TIDMSLE
RNS Number : 4815P
San Leon Energy PLC
10 October 2023
Prior to publication, the information contained within this
announcement was deemed by the Company to constitute inside
information for the purposes of Regulation 11 of the Market Abuse
(Amendment) (EU Exit) Regulations 2019/310. With the publication of
this announcement, this information is now considered to be in the
public domain.
10 October 2023
San Leon Energy plc
(" San Leon " or the " Company ")
Investment of up to US$187 million from a strategic investor
and
further investments into ELI
San Leon, the independent oil and gas production, development
and exploration company focused on Nigeria, is pleased to announce
the following significant developments:
1. an investment of up to US$187 million by Tri Ri Asset
Management Corp. ("TRAM") into San Leon; and
2. further investments by San Leon in Energy Link Infrastructure
(Malta) Limited ("ELI") using the proceeds of the TRAM investment,
making San Leon the largest and majority shareholder in ELI with
approximately 55 per cent. of the company .
Oisin Fanning, Chief Executive Officer of San Leon,
commented:
"It is no secret that the past few months have been difficult
for San Leon, as they have been for many businesses, but it is
testament to the determination and commitment of our team that we
have secured one of the largest fundraisings by an AIM oil &
gas company in recent years. In addition, and in line with our
announcements over the past year, we have aligned San Leon with a
strategic funding partner who has been able to commit a greater
level of support than our previous proposed lender, through an
innovative investment arrangement which includes them becoming a
major shareholder of our Company.
"Importantly our partnership with TRAM enables us to fulfil our
long-held strategy of becoming the majority shareholder in ELI. It
is no understatement to say that the commissioning of the FSO Akaso
Terminalis a game changer, not only for OML 18 but for the entire
industry in that region. We are confident that the FSO and the
ACOES pipeline will be a significantly profitable and
cash-generative project from which San Leon expects substantial
upside ."
Asad Ali, Chief Investment Officer of Tri Ri Asset Management
Corp., commented:
"We are delighted to announce this financial partnership with
San Leon which we expect is the start of a long-term relationship.
We have come to know Oisin and the team well in recent weeks and
their professionalism and understanding of Sub-Saharan Africa is a
strong fit for our investment criteria and we are looking forward
to working with them in fulfillment of their strategic objectives.
We believe that the scale of OML 18 and the efficiencies that ELI's
new infrastructure will bring represents a very exciting
opportunity for us and all investors in San Leon."
Overview and summary of the investment in San Leon by TRAM
The Company has entered into documentation with TRAM in relation
to an investment of up to US$187 million by TRAM into San Leon (the
"Investment"). The Investment comprises of:
1. a US$125 million convertible secured loan from TRAM to San
Leon (the "Loan"). The Loan will be fully drawn down by the Company
immediately;
2. a US$16 million subscription by TRAM for 44,991,302 new
ordinary shares of EUR0.005 each in the Company (the "Ordinary
Shares") at 30 pence per new Ordinary Share, which is proposed to
take place before the end of October 2023 (the "Subscription");
and
3. a potential US$46 million further investment by TRAM from the
grant of 62,500,000 warrants by San Leon, exercisable at 60 pence
per new Ordinary Share, to TRAM (the "Warrants").
A. Details of the Loan
The Loan has a term of three years and the Company will pay a
7.5 per cent. fixed rate of interest per annum. The aggregate
interest to be charged on the Loan over the three-year term (being
US$28.125 million) has been deducted from the principal drawn down
by the Company and the Company is also paying a one-off arrangement
fee of US$7.5 million (being 6.0 per cent of the gross value of the
Loan) to certain advisers who arranged the Investment. The Company
will therefore receive net proceeds from the Loan of US$89.375
million. There are no commissions payable on either the
Subscription or the issue/exercise of the Warrants.
TRAM has the right to convert the Loan at any time prior to the
end of the three-year term as follows:
1. US$70 million of the principal value of the Loan into a
one-third shareholding in San Leon ELI Limited ("SLE ELI"), the
Company's wholly owned subsidiary which owns San Leon's
shareholding in ELI; and
2. the remaining proportion of the principal value of the Loan,
being US$55 million, into 90 million new Ordinary Shares at an
effective conversion price of 50 pence per new Ordinary Share.
In addition to the fixed interest described above, TRAM will be
entitled to a preferential economic return (the "PER"), equal to
50% of any dividends directly or indirectly received by San Leon
from ELI, for a period of 15 years (provided always that SLE ELI
shall not be obliged to pay any PER to TRAM from ELI dividends
received in respect of any investment that it may have in ELI at
any time that represents more than 50% of ELI). The PER will be
payable to TRAM whether the Loan is repaid in full or if TRAM
exercises its conversion rights as described above. Under the terms
of the Loan, TRAM is also entitled to co-invest with San Leon on
any future investments that the Company may make in ELI (excluding
the New ELI Investments described below).
San Leon has granted a fixed and floating charge over the
Company and its subsidiaries, including the Company's direct and
indirect investments in the OML 18 oil and gas block in Nigeria
("OML 18") and ELI and any receivables due to the Company. San Leon
has also provided a negative pledge to TRAM in relation to any
further security over the Group's assets and certain of San Leon's
subsidiaries have provided a corporate guarantee to TRAM.
B. Equity components of the Investment
TRAM intends to subscribe for 44,991,302 new Ordinary Shares in
San Leon (equivalent to 10 per cent. of the Company's existing
issued share capital) (the "Subscription Shares") on or before 31
October 2023 at a price of 30 pence per Subscription Share, which
would raise gross proceeds of approximately GBP13.5 million (or
US$16.4 million at an exchange rate of GBP1:US$1.215) for the
Company. The Company intends to seek admission of the Subscription
Shares to trading on AIM ("Admission"). A further announcement will
be made in relation to the Subscription Shares in due course.
San Leon has also issued warrants to TRAM to subscribe for
62,500,000 new Ordinary Shares at 60 pence per new Ordinary Share
for a period of five years from 6 October 2023. If exercised in
full, the Warrants could generate a further GBP37.5 million of
equity capital (US$45.6 million) for the Company. The Company will
apply for any new Ordinary Shares issued pursuant to the exercise
of the Warrants to be admitted to trading on AIM.
Exercise of the Warrants and conversion of the Loan into
Ordinary Shares will be subject to approval of shareholders and San
Leon expects to publish a circular convening an extraordinary
general meeting ("EGM") in due course. Toscafund Asset Management
LLP ("Toscafund"), the Company's largest shareholder and holding
75.00 per cent. of the Ordinary Shares, has provided the Company
and TRAM with a letter of intent to vote in favour of all necessary
resolutions at the EGM.
C. Use of proceeds
The Company intends to use the net proceeds from the Investment
to, inter alia:
a) loan a further US$37 million into ELI, which owns a new
pipeline and a floating storage and offloading vessel, together
with the right to subscribe for 35 per cent. of ELI. The Board
continues to believe that it is important for San Leon to assist
ELI with the funding requirements for achieving its key project
milestones;
b) acquire a further 13.5 per cent. of ELI's existing shares
from Ocean Pearl Maritime SA ("Ocean Pearl") for US$12 million
(which has been successfully negotiated down from the indicative
price of US$15 million as set out in the Company's admission
document last year); and
c) repay the US$5 million loan from funds managed by Toscafund,
which was announced on 8 August 2023, along with its associated
coupon at a rate of 10 per cent. per annum. As announced on 9
October 2023 Toscafund has provided the Company with a redemption
and release letter which sets out, inter alia, the arrangements for
the release of their security, comprising both a debenture issued
by the Company as well as assignments and pledges over all of its
group companies' loan and equity interests in ELI. The redemption
and release letter includes a standstill provision by which
Toscafund has agreed not to make any demand for repayment of its
loan or enforce its security before 13 October 2023. Following the
full repayment of the loan from funds managed by Toscafund and the
release of their security the Company will grant similar security
in favour of TRAM; and
d) settle the Company's creditors, satisfy its working capital
needs and pursue its strategy. As previously announced, the Company
has numerous outstanding creditors (totaling around US$15 million)
and these creditors have been exerting increasing pressure on the
Company (including sending letters before action). The Board
believes that without the receipt of the proceeds of the
Investment, the Company's financial position would have become
increasingly precarious and that it would need to take steps to
protect the interests of the Company's creditors.
It is a condition of the Investment that San Leon advances the
further US$37 million to ELI and acquires Ocean Pearl's
shareholding in ELI without delay. ELI is heavily indebted and
requires an immediate injection of capital in order to meet certain
court sanctioned obligations to its main contractor for the
pipeline construction (which have not been complied with by ELI).
Without the further US$37 million loan from San Leon, the Board
believes that ELI would be unable to pursue its strategy and, in
particular, would have failed to secure customers for its pipeline.
This would inevitably have been highly detrimental to the value of
San Leon's investment in ELI. In addition, the Board believes that,
due to ELI's severe financial difficulties, without the US$37
million loan from San Leon, ELI may be required to take steps to
protect the interests of its creditors. The Board anticipates that
part of the US$37 million loan will be applied by San Leon settling
ELI's creditors directly.
The purchase of Ocean Pearl's shareholding is likewise
significant as it takes San Leon's shareholding in ELI to
approximately 55 per cent. in aggregate. As the majority
shareholder, San Leon is now able to exert control over ELI's
strategy and management and this is an important factor in TRAM's
decision to make the Investment. Of most importance is the
conclusion of the pipeline construction by ELI which San Leon will
now be directly overseeing.
D. Further information on TRAM
TRAM is a concentrated, research-intensive, fundamental value
investor in the public markets based in New York. Since 2019, TRAM
has built a portfolio of public market and real estate investment.
As of March 2023, TRAM's portfolio is composed of US$850 million in
assets under management along with US$1.2 billion in
co-investments.
Further information on ELI
The Investment enables the Company to conclude its further US
$42 million investment in ELI , as originally announced on 8 August
2023 , as well as complete the acquisition from Ocean Pearl of its
entire holding in ELI (together the " New ELI Investments ") . The
New ELI Investments , together with the Company's existing
investments in ELI , will make San Leon the largest and majority
shareholder in ELI with approximately 55 per cent. of the company .
The Company has entered into an agreement with Ocean Pearl for the
acquisition of Ocean Pearl's 54,600 shares in ELI (representing
13.5 of ELI's existing issued shares) for a consideration of US$12
million . Although San Leon needs to advance the payment to Ocean
Pearl shortly, settlement of the share transfer is subject to the
consent of ELI's lender, Guaranty Trust Bank Limited, which holds a
pledge over all shares issued by ELI.
ELI owns the alternative crude oil evacuation system, comprising
a new undersea pipeline and the FSO ELI Akaso Terminal (the
"ACOES") . The mooring of the FSO ELI Akaso has now been completed
and has been classed by Bureau Veritas for oil storage services and
will now start processing hydrocarbons through its facilities. As
previously announced, the ACOES will provide a dedicated oil export
route from the OML 18 oil and gas block and is a new 47-kilometre
secure undersea pipeline from OML 18 to the FSO ELI Akaso terminal.
The ACOES pipeline component is expected to have a throughput
capability of 100,000 barrels per day (b/d) of oil, while the FSO
ELI Akaso has a storage capacity of 2 million barrels of oil. Once
commissioned, the ACOES is expected to reduce the downtime and
allocated pipeline losses currently associated with the Nembe Creek
Trunk Line (" NCTL "), to below 10 per cent. The ACOES is expected
to be completed in the second half of 2023.
ELI's accounts for the year ended 31 December 2021 state that
the company made a loss before tax of approximately US$10.5 million
and reported total assets of approximately US$226.9 million. One of
San Leon's directors is currently appointed to ELI's board . Due to
its difficult financial condition (indicated above) ELI has not yet
prepare d its accounts for the year ended 31 December 2022.
The Board believes that the ACOES pipeline will have a
significant effect on the operation of OML 18, primarily through
the reduction of downtime and losses associated with the existing
export route. ELI, through its Nigerian subsidiary, will also earn
fees for transporting and storing crude oil from OML 18 and
potential third parties.
The New ELI Investments constitute a reverse takeover under the
AIM Rules for Companies and full details will be included in a
separate admission document which will be published by the Company
. The Company's shareholders will be asked formally to approve the
New ELI Investments at a general meeting to be convened and the
Company will seek irrevocable undertakings from its three largest
shareholders to vote in favour of ratifying the New ELI Investments
prior to the readmission to trading on AIM of the Company, as
enlarged by the New ELI Investments.
The Board notes that Company has previously sought and obtained
shareholder approval (at an extraordinary general meeting held on 5
August 2022) for the Company to increase its shareholding in ELI
above 50%. N otwithstanding the Company ha ving received approval
at the extraordinary general meeting for further investment in to
ELI and the Board being comfortable proceeding with the New ELI
Investments on this basis , the Company will seek ratification from
shareholders that they support the method of financing the New ELI
Investments .
The admission document in relation to the New ELI Investments
will be in addition to, and separate from, any admission document
that may be published in connection with the p otential t
ransaction the Company is discussing with Midwestern Oil & Gas
Company Limited ("Midwestern") following the Company's decision to
terminate the proposed transactions with Midwestern, details of
which were announced on 9 October 2023 .
In light of the discussions with the Company's three principal
shareholders (set out below) the Board considers that it is
appropriate for the Company to enter into the New ELI
Investments.
The Ordinary Shares will remain s uspended until the Company has
published an a dmission d ocument in relation to the New ELI
Investments and the Company's shareholders have ratified the
actions taken by the B oard .
Discussions with the Company's major shareholders
As announced on 9 October 2023 over the last couple of months,
while enaging with TRAM on the Investment, the Board has
reappraised the strategic opportunities for the Company. The Board
believe that the Company's existing investment in ELI has potential
to generate significant value for shareholders, but it will only do
so once ELI is refinanced. This will be achieved by the New ELI
Investments.
As announced 9 October 2023 the Board has engaged with the
Company's three largest shareholders, being: i) funds managed by
Toscafund (75.00 per cent. shareholding in the Company); ii)
Midwestern (13.18 per cent. shareholding); and iii) Oisin Fanning,
the Company's Chief Executive Officer (2.11 per cent. shareholding)
on revising the Company's strategy. All three shareholders (who
together own 90.29 per cent. of the Company's issued shares) have
confirmed in writing that they are supportive of the Company's
revised strategy, the financing of the Company by way of the
Investment and the Company making the New ELI Investments.
Appointment of joint broker
San Leon is also pleased to announce the appointment of
Fortified Securities as joint broker to the Company with immediate
effect. Fortified Securities introduced TRAM and assisted in the
investment negotiations .
Enquiries:
San Leon Energy plc +353 1291 6292
Oisin Fanning, Chief Executive
Julian Tedder, Chief Financial Officer
Allenby Capital Limited
(Nominated adviser and joint broker to the Company) +44 20 3328 5656
Nick Naylor
Alex Brearley
Vivek Bhardwaj
Panmure Gordon & Co
(Joint broker to the Company) +44 20 7886 2500
James Sinclair-Ford
John Prior
Fortified Securities
(Joint broker to the Company) +44 7493989014
Guy Wheatley
Tavistock
(Financial Public Relations) +44 20 7920 3150
Nick Elwes
Simon Hudson
Plunkett Public Relations +353 1 230 3781
Sharon Plunkett
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END
MSCFLFSAIVLAIIV
(END) Dow Jones Newswires
October 10, 2023 02:00 ET (06:00 GMT)
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