San Leon Regulatory News (SLE)

23 April 2018

San Leon Energy plc

("San Leon" or the "Company")

Termination of discussions and Resumption of Trading in its Ordinary Shares

San Leon, the AIM listed company focused on oil and gas development and appraisal in Africa and Europe, received an indicative proposal from Midwestern Oil and Gas ("Midwestern") on 11 September 2017 for San Leon to acquire Midwestern's shares in Midwestern Leon Petroleum Limited ("MLPL"). Such an acquisition could have constituted a reverse takeover under AIM Rules for Companies (the "AIM Rules") and accordingly, following press speculation on 03 November 2017 concerning these discussions, the Company's ordinary shares ("Shares") were suspended from trading.

Discussions with Midwestern have continued since that date and, whilst there were some clear attractions of increasing San Leon's indirect ownership in OML 18, after careful consideration the board of San Leon (the "Board") has determined that a combination with MLPL is not in the best interests of San Leon's shareholders at this time as it does not provide a sufficient balance of added value for San Leon shareholders and certainty of near-term cash flow. The Company has therefore notified Midwestern of its decision to terminate discussions regarding a potential merger and has requested the lifting of the suspension of trading of its Shares on AIM. Trading in its Shares will recommence on AIM with effect from 07.30 on 23 April 2018.

The Company continues to have a good relationship with Midwestern. The Board believes that the discussions have themselves strengthened the working relationship between the two companies and looks forward to working with Midwestern, as its partner, and jointly advancing production at OML 18.

San Leon has now received $58.6 million in quarterly payments, and since its Shares were suspended in November 2017 has settled its dispute with Avobone and repaid material outstanding liabilities. As at 19 April 2018, San Leon had a cash balance of approximately $13.5 million. The Company is now in a strong financial position, with the benefit of an expected regular future income stream from its ongoing quarterly loan note repayments (of approximately US$19 million).

Accordingly, the Company is now able to progress with the capital reduction, subject to the confirmation of the High Court in Ireland, which has already been approved by the shareholders, to allow capital returns to shareholders.

Oisin Fanning, CEO of San Leon, commented:

"The Company has worked hard with Midwestern over the recent months to see if there was a transaction that would be beneficial to existing San Leon shareholders. Whilst the Company received an interesting proposal from Midwestern, the Board does not feel the structure of the combination (which would have included the Loan Notes being deemed to have been repaid) reflected the true value of the Company's portfolio. Accordingly, we have elected to terminate discussions with Midwestern.

Our financial position is much stronger than when discussions with Midwestern commenced. We are pleased to report that the first three quarterly payments have been received. Consequently, San Leon is now on a solid financial footing with a cash balance of $13.5 million and all material problems with creditors and litigation are behind us. I am therefore pleased to say that the Company is progressing its capital reorganisation in order to allow shareholder distributions. I thank all shareholders, and in particular, our largest shareholder, Toscafund for their patience and support during this period.

The Company has experienced a number of positive developments across its business over the last few months (as described below), whilst the backdrop of improving oil prices is encouraging. I look forward to updating shareholders with continued progress."

Notable Additional Developments during the period of temporary suspension

A number of important events occurred during the period of suspension, each of which has been already announced.

Repayment of Midwestern Leon Petroleum Limited Loan Notes

As previously stated, San Leon entered into an arrangement in September 2016 with MLPL, whereby SLE would be repaid $174.5 million plus an annual coupon of 17% through to 2020. The Instrument had an inbuilt grace period as historically explained (see the Half year results announced on 29 September 2017). This grace period has now lapsed and, as announced on 03 April 2018, a payment of US$19 million was received, being the third such quarterly payment of the outstanding Loan Notes, with payments received now totalling $58.6 million. A further $168.6 million of principal and interest remains outstanding and payable, along with future interest, in similar quarterly instalments to those received to date.

In the event of default of any of the future quarterly payments, SLE may demand immediate repayment of the full outstanding principal amount of the Loan Notes, all unpaid accrued interest and any other sum then payable from MLPL. SLE also has the benefit of a security package including guarantees from Midwestern Oil & Gas Company Limited (60% shareholder in MLPL) and Mart Resources Limited to guarantee the obligations of MLPL under the Instrument, as well as a share pledge.

Settlement of Outstanding Material Creditors

At the time of suspension, San Leon was involved in a legal dispute with Avobone N.V. over outstanding payments and their timing to Avobone N.V. The Company announced on 19 December 2018 that all outstanding payments to Avobone (totalling €11.53 million) had been settled.

Barryroe Farm Out

On 28 March 2018, Providence Resources Plc announced it had entered into a farm out agreement on the Barryroe Field, offshore Ireland, with a Chinese consortium who would fund the cost of drilling three wells and associated side-tracks. San Leon regards this as a positive development in a material asset in which the Company holds a 4.5% Net Profit Interest across the whole field and is not required to pay any further appraisal or development costs on the licence.

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