Further Extension of the Conditional Payment Waiver in relation to the MLPL Loan Notes

Source: www.gulfoilandgas.com 2/1/2022, Location: Africa

San Leon, the independent oil and gas production, development and exploration company focused on Nigeria, provides the following update regarding the outstanding loan notes due from Midwestern Leon Petroleum Limited ("MLPL") (the "Loan Notes").

Further to the announcement on 4 January 2022, San Leon has agreed with MLPL, Midwestern and Martwestern (as defined below) to a further extension of the Conditional Payment Waiver to 28 February 2022 or, if sooner, the termination of discussions or the signing of an agreement to effect the Potential Transaction, as defined below (but otherwise on the same terms as announced on 7 July 2021), in relation to three instalments that were originally due to be repaid on 5 July 2021, 30 September 2021 and 31 December 2021 (the "Extended Conditional Payment Waiver"). Interest continues to accrue on the principal amounts waived whilst the Extended Conditional Payment Waiver is in effect. As at 31 January 2022, the Extended Conditional Payment Waiver relates to US$100.4 million, being a principal amount due of US$82.2 million and total accrued interest due of US$18.2 million, which will be payable 90 days after such expiry, save for, inter alia, if there is an event of default.

MLPL is part of the structure through which San Leon holds its current 10.58% indirect economic interest in OML 18. San Leon currently has a 40% equity interest in MLPL with the remaining interest in MLPL being owned by Midwestern Oil and Gas Company Limited ("Midwestern"). Midwestern is also the guarantor of the Loan Notes. MLPL has a 100% equity investment in Martwestern Energy Limited ("Martwestern"), which in turn has a 98% economic interest in Eroton Exploration and Production Company Limited ("Eroton"), which currently holds a 27% working interest in OML 18 and is its operator.

On 24 June 2021, San Leon announced that, inter alia, the Company was in preliminary discussions with Midwestern in relation to a transaction to reorganize Midwestern's holdings in the Company and MLPL into a single holding in the Company, through the transfer to the Company of the 60% equity interest in MLPL that it does not currently own (the "Potential Transaction"). It was also announced that it is expected that, inter alia, as part of the Potential Transaction, the amounts owed to San Leon by MLPL pursuant to the Loan Notes will be taken into account in the overall structure and eliminated from the resulting structure. On 24 December 2021, San Leon provided a further update on the Potential Transaction, which would be classified as a reverse takeover pursuant to the AIM Rules for Companies (the "AIM Rules").

Related party transaction disclosure
Midwestern and MLPL are related parties of the Company for the purposes of the AIM Rules by virtue of Midwestern holding more than 10% of the existing Ordinary Shares in the Company and the level of Midwestern's current interest in MLPL. The Extended Conditional Payment Waiver is therefore a related party transaction under the AIM Rules. The Directors of San Leon (excluding Adekolapo Ademola who is not considered to be independent as he is a representative of Midwestern on the Company's board) consider, having consulted with the Company's nominated adviser, Allenby Capital Limited, that the terms of the Extended Conditional Payment Waiver are fair and reasonable insofar as the Company's shareholders are concerned.


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