- Aim listing cancelled
- Proposed refinancing expected to complete this month
- Publication of accounts expected two months after refinancing
- New listing in the UK or on overseas stock exchange planned before the year-end
Shares in Nigeria-focused exploration and production company San Leon Energy (SLE) have been delisted from trading on Aim after being suspended for more than six months, pending the publication of the 2022 annual accounts, 2023 interim accounts and an Aim admission document in relation to a further investment in Energy Link Infrastructure (ELI), a midstream infrastructure group. However, all is not lost.
That’s because the board expects to finally complete a refinancing later this month, which will not only enable San Leon to settle all outstanding trade creditors ($25mn of liabilities) and take majority control of ELI, but be in a position to publish its accounts within two months of receipt of the funds.
Furthermore, it is the board’s firm intention to undertake a listing, either in the UK or on an international stock exchange, in the second half of 2024 to restore liquidity for its shareholders. At that point, the directors expect San Leon will be fully funded as well as being ELI’s majority shareholder. ELI is the operator of the new subsea 100,000 barrels of oil per day (bopd) alternative crude oil evacuation system (ACOES) export pipeline within the Niger Delta OML18 acreage and a 2mn barrels of oil capacity offshore floating storage and offloading (FSO) vessel. Once commissioned, the ACOES is expected to reduce the downtime and allocated pipeline losses currently associated with the Nembe Creek Trunk Line to below 10 per cent.
Refinancing arrangements
Last month, San Leon became a beneficiary of a €500mn (£424mn) German government bond which it plans to use as security to obtain finance from a third party (although the legal ownership of the bond will remain with the owners). The company is in negotiations with a “well-known international finance institution” in respect of a third-party finance arrangement.
San Leon is also in advanced discussions with Midwestern Oil & Gas Company (Midwestern) in relation to a reorganisation of the two companies' holdings in Midwestern Leon Petroleum Limited (MLPL). San Leon owns 40 per cent of MLPL's issued shares, with Midwestern owning the remaining 60 per cent. Since 9 October 2023, San Leon and Midwestern have sought to align their interests, noting the $140mn of outstanding loan notes due from MLPL to San Leon (which are guaranteed by Midwestern).
The revised agreement between the parties will involve San Leon swapping a portion of the loan notes for a cash payment of $15mn, alongside a further $5mn bridging loan if required. The second stage of the transaction involves Midwestern transferring certain of its interests in Eli to San Leon. The documentation in respect of the proposed transactions with Midwestern is at an advanced stage.
Timeline for new listing
Clearly, the cancellation of the Aim listing is not ideal, but as chief executive Oisin Fanning notes "it makes no difference to the activities we are undertaking to complete our refinancing – and, in many respects, may simplify some of the processes.” He has a point as there is little change to the work stream as San Leon still needs to publish an admission document and release its delayed accounts before trading in the shares can be restored.
Moreover, the completion of the refinancing and resolution of the outstanding loan note debtors will bring much-needed clarity to investors, who will then be able to focus on a profitable and cash-generative project from which San Leon expects substantial upside through its majority ownership following completion of the proposed further investments in ELI. In the meantime, the directors plan to keep shareholders fully informed of all developments during the period the shares are not listed.
So, although shareholders in San Leon have had a roller coaster ride since I selected the shares, at 27.5p, in my 2021 Bargain Share Portfolio, hitting a high of 57p in the summer of 2022 before sliding below my entry point shortly before they were suspended, there is light at the end of the tunnel. I expect a profitable outcome on the holding in due course. Hold.
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