San Leon Energy gets nods of approval for ELI investment
The oiler is investing US$15m in EIL (Malta), which owns the Alternative Crude Oil Evacuation System (ACOES) project.
ACOES is being constructed to provide a dedicated oil export route from the OML 18 asset in Nigeria, comprising a new pipeline from OML 18 and FSO.
The investment comprises a 10% equity interest in ELI together with a US$15m shareholder loan at a coupon of 14% per annum over 4 years.
SP Angel said it was a shrewd investment in its view, securing the additional control of the midstream export route (through the ELI board seat) at no cost.
Operationally, ACOES will also have a material effect on the operation of OML 18, primarily through the reduction of downtime and losses associated with the existing export route.
ELI, through its Nigerian subsidiary, will earn fees for transporting and storing crude oil from OML 18 and potential third parties.
As a shareholder in ELI, San Leon stands to benefit from what can be a very profitable operation in the medium-to-long term in our view.
Fox Davies, meanwhile, notes the funds will be provided by SLE to ELI in two tranches, the first US$10mln immediately and the balance of US$5mln in Q4 2020 following receipt from Midwestern Leon Petroleum Limited of the next repayment of Loan Notes due then.
“We see this deal as very positive for SLE,” said the broker.
“At no cost it secures SLE some control of the midstream export route (one Board seat at ELI), which is crucial for the full monetisation of the upstream asset, and a 10% share of future crude transportation profits which we estimate to be worth US$35mln or 6p per SLE share.”
Fox Davies increased its price target to 45p from 40p previously, and its NAV estimate to 53p from 47p.
“This deal demonstrates the ability of SLE to take advantage of very accretive opportunities and should provide added comfort to investors,” it added.
Shares rose 6% to 23.9p.