SLE.L Regulatory News (SLE)

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.

29 November 2021

San Leon Energy plc

("San Leon" or the "Company")

Update on potential transaction

San Leon, the independent oil and gas production, development and exploration company focused on Nigeria, is pleased to provide the following update on the proposed reorganisation to consolidate Midwestern Oil and Gas Company Limited's ("Midwestern") holding in the Company and Midwestern Leon Petroleum Limited ("MLPL") into a single holding in the Company (the "Potential Transaction"). The Potential Transaction also includes, inter alia, proposed further debt and equity investments to be made by San Leon in Energy Link Infrastructure (Malta) Limited ("ELI").

San Leon has been informed that Eroton Exploration and Production Company Limited ("Eroton"), in which San Leon currently has an indirect 39.2% economic interest, has signed a non-binding term sheet with Africa Import Export Bank ("Afrexim") for a prospective US$750,000,000 senior secured reserve-based lending facility. The purpose of the proposed facility, in addition to refinancing Eroton's current senior bank debt (of approximately US$196 million), is to provide funding which will be used by Eroton to acquire an additional 18% interest in OML 18 from two of the other partners in OML 18, subject to agreeing documentation and relevant consents, thereby taking Eroton's interest in OML 18 to 45% (the "Proposed Eroton Transaction"). Eroton is also the operator of OML 18.

San Leon currently has a 40% equity interest in MLPL with the remaining interest in MLPL being owned by Midwestern. MLPL has a 100% equity investment in Martwestern Energy Limited ("Martwestern"), which in turn has a 98% economic interest in Eroton.

As part of the Potential Transaction San Leon would increase its indirect economic interest in Eroton from 39.2% to 98% and, following completion of the Proposed Eroton Transaction, San Leon's indirect economic interest in OML 18 would increase from the current 10.58% to 44.1%. Given that the Proposed Eroton Transaction is to be financed through a debt facility, it is not expected that the consideration payable under the Potential Transaction (being an issue of new shares in the Company to Midwestern), will be impacted. As previously announced, it is expected that, inter alia, as part of the Potential Transaction, the amounts currently owed to San Leon by MLPL (pursuant to the loan notes) will be eliminated.

The heads of terms for the Potential Transaction (the signing of which was announced on 12 July 2021) are being updated to reflect a proposed restructuring of Midwestern's indirect holding in ELI (which is currently held through a joint venture) to facilitate the proposed transfer of this holding to San Leon as part of the Potential Transaction. There is expected to be no economic impact on the Potential Transaction from San Leon's perspective in respect of Midwestern's restructuring of its holding in ELI.

The parties continue to work with their respective advisers to prepare the necessary transaction documentation in relation to the Potential Transaction (including publishing an AIM admission document, given that the Potential Transaction will be classified as a reverse takeover under the AIM Rules for Companies (the "AIM Rules")) and to carry out due diligence.

In accordance with Rule 14 of the AIM Rules, the Company's ordinary shares will remain suspended from trading on AIM until such time as either an AIM admission document is published or an announcement is released in the event that the reverse takeover in contemplation is not proceeding.

Given the need for binding contractual documentation and applicable regulatory consents, there can be no guarantee at this stage that the Potential Transaction (including the proposed debt and equity investments by San Leon in ELI) or the Proposed Eroton Transaction will be entered into or, if entered into, that they will complete.

The Company will release further announcements as and when appropriate.

Oisin Fanning, CEO of San Leon Energy, commented:

"Eroton's new loan term sheet and its consequential proposed acquisition of an additional interest in OML 18 demonstrates the widespread and ongoing support for OML 18 as a world class oil and gas asset. We stand to be a further beneficiary of this following the conclusion of San Leon's proposed acquisition of 100% of MLPL. Our advisers are continuing to work on the transaction documentation and Eroton's planned refinancing marks an important milestone."

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