San Leon Regulatory News (SLE)

22 January 2015

San Leon Energy Plc

("San Leon" or "the Company")

Nigerian Onshore Production Deal and Temporary Suspension of Shares

San Leon Energy Plc (the "Company"), the AIM listed company focused on oil and gas exploration and production in Europe and Africa, announces its proposed entry into Nigerian onshore oil and gas production.

Highlights

· US$180 million transaction to finance the acquisition of Mart Resources, Inc. and an additional interest in MartWestern Energy Limited, and to restructure the assets and liabilities of these acquisitions with Midwestern Oil and Gas Company Limited. The acquisition and restructuring will result in San Leon securing a 9.72% indirect economic interest in the world-class OML 18 block, onshore Nigeria.

· Significant portion of production covered by hedge at $95 per barrel until December 2017.

· The transaction includes a definitive agreement signed between San Leon Energy Plc, Mart Resources, Inc., and Midwestern Oil and Gas Company Limited to acquire Mart Resources Inc. for approximately US$62.6 million.

· San Leon will receive a minimum 65% enhanced cash sweep of Martwestern's production proceeds from OML 18 to cover the timely repayment of debt incurred to finance the total acquisition cost.

· San Leon will have no other assets or liabilities resulting from the transaction outside of the OML 18 block.

· San Leon will additionally have the right to provide oilfield services, such as workover and drilling rigs, to the OML 18 operator (EROTON Exploration and Production Limited).

· Gross block production was 31,600 bopd in September 2015, with production ramp-up plan proceeding.

· Proof of debt funding for more than US$100 million of the total US$180 million transaction has been secured by San Leon, and the Company is in advanced discussions to raise the balance.

· Subject to applicable approvals, the transaction is expected to close in March 2016.

· No dilution to existing San Leon shareholders.

Deal Overview

Subject to customary conditions (including court approvals in Canada, applicable third party approvals, applicable regulatory and stock exchange approvals, and applicable shareholder approvals), and the payment into escrow of the purchase price in respect of the Mart Acquisition, the Company will acquire and simultaneously restructure an interest in Nigerian onshore block OML 18. San Leon will also, through a new subsidiary with a local indigenous partner, have the right to provide oilfield services (such as workover and drilling rigs) to the operator.

Deal Mechanics

A binding arrangement agreement has been signed between the Company and Midwestern Oil and Gas Limited ("Midwestern", a private indigenous Nigerian exploration and production company) to acquire Mart Resources, Inc. ("Mart", a Canadian-listed exploration and production company), the "Mart Transaction".

San Leon and Midwestern (through a Canadian acquiring entity) will acquire all of the issued and outstanding common shares of Mart by way of a Plan of Arrangement under the Business Corporations Act (Alberta), at a price of C$0.25 per share, a 194% premium to the closing price on 21st January 2016. The aggregate consideration for the Mart shares will be approximately US$62.6 million.

Martwestern Energy Limited ("Martwestern"), a Nigerian holding company which is a major shareholder of EROTON Exploration and Production Limited ("EROTON", the Operator of OML 18), is owned by Midwestern, Mart and SunTrust Oil Company Limited ("SunTrust" a private indigenous Nigerian exploration and production company). Under certain restructuring agreements between Midwestern and San Leon, which will include the acquisition of SunTrust's 20% interest in Martwestern, Midwestern will assume from the Mart Transaction all assets and liabilities of Mart not associated with OML 18. The balance of the US$180 million total transaction cost is accounted for by the SunTrust acquisition and restructuring, and by transaction fees. This transaction cost will be funded by the issue of debt instruments by the Company, and the Company has already secured proof of funds for a majority of this amount.

Following the restructuring of Martwestern, the Company will hold a total indirect interest in OML 18 of 9.72%.

Attractiveness of he Deal to The Company

Unlike other divestments by IOCs in Nigeria, OML18 is unique in that the critical infrastructure is in place, is operational and has spare capacity. The development program (which has already seen success from well reactivations) will consist of workovers, equipment refurbishment and simple infill drilling. The Company therefore regards the technical and operational risks to be low.

A material part of current and future field production to the end of 2017 is covered by an oil price hedge at $95 per barrel. The hedge is paid on approximately 40% of the production for 2016 and 2017. Additionally, while the Company is paying back its transaction debt, it will receive an enhanced cash sweep of a minimum of 65% from Martwestern's share of OML 18 production to ensure a particular minimum level of investment return. Together, these factors significantly de-risk project performance for San Leon and creditors, and incentivise the development of OML 18.

Additional income is expected to be generated by the right of San Leon to provide oilfield services, such as workover and drilling rigs, to the OML 18 Operator.

Timing

Subject to necessary approvals, the transaction is expected to close in March 2016. San Leon has undertaken to deliver the purchase price into escrow by February 17th 2016, and will pay a reverse break fee to Mart of US$2.2 million in the event that it fails to do so.

Two senior executives with considerable Nigerian experience across operations, finance and transactions will join the San Leon Board once the transaction has completed.

San Leon was assisted in this transaction by DSA Investments Inc., a principal investment and family office with cross-sector expertise in origination, structuring, equity and debt raising together will full cycle project management of global transactions particularly in the energy and infrastructure sectors.

Brandon Hill Capital provided transaction support to the Company.

Full details of the proposed Mart transaction are available from Mart's website and their press release of today.

OML 18 Background

The OML 18 licence area is mangrove swamp in the Southern Nigerian Delta close to the Shell-operated Bonny export terminal. It covers 1,035km2 (larger than the country of Bahrain), is a world-class resource of oil, natural gas and condensate and includes the Alakiri, Awoba, Cawthorne Channel, Krakama, and Buguma Creek fields and related facilities. The Awoba field straddles into OML 24. The operational associated infrastructure includes seven oil flow stations, three associated gas gathering processing plants and one non-associated gas processing plant, and associated gathering facilities. Approximately 140 wells have been drilled on OML 18. Three fields are currently on production. Crude oil production from OML 18 is exported through the Bonny Crude Oil Terminal via the Nembe Creek Trunkline. Gas production from OML 18 is delivered to Notore Petrochemcial Plant, located adjacent to OML 18 via the Nigeria Gas Company's pipeline.

Gross crude oil production from OML 18, increased from approximately 14,000 bopd in March 2015 to approximately 31,600 bopd in September 2015 as the initial stages of a comprehensive well workover programme were executed. The programme will be expanded to an extensive infill well drilling programme in due course.

Temporary Suspension of Shares

The transaction, if completed, would constitute a Reverse Takeover of San Leon under the AIM Rules and will be subject to the approval of San Leon shareholders. Trading in San Leon's ordinary shares has therefore been suspended from 3 p.m. today, 22 January 2016, pending publication of a re-admission document or confirmation that the transaction is not proceeding.

Oisin Fanning, San Leon Executive Chairman, commented:

"As part of San Leon's long-term strategy to move towards production and secure near-term operational cash flow, the Company has been able to achieve a deal that capitalises on the current low oil price environment and buy into production with significant yet low risk upside and attractive hedges already in place. The proposed transaction will provide San Leon with substantial production and cash flow not only from both production but also from service provision in a world-class asset, and is also expected to provide a platform for further transactions. The move also furthers our involvement in Nigeria where we have already announced that our seismic subsidiary, NovaSeis, has signed a MoU with an indigenous Nigerian company. We also look forward to welcoming the new executives into the Company on completion of the transaction, providing country-specific operating and financial expertise. We firmly believe this will be transformational for the Company, and a large step towards San Leon becoming a dividend-paying company."

Qualified person

Joel Price, who has reviewed this update, has more than 20 years' experience in the oil & gas industry and is a member of the Society of Petroleum Engineers. He holds a BA in Natural Sciences (Geology) from Cambridge University, an MEng in Petroleum Engineering from Heriot-Watt University, and an MBA from Durham University. Joel is Chief Operating Officer for San Leon Energy and is based in San Leon's London office.

Enquiries:

www.sanleonenergy.com