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San Leon Energy PLC Final Results

29/06/2021 7:00am

UK Regulatory (RNS & others)


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San Leon Energy PLC

29 June 2021

The information communicated within this announcement is deemed to constitute inside information for the purposes of Regulation 11 of the Market Abuse (Amendment) (EU Exit) Regulations 2019/310. Upon the publication of this announcement, this inside information is now considered to be in the public domain.

29 June 2021

San Leon Energy plc

("San Leon" or the "Company")

Final Results

San Leon, the independent oil and gas production, development and exploration company focused on Nigeria, is pleased to announce its audited final results for the year ended 31 December 2020. The full annual report for the year to 31 December 2020 is available on the Company's website (www.sanleonenergy.com) and will be posted to shareholders shortly.

Highlights

Corporate

-- Completed the return of approximately US$33.8 million to shareholders during the first half of 2020 delivering on the Company's commitment to shareholder returns.

-- The Company entered into an agreement dated 6 April 2020 amending the existing Loan Notes Instrument (the "Amendment") between San Leon and Midwestern Leon Petroleum Limited ("MLPL"). Under the terms of the Amendment, US$40.0 million was received immediately by San Leon.

-- On 3 August 2020 the Company provided a US$10.0 million loan plus an additional US$5.0 million loan on 6 October 2020 and acquired a direct 10% interest in Energy Link Infrastructure (Malta) Ltd ("ELI"). ELI's sole asset is the proposed new Alternative Crude Oil Evacuation System ("ACOES") constructed to provide a dedicated oil export route (comprising a new pipeline together with a Floating Storage and Offloading ("FSO") vessel) from OML 18. Once commissioned, the system is expected, by Eroton, to reduce the downtime and allocated pipeline losses to below 10%.

-- On 1 September 2020, the Company announced that it had conditionally agreed to invest US$7.5 million by way of a loan to Decklar Petroleum Limited ("Decklar"), which is the holder of a Risk Service Agreement ("RSA") with Millenium Oil and Gas Company Limited ("Millenium") on the Oza marginal field, carved out of OML 11, onshore Nigeria. Under the agreements, once completed, the Company will also receive a 15% interest in Decklar for a nominal amount paid. This transaction is still awaiting final conditions precedents to complete.

-- Board appointment process previously announced completed with appointment of John Brown as Independent Non-Executive Director and Chair of the Audit and Risk Committee and Adekolapo Ademola as Non -Independent Non-Executive Director on behalf of Midwestern Oil & Gas Company Ltd. Non-Executive Directors, Mark Phillips, Bill Higgs and Linda Beal, left the Board during 2020 and Alan Campbell has since stepped off the Board in 2021 as part of a board restructure.

Financial

-- Cash and cash equivalents as at 31 December 2020 of US$18.5 million (includes US$6.8 million restricted and held in escrow for the Oza transaction) (31 December 2019: US$36.7 million).

-- Cash and cash equivalents as at 18 June 2021 were US$14.8 million (includes Oza escrow of US$6.8 million).

-- In the past 18 months US$47.3 million, of which US$46.5 million relates to 2020 (31 December 2019: US$43.2 million) in principal and interest payments has been received under the MLPL Loan Notes.

-- US$5.8 million has so far been paid of the US$10.0 million due under the MLPL Loan Notes in September 2020, leaving US$4.2 million still outstanding.

-- A share repurchase programme of US$2.0 million of Company's shares was completed between October 2019 and January 2020.

-- A special dividend of US$33.3 million was declared in May 2020, giving a dividend yield of approximately 30% as at the date of dividend announcement.

Operational

An update on OML 18 activity during 2020 is provided below.

-- Oil delivered to the Bonny terminal for sales was approximately 21,100 barrels of oil per day ("bopd") in 2020 (32,000 bopd in 2019) and continues to be affected by combined losses and downtime of approximately 35%. The 2020 figure has also been affected by OPEC oil production quota restrictions, and some Covid-related delays. Together, the losses, downtime, OPEC restrictions and Covid-related delays have caused the majority of the difference between gross production when there is minimal disruption to production, and oil is received at Bonny terminal for sales.

-- Gas sales averaged 32.7 million standard cubic feet per day ("mmscf/d") in 2020 after downtime (36.0 mmscf/d in 2019).

-- Production downtime of 9% in 2020 was caused by third party terminal and gathering system issues. This relates to days when oil production was entirely shut down at OML 18. OPEC quota restrictions on production also had an adverse effect on production rates, however downtime and Covid-related delays have meant these quotas at times have not been met. Such issues in the third-party export system are expected to be substantially resolved by the implementation of the new ACOES for the purpose of transporting, storing and evacuating crude oil from OML 18 export Pipeline. The pipeline will run from within the OML 18 acreage to a dedicated FSO vessel in the open sea, approximately 50 kilometres offshore. Expected timing for the commencement of operations is H2 of 2021. See ELI update below.

-- Pipeline losses by the Bonny Terminal operator have increased over the past year (31 December 2020: 28%; 31 December 2019: 22%), largely due to lower pipeline throughput as a result of OPEC quota restrictions. In the longer term, the ACOES is expected to reduce losses significantly.

-- Eroton completed its three well drilling programme in early 2020, with the final completion and flow of these wells impacted by Covid-19. Lower oil prices for much of 2020 have led Eroton to improve capital discipline and the prudent deferral of the next drilling campaign, now expected to commence during 2022.

-- Eroton has taken all appropriate precautions for its operations and people, with regards to Covid-19 and we understand has had no Covid-19 cases on OML 18.

ELI

-- ELI has received approval from the President of Nigeria (acting in his capacity as Minister for Petroleum Resources) for the FSO, ELI Akaso, to be set up as an oil terminal.

-- ELI is in advanced negotiations with other third party injectors for use of its pipeline and terminalling facilities.

-- Construction of the pipeline continues to progress and hook up with ELI Akaso is expected to take place in H2 2021.

Outlook 2021

   --    The commissioning of the ELI pipeline. 
   --    Expected close out of the Oza transaction. 
   --    Continuing to position the Company for further transactions. 

Oisin Fanning, CEO of San Leon, Commented:

"The period under review has been one of considerable uncertainty globally. Despite this, San Leon has continued to deliver its strategy. 2020 saw operational progress at OML 18 in preparation for its next stage of development, tempered by the macroeconomic environment. On a corporate level, we are very pleased to have been able to return just over $33 million to shareholders while also building and diversifying our portfolio with the Oza and ELI transactions, respectively. Our underlying strategy remains unchanged to deliver sustainable value to our shareholders."

Enquiries:

 
                                         + 353 1291 
 San Leon Energy plc                      6292 
 Oisin Fanning, Chief Executive 
 
 
 Allenby Capital Limited 
  (Nominated adviser and joint broker    +44 20 3328 
  to the Company)                         5656 
 Nick Naylor 
  Alex Brearley 
 Panmure Gordon & Co (Joint broker to    +44 20 7886 
  the Company)                            2500 
 Nick Lovering 
 
 Brandon Hill Capital Limited            +44 20 3463 
  (Joint broker to the Company)           5000 
 Oliver Stansfield, Jonathan Evans 
 
 Tavistock                               +44 20 7920 
  (Financial Public Relations)            3150 
 Nick Elwes, Simon Hudson 
 
                                         +353 1 230 
 Plunkett Public Relations                3781 
 Sharon Plunkett 
 

Qualified Person's Statement

Pursuant to the requirements of the AIM Rules and in particular, the AIM Note for Mining and Oil and Gas Companies, Joel Price has reviewed and approved the technical information and resource reporting contained in this announcement. Joel has more than 25 years' experience in the oil & gas industry and is a member of the Society of Petroleum Engineers. He holds a BA in Natural Sciences (Geology) from Cambridge University, an MEng in Petroleum Engineering from Heriot-Watt University, and an MBA from Durham University. Joel is Chief Operating Officer for San Leon Energy and is based in the United Kingdom.

Chairman's statement

As we went into 2020, there had been significant turmoil in the financial markets due to the impact of the Covid-19 pandemic. This, along with certain geopolitical issues, had also led to a sharp fall and continued volatility in the oil price, which continued for much of 2020.

During this sustained period of reduced demand, San Leon continued to deliver further shareholder returns. An additional US$46.5 million was received in cash from the loan notes mechanism relating to its OML 18 investment during the year, which enabled us to announce the inaugural special dividend of US$33.3 million in April 2020.

On receipt of US$40.0 million in Loan Note repayments (principal and interest) in April 2020, the Company amended the terms of the Loan Notes, extending the term out to December 2021. The Company anticipates the remaining outstanding balance at 31 December 2020 of US$ 84.2 million , including interest, to be repaid, however given the issues around Covid-19, volatility in the oil price and demand as well as short term production issues at the asset level, the Company is not confident of repayments being received on time. This has resulted in a credit impairment of the Loan Notes due to uncertainty in timing of these repayments.

The Company's financial position enabled it to take advantage of potential value-adding opportunities, and I am pleased to report that San Leon did so during the second half of 2020, acquiring an interest in ELI and announcing the proposed Oza field investment.

Last year I reported that Eroton had continued to drill its three-well campaign and progressed the new oil export system. The drilling campaign was successfully completed during 2020, and the new oil export system, ACOES, is expected to be operational during H2 2021.

I continue to believe that we should not expect significant long-term impacts resulting from the sustained economic downturn, to our indirect interest in OML 18 or the underlying asset, however we have credit impaired the MLPL Loan Notes due to these increased risks previously mentioned. San Leon and Eroton, the operator of OML 18, continue to observe work from home where possible for office employees, while continuing to adjust field location rotations and managing working capital. Naturally, the operational deferrals, OPEC production restrictions and increased production downtime have reduced production during 2020 and have some natural delay in achieving future production increases from new well drilling. Alongside the revival in oil prices post the reporting period, I expect Eroton to start to consider when to restart well operations with an aim to boosting production on what we consider to be a world-class asset.

West Africa, focusing on Nigeria, is where San Leon's activities and resources will continue to be concentrated, and we expect this focus to continue to deliver value for shareholders.

Our investment in ELI is expected to yield attractive returns to the Company from its loan plus equity component, and we anticipate the ACOES and FSO will be commissioned in the second half of 2021. We continue to finalise our investment in the Oza marginal field, within the broader OML 11 block, onshore Nigeria. This is an existing field with some production history, where we believe workovers and new drilling can release the asset's expected inherent value. Again, a relatively low-risk investment with a cash sweep, combined with an equity interest via the Risk Service Provider on Oza, fits well with the Company's strategy to broaden its portfolio in Nigeria using limited risk investments with near-term targeted cash flow. This transaction is still awaiting final conditions precedents to complete.

The Company still retains two non--Nigerian, non-core assets. These are the Durresi block o shore Albania, for which a farm out is being sought, and the Company's Net Pro t Interest ("NPI") in the Barryroe field, offshore Ireland, the operator, Providence Resources plc, continues to work on a funding solution which is expected by Providence to conclude by the end of the third quarter in time to meet drilling in 2022 and progress development of the field.

The Company has nearly completed its exit from Poland, with the small amount of remaining activity being administrative. The Company continues to hold certain NPIs in relation to Polish licences.

The assets of NovaSeis are planned to be sold as part of the Company's exit from Poland, with the majority of non-seismic equipment having already been sold.

Staff welfare is of utmost importance to us and as such at San Leon Energy plc we have also been working remotely whenever possible since March 2020 as mandated by the different governments in the countries in which we have a presence. All employees and consultants have continued to be actively engaged regardless of the home working conditions.

As at 18 June 2021 San Leon had unrestricted cash on hand of US$8.0 million, however given the issues around Covid-19, volatility in the oil price and demand as well as short term production issues at the asset level, the Company is not confident of repayments being received on time. This has resulted in a credit impairment of the Loan Notes due to uncertainty in timing of repayments. Our cash inflows have allowed the Company not only to survive the on-going market turmoil, but also to take advantage of potential value-adding opportunities. The Company continues to monitor the situation and is managing its financial position accordingly.

During 2020 , the Company appointed Adekolapo Ademola as a Non-Executive Director. Adekolapo brings a wealth of experience across a variety of disciplines with a strong focus on Nigeria. John Brown was recently appointed as Independent Non-Executive Director and the Chair of the Audit and Risk Committee. John brings 20 years of international experience in the oil and gas and related industries , including 10 years in West Africa . Following John's appointment and as part of a corporate governance review conducted in conjunction with its search for a new non-executive director, Alan Campbell, Director of Commercial & Business Development, also stepped down from the Board. I am grateful to Alan for stepping down from his Board role at this time as part of our corporate governance Board restructuring, where there is now an equal balance of three Non-Executive Directors and three Executive Directors. Alan was a key figure in San Leon's growth and transformation during his time as a Director. He will remain a part of the Company's executive management team and continue to contribute to San Leon's commercial and business operations going forward. He also remains as Company Secretary. The Company would like to thank Non-Executive Directors, Mark Phillips, Bill Higgs and Linda Beal, who left the Board during the period, for their service and wish them well for the future.

During July, Allenby Capital Limited was appointed as the Company's Nominated Adviser and Joint Broker. At the same time, pursuant to the acquisition of Whitman Howard Limited by Panmure Gordon & Co ("Panmure Gordon"), the Company appointed Panmure Gordon as its Joint Broker.

Environment, Social and Governance ("ESG") is an area of increasing importance for businesses and investors. We constituted a formal Committee of the Board during December 2020 to oversee San Leon's ESG strategy and initiatives. This is an area to which San Leon continues to be committed and our focus in 2021 is in developing our own ESG strategy, which the Company anticipates will meet the expectations of good international industry practice. As part of this we will continue ongoing engagement with all stakeholders and governments to ensure that we operate our business in a way that is sustainable and benefits the local communities in which we have a presence. The Company continued several initiatives during the course of 2020 in Nigeria including the provision of educational support for disadvantaged children, the building of a new medical centre, and construction of a new classroom block at a school in Benue State. This is in addition to our ongoing support of women-led small enterprises in Nassarawa and Benue States and the installation of motorised water boreholes .

With its increasing technical involvement in OML 18, relationships in-country, additional investments in ELI and Oza (yet to be completed), and funds expected in the future, we believe San Leon is well-positioned to continue to realise value for shareholders from Nigeria. With the stabilised oil price and planned ACOES, we hope to see an improvement in the short term production issues at the asset level, and continue to monitor the situation closely.

Our strategy continues to include the delivery of sustainable long-term returns to shareholders. We aim to achieve this through a combination of returns to shareholders and also growth in our asset base.

I look forward with confidence to updating shareholders on the achievement of these aims.

Mutiu Sunmonu Chairman

CEO's statement

OML 18 IS POSITIONED FOR ITS NEXT STAGE IN DEVELOPMENT

2020 saw operational progress at OML 18 in preparation for its next stage of development, tempered by the macroeconomic environment.

Eroton completed its three-well drilling programme and the new oil export system (Alternative Crude Oil Evacuation and Storage system, or "ACOES") had continued to progress its implementation. Following year end, the FSO has arrived in Nigerian waters. Such operational activity, together with expected future well work, is we believe, the key to the anticipated unlocking of further value for the stakeholders in OML 18.

Both gross production at the wellhead and sales oil volumes were lower than expected. This was due to downtime; allocated pipeline losses associated with the use of the Nembe Creek Trunk Line ("NCTL"); Covid-related operational delays; prudent reduced operational expenditure and capital expenditure spending as a result of lower oil price; and also, OPEC production quota restrictions. Gross oil production, taking out the e ect of NCTL downtime, (but after reductions for OPEC quota production restrictions), was around 32,000 bopd. Sales oil, including the e ects of downtime and allocated losses, and of OPEC quota production restrictions, was around 21,000 bopd.

The most positive impact on OML 18 oil sales is expected to be Eroton's agreement with Energy Link Infrastructure (Malta) Limited ("ELI"). ELI is financing and constructing the ACOES and once commissioned, this system is expected, by Eroton, to significantly reduce the downtime and allocated pipeline losses currently associated with the NCTL. The NCTL was responsible for the majority of the approximately 11,000 bopd difference between gross production, when the pipeline is running, and average sales oil. In addition, it is anticipated that the ACOES and FSO project will greatly improve overall well uptime.

San Leon continues to be involved with the subsurface technical input into OML 18 and has a contract to provide such services on OML 18, providing geoscience and engineering resource into well and reservoir planning for new wells. We believe that OML 18 is a world class asset and one that we look forward to developing further with our partners.

Additions to our asset base

I have previously been clear that San Leon's strong cash position, professional relationships and technical capability would be used to broaden our portfolio of assets, particularly where market forces make financial strength a differentiator. To that end, we were pleased to announce our investment in ELI.

The Company invested US$15.0 million into ELI as a loan, whilst securing a 10% equity interest in ELI. Repayments are expected from 31 July 2021 adding to our cashflow in the second half of the year. It is anticipated that the pipeline will be commissioned during the second half of 2021 and we are pleased to report that third party sales are planned to commence during the second half of 2021. It is expected that Eroton volumes will commence during H2 which will then complete the vital role in optimising cashflow from OML 18. The ELI investment is also expected to be a value-adding asset for Company shareholders as part of a broader portfolio.

Additionally, San Leon also announced an investment of US$7.5 million into Decklar during 2020, which is still to complete. This transaction involves Decklar, as Risk Service Provider to the operator of the Oza field, performing workover and new well drilling to develop the reserves and contingent resources on what is a proven producing field with existing infrastructure. Under the terms of the financing, SLE have rights to a cash sweep until the loan coupon is repaid, with an option to purchase an additional 15% equity holding (30% in total) on the same terms following the initial development well. With near term operations imminent, I look forward to updating you after the first well results are known and in relation to the completion of the investment.

San Leon also notes the announcement by Providence Resources plc that it has terminated the farm-out agreement with SpotOn Energy for the Barryroe Licence and is progressing arrangements for an alternative funding package to finance 100% of the costs of the early development scheme ("EDS") for the Barryroe licence (SEL 1/11). San Leon retains a 4.5% Net Profit Interest over the Barryroe field, one of the largest undeveloped discoveries in Western Europe, with independently appraised 2C resources of 346 MMboe and significant further resource potential in additional reservoirs. The Company continues to follow these negotiations with interest.

Cash ow

The Company has four anticipated sources of cash ow, as it builds its portfolio in line with its stated strategy. As of 31 December 2020, cash receipts totalling US$195.6 million have come from the repayment of MLPL Loan Notes, including interest. The outstanding balance payable as of 18 June 2021 is US$93.2 million* at par value (US$92.4 million under IFRS), which continues to accrue interest. Final payment of the MLPL Loan Notes was anticipated by the end of 2021, however due to issues around Covid-19, volatility in the oil price and demand as well as short term production issues on OML 18, the Company believes this date is unlikely to be met. The Company is still confident in receiving all repayments and late payment interest, however in line with our accounting policy we have recognised a credit impairment to reflect the uncertainty around timing of repayments.

Repayments of loan notes from our investment in ELI are due to commence in July this year.

The Company will also generate income from the provision of subsurface technical services to Eroton which will align with field development expected in 2022. In addition, future OML 18 rig activity is an opportunity for the Company to generate income from the provision of services under its Master Service Agreement with Eroton.

Cash ow from the Company's indirect shareholding in Eroton is anticipated once OML 18 is generating su cient free cash ow. We are also hopeful of future dividends from our equity interest in ELI in the medium to long term.

Corporate

Further shareholder returns were provided in 2020 via the Company's first special dividend of US$33.3 million, in line with the Company's announced policy. This follows on from share repurchases of US$2.0 million over October 2019 to January 2020.

ESG

As discussed in the Chairman's statement ESG is an area of increasing importance. This is an area in which San Leon is committed to meeting high standards of ESG practices across all aspects of the business. The Company is committed to the countries in which it operates and is dedicated to promoting sustainable growth as well as providing support to local communities in Nigeria. The Company firmly believes that by providing the younger generation with the valuable skills and education needed to succeed, the whole country will benefit from growth and prosperity.

Outlook

The Oil price was significantly impacted for the majority of 2020, due to the combined effects of Covid-19 affecting demand, and quota disagreements within OPEC regarding how to deal with that reduction in demand. This uncertainty presented the Company with both risks and opportunities, and we are delighted to see that the oil priced has strengthened considerably in 2021. The opportunities taken to date were the investment in and loan to ELI and the expected finalisation of the investment in Oza (still to complete).

The Company has cash in hand as at 18 June 2021 of US$14.8 million, and with future loan note repayments, we believe it will put us in a position to continue moving forward with our strategy and capitalising on accretive opportunities. The Company continues to monitor the performance of OML 18, and is ready to pursue any appropriate opportunities that may arise in the current market.

I look forward to updating shareholders with news of the impact of the ACOES on OML 18, plans for operations on OML 18 as we hopefully emerge from macroeconomic issues, and how our various expected cash ow streams are performing. The Company is in a good position, with several future cash streams, and together with its professional relationships and people, I believe is well-positioned to grow and add further value to shareholders.

Oisín Fanning

CEO

* Refer to Alternate Performance Measures for full reconciliation of IFRS numbers and Alternative Performance Measures

Consolidated Income Statement

for the year ended 31 December 2020

 
                                                Notes      2020        2019 
                                                        US$'000     US$'000 
                                                                  (Restated 
                                                                         *) 
----------------------------------------------  -----  --------  ---------- 
Continuing operations 
----------------------------------------------  -----  --------  ---------- 
Revenue from contracts with customers               2         -         266 
----------------------------------------------  -----  --------  ---------- 
Cost of sales                                                 -       (148) 
----------------------------------------------  -----  --------  ---------- 
Gross profit                                                  -         118 
----------------------------------------------  -----  --------  ---------- 
 
Share of loss of equity accounted investments       6   (1,139)     (9,214) 
----------------------------------------------  -----  --------  ---------- 
Administrative expenses                                (14,918)    (14,899) 
----------------------------------------------  -----  --------  ---------- 
Loss on disposal of subsidiaries                    3   (1,044)    (13,770) 
----------------------------------------------  -----  --------  ---------- 
Impairment / write off of exploration 
 and evaluation assets                                    (196)     (1,407) 
----------------------------------------------  -----  --------  ---------- 
Other income                                                  -       1,400 
----------------------------------------------  -----  --------  ---------- 
Loss from operating activities                         (17,297)    (37,772) 
----------------------------------------------  -----  --------  ---------- 
 
Finance expense                                           (131)       (144) 
----------------------------------------------  -----  --------  ---------- 
Finance income                                      4    17,442      24,123 
----------------------------------------------  -----  --------  ---------- 
Expected credit losses                                 (13,692)       3,465 
----------------------------------------------  -----  --------  ---------- 
Fair value movements in financial assets            8     4,073    (48,373) 
----------------------------------------------  -----  --------  ---------- 
Loss before income tax                                  (9,605)    (58,701) 
----------------------------------------------  -----  --------  ---------- 
 
Income tax                                              (2,248)      14,079 
----------------------------------------------  -----  --------  ---------- 
 
Loss for the financial year                            (11,853)    (44,622) 
----------------------------------------------  -----  --------  ---------- 
 
Loss per share (cent) - total 
----------------------------------------------  -----  --------  ---------- 
Basic loss per share                                5    (2.63)      (9.57) 
----------------------------------------------  -----  --------  ---------- 
Diluted loss per share                              5    (2.63)      (9.57) 
----------------------------------------------  -----  --------  ---------- 
 

* See Note 6 for details on restated amounts

The accompanying notes below form an integral part of these financial statements.

Consolidated Statement of

Other Comprehensive Income

for the year ended 31 December 2020

 
                                                             2020        2019 
                                                          US$'000     US$'000 
                                                                    (Restated 
                                                  Notes                    *) 
------------------------------------------------  -----  --------  ---------- 
Loss for the year                                        (11,853)    (44,622) 
------------------------------------------------  -----  --------  ---------- 
Items that may be reclassified subsequently 
 to profit or loss 
------------------------------------------------  -----  --------  ---------- 
Currency translation differences - subsidiaries                83        (26) 
------------------------------------------------  -----  --------  ---------- 
Recycling of currency translation reserve 
 on disposal of subsidiaries                                1,044      13,870 
------------------------------------------------  -----  --------  ---------- 
Fair value movements in financial assets              8     (194)     (2,625) 
------------------------------------------------  -----  --------  ---------- 
Deferred tax on fair value movements in 
 financial assets                                               -          40 
------------------------------------------------  -----  --------  ---------- 
Total other comprehensive income                              933      11,259 
------------------------------------------------  -----  --------  ---------- 
 
Total comprehensive loss for the year                    (10,920)    (33,363) 
------------------------------------------------  -----  --------  ---------- 
 

* See Note 6 for details on restated amounts

Consolidated Statement

of Changes in Equity

for the year ended 31 December 2020

 
                                                                                  Shares                       Attributable 
                                                                          Share       to                                 to 
                  Share    Share           Other              Currency    based       be      Fair                   equity 
                capital  premium  un-denominated  Special  translation  payment   issued     value   Retained       holders 
                reserve  reserve         reserve  reserve      reserve  reserve  reserve   reserve   earnings      in Group 
                US$'000  US$'000         US$'000  US$'000      US$'000  US$'000  US$'000   US$'000    US$'000       US$'000 
--------------  -------  -------  --------------  -------  -----------  -------  -------  --------  ---------  ------------ 
2019 
--------------  -------  -------  --------------  -------  -----------  -------  -------  --------  ---------  ------------ 
Balance 
 as at 
 1 January 
 2019           150,600  478,666               -        -       10,777   14,977    2,099        80  (396,049)       261,150 
--------------  -------  -------  --------------  -------  -----------  -------  -------  --------  ---------  ------------ 
Restatements 
 *: 
--------------  -------  -------  --------------  -------  -----------  -------  -------  --------  ---------  ------------ 
Share of 
 loss of 
 equity 
 accounted 
 investments          -        -               -        -            -        -        -         -    (1,058)       (1,058) 
--------------  -------  -------  --------------  -------  -----------  -------  -------  --------  ---------  ------------ 
Balance 
 as at 
 1 January 
 2019 
 (Restated)     150,600  478,666               -        -       10,777   14,977    2,099        80  (397,107)       260,092 
--------------  -------  -------  --------------  -------  -----------  -------  -------  --------  ---------  ------------ 
Total 
comprehensive 
income for 
year 
--------------  -------  -------  --------------  -------  -----------  -------  -------  --------  ---------  ------------ 
Loss for 
 the year 
 (Restated 
 *)                   -        -               -        -            -        -        -         -   (44,622)      (44,622) 
--------------  -------  -------  --------------  -------  -----------  -------  -------  --------  ---------  ------------ 
Other 
comprehensive 
income 
--------------  -------  -------  --------------  -------  -----------  -------  -------  --------  ---------  ------------ 
Recycling 
 of currency 
 translation 
 reserve 
 on disposal 
 of 
 subsidiaries         -        -               -        -       13,870        -        -         -          -        13,870 
--------------  -------  -------  --------------  -------  -----------  -------  -------  --------  ---------  ------------ 
Foreign 
 currency 
 translation 
 differences 
 - 
 subsidiaries         -        -               -        -         (26)        -        -         -          -          (26) 
--------------  -------  -------  --------------  -------  -----------  -------  -------  --------  ---------  ------------ 
Fair value 
 movements 
 in financial 
 assets               -        -               -        -            -        -        -   (2,625)          -       (2,625) 
--------------  -------  -------  --------------  -------  -----------  -------  -------  --------  ---------  ------------ 
Deferred 
 tax on fair 
 value 
 movements 
 in financial 
 assets         -              -               -        -            -        -        -        40          -            40 
--------------  -------  -------  --------------  -------  -----------  -------  -------  --------  ---------  ------------ 
Total 
 comprehensive 
 income for 
 year                 -        -               -        -       13,844        -        -   (2,585)   (44,622)      (33,363) 
--------------  -------  -------  --------------  -------  -----------  -------  -------  --------  ---------  ------------ 
 

The accompanying notes below form an integral part of these financial statements.

 
Transactions 
 with owners 
 recognised 
 directly 
 in equity 
----------------------  -----------  -----------  ---  -------  ------  -------  -------  -------  ---------  -------- 
Contributions 
 by and distributions 
 to owners 
----------------------  -----------  -----------  ---  -------  ------  -------  -------  -------  ---------  -------- 
Tender offer 
 (Note 10)                (144,871)    (459,721)    -    5,024       -        -        -        -    599,568         - 
----------------------  -----------  -----------  ---  -------  ------  -------  -------  -------  ---------  -------- 
Reduction 
 of capital 
 (Note 10)                    (576)            -  576        -       -        -        -        -   (30,512)  (30,512) 
----------------------  -----------  -----------  ---  -------  ------  -------  -------  -------  ---------  -------- 
Share buybacks 
 (Note 10)                     (47)            -   47        -       -        -        -        -    (1,535)   (1,535) 
----------------------  -----------  -----------  ---  -------  ------  -------  -------  -------  ---------  -------- 
Share-based 
 payment                          -            -    -        -       -      848        -        -          -       848 
----------------------  -----------  -----------  ---  -------  ------  -------  -------  -------  ---------  -------- 
Issue of 
 shares in 
 lieu of 
 salary                          63        2,036    -        -       -        -  (2,099)        -          -         - 
----------------------  -----------  -----------  ---  -------  ------  -------  -------  -------  ---------  -------- 
Effect of 
 share options 
 exercised                        3           96    -        -       -     (72)        -        -         72        99 
----------------------  -----------  -----------  ---  -------  ------  -------  -------  -------  ---------  -------- 
Effect of 
 repricing 
 of share 
 options                          -            -    -        -       -      219        -        -          -       219 
----------------------  -----------  -----------  ---  -------  ------  -------  -------  -------  ---------  -------- 
Effect of 
 options 
 expired                          -            -    -        -       -  (1,680)        -        -      1,680         - 
----------------------  -----------  -----------  ---  -------  ------  -------  -------  -------  ---------  -------- 
Total transactions 
 with owners              (145,428)    (457,589)  623    5,024       -    (685)  (2,099)        -    569,273  (30,881) 
----------------------  -----------  -----------  ---  -------  ------  -------  -------  -------  ---------  -------- 
Balance 
 at 
 31 December 
 2019                         5,172       21,077  623    5,024  24,621   14,292        -  (2,505)    127,544   195,848 
----------------------  -----------  -----------  ---  -------  ------  -------  -------  -------  ---------  -------- 
 

* The balance at 1 January 2019 has been restated to account for the following:

The share of loss of equity accounted investments increased by US$1.1 million in 2018 resulting in a decrease in the Company's equity by the same amount, see Note 6 for full details.

The accompanying notes below form an integral part of these financial statements.

 
                                                                                     Shares                      Attributable 
                                             Other   Special                 Share       to                                to 
                   Share    Share   un-denominated   reserve     Currency    based       be      Fair                  equity 
                 capital  premium          reserve   US$'000  translation  payment   issued     value  Retained       holders 
                 reserve  reserve          US$'000                reserve  reserve  reserve   reserve  earnings      in Group 
                 US$'000  US$'000                                 US$'000  US$'000  US$'000   US$'000   US$'000       US$'000 
--------------  --------  -------  ---------------  --------  -----------  -------  -------  --------  --------  ------------ 
2020 
---------------  -------  -------  ---------------  --------  -----------  -------  -------  --------  --------  ------------ 
Balance as 
 at 
 1 January 
 2020              5,172   21,077              623     5,024       24,621   14,292        -   (2,505)   127,544       195,848 
---------------  -------  -------  ---------------  --------  -----------  -------  -------  --------  --------  ------------ 
Total 
comprehensive 
income for 
year 
---------------  -------  -------  ---------------  --------  -----------  -------  -------  --------  --------  ------------ 
Loss for 
 the year              -        -                -         -            -        -        -         -  (11,853)      (11,853) 
--------------  --------  -------  ---------------  --------  -----------  -------  -------  --------  --------  ------------ 
Other 
comprehensive 
income 
--------------  --------  -------  ---------------  --------  -----------  -------  -------  --------  --------  ------------ 
Foreign 
 currency 
 translation 
 differences 
 - 
 subsidiaries          -        -                -         -           83        -        -         -         -            83 
--------------  --------  -------  ---------------  --------  -----------  -------  -------  --------  --------  ------------ 
Recycling 
 of currency 
 translation 
 reserve 
 on disposal 
 of 
 subsidiaries          -        -                -         -        1,044        -        -         -         -         1,044 
--------------  --------  -------  ---------------  --------  -----------  -------  -------  --------  --------  ------------ 
Fair value 
 movements 
 in financial 
 assets                -        -                -         -            -        -        -     (194)         -         (194) 
--------------  --------  -------  ---------------  --------  -----------  -------  -------  --------  --------  ------------ 
Deferred               -        -                -         -            -        -        -         -         -             - 
tax on fair 
value 
movements 
in financial 
assets 
--------------  --------  -------  ---------------  --------  -----------  -------  -------  --------  --------  ------------ 
Total 
 comprehensive 
 income for 
 year                  -        -                -         -        1,127        -        -     (194)  (11,853)      (10,920) 
--------------  --------  -------  ---------------  --------  -----------  -------  -------  --------  --------  ------------ 
 
 
 
 
Transactions 
 with owners 
 recognised 
 directly 
 in equity 
----------------------  -----  ------  ---  -----  ------  ------   -------  --------  -------- 
Contributions 
 by and distributions 
 to owners 
----------------------  -----  ------  ---  -----  ------  ------   -------  --------  -------- 
Tender offer                -       -    -      -       -       -  -      -         -         - 
 (Note 10) 
----------------------  -----  ------  ---  -----  ------  ------   -------  --------  -------- 
Dividend 
 payment                    -       -    -      -       -       -  -      -  (33,251)  (33,251) 
----------------------  -----  ------  ---  -----  ------  ------   -------  --------  -------- 
Reduction                   -       -    -      -       -       -  -      -         -         - 
 of capital 
 (Note 10) 
----------------------  -----  ------  ---  -----  ------  ------   -------  --------  -------- 
Share buybacks 
 (Note 10)               (15)       -   15      -       -       -  -      -     (507)     (507) 
----------------------  -----  ------  ---  -----  ------  ------   -------  --------  -------- 
Share-based 
 payment                    -       -    -      -       -     417  -      -         -       417 
----------------------  -----  ------  ---  -----  ------  ------   -------  --------  -------- 
Issue of                    -       -    -      -       -       -  -      -         -         - 
 shares in 
 lieu of 
 salary 
----------------------  -----  ------  ---  -----  ------  ------   -------  --------  -------- 
Effect of 
 share options 
 modified                   -       -    -      -       -     473  -      -         -       473 
----------------------  -----  ------  ---  -----  ------  ------   -------  --------  -------- 
Effect of                   -       -    -      -       -       -  -      -         -         - 
 repricing 
 of share 
 options 
----------------------  -----  ------  ---  -----  ------  ------   -------  --------  -------- 
Effect of 
 options 
 expired                    -       -    -      -       -    (43)  -      -        43         - 
----------------------  -----  ------  ---  -----  ------  ------   -------  --------  -------- 
Total transactions 
 with owners             (15)       -   15      -       -     847  -      -  (33,715)  (32,868) 
----------------------  -----  ------  ---  -----  ------  ------   -------  --------  -------- 
Balance 
 at 
 31 December 
 2020                   5,157  21,077  638  5,024  25,748  15,139  -(2,699)    81,976   152,060 
----------------------  -----  ------  ---  -----  ------  ------   -------  --------  -------- 
 

The accompanying notes below form an integral part of these financial statements.

Company Statement

of Changes in Equity

for the year ended 31 December 2020

 
                                                                                           Shares 
                                                    Other                         Share-       to 
                                           un-denominated              Currency    based       be     Fair 
                      Share        Share          reserve  Special  translation  payment   issued    value   Retained     Total 
                    capital      premium          US$'000  reserve      reserve  reserve  reserve  reserve   earnings    equity 
                    US$'000      US$'000                   US$'000      US$'000  US$'000  US$'000  US$'000    US$'000   US$'000 
--------------  -----------  -----------  ---------------  -------  -----------  -------  -------  -------  ---------  -------- 
2019 
--------------  -----------  -----------  ---------------  -------  -----------  -------  -------  -------  ---------  -------- 
Balance as at 
 1 
 January 2019       150,600      478,666                -        -            -   14,977    2,099       80  (416,122)   230,300 
--------------  -----------  -----------  ---------------  -------  -----------  -------  -------  -------  ---------  -------- 
Total 
comprehensive 
income 
--------------  -----------  -----------  ---------------  -------  -----------  -------  -------  -------  ---------  -------- 
Profit for the 
 year                     -            -                -        -            -        -        -        -   (12,284)  (12,284) 
--------------  -----------  -----------  ---------------  -------  -----------  -------  -------  -------  ---------  -------- 
Fair value 
 movements 
 in financial 
 assets                   -            -                -        -            -        -        -  (2,625)          -   (2,625) 
--------------  -----------  -----------  ---------------  -------  -----------  -------  -------  -------  ---------  -------- 
Deferred tax 
 on 
 fair value 
 movements 
 in financial 
 assets                   -            -                -        -            -        -        -       40          -        40 
--------------  -----------  -----------  ---------------  -------  -----------  -------  -------  -------  ---------  -------- 
Total 
 comprehensive 
 income 
 for the year             -            -                -        -            -        -        -  (2,585)   (12,284)  (14,869) 
--------------  -----------  -----------  ---------------  -------  -----------  -------  -------  -------  ---------  -------- 
Transactions 
with 
owners 
recognised 
directly in 
equity 
--------------  -----------  -----------  ---------------  -------  -----------  -------  -------  -------  ---------  -------- 
Contributions 
by 
and 
distributions 
to owners 
--------------  -----------  -----------  ---------------  -------  -----------  -------  -------  -------  ---------  -------- 
Tender offer 
 and 
 reduction of 
 capital 
 (Note 10)        (144,871)    (459,721)                -    5,024            -        -        -        -    599,568         - 
--------------  -----------  -----------  ---------------  -------  -----------  -------  -------  -------  ---------  -------- 
Reduction of 
 capital 
 (Note 10)            (576)            -              576        -            -        -        -        -   (30,512)  (30,512) 
--------------  -----------  -----------  ---------------  -------  -----------  -------  -------  -------  ---------  -------- 
Share buybacks 
 (Note 10)             (47)            -               47        -            -        -        -        -    (1,535)   (1,535) 
--------------  -----------  -----------  ---------------  -------  -----------  -------  -------  -------  ---------  -------- 
Share-based 
 payment                  -            -                -        -            -      848        -        -          -       848 
--------------  -----------  -----------  ---------------  -------  -----------  -------  -------  -------  ---------  -------- 
Issue of 
 shares 
 in lieu of 
 salary                  63        2,036                -        -            -        -  (2,099)        -          -         - 
--------------  -----------  -----------  ---------------  -------  -----------  -------  -------  -------  ---------  -------- 
Effect of 
 share 
 options 
 exercised                3           96                -        -            -     (72)        -        -         72        99 
--------------  -----------  -----------  ---------------  -------  -----------  -------  -------  -------  ---------  -------- 
Effect of 
 repricing 
 of share 
 options                  -            -                -        -            -      219        -        -          -       219 
--------------  -----------  -----------  ---------------  -------  -----------  -------  -------  -------  ---------  -------- 
Effect of 
 options 
 expired                  -            -                -        -            -  (1,680)        -        -      1,680         - 
--------------  -----------  -----------  ---------------  -------  -----------  -------  -------  -------  ---------  -------- 
Total 
 transactions 
 with owners      (145,428)    (457,589)              623    5,024            -    (685)  (2,099)        -    569,273  (30,881) 
--------------  -----------  -----------  ---------------  -------  -----------  -------  -------  -------  ---------  -------- 
Balance at 31 
 December 
 2019                 5,172       21,077              623    5,024            -   14,292        -  (2,505)    140,867   184,550 
--------------  -----------  -----------  ---------------  -------  -----------  -------  -------  -------  ---------  -------- 
 

The accompanying notes below form an integral part of these financial statements.

 
                                                                       Share     Shares 
                                    Other                 Currency     based         to      Fair 
         Share     Share   un-denominated    Special   translation   payment  be issued     value   Retained     Total 
       capital   premium          reserve    reserve       reserve   reserve    reserve   reserve   earnings    equity 
       US$'000   US$'000          US$'000    US$'000       US$'000   US$'000    US$'000   US$'000    US$'000   US$'000 
----  --------  --------  ---------------  ---------  ------------  --------  ---------  --------  ---------  -------- 
2020 
----  --------  --------  ---------------  ---------  ------------  --------  ---------  --------  ---------  -------- 
 
 
Balance as at 
 1 January 2020            5,172    21,077    623    5,024    -    14,292    -    (2,505)    140,867    184,550 
-----------------------  -------  --------  -----  -------  ---  --------  ---  ---------  ---------  --------- 
Total comprehensive 
 income 
-----------------------  -------  --------  -----  -------  ---  --------  ---  ---------  ---------  --------- 
Loss for the year              -         -      -        -    -         -    -          -    (9,946)    (9,946) 
-----------------------  -------  --------  -----  -------  ---  --------  ---  ---------  ---------  --------- 
Fair value movements 
 in financial assets           -         -      -        -    -         -    -          -          -          - 
-----------------------  -------  --------  -----  -------  ---  --------  ---  ---------  ---------  --------- 
Deferred tax on 
 fair value movements          -         -      -        -    -         -    -          -          -          - 
 in financial assets 
-----------------------  -------  --------  -----  -------  ---  --------  ---  ---------  ---------  --------- 
Total comprehensive 
 income 
 for the year                  -         -      -        -    -         -    -          -    (9,946)    (9,946) 
-----------------------  -------  --------  -----  -------  ---  --------  ---  ---------  ---------  --------- 
Transactions with 
 owners recognised 
 directly in equity 
-----------------------  -------  --------  -----  -------  ---  --------  ---  ---------  ---------  --------- 
Contributions by 
 and distributions 
 to owners 
-----------------------  -------  --------  -----  -------  ---  --------  ---  ---------  ---------  --------- 
Tender offer and 
 reduction of capital          -         -      -        -    -         -    -          -          -          - 
 (Note 10) 
-----------------------  -------  --------  -----  -------  ---  --------  ---  ---------  ---------  --------- 
Dividend payment               -         -      -        -    -         -    -          -   (33,251)   (33,251) 
-----------------------  -------  --------  -----  -------  ---  --------  ---  ---------  ---------  --------- 
Reduction of capital           -         -      -        -    -         -    -          -          -          - 
 (Note 10) 
-----------------------  -------  --------  -----  -------  ---  --------  ---  ---------  ---------  --------- 
Share buybacks 
 (Note 10)                  (15)         -     15        -    -         -    -          -      (507)      (507) 
-----------------------  -------  --------  -----  -------  ---  --------  ---  ---------  ---------  --------- 
Share-based payment            -         -      -        -    -       417    -          -          -        417 
-----------------------  -------  --------  -----  -------  ---  --------  ---  ---------  ---------  --------- 
Issue of shares                -         -      -        -    -         -    -          -          -          - 
 in lieu of salary 
-----------------------  -------  --------  -----  -------  ---  --------  ---  ---------  ---------  --------- 
Effect of share 
 options modified              -         -      -        -    -       473    -          -          -        473 
-----------------------  -------  --------  -----  -------  ---  --------  ---  ---------  ---------  --------- 
Effect of repricing 
 of share options              -         -      -        -    -         -    -          -          -          - 
-----------------------  -------  --------  -----  -------  ---  --------  ---  ---------  ---------  --------- 
Effect of options 
 expired                       -         -      -        -    -      (43)    -          -         43          - 
-----------------------  -------  --------  -----  -------  ---  --------  ---  ---------  ---------  --------- 
Total transactions 
 with owners                (15)         -     15        -    -       847    -          -   (33,715)   (32,868) 
-----------------------  -------  --------  -----  -------  ---  --------  ---  ---------  ---------  --------- 
Balance at 31 December 
 2020                      5,157    21,077    638    5,024    -    15,139    -    (2,505)     97,206    141,736 
-----------------------  -------  --------  -----  -------  ---  --------  ---  ---------  ---------  --------- 
 

The accompanying notes form an integral part of these financial statements.

Consolidated Statement

of Financial Position

as at 31 December 2020

 
                                                                           2019        2018 
                                                               2020     US$'000     US$'000 
                                                            US$'000   (Restated   (Restated 
                                                   Notes                     *)          *) 
-------------------------------------------------  -----  ---------  ----------  ---------- 
Assets 
-------------------------------------------------  -----  ---------  ----------  ---------- 
Non-current assets 
-------------------------------------------------  -----  ---------  ----------  ---------- 
Intangible assets                                                 -           -           - 
-------------------------------------------------  -----  ---------  ----------  ---------- 
Equity accounted investments                           6     44,102      44,798      54,012 
-------------------------------------------------  -----  ---------  ----------  ---------- 
Property, plant and equipment                                 3,294       4,344       1,964 
-------------------------------------------------  -----  ---------  ----------  ---------- 
Financial assets                                       8     17,846       2,963     124,876 
-------------------------------------------------  -----  ---------  ----------  ---------- 
Deferred tax asset                                                -       1,718           - 
-------------------------------------------------  -----  ---------  ----------  ---------- 
Other non-current assets                                          -           -         206 
-------------------------------------------------  -----  ---------  ----------  ---------- 
                                                             65,242      53,823     181,058 
-------------------------------------------------  -----  ---------  ----------  ---------- 
Current assets 
-------------------------------------------------  -----  ---------  ----------  ---------- 
Inventory                                                       183         180         272 
-------------------------------------------------  -----  ---------  ----------  ---------- 
Trade and other receivables                                   1,878         987       2,440 
-------------------------------------------------  -----  ---------  ----------  ---------- 
Financial assets                                       8     72,889     112,252      57,611 
-------------------------------------------------  -----  ---------  ----------  ---------- 
Cash and cash equivalents                                    18,510      36,697      40,762 
-------------------------------------------------  -----  ---------  ----------  ---------- 
                                                             93,460     150,116     101,085 
-------------------------------------------------  -----  ---------  ----------  ---------- 
Total assets                                                158,702     203,939     282,143 
-------------------------------------------------  -----  ---------  ----------  ---------- 
 
Equity and liabilities 
-------------------------------------------------  -----  ---------  ----------  ---------- 
Equity 
-------------------------------------------------  -----  ---------  ----------  ---------- 
Called up share capital                               10      5,157       5,172     150,600 
-------------------------------------------------  -----  ---------  ----------  ---------- 
Share premium account                                 10     21,077      21,077     478,666 
-------------------------------------------------  -----  ---------  ----------  ---------- 
Other undenominated reserve                                     638         623           - 
-------------------------------------------------  -----  ---------  ----------  ---------- 
Special reserve                                               5,024       5,024           - 
-------------------------------------------------  -----  ---------  ----------  ---------- 
Share-based payments reserve                                 15,139      14,292      14,977 
-------------------------------------------------  -----  ---------  ----------  ---------- 
Shares to be issued reserve                                       -           -       2,099 
-------------------------------------------------  -----  ---------  ----------  ---------- 
Currency translation reserve                                 25,748      24,621      10,777 
-------------------------------------------------  -----  ---------  ----------  ---------- 
Fair value reserve                                          (2,699)     (2,505)          80 
-------------------------------------------------  -----  ---------  ----------  ---------- 
Retained earnings                                            81,976     127,544   (397,107) 
-------------------------------------------------  -----  ---------  ----------  ---------- 
Total equity attributable to equity shareholders            152,060     195,848     260,092 
-------------------------------------------------  -----  ---------  ----------  ---------- 
Non-current liabilities 
-------------------------------------------------  -----  ---------  ----------  ---------- 
Lease liability                                               2,428       2,501           - 
-------------------------------------------------  -----  ---------  ----------  ---------- 
Derivative                                                        9         128         659 
-------------------------------------------------  -----  ---------  ----------  ---------- 
Deferred tax liabilities                                        518           -      12,404 
-------------------------------------------------  -----  ---------  ----------  ---------- 
                                                              2,955       2,629      13,063 
-------------------------------------------------  -----  ---------  ----------  ---------- 
 
 
                                                        2019        2018 
                                            2020     US$'000     US$'000 
                                         US$'000   (Restated   (Restated 
                                Notes                     *)          *) 
-----------------------------  ------  ---------  ----------  ---------- 
Current liabilities 
-----------------------------  ------  ---------  ----------  ---------- 
Trade and other payables                   3,631       5,406       8,228 
-------------------------------------  ---------  ----------  ---------- 
Provisions                                    56          56         760 
-------------------------------------  ---------  ----------  ---------- 
                                           3,687       5,462       8,988 
 ------------------------------------  ---------  ----------  ---------- 
Total liabilities                          6,642       8,091      22,051 
-------------------------------------  ---------  ----------  ---------- 
Total equity and liabilities             158,702     203,939     282,143 
-------------------------------------  ---------  ----------  ---------- 
 

* See Note 6 for details on restated amounts

The accompanying notes below form an integral part of these financial statements.

   Oisín Fanning                       Lisa Mitchell 
   Director                                  Director 

Company Statement

of Financial Position

as at 31 December 2020

 
                                                           2020      2019 
                                                Notes   US$'000   US$'000 
----------------------------------------------  -----  --------  -------- 
Assets 
----------------------------------------------  -----  --------  -------- 
Property, plant and equipment                             2,612     3,066 
----------------------------------------------  -----  --------  -------- 
Financial assets                                    8     6,842     2,769 
----------------------------------------------  -----  --------  -------- 
Financial assets - investment in subsidiaries       7    31,539    31,539 
----------------------------------------------  -----  --------  -------- 
Deferred tax asset                                            -     1,691 
----------------------------------------------  -----  --------  -------- 
                                                         40,993    39,065 
----------------------------------------------  -----  --------  -------- 
Current assets 
----------------------------------------------  -----  --------  -------- 
Trade and other receivables                              19,992     4,068 
----------------------------------------------  -----  --------  -------- 
Financial assets                                    8    68,925   112,252 
----------------------------------------------  -----  --------  -------- 
Cash and cash equivalents                                18,145    36,388 
----------------------------------------------  -----  --------  -------- 
                                                        107,062   152,708 
----------------------------------------------  -----  --------  -------- 
Total assets                                            148,055   191,773 
----------------------------------------------  -----  --------  -------- 
 
Equity and liabilities 
----------------------------------------------  -----  --------  -------- 
Equity 
----------------------------------------------  -----  --------  -------- 
Called up share capital                            10     5,157     5,172 
----------------------------------------------  -----  --------  -------- 
Share premium account                              10    21,077    21,077 
----------------------------------------------  -----  --------  -------- 
Other un-denominated reserve                                638       623 
----------------------------------------------  -----  --------  -------- 
Special reserve                                           5,024     5,024 
----------------------------------------------  -----  --------  -------- 
Share-based payments reserve                             15,139    14,292 
----------------------------------------------  -----  --------  -------- 
Fair value reserve                                      (2,505)   (2,505) 
----------------------------------------------  -----  --------  -------- 
Retained earnings                                        97,206   140,867 
----------------------------------------------  -----  --------  -------- 
Attributable to equity shareholders                     141,736   184,550 
----------------------------------------------  -----  --------  -------- 
Non-current liabilities 
----------------------------------------------  -----  --------  -------- 
Lease liability                                           2,428     2,501 
----------------------------------------------  -----  --------  -------- 
Derivative                                                    9       128 
----------------------------------------------  -----  --------  -------- 
Deferred tax liabilities                                    245         - 
----------------------------------------------  -----  --------  -------- 
                                                          2,682     2,629 
----------------------------------------------  -----  --------  -------- 
Current liabilities 
----------------------------------------------  -----  --------  -------- 
Trade and other payables                                  3,637     4,594 
----------------------------------------------  -----  --------  -------- 
                                                          3,637     4,594 
----------------------------------------------  -----  --------  -------- 
Total liabilities                                         6,319     7,223 
----------------------------------------------  -----  --------  -------- 
Total equity and liabilities                            148,055   191,773 
----------------------------------------------  -----  --------  -------- 
 

The accompanying notes form an integral part of these financial statements.

   Oisín Fanning                       Lisa Mitchell 
   Director                                  Director 

Consolidated Statement

of Cash Flows

for the year ended 31 December 2020

 
                                                                        2019 
                                                            2020     US$'000 
                                                         US$'000   (Restated 
                                                Notes                     *) 
----------------------------------------------  -----  ---------  ---------- 
Cash flows from operating activities 
----------------------------------------------  -----  ---------  ---------- 
Loss for the year - continuing operations               (11,853)    (44,622) 
----------------------------------------------  -----  ---------  ---------- 
Adjustments for: 
----------------------------------------------  -----  ---------  ---------- 
Depletion and depreciation                                 1,028         960 
----------------------------------------------  -----  ---------  ---------- 
Finance expense                                              131         144 
----------------------------------------------  -----  ---------  ---------- 
Finance income                                      4   (17,442)    (24,123) 
----------------------------------------------  -----  ---------  ---------- 
Share-based payments charge                                  890       1,069 
----------------------------------------------  -----  ---------  ---------- 
Foreign exchange                                             113       (403) 
----------------------------------------------  -----  ---------  ---------- 
Income tax expense                                         2,248    (14,079) 
----------------------------------------------  -----  ---------  ---------- 
Impairment of exploration and evaluation 
 assets - continuing operations                              196       1,407 
----------------------------------------------  -----  ---------  ---------- 
Expected credit losses                                    13,692     (3,465) 
----------------------------------------------  -----  ---------  ---------- 
Loss on disposal of subsidiaries                           1,044      13,770 
----------------------------------------------  -----  ---------  ---------- 
Decommissioning payments                                       -       (702) 
----------------------------------------------  -----  ---------  ---------- 
Fair value movements in financial assets            8    (4,073)      48,373 
----------------------------------------------  -----  ---------  ---------- 
(Increase) / decrease in inventory                           (3)          92 
----------------------------------------------  -----  ---------  ---------- 
(Increase) / decrease in trade and other 
 receivables                                               (897)         532 
----------------------------------------------  -----  ---------  ---------- 
Decrease in trade and other payables                     (1,778)     (3,876) 
----------------------------------------------  -----  ---------  ---------- 
Share of loss of equity-accounted investments       6      1,139       9,214 
----------------------------------------------  -----  ---------  ---------- 
Tax paid                                                       -        (18) 
----------------------------------------------  -----  ---------  ---------- 
Net cash outflow from operating activities              (15,565)    (15,727) 
----------------------------------------------  -----  ---------  ---------- 
Cash flows from investing activities 
----------------------------------------------  -----  ---------  ---------- 
Expenditure on exploration and evaluation 
 assets                                                    (196)       (466) 
----------------------------------------------  -----  ---------  ---------- 
Purchase of property, plant and equipment                      -        (82) 
----------------------------------------------  -----  ---------  ---------- 
Lease - prepaid rental                                         -       (231) 
----------------------------------------------  -----  ---------  ---------- 
Loans repaid by Directors                                      -         727 
----------------------------------------------  -----  ---------  ---------- 
Interest on Director's loan                                    -           1 
----------------------------------------------  -----  ---------  ---------- 
Interest and investment income received                       47         278 
----------------------------------------------  -----  ---------  ---------- 
Acquisition of ELI Equity Interest                      (14,557)           - 
----------------------------------------------  -----  ---------  ---------- 
ELI Loan Notes                                             (443)           - 
----------------------------------------------  -----  ---------  ---------- 
OML 18 Loan Notes principal payments received       8     35,285      23,361 
----------------------------------------------  -----  ---------  ---------- 
OML 18 Loan Notes interest payments received        8     11,215      19,885 
----------------------------------------------  -----  ---------  ---------- 
Net cash inflow from investing activities                 31,351      43,473 
----------------------------------------------  -----  ---------  ---------- 
 
 
                                                                      2019 
                                                          2020     US$'000 
                                                       US$'000   (Restated 
                                              Notes                     *) 
-------------------------------------------  ------  ---------  ---------- 
Cash flows from financing activities 
-------------------------------------------  ------  ---------  ---------- 
Dividends paid                                        (33,251)           - 
---------------------------------------------------  ---------  ---------- 
Share buybacks                                           (507)    (32,048) 
---------------------------------------------------  ---------  ---------- 
Proceeds from issue of shares                                -          99 
---------------------------------------------------  ---------  ---------- 
Repayment of lease liability - principal                 (211)       (192) 
---------------------------------------------------  ---------  ---------- 
Interest paid                                            (131)       (144) 
---------------------------------------------------  ---------  ---------- 
Net cash outflow from financing activities            (34,100)    (32,285) 
---------------------------------------------------  ---------  ---------- 
Net decrease in cash and cash equivalents             (18,314)     (4,539) 
---------------------------------------------------  ---------  ---------- 
Effect of foreign exchange fluctuation 
 on cash and cash equivalents                              127         474 
---------------------------------------------------  ---------  ---------- 
Cash and cash equivalents at start of 
 year                                                   36,697      40,762 
---------------------------------------------------  ---------  ---------- 
Cash and cash equivalents at end of year                18,510      36,697 
---------------------------------------------------  ---------  ---------- 
 

* See Note 6 for details on restated amounts

The accompanying notes form an integral part of these financial statements.

Company Statement of Cash Flows

for the year ended 31 December 2020

 
                                                           2020      2019 
                                                Notes   US$'000   US$'000 
----------------------------------------------  -----  --------  -------- 
Cash flows from operating activities 
----------------------------------------------  -----  --------  -------- 
Loss for the year                                       (9,946)  (12,284) 
----------------------------------------------  -----  --------  -------- 
Adjustments for: 
----------------------------------------------  -----  --------  -------- 
Depletion and depreciation                                  358       343 
----------------------------------------------  -----  --------  -------- 
Finance income                                      4  (16,646)  (24,123) 
----------------------------------------------  -----  --------  -------- 
Finance expense                                             131       144 
----------------------------------------------  -----  --------  -------- 
Share-based payments charge                                 890     1,069 
----------------------------------------------  -----  --------  -------- 
Impairment / (reversal of impairment) 
 of investment in subsidiaries 
 and amounts due from Group undertakings                  4,020   (6,943) 
----------------------------------------------  -----  --------  -------- 
Fair value movements in financial assets            8   (4,073)    48,373 
----------------------------------------------  -----  --------  -------- 
Expected credit losses                                   13,307   (3,465) 
----------------------------------------------  -----  --------  -------- 
Foreign exchange                                             76     (678) 
----------------------------------------------  -----  --------  -------- 
Income tax expense                                        1,937  (14,084) 
----------------------------------------------  -----  --------  -------- 
(Increase) / decrease in trade and other 
 receivables                                              (926)       130 
----------------------------------------------  -----  --------  -------- 
Decrease in trade and other payables                      (968)   (2,403) 
----------------------------------------------  -----  --------  -------- 
Tax paid                                                      -      (18) 
----------------------------------------------  -----  --------  -------- 
Net cash outflow from operating activities             (11,840)  (13,939) 
----------------------------------------------  -----  --------  -------- 
 
Cash flows from investing activities 
----------------------------------------------  -----  --------  -------- 
Advances to subsidiary companies                       (19,010)   (2,160) 
----------------------------------------------  -----  --------  -------- 
OML 18 Loan Notes principal payments received       8    35,285    23,361 
----------------------------------------------  -----  --------  -------- 
OML 18 Loan Notes interest payments received        8    11,215    19,885 
----------------------------------------------  -----  --------  -------- 
Loans repaid by Directors                                     -       727 
----------------------------------------------  -----  --------  -------- 
Interest on Director's loan                                   -         1 
----------------------------------------------  -----  --------  -------- 
Interest and investment income received                      47       278 
----------------------------------------------  -----  --------  -------- 
Lease - prepaid rental                                       96     (231) 
----------------------------------------------  -----  --------  -------- 
Purchase of property, plant and equipment                     -      (82) 
----------------------------------------------  -----  --------  -------- 
Net cash inflow from investing activities                27,633    41,779 
----------------------------------------------  -----  --------  -------- 
 
Cash flows from financing activities 
----------------------------------------------  -----  --------  -------- 
Dividends paid                                         (33,251)         - 
----------------------------------------------  -----  --------  -------- 
Share buybacks                                            (507)  (32,048) 
----------------------------------------------  -----  --------  -------- 
Proceeds of issue of shares                                   -        99 
----------------------------------------------  -----  --------  -------- 
Repayment on lease obligations                            (211)     (192) 
----------------------------------------------  -----  --------  -------- 
Interest paid                                             (131)     (144) 
----------------------------------------------  -----  --------  -------- 
Net cash outflow from financing activities             (34,100)  (32,285) 
----------------------------------------------  -----  --------  -------- 
 
 
                                                        2020      2019 
                                             Notes   US$'000   US$'000 
------------------------------------------  ------  --------  -------- 
Net decrease in cash and cash equivalents           (18,307)   (4,445) 
--------------------------------------------------  --------  -------- 
Effect of foreign exchange fluctuation 
 on cash and cash equivalents                             64       653 
--------------------------------------------------  --------  -------- 
Cash and cash equivalents at start of 
 year                                                 36,388    40,180 
--------------------------------------------------  --------  -------- 
Cash and cash equivalents at end of year              18,145    36,388 
--------------------------------------------------  --------  -------- 
 

The accompanying notes form an integral part of these financial statements.

Notes to the Financial Statements

for the year ended 31 December 2020

These Notes are truncated but can be viewed in full in the Annual Report and Accounts for the year ended 31 December 2020. This document is available on the Company's website at www.sanleonenergy.com .

1. Accounting Policies

San Leon Energy plc ("the Company") is a company incorporated and domiciled in the Republic of Ireland. The Company's ordinary shares are admitted to trading on the AIM Market of the London Stock Exchange. The Group financial statements consolidate those of the Company and its subsidiaries (together referred to as the "Group"). The registered office address is 2 Shelbourne Buildings, Crampton Avenue, Shelbourne Road, Ballsbridge, Dublin 4.

Statement of compliance

As required by the AIM Rules and permitted by Company Law, the Group financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRS") as adopted by the EU. The individual financial statements of the Company (Company financial statements) have been prepared in accordance with IFRS as adopted by the EU and as applied in accordance with the Companies Act 2014 which permits a Company that publishes its Company and Group financial statements together, to take advantage of the exemption in Section 304 of the Companies Act 2014, from presenting to its members its Company statement of comprehensive income and related notes that form part of the approved Company financial statements. The IFRS adopted by the EU as applied by the Company and the Group in the preparation of these financial statements are those that were effective for accounting periods commencing on or before 1 January 2020 or were early adopted as indicated below.

New standards required by EU companies for the year ended 31 December 2020

The following new standards and amendments were adopted by the Group and the Company for the first time in the current financial reporting period.

New standards and interpretations effective that were adopted

 
                                       IASB effective  EU effective 
Standard                                date            date 
------------------------------------  ---------------  -------------- 
Definition of material (Amendments 
 to IAS 1 and IAS 8)                   1 January 2020  1 January 2020 
------------------------------------  ---------------  -------------- 
Amendments to References to 
 the Conceptual Framework in 
 IFRS Standards                        1 January 2020  1 January 2020 
------------------------------------  ---------------  -------------- 
Interest Rate Benchmark Reform 
 (Amendments to IFRS 9, IAS 
 39 and IFRS 7)                        1 January 2020  1 January 2020 
------------------------------------  ---------------  -------------- 
Definition of a Business (Amendments 
 to IFRS 3)                            1 January 2020  1 January 2020 
------------------------------------  ---------------  -------------- 
 

The standards listed above, are effective from 1 January 2020 but they do not have a material effect on the Group's financial statements.

New standards and amendments issued by the IASB but not yet effective

There are a number of new standards, amendments to standards and interpretations that are not yet effective and have not been applied in preparing these consolidated financial statements. These new standards, amendments to standards and interpretations are either not expected to have a material impact on the Group and the Company's financial statements or are still under assessment by the Group and the Company.

The principal new standards, amendments to standards and interpretations are as follows:

 
                                    IASB effective 
Standard                             date                   EU effective date 
---------------------------------  -----------------------  ----------------------- 
COVID-19 Related Rent Concessions 
 (Amendment to IFRS 16)             1 June 2020             1 June 2020 
---------------------------------  -----------------------  ----------------------- 
Interest Rate Benchmark 
 Reform - Phase 2 (Amendments 
 to IFRS 9, IAS 39, IFRS 
 7, IFRS 4 and IFRS 16)             1 January 2021          1 January 2021 
---------------------------------  -----------------------  ----------------------- 
Onerous Contracts - Cost 
 of Fulfilling a Contract 
 (Amendments to IAS 37)             1 January 2022          1 January 2022 
---------------------------------  -----------------------  ----------------------- 
Annual Improvements to IFRS 
 Standards 2018 - 2020              1 January 2022          1 January 2022 
---------------------------------  -----------------------  ----------------------- 
Property, Plant and Equipment: 
 Proceeds before Intended 
 Use (Amendments to IAS 16)         1 January 2022          1 January 2022 
---------------------------------  -----------------------  ----------------------- 
Reference to the Conceptual 
 Framework (Amendments to 
 IFRS 3)                            1 January 2022          1 January 2022 
---------------------------------  -----------------------  ----------------------- 
Classification of Liabilities 
 as Current or Non-current 
 (Amendments to IAS 1)              1 January 2023          1 January 2023 
---------------------------------  -----------------------  ----------------------- 
IFRS 17 Insurance Contracts 
 and amendments to IFRS 17 
 Insurance Contracts                1 January 2023          1 January 2023 
---------------------------------  -----------------------  ----------------------- 
Sale or Contribution of 
 Assets between an Investor 
 and its Associate or Joint 
 Venture (Amendments to IFRS        Effective date          Effective date deferred 
 10 and IAS 28)                      deferred indefinitely   indefinitely 
---------------------------------  -----------------------  ----------------------- 
 

New standards that came into effect on 1 January 2021 will be applied in the year ending 31 December 2021 first reporting to include these will be for the period ending 30 June 2021. The Directors do not believe that any of these standards will have a significant impact on Group and Company reporting.

Basis of preparation

The Group and Company financial statements are prepared on the historical cost basis, except for financial assets (net profit interests, quoted shares and unquoted shares), which are carried at fair value, and equity settled share option awards and warrants which are measured at grant date fair value.

Going concern

The Directors have prepared a detailed cash flow forecast for the Group and Company for the period from 1 June 2021 to 31 December 2022.

The principal assumptions underlying the cash flow forecast and the availability of finance to the Group are as follows:

-- Following completion of a transaction in 2016, the Company paid US$174.5 million to acquire Loan Notes in Midwestern Leon Petroleum Limited ("MLPL"), which are repayable by MLPL to San Leon and a 40% shareholding in MLPL. The economic effect of this structure is that San Leon has an initial indirect economic interest of 10.584% in OML 18. Shareholders will note this is 0.864% higher than the percentage interest anticipated by San Leon at the time of the acquisition in 2016. There have been no further purchases or payments by San Leon but this revised percentage is based on a reassessment and recalculation of the various parties' interests in OML 18 which has resulted in Martwestern Energy Limited's ("Martwestern") economic interest in Eroton now standing at 98%. The Group will receive cash flows from the Loan Notes in the form of interest and capital repayments. This continued to be the case during 2020 and the basis of the forecast for 2021 and 2022. On 6 April 2020, the Company entered into an agreement amending the Loan Notes Instrument. The Amendment extends the term of the Loan Notes to December 2021 and changes the expected loan note repayment schedule. Up to 31 December 2020, Loan Note payments totalling US$195.6 million of both principal and interest have been made on behalf of MLPL. Since the reporting date, a further US$0.8 million has been received. Of the US$10.0 million due on 6 October 2020, a balance of US$4.2 million is still outstanding. Quarterly repayments are due to start from July 2021.

-- Income from the provision of subsurface technical and management services of US$5.3 million in 2022.

-- Ongoing exploration and administrative expenditure from the Group's existing activities are in line with current expectations and commitments.

-- Repayments from ELI of loan notes of US$10.6 million during 2021 and 2022.

-- OZA deal finalised in June 2021, with repayments of loan notes in 2022 of US$2.2 million.

Given the Group's well understood cost base, the principal uncertainty relates to the quantum and timing of receipt of interest and capital repayments on the Loan Notes with MLPL. It was originally envisaged that the MLPL Loan Note payments due to the Group would be sourced by MLPL from the receipt of dividends through its indirect interest in Eroton via Martwestern. These dividends have not been received and consequently MLPL has entered into loan arrangements in order to be able to make Loan Note payments to the Company. In the absence of the dividend payments, MLPL will be reliant on further advances under the loan arrangement and in turn being able to make Loan Note payments to the Company. The Company has no obligation arising from the loan arrangements entered into by MLPL.

The Directors have considered the impact of the Covid-19 pandemic, the volatility in oil prices and demand, OPEC quotas, and recent operational challenges being experienced by OML 18 upon the Company's indirect interest in OML 18, and upon the Loan Notes. The Directors are still confident in the operational potential and ultimately recovering the full amount of the outstanding Loan Notes, however due to the above issues management recognise the uncertainty in timing of future cashflows and for this reason the MLPL Loan Notes have been credit impaired.

The Directors have concluded, that whilst any MLPL Loan Note payments, if delayed or not received, represents an uncertainty, the receipt of any further MLPL Loan Note payment(s) is not required given other expected cash inflows considered in the assumptions, such as ELI Loan Note repayments, and mitigants such as the implementation of certain cost saving measures, to continue for a period of at least 12 months from the date of approval of the financial statements.

Based on its consideration of Group cash flow projections and underlying assumptions outlined above, the Directors have a reasonable expectation that the Group and Company will have adequate resources to continue in operational existence and to discharge its debts as they fall due for the foreseeable future and for a period of at least 12 months from the date of approval of the financial statements.

Accordingly, the Directors continue to adopt the going concern basis of preparation of the financial statements for the year ended 31 December 2020.

Functional and presentation currency

Items included in the financial statements of each of the Group's entities are measured using the currency of the primary economic environment in which the entity operates (the "functional currency"). These consolidated financial statements are presented in US Dollars (US$), which is the Company's functional currency and the Group's presentational currency, rounded to the nearest thousand.

Use of estimates and judgements

The preparation of financial statements, in conformity with EU IFRS, requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. Actual results may differ from these estimates. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgements about carrying values of assets and liabilities that are not readily apparent from other sources. Estimates and underlying assumptions are reviewed on an on-going basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised and in any future periods affected. In particular, significant areas of estimation uncertainty and critical judgements used in applying accounting policies that have the most significant effect on the amounts recognised in the financial statements include:

Judgements

-- Going concern (Note 1)

-- Classification of finance income (Note 4)

-- Impairment of investment in subsidiary (Note 7)

-- Recoverability of equity accounted investments (Note 6)

-- Recoverability of financial assets (Note 8)

Estimates

-- Measurement of equity accounted investments (Note 6)

-- Measurement of financial assets (Note 8)

-- Recognition and measurement of derivatives

-- Measurement of share-based payments

-- Recognition of deferred tax asset for tax losses

Basis of consolidation

The financial information incorporates the financial information of the Company and entities controlled by the Group (its subsidiaries). Control is defined as when the Group is exposed to or has the rights to variable returns from its investment with the entity and has the ability to affect these returns through its power over the entity. The financial statements of subsidiaries are included in the consolidated financial statements from the date control commences until the date that control ceases. Where necessary, adjustments are made to the financial information of subsidiaries to bring their accounting policies into line with those used by other members of the Group. Intra-group balances and any unrealised gains and losses or income or expenses arising from intragroup transactions are eliminated in preparing the Group financial statements.

Business combinations and goodwill

Business combinations are accounted for using the acquisition method as at the acquisition date, which is the date on which control is transferred to the Group. Control is defined as when the Group and Company have the rights to variable returns from its investment with the entity and have the ability to affect these returns through its power over the entity. In assessing control, the Group takes into consideration potential voting rights that currently are substantive.

Acquisitions

The Group and Company measures goodwill at the acquisition date as:

-- the fair value of the consideration transferred; plus

-- the recognised amount of any non-controlling interests in the acquiree; plus, if the business combination is achieved in stages, the fair value of the existing equity interest in the acquiree; less

-- the net recognised amount (generally fair value) of the identifiable assets acquired and liabilities assumed.

When the excess is negative, a bargain purchase gain is recognised immediately in profit or loss.

Costs related to the acquisition, other than those associated with the issue of debt or equity securities, that the Group incurs in connection with a business combination are expensed as incurred.

Any contingent consideration payable is recognised at fair value at the acquisition date. If the contingent consideration is classified as equity, it is not re-measured and settlement is accounted for within equity. Otherwise, subsequent changes to the fair value of the contingent consideration are recognised in profit or loss.

Intangible assets - exploration and evaluation assets

Expenditure incurred prior to obtaining the legal rights to explore an area is recognised in profit or loss as incurred. All other expenditure relating to licence acquisition, exploration, evaluation and appraisal of oil and gas interests, including an appropriate share of directly attributable overheads, is capitalised on a licence by licence basis.

Exploration and evaluation assets are carried at cost until the exploration phase is complete or commercial reserves have been discovered. The Group and Company regularly review the carrying amount of exploration and evaluation assets for indicators of impairment and capitalised costs are written off where the carrying amount of assets may not be recoverable. Where commercial reserves have been established and development is approved by the Board, the relevant expenditure is transferred to oil and gas properties following assessment of impairment.

Impairment of non-financial assets

The carrying amounts of the Group's assets are reviewed at each reporting date and, if there is any indication that an asset may be impaired, its recoverable amount is estimated. The recoverable amount is the higher of its fair value less costs to sell and its value in use.

Estimates of impairment are limited to an assessment by the Directors of any events or changes in circumstance that would indicate that the carrying amount of the asset may not be recoverable.

Any impairment loss arising from the review is recognised in profit or loss to the extent the carrying amount of the asset exceeds its recoverable amount. An impairment loss is reversed only to the extent that the asset's carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised.

Property, plant and equipment

Property, plant and equipment are stated at cost less accumulated depreciation. Depreciation is provided at rates calculated to write off the cost less residual value of each asset over its expected useful life. The residual value is the estimated amount that would currently be obtained from disposal of the asset if the asset were already of the age and in the condition expected at the end of its useful life. The annual rate of depreciation for each class of depreciable asset is:

   Office equipment                   25% Straight line 
   Motor vehicles                       20% Reducing balance 
   Plant and equipment             20% - 33% Straight line 

Leased assets Shorter of the term of lease or useful life of the asset as defined under IFRS 16

Inventories

Inventories are valued at the lower of cost and net realisable value.

Joint ventures

The Group has also entered into a joint venture arrangement which is operated through a joint venture. The Group accounts for its interest in this entity on an equity basis, with Group share of profit or loss after tax recognised in the Income Statement and its share of Other Comprehensive Income ("OCI") of the joint venture recognised in OCI.

Financial fixed assets - investment in subsidiaries

Financial fixed assets in the Company Statement of Financial Position consist of investments in subsidiary undertakings and are stated at cost less provision for impairment where applicable.

Financial assets and financial liabilities

i. Recognition and initial measurement

Financial assets are classified at initial recognition and subsequently measured at amortised cost, Fair Value through Other Comprehensive Income ("FVOCI") or Fair Value Through Profit or Loss ("FVTPL"). The classification of financial assets is determined by the contractual cash flows and where applicable the business model for managing the financial assets.

A financial asset or financial liability is initially measured at fair value plus, for an item not at FVTPL, transaction costs that are directly attributable to its acquisition or issue.

ii. Classification and subsequent measurement

Financial assets

On initial recognition, a financial asset is classified as measured at: amortised cost; FVOCI - debt investment; FVOCI - equity investment; or FVTPL. Financial assets are not reclassified subsequent to their initial recognition unless the Group changes its business model for managing financial assets.

A financial asset is measured at amortised cost if the objective of the business model is to hold the financial asset in order to collect contractual cash flows and the contractual terms give rise to cash flows that are solely payments of principal and interest. Subsequently the financial asset is measured using the effective interest method less any impairment. The amortised cost is reduced by impairment losses in accordance with Group policy set out below. Interest income, foreign exchange gains and losses and impairment are recognised in profit or loss. Any gain or loss on derecognition is recognised in profit or loss.

The business model in which a financial asset is held is assessed at an individual asset level for assets that are individually material, and otherwise at a portfolio level. Financial assets that are held as part of a long-term strategic investment are considered within a business model to collect contractual cash flows.

In assessing whether the contractual cash flows are solely payments of principal and interest, the Group considers the contractual terms of the instrument. This includes assessing whether the financial asset contains a contractual term that could change the timing or amount of contractual cash flows such that it would not meet this condition.

On initial recognition of an equity investment that is not held for trading, the Group may irrevocably elect to present subsequent changes in the investment's fair value in OCI (FVOCI - equity investment). This election is made on an investment -- by -- investment basis. These assets are subsequently measured at fair value. Dividends are recognised as income in profit or loss unless the dividend clearly represents a recovery of part of the cost of the investment. Other net gains and losses are recognised in OCI and are never reclassified to profit or loss.

All financial assets not classified as measured at amortised cost or FVOCI as described above are measured at FVTPL. This includes all derivative financial assets. These assets are subsequently measured at fair value. Net gains and losses, including any interest or dividend income, are recognised in profit or loss.

On initial recognition, the Group may irrevocably designate a financial asset that otherwise meets the requirements to be measured at amortised cost or at FVOCI as at FVTPL if doing so eliminates or significantly reduces an accounting mismatch that would otherwise arise.

Financial liabilities

Financial liabilities are classified as measured at amortised cost or FVTPL. A financial liability is classified as at FVTPL if it is classified as held -- for -- trading, it is a derivative or it is designated as such on initial recognition. Financial liabilities at FVTPL are measured at fair value and net gains and losses, including any interest expense, are recognised in profit or loss. Other financial liabilities are subsequently measured at amortised cost using the effective interest method. Interest expense and foreign exchange gains and losses are recognised in profit or loss. Any gain or loss on derecognition is also recognised in profit or loss.

iii. Impairment (including receivables)

The Group recognises loss allowances for expected credit losses ("ECL's") on financial assets measured at amortised cost.

A provision for 12-month ECL is recognised in respect of low risk assets. A provision for the lifetime ECL is recognised in respect of higher risk assets that are not credit impaired. If an asset is credit impaired, the carrying amount of the asset is reduced by its lifetime ECL.

The 12-month ECL represents the weighted average of credit losses that result from default events on a financial instrument that are possible within the 12 months after the reporting date. This requires a number of outcomes to be considered, a probability assigned to each, and a resulting credit loss applied to each. ECLs are discounted at the effective interest rate of the financial asset.

12-month ECL is determined based on forward looking analysis where a range of outcomes have been considered taking into account the size and timing of the contractual cashflows, the risk of late payment and the risk of default leading to less than full recovery of the amounts due. Lifetime ECL is calculated the same way, but over the relevant period.

At each reporting date, the Group assesses whether financial assets carried at amortised cost are credit -- impaired. A financial asset is 'credit -- impaired' when one or more events that have a detrimental impact on the estimated future cash flows of the financial asset have occurred. The Group considers a financial asset to be in default and presumed credit impaired when contractual payments are outstanding 90 days after their due date, unless there is reasonable information that amounts will be recovered; or when the borrower is unlikely to pay its credit obligations to the Group in full, without recourse by the Group to actions such as realising security including guarantees (if any is held).

The Company has determined that MLPL is likely to meet its credit obligations as evidenced by the preparation of a Competent Persons Report in relation to San Leon's interest in OML 18, however are uncertain of the timing of when these obligations will be met. The Company has therefore credit impaired the asset.

The Company has determined that ELI is likely to meet its credit obligations as evidenced by recent management information in relation to San Leon's interest in ELI.

Write-off

The gross carrying amount of a financial asset is written off when the Group has no reasonable expectations of recovering a financial asset in its entirety or a portion thereof. The Group expects no significant recovery from the amount written off. However, financial assets that are written off could still be subject to enforcement activities in order to comply with the Group's procedures for recovery of amounts due.

iv. Derecognition

The Group derecognises a financial asset when the contractual rights to the cash flows from the financial asset expire.

The Group derecognises a financial liability when its contractual obligations are discharged or cancelled or expire.

On derecognition of a financial asset or financial liability, the difference between the carrying amount removed or extinguished and the consideration received or paid is recognised in profit or loss.

Decommissioning provision

A provision is made for decommissioning of oil and gas wells. The cost of decommissioning is determined through discounting the amounts expected to be payable to their present value at the date the provision is recognised and reassessed at each reporting date. This amount is regarded as part of the total investment to gain access to economic benefits and consequently capitalised as part of the cost of the asset and the liability is recognised in provisions. Such cost is depleted over the life of the asset on the basis of proven and probable reserves and charged to the Income Statement. The unwinding of the discount is reflected as a finance cost in the Income Statement over the life of the field or well.

Taxation

Income tax expense comprises current and deferred tax. Income tax expense is recognised in the Consolidated Income Statement except to the extent that it relates to items recognised directly in Other Comprehensive Income or equity, in which case it is recognised in Other Comprehensive Income or equity.

i. Current tax

Current tax comprises the expected tax payable or receivable on the taxable income or loss for the year and any adjustment to the tax payable or receivable in respect of previous years. The amount of current tax payable or receivable is the best estimate of the tax amount expected to be paid or received that reflects uncertainty relates to income taxes, if any. It is measured using tax rates enacted or substantively enacted at the reporting date. Current tax also includes any tax arising from dividends.

Current tax assets and liabilities are offset only if certain criteria are met.

ii. Deferred tax

Deferred tax is recognised using the liability method, providing for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognised for the following temporary differences: the initial recognition of goodwill, the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit, and differences relating to investments in subsidiaries to the extent that they are controlled and probably will not reverse in the foreseeable future. Deferred tax is measured at the tax rates that are expected to be applied to the temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by the reporting date.

A deferred tax asset is recognised to the extent that it is probable that future taxable profits will be available against which the temporary differences can be utilised. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised.

Unrecognised deferred tax assets are reassessed as each reporting date and recognised to the extent that it has become probable that future taxable profits will be available against which they can be used.

Deferred tax assets and liabilities are offset only if certain criteria are met.

Foreign currencies

Transactions in foreign currencies are initially translated to the respective functional currencies of Group entities at the exchange rates at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies are retranslated to the functional currency at the exchange rates ruling at the reporting date with gains or losses recognised in profit or loss. Non-monetary items are translated using the exchange rates ruling as at the date of the initial transaction.

Foreign currency differences are generally recognised in profit or loss and presented within finance costs. However, foreign currency differences arising from the translation of the following items are recognised in OCI:

-- an investment in equity securities designated as at FVOCI (except on impairment, in which case foreign currency differences that have been recognised in OCI are reclassified to profit or loss);

-- a financial liability designated as a hedge of the net investment in a foreign operation to the extent that the hedge is effective; and

-- qualifying cash flow hedges to the extent that the hedges are effective.

Foreign operations

The assets and liabilities of foreign operations are translated into US Dollars at the exchange rate at the reporting date and the income and expenses of foreign operations are translated at the actual exchange rates at the date of the transaction or at average exchange rates for the year where this approximates to the actual rate. Exchange differences arising on translation are recognised in Other Comprehensive Income and presented in the foreign currency translation reserve in equity. Details of exchange rates used are set out in Note 32 of the Annual Report and Accounts.

Revenue recognition

For the year ended 31 December 2020 the Group used the five-step model as prescribed under IFRS 15 on the Group's revenue transactions. This included the identification of the contract, identification of the performance obligations under same, determination of the transaction price, allocation of the transaction price to performance obligations and recognition of revenue. The point of recognition arises when the Group satisfies a performance obligation by transferring control of a promised seismic processing service to the customer, which could occur over time.

Finance income and expenses

Interest income is accrued on a time basis by reference to the principal on deposit and the effective interest rate applicable.

The 'effective interest rate' is the rate that at initial recognition exactly discounts estimated future cash payments or receipts through the expected life of the financial instrument to:

-- the gross carrying amount of the financial asset; or

-- the amortised cost of the financial liability.

In calculating interest income and expense, the effective interest rate is applied to the gross carrying amount of the asset (when the asset is not credit -- impaired) or to the amortised cost of the liability. However, for financial assets that have become credit -- impaired subsequent to initial recognition, interest income is calculated by applying the effective interest rate to the amortised cost of the financial asset net of impairment provision. If the asset is no longer credit -- impaired, then the calculation of interest income reverts to the gross basis.

Finance expenses comprise interest or finance costs on borrowings and unwinding of any discount on provisions using the effective interest rate.

Share capital

Incremental costs directly attributable to the issue of ordinary shares are recognised as a deduction from equity.

Share based payments

The Group has applied the requirements of IFRS 2 'share based payments'. The Group issues share options as an incentive to certain key management and staff (including Directors), which are classified as equity settled share based payment awards. The grant date fair value of share options granted to Directors and employees under the Company's share option scheme is recognised as an expense over the vesting period with a corresponding credit to the share-based payments reserve. The fair value is measured at grant date and spread over the period during which the awards vest.

The options issued by the Group are subject to both market-based and non-market based vesting conditions. Market conditions are included in the calculation of fair value at the date of the grant. Non-market vesting conditions are not taken into account when estimating the fair value of awards as at grant date; such conditions are taken into account through adjusting the number of the equity instruments that are expected to vest.

The proceeds received will be credited to share capital (nominal value) and share premium when options are converted into ordinary shares.

Where the terms of an equity-settled transaction are modified, an additional expense is recognised for any modification that increases the total fair value of the share-based payment transaction, or is otherwise beneficial to the employee as measured at the date of modification.

Where an equity-settled award is cancelled, it is treated as if it had vested on the date of cancellation, and any expense not yet recognised for the award is recognised immediately. However, if a new award is substituted for the cancelled award, and designated as a replacement award on the date that it is granted, the cancelled and new awards are treated as if they were a modification of the original award, as described in the previous paragraph.

Dividends

The Group has elected to classify cashflows from dividends paid as financing activities.

Earnings per share

The Group and the Company present basic and diluted earnings per share ("EPS") data for its ordinary shares. Basic EPS is calculated by dividing the profit or loss attributable to equity shareholders of the Company by the weighted average number of ordinary shares outstanding during the period. Diluted EPS is determined by adjusting the profit or loss attributable to ordinary shareholders and the weighted average number of ordinary shares outstanding for the effects of all dilutive potential ordinary shares, which comprise convertible notes, share options granted to employees and warrants.

Cash and cash equivalents

Cash and cash equivalents comprise cash at bank and in hand on demand.

Leases:

As a lessee

The Group recognises right-of-use assets representing its right to use the underlying assets and lease liabilities representing its obligation to make lease payments at the lease commencement date. The right-of-use assets are initially measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or before the commencement date, plus any initial direct costs incurred and an estimate of costs to dismantle and remove the underlying asset or to restore the underlying asset or to restore the site on which it is located, less any lease incentives received.

The right-of-use asset is subsequently depreciated using the straight-line method from the commencement date to the end of the lease term, unless the lease transfers ownership of the underlying asset to the Group by the end of the lease term or the cost of the right-of-use asset reflects that the Group will exercise a purchase option. In that case the right-of-use asset will be depreciated over the useful life of the underlying asset, which is determined on the same basis as those of property and equipment. In addition, the right-of-use asset is periodically reduced by impairment losses, if any, and adjusted for certain remeasurements of the lease liability.

The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the Group's incremental borrowing rate. Generally, the Group uses its incremental borrowing rate as the discount rate.

The Group determines its incremental borrowing rate by obtaining interest rates from various external financing sources and makes certain adjustments to reflect the terms of the lease and type of the asset leased.

Lease payments included in the measurement of the lease liability comprise the following:

   -               fixed payments, including in-substance fixed payments; 

- variable lease payments that depend on an index or rate, initially measured using the index or rate as at the commencement date;

   -               amounts expected to be payable under a residual value guarantee; and 

- the exercise price under a purchase option that the Group is reasonably certain to exercise, lease payments in an optional renewal period if the Group is reasonably certain to exercise an extension option, and penalties for early termination of a lease unless the Group is reasonably certain not to terminate early.

The lease liability is measured at amortised cost using the effective interest method. It is remeasured when there is a change in the Group's estimate of the amount expected to be payable under a residual value guarantee, if the Group changes its assessment of whether it will exercise a purchase, extension or termination option or if there is a revised in-substance fixed lease payment.

When the lease liability is remeasured in this way, a corresponding adjustment is made to the carrying amount of the right-of-use asset, or is recorded in profit or loss if the carrying amount of the right-of-use asset has been reduced to zero.

The Group presents right-of-use assets that do not meet the definition of investment property in 'property, plant and equipment' and lease liabilities in 'loans and borrowings' in the Statement of Financial Position.

Short-term leases and leases of low-value assets

The Group has elected not to recognise right-of-use assets and lease liabilities for leases of low-value assets and short-term leases, including IT equipment. The Group recognises the lease payments associated with these leases as an expense on a straight-line basis over the lease term.

Segmental reporting

A segment is a distinguishable component of the Group that is engaged in business activities from which it may earn revenues and incur expenses which is subject to risks and rewards that are different from those of other segments and for which discrete financial information is available.

All operating segments and results are regularly reviewed by the Board of Directors to make decisions about resources to be allocated to each segment and to assess its performance.

Full details of the Group's operating segments all of which are involved in oil and gas exploration and production are set out in Note 2 to the Annual Report and Accounts.

Defined contribution pension scheme

The Company operates a defined contribution scheme. All contributions made are recognised in the Income Statement in the period in which they fall due.

Fair value movement

The Group has an established process with respect to the measurement of fair values. The finance team regularly reviews significant unobservable inputs and valuation adjustments. If third party information, such as broker quotes or pricing services, is used to measure fair values, then the valuation team assesses the evidence obtained from the third parties to support the conclusion that such valuations meet the requirements of IFRS, including the level in the fair value hierarchy in which such valuations should be classified.

Significant valuation issues are reported to the Board.

Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities.

Level 2: inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).

Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).

For further detail on assumptions made in measuring Level 3 fair values see the following notes:

-- Note 17 Financial Assets in the Annual Report and Accounts

-- Note 22 Derivative in the Annual Report and Accounts

Assets and liabilities measured at fair value

In accordance with IFRS 13, the Group discloses its assets and liabilities held at fair value after initial recognition in the following categories: FVOCI - equity instrument and FVTPL.

With the exception of shares held in quoted entities, which are classified as Level 1 items under the fair value hierarchy, all assets and liabilities held at fair value are measured on the basis of inputs classified as Level 3 under the fair value hierarchy on the basis that the inputs underpinning the valuations are not based on observable market data as defined in IFRS 13.

Where derivatives are traded either on exchanges or liquid over-the-counter markets, the Group uses the closing price at the reporting date. Normally, the derivatives entered into by the Group are not traded in active markets. The fair values of these contracts are estimated using a valuation technique that maximises the use of observable market inputs, e.g. market exchange and interest rates. All derivatives entered into by the Group are included in Level 3 and consist of share warrants issued.

2. Revenue and Segmental Information

Operating segment information is presented on the basis of the geographical areas as detailed below, which represent the financial basis by which the Group manages its operations. The Board of Directors, which has been recognised as the Chief Operating Decision Maker ("CODM"), regularly receive verbal or written reports at board meetings for each of the segments based on the below criteria which management consider to be appropriate in evaluating segment performance relative to other entities that operate in the industry.

Revenue and Segmental Information

 
                          Poland   Morocco   Albania   Nigeria   Ireland     Spain  Unallocated#      Total 
2020                     US$'000   US$'000   US$'000   US$'000   US$'000   US$'000       US$'000    US$'000 
---------------------  ---------  --------  --------  --------  --------  --------  ------------  --------- 
Total revenue                  -         -         -         -         -         -             -          - 
---------------------  ---------  --------  --------  --------  --------  --------  ------------  --------- 
Impairment of 
 exploration 
 and evaluation 
 assets                        -         -     (196)         -         -         -             -      (196) 
---------------------  ---------  --------  --------  --------  --------  --------  ------------  --------- 
Segment (loss) 
 / profit before 
 income tax              (2,093)         -     (196)     3,259     4,073      (59)      (14,589)    (9,605) 
---------------------  ---------  --------  --------  --------  --------  --------  ------------  --------- 
Property, plant 
 and equipment                11         -         -       575     2,708         -             -      3,294 
---------------------  ---------  --------  --------  --------  --------  --------  ------------  --------- 
Equity accounted 
 investments                   -         -         -    44,102         -         -             -     44,102 
---------------------  ---------  --------  --------  --------  --------  --------  ------------  --------- 
Segment non-current 
assets                         -         -         -    55,729     9,513         -             -     65,242 
---------------------  ---------  --------  --------  --------  --------  --------  ------------  --------- 
Segment liabilities         (83)      (18)     (804)       (4)   (3,279)     (748)       (1,706)    (6,642) 
---------------------  ---------  --------  --------  --------  --------  --------  ------------  --------- 
 # Unallocated expenditure and liabilities include amounts 
  of a corporate nature and not specifically attributable 
  to a reportable segment. 
 
 

Revenue relates to the provision of seismic acquisition services in Poland.

 
                                                                                                            Total 
                               Poland   Morocco   Albania   Nigeria   Ireland     Spain  Unallocated#     US$'000 
                                                                                                        (Restated 
2019                          US$'000   US$'000   US$'000   US$'000   US$'000   US$'000       US$'000          *) 
---------------------------  --------  --------  --------  --------  --------  --------  ------------  ---------- 
Total revenue                     266         -         -         -         -         -             -         266 
---------------------------  --------  --------  --------  --------  --------  --------  ------------  ---------- 
Impairment of exploration 
and evaluation 
assets                          (126)     (150)     (190)         -         -     (941)             -     (1,407) 
---------------------------  --------  --------  --------  --------  --------  --------  ------------  ---------- 
Segment (loss) 
 / profit before 
 income tax (Restated 
 *)                          (15,074)     1,134     (190)    17,565  (48,373)   (1,014)      (12,749)    (58,701) 
---------------------------  --------  --------  --------  --------  --------  --------  ------------  ---------- 
Property, plant 
 and equipment                     32         -         -     1,476     2,836         -             -       4,344 
---------------------------  --------  --------  --------  --------  --------  --------  ------------  ---------- 
Equity accounted 
 investments (Restated 
 *)                                 -         -         -    44,798         -         -             -      44,798 
---------------------------  --------  --------  --------  --------  --------  --------  ------------  ---------- 
Segment non-current 
 assets (Restated 
 *)                                32         -         -    46,043     7,554         -           194      53,823 
---------------------------  --------  --------  --------  --------  --------  --------  ------------  ---------- 
Segment liabilities             (194)     (268)     (804)         -   (2,835)     (739)       (3,251)     (8,091) 
---------------------------  --------  --------  --------  --------  --------  --------  ------------  ---------- 
 # Unallocated expenditure and liabilities include amounts 
  of a corporate nature and not specifically attributable 
  to a reportable segment. 
 
 

Revenue relates to the provision of seismic acquisition services in Poland.

* See Note 6 for details on restated amounts

3. LOSS on disposal of subsidiaries

 
                                                       2020      2019 
                                                    US$'000   US$'000 
-------------------------------------------------  --------  -------- 
Other, recycling from equity to income statement 
 (i)                                                (1,044)  (13,870) 
-------------------------------------------------  --------  -------- 
Horizon Petroleum Ltd (ii)                                -       100 
-------------------------------------------------  --------  -------- 
                                                    (1,044)  (13,770) 
-------------------------------------------------  --------  -------- 
 

(i) Other

In 2020 the Company liquidated certain foreign operations that held non-core assets. The Group's investment in the assets held by the subsidiaries has been fully impaired in prior periods. The liquidation of the foreign operations has resulted in the realisation of cumulative foreign currency losses of US$1.0 million (2019: US$13.9 million), that had previously been recognised in equity. The realisation of the cumulative foreign currency losses does not impact the consolidated assets or liabilities.

(ii) Horizon Petroleum Ltd

In August 2019, sale and purchase agreements were completed for the sale of a 100% interest in two oil & gas concessions in Poland, known as Bielsko-Biala and Cieszyn (together the "Primary Concessions"), and a 100% interest in two additional oil & gas concessions in Poland, known as Prusice and Kotlarka, (together the "Secondary Concessions") with Horizon Petroleum Ltd. ('Horizon') (TSXV: HPL).

San Leon will receive a 6% net profit interest on the Primary and Secondary Concessions when the concessions are transformed and granted to Horizon. Under revised completion terms, a cash payment of US$1,080,000 is also due to be paid to San Leon if the Bielsko-Biala concession is transformed and granted to Horizon. At the same time, San Leon is also to receive US$769,558 (CAD$1.0 million) in shares of Horizon. A cash payment of approximately US$75,000 is due to be paid to San Leon for each of the Secondary Concessions if granted to Horizon.

The aggregate consideration of US$2.0 million has been noted as a contingent asset in Commitments and Contingencies (Note 28 in the Annual Report and Accounts).

On completion of the sale, a US$100,000 advance received by the Company in 2017 as part of the Memorandum of Understanding became non-refundable.

At 31 December 2020 and at the date of signing these accounts, the concessions have yet to be transformed and granted to Horizon.

4. Finance income

 
                                                  2020      2019 
                                               US$'000   US$'000 
--------------------------------------------  --------  -------- 
Total finance income on Loan Notes (Note 8)     17,276    23,313 
--------------------------------------------  --------  -------- 
Movement in fair value of derivatives              119       531 
--------------------------------------------  --------  -------- 
Deposit interest received                           47       278 
--------------------------------------------  --------  -------- 
Interest on Director's loan                          -         1 
--------------------------------------------  --------  -------- 
                                                17,442    24,123 
--------------------------------------------  --------  -------- 
 

All interest income is in respect of assets measured at amortised cost.

5. LOSS per share

Basic loss per share

Basic loss per share is calculated by dividing the loss attributable to equity holders of the Company by the weighted average number of ordinary shares in issue during the year as follows:

 
                                     2019 
                         2020     US$'000 
                      US$'000   (Restated 
                                       *) 
------------------  ---------  ---------- 
Loss for the year    (11,853)    (44,622) 
------------------  ---------  ---------- 
 

The weighted average number of shares in issue is calculated as follows:

 
                                                    2020          2019 
                                                  Number        Number 
                                               of shares     of shares 
-------------------------------------------  -----------  ------------ 
In issue at start of year (Note 10)          451,303,014   500,256,857 
-------------------------------------------  -----------  ------------ 
Shares to be issued at start of year                   -     5,590,270 
-------------------------------------------  -----------  ------------ 
Effect of tender offer and buybacks in the 
 year                                        (1,332,865)  (39,697,582) 
-------------------------------------------  -----------  ------------ 
Effect of shares issued and shares to be 
 issued in the year                                    -       195,890 
-------------------------------------------  -----------  ------------ 
Weighted average number of ordinary shares 
 in issue (basic)                            449,970,149   466,345,435 
-------------------------------------------  -----------  ------------ 
Basic loss per ordinary share (cent)              (2.63)        (9.57) 
-------------------------------------------  -----------  ------------ 
 

* See Note 6 for details on restated amounts

Diluted loss per share

Diluted loss per share is calculated by dividing the loss attributable to equity holders of the Company by the weighted average number of ordinary shares outstanding after adjustment for effects of all dilutive potential ordinary shares as follows:

 
                                     2019 
                         2020     US$'000 
                      US$'000   (Restated 
                                       *) 
------------------  ---------  ---------- 
Loss for the year    (11,853)    (44,622) 
------------------  ---------  ---------- 
 

The diluted weighted average number of shares in issue is calculated as follows:

 
                                                 2020         2019 
                                               Number       Number 
                                            of shares    of shares 
----------------------------------------  -----------  ----------- 
Basic weighted average number of shares 
 in issue during the year                 449,970,149  466,345,435 
----------------------------------------  -----------  ----------- 
Effect of share options and warrants in             -            - 
 issue 
----------------------------------------  -----------  ----------- 
                                          449,970,149  466,345,435 
----------------------------------------  -----------  ----------- 
Diluted loss per ordinary share (cent)         (2.63)       (9.57) 
----------------------------------------  -----------  ----------- 
 

* See Note 6 for details on restated amounts

The number of options which are anti-dilutive and have therefore not been included in the above calculations is 41,221,626 (2019: 39,559,074).

6. Equity accounted investments

 
Group                                                            2019        2018 
                                                     2020     US$'000     US$'000 
                                                  US$'000   (Restated   (Restated 
                                                                   *)          *) 
----------------------------------------------  ---------  ----------  ---------- 
Cost and net book value 
----------------------------------------------  ---------  ----------  ---------- 
At 1 January                                       44,798      54,012      69,763 
----------------------------------------------  ---------  ----------  ---------- 
Additions (ELI)                                       443           -           - 
----------------------------------------------  ---------  ----------  ---------- 
Share of loss of equity accounted investments     (1,139)     (9,214)    (15,751) 
----------------------------------------------  ---------  ----------  ---------- 
At 31 December                                     44,102      44,798      54,012 
----------------------------------------------  ---------  ----------  ---------- 
 

The Group's only joint venture entities and associates at 31 December 2020 were as follows:

 
Name                         Registered office                          Type  % held 
---------------------------  -----------------------------------  ----------  ------ 
                             5th Floor Barkly Wharf, Le 
Midwestern Leon Petroleum     Caudan Waterfront,                       Joint 
 Limited                      Port Louis, Republic of Mauritius      Venture     40% 
---------------------------  -----------------------------------  ----------  ------ 
Energy Link Infrastructure   260 Triq San Albert, Griza, 
 (Malta) Limited              GZR 1150, Malta                      Associate     10% 
---------------------------  -----------------------------------  ----------  ------ 
 

2020

A summary of the financial information of the equity investments is detailed below.

 
                                                   Midwestern                Energy 
                                               Leon Petroleum   Link Infrastructure 
                                                      Limited               (Malta) 
                                                          (i)               Limited 
                                                                               (ii)      Total 
-------------------------------------------   ---------------  --------------------  --------- 
Equity Interest                                           40%                   10% 
--------------------------------------------  ---------------  --------------------  --------- 
 
                                                      US$'000               US$'000    US$'000 
-------------------------------------------   ---------------  --------------------  --------- 
Loss from continuing operations                       (2,440)               (2,804)    (5,244) 
--------------------------------------------  ---------------  --------------------  --------- 
Total comprehensive loss                              (2,440)               (2,804)    (5,244) 
--------------------------------------------  ---------------  --------------------  --------- 
Non-current assets                                    198,948               147,922    346,870 
--------------------------------------------  ---------------  --------------------  --------- 
Current assets (excluding cash)                       286,687                   167    286,854 
--------------------------------------------  ---------------  --------------------  --------- 
Cash                                                        -                46,334     46,334 
--------------------------------------------  ---------------  --------------------  --------- 
Non-current liabilities                                     -             (141,458)  (141,458) 
--------------------------------------------  ---------------  --------------------  --------- 
Current liabilities                                 (376,082)              (47,214)  (423,296) 
--------------------------------------------  ---------------  --------------------  --------- 
Net assets                                            109,553                 5,751    115,304 
--------------------------------------------  ---------------  --------------------  --------- 
Group's interest in net assets of investee 
 at 1 January 2020                                     44,798                     -     44,798 
--------------------------------------------  ---------------  --------------------  --------- 
Additions                                                   -                   443        443 
--------------------------------------------  ---------------  --------------------  --------- 
Share of loss                                           (976)                 (163)    (1,139) 
--------------------------------------------  ---------------  --------------------  --------- 
Group's interest in net assets of investee 
 at 31 December 2020                                   43,822                   280     44,102 
--------------------------------------------  ---------------  --------------------  --------- 
 

2019

A summary of the financial information of the equity investments is detailed below.

 
                                                                 Midwestern 
                                                             Leon Petroleum 
                                                                    Limited 
                                                                        (i) 
-------------------------------------------  ---  ---  ---  --------------- 
Equity Interest                                                         40% 
----------------------------------------------------------  --------------- 
 
                                                                    US$'000 
                                                                  (Restated 
                                                                         *) 
-------------------------------------------  ---  ---  ---  --------------- 
Loss from continuing operations                                    (23,035) 
----------------------------------------------------------  --------------- 
Total comprehensive loss                                           (23,035) 
----------------------------------------------------------  --------------- 
Non-current assets                                                  186,642 
----------------------------------------------------------  --------------- 
Current assets (excluding cash)                                     262,444 
----------------------------------------------------------  --------------- 
Non-current liabilities                                                   - 
-------------------------------------------  ---  ---  ---  --------------- 
Current liabilities                                               (337,091) 
----------------------------------------------------------  --------------- 
Net assets                                                          111,995 
----------------------------------------------------------  --------------- 
Group's interest in net assets of investee 
 at 1 January 2019                                                   54,012 
----------------------------------------------------------  --------------- 
Share of loss                                                       (3,204) 
----------------------------------------------------------  --------------- 
Restatement of share of loss *                                      (6,010) 
----------------------------------------------------------  --------------- 
Group's interest in net assets of investee 
 at 31 December 2019                                                 44,798 
----------------------------------------------------------  --------------- 
 

2018

A summary of the financial information of the equity investments is detailed below.

 
                                                                 Midwestern 
                                                             Leon Petroleum 
                                                                    Limited 
                                                                        (i) 
-------------------------------------------  ---  ---  ---  --------------- 
Equity Interest                                                         40% 
----------------------------------------------------------  --------------- 
 
                                                                    US$'000 
                                                                  (Restated 
                                                                         *) 
-------------------------------------------  ---  ---  ---  --------------- 
Loss from continuing operations                                    (35,046) 
----------------------------------------------------------  --------------- 
Total comprehensive loss                                           (39,378) 
----------------------------------------------------------  --------------- 
Non-current assets                                                  201,148 
----------------------------------------------------------  --------------- 
Current assets (excluding cash)                                     242,749 
----------------------------------------------------------  --------------- 
Non-current liabilities                                            (48,259) 
----------------------------------------------------------  --------------- 
Current liabilities                                               (260,608) 
----------------------------------------------------------  --------------- 
Net assets                                                          135,030 
----------------------------------------------------------  --------------- 
Group's interest in net assets of investee 
 at 1 January 2018                                                   69,763 
----------------------------------------------------------  --------------- 
Share of loss                                                      (14,693) 
----------------------------------------------------------  --------------- 
Restatement of share of loss *                                      (1,058) 
----------------------------------------------------------  --------------- 
Group's interest in net assets of investee 
 at 31 December 2018                                                 54,012 
----------------------------------------------------------  --------------- 
 

(i) Midwestern Leon Petroleum Limited

During 2016 the Company acquired a 40% non-controlling interest in MLPL as part of the OML 18 transaction. Full details of the OML 18 transaction are set out in Note 17(i). The movement during 2020 reflects a share of the loss of MLPL being administrative costs of US$9.7 million (2019: US$2.1 million), other income of US$nil (2019: US$7.2 million), net finance income / costs of US$3.3 million income (2019: US$5.5 million costs), profit on investment of US$12.2 million (2019: US$14.6 million loss (restated *)), net impairment losses on financial assets of US$0.3 million (2019: US$nil) and a tax charge of US$7.9 million (2019: US$8.0 million).

The above interest is accounted for as an equity accounted investment as San Leon does not have control over the entity, which is governed under a Joint Venture Agreement requiring the approval of both parties to the Joint Venture Agreement in respect of all operating decisions.

The Group identified potential impairment indicators, being that MLPL is yet to receive a dividend from Eroton, the equity interest is currently loss making, US$5.0 million of a US$10.0 million repayment due on 6 October 2020 was still outstanding at year end, and MLPL has entered into a loan to be able to make Loan Note repayments to the Group. To test for a potential impairment the carrying value of the equity interest in MLPL was compared against the fair value less cost of sale. This was estimated using a discounted cashflow model of the expected future cashflows from MLPL's share of the underlying OML 18 asset. Future cashflows of OML 18 were estimated using the following price assumptions of US$54/bbl in 2021, US$57/bbl in 2022, 2023 and 2024 and a subsequent long term price US$62/bbl escalated at 2% annually, with the cashflows discounted using a post-tax discount rate of 10%. Assumptions involved in the impairment assessment include estimates of commercial reserves, production rates, future oil prices, discount rates and operating and capital expenditure profiles, all of which are inherently uncertain. This analysis identified that the carrying value of the equity interest in MLPL is not impaired.

If the recoverable amount was estimated taking into account a reduction in the oil price of 30% over the same period and an increase in the discount rate to 25%, then the carrying value of the equity interest in MLPL would still not be impaired.

The Directors recognise that the future realisation of the equity accounted investment is dependent on future successful exploration and appraisal activities and subsequent production of oil and gas reserves.

* Restatements

Restatement adjustments have been made in the 2019 comparative to reflect the following misstatements in MLPL's 100% owned subsidiary Martwestern Energy Limited ("Martwestern"), who in turn owns 50% of Eroton, which is recognised in Martwestern as an equity accounted investment:

- Correction of the treatment of dividend received on equity investment which had been recognised as income, resulting in an increase in the restated loss of US$2.5 million

- Share of restated total comprehensive loss of the investee (Eroton) due to the recognition of leases, resulting in an increase in the restated loss of US$3.5 million

- Share of receivable impairment in investee (Eroton) not previously recognised in Martwestern, resulting in an increase in the restated loss of US$1.1 million in 2018

The earliest comparatives that required restatement for this error was in 2018.

The impact on the prior year financial statements is outlined below:

Income statement:

The impact of the restatement has resulted in the loss for the financial year increasing by US$6.0 million from a loss of US$38.6 million to a loss of US$44.6 million

 
Loss for the financial year ended 31 December 2019 as disclosed 
 in the 2019 Annual Report                                               (38,612) 
-----------------------------------------------------------------        -------- 
Restatement of loss on equity accounted investments                       (6,010) 
-----------------------------------------------------------------        -------- 
Restated loss for the financial year ended 
 31 December 2019                                                        (44,622) 
-----------------------------------------------------------------------  -------- 
 
 

Basic and diluted loss per ordinary share (cent)

 
Basic and diluted loss per ordinary share (cent) for the financial 
 year ended 31 December 2019 as disclosed in the 2019 Annual Report          (8.28) 
---------------------------------------------------------------------------  ------ 
Restatement of basic and diluted loss per ordinary share (cent) 
 attributable to increase in loss on equity accounted investments            (1.29) 
---------------------------------------------------------------------------  ------ 
Restated basic and diluted loss per ordinary share (cent) for 
 the financial year ended 31 December 2019                                   (9.57) 
---------------------------------------------------------------------        ------ 
 
 

Statement of Financial Position:

The impact of the restatement has resulted in lower Equity accounted investments.

 
Equity accounted investments as at 31 December 2019 as disclosed 
 in the 2019 Annual Report                                                 51,866 
------------------------------------------------------------------        ------- 
Restatement of 2018 loss on equity accounted investments                  (1,058) 
------------------------------------------------------------------        ------- 
Restatement of 2019 loss on equity accounted investments                  (6,010) 
------------------------------------------------------------------        ------- 
Restated Equity accounted investments for the financial 
 year ended 31 December 2019                                               44,798 
------------------------------------------------------------------------  ------- 
 
 

Cash flow statement:

The impact of the restatement has resulted in lower Equity accounted investments.

 
Share of loss of equity-accounted investments for the ended 
 31 December 2019 as disclosed in the 2019 Annual Report                (3,204) 
----------------------------------------------------------------------  ------- 
Restatement of loss on equity accounted investments                     (6,010) 
----------------------------------------------------------------------  ------- 
Restated share of loss of equity-accounted investments for the 
 financial year ended 31 December 2019                                  (9,214) 
----------------------------------------------------------------        ------- 
 
 

(ii) Energy Link Infrastructure (Malta) Limited

In August 2020 the Company acquired a 10% non-controlling interest in ELI (Malta) Limited (See Note 8(ii)). The movement during 2020 reflects a share of the loss of ELI being sales income of US$5.7 million, other income of US$0.1 million, cost of sales of US$4.9 million and operating expenses including administrative costs of US$3.7 million.

San Leon does not have control over the entity, however it has been determined to have significant influence. On this basis, the above interest is recognised as an equity accounted investment. Significant influence has been determined based on the Company having 10% of voting rights, a board position and a Shareholder Agreement requiring a majority, and in some instances a super majority (meaning 70% of votes are required to pass a resolution), to approve all operating decisions.

Under the terms of ELI's senior debt facility, the lender has a charge over all of the company's assets and, as further security, each shareholder (including San Leon Energy) has pledged their shares to the lender. The terms of the pledge are that the shares cannot be transferred or otherwise utilised without the lender's consent.

The Directors recognise that the future realisation of the equity accounted investment is dependent on completion of the pipeline and subsequent throughput of oil from various customers.

7. Financial assets - Company

 
                                                     2020      2019 
                                                  US$'000   US$'000 
-----------------------------------------------  --------  -------- 
Investment in subsidiary undertakings at cost: 
-----------------------------------------------  --------  -------- 
Balance at beginning and end of year               31,539    31,539 
-----------------------------------------------  --------  -------- 
 

San Leon Energy Nigeria B.V. holds the equity interest in MLPL. As per Note 6(i), the Group identified potential impairment indicators with respect to the equity interest. These same indicators are also impairment indicators for the Company's holding in San Leon Energy B.V. The same tests as detailed in Note 6(i) were carried out to assess the carrying value of the Company's investment in its subsidiary and the analysis identified that the carrying value of the investment in MLPL is not impaired.

At 31 December 2020, the Company had the following principal subsidiaries, all of which are wholly owned through holding all of the issued ordinary shares of the entities:

 
 Name                        Registered Office         Principal         Country of 
                                                        Activities        Incorporation 
--------------------------  ------------------------  ----------------  --------------- 
 Directly held: 
--------------------------  ------------------------  ----------------  --------------- 
 San Leon Energy B.V.        de Ronge 16,              Holding company   Netherlands 
                             1852 XB Heiloo 
                             The Netherlands 
--------------------------  ------------------------  ----------------  --------------- 
 San Leon Services Limited   12 Castle Street          Service company   Jersey 
                             St. Helier 
                             Jersey 
                             JE2 3RT 
--------------------------  ------------------------  ----------------  --------------- 
 San Leon Energy Nigeria     de Ronge 16,              Holding company   Netherlands 
  B.V. 
                             1852 XB Heiloo 
                             The Netherlands 
--------------------------  ------------------------  ----------------  --------------- 
 San Leon Energy Financing   2 Shelbourne Buildings,   Financing         Ireland 
  Limited                                               company 
                             Crampton Avenue 
                             Shelbourne Road, 
                             Ballsbridge, 
                             Dublin 4 
--------------------------  ------------------------  ----------------  --------------- 
 San Leon Holdings Limited   27/28 Eastcastle          Holding company   England 
                              Street, 
                             London, 
                             England, 
                             W1W 8DH 
--------------------------  ------------------------  ----------------  --------------- 
 
 Indirectly held: 
--------------------------  ------------------------  ----------------  --------------- 
 San Leon Nigeria Limited    No. 801,                  Service company   Nigeria 
                             Eden Heights, 
                             6 Elsie Femi Pearse 
                              Street, 
                             Victoria Island 
                             Lagos, 
                             Nigeria 
--------------------------  ------------------------  ----------------  --------------- 
 San Leon Energy (UK)        27/28 Eastcastle          Service company   England 
  Limited                     Street, 
                             London, 
                             England, 
                             W1W 8DH 
--------------------------  ------------------------  ----------------  --------------- 
 San Leon Energy Eli         27/28 Eastcastle          Holding company   England 
  Limited                     Street, 
                             London, 
                             England, 
                             W1W 8DH 
--------------------------  ------------------------  ----------------  --------------- 
 San Leon Energy Oza         27/28 Eastcastle          Holding company   England 
  Limited                     Street, 
                             London, 
                             England, 
                             W1W 8DH 
--------------------------  ------------------------  ----------------  --------------- 
 

A full list of subsidiaries will be annexed to the Annual Report of the Company to be filed with the Irish Registrar of Companies.

8. Financial Assets

 
                                                                           Barryroe 
                                                                               4.5% 
                                                                         net profit      Unquoted 
                                                OML 18                     interest        shares 
                                                   (i)      ELI (ii)          (iii)   (iv) (viii)     Total 
Group                                          US$'000       US$'000        US$'000       US$'000   US$'000 
-------------------------------------------  ---------  ------------  -------------  ------------  -------- 
                                                                                            FVOCI 
                                                                                                - 
                                             Amortised     Amortised                       equity 
                                                  cost          cost          FVTPL    instrument 
-------------------------------------------  ---------  ------------  -------------  ------------  -------- 
Cost / Valuation 
-------------------------------------------  ---------  ------------  -------------  ------------  -------- 
At 1 January 2019                              134,187             -         51,142         2,625   187,954 
-------------------------------------------  ---------  ------------  -------------  ------------  -------- 
Finance income                                  23,313             -              -             -    23,313 
-------------------------------------------  ---------  ------------  -------------  ------------  -------- 
Loan Notes receipts - principal               (23,361)             -              -             -  (23,361) 
-------------------------------------------  ---------  ------------  -------------  ------------  -------- 
Loan Notes receipts - interest                (19,885)             -              -             -  (19,885) 
-------------------------------------------  ---------  ------------  -------------  ------------  -------- 
Impairment of unquoted shares, 
 Other comprehensive income                          -             -              -       (2,625)   (2,625) 
-------------------------------------------  ---------  ------------  -------------  ------------  -------- 
Additions (viii)                                     -             -              -           194       194 
-------------------------------------------  ---------  ------------  -------------  ------------  -------- 
Fair value movement, Income statement                -             -       (48,373)             -  (48,373) 
-------------------------------------------  ---------  ------------  -------------  ------------  -------- 
At 31 December 2019                            114,254             -          2,769           194   117,217 
-------------------------------------------  ---------  ------------  -------------  ------------  -------- 
Net fair value of acquisition 
 of ELI Loan Notes                                   -        14,557              -             -    14,557 
-------------------------------------------  ---------  ------------  -------------  ------------  -------- 
Finance income                                  16,480           796              -             -    17,276 
-------------------------------------------  ---------  ------------  -------------  ------------  -------- 
Loan Notes receipts - principal               (35,285)             -              -             -  (35,285) 
-------------------------------------------  ---------  ------------  -------------  ------------  -------- 
Loan Notes receipts - interest                (11,215)             -              -             -  (11,215) 
-------------------------------------------  ---------  ------------  -------------  ------------  -------- 
Lifetime ECL - credit-impaired 
 #                                            (15,309)             -              -             -  (15,309) 
-------------------------------------------  ---------  ------------  -------------  ------------  -------- 
Impairment of unquoted shares, 
 Other comprehensive income                          -             -              -         (194)     (194) 
-------------------------------------------  ---------  ------------  -------------  ------------  -------- 
Fair value movement, Income statement                -             -          4,073             -     4,073 
-------------------------------------------  ---------  ------------  -------------  ------------  -------- 
At 31 December 2020                             68,925        15,353          6,842             -    91,120 
-------------------------------------------  ---------  ------------  -------------  ------------  -------- 
 
Expected Credit Loss Provision 
-------------------------------------------  ---------  ------------  -------------  ------------  -------- 
At 1 January 2019 and 31 December                                  -              -             -         - 
 2019 
-------------------------------------------  ---------  ------------  -------------  ------------  -------- 
New financial asset acquired *                                 (385)              -             -     (385) 
-------------------------------------------  ---------  ------------  -------------  ------------  -------- 
At 31 December 2020                                            (385)              -             -     (385) 
-------------------------------------------  ---------  ------------  -------------  ------------  -------- 
 
  # See OML18 ECL table below 
  * See ELI ECL table below 
-------------------------------------------  ---------  ------------  -------------  ------------  -------- 
 
 
                                                                             Higher 
                                                                        risk assets 
  Expected Credit Loss - OML 18                           Performing     not credit        Credit 
                                                            12-month       impaired      impaired     Total 
                                                                 ECL       Lifetime      Lifetime 
                                                                                ECL           ECL 
-------------------------------------------  ---------  ------------  -------------  ------------  -------- 
At 1 January 2019                                                  -        (5,467)             -   (5,467) 
-------------------------------------------  ---------  ------------  -------------  ------------  -------- 
Net remeasurement of loss allowance                                -          3,465             -     3,465 
-------------------------------------------  ---------  ------------  -------------  ------------  -------- 
At 31 December 2019                                                -        (2,002)             -   (2,002) 
-------------------------------------------  ---------  ------------  -------------  ------------  -------- 
Impact of modification                                             -        (5,857)             -   (5,857) 
-------------------------------------------  ---------  ------------  -------------  ------------  -------- 
Net remeasurement of loss allowance                                -        (7,450)             -   (7,450) 
-------------------------------------------  ---------  ------------  -------------  ------------  -------- 
Transfer to lifetime ECL - credit-impaired                         -         15,309      (15,309)         - 
-------------------------------------------  ---------  ------------  -------------  ------------  -------- 
At 31 December 2020                                                -              -      (15,309)  (15,309) 
-------------------------------------------  ---------  ------------  -------------  ------------  -------- 
 
 
 
 
 
                                                                    Higher 
                                                               risk assets 
  Expected Credit Loss - ELI                     Performing     not credit        Credit 
                                                   12-month       impaired      impaired     Total 
                                                        ECL       Lifetime      Lifetime 
                                                                       ECL           ECL 
----------------------------------  ---------  ------------  -------------  ------------  -------- 
At 1 January 2019 and 31 December                         -              -             -         - 
 2019 
----------------------------------  ---------  ------------  -------------  ------------  -------- 
New financial assets originated                       (385)              -             -     (385) 
----------------------------------  ---------  ------------  -------------  ------------  -------- 
At 31 December 2020                                   (385)              -             -     (385) 
----------------------------------  ---------  ------------  -------------  ------------  -------- 
 
                                                                  Barryroe 
                                                                      4.5% 
                                                                net profit      Unquoted 
                                       OML 18                     interest        shares 
                                          (i)      ELI (ii)          (iii)   (iv) (viii)     Total 
                                      US$'000       US$'000        US$'000       US$'000   US$'000 
----------------------------------  ---------  ------------  -------------  ------------  -------- 
                                                                                   FVOCI 
                                                                                       - 
                                    Amortised     Amortised                       equity 
                                         cost          cost          FVTPL    instrument 
----------------------------------  ---------  ------------  -------------  ------------  -------- 
Book value at 31 December 2020         68,925        14,968          6,842             -    90,735 
----------------------------------  ---------  ------------  -------------  ------------  -------- 
Current                                68,925         3,964              -             -    72,889 
----------------------------------  ---------  ------------  -------------  ------------  -------- 
Non-current                                 -        11,004          6,842             -    17,846 
----------------------------------  ---------  ------------  -------------  ------------  -------- 
 
Book value at 31 December 2019        112,252             -          2,769           194   115,215 
----------------------------------  ---------  ------------  -------------  ------------  -------- 
Current                               112,252             -              -             -   112,252 
----------------------------------  ---------  ------------  -------------  ------------  -------- 
Non-current                                 -             -          2,769           194     2,963 
----------------------------------  ---------  ------------  -------------  ------------  -------- 
 

Net Profit Interests (Poznan, v) (Gora, vi) (Liesa, vii): These NPIs have a nil value from acquisition.

 
                                                                Barryroe 
                                                                    4.5% 
                                                              net profit     Unquoted 
                                                   OML 18       interest       shares 
                                                      (i)          (iii)         (iv)     Total 
Company                                           US$'000        US$'000      US$'000   US$'000 
-------------------------------------------  ------------  -------------  -----------  -------- 
                                                                                FVOCI 
                                                                                    - 
                                                Amortised                      equity 
                                                     cost          FVTPL   instrument 
-------------------------------------------  ------------  -------------  -----------  -------- 
Cost / Valuation 
-------------------------------------------  ------------  -------------  -----------  -------- 
At 1 January 2019                                 134,187         51,142        2,625   187,954 
-------------------------------------------  ------------  -------------  -----------  -------- 
Finance income                                     23,313              -            -    23,313 
-------------------------------------------  ------------  -------------  -----------  -------- 
Loan Notes receipts - principal                  (23,361)              -            -  (23,361) 
-------------------------------------------  ------------  -------------  -----------  -------- 
Loan Notes receipts - interest                   (19,885)              -            -  (19,885) 
-------------------------------------------  ------------  -------------  -----------  -------- 
Impairment of unquoted shares                           -              -      (2,625)   (2,625) 
-------------------------------------------  ------------  -------------  -----------  -------- 
Fair value movement, Income statement                   -       (48,373)            -  (48,373) 
-------------------------------------------  ------------  -------------  -----------  -------- 
At 31 December 2019                               114,254          2,769            -   117,023 
-------------------------------------------  ------------  -------------  -----------  -------- 
Finance income                                     16,480              -            -    16,480 
-------------------------------------------  ------------  -------------  -----------  -------- 
Loan Notes receipts - principal                  (35,285)              -            -  (35,285) 
-------------------------------------------  ------------  -------------  -----------  -------- 
Loan Notes receipts - interest                   (11,215)              -            -  (11,215) 
-------------------------------------------  ------------  -------------  -----------  -------- 
Lifetime ECL - credit-impaired 
 #                                               (15,309)              -            -  (15,309) 
-------------------------------------------  ------------  -------------  -----------  -------- 
Impairment of unquoted shares                           -              -            -         - 
-------------------------------------------  ------------  -------------  -----------  -------- 
Fair value movement, Income statement                   -          4,073            -     4,073 
-------------------------------------------  ------------  -------------  -----------  -------- 
At 31 December 2020                                68,925          6,842            -    75,767 
-------------------------------------------  ------------  -------------  -----------  -------- 
 
Expected Credit Loss Provision 
-------------------------------------------  ------------  -------------  -----------  -------- 
At 1 January 2019, 31 December                                         -            -         - 
 2019 and 31 December 2020 
-------------------------------------------  ------------  -------------  -----------  -------- 
 
  # See OML18 ECL table below 
-------------------------------------------  ------------  -------------  -----------  -------- 
 
 
                                                                  Higher 
                                                             risk assets 
  Expected Credit Loss - OML 18                Performing     not credit       Credit 
                                                 12-month       impaired     impaired     Total 
                                                      ECL       Lifetime     Lifetime 
                                                                     ECL          ECL 
-------------------------------------------  ------------  -------------  -----------  -------- 
At 1 January 2019                                       -        (5,467)            -   (5,467) 
-------------------------------------------  ------------  -------------  -----------  -------- 
Net remeasurement of loss allowance                     -          3,465            -     3,465 
-------------------------------------------  ------------  -------------  -----------  -------- 
At 31 December 2019                                     -        (2,002)            -   (2,002) 
-------------------------------------------  ------------  -------------  -----------  -------- 
Impact of modification                                  -        (5,857)            -   (5,857) 
-------------------------------------------  ------------  -------------  -----------  -------- 
Net remeasurement of loss allowance                     -        (7,450)            -   (7,450) 
-------------------------------------------  ------------  -------------  -----------  -------- 
Transfer to lifetime ECL - credit-impaired              -         15,309     (15,309)         - 
-------------------------------------------  ------------  -------------  -----------  -------- 
At 31 December 2020                                                    -     (15,309)  (15,309) 
-------------------------------------------  ------------  -------------  -----------  -------- 
 
                                                                Barryroe 
                                                                    4.5% 
                                                              net profit     Unquoted 
                                                   OML 18       interest       shares 
                                                      (i)          (iii)         (iv)     Total 
Company                                           US$'000        US$'000      US$'000   US$'000 
-------------------------------------------  ------------  -------------  -----------  -------- 
                                                                                FVOCI 
                                                                                    - 
                                                Amortised                      equity 
                                                     cost          FVTPL   instrument 
-------------------------------------------  ------------  -------------  -----------  -------- 
Book value at 31 December 2020                     68,925          6,842            -    75,767 
-------------------------------------------  ------------  -------------  -----------  -------- 
Current                                            68,925              -            -    68,925 
-------------------------------------------  ------------  -------------  -----------  -------- 
Non-current                                             -          6,842            -     6,842 
-------------------------------------------  ------------  -------------  -----------  -------- 
 
Book value at 31 December 2019                    112,252          2,769            -   115,021 
-------------------------------------------  ------------  -------------  -----------  -------- 
Current                                           112,252              -            -   112,252 
-------------------------------------------  ------------  -------------  -----------  -------- 
Non-current                                             -          2,769            -     2,769 
-------------------------------------------  ------------  -------------  -----------  -------- 
 

(i) OML 18

In September 2016, the Company secured an indirect economic interest in OML 18, onshore Nigeria.

The Company undertook a number of steps to effect this purchase. MLPL, a company incorporated in Mauritius of which San Leon Nigeria B.V. has a 40% shareholding, was established as a special purpose vehicle to complete the transaction by purchasing all of the shares in Martwestern, a company incorporated in Nigeria. Martwestern holds a 50% shareholding in Eroton, a company incorporated in Nigeria and the operator of OML 18, and Martwestern also holds an initial 98% economic interest in Eroton. The economic effect of this structure is that San Leon has an initial indirect economic interest of 10.584% in OML 18. Shareholders will note that this is higher than the percentage interest anticipated by San Leon at the time of the acquisition in 2016. There have been no further purchases or payments by San Leon but this revised percentage is based on a reassessment and recalculation of the various parties' interests in OML 18.

To partly fund the purchase of 100% of the shares of Martwestern, MLPL borrowed US$174.5 million in incremental amounts by issuing loan notes with an annual coupon of 17% ("Loan Notes") and effective interest rate of 25%, as noted below. Midwestern Oil and Gas Company Limited ("Midwestern") is the 60% shareholder of MLPL and transferred its shares in Martwestern to MLPL as part of the full transaction. Following its placing in September 2016, San Leon became beneficiary and holder of all Loan Notes issued by MLPL and the holder of an indirect economic interest in OML 18. San Leon is due to be repaid the full amount of the US$174.5 million plus the 17% coupon once certain conditions have been met and using an agreed distribution mechanism. Through its wholly owned subsidiary, San Leon Nigeria B.V., the Company is also a beneficiary of any dividends that will be paid by MLPL as a 40% shareholder in MLPL but the Loan Notes repayments must take priority over any dividend payments made to the MLPL shareholders.

The fair value assessment of the Loan Notes on acquisition was calculated as follows:

 
                                                                Total 
                                                              US$'000 
-----------------------------------------------------------  -------- 
Total consideration                                           188,419 
-----------------------------------------------------------  -------- 
Fair value of Loan Notes attributable to equity investment 
 #                                                           (30,889) 
-----------------------------------------------------------  -------- 
Net fair value of Loan Notes                                  157,530 
-----------------------------------------------------------  -------- 
Arrangement fees                                              (5,500) 
-----------------------------------------------------------  -------- 
Additions to Financial Assets in 2016 including accrued 
 interest 
 at date of acquisition                                       152,030 
-----------------------------------------------------------  -------- 
# The fair value of Loan Notes attributable to the equity 
 investment is calculated using a discount factor of management's 
 estimate of a market rate of interest of 8% above the coupon 
 rate of 17% over the term of the Loan Notes, giving an 
 effective interest rate of 25%. 
 

The key information relevant to the fair value of the Loan Notes on the date they were initially recognised is as follows:

 
                                                                                     Inter-relationships 
                                                                                      between the unobservable 
                       Significant unobservable                                       inputs and fair value 
Valuation technique     inputs*                                                       measurements 
---------------------  -----------------------------------------------------------  -------------------------- 
Discounted cash flows                                                                Nil 
                         *    Discount rate 25% based on a market rate of interest 
                              of 8% above the coupon rate of 17% 
 
 
                         *    MLPL ability to generate cash flows for timely 
                              repayment 
 
 
                         *    Loan Notes are repayable in full by 31 December 2021 
                              (2019: 30 September 2020). 
---------------------  -----------------------------------------------------------  -------------------------- 
*Day 1 and considered appropriate at 31 December 2020. 
 

The business model for the MLPL loan is to hold to collect. The Loan Notes are accounted for at amortised cost.

The credit risk is managed via various undertakings, guarantees, a pledge over shares and the mechanism whereby MLPL prioritises payment of sums due under the Loan Notes. These are described further in Note 31 of Annual Report and Accounts. Given the size and quality of the OML 18 oil and gas asset the main credit risk is regarded as the timing of payments by MLPL which is dependent on dividend distributions by Eroton rather than being unable to pay the total quantum due under the Loan Notes. To date Eroton have been unable to make a dividend distribution. Consequently, MLPL had to enter into a loan in 2017 and subsequently, in order to be able to meet its obligations under the Loan Notes and make payments to San Leon.

On 6 April 2020, the Company entered into an Agreement with MLPL, amending the timing of the remaining payment of the Loan Notes Instrument. At the date of the Agreement, the remaining outstanding balance on the par value was US$82.1 million* (accounted for as US$79.5 million under IFRS). Under the terms of the Agreement, US$10.0 million was due to be repaid on or before 6 October 2020, with the balance of the Loan Notes receivable payable in three quarterly instalments, commencing in July 2021 and completing by December 2021. The outstanding loan will continue to have an annual coupon rate of 17% and an effective interest rate of 25% per annum until repaid. All other material terms of the Loan Notes Instrument remain unchanged. The Agreement with MLPL was accounted for as a modification of the financial asset which did not give rise to derecognition. A loss of US$2.5 million was recognised in respect of the change in present value of the revised cashflows discounted at the original effective interest rate.

During 2020 San Leon received total payments under the Loan Notes of US$46.5 million (2019: US$43.2 million). The payments received during 2020 represent principal of US$35.3 million (2019: US$23.3 million) and interest of US$11.2 million (2019: US$19.9 million)) on the Loan Notes repaid. As at 31 December 2020 there was US$84.2 million in principal and interest (2019: US$114.3 million), due under the Loan Notes. As at 31 December 2020, US$5.0 million was outstanding from the US$10.0 million due to be repaid on 6 October 2020. Since then, US$0.8 million of the balance outstanding has been received.

The Directors of San Leon have considered the credit risk of the Loan Notes at 31 December 2019 and 31 December 2020. Due to the inability of MLPL to make dividend distributions, the Directors continue to consider that the credit risk has significantly increased since initial recognition. At 31 December 2019 a provision for the lifetime expected credit loss of the Loan Notes had been recognised. In 2020, issues such as the impact of the Covid-19 pandemic on the global economy, the volatility in oil prices and demand, OPEC quotas, and recent operational challenges experienced by OML 18 resulted in a significant loss being recorded in MLPL at 31 December 2020. This, along with ongoing production issues at the field has impacted the financial strength of MLPL, particularly in respect of short term liquidity.

In addition, the Directors have reviewed the counterparty credit risk associated with measurement of the expected credit loss. This was assessed as having increased significantly since initial recognition, and is now considered to have increased further during the year ended 31 December 2020.

Management are still confident in the operational potential of OML 18 and ultimately recovering the full amount of the outstanding Loan Notes, however due to the above issues management are unable to determine the timing of future cashflows and for this reason the Loan Notes are now considered credit impaired.

The Loan Notes are unique assets for which there is no directly comparable market data. Repayments of the Loan Notes are expected to be made from the underlying cashflows that support MLPL. The Directors have considered the credit risk of MLPL, in particular in light of the Covid-19 pandemic and the resultant impact on the oil price and demand, as well as ongoing short term production issues. As a result, the credit risk has been determined to have increased since 31 December 2019 and the Loan Notes are now considered to be impaired. In previous periods an annualised expected credit loss of 3.11% was applied to the amount outstanding on the Loan Notes. This rate was determined on the basis of long-term historical default rates of loans originated in similar geography and industry. A default rate determined by reference to historical default rates has been determined to be less appropriate in the current environment as a result of the uncertainty created by the Covid-19 pandemic and ongoing operational issues. In addition, the change in profile of the repayments due under the Loan Notes, arising as a result of the amendments to the Loan Notes agreed in April 2020, means that an expected default risk taking into account the timing of the payments is now also appropriate. An impairment has been estimated based on a forward looking analysis where a range of outcomes has been considered taking into account the size and timing of the contractual cashflows, the risk of late payment and the risk of default leading to less than full recovery of the amounts due in respect of the Loan Notes. The Directors have considered the possible scenarios and used their judgement to estimate a weighted average outcome of these scenarios. The impairment is calculated as the difference between the present value of the weighted average of possible outcomes (discounted at the effective interest rate of the Loan Notes) and the present value of the contractual cashflows. This has then been compared to publicly available macroeconomic data of default rates by geography and industry.

As at 31 December 2020 the Loan Notes are considered credit impaired. The expected credit loss of US$15.3 million (2019: US$2.0 million) has been presented net with the amortised cost of the Loan Notes.

*Refer to Alternate Performance Measures for full reconciliation of IFRS numbers and Alternative Performance Measures.

   (ii)   Energy Link Infrastructure (Malta) Limited 

In August 2020, the Company acquired an indirect economic interest in the Alternate Crude Oil Evacuation System ("ACOES") project.

The interest was acquired through the direct investment in Energy Link Infrastructure (Malta) Limited ("ELI"), a company incorporated in Malta, which owns the ACOES project through its 100% owned subsidiary Energy Link Infrastructure (Nigeria) Limited, a company incorporated in Nigeria.

The investment comprises a 10% equity interest in ELI together with a US$15.0 million shareholder loan at a coupon of 14% per annum over 4 years, and repayable quarterly following a one year moratorium from the date of investment. Funds were provided to ELI in two tranches with the first US$10.0 million tranche being paid in August, and the second tranche of US$5.0 million on 6 October 2020, being half of the funds due from Midwestern Leon Petroleum Limited as part of the repayment of the MLPL Loan Notes.

The fair value assessment of the Loan Notes on acquisition was calculated as follows:

 
                                                                Total 
                                                              US$'000 
-----------------------------------------------------------  -------- 
Total consideration                                            15,000 
-----------------------------------------------------------  -------- 
Fair value of Loan Notes attributable to equity investment 
 #                                                              (443) 
-----------------------------------------------------------  -------- 
Net fair value of Loan Notes                                   14,557 
-----------------------------------------------------------  -------- 
# The fair value of Loan Notes attributable to the equity 
 investment is calculated using a discount factor of management's 
 estimate of a market rate of interest of 2% above the coupon 
 rate of 14% over the term of the Loan Notes, giving an 
 effective interest rate of 16%. 
 

The key information relevant to the fair value of the Loan Notes on the date they were initially recognised is as follows:

 
                                                                                     Inter-relationships 
                                                                                      between the unobservable 
                       Significant unobservable                                       inputs and fair value 
Valuation technique     inputs*                                                       measurements 
---------------------  -----------------------------------------------------------  -------------------------- 
Discounted cash flows                                                                Nil 
                         *    Discount rate 16% based on a market rate of interest 
                              of 2% above the coupon rate of 14% 
 
 
                         *    ELI ability to generate cash flows for timely 
                              repayment 
 
 
                         *    Loan Notes are repayable in full by 6 October 2024. 
---------------------  -----------------------------------------------------------  -------------------------- 
*Day 1 and considered appropriate at 31 December 2020. 
 

The intention for the ELI loan is to hold to collect.

The credit risk is managed via various undertakings, such as representations, warranties and covenants and the ability for a preferential distribution should some warranties be breached. These are described further in Note 31 of the Annual Report and Accounts. Given the nature and stage of the asset the main credit risk is regarded as the timing of payments by ELI Malta which is dependent on dividend distributions by ELI Nigeria rather than being unable to pay the total quantum due under the Loan Notes. Currently the Loan Notes are in good standing with the first repayment due on 31 July 2021.

During 2020 San Leon was not due any contractual repayments of the Loan Notes. As at 31 December 2020 there was US$15.4 million in principal and interest, due under the Loan Notes.

The Directors of San Leon have considered the credit risk of the Loan Notes at 31 December 2020. Both tranches of the Loan Notes were issued in H2 2020, with a one year repayment holiday. The first repayment due is on 31 July 2021 and therefore the Loan Notes are currently in good standing. Despite some project delays due to the impacts of Covid-19, it is not expected that that this would impact the ability of ELI to make Loan Note repayments, with current projections indicating that all debt will be serviced in accordance with contract expectations. The Directors do not consider the credit risk has significantly increased since initial recognition, and a provision for a 12-month expected credit loss of the Loan Notes has been recognised.

In addition, the Directors have reviewed the counterparty credit risk associated with measurement of the expected credit loss and, this has been assessed as not having increased significantly since initial recognition. A factor that has been considered to reduce overall credit risk is a guarantee from ELI Nigeria, who guarantee all payment obligations of ELI Malta.

An expected credit loss provision has been estimated based on a forward looking analysis where a range of outcomes has been considered taking into account the size and timing of the contractual cashflows, the risk of late payment and the risk of default leading to less than full recovery of the amounts due in respect of the Loan Notes. The Directors have considered the possible scenarios and used their judgement to estimate a weighted average outcome of these scenarios. The ECL provision is calculated as the difference between the present value of the weighted average of possible outcomes (discounted at the effective interest rate of the Loan Notes) and the present value of the contractual cashflows. This has then been compared to publicly available macroeconomic data of default rates by geography, industry and rating.

The Company determined that the expected credit loss provision of US$0.4 million, being 2.6% of the balance at acquisition was appropriate.

(iii) Barryroe - 4.5% Net Profit Interest

SLE holds a 4.5% Net Profit Interest in the Barryroe ("Barryroe NPI") oil field at fair value through profit and loss under IFRS 9. In 2019 a market-based valuation approach was adopted, using the price of the publicly listed shares of Providence Resources plc ("Providence") (operator and holder of an 80% interest in the Barryroe oil field) as its basis. The Directors believe the markets assessment of the current risks and uncertainties of the project have been reflected within the share price of Providence at year end, and it is therefore appropriate to use this to update their valuation.

The 2020 announcements by Providence in relation to Standard Exploration Licence 1/11 which contains the Barryroe oil accumulation indicated that a partner for the project had been found, which had reduced project risk around both funding and timing of the potential development of the asset.

Given the latest announcements, the Directors have reviewed the modelling assumptions and consider it reasonable and appropriate to continue to use a market based approach to increase the Barryroe carrying value by US$4.0 million (2019: impairment of US$48.4 million) to US$6.8 million to reflect their estimate of the impact of these risks to the future cash flows on the value of the asset.

The key information relevant to the fair value of the Barryroe 4.5% net profit interest is as follows:

 
                                                                          Inter-relationships 
                                                                           between the unobservable 
Valuation     Significant unobservable                                     inputs and fair value 
technique      inputs                                                      measurements 
------------  ---------------------------------------------------------  ------------------------------------------------------ 
Market based                                                              The estimated fair 
approach       *    Estimated value of NPI as percentage of total field   value would increase 
using share         NPV 9.5% (2019: 9.5%)                                 / (decrease) if: 
price 
of Operator                                                                *    US Dollar exchange rate increased / (decreased) 
(Providence) 
------------  ---------------------------------------------------------  ------------------------------------------------------ 
 

(iv) Ardilaun Energy Limited

As part of the consideration for the sale of Island Oil & Gas Limited to Ardilaun Energy Limited ("Ardilaun") in 2014 Ardilaun agreed to issue shares equivalent to 15% of the issued share capital of Ardilaun to San Leon. The original fair value of the 15% interest in Ardilaun was based on a market transaction in Ardilaun shares.

The Directors have considered the carrying value of this interest at 31 December 2020 and given the length of time to obtain Irish government approval for the transaction, the Directors feel it is prudent to continue to carry the 15% of Ardilaun shares still to be issued to San Leon at a value of US$Nil (2019: US$Nil).

(v) Poznan 10% Net Profit Interest

In 2016, San Leon sold its 35% interest in the Poznan assets for a consideration of EUR1 plus a 10% NPI. Until active development commences a nil value has been placed on the NPI. There has been no change in 2020.

(vi) Gora 5% Net Profit Interest

In 2018, San Leon sold its interest in the Gora assets for a consideration of EUR1 plus a 5% NPI. Until active development commences a nil value has been placed on the NPI. There has been no change in 2020.

(vii) Liesa 5% Net Profit Interest

In 2018, San Leon sold its interest in the Liesa assets for a consideration of EUR1 plus a 5% Net Profit Interest ("NPI"). Until active development commences a nil value has been placed on the NPI. There has been no change in 2020.

(viii) Gemini Resources Limited

In 2019, San Leon converted a debtor of US$192,607 due from Gemini Resources Limited ("Gemini") into 54,818 fully paid ordinary shares in Gemini.

(ix) Amedeo Resources plc

At 31 December 2020, the Company holds 213,512 ordinary shares at a market value of US$Nil (2019: US$Nil). The value of the investment was written down to nil in 2018 due to the shares of Amedeo Resources plc being de-listed.

9. Subsequent events

MLPL Loan Note

The Company has received US$0.8 million in Loan Note repayments since 31 December 2020.

Barryroe NPI

On 22 April 2021, Providence Resources plc announced that the farmout agreement with SpotOn Energy for the Barryroe Licence had been terminated due to SpotOn Energy's inability to secure financing. Providence are now progressing arrangements for an alternative funding package to finance 100% of the costs for the early development scheme of the Barryroe Licence.

Since this announcement the share price of Providence has materially reduced compared to the price quoted at 31 December 2020 which was used as a key input in the valuation of the Company's 4.5% NPI in Barryroe. Should the share price remain materially lower than at half year reporting, the carrying value of the Barryroe NPI will likely be impaired.

Appointment of new Director

On 7 May 2021, John Brown was appointed to the Board as an Independent Non-Executive Director.

Resignation of Director

On 7 May 2021, Alan Campbell stepped down from the Board as an Executive Director.

Property owned by Mr. Oisín Fanning

In June 2021, the Company signed a licence with Mr. Oisín Fanning to use the property previously disclosed in Note 31 of the Annual Report and Accounts for office space. The monthly rent payable is on average US$32,000.

ELI - additional investment

On 24 June 2021, the Company announced a conditional investment of US$2.0 million and an option to conditionally invest a further US$6.5 million in the equity of ELI. The equity being conditionally purchased and the equity that may be purchased via the option are existing equity interests in ELI owned by Walstrand (Malta) Limited, ELI's largest shareholder.

Proposed transactions and Suspension of San Leon shares

On 24 June 2021, the Company announced that it was is in preliminary discussions with Midwestern about acquiring Midwestern's interest in the OML 18 oil and gas block located onshore in Nigeria. At this date, heads of terms for the transaction had not been agreed. The transaction would involve San Leon acquiring the outstanding shares not already owned by San Leon in relation to MLPL. San Leon is not contemplating acquiring Midwestern. San Leon currently owns 40% of MLPL with Midwestern owning the other 60%.

In addition, the Company is considering making further debt and equity investments in ELI.

Elements of the above transactions would constitute a reverse takeover under rule 14 of the AIM Rules for Companies.

San Leon and Midwestern are in discussions for the Company to acquire the remaining 60% equity interest in MLPL from Midwestern. The consideration for this would be satisfied by the issuance of a substantial number of new ordinary shares in San Leon to Midwestern such that Midwestern would become the majority shareholder of San Leon.

The proposed transaction is at a very early stage and will therefore be subject to a number of factors, including, inter alia, the completion of due diligence, negotiation of transaction documentation, regulatory approvals, a "whitewash" under the Irish Takeover Rules and shareholder approval. As such, there is no certainty that the transaction will proceed nor any certainty regarding the terms on which they would proceed.

Related party

Midwestern currently holds more than 10% of the Company's ordinary shares. Accordingly, Midwestern is classified as a related party under the AIM Rules and the transactions above in which Midwestern has an interest will therefore be treated as transactions with a related party pursuant to rule 13 of the AIM Rules.

Suspension of trading

As the transactions would constitute a reverse takeover under rule 14 of the AIM Rules, these will be subject, inter alia, to the approval of San Leon's shareholders. As such, a further announcement including, inter alia, full details of the transactions will be issued at the appropriate time once binding contracts are entered into and an AIM admission document published and sent to San Leon's shareholders with a notice of general meeting.

In accordance with rule 14 of the AIM Rules, the Company's ordinary shares were suspended from trading on AIM on 24 June 2021. The Company's ordinary shares will remain suspended until such time as either an AIM admission document is published or an announcement is released confirming that the relevant transactions are not proceeding.

10. Share capital - Group and Company

Rights and obligations attaching to the Ordinary Shares

The Company has no securities in issue conferring special rights with regards control of the Company. All Ordinary Shares rank pari passu, and the rights attaching to the Ordinary Shares (including as to voting and transfer) are as set out in the Company's Articles of Association ("Articles").

 
                                             Number of 
                          Number of           Deferred 
                       New Ordinary    Ordinary shares  Authorised 
                             shares          EUR0.0001      Equity 
                       EUR0.01 each               each     US$'000 
--------------------  -------------  -----------------  ---------- 
Authorised equity 
--------------------  -------------  -----------------  ---------- 
At 1 January 2019     2,847,406,025  1,265,259,397,525     177,475 
--------------------  -------------  -----------------  ---------- 
At 31 December 2019   2,847,406,025                  -     177,475 
--------------------  -------------  -----------------  ---------- 
At 31 December 2020   2,847,406,025                  -     177,475 
--------------------  -------------  -----------------  ---------- 
 

Issued, called up and fully paid:

 
                                                     Number of 
                                Number of             Deferred 
                             New Ordinary      Ordinary shares      Share      Share 
                                   shares            EUR0.0001    capital    premium 
                             EUR0.01 each                 each    US$'000    US$'000 
--------------------------  -------------  -------------------  ---------  --------- 
At 1 January 2019             500,256,857    1,265,259,397,525    150,600    478,666 
--------------------------  -------------  -------------------  ---------  --------- 
Issue of shares in lieu 
 of salary (i)                  5,590,270                    -         63      2,036 
--------------------------  -------------  -------------------  ---------  --------- 
Exercise of share options 
 (ii)                             250,000                    -          3         96 
--------------------------  -------------  -------------------  ---------  --------- 
Reduction of capital                    -  (1,265,259,397,525)  (144,871)  (459,721) 
--------------------------  -------------  -------------------  ---------  --------- 
Tender offer                 (50,475,000)                    -      (576)          - 
--------------------------  -------------  -------------------  ---------  --------- 
Share buybacks                (4,319,113)                    -       (47)          - 
--------------------------  -------------  -------------------  ---------  --------- 
At 31 December 2019           451,303,014                    -      5,172     21,077 
--------------------------  -------------  -------------------  ---------  --------- 
Share buybacks                (1,389,988)                    -       (15)          - 
--------------------------  -------------  -------------------  ---------  --------- 
At 31 December 2020           449,913,026                    -      5,157     21,077 
--------------------------  -------------  -------------------  ---------  --------- 
 

(i) On 25 February 2019, 5,590,270 ordinary shares were issued to Oisín Fanning in lieu of 80% of his salary due to him for the period 1 September 2016 to 30 September 2018.

(ii) On 20 March 2019, the Company issued and allotted 250,000 New Ordinary Shares of EUR0.01 each in respect of options exercised. The options were exercised at a price of GBP0.30 (US$0.39) per share.

Reduction of Capital

On 8 February 2019, the Company obtained local statutory approval to cancel all the Deferred Shares of EUR0.0001 each, this resulted in the release of Share Capital of US$144.9 million, Share Premium of US$459.7 million, a required Special Reserve of US$5.0 million and an increase in retained earnings of US$599.0 million.

Tender offer

On 22 March 2019 the Company announced the result of the Tender Offer, being an offer by the Company to purchase shares from shareholders at 46p per share set out in the shareholder circular published by the Company on 20 February 2019 (the "Circular").

The maximum number of Ordinary Shares authorised by shareholders under the Tender Offer, being 50,475,000 Ordinary Shares, was acquired for a total cost of US$30.5 million. This represented approximately 9.97% of the issued ordinary share capital of the Company, at the date of the announcement.

The Tender Offer was oversubscribed, with a total of 81,177,508 Ordinary Shares validly tendered by Qualifying Shareholders. Qualifying Shareholders who tendered Ordinary Shares equal to or less than their Individual Basic Entitlement had their tender accepted in full. Qualifying Shareholders who validly tendered in excess of their Individual Basic Entitlement had their tender accepted in respect of their Individual Basic Entitlement (being approximately 9.97% of their shareholding) plus approximately 50.23% of the number of Ordinary Shares in excess of their Individual Basic Entitlement that they validly tendered.

All proceeds payable under the Tender Offer to the Company's shareholders were transferred to Computershare on 23 March 2019 for distribution to the shareholders.

As set out in the Circular, the Ordinary Shares were purchased by Cantor Fitzgerald Europe pursuant to the Tender Offer and the Company purchased such Ordinary Shares from Cantor Fitzgerald Europe under the terms of the Repurchase Agreement described in the Circular.

The Company cancelled the Ordinary Shares purchased by it under the Repurchase Agreement, reducing the number of Ordinary Shares in issue from 506,097,127 Ordinary Shares to 455,622,127 Ordinary Shares (the "Cancellation").

Share buyback programme

On 18 October 2019 the Company announced that, pursuant to the shareholder resolutions passed on 27 September 2019 at the Annual General Meeting, it planned to acquire ordinary shares of EUR 0.01 nominal value each ("Ordinary Shares"), up to a total value of US$2.0 million (the "Buyback Programme"). In accordance with the shareholder resolutions, the Company is proposed to acquire the Ordinary Shares at a maximum price of the greater of (i) 105% of the average market price of such shares for the previous five days and (ii) the higher of the price quoted for the last independent trade and the highest current independent bid or offer for such shares.

Ordinary Shares acquired as a result of the Buyback Programme were cancelled. The Buyback Programme was funded from the Company's cash balances.

At 31 December 2019 Company had repurchased 4,319,113 Ordinary Shares at an aggregate value of US$1.5 million. Following cancellation of the shares repurchased to 31 December 2019, the total number of Ordinary Shares in issue with voting rights was 451,303,014.

On 22 January 2020 the Company announced that it had completed the buyback programme. Under the Buyback Programme, the Company repurchased 5,709,101 Ordinary Shares at an aggregate value of GBP1,570,085.49. Following cancellation of the final shares repurchased, the total number of Ordinary Shares in issue with voting rights was 449,913,026.

ALTERNATIVE PERFORMANCE MEASURES

The Group monitors the par value of the Loan Notes, which is a non-IFRS measure.

The Group believes that the disclosure of the par value of the Loan Notes will assist investors in evaluating the performance of the underlying Loan Notes. Given that these cash metrics are used by management, they also give the investor an insight into how the Group management review and monitor the Loan Notes on an ongoing basis.

A reconciliation from the value of the OML 18 Loan Notes under IFRS 9, excluding expected credit losses, and the par value is provided below:

 
                                                             IFRS 
                                                      9 Amortised            IFRS 
                                                             Cost    9 Adjustment  Par value 
                                                          US$'000        US$'000*    US$'000 
---------------------------------------------------  ------------  --------------  --------- 
Loan Notes at 31 December 2019                            114,254           4,494   118,748# 
---------------------------------------------------  ------------  --------------  --------- 
Interest accrued on Loan Notes (1 January 2020 to 
 6 April 2020)                                              6,783         (1,886)      4,897 
---------------------------------------------------  ------------  --------------  --------- 
Cash receipts (1 January 2020 to 6 April 2020)           (41,500)               -   (41,500) 
---------------------------------------------------  ------------  --------------  --------- 
Loan Notes at 6 April 2020                                 79,537           2,608     82,145 
---------------------------------------------------  ------------  --------------  --------- 
Interest accrued on Loan Notes (7 April 2020 to 31 
 December 2020)                                             9,697             595     10,292 
---------------------------------------------------  ------------  --------------  --------- 
Cash receipts (7 April 2020 to 31 December 2020)          (5,000)               -    (5,000) 
---------------------------------------------------  ------------  --------------  --------- 
Loan Notes at 31 December 2020                             84,234           3,203    87,437^ 
---------------------------------------------------  ------------  --------------  --------- 
Interest accrued on Loan Notes (1 January 2021 to 
 18 June 2021)                                              8,961         (2,496)      6,465 
---------------------------------------------------  ------------  --------------  --------- 
Cash receipts (1 January 2021 to18 June 2021)               (750)               -      (750) 
---------------------------------------------------  ------------  --------------  --------- 
Loan Notes at 18 June 2021                                 92,445             707     93,152 
---------------------------------------------------  ------------  --------------  --------- 
 
 

*The effective interest rate is 25% and the coupon rate is 17% (Note 8)

# Made up of capital balance of US$108.4 million and accrued interest of US$10.3 million

^ Made up of capital balance of US$82.1 million and accrued interest of US$5.3 million

A reconciliation from the value of the ELI Loan Notes under IFRS 9, excluding expected credit losses, and the par value is provided below:

 
                                                            IFRS 
                                                     9 Amortised            IFRS 
                                                            Cost    9 Adjustment  Par value 
                                                         US$'000        US$'000*    US$'000 
--------------------------------------------------  ------------  --------------  --------- 
Loan Notes at 31 December 2020                            15,353             399    15,752^ 
--------------------------------------------------  ------------  --------------  --------- 
Interest accrued on Loan Notes (1 January 2021 to 
 18 June 2021)                                             1,092           (120)        972 
--------------------------------------------------  ------------  --------------  --------- 
Cash receipts (1 January 2021 to 18 June 2021)                 -               -          - 
--------------------------------------------------  ------------  --------------  --------- 
Loan Notes at 18 June 2021                                16,445             279     16,724 
--------------------------------------------------  ------------  --------------  --------- 
 
 

*The effective interest rate is 16% and the coupon rate is 14% (Note 8)

^ Made up of capital balance of US$15.0 million and accrued interest of US$0.8 million

Glossary

   2C                                          Best estimate of Contingent Resources 
   1P                                           Proven Reserves 
   2P                                           Proven plus Probable Reserves 
   3P                                           Proven plus Probable plus Possible Reserves 
   AIM                                         The London Stock Exchange's AIM market 
   AIM Rules                              AIM Rules for Companies 
   BCF or bcf                             Billion cubic feet 
   Bilton                                     Bilton Energy Limited 
   B.V.                                         Dutch private limited company 
   BVI                                          British Virgin Islands 
   CPR                                        Competent Person's Report 
   Eroton                                   Eroton Exploration and Production Company Limited 
   US$'000                                 United States Dollars, thousands 
   ESM                                        European Stability Mechanism 
   FSO                                       Floating Storage and Offloading 
   Group                                    San Leon and its subsidiaries 
   LLP                                        Limited liability partnership 

Loan Notes $174.5 million principal amount of 17% fixed rate loan notes acquired by San Leon pursuant to the amended and restated loan note instrument dated September 30, 2016 executed and issued by Midwestern Leon Petroleum Limited

Ltd or limited A private limited company incorporated under the laws of England and Wales, Scotland, certain Commonwealth countries and Ireland

   m                                             Metres 
   'm                                            Millions 
   Martwestern                          Martwestern Energy Limited 
   Midwestern                            Midwestern Oil and Gas Company Limited 
   MLPL                                      Midwestern Leon Petroleum Limited 
   MSA                                        Master Services Agreement 
   mmbbL                                  Million barrels 

Nomad A company that has been approved as a nominated advisor for AIM by the London Stock Exchange

   NNPC                                     Nigerian National Petroleum Corporation 
   NPI                                          Net Profit Interest 
   PLC                                        A publicly held company 
   San Leon or the Company   San Leon Energy PLC 
   SEDA                                     Standby Equity Distribution Agreement 
   Sp. z o.o.                               Polish limited liability company 
   Sp. z o.o. sp.k                        Polish LLP 
   SPV                                         Special purpose vehicle 

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END

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