San Leon Energy Share Discussion Threads

[1kempton] 05/2/2021 12:26

Here it is plasbryn.

Oil price surge since autumn de-risks investment Cash could equate to 60 per cent of market capitalisation by year-end Shares trading 70 per cent below sum-of-the-parts valuation Hidden value in net profit interest in undeveloped Barryroe oil and gas field The oil price has rallied by 55 per cent since early November, but this has yet to be reflected in the share price of San Leon Energy (SLE), a Nigeria focused exploration and production company that indirectly owns a 10.58 per cent interest in the vast 1,035 sq km Niger Delta licence, OML 18, located 500 km from Lagos. Operated by Eroton, the acreage is the size of Bahrain and current deliveries of 25,000 to 30,000 barrels of per day (bopd) could easily double to 50,000 bopd with the benefit of a new export pipeline that comes on stream later this year (see below). Even then output could be maintained for 32 years based on the 2016 Competent Persons Report that estimated 1P and 2P (proven) reserves of 1.1bn barrels of oil equivalent (boe).   OML 18 Reserves estimates OML 18 Gross Reserves 1P 2P 3P Oil Condensate 389 576 777 (mmbbls) Gas 3119 3213 5080 (bcf) Source: San Leon Energy annual accounts.   Eroton led the US$1.1bn equity buyout of OML18 from a Shell operated consortium in 2015 and holds a valuable 27 per cent equity interest. OML 18’s other shareholders are Nigeria state oil company NNPC (55 per cent) and two indigenous companies (18 per cent). San Leon holds its indirect 10.58 per cent interest in Eroton through a 40 per cent stake in Mauritius-acquisition vehicle Midwestern Leon Petroleum Limited (MLPL) which effectively owns a 98 per cent stake in Eroton. San Leon also purchased US$174.5m of loan notes (17 per cent annual coupon) issued by MLPL to enable Eroton to fund its share of the OML18 acquisition. These were financed by a US$221m placing in September 2018. The guarantor of the loan notes is Midwestern Oil and Gas, a company that holds the other 60 per cent of MLPL and which has close links to Eroton and other members of the OML 18 consortium. Midwestern and Eroton have a common chairman and Midwestern is the third largest shareholder in San Leon. It’s proved a successful investment to date. Between 2017 and April 2020, San Leon received principal and interest of US$190.6m and still held loan notes worth US$82.1m at its 30 June 2020 half year-end. Under the loan agreement repayment schedule, San Leon was due a US$10m principal payment in the final quarter of 2020 followed by three US$24m principal payments in July, October and December 2021. The company will also earn a further US$8m in interest to bring the total return to US$281m on its US$174.5m initial investment. Of course, the ability of MLPL to continue to make its loan note repayments to San Leon is partly dependent on the ability of OML 18 to generate sufficient cashflow for its stakeholders.   Bearing this in mind, the surge in the oil price will have done wonders for OML18’s cash flow. Based on a US$50 a barrel Brent price (spot price US$55.50), and after factoring in cash operating costs of US$23 a barrel and a 20 per cent federal government royalty, analysts at joint house broker Allenby Capital estimate that OML 18 is generating US$17 a barrel of cash. At US$60 a barrel, the cash contribution rises to US$25 a barrel. Eroton has an offtake agreement with Shell whereby oil is sold at spot prices. Bonny Light and Brent Crude are the key benchmark grades for pricing purposes. Moreover, there is a plan in place to ramp up deliveries. That’s because OML 18’s 50 fields produce an average 50,000 bopd, but deliveries are running significantly below this level mainly due to downtime and losses to theft and vandalism on the existing Nembe Creek Tunnel line (NCTL) to the Bonny Terminal. That will all change when a new subsea 100,000 bopd capacity Alternative Crude Oil Evacuation System (ACOES) export pipeline becomes operational later this year. It will cut pipeline downtime and allocated losses from 35 per cent to 10 per cent of output, according to Eroton, thus driving up deliveries at a time when the oil price is recovering strong. The ACOES tariff will be US$5 a barrel, in line with the existing NCTL tariff. For good measure, San Leon has acquired a 10 per cent equity stake in Energy Link Infrastructure, the operator of ACOES, and made a US$15m shareholder loan which carries a coupon of 14 per cent and has a four-year maturity.   Significantly undervalued As the OML 18 consortium pays down the remaining US$210m of the US$663m reserve backed loan facility which it took on to fund the US$1.1bn purchase price – the loan matures at the end of 2025 – then it will bring into sharp focus the chronic undervaluation of San Leon’s 10.58 per cent indirect equity stake in OML 18 which is held at US$37.7m (6.2p a share) in the company’s accounts. Based on San Leon’s share of OML 18’s 2P reserves of 117.7m the stake is worth nine times that amount using a modest US$3 a barrel valuation. That’s one reason why San Leon’s NAV of US$156.6m (25.75p a share) materially undervalues the true value of its assets. Another is that San Leon has a hidden gem on its balance sheet, a 4.5 per cent net profit interest in the undeveloped Barryroe oil and gas field in the Celtic Sea Basin which has 2C recoverable resources of 346m boe. San Leon’s stake was held in the interim accounts at US$4.4m. However, the operator Providence Resources (PVR) announced a farm-out with Norway-based SpotOn Energy at the tail end of last year to develop and fund the project in conjunction with a world class oilfield services company. Production could start in the second half of 2023 following an appraisal and development drilling in late 2022. Analysts have placed a value of US$35m (6p a share) on San Leon’s net profit interest, or eight times the carrying value in its accounts. It’s worth noting that analysts are predicting that cash inflows from the loan note repayment will drive up San Leon’s cash from US$35.6m (30 June 2020) to US$93.3m (15.3p a share) by the end of 2021, a sum that covers 60 per cent of San Leon’s current market capitalisation of £113m.   San Leon Energy's cash flow set to rebound   2018 2019 2020E 2021E Cash flow pre-financing $40.1m $27.7m $16.6m $72.9m Net cash (debt) $70.7m $36.7m $20.3m $93.3m Source: San Leon Energy annual report, Allenby Capital forecasts 2020 and 2021     Material discount to sum-of-the-parts valuation By my reckoning, San Leon has a sum-of-the-parts (SOTP) valuation of US$511m (£378m), or more than three times its current market capitalisation of £113m. As the company’s cash pile builds this year the shares should start to narrow the unwarranted 70 per cent share price discount as investors cotton on to the value in the company’s other assets.   San Leon Energy investment portfolio Investment  Valuation Value per share Cash balance (mid-September 2020) $15.8m 2.6p OML 18 loan note balance $82.0m 13.5p Energy Link Infrastructure loan note receivable $10.0m 1.6p Total cash and cash equivalents $107.8m 17.7p OML 18 working interest (10.58 per cent) $353.1m 58.1p Energy Link Infrastructure working interest (10 per cent) $15.0m 2.5p Barryroe net profit interest (4.5 per cent) $35.1m 5.8p PORTFOLIO VALUE $511.0m 84.0p Source: San Leon Energy accounts, London Stock Exchange RNS, Allenby Capital. Exchange rate £1:US$1.35.   The fact that San Leon’s largest shareholder, Tosca Fund Management, owns 73.4 per cent of the 450m shares in issue means that any good news is likely to lead to accentuated share price moves given the lower than average free float. There is even the possibility of a hefty cash return if the board follow up on last year’s maiden special dividend of £27m (6p a share). Buy.

[1kempton] 05/2/2021 11:37

Plasbryn, go onto google type Simon's article, that's where I read it for free

Unfortunately every time I go to copy and paste it, its encrypted and wont copy the article, but it is very very good

[plasybryn] 05/2/2021 11:18

Haven't been able to read it. Subscription only. Grrr

[l33matthews] 05/2/2021 10:26

Very positive write up. Trading at a 70% discount to sum of parts valuation.Very happy to enter at10% higher than the open.

[1kempton] 05/2/2021 09:13

Wow, great write up, more dividends coming this year .

[plasybryn] 05/2/2021 08:22

Any more information on that tip please?

[snape] 05/2/2021 08:08

Simon Thompson Bargain shares tip in the IC

[undertaker] 05/2/2021 08:06

nice rise this am...any news out?!

[alaric7] 03/2/2021 10:27

like it fell down an oil well? wot is this - day release at the psychiatric unit?

[glavey] 03/2/2021 05:54

What happens if they loose the money?

[1kempton] 02/2/2021 07:36

Malcy's Blog – 1 Feb 21Malcy's Blog: Oil stocks ‘bucket list’

Malcy's Blog: Malcy's reaction to oil sector news as it arises. Oil stocks ‘bucket list’

Estimated reading time: 1 minute

19.40mins in… exellent mention

[1kempton] 02/2/2021 06:50

Proactiveinvestors UK

Oil price, San Leon, Union Jack/Egdon/Europa, Jadestone, UOG. And finally…

A relatively quiet time for oil after the Robin Hood events that have grabbed the headlines in the last few days but with todays news that silver is in...

San Leon have a history of successfully using its model to fund companies in Nigeria who are bringing on production and hence capable of repaying the debt sometimes with decent equity stake to boot thus enhancing the return on the investment. I see no reason why SLE holders should not in due course receive significant dividends as they have in the past as the company keeps its promise to pay at least 50% of free cash flow to them.

[1kempton] 01/2/2021 21:31

hxxps://sweetcrudereports.com/nnpc-repays-3-08bn-of-jv-cash-call-debts/

[1kempton] 01/2/2021 07:14

Very very nice indeed.

1 February 2021

San Leon Energy plc

("San Leon" or the "Company")

 

Update on investment in Oza Field, Nigeria

 

Further to its previous announcements, San Leon, the independent oil and gas production, development and exploration company focused on Nigeria, is pleased to provide an update on the funding arrangements by Decklar Petroleum Limited ("Decklar") to develop the Oza Oil Field in Nigeria.  When fully disbursed, the funding is expected to be sufficient to re-establish oil production and provide development funding for the Oza Oil Field.

 

Update Regarding Funding Arrangements

 

The due diligence required to finalise the term debt to Millenium Oil and Gas Company Limited, Decklar's local partner, arranged with a Nigerian bank and the trading subsidiary of a large multinational oil company active in Nigeria has progressed and the final report by the independent technical consultant that they contracted, which is based on a review of reserve and production data and financial projections, has been issued. The definitive loan documents are now being finalised and are anticipated to be issued by the end of the first week of February 2021.

 

The details of the funding plans for the development of the Oza Oil Field were included in the Company's announcement of 1 September 2020.  In particular, San Leon has entered into a subscription agreement (the "Subscription Agreement") with Decklar. The Subscription Agreement entitles San Leon to purchase US$7,500,000 of 10% unsecured subordinated loan notes of Decklar (the "Loan Notes") and 1,764,706 ordinary shares of Decklar ("Decklar Shares") (representing 15% of the enlarged share capital of Decklar) for a cash consideration of US$7,500,000 and N1,764,706 (c.US$4,600) respectively.  Aside from an initial deposit of US$750,000, the balance of San Leon's proposed investment in Decklar is being held in escrow and will be released upon satisfaction (or waiver) of the final conditions precedent contained in the Subscription Agreement. A further announcement will be made in due course in relation to the completion of the Subscription Agreement.

 

In addition, and as previously announced, Decklar and San Leon have entered into an option agreement that, at San Leon's sole discretion, entitles San Leon to purchase an additional US$7,500,000 of Loan Notes and 2,521,008 Decklar Shares (representing an additional 15% of the enlarged share capital of Decklar, together with a gross-up of the original 15% so as to provide San Leon with a total of 30% of the enlarged share capital of Decklar) for a cash consideration of US$7,500,000 and N2,521,008 (c. US$6,500), respectively, at any time until the date that is forty-five (45) days after the well test results of the first development well on the Oza Oil Field have been delivered to San Leon.

 

Update Regarding Oza Field Preparation

 

Well site and drilling location preparation for the Oza-1 well re-entry and first horizontal development well have progressed, and the Company is pleased to report that these steps have now been completed. The road to the well site location has been rebuilt and construction of a concrete drilling pad, concrete mud pit, buildings and related infrastructure have also been completed. Long lead time items needed for the Oza-1 re-entry have been secured and a drilling rig currently located near the field has been identified and contracted.

 

As previously reported, an export pipeline that ties the Oza Oil Field production into the Trans Niger Pipeline and continues on to the Bonny Export Terminal, operated by Shell Production Development Company, is already in place. Infrastructure also in place at the Oza Oil Field includes a lease automatic custody transfer unit fiscal metering system, infield flow-lines, manifolds and a rental 6,000 barrel per day early production facility. These production and pipeline facilities should ensure that oil tested from the Oza-1 well re-entry and early production can be immediately delivered and sold on an expedited basis.

 

Oisin Fanning, Chief Executive officer, commented:

 

"As we have previously announced, the global restrictions imposed in response to the Covid-19 pandemic frustrated our attempts to complete our investment in the Oza Oil Field on our original timeframe.  I am however pleased to report that, through the combined efforts of all of the partners, we are now close to concluding the funding arrangements.  In the meantime, significant preparatory work has been completed on site and we now anticipate being able to start the project promptly.

 

"The Oza Oil Field is an existing field with historical production expected to deliver near-term cash flow.  Furthermore, we have structured the transaction to minimise our own risk through a repayable loan at an attractive interest rate with an additional significant equity upside. The option to scale up our investment following receipt of the well test results

[1kempton] 30/1/2021 13:36

So correct Alaric, the deal is blinding and the resource is there and awaits us shareholders, exellent news and all adds once up and running to a great dividend policy by sle management..

[alaric7] 30/1/2021 13:24

this Oza deal is simply awesome for San Leon. Loan to own will see us taking 30% of Decklar and first production before Easter. with all drilling preparations made and production infrastructure already in place, this will deliver an unbelievably quick payback, as well as increasing future oil revenues. the full potential of Oza is all ahead of us. oisin fanning told us there were deals like this to be done, in and around the Delta, for cash rich companies like us with zero debt and no liabities and he's gone and delivered another stunning deal here.

[1kempton] 29/1/2021 21:41

Looks like the oza deal is gunna flow.

[1kempton] 23/1/2021 15:24

hxxps://www.share-talk.com/top-twenty-the-stocks-of-the-year-for-2021-review-2-2/?utm_campaign=Weekly%20Stock%20Market%20News&utm_medium=email&utm_source=Revue%20newsletter#gs.rhayfz

San Leon Energy (SLE): Hefty Broker Price Target

Of course, 2020 was a tough year for most companies in the oil and gas space. But ironically, we have seen more issues for some of the larger players with regard to production cuts and dividend payouts than at the more nimble and specialist plays such as San Leon. It continues to be a massive dividend payer to its shareholders, most notably the near 25% special dividend paid out early in 2020. The cash for this is the result of the company’s ongoing and successful strategy of acquiring equity stakes and lending to world class assets such as OML 18, offshore Nigeria. The concept of lending to such projects at high coupon rates and then having the benefit of their growth and development means that San Leon has flown very much above the clouds during the time of COVID-19 disruption. While the pandemic is clearly going to be an influence on any company currently, San Leon’s income and quality of assets can help it ride through any delays / bumps in the road. Interestingly, the shares are less than half the 59p Panmure Gordon price target – off the back of the broker’s appreciation of San Leon’s lend-invest strategy – hence de-risking exposure in the present environment. Indeed, the only downside so far of this approach seems to be that the stock market does not yet appreciate the value and income creation at San Leon Energy. Therein lies the opportunity for 2021. This certainly appears to be one of those stock market situations where investors – apart from those who fully understand the momentum San Leon is building, continue to look the income delivering gift horse in the mouth

[1kempton] 23/1/2021 10:06

Fso eli akaso heading toward togo

[1kempton] 22/1/2021 17:05

hxxps://www.spglobal.com/platts/en/market-insights/blogs/oil/012121-ci-christyan-malek-jpmorgan-oil-gas-biden-us-shale-opec

$100pb on way by this article

[1kempton] 21/1/2021 22:50

oil over $56pb..

hxxps://oilprice.com/

[1kempton] 21/1/2021 22:40

from ii

fso on the move!!!..

Eli Akaso
Position Received
Position Received21 Jan 2021, 16:05 UTC Satellite
5 hours 40 minutes ago
Speed
Speed8.2 kn
15.2 km/h
Draught
Draught1.3 m
Course
Course153°
Navigation Status
Navigation Status … under way using engine

[1kempton] 21/1/2021 09:58

San-Leon-Energy-plc-SLEL-LONSLE-Given-New-GBX-335-Price-Target-at-JPMorgan-Chase--Co