash call arrears, and was up-todate with more recent cash calls. Just after the reporting period, in January 2019, San Leon announced that Eroton had successfully restructured its Reserves Based Lending (“RBL”) facility, providing a material boost to cash availability for operations, and reducing the burden of cash required in the Debt Service Reserve Account (“DSRA”) – preparing the way for Eroton to distribute dividends to its shareholders (of which San Leon is an indirect shareholder) in due course.

With the increase in operational activity, debottlenecking of OML 18’s finances, and export solutions in progress (LACT units installed, and the planned new export pipeline well advanced in planning), challenges are being tackled, and I look to our future with OML 18 with increased confidence.


In March 2018 Providence Resources Inc (“Providence”), operator of the Barryroe oil and gas discovery offshore Ireland, announced that it had agreed a farm out of part of the asset to a Chinese consortium. In September 2018 Providence announced that binding terms had been signed for this agreement, paving the way for a four-well drilling programme. San Leon welcomes this significant step forward in the appraisal and development of the asset, and considers its 4.5% NPI over the whole of the Barryroe asset to be of significant potential value. An NPI structure means that San Leon has no costs whatsoever with regard to Barryroe, but has a right to a share of cash flow from the asset once Barryroe equity holders’ costs have been deducted.

The Company continues to discuss with the Albanian authorities the next phase of exploration on the offshore Durresi licence. The main target of interest on the block has an offset discovery (well A4-1X), and the recent installation by third parties of major gas pipeline infrastructure in the area provides additional options for asset monetisation.


The four anticipated sources of cash flow are described in the Cash Generation section. Of these, receipts to date – totalling €90.7 million (US$105.5 million) as of 31 December 2018 comes from repayment of Loan Notes. The balance of the principal on a cash receipt basis payable as of 24 June 2019 is €118.3 million (US$133.9 million), which continues to accrue interest at 17%. Final payment of the Loan Notes is anticipated late 2020.

The increase in operational activity is an opportunity for the Company to generate income from the provision of rig and rig-related services, and production services, from its Master Service Agreement with Eroton, and I look forward to providing an update on such income. Cash flow from the Company’s indirect shareholding in Eroton is anticipated once OML 18 is generating sufficient free cash flow (assisted by recent operational and RBL changes).


The year began with the Company being in discussions with multiple parties regarding potential corporate transactions. By April, these discussions had all been terminated, and the Company’s shares resumed trading after a period of necessary suspension. I am grateful to shareholders for their patience while discussions were ongoing. The last of the entities with which the Company was in discussions was Midwestern, which partners the Company in its indirect shareholding in OML 18. Ultimately the Company decided that the proposed deal was not in the best interests of San Leon’s shareholders at the time as it did not provide a sufficient balance of added value for San Leon shareholders and certainty of near-term cash flow. Indeed following the receipt by San Leon of the June 2018 quarterly Loan Notes repayment, it held cash in excess of total liabilities for the first time in many years. Loan Notes receipts continue, and put the Company in a strong financial position. April also saw the Company appoint Cantor Fitzgerald Europe as Nominated Advisor (“Nomad”), financial adviser and joint broker.

During May 2018 the first of several allegations by SunTrust Oil (“SunTrust”) were made in the Nigerian press, against San Leon and other entities involved in the 2016 transactions through which the Company became an indirect shareholder in Eroton and OML 18. The Company made it clear that all such allegations were spurious and would be vigorously defended, and it maintains that position. The appointments of Linda Beal and Bill Higgs as non-executive Directors in the first half of 2018 and Lisa Mitchell as Chief Financial Officer and Executive Director in 2019 are very welcome both from an overall Board function point of view, as well as providing valuable relevant financial and operational ideas and challenge. I would like to thank Ray King for his many years of invaluable service as a director and Company Secretary and I wish him well in his retirement. I would also like to thank Ewen for his contribution since San Leon’s readmission in 2016, and wish him well in his future endeavours. I look forward to updating shareholders with news of the planned continued operational activity on OML 18, its effect on production, and how our various expected cash flow streams are performing.

Oisín Fanning
Chief Executive Officer


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