San Leon Energy Plc (“San Leon” or “the Company”), the AIM listed oil and gas exploration and production company focused on Africa and Europe, today announces that Eroton has verbally informed the Company that Eroton has received the first payment from Nigerian National Petroleum Corporation (“NNPC”) for its 2015-2016 arrears on OML 18, onshore Nigeria. US$7 million has been received, leaving
approximately US$86 million outstanding to Eroton.
The delayed receipt of NNPC arrears has had two main impacts to date.
Firstly, as announced on 7
September 2017, this has been a contributory factor to some work programme delays (such as well workovers and the drilling of new wells). These delays to heavy workovers and new well drilling, which target significant hikes in production rates, in turn impact the cash generated by Eroton.
Secondly, as also announced on 7 September 2017, depositing three future quarterly reserve based lending (“RBL”) repayments into the debt service reserve account (“DSRA”) attached to Eroton’s existing RBL facility, is one of the conditions that needs to be met before the RBL lenders will allow distribution of dividends from Eroton to its shareholders. The cumulative amount required to fill the DSRA account varies according to the RBL amortisation schedule, but is approximately US$120 million during 2017. This falls to approximately US$90 million in 2018 due to a decrease in quarterly RBL repayments. As of 2 October 2017, the DSRA contained approximately US$32 million (9.9 bn Naira). The deferred receipt of funds from NNPC has contributed to a delay in filling the DSRA.
Oisin Fanning, CEO, commented:
“NNPC has been paying OPEX and CAPEX contributions throughout this year towards 2017 costs on OML 18. 2015 and 2016 were difficult years for the oil and gas industry and the receipt of this payment for arrears related to this period is a significant and welcome development which increases confidence for international independent oil and gas companies investing in Nigeria. For OML 18, this is an important step towards boosting production and targeting the beginning of dividend distributions to its shareholders by Eroton. We look forward to updating the market on further arrears payments.”