30th Sep 2016 11:35
LONDON (Alliance News) - San Leon Energy PLC said it remained loss-making in the first half despite a reduction in debt leading to a large fall in finance costs but the company is expected to sign a landmark deal on Friday that will kick-start production to deliver immediate returns for shareholders.
Revenue remained nominal in the first six months of the year whilst administrative costs increased to EUR5.7 million from EUR4.4 million, but that was more than offset by a fall in finance costs to EUR754,000 from EUR3.9 million.
Subsequently, the pretax loss for the half totalled EUR6.2 million rather than the wider loss last year that amounted to EUR8.3 million.
The company found itself in a very favourable position last month when it was able to raise a staggering GBP170.3 million through a placing priced at a huge 55% premium as appetite for its shares grew following the acquisition of a stake in a producing oilfield in Nigeria.
San Leon shares have been suspended since the middle of January as it progresses the substantial deal to acquire a 9.72% indirect economic interest in OML18, which is currently pumping out 54,000 barrels per day and 55.0 million standard cubic feet of gas compared to late August when it was producing 50,000 barrels a day and 50.0 million standard cubic feet of gas.
Despite the significant levels of production, plans are underway to continue growing the level of oil and gas extraction to reach target production of approximately 115,000 barrels of oil and approximately 485 million standard cubic feet of gas by 2020.
That expansion, which will be conducted over a five year period at a cost of USD1.50 billion, is significant for San Leon as the London-listed company, as part of the deal, has the right to provide drilling and workover rig services to Eroton.
San Leon said the production agreement for OML18 is expected to "complete today" after the previously conducted fundraising was approved by shareholders earlier this month.
Shareholders should begin to benefit immediately as San Leon has committed to returning 50% of the OML18 free cashflows to shareholders either by way of buyback of ordinary shares or by way of dividends for a five year period.
"San Leon is partnering closely with Eroton to execute the redevelopment of OML 18. The operational activity listed in this report demonstrates the strong breadth and depth of the technical work being carried out and planned. We look forward to reporting the results of the Nigerian work programme in due course," said Chief Executive Oisin Fanning.
Operational activity in other non-core assets has been minimized in order to preserve capital but a second successful gas well, Racwicz-15, was drilled on its asset onshore Poland in the period, The operator, Palomar, is continuing to develop the Polish field and an update is due in the near future, but the asset simply cannot compete with the potential of the Nigerian asset.
"With the focus of operations shifting to Nigeria and away from historical international activities focused on exploration, the Company has taken the prudent steps to exit a number of peripheral assets to reduce costs and allow concentration of effort in the right place," it said.
San Leon shares were up 2.5% on Friday afternoon at 46.50 pence per share, 44% higher than the start of 2016.
By Joshua Warner; [email protected]; @JoshAlliance
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