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.

20 December 2022

San Leon Energy plc

("San Leon" or the "Company")

Update on proposed refinancing, balance sheet and working capital position

Potential disposal of Oza investments

San Leon, the independent oil and gas production, development and exploration company focused on Nigeria, provides the following update in relation to the Company's proposed refinancing discussions, its US$50 million loan facility and its working capital position. The Company also announces the proposed sale of its non-core investments relating to the Oza oil field.

As disclosed in the AIM Admission Document that was published on 8 July 2022 (the "Admission Document"), a loan facility of US$50 million has been made available to the Company by MM Capital Holding Limited ("MM Capital") for the purposes of funding the Company's working capital requirements and financing the Further ELI Investments (the "MM Capital Facility").  Whilst the MM Capital Facility is a legally binding facility agreement in place between the Company and MM Capital, the Board of San Leon has delayed utilising the facility as it believes that additional or alternative financing might be available on terms that may be better aligned with the Company's overall strategic and financing objectives.  Specifically, a prospective alternative lender has also indicated that it may have an interest in taking an equity position in San Leon by acquiring existing ordinary shares from certain shareholders. As the Company seeks to diversify its shareholder base and build long term support ahead of the planned expansion of its activities in Nigeria, the Board considers that financing on this basis represents a substantial improvement over the MM Capital Facility.

As previously announced, San Leon is in discussions with a prospective alternative lender in this regard.  It is the Board's view that these two financing sources are mutually exclusive and, noting what it believes to be considerable advantages with the alternative counter party, the Board does not consider it to be in the Company's or shareholders' best interests to draw down the MM Capital Facility at this time.

On 1 December 2022, the Company announced that discussions on the alternative financing were expected to be concluded by mid-December 2022. However, given its more extensive terms, this process has since been proved to be more complex than anticipated, and the timetable has become more protracted, especially against the backdrop of the current macroeconomic environment.  Conversations remain very positive but, with the holiday period fast approaching, the Board now expects this alternative facility to be finalised and available for draw down early in the New Year and a further announcement will be made at that time by the Company, as appropriate.

As a further source of near-term funding, the Board is also currently in advanced negotiations in respect of the proposed sale of the Company's non-core investments relating to the Oza oil field in Nigeria (the "Proposed Non-core Investments Sale"), which had a book value of US$5.6 million in San Leon's unaudited interim results for the six months ended 30 June 2022, to generate working capital. All terms for the Proposed Non-core Investments Sale are in agreed form, however, San Leon expects the transaction to formally be entered into once the purchaser has finalised its own financing arrangements.  It is San Leon's understanding that this could be imminent and the Company is in daily contact with the prospective buyer in this regard.  A further announcement will be made at that time by the Company, as appropriate.

Since the publication of the Admission Document, the Company has not received any material cash inflows but, during that period, the Company has taken steps to manage its overheads whilst it explores these alternative refinancing options.  In addition, pending securing funding from one or both of these sources, the Company has not yet been able to progress the Further ELI Investments and several of the Company's trade creditors, predominantly related to adviser and other fees incurred in relation to the proposed Midwestern Reorganisation and the Proposed Further ELI Investments, remain outstanding. San Leon is in regular dialogue with both its creditors and ELI in respect of timing for settling these payments.

It is important to note that, notwithstanding this short term cashflow delay, San Leon's balance sheet is robust with, in particular, US$112.6 million owed to it by Midwestern Leon Petroleum Limited (the "MLPL Loan") and US$23.0 million owed to it by ELI.  The MLPL Loan will be extinguished following the proposed Midwestern Reorganisation but, for the time being, remains a valid obligation and therefore a significant asset of the Company's.  Aside from Oza, the Company also holds non-core assets in other countries which may have a meaningful value, such as the 4.5% net profit interest in the Barryroe Field, which lies in shallow water of about 100m some 50km off the south coast of Ireland.

For the time being the Board is satisfied that its alternative refinancing options are progressing satisfactorily, even if slower than initially hoped, and furthermore that conversations with those creditors who are due outstanding payments are not producing any undue pressure on San Leon.  Nevertheless, the Board continues to keep these matters under review and will take actions to protect the interests of both shareholders and creditors as appropriate.  As set out in the Admission Document, the Further ELI Investments are contingent on San Leon securing further funding, whether from the MM Capital Facility or otherwise, and the Board are focused on finalising this.

Unless otherwise defined herein, the capitalised defined terms used in this announcement have the same meaning as those used in the Company's Admission Document.

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