Business Irish

Wednesday 20 June 2018

San Leon boosted by $19m loan repayment

Cash flow has been slow from turbulent Nigerian investment

San Leon’s Oisin Fanning — the former chief executive of Smart Telecom
San Leon’s Oisin Fanning — the former chief executive of Smart Telecom
Gavin McLoughlin

Gavin McLoughlin

Irish oil and gas explorer San Leon Energy has received a $19m (€15m) loan repayment from its interest in a Nigerian oil field.

The company, run by former Smart Telecom chief executive Oisin Fanning, has had a tumultuous run since investing in the project.

The stake was acquired via a complex arrangement that saw San Leon become the beneficial owner of around $175m of loan notes. But cash flow from that project, known as OML 18, had initially been slow - as of April 1 2017, it was due $58m but had only received $5m.

San Leon has now received the $19m payment it was due to receive in the first quarter of this year, despite some difficulties relating to production. Fanning told the market in February that "pressure on production levels caused by a scarcity of capital available to OML 18 for investment in well activity, together with securing permissions, has been exacerbated by downtime and pipeline losses caused by external factors."

"This has resulted in materially lower production and sales volumes...[but] these issues are not expected to affect, materially, the long-term field performance, whilst in the shorter term San Leon has a number of protections in place for receiving loan note repayments which are expected to be approximately $19m per quarter."

One of the issues the project ran into was so-called "illegal bunkering"-- filling a ship with fuel in an unlawful fashion. This caused a fire at a non-operational well.

"This did not affect production, and there were no casualties. The fire was swiftly brought under control ... without a reportable spill."

The Nigerian project also contributed to problems in filing accounts for 2016. San Leon missed the stock-market-imposed deadline. It said this was due to the complexity of the Nigerian venture.

"The delay in publication of the accounts has been for procedural reasons," San Leon said, adding that it needed to incorporate "the consolidated financial statements" of a particular entity related to the Nigerian asset using the equity method of accounting - a process for dealing with the financial effects of an investee company in which the core company has a significant influence.

"The consolidation process involves several jurisdictions, and has taken longer than expected for what is the first such consolidation and equity accounted investment in Nigeria for San Leon. When this process is completed, it will be followed by a number of normal audit confirmatory and technical review matters, which when completed will then put the company in a position to finalise and publish its financial statements."

When the accounts were published, San Leon's auditors said there were "material uncertainties which may cast significant doubt" about the company's ability to continue. Later the company said it was in talks with a partner in the Nigeria project, Midwestern, about a transaction that could constitute a reverse takeover - a form of merger of the two companies. San Leon's shares remain suspended from trading on foot of those discussions.

Sunday Indo Business

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