San Leon Energy Secures Funding for Nigerian Oil and Gas Projects

The London-listed company will buy out some of its partners and boost its cash generation and dividend potential

by Motoni Olodun

San Leon Energy, a London-listed oil and gas company, has announced a deal to secure $187 million in financing from a North American fund, Tri Ri Asset Management. The deal will allow San Leon to simplify its business structure and increase its stake in Nigeria’s export infrastructure.

San Leon Energy has been involved in Nigeria’s oil and gas sector since 2014 when it acquired a 9.72% interest in OML 18, a prolific oil block in the Niger Delta region. The company partnered with Eroton Exploration and Production, a Nigerian firm that operated the block under a joint venture with the state-owned Nigerian National Petroleum Corporation (NNPC).

However, San Leon faced several challenges in its Nigerian operations, such as declining production, pipeline vandalism, crude theft, tax disputes, and regulatory issues. The company also had a complex web of agreements with other parties, such as Sahara Group and Midwestern Oil and Gas, that complicated its cash flow and dividend payments.

The new deal with Tri Ri will help San Leon resolve these issues and streamline its business model. According to the company’s CEO, Oisin Fanning, “San Leon has always suffered from a complicated story. It was a square peg in a round hole.”

Under the agreement, San Leon will use part of the funding to buy out Sahara Group’s stake in OML 18 and Midwestern’s stake in the export infrastructure company Energy Link Infrastructure (ELI). ELI owns the FSO Akaso, a floating storage, and offloading vessel that is an alternative export route for OML 18 and other nearby fields.

San Leon will increase its stake in ELI to 55%, while Tri Ri will receive 50% of the dividends paid by ELI for 15 years. San Leon will also increase its stake in OML 18 to 10.58%, while NNPC will take over as the block operator from Eroton.

Fanning said the deal would make San Leon’s story “much simpler and less complicated” and enhance its cash generation and dividend potential. He also said that the company will benefit from the increased investment in midstream and downstream infrastructure in Nigeria, as well as the improved security and regulatory environment.

San Leon is not the only foreign oil company seeking to boost its presence in Nigeria’s oil and gas sector. In recent months, several other firms, such as TotalEnergies, Shell, ExxonMobil, Chevron, Eni, Equinor, and Seplat, have announced new deals or projects in the country.

Nigeria is Africa’s largest oil producer and exporter, with proven reserves of about 37 billion barrels of crude oil and 200 trillion cubic feet of natural gas. The country is also implementing a new Petroleum Industry Act (PIA) to reform the sector and attract more investment.

The PIA, signed into law by President Muhammadu Buhari in August 2021, will create new regulatory agencies, streamline fiscal terms, promote local content, enhance environmental standards, and allocate more revenue to host communities.

The PIA is expected to boost Nigeria’s oil production from about 1.4 million barrels per day (bpd) to 2.5 million bpd by 2025. It will also increase the country’s gas production from about 7.5 billion cubic feet per day (bcfd) to 15 bcfd by 2030.

San Leon Energy is optimistic about its future prospects in Nigeria’s oil and gas sector. Fanning said the company is “very excited about what we can achieve together with our partners and the Nigerian government.”

Source: Energy Voice

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