Petroleum Africa
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Tuesday, January 26, 2016
San Leon Energy is looking to enter Nigeria through an acquistion of a company operating there; that company is Mart Resources. The deal involves a $180 million transaction to finance the acquisition of Mart and an addition interest in Martwestern Energy, and to restructure the assets and liabilities of these acquisitions with Midwestern Oil and Gas Company. The acquisition and restructuring will result in San Leon securing a 9.72% indirect economic interest in the world-class OML 18 block, onshore Nigeria.
San Leon and Midwestern will acquire, through a Canadian acquiring entity, all of the issued and outstanding common shares of Mart by way of a Plan of Arrangement, at a price of C$0.25 per share, a 194% premium to the closing price on January 21. The aggregate consideration for the Mart shares will be approximately $62.6 million.
Martwestern Energy, a Nigerian holding company which is a major shareholder of EROTON Exploration and Production (the operator of OML 18), is owned by Midwestern, Mart, and SunTrust Oil Company. Under certain restructuring agreements between Midwestern and San Leon, which will include the acquisition of SunTrust’s 20% interest in Martwestern, Midwestern will assume from the Mart transaction all assets and liabilities of Mart not associated with OML 18. The balance of the $180 million total transaction cost is accounted for by the SunTrust acquisition and restructuring, and by transaction fees. This transaction cost will be funded by the issue of debt instruments by the company, and it has already secured proof of funds for a majority of this amount.
The deal gives San Leon access to Nigerian production through the Umusadege oil field.
Subject to applicable approvals, the transaction is expected to close in March 2016.
Oisin Fanning, San Leon Executive Chairman, commented: “As part of San Leon’s long-term strategy to move towards production and secure near-term operational cash flow, the company has been able to achieve a deal that capitalizes on the current low oil price environment and buy into production with significant yet low risk upside and attractive hedges already in place. The proposed transaction will provide San Leon with substantial production and cash flow not only from both production but also from service provision in a world-class asset, and is also expected to provide a platform for further transactions. The move also furthers our involvement in Nigeria where we have already announced that our seismic subsidiary, NovaSeis, has signed a MoU with an indigenous Nigerian company. We also look forward to welcoming the new executives into the company on completion of the transaction, providing country-specific operating and financial expertise. We firmly believe this will be transformational for the company, and a large step towards San Leon becoming a dividend-paying company.”
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