With a view to implementing the dividend policy, the Company proposes to carry out the Capital Reduction pursuant to which, subject to the confirmation of the High Court of Ireland:
(a) an amount of up to: (i) €205,126,205 being the sum standing to the credit of the Company's share premium account immediately prior to the passing of the Resolutions at the EGM; and, (ii) such other amounts as may be credited to the share premium account of the Company by 21 October 2016 consequent upon the allotment of the New Ordinary Shares, will be cancelled and extinguished, or such lesser amount as is approved by the High Court of Ireland; and
(b) all the Deferred Shares will be cancelled or such lesser number as is approved by the High Court of Ireland.
The reserves which may result from such cancellations of capital would be treated as profits available for distribution by the Company.
The Deferred Shares have effectively no rights attached to them. In addition, the Articles of Association provide that the reduction of capital by the Company, involving the cancellation of the Deferred Shares without any repayment of the capital in respect thereof, or any reduction of share premium account shall not constitute a variation or abrogation of the rights attached to the Deferred Shares.
If implemented, it is expected that the Capital Reduction would, subject to the legal, contractual, regulatory and capital requirements referred to below, reduce the constraints on the Company, due to a lack of distributable reserves, from paying dividends on its Ordinary Shares at a future date should the Board deem this to be appropriate. It should be noted that the Placing is conditional on Resolution 4, being the necessary resolution to approve the Capital Reduction, being passed at the EGM, so that if Shareholders do not approve Resolution 4 the Placing will not proceed.
The Capital Reduction itself will not involve any distribution or repayment of capital or share premium by the Company and will not reduce the underlying net assets of the Company and the High Court of Ireland will need to be satisfied that the interests of creditors are not prejudiced by the Capital Reduction. Under the Irish Companies Act 2014, the proposed reduction of capital can only be undertaken with Shareholder approval (being sought in Resolution 4) and with the confirmation of the High Court of Ireland, which is intended to be sought at an appropriate time following the EGM.
The OML 18 Production Arrangement constitutes a 'reverse takeover' under the AIM Rules for Companies and is therefore dependent upon the approval of Shareholders being given at the EGM, details of which are set out below.
Resolutions will be proposed at the EGM, inter alia, to approve the OML 18 Production Arrangement. If the Resolutions are duly passed at the EGM, the admission of the Existing Ordinary Shares to trading on AIM will be cancelled (immediately prior to Admission) and the Enlarged Share Capital will be admitted to trading on AIM.
Application will be made by the Company for the Enlarged Share Capital to be admitted to trading on AIM and it is anticipated, subject to completion of the OML 18 Production Arrangement that Admission to AIM will become effective and that trading in the Enlarged Share Capital on AIM will commence at 8.00 am on 21 September 2016.
If the OML 18 Production Arrangement is not completed, the Existing Ordinary Shares will continue to be traded on AIM, the New Ordinary Shares will not be issued or admitted to AIM, the Proposed Directors will not be appointed to the New Board and the Existing Directors will remain on the Existing Board.
Oisin Fanning, Executive Chairman of San Leon said:
'This is a transformational transaction representing the progress that we have made in delivering against our strategy of securing production and near-term operational cash flow. The OML 18 field in Nigeria is a world class asset currently producing more than 50,000 barrels of oil per day and 50MMscfpd of gas and containing substantial 2P reserves. San Leon's interest in OML 18, secured through an initial 9.72% indirect holding, provides material production, cash flow and significant expected returns to our Shareholders. Cash flow is expected from three different sources: repayment of loan and interest provided by the Company to BidCo* (with preferential repayment terms); dividends as a shareholder of BidCo; and income from the provision of rig and workover services.
Our Board will be further strengthened through the appointment of several new Non-Executive Directors. In particular I would like to highlight the appointment of Mr Mutiu Sunmonu, a former managing director of Shell and country chairman for Shell's operations in Nigeria, to Non-Executive Chairman. Mr Sunmonu brings a wealth of knowledge of the Nigerian oil and gas industry and his addition to the Board allows me to take the role of CEO to focus on the day to day running of the enlarged company. All Board changes are conditional upon Admission.
Finally, we are extremely grateful to our shareholders for their continued patience and support. This has been a long transaction, reflecting its scale and ambition. In particular, we would like to thank Toscafund which has demonstrated its continued commitment to the Company and to our future growth prospects. We believe that the OML 18 Production Arrangement represents a huge opportunity for the Company and its shareholders, providing a platform for significant growth and the creation of shareholder value.'
*BidCo is a Mauritian incorporated special purpose vehicle, established for the purpose of holding the San Leon's OML 18 interest. San Leon will hold 40% of BidCo following Admission.
The Admission Document and Notice of General Meeting will be posted to shareholders today and are also available on the Company's website at www.sanleonenergy.com. The definitions in this Announcement are the same as those in the Admission Document.
Brandon Hill Capital, SP Angel and Whitman Howard are acting as agents to the Placing.
Placing at 45p per share to raise approximately £170.3 million (US$221.4 million)
Approval of waiver of obligations under Rule 9 of the Irish Takeover Rules
Resumption of trading on AIM
Notice of Extraordinary General Meeting
San Leon is pleased to announce today it has conditionally raised approximately £170.3 million (US$221.4 million) through an issue of 378,400,000 new ordinary shares ("Ordinary Shares") at a placing price of 45 pence per Ordinary Share ("Placing Price") with institutional and other investors. The net proceeds are being used to complete the OML 18 Production Agreement, which will result in the Company securing an initial 9.72 per cent. indirect economic interest in OML 18, the world-class Nigerian onshore oil and gas asset, and for general corporate purposes.
· Conditionally raised approximately £170.3 million (US$221.4 million) through an issue of 378,400,000 new ordinary shares by way of a placing at a placing price of 45 pence per Ordinary Share, a 54.5% premium to the last traded price of 29.125p on 21 January 2016.
OML 18 PRODUCTION ARRANGEMENT:
· The OML 18 Production Arrangement represents the entry by the Company into the Nigerian onshore oil and gas production industry, one of the largest oil producing countries in the world.
· San Leon will secure an initial 9.72 per cent. indirect economic interest in OML 18, a world-class onshore producing asset.
· OML 18's estimated gross 2P reserves are approximately 576 MMbbl of oil and approximately 4.2 Tcf of gas and its gross 2C contingent resources are approximately 203 MMbbls of oil and approximately 1.6 Tcf of gas.
· As of June 2016 OML 18 was producing at approximately 50,000 bopd of oil and approximately 50 MMscfpd of gas.
· Eroton, the Operator of OML 18, has entered into an Offtake Agreement at a gross price of US$95 (US$91.5 net) for approximately 35% of the expected 2P production to the end of 2017.
· San Leon has the right to provide oilfield services to Eroton.
The Placing and the OML 18 Production Arrangement are conditional on the passing of various resolutions, which are being put to Shareholders at an Extraordinary General Meeting.
Oisin Fanning, Executive Chairman of San Leon said:
'This is a transformational transaction representing the progress that we have made in delivering against our strategy of securing production and near-term operational cash flow. The OML 18 field in Nigeria is a world class asset currently producing more than 50,000 barrels of oil per day and 50MMscfpd of gas and containing substantial 2P reserves. San Leon's interest in OML 18, secured through an initial 9.72% indirect holding, provide
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