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San Leon encouraged by progress at OML 18

Published: 07:55 30 Dec 2016 GMT

San Leon Energy night-time operations
The company also updated on operations at Krakama and Buguma fields

Bid target San Leon Energy PLC (LON:SLE) has been encouraged by progress on the OML 18 onshore project in Nigeria, in which it has a stake.

The electric line operations at OML 18 have now acquired water saturation logs within a group of wells, and perforation of new producing intervals has commenced based upon that data, San Leon said.

Re-perforation operations on the first of these wells was successful and increased gross OML 18 production (before losses and downtime) to some 61,000 barrels of oil per day (bopd). 

The re-perforation programme will continue to be implemented across a number of wells in this field in the coming months.

Numerous wells have been identified that require re-entry in new zones using a service rig and San Leon expects to provide work-over rig, drilling rig and production facility construction services to the operator, Eroton Exploration and Production, starting in 2017.

San Leon has an initial 9.72% stake in the project, and is also set to receive interest payments, taken from cash flows, from the debt it helped provide to enable the acquisition of OML 18.

Before the payments can start, however, Eroton needs to get a few more ducks in a row.

Specifically, the company needs to arrange the reservation of nine months' of upcoming debt repayments due in the debt service account and to submit audited financial statements whereby 60% of audited net profits can be paid to the dividends account.

San Leon has been informed by Eroton that the timing for the satisfaction of these conditions is influenced by the receipt by Eroton of the outstanding balance of historic cash calls from the Nigerian National Petroleum Corporation.

These cash calls were expected to be answered in 2016 but were not.

San Leon is working with Eroton to explore other interim mechanisms to enable cash distributions to be made to San Leon, pending satisfaction of all of the reserve bank lending (RBL) debt service reserve account conditions.

San Leon assured investors that any delays do not adversely affect the amounts of interest and principal due to San Leon.

"We are encouraged by the performance of the OML 18 field to date, including the approximate doubling of production over what was expected when the RBL was first put in place,” said Oisin Fanning, chief executive of San Leon.

“We are confident, and fully supportive of Eroton in its attempts to satisfy all the conditions of the RBL facility in order to declare dividends in order for San Leon to receive its first cash flow from OML 18,” he added.

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