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.

5 June 2024

San Leon Energy plc

("San Leon" or the "Company")

Corporate update

San Leon, the independent oil and gas production, development and exploration company focused on Nigeria, provides the following corporate update.

Refinancing update

The Company is pleased to announce that it has been made a beneficiary of a €500 million German government bond (the "Bond").  Under the proposed terms of the agreement with the legal owners of the Bond, San Leon will be able to utilise the Bond for a period of three years by applying it as security to obtain finance from a third party, although the legal ownership of the Bond will remain with the owners.  In this regard, the Company is now in negotiations in respect of the terms of such a third-party finance arrangement (the "Expected Refinancing") with a well-known international financial services institution and expects to announce further details within the next two weeks.  This further announcement is anticipated to include both the contractual terms for San Leon receiving such finance, as well as the terms for San Leon utilising the Bond as security for such financing.

Should documentation in relation to this Expected Refinancing be agreed within the next two weeks, as anticipated by the board of San Leon (the "Board"), then the Company expects funds to be received during June 2024. Receipt of funds pursuant to the Expected Refinancing will allow the Company to: i) undertake its further investment in Energy Link Infrastructure (Malta) Limited ("ELI"), as detailed in the announcement made on 10 October 2023; and ii) settle, in full, the Company's outstanding creditors. Importantly, the Expected Refinancing, if completed, is expected to enable San Leon to use the funds received towards all of the proposed actions originally contemplated within the announcement of the proposed funding from Tri Ri Asset Management Corp. ("TRAM") on 10 October 2023.  Furthermore, San Leon notes that, since October 2023, ELI's funding requirements have increased, and the Expected Refinancing has been negotiated with that in mind.  At this time there can be no certainty that Expected Refinancing will be concluded or as to its final terms.

San Leon also previously announced that it was in discussions with other potential financing partners and had received acceptable commercial terms from two of these prospective funders.  Although negotiations remain ongoing, it is apparent that the timetable to completion of either fundraising is far longer than the Company had previously expected. Consequently, the Board considers the Expected Refinancing, supported by the Bond, to be the most likely outcome now. 

As announced on 11 March 2024, the Company also concluded that funds will not be forthcoming from TRAM (details of which were announced on 10 October 2023) and, following completion of the Expected Refinancing, San Leon will explore its options in relation to TRAM's breach of contract. 

Possible revised transactions with Midwestern Oil &Gas Company Limited

On 9 October 2023, San Leon announced the termination of its proposed transactions with Midwestern Oil & Gas Company Limited ("Midwestern") and the Company's further conditional investments in ELI (together the "Proposed Transactions").  The Proposed Transactions were announced by the Company on 8 July 2022 and full details were set out in an admission document published by the Company on the same date. The Company also announced on 9 October 2023 that, notwithstanding this termination, it remained in discussions with Midwestern regarding a revised transaction in relation to Midwestern Leon Petroleum Limited ("MLPL") and Midwestern's indirect shareholding in ELI.  The Company currently owns 40% of MLPL's issued shares with Midwestern owning the remaining 60%.  Since 9 October 2023 the Company and Midwestern have sought to align their interests, noting the approximate US$140 million of outstanding loan notes (the "MLPL Loan Notes") due from MLPL to San Leon (which are guaranteed by Midwestern).  San Leon has agreed a number of conditional payment waivers with Midwestern which expire on 30 June 2024. The Board does not currently intend to extend these conditional payment waivers beyond 30 June 2024.

San Leon announces that these discussions with Midwestern are at an advanced stage.  The Company anticipates that a revised agreement with Midwestern will involve swapping a proportion of the MLPL Loan Notes for a cash payment, the Company receiving a greater holding in MLPL and the Company receiving certain of Midwestern's interests in ELI.  At this time the Company anticipates that the revised agreement with Midwestern would have two stages:

1.    Stage 1 would involve Midwestern reorganising parts of its holding in MLPL and paying San Leon a cash deposit, pending full completion of the Expected Refinancing.  Stage 1, if entered into, would enable San Leon to receive funding in the short term which, should the Expected Refinancing not complete, would be utilised to prepare the Company's outstanding accounts (of which further details are outlined below) as part of the process to restore trading in the Company's ordinary shares of €0.01 each ("Ordinary Shares") on AIM.

2.    Stage 2 (which would be anticipated to occur in the following months) would allow Midwestern to transfer certain of its interests in ELI to the Company, subject to any regulatory requirements (including any obligations that the Company has under the AIM Rules for Companies).

At this time there can be no certainty that any such agreement will be concluded with Midwestern.  Should no agreement be reached on a revised transaction with Midwestern, San Leon will seek the repayment of the outstanding approximate US$140 million of outstanding loan notes from MLPL (which, as stated above, have been guaranteed by Midwestern) in full. 

Creditor update

With the ongoing delay in obtaining funding, the Company has numerous outstanding trade creditors (around US$25 million in aggregate) and these creditors have continued to exert increasing pressure on the Company which includes, in some cases, sending legal letters before action and, as announced in respect of Ocean Pearl Maritime SA on 11 April 2024 and 23 May 2024, commencing a petition to wind up one of the Company's subsidiaries, San Leon ELI Limited (which has since been adjourned to take place in July 2024 or shortly thereafter).  San Leon continues to liaise with its creditors, especially given the anticipation of funds from the Expected Refinancing.

Pending conclusion of the Expected Refinancing, the US$5.0 million loan to the Company from funds managed by Toscafund Asset Management LLP ("Toscafund"), which was announced by San Leon on 8 August 2023, also remains outstanding and continues to accrue interest at 10 per cent. per annum. San Leon is in regular correspondence with Toscafund in relation to the timing of repayment of this loan and Toscafund, which own 75% of the Ordinary Shares, continues to be supportive of the Company's progress. 

If, as expected, the Expected Refinancing is completed then as outlined above, the Company will settle, in full, the amounts owed to its outstanding creditors.

Ongoing suspension

The Company's Ordinary Shares remain suspended from trading on AIM, pending San Leon publishing, inter alia: i) its audited accounts for the year ended 31 December 2022 (the "2022 Accounts"), as required by Rule 19 of the AIM Rules for Companies; ii) its unaudited interim results for the six months ended 30 June 2023 (the "2023 Interim Accounts"), as stipulated by Rule 18 of the AIM Rules for Companies; and iii) an AIM admission document in relation to the further investment in ELI (the "Admission Document"), details of which were announced by San Leon on 10 October 2023.  The Company intends to pursue all of these requirements following the conclusion of its Expected Refinancing.

If, as expected, the Expected Refinancing completes during June 2024, the Company expects to publish the 2022 Accounts and the 2023 Interim Accounts around two months after receiving funds and the AIM Admission Document around a month following the publication of these accounts.  The Company has already put plans in place to progress all of these requirements following the conclusion of the Expected Refinancing.

The Company will make further announcements as required.

Enquiries: