San Leon Energy PLC (AIM:SLE, AQSE:SLE, OTC:SLGYF) is to issue dividend-paying preference shares as part of the deal to take control of the Midwestern Leon Petroleum vehicle which holds a stake in the OML 18 oil assets in Nigeria.
The new share series are expected to return up to US$40mln over three years. They are designed to provide a cash return to existing shareholders, replacing what may have been paid out had outstanding loan note repayments been recouped.
San Leon is to waive final outstanding loan note repayments – of around US$99mln – in exchange for a larger equity interest in the Midwestern vehicle.
San Leon’s indirect economic interest in OML 18 will increase to 44.1%, from 10.58%, as a result of the consolidation and reorganisation. It will also make the company the largest stakeholder in the Alternative Crude Oil Evacuation System (ACOES) project, presently under construction, which is intended to transport, store and evacuate crude oil from the OML 18 export pipeline.
"Our potential transaction with Midwestern is a transformational opportunity for San Leon, achieving our twin aims of increasing our interest in OML 18 and building our shareholding in the operator of the new ACOES pipeline project,” San Leon chief executive Oisin Fanning said in a statement.
“We have long considered OML 18 to be a world-class oil and gas asset and our plans to further enhance our involvement there could be very significant to the company's future growth plans.
“A considerable amount of work has already been carried out by both parties and their respective advisers. We continue to diligently progress the transaction towards completion."
Meanwhile, San Leon also told investors it expects to publish its updated AIM admission document in February, to reflect the proposed reorganisation to consolidate the Midwestern vehicles that will simplify and increase the company’s interests in the OML 18 asset.
The company will then seek the restoration of trading of the company's shares on AIM.