The incredible shrinking asset5 Dec 2018 17:03
Below is an extract from the Competent Persons Report in the 2016 Admission Document.
"SLE's economic interest is held through Midwestern Leon Petroleum Limited ("BidCo"), a Mauritian incorporated
special purpose vehicle, established for the purpose of holding the combined OML 18 interest of both San Leon
Energy and Midwestern Oil & Gas Company Limited. On completion of the OML 18 transaction, San Leon will
hold 40% and Midwestern will hold 60% of BidCo and SLE will own a 5.4% net working interest. SLE will own a
9.72% net economic interest until two hurdles have been met:
1) The original purchase price paid by Eroton in March 2015 has been paid back with interest through cash
flow at Eroton level
2) Various production milestones have been met, beginning when hurdle 1) has been passed. When 20
million barrels of gross OML 18 production have been realised, Bilton increases its net economic interest in
Martwestern from 10% to 20%, and SLE net economic interest in OML 18 decreases to 8.64%. Various further
cumulative production hurdles increase Bilton’s net economic interest in Martwestern until after 40 million barrels
of gross OML 18 cumulative production its net economic interest in Midwestern reaches 50% and SLE’s net
economic interest in OML 18 reaches 5.40%."
To date we know that Eroton haven't paid off their original OML18 purchase price. Hence Hurdle 1 has not yet been achieved. Hence Midwestern's temporary 90% interest still pertains, as does SLE's 9.72%.
However, it does appear that some of the Hurdle 2 milestones must have been surpassed. Taking the CPR words literally, SLE's economic interest drops to 8.64% when 20 million barrels of GROSS OML18 production is reached. I take 'gross' to mean the totality of OML18 production including NNPC et al.
SLE's deal was operative from 30 June 2016. Therefore at 31 December 2018 we are talking about 2 1/2 years production. 20 million barrels equates to gross total field production of 21,917 boepd, well below what has been reported. So, unless I cannot read English, fulfillment of Hurdle 1 will automatically reduce SLE's indirect interest.
If anyone has contrary information, please post it with specific reference to the Admission document.
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