San Leon provide Nigerian onshore production deal update

Additional Investment by Toscafund in BidCo

Related Party Transaction
AA – San Leon Energy plc (“San Leon” or “the Company”), the AIM quoted oil and gas exploration and production company focused on Europe and Africa, is pleased to provide the following update on its production deal on the OML 18 block, onshore Nigeria.

Certain defined terms used herein are set forth in the “Definitions” section of this press release. All dollar amounts or references to “$” refer to US dollars.

As announced on 24 May 2016, in order to complete the third part of the OML 18 Production Arrangement, which would result in the Company securing an initial 9.72% indirect economic interest in OML 18, BidCo needed to raise $70 million.

The Company announces that on 30 June 2016 BidCo, has signed agreements to complete part of the final stage of the OML 18 Production Arrangement.

The final stage of the OML 18 Production Arrangement is the acquisition by BidCo of the remaining 20 per cent. interest in Martwestern. Martwestern holds an initial 90% economic interest in Eroton, the operator of OML 18.

The Board of San Leon can confirm that $12.5 million of the remaining $70 million has been provided by funds managed by Toscafund to BidCo, in order for BidCo to purchase part of the remaining 20 per cent. interest in Martwestern and secure the right to complete the final step of the OML 18 Production Arrangement by purchasing all of the remaining 20 per cent. interest in Martwestern by 31 July 2016.

This investment has been structured as $12.5 million of Loan Notes issued by BidCo and warrants to subscribe for new ordinary shares at $0.001 in BidCo. No fees were paid to Toscafund by BidCo or the Company for this investment and San Leon’s shares in BidCo remain pledged to Toscafund. Funds managed by Toscafund have invested approximately $115.5 million into BidCo to complete the OML 18 Production Arrangement to date.

The Company has amended its agreement with Toscafund dated 22 March 2016 (which was to repurchase approximately $73 million Loan Notes), to repurchase all of Toscafund’s Loan Notes and warrants in BidCo for approximately $115.5 million (plus interest), the total amount subscribed for by Toscafund to date. The purchase of all of Toscafund’s Loan Notes and warrants will secure the Company a 6.46% initial economic interest in OML 18.

The funds required to purchase all of Toscafund’s Loan Notes is expected to be raised through an equity placing in San Leon of at least $200 million, the net proceeds of which will be used to repurchase the Toscafund Loan notes and warrants in BidCo and to subscribe for $57.5 million of new Loan Notes in BidCo. The $57.5 million is the balance of the remaining $70m required to complete the Remaining Transactions and will allow BidCo to purchase the remaining 20 per cent. of

Martwestern and therefore fully complete the third stage of the OML 18 Production Arrangement.

Following completion, San Leon will hold a 40% interest in BidCo, representing an initial economic interest of 9.72% in OML 18.

Toscafund is a substantial shareholder in San Leon, and as such the amendment to the agreement to repurchase the Loan Notes and warrants from Toscafund is classified as a related party transaction under AIM Rule 13.

The Directors of San Leon consider, having consulted with the Company’s Nominated Adviser, SP Angel Corporate Finance LLP, that the terms of the agreement to acquire the Loan Notes and the warrants are fair and reasonable insofar as its shareholders are concerned.

As previously announced, the OML 18 Production Arrangement would represent a reverse takeover under AIM Rules, and so trading in the Company’s ordinary shares will remain suspended pending the publication of an admission document by the Company or an announcement that the proposed acquisition is not proceeding. Shareholders should also be mindful that any acquisition that constitutes a reverse takeover under the AIM Rules is conditional upon shareholder approval, and requires the Company to publish an AIM re-admission document and to reapply for the Company’s ordinary shares to be re-admitted to trading on AIM. As a consequence, there is no certainty that the Acquisition will be completed.

Oisin Fanning, Executive Chairman, commented:

“The Company is again grateful to Toscafund for providing further debt funding to secure the last part of the Acquisition, while the Company organises Placing funds and finalises its AIM readmission document. The Company is proposing to repurchase all Loan Notes, subject to San Leon shareholder and regulatory approvals, using funds from the proposed placing. On completion, San Leon will have full equity rights and associated potential upside as an indirect shareholder in OML 18, but will also have the protection of having provided its investment through the Loan Notes structure, which once purchased from Toscafund, will be fully repayable by BidCo to San Leon with a 17% coupon per annum over four years.”


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