26th May 2015 07:31
LONDON (Alliance News) - San Leon Energy PLC on Tuesday said it intends to appeal a decision made by the International Court of Arbitration involving its Aurelian Oil & Gas subsidiary's acquisition of a stake in Energia Zachód.
In 2013, the International Court of Arbitration of the International Chamber of Commerce said it had received a request for arbitration from Avobone NV and Avobone Poland BV in relation to Aurelian's acquisition of Avobone's 10% shares and loans in Energia Zachód, the holder of the Siekierki asset in Poland.
San Leon said at the time that it believed the request was without merit and has contested the claims, but the court this weekend ruled Aurelian will have to pay GBP13 million, including costs, to settle the case. Two-thirds of this relates to the repayment of a loan provided to Aurelian by Avobone.
In Aurelian's view, the loan was a standard industry-practice mechanism that was used to fund Avobone's share of the drilling and other field-related costs in a tax-efficient manner, and should only have been repayable had Avobone exited after the field had generated sufficient cashflow to repay the loan, San Leon said. As of the timing of Avobone's exit in early 2013, the field had yet to generate cashflow, it added.
Following consultation with counsel, San Leon remains of the view that Avobone's claim is "substantially without merit" and that the findings of the Court of Arbitration constitute a "serious procedural irregularity", meaning it has grounds to lodge an appeal. Lodging that appeal is expected to take around nine months, San Leon said, and the company will provide further updates in due course.
San Leon shares were down 15% to 1.10 pence in early trade, one of the worst performers in the AIM All-Share.
By Sam Unsted; [email protected]; @SamUAtAlliance
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