San Leon Energy PLC (LON:SLE) said there has been progress on a loan agreement to fund a fast-track redevelopment of the Oza oil field in Nigeria.
Following the completion of due diligence and a technical report, loan documents are anticipated to be issued by the end of this week.
As part of a deal struck in September, San Leon will invest in US$7.5mln of loan notes issued by Decklar Petroleum, a subsidiary of Asian Mineral Resources (CVE:ASN), and roughly US$4,600 for a 15% stake in Decklar.
San Leon has made an initial deposit of US$750,000 and the balance of the investment in Decklar is being held in escrow.
The AIM-listed company can also, under the deal, decide later if it wishes to buy another US$7.5mln of loan notes and an additional 15% of Decklar’s shares for US$6,500 up to 45 days after it has received well test results on the first Oza development well.
Preparation of the well site and drilling location for well re-entry and a first horizontal development well has also been completed, San Leon said, with the road to the well site rebuilt, drilling infrastructure made ready and a nearby drilling rig contracted.
“As we have previously announced, the global restrictions imposed in response to the COVID-19 pandemic frustrated our attempts to complete our investment in the Oza Oil Field on our original timeframe,” said San Leon chief executive Oisin Fanning in a statement.
“I am however pleased to report that, through the combined efforts of all of the partners, we are now close to concluding the funding arrangements. In the meantime, significant preparatory work has been completed on-site and we now anticipate being able to start the project promptly.”
With Oza being an existing field with historical production and connected to an export pipeline tied into the Trans Niger Pipeline and the Bonny Export Terminal, Fanning said it is “expected to deliver near-term cash flow”.
He added: “Furthermore, we have structured the transaction to minimise our own risk through a repayable loan at an attractive interest rate with an additional significant equity upside. The option to scale up our investment following receipt of the well test results provides us with valuable informed optionality.”