# San Leon Energy Plc Final results for the year ended 31 December 2016

- Link: https://www.directorstalkinterviews.com/san-leon-energy-plc-final-results-year-ended-31-december-2016/412734824
- Published: 2017-09-07T07:29:48+01:00
- Author: Giles Arbor

**San Leon Energy PLC ORD EURO0.01** (LON:SLE), the AIM listed oil and gas exploration
and production company focused on Africa and Europe, today announced its audited
final results for the year ended 31 December 2016.

**Highlights:**

· San Leon announced and completed its transformational entry into Nigerian onshore
oil and gas production, in the world-class OML 18 block, securing an initial 9.72%
indirect economic interest.

· Since the acquisition constituted a reverse takeover under the AIM Rules, San 
Leon published an AIM readmission document and the Company’s ordinary shares were
subsequently readmitted to trading on AIM in September 2016.

**Operational**

· Eroton is the Operator of OML 18 while San Leon has a defined partner role under
the Master Services Agreement. Plans from the 2016 Competent Persons Report (by 
Petrovision Energy Services Limited) are being executed to optimise production using
coiled tubing, electric line, and slickline. Challenges are being addressed as they
arise. Such issues include:

– higher than expected pipeline loss allocation (with fiscal metering being installed
during Q4 2017 to help resolve)

– higher than expected downtime (with valves to allow isolation of the upstream 
part of the NCTL pipelines being installed to reduce downtime)

– slower than anticipated well work, due to a combination of downhole challenges,
delays in permissions being granted, and capex availability. Downhole challenges
are being addressed with the appropriate technical resources

· The Orubiri Field came online in late 2016, and the Krakama Field was brought 
onto production in early 2017. They are expected to be followed by the Buguma Field
in Q4 2017, which will now be brought on by direct tie-back to the Krakama Field.

· Q4 2017 is expected to see the commencement of heavy workover and new well drilling.

**Corporate**

· Completed an approximately $220 million equity raise as part of the OML 18 transaction,
through a placing of new ordinary shares in September 2016.

· A new Board was put in place at the time of the closing of the OML 18 transaction,
to reflect the new focus on Nigeria. This included the appointment of Mutiu Sunmonu,
formerly Managing Director of Shell Petroleum Development Company and Country Chairman
of Shell Companies in Nigeria, as non-executive Chairman.

· In November 2016, San Leon monetised its position in the Rawicz gas development
for a net US$9.0 million in cash (part of which is due to be received in 2017).

· The Company reached agreement with Avobone in November 2016, which was subsequently
revised in June 2017, regarding payment for Avobone’s exit from the Siekierki project.
The remaining amount to be paid according to the agreed repayment schedule is approximately
€14.7 million as at 06 September 2017. Payments are currently up to date.

· Just before year end, we announced the receipt of an approach from a possible 
offeror, which may or may not lead to an offer being made for San Leon. After the
reporting period we announced that we were in discussions with a further three entities,
and in June 2017 we announced a conditional offer from China Great United Petroleum(
Holding) Limited. There can be no certainty that any of these discussions will lead
to a firm bid, or any transaction.

· Oisin Fanning (now Chief Executive Officer) has drawn only 20% of his salary in
cash with the balance paid or accruing in San Leon shares.

**Financial**

· Total comprehensive profit for the year of €10.7m (2015: loss of €213.6m).

· Total assets increased to €346m at 31 December 2016 (2015: €132m).

· At year end the Group had cash and cash equivalents of €0.2m (2015: €0.9m).

· Eroton continues to accrue cash from OML 18 operations into the Debt Service Reserve
Account (“DSRA”) attached to its existing Reserves Based Lending (“RBL”) facility.
Depositing three future quarterly RBL repayments into the DSRA is one of the conditions
that need to be met before the RBL lenders will allow distribution of dividends 
from Eroton to its shareholders.

· As Eroton has confirmed that other conditions have already been met, cash flow
from Eroton can begin once sufficient funds have accrued in the DRSA, subsequent
to which the Company can initiate its capital distribution policy.

· The Company’s Irish counsel is progressing a capital reorganisation which is required
to allow such distributions, which are later than originally expected, and the timing
of such distributions will depend in part on the timing of distribution of dividends
from Eroton.

· The Company has various guarantees and a share pledge in place which provides 
security for all payments due to the Company under the MLPL Loan Notes. As of 06
September 2017 the Company had US$77.7 million in outstanding repayments.

· An assessment of going concern highlights the importance of cash flow from Nigeria
to San Leon’s continued operations, particularly as receipt of cash from dividends
by Eroton and loan note repayments have been delayed (Ref: Note 2 Emphasis of matter:
Going concern and Note 3: Going concern).

· Continued asset optimisation and cost reduction strategy, resulting in relinquishing
certain licences.

**Outlook**

· San Leon Energy Plc has concentrated on the right asset in Nigeria, with the right
partner. The three expected revenue streams (loan repayments, dividends from San
Leon’s indirect shareholding in OML 18 and from the provision of workover drilling
and facilities services) represents a diversified approach to securing cash flow.

Share on: