San Leon Energy PLC Half-year Report

TIDMSLE

RNS Number : 1744S

San Leon Energy PLC

29 September 2017

29 September 2017

San Leon Energy Plc

('San Leon', 'SLE' or 'the Company')

Interim Results



San Leon Energy, the AIM listed company focused on oil and gas development and appraisal in Africa and Europe, today announces its interim results for the six months ended 30 June 2017, and provides an update on its indirect interest in OML 18, a world-class oil and gas block onshore Nigeria, and other assets.

Highlights

Corporate


*    US$20.6 million has been received to date in relation
to the US$174.5 million Loan Notes. The Company is
scheduled to be repaid approximately US$19 million
per quarter from Q4 2017
* The Company previously reached agreement with Avobone
in November 2016, which was subsequently revised in
June 2017, regarding payment for Avobone's exit from
the Siekierki project in Poland. The remaining amount
to be paid is approximately EUR14.7 million during
October and November 2017
* In December 2016, the Company announced the receipt
of an approach from a possible offeror. In April
2017, we announced that we had signed confidentiality
agreements and were in discussions with a further
three entities, and in June 2017 we announced an
offer, conditional on completing final due diligence,
from China Great United Petroleum (Holding) Limited
('China Great'). China Great has remained in a
dialogue with the Company and has advised that the
delay in its due diligence has been due to it now
being in discussions to bring in a large EPC partner
to add value in midstream projects on OML 18. China
Great will update the Company regarding progress in
due course. There can be no certainty that any of
these discussions will lead to a firm intention to
make an offer
* Nick Butler resigned as a Non-Executive Director from
the Board effective on 6 September 2017. An executive
search has been launched to appoint two new
Non-Executive Directors

Operational


*    Contract is in place for San Leon's senior
operational appointee into Eroton, with his arrival
in Nigeria imminent
* Eroton is the Operator of OML 18 while San Leon has a
defined partner role under the Master Services
Agreement. Plans from the 2016 Competent Persons
Report (by Petrovision Energy Services Limited) (the
'CPR') are being executed to optimise production
using coiled tubing, electric line, and slickline.
Challenges regarding pipeline loss allocation,
downtime and slower-than-anticipated well work mean
that current production is below the production and
sales forecasts set out in the CPR, and those
challenges are being addressed as they arise.
* The Orubiri Field came online in late 2016, and the
Krakama Field was brought onto production in early
2017. The Buguma Field is expected to follow in Q4
2017 and will now be brought on by direct tie-back to
the Krakama Field
* Commencement of heavy workover and new well drilling
on various OML 18 fields to boost production expected
in Q4 2017
* Eroton is near to completing an updated reserves
report on OML 18

Financial


*    Loss for the period ended 30 June 2017 was EUR5.24m
(2016: loss of EUR6.23m), of which EUR11.3m relates
to a foreign exchange loss on the loan notes
* Cash and cash equivalents as at 30 June 2017 of
EUR0.3m (30 June 2016: EUR0.7m)
* As at 27 September 2017:
o US$20.6m has been received in relation to payments due to San Leon
under the US$174.5m Loan Notes
o EUR4.3m received from loans provided to San Leon
o EUR8.175m has been paid to Avobone during 2017
o EUR1.7m cash and cash equivalents
* Under an agreement with Yorkville, as announced on
the 22 June 2017, San Leon issued 6,254,905 new
ordinary shares at a price per share of 32 pence with
a value of US$2.6m
* As announced on 19 September 2017, agreements were
entered into for the sale of a majority of the
Company's Polish assets, subject to certain
conditions
* Decision made to relinquish Sidi Moussa, offshore
Morocco

Chief Executive Officer, Oisin Fanning, commented:



'The Company has three targeted cash flow streams from Nigeria: Loan Note repayments, dividends from production via the indirect equity interest in OML 18, and from the provision of drilling and workover rig services to Eroton under the Master Services Agreement. While well activity and dividends from production have been delayed for the reasons set out in the final results for the year ended 31 December 2016, the security package held by San Leon over Loan Note repayments have resulted in $20.6 million being received by the Company to date, and approximately $19 million expected on a quarterly basis as a minimum from Q4 2017 onwards, until the Loan Notes are repaid in full.

San Leon continues to work with Eroton to target the commencement of dividend payments, and I look forward to updating shareholders on progress in that regard in due course.'

Directors' Responsibility Statement



The directors of San Leon accept responsibility for the information contained in this announcement. To the best of their knowledge and belief (having taken all reasonable care to ensure such is the case), the information contained in this announcement is in accordance with the facts and does not omit anything likely to affect the import of such information.

Market Abuse Regulation (MAR) Disclosure



Certain information contained in this announcement would have been deemed inside information for the purposes of Article 7 of Regulation (EU) No 596/2014 until the release of this announcement.

References within this announcement to China Great and its ongoing discussions with the Company are being made with the approval of China Great, being the Offeror in relation to the conditional offer for San Leon referenced in this announcement.

Enquiries:


+ 353 1291
San Leon Energy plc 6292
Oisin Fanning, Chief Executive
SP Angel Corporate Finance LLP (Nominated +44 20 3470
adviser to the Company) 0470
Richard Morrison
Ewan Leggat
Soltan Tagiev
Whitman Howard Limited (Financial +44 20 7659
adviser to the Company) 1234
Nick Lovering
Brandon Hill Capital Limited (Joint +44 203
broker to the Company) 463 5000
Oliver Stansfield
Jonathan Evans
Vigo Communications (Financial Public +44 207
Relations) 830 9700
Chris McMahon
Alexandra Roper
+353 1 280
Plunkett Public Relations 7873
Sharon Plunkett

Chairman's Statement



It has been one year since the completion of the OML 18 transaction and the Company's entry into Nigeria. Work has been performed on wells, additional fields have come on stream after being renovated, and significant field data has been gathered. However, certain challenges have been faced by Eroton, the operator, in terms of operations and permissions, and those are being tackled. Those issue include:

- higher than expected pipeline loss allocation (with fiscal metering being installed during Q4 2017 to help resolve)

- higher than expected downtime (with valves to allow isolation of the upstream part of the NCTL pipelines being installed to reduce downtime)

- slower than anticipated well work, due to a combination of downhole challenges, delays in permissions being granted, and capex availability. Downhole challenges are being addressed with the appropriate technical resources.

As a result current production is below the sales and production expectations set out in the CPR. In Q4 2017, the Company expects to see the commencement of heavy workover operations to boost production levels and new well drilling, the results of which we look forward to announcing in due course.

I am also pleased to highlight that San Leon has received $20.6 million in Loan Notes repayments to date. Further information on the loan notes is detailed below.

In addition to the 2017 events reported in the final results for the year ended 31 December 2016, the Company has continued to reduce its footprint in areas outside Nigeria. With agreements signed to dispose of interests in Poland, the deals, if completed will result in the Company only holding interests in two Baltic Basin shale gas assets in the country. To ensure management time and company funds are focused on Nigeria the Company will continue to dispose of non-core assets.

I am pleased to welcome Constantine Ogunbiyi as an advisor to the Board, bringing with him a wealth of Nigerian corporate and financial experience and contacts. Amongst other roles, he established and was CEO of First Hydrocarbon Nigeria ('FHN'), which with Seplat, acquired certain Nigerian assets from Shell in 2010. He raised more than $320 million in debt and equity for FHN, mostly from major Nigerian institutions.

Midwestern Leon Petroleum Limited Loan Notes Summary

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In September 2016, SLE acquired approximately $174.5 million principal amount of 17% fixed rate secured loan notes 2020 (the 'Loan Notes') constituted under an instrument dated 22 March 2016 (as amended and restated) (the 'Instrument') executed by Midwestern Leon Petroleum Limited ('MLPL').

Under the Instrument, MLPL is required to make quarterly interest payments on the Loan Notes, subject to MLPL having received funds derived from OML 18 by way of dividends or distributions from Eroton, through Martwestern to MLPL ('Dedicated Proceeds'). Dividends or distributions from Eroton, through Martwestern to MLPL, can only be paid once the conditions of the Reserves Bank Lending facility have been met. The only condition still to be satisfied is the reservation of nine months' worth of upcoming debt repayments due in the debt service reserve account.

If over a fiscal quarter no Dedicated Proceeds are received by MLPL no interest is payable on the relevant interest payment date and MLPL is not in default under the Instrument. However, regardless of whether MLPL has actually received Dedicated Proceeds, the Instrument contains a 'long stop date' for each scheduled quarterly payment.

If over a fiscal quarter payments by MLPL to San Leon in respect of the Loan Notes are less than the scheduled quarterly payment, the shortfall is a 'Noteholder Underpayment' and must be paid within a 'cure period' to avoid default under the Instrument. The cure period in the Instrument allows MLPL nine months from the occurrence of a Noteholder Underpayment to pay such amounts to SLE. If any Noteholder Underpayment is not paid in full on (or before) the expiration of this nine month cure period, an event of default arises.

In the case of an event of default, SLE may demand immediate payment of the full outstanding principal amount of the Loan Notes, all unpaid accrued interest and any other sum then payable from MLPL. As disclosed in SLE's admission document, SLE has the benefit of a security package including guarantees and a share pledge. Midwestern Oil & Gas Company Limited, the 60% shareholder in MLPL, and Mart Resources Limited (together, the 'Guarantors') have agreed to guarantee the obligations of MLPL under the Instrument.

The average quarterly scheduled amount of principal and interest to date is approximately $19 million. SLE has received payment of $20.6 million in satisfaction of Noteholder Underpayments to date. SLE must further receive approximately $19 million by 1 January 2018 from or on behalf of MLPL, and the same amount again by 1 April 2018 and every quarter thereafter until all Notes have been repaid for an event of default to be avoided and the guarantees to become enforceable. Once MLPL starts receiving sufficient Dedicated Proceeds, 100% of such proceeds can be applied by MLPL to repay the scheduled amounts payable under the Instrument and satisfying all Noteholder Underpayments.

If there are excess Dedicated Proceeds in a relevant fiscal quarter after satisfying the quarterly interest payment, the excess is used to repay any Noteholder Underpayments and then redeeming one fifteenth of the outstanding principal amount (approximately $11.6 million) of the Loan Notes.

Financial Review



Revenue for the six months to 30 June 2017 was EUR0.1m compared with EUR0.2m for the 6 months to 30 June 2016. Cost of sales for the 6 months to 30 June 2017 was EUR0.03m compared with EURNil for the 6 months to 30 June 2016.

Loss on equity investments for the 6 months to 30 June 2017 was EUR3.5m (30 June 2016: EUR0.002m). This loss relates to the equity investment by San Leon in MLPL and in turn MLPL's investment in Martwestern Energy and in turn the investment in Eroton and its OML 18 asset in Nigeria. During the 6 month period to 30 June 2017 profit generated from the investment in Eroton and Martwestern Energy is more than offset by the financing cost of arrangements entered into by MLPL.

Administrative costs decreased to EUR3.9m for the 6 months to 30 June 2017 (30 June 2016: EUR5.7m). The main reason for the decrease is the higher spend on legal and consultancy fees during the first half of 2016, and a swing in foreign exchange rates.

Avobone costs of EUR1.0m relate to fees and interest incurred during the 6 months to 30 June 2017 (30 June 2016: EURNil).

Finance expense of EUR13.9m for the 6 months to 30 June 2017 (30 June 2016: EUR0.8m) relates to a foreign exchange loss on the Loan Notes of EUR11.3m and other loan and finance costs of EUR2.6m.

Finance income of EUR16.5m (30 June 2016: EURNil) is interest income on the US$174.5m Loan Notes.

Tax income for the 6 months to 30 June 2017 is EUR0.5m (30 June 2016: EURNil).

San Leon generated a loss after tax of EUR5.24m for the 6 months to 30 June 2017 compared with a loss after tax of EUR6.23m in the 6 months to 30 June 2016.

Adjusting for the foreign exchange loss of EUR11.3m on the US$174.5m Loan Notes, underlying profit for the 6 months to 30 June 2017 was EUR6.1m.

San Leon has requested payment of approximately US$77.7 million of loan principal and interest payments to date. To date, San Leon has received US$20.6 million which has been applied in satisfaction of principal and accrued interest on the Loan Notes. The outstanding balance is therefore US$57.1 million, increasing by approximately $19 million on the 1 October 2017. The Loan Notes are explained in more detail in the section above entitled 'Midwestern Leon Petroleum Limited Loan Notes Summary'.

The Company has well established loan relationships usually lasting less than a year with various terms and conditions and parties. During 2017 additional funds of approximately EUR6.3 million have been provided to the Company with a current outstanding principal of approximately EUR4.3 million (GBP4.0 million).

During 2017, EUR8,175,000 was paid to Avobone. Under the arbitration award, the Group has to pay Avobone a further EUR8,000,000 during October 2017 and EUR6,694,840 during November 2017.

Under an agreement with Yorkville, as announced on 22 June 2017, San Leon issued 6,254,905 ordinary shares at a price of 32 pence per share with a value of US$2.6m in part settlement of US$5.4mm owed under a promissory note backed by a Standby Equity Distribution Agreement announced on 1 November 2010. The remaining balance of $2.8m is to be repaid to Yorkville on or before 31 October 2017.

On 17 January 2017, San Leon issued and allotted 3,000,000 ordinary shares to two service providers, Robin Management Services and 4,000,000 ordinary shares to DSA Investments Inc. in respect of options granted and then exercised at a price of 30 pence per share.

The Company's Irish counsel is progressing a capital reorganisation which is required to allow dividends to be paid to San Leon shareholders. This is happening later than originally planned.

Outlook



The Company is very active in terms of assets - concentrating on its Nigerian interests, recently appointing its senior operations advisor to Eroton - as well as on a corporate front with the discussions regarding a potential takeover offer for the Company. While offer talks have been protracted, discussions continue with China Great and, while there can be no certainty that any of these discussions will lead to a firm intention to make an offer, we look forward to updating shareholders with progress on both operations and offer discussions in due course.

The following financial information on San Leon Energy Plc represents the Group's interim results for the 6 months ended 30 June 2017.

Consolidated income statement

For the six months ended 30 June 2017


Notes   Un-audited   Un-audited     Audited
30/06/17 30/06/16 31/12/16
EUR'000 EUR'000 EUR'000
---------------------------------- ------ ----------- ----------- ----------
Continuing operations
Revenue 71 187 345
Cost of sales (32) - (128)
---------------------------------- ------ ----------- ----------- ----------
Gross profit 39 187 217
Share of (loss) / profit
of equity accounted investments 8 (3,519) (2) 12,217
Administrative expenses (3,886) (5,663) (26,367)
Impairment of exploration
and evaluation assets 7 - - (9,300)
Decommissioning of wells 17 - - (274)
Arbitration award 17 (968) - (3,628)
Other income 2 - - 29,926
Dissenting shareholders
award 17 - - (1,125)
Loss on disposal of equity
accounted investments 3 - - (1,954)
Loss from operating activities (8,334) (5,478) (288)
Finance expense 4 (13,914) (754) (13,025)
Finance income 5 - 1 2
Finance income - OML 18
Production Arrangement 6 16,520 - 16,801
---------------------------------- ------ ----------- ----------- ----------
(Loss) / profit before
income tax (5,728) (6,231) 3,490
Income tax 486 1 2,227
---------------------------------- ------ ----------- ----------- ----------
(Loss) / profit from continuing
operations (5,242) (6,230) 5,717
---------------------------------- ------ ----------- ----------- ----------
Profit / (loss) per share
(cent) - continuing operations
Basic (loss) / profit per

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share                              (1.2)   (14.8)   3.4
Diluted (loss) / profit
per share (1.2) (14.8) 3.3
---------------------------------- ------ ------- ----

Consolidated statement of other comprehensive income

For the six months ended 30 June 2017


Notes   Un-audited   Un-audited                 Audited
30/06/17 30/06/16 31/12/16
EUR'000 EUR'000 EUR'000
-------------------------------- ------ ----------- ----------- ----------------------
(Loss) / profit for the
period (5,242) (6,230) 5,717
-------------------------------- ------ ----------- ----------- ----------------------
Items that may be reclassified
subsequently to the income
statement
Foreign currency translation
differences - subsidiaries (997) 633 (763)
Foreign currency translation
differences - joint venture 8 (5,679) - 4,694
Fair value movements in
financial assets 10 (3,717) 4,658 1,545
Deferred tax on fair value
movements in financial
assets 1,222 (1,615) (494)
-------------------------------- ------ ----------- ----------- ----------------------
Total comprehensive (loss)
/ profit for the period (14,413) (2,554) 10,699
-------------------------------- ------ ----------- ----------- ----------------------

Consolidated statement of changes in equity

For the period ended 30 June 2017


Share                      Attributable
Share Share Currency based Fair to equity
Un-audited capital premium translation payment value Retained holders Non-controlling
30 June reserve reserve reserve reserve reserve earnings in Group interest Total
2017 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000
-------------- -------- -------- ----------- -------- ------- --------- ------------ --------------- -------- Balance
at 1 January
2017 130,957 401,503 40 20,693 4,017 (263,273) 293,937 - 293,937
-------------- -------- -------- ----------- -------- ------- --------- ------------ --------------- -------- Total
comprehensive
income
for period
Loss for
the period - - - - - (5,242) (5,242) - (5,242) Other
comprehensive
income
Foreign
currency
translation
differences
-
subsidiaries - - (997) - - - (997) - (997) Foreign
currency
translation
differences
- joint
venture
(Note 8) - - (5,679) - - - (5,679) - (5,679) Fair value
movements
in financial
assets - - - - (3,717) - (3,717) - (3,717) Deferred
tax on
fair value
movements
in
financial
assets - - - - 1,222 - 1,222 - 1,222
-------------- -------- -------- ----------- -------- ------- --------- ------------ --------------- -------- Total
comprehensive
income
for period - - (6,676) - (2,495) (5,242) (14,413) - (14,413)
-------------- -------- -------- ----------- -------- ------- --------- ------------ --------------- -------- Transactions
with owners
recognised
directly
in equity
Contributions
by and
distributions
to owners
Issue of
shares
for cash 132 4,538 - (1,905) - 1,905 4,670 - 4,670 Shares
to be issued
in lieu
of salary - - - 409 - - 409 - 409

Share based
payment - - - - - - - - - Warrants
issued
on placing - - - - - - - - -
-------------- -------- -------- ----------- -------- ------- --------- ------------ --------------- -------- Total
transactions
with owners 132 4,538 - (1,496) - 1,905 5,079 - 5,079
-------------- -------- -------- ----------- -------- ------- --------- ------------ --------------- -------- Balance
at 30 June
2017 131,089 406,041 (6,636) 19,197 1,522 (266,610) 284,603 - 284,603
-------------- -------- -------- ----------- -------- ------- --------- ------------ --------------- --------

Consolidated statement of changes in equity

For the period ended 30 June 2017


Share                      Attributable
Share Share Currency based Fair to equity
Un-audited capital premium translation payment value Retained holders Non-controlling
30 June reserve reserve reserve reserve reserve earnings in Group interest Total
2016 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000
-------------- -------- -------- ----------- -------- ------- --------- ------------ --------------- -------- Balance
at 1 January
2016 127,145 205,126 (3,891) 12,049 2,966 (266,332) 77,063 - 77,063
-------------- -------- -------- ----------- -------- ------- --------- ------------ --------------- -------- Total
comprehensive
income
for period
Loss for
the period - - - - - (6,230) (6,230) - (6,230) Other
comprehensive
income
Foreign
currency
translation
differences
-
subsidiaries - - 634 - - - 634 - 634 Fair value
movements
in financial
assets - - - - (1,050) - (1,050) - (1,050) Deferred
tax on
fair value
movements
in
financial
assets - - - - 314 - 314 - 314
-------------- -------- -------- ----------- -------- ------- --------- ------------ --------------- -------- Total
comprehensive
income
for period - - 634 - (736) (6,230) (6,332) - (6,332)
-------------- -------- -------- ----------- -------- ------- --------- ------------ --------------- -------- Transactions
with owners
recognised
directly
in equity
Contributions
by and
distributions
to owners
Share based
payment - - - 458 - - 458 - 458 Total
transactions
with owners - - - 458 - - 458 - 458
-------------- -------- -------- ----------- -------- ------- --------- ------------ --------------- -------- Balance
at 30 June
2016 127,145 205,126 (3,257) 12,507 2,230 (272,562) 71,189 - 71,189
-------------- -------- -------- ----------- -------- ------- --------- ------------ --------------- --------

Consolidated statement of changes in equity

For the period ended 30 June 2017


Share                      Attributable
Share Share Currency based Fair to equity
Audited capital premium translation payment value Retained holders Non-controlling
31 December reserve reserve reserve reserve reserve earnings in Group interest Total
2016 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000
-------------- -------- -------- ----------- -------- ------- --------- ------------ --------------- -------- Balance
at 1 January
2016 127,145 205,126 (3,891) 12,049 2,966 (266,332) 77,063 - 77,063
-------------- -------- -------- ----------- -------- ------- --------- ------------ --------------- -------- Total
comprehensive
income
for year
Profit
for the
year - - - - - 5,717 5,717 - 5,717 Other
comprehensive
income
Foreign
currency
translation
differences
-
subsidiaries - - (763) - - - (763) - (763) Foreign
currency
translation
differences
- joint
venture
(Note 8) - - 4,694 - - - 4,694 - 4,694 Fair value
movements
in financial
assets - - - - 1,545 - 1,545 - 1,545 Deferred
tax on
fair value
movements
in
financial

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assets                -         -            -         -    (494)          -         (494)                -     (494)
-------------- -------- -------- ----------- -------- ------- --------- ------------ --------------- -------- Total
comprehensive
income
for year - - 3,931 - 1,051 5,717 10,699 - 10,699
-------------- -------- -------- ----------- -------- ------- --------- ------------ --------------- -------- Transactions
with owners
recognised
directly
in equity
Contributions
by and
distributions
to owners
Issue of
shares
for cash 3,784 194,926 - - - (1,957) 196,753 - 196,753 Issue of
shares
in lieu
of salary 28 1,451 - (1,594) - - (115) - (115)

Share based
payment - - - 9,537 - - 9,537 - 9,537 Warrants
issued
on placing - - - 701 - (701) - - -
-------------- -------- -------- ----------- -------- ------- --------- ------------ --------------- -------- Total
transactions
with owners 3,812 196,377 - 8,644 - (2,658) 206,175 - 206,175
-------------- -------- -------- ----------- -------- ------- --------- ------------ --------------- -------- Balance
at 31
December
2016 130,957 401,503 40 20,693 4,017 (263,273) 293,937 - 293,937
-------------- -------- -------- ----------- -------- ------- --------- ------------ --------------- --------

Consolidated statement of financial position

As at 30 June 2016


Notes   Un-audited   Un-audited      Audited
30/06/17 30/06/16 31/12/16
EUR'000 EUR'000 EUR'000
--------------------------- ------ ----------- ----------- -----------
Assets
Non-current assets
Intangible assets 7 44,704 47,761 44,621
Equity accounted
investments 8 65,184 11,417 74,382
Property, plant
and equipment 9 3,118 9,825 3,279
Financial assets 10 140,280 51,503 169,616
Other non-current
assets 257 277 257
253,543 120,783 292,155
Current assets
Inventory 264 315 253
Trade and other
receivables 11 10,818 6,379 11,490
Other financial
assets 12 1,227 1,261 1,328
Financial assets 10 57,174 - 37,727
Cash and cash equivalents 13 283 729 177
Assets classified
as held for sale 14 2,641 - 2,553
72,407 8,684 53,528
--------------------------- ------ ----------- ----------- -----------
Total assets 325,950 129,467 345,683
---------------------------- ------ ----------- ----------- -----------
Equity and liabilities
Equity
Called up share
capital 18 131,089 127,145 130,957
Share premium account 18 406,041 205,126 401,503
Share based payments
reserve 19,197 12,507 20,693
Currency translation
reserve (6,636) (3,257) 40
Fair value reserve 1,522 2,230 4,017
Retained deficit (266,610) (272,562) (263,273)
---------------------------- ------ ----------- ----------- -----------
Total equity 284,603 71,189 293,937
Non-current liabilities
Provisions 17 1,280 24,437 1,280
Derivative 360 - 255
Deferred tax liabilities 5,624 8,772 7,332
---------------------------- ------ ----------- ----------- -----------
7,264 33,209 8,867
--------------------------- ------ ----------- ----------- -----------
Current liabilities
Trade and other
payables 15 8,702 16,481 11,298
Loans and borrowings 16 5,955 6,748 6,283
Provisions 17 18,426 1,840 24,298
Liabilities classified
as held for sale 14 1,000 - 1,000
34,083 25,069 42,879
--------------------------- ------ ----------- ----------- -----------
Total liabilities 41,347 58,278 51,746
---------------------------- ------ ----------- ----------- -----------
Total equity and
liabilities 325,950 129,467 345,683
---------------------------- ------ ----------- ----------- -----------

Consolidated statement of cash flows

For the six months ended 30 June 2016


Notes   Un-audited   Un-audited     Audited
30/06/17 30/06/16 31/12/16
EUR'000 EUR'000 EUR'000
------------------------------------------ ------ ----------- ----------- ----------
Cash flows from operating
activities
(Loss) / profit for the period
- continuing operations (5,242) (6,230) 5,717
Adjustments for:
Depletion and depreciation 9 194 418 647
Finance expense 4 13,914 754 13,025
Finance income 6 (16,520) (2) (16,803)
Share based payments charge 409 459 9,537
Foreign exchange (1,609) 1,080 (391)
Income tax (486) (1) (2,227)
Impairment of exploration and evaluation
assets - continuing operations - - 9,300
Arbitration award 17 968 - 3,628
Dissenting shareholders - - 1,125
Decommissioning costs - - 274
Disposal of equity accounted
investment - - 1,954
Bargain purchase of MLPL - - (29,926)
(Increase) / decrease in inventory (11) 13 76
Decrease/ (increase) in trade
and other receivables 673 142 (784)
Decrease in trade and other
payables (2,308) 2,079 (3,270)
Movement in other non-current
assets - 556 576
Share of loss / (profit) of
equity accounted investments 8 3,519 2 (12,217)
Tax paid - - (4)
------------------------------------------ ------ ----------- ----------- ----------
Net cash outflow in operating
activities (6,499) (730) (19,763)
------------------------------------------ ------ ----------- ----------- ----------
Cash flows from investing
activities
Net expenditure on exploration
and evaluation assets (4) (716) (1,117)
Dissenting shareholder payment 17 (1,864) - (705)
Proceeds of disposal of equity-accounted
investments 3 - - 4,222
Arbitration payment 17 (4,976) - (2,231)
Purchases of property, plant
and equipment 9 (9) (21) (2,719)
Advances to equity accounted
investments 8 - (45) 53
Decrease in restricted cash 12 - 83 84
Acquisition of OML 18 equity
interest 8 - - (27,545)
OML 18 Production Arrangement
loan notes 10 11,341 - (136,583)
Proceeds of financial investments
and investment income 10 31 2 140
Net cash inflow / (outflow)
from investing activities 4,519 (697) (166,401)
------------------------------------------ ------ ----------- ----------- ----------
Cash flows from financing
activities
Proceeds from issue of shares 4,670 - 196,753
Proceeds from drawdown of
other loans 3,788 1,851 6,104
Repayment of other loans (3,743) - (12,437)

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Movement in Director loan                    15          (287)          151         145
Interest and arrangement fees
paid (2,378) (754) (5,040)
------------------------------------------ ------ -----------
Net cash inflow from financing
activities 2,050 1,248 185,525
------------------------------------------ ------ ----------- ----------- ----------
Net increase / (decrease)
in cash and cash equivalents 70 (179) (639)
Effect of foreign exchange
fluctuation on cash and cash
equivalents 36 (5) (97)
Cash and cash equivalents
at start of period 177 913 913
------------------------------------------ ------ ----------- ----------- ----------
Cash and cash equivalents
at end of period 13 283 729 177
------------------------------------------ ------ ----------- ----------- ----------

Notes to the Interim Financial Information

1. Basis of preparation and accounting policies



The Group interim financial information has been prepared in accordance with International Financial Reporting Standards and the accounting policies adopted are consistent with those followed in the preparation of the Group's financial statements for the year ended 31 December 2016. The interim financial information was approved by the Board of Directors on 27 September 2017.

The interim consolidated financial statements do not constitute statutory financial statements and therefore do not include all the information and disclosures required in the annual financial statements, and should be read in conjunction with the Group's annual financial statements as at 31 December 2016 which are available on the Group's website www.sanleonenergy.com.

The interim consolidated financial statements are presented in Euro ('EUR').

2. Other income


Un-audited   Un-audited    Audited
30/06/17 30/06/16 31/12/16
EUR'000 EUR'000 EUR'000
Bargain purchase on acquisition
of Midwestern Leon Petroleum
Limited - - 29,926
--------------------------------- ----------- ----------- ---------

The bargain purchase on acquiring a 40% interest in Midwestern Leon Petroleum Limited (MLPL) is calculated as follows:


Un-audited   Un-audited    Audited
30/06/17 30/06/16 31/12/16
EUR'000 EUR'000 EUR'000
---------------------------------- ----------- ----------- ---------
Fair value at the date of
acquisition - - 57,471
Less equity investment in
MLPL by San Leon Energy Nigeria
B.V. - - (27,545)
Bargain purchase of MLPL - - 29,926
---------------------------------- ----------- ----------- ---------

3. Loss on disposal on equity accounted investments


Un-audited   Un-audited    Audited
30/06/17 30/06/16 31/12/16
EUR'000 EUR'000 EUR'000
-------------------------------- ----------- ----------- ---------
Consideration on sale of
equity accounted investments - - 8,478
Loans eliminated on disposal - - 2,800
Book value at date of disposal - - (15,041)
Decommissioning provision
reversed - - 1,809
Loss on disposal of equity
accounted investments - - (1,954)
-------------------------------- ----------- ----------- ---------

In November 2016, the Company sold its 35% interest in the Rawicz gas field held through TSH Energy Joint Venture B.V. for a cash consideration of EUR8.5 million (US$9.0 million), and the release of certain San Leon liabilities.

These liabilities included loans which were advanced by Palomar to the Company as a temporary carry of the drilling and testing costs of the Rawicz-12 and Rawicz-15 wells, and amount each to approximately EUR2.8 million (US$3.0 million).

The Company also sold its 35% interest in the Poznan assets held through Poznan Energy B.V (largely the Siekierki field) for a consideration of EUR1 plus a 10% Net Profit Interest ('NPI') in the Poznan assets. The NPI removes any further cost exposure to San Leon, while providing an interest in any future profits made by Palomar on the Poznan assets. A nil value has been placed on the NPI at this stage, since no agreed work programmes are in place for the asset. The first EUR2.1 million (US$2.2 million) was received on closing, the next EUR2.1 million (US$2.3 million) was received on 30 November 2016 and the remaining EUR4.3 million (US$4.5 million) is due to be paid to San Leon on or before 1 October 2017. An interest charge of LIBOR plus 5% is being applied to any sum not paid by 1 February 2017.

4. Finance expense


Un-audited   Un-audited    Audited
30/06/17 30/06/16 31/12/16
EUR'000 EUR'000 EUR'000
------------------------------- ----------- ----------- ---------
On loans and overdraft 1,355 754 4,844
Finance arrangement expenses
other than OML 18 Production
Arrangement 1,136 - 3,022
OML 18 Production Arrangement
- fees - - 4,904
Foreign exchange loss on 11,320 - -
loan notes
Fair value charge on issue
of warrants 103 - 255
------------------------------- ----------- ----------- ---------
13,914 754 13,025
------------------------------- ----------- ----------- ---------

5. Finance income


Un-audited   Un-audited    Audited
30/06/17 30/06/16 31/12/16
EUR'000 EUR'000 EUR'000
Deposit interest received - 1 2
--------------------------- ----------- ----------- ---------

6. Finance income - OML 18 Production Arrangement


Un-audited   Un-audited    Audited
30/06/17 30/06/16 31/12/16
EUR'000 EUR'000 EUR'000
------------------------------- ----------- ----------- ---------
Interest income on loan notes 16,520 - 8,843
Foreign exchange gain on
loan notes - - 7,958
16,520 - 16,801
------------------------------- ----------- ----------- ---------

7. Intangible assets

Exploration and evaluation assets


Un-audited
30/06/17
EUR'000
---------------------------------------- -----------
Cost and net book value
At 1 January 2016 47,532
Additions 1,117
Disposals (849)
Transfer from property, plant and
equipment (assets under construction) 9,020
Transfer to held for sale assets (2,553)
Currency translation adjustment (346)
Impairment of exploration assets (9,300)
----------------------------------------- -----------
At 31 December 2016 44,621
Additions 116
Disposals (201)
Currency translation adjustment 168
----------------------------------------- -----------
At 30 June 2017 44,704
----------------------------------------- -----------

An analysis of exploration assets by geographical area is set out below:


Un-audited   Un-audited     Audited
30/06/17 30/06/16 31/12/16
EUR'000 EUR'000 EUR'000
--------- ----------- ----------- ----------
Poland 7,276 12,372 7,143
Morocco 29,018 27,184 29,162
Albania 8,410 8,205 8,316
--------- ----------- ----------- ----------
Total 44,704 47,761 44,621
--------- ----------- ----------- ----------

The Directors have considered the licence, exploration and appraisal costs capitalised in respect of exploration and evaluation assets, which are carried at historical cost. Those assets have been assessed for impairment and in particular with regard to remaining licence terms, likelihood of licence renewal, likelihood of further expenditures and on-going appraisals for each year. The directors are satisfied that there are no current indications of impairment, but recognise that the future realisation of these exploration and evaluation assets is dependent on future successful exploration and appraisal activities and the subsequent economic production of oil and gas reserves.

8. Equity accounted investments

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Midwestern Leon Petroleum Limited


Un-audited   Un-audited    Audited
30/06/17 30/06/16 31/12/16
EUR'000 EUR'000 EUR'000
---------------------------------- ----------- ----------- ---------
Opening balance 74,382 - -
Acquisition of OML 18 equity
interest # - - 57,471
Share of (loss)/ profit
of equity accounted investments (3,519) - 12,217
Exchange rate adjustment (5,679) - 4,694
---------------------------------- ----------- ----------- ---------
Closing balance 65,184 - 74,382
---------------------------------- ----------- ----------- ---------

Equity investment of EUR27.5 million plus bargain purchase of EUR30.0 million (Note 2).

Other equity accounted investments


Un-audited   Un-audited    Audited
30/06/17 30/06/16 31/12/16
EUR'000 EUR'000 EUR'000
------------------------------ ----------- ----------- ---------
Opening balance - 11,375 11,375
Advances to equity accounted
investments - 44 53
Disposal of interests - (2) (11,428)
Closing balance - 11,417 -
------------------------------ ----------- ----------- ---------

9. Property, plant and equipment


Assets
Plant under Office Motor
& equipment construction equipment vehicles Total
EUR'000 EUR'000 EUR'000 EUR'000 EUR'000
------------------------ ------------- -------------- ----------- ---------- ---------
Cost
At 1 January 2016 5,352 9,020 1,086 428 15,886
Transfer to intangible
assets - (9,020) - - (9,020)
Additions 2,719 - - - 2,719
Disposals - - (24) (27) (51)
Currency translation
adjustment (178) - (7) (9) (194)
------------------------ ------------- -------------- ----------- ---------- ---------
At 31 December
2016 7,893 - 1,055 392 9,340
Additions - - 7 2 9
Exchange rate
adjustment 227 - 8 12 247
------------------------
At 30 June 2017 8,120 - 1,070 406 9,596
------------------------ ------------- -------------- ----------- ---------- ---------
At 30 June 2016 5,145 9,049 1,052 390 15,636
------------------------ ------------- -------------- ----------- ---------- ---------
Depreciation
At 1 January 2016 4,292 - 955 373 5,620
Disposals - - (24) (27) (51)
Charge for the
period 528 - 83 36 647
Currency translation
adjustment (142) - (6) (7) (155)
------------------------ ------------- -------------- ----------- ---------- ---------
At 31 December
2016 4,678 - 1,008 375 6,061
Exchange rate
adjustment 204 - 8 11 223
Charge for period 165 - 21 8 194
------------------------ ------------- -------------- ----------- ---------- ---------
At 30 June 2017 5,047 - 1,037 394 6,478
------------------------ ------------- -------------- ----------- ---------- ---------
At 30 June 2016 4,482 - 971 358 5,811
Net book values
At 30 June 2017 3,073 - 33 12 3,118
------------------------ ------------- -------------- ----------- ---------- ---------
At 30 June 2016 663 9,049 81 32 9,825
------------------------ ------------- -------------- ----------- ---------- ---------
At 31 December
2016 3,215 - 47 17 3,279
------------------------ ------------- -------------- ----------- ---------- ---------

Assets under construction related to the Group's Oil Shale Project in Morocco. The Directors have considered the classification of 'assets under construction' and made the decision to transfer the carrying value to 'Intangible assets' as the project is not yet at the stage of development and is still being evaluated.

10. Financial assets


OML 18      Barryroe      Quoted
Production 4.5% shares
Arrangement net profit (iii) Unquoted
(i) interest EUR'000 shares Total
EUR'000 (ii) (iv) EUR'000
EUR'000 EUR'000
--------------------- -------------- ------------ ---------- ----------- ----------
Cost
At 1 January
2016 - 47,018 175 5,360 52,553
Additions 136,583 - - - 136,583
Finance income 8,843 - - - 8,843
Disposals - - (139) - (139)
Exchange rate
adjustment 7,958 - - - 7,958
Fair value movement - 1,499 46 - 1,545
--------------------- -------------- ------------ ---------- ----------- ----------
At 31 December
2016 153,384 48,517 82 5,360 207,343
Finance income 16,520 - - - 16,520
Loan note receipts (11,341) - - - (11,341)
Exchange rate
adjustment (11,320) - - - (11,320)
Disposals - - (31) - (31)
Fair value movement - (3,704) (13) - (3,717)
--------------------- -------------- ------------ ---------- ----------- ----------
At 30 June 2017 147,243 44,813 38 5,360 197,454
--------------------- -------------- ------------ ---------- ----------- ----------
Current 57,174 - - - 57,174
--------------------- --------------
Non-current 90,069 44,813 38 5,360 140,280
--------------------- --------------
At 30 June 2016 - 46,065 78 5,360 51,503
--------------------- -------------- ------------ ---------- ----------- ----------
Current - - - - -
--------------------- -------------- ------------ ---------- ----------- ----------
Non-current - 46,065 78 5,360 51,503
--------------------- -------------- ------------ ---------- ----------- ----------
At 31 December
2016 153,384 48,517 82 5,360 207,343
--------------------- -------------- ------------ ---------- ----------- ----------
Current 37,727 - - - 37,727
--------------------- -------------- ------------ ---------- ----------- ----------
Non-current 115,657 48,517 82 5,360 169,616
--------------------- -------------- ------------ ---------- ----------- ----------
(i) OML 18 Production Arrangement

The Company secured an initial 9.72% indirect economic interest in the OML 18 Production Arrangement, onshore Nigeria for a total consideration of EUR169 million (US$188.4 million).

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The fair value assessment of the loan notes as referred to below is calculated as follows:


Un-audited   Un-audited    Audited
30/06/17 30/06/16 31/12/16
EUR'000 EUR'000 EUR'000
---------------------------------- ----------- ----------- ---------
Total consideration (US$188.4
million) - - 169,032
Fair value of loan notes
attributable to equity
investment (US$30.9 million)(#) - - (27,545)
---------------------------------- ----------- ----------- ---------
Net fair value of loan
notes (US$157.5 million) - - 141,487
Arrangement fees (US$5.5
million) (Note 6) - - (4,904)
---------------------------------- ----------- ----------- ---------
Additions - - 136,583
---------------------------------- ----------- ----------- ---------

The fair value of loan notes attributable to the equity investment is calculated using a discount factor of management's estimate of a market rate of interest of 8% above the coupon rate of 17% over the term of the loan notes.

The Company undertook a number of steps to effect the purchase of its interest in the OML 18 Production Arrangement in 2016. Midwestern Leon Petroleum Limited (MLPL), a company incorporated in Mauritius of which San Leon Nigeria B.V. has a 40% shareholding, was established as a special purpose vehicle to complete the transaction by purchasing all of the shares in Martwestern Energy Limited (Martwestern), a company incorporated in Nigeria. Martwestern holds a 50% shareholding in Eroton Exploration and Production Company Limited (Eroton), a company incorporated in Nigeria and the Operator of OML 18.

To partly fund the purchase of 100% of the shares of Martwestern, MLPL borrowed EUR156.6 million (US$174.5 million) in incremental amounts by issuing Loan Notes under a Loan Note Instrument which attracts a coupon of 17 per cent. Midwestern Oil and Gas Company Limited is the 60% shareholder of MLPL and transferred its shares in Martwestern to MLPL as part of the full transaction. Following its Placing in September 2016, San Leon Energy PLC purchased all of the outstanding Loan Notes issued of EUR103.7 million (US$115.5 million) and subscribed for further EUR52.9 million (US$58.9 million) of newly issued loan notes and is therefore the beneficiary and holder of all Loan Notes issued by MLPL. SLE will be repaid the full EUR156.6 million (US$174.5 million) plus the 17% coupon once certain conditions have been met and using an agreed distribution mechanism. SLE is also a beneficiary of any dividends that will be paid by MLPL as a 40% shareholder in MLPL, but the Loan Note repayments must take priority over any dividend payments made to the MLPL shareholders.

Through its 50% shareholding in Eroton and other agreements, Martwestern holds an initial indirect 24.3% economic interest in the OML 18 Production Arrangement. Through the ownership of MLPL and other commercial agreements, SLE is an indirect shareholder of Eroton, and the Company holds a 9.72% initial economic interest in OML 18.

The key information relevant to the fair value of the Loan Notes is as follows:


Inter-relationships
between the unobservable
Significant unobservable inputs and fair
Valuation technique inputs value measurement
------------------- ------------------------ ------------------------------------------------------- Discounted cash - Discount rate The estimated
flows 25% based on a fair value would
market rate of increase / (decrease)
interest of 8% if:
above the coupon * US Dollar exchange rate increased / (decreased) rate of 17%
- MLPL profitability
i.e. ability to
generate cash flows
for repayment
- Loan Notes are
repayable in full
by 31 March 2020.
------------------- ------------------------ -------------------------------------------------------

The recoverability of the group and company's equity and loan note investments in the MLPL (OML 18 Production) arrangement is dependent on the ability of the OML 18 operator, Eroton, to make distributions. Eroton needs to meet certain conditions before its lenders will allow Eroton to make distributions to its shareholders. These distributions need to be made to enable MLPL repay interest and principal to San Leon. At the balance sheet date and at the date of approval of their financial statements these conditions have not been met by Eroton. The directors of San Leon have considered the carrying amounts of the loan notes and equity interest at 31 December 2016 and are satisfied that these are appropriate.

(ii) Barryroe - 4.5% Net Profit Interest (NPI)



The Directors have estimated the fair value of the NPI by reference to a third party evaluation report of contingent resources and cash flows prepared by Netherland Sewell & Associates Inc. (NSAI) in July 2013 for Providence Resources Plc ('Providence').

NSAI reported that the Basal Wealden oil reservoir has an estimated 2C in-place gross on-block volume of 761 MMBO with recoverable resources of 266 MMBO and 187 BCF of associated gas, based on a 35% oil recovery factor. In July 2013, NSAI also provided an estimate of the cash flows attributable to Providence's net interest from the Basal Wealden oil reservoir only. It estimated Providence's net present value at US$2.63 billion in the 2C case (estimated recoverable resources of 266 MMBO and 187 BCF of associated gas) at a 10% discount rate. Further details are available on the Providence website.

Further information has also been made available regarding the revised development plan or development costs which are key inputs into the valuation model.

As San Leon is not the operator of this licence, the Group does not have the ability to commission an independent technical evaluation of the licence area. Therefore, the Directors believe that the NSAI report, when coupled with other information released by Providence and adopted for certain changes in the market, gives the basis for the best estimate of fair value at year end.

With the increase in the oil price since the lows of early 2016 and an increase in farm-out activity, San Leon is confident of the asset value ascribed to Barryroe.

iii) Amedeo Resources plc



During 2017, the Company sold 100,000< ordinary shares in Amedeo Resources plc for cash consideration of EUR30,998. At 30 June 2017, the Company hold 213,512< ordinary shares with a market value of EUR28,548 (2016:EUR139,219).

During 2016, the Company sold 398,738< ordinary shares in Amedeo Resources plc for cash consideration of EUR139,219.

Adjusted for share consolidation of 1 for 100 in Amedeo Resources plc.

(iv) Ardilaun Energy Limited



As part of the consideration for the sale of Island Oil & Gas Limited to Ardilaun Energy Limited ('Ardilaun') in 2014.

Ardilaun agreed to issue shares equivalent to 15% of the issued share capital of Ardilaun. The original fair value of the 15% interest in Ardilaun was based on a market transaction in Ardilaun shares. The Directors have considered the carrying value of this interest at 31 December 2016 and are satisfied that the carrying value continues to be appropriate in the absence of further market data.

(v) Poznan 1% Net Profit Interest

Please see Note 3 for further details.

11. Trade and other receivables


Un-audited   Un-audited    Audited
30/06/17 30/06/16 31/12/16
EUR'000 EUR'000 EUR'000
--------------------------- ----------- ----------- ---------
Amounts falling due
within one year:
Trade receivables from
joint operating partners 41 75 19
VAT and other taxes
refundable 1,071 711 894
Other debtors (i) 7,647 5,412 8,368
Prepayments and accrued
income 2,059 181 2,209
---------------------------- ----------- ----------- ---------
10,818 6,379 11,490
--------------------------- ----------- ----------- ---------

(i) Other debtors includes EUR4.3 million (US$4.5 million) due from Palomar for the disposal of equity accounted investments in 2016 (Note 3).

12. Other financial assets


Un-audited   Un-audited    Audited
30/06/17 30/06/16 31/12/16
EUR'000 EUR'000 EUR'000
------------------------- ----------- ----------- ---------
Restricted cash at bank 1,227 1,261 1,328
-------------------------- ----------- ----------- ---------

Restricted cash at bank at 30 June 2017 is a deposit account held in support of bank guarantees required under the Moroccan exploration licence, Zag, held by the Group.

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After the reporting period, in April 2017, the Company announced that the Office National des Hydrocarbures et des Mines ('ONHYM') has written to the Company regarding the non-performance of the work programme on its Zag Licence, onshore Morocco. ONHYM has assumed control of the existing bank guarantee (listed above as restricted cash), and has requested a penalty of the same amount again to be paid. The Zag licence is in a geographical area which the Company believes justifies a declaration of force majeure due to the regional security situation. The Directors are confident, given their belief in the force majeure status of the licence, with the recoverability of the bank guarantee and that the penalty cannot be enforced. The company is in negotiations with ONHYM regarding the future of the licence including the week programme, and the force majeure status.

13. Cash and cash equivalents


Un-audited   Un-audited    Audited
30/06/17 30/06/16 31/12/16
EUR'000 EUR'000 EUR'000
---------------------------
Cash and cash equivalents 283 729 177
---------------------------- ----------- ----------- ---------

14. Held for sale assets and liabilities



During 2016 efforts to sell, relinquish, or farm-out most of the Company's assets in Poland commenced as part of the strategic realignment and focus on Nigeria. This process is substantially underway and it is anticipated that sale and purchase agreements will be concluded in the second half of 2017 with regard to the held for sale assets, following which various formalities will have to be concluded, in particular with governmental authorities, before completion, expected in 2018.

The assets and liabilities that are up for sale in Poland are as follows:


Un-audited   Un-audited    Audited
30/06/17 30/06/16 31/12/16
EUR'000 EUR'000 EUR'000
---------------------------- ----------- ----------- ---------
Assets
Exploration and evaluation
assets 2,641 - 2,553
----------------------------- ----------- ----------- ---------
Liabilities
Decommissioning provision 1,000 - 1,000
----------------------------- ----------- ----------- ---------

During 2016 the held for sale exploration and evaluation assets were impaired by EUR2,861,100 in order to reduce their carrying value to fair value less costs to sell.

There are no other income or expenses related to the held for sale assets.

15. Trade and other payables


Un-audited   Un-audited    Audited
30/06/17 30/06/16 31/12/16
EUR'000 EUR'000 EUR'000
----------------- ----------- ----------- ---------
Current
Trade payables 5,283 11,478 7,432
PAYE / PRSI 365 644 211
Other creditors 1,332 2,374 1,270
Accruals 1,662 1,985 2,038
Director's Loan 60 - 347
------------------
8,702 16,481 11,298
----------------- ----------- ----------- ---------

16. Loans and borrowings


Un-audited   Un-audited    Audited
30/06/17 30/06/16 31/12/16
EUR'000 EUR'000 EUR'000
--------------------- ----------- ----------- ---------
Current
YA Global Masters
SPV Limited 2,467 3,254 4,273
21st Luxury Luxtech 3,104 - -
Fund Ltd
Other 384 2,587 -
LPL Finance Limited - 907 2,010
----------------------
5,955 6,748 6,283
--------------------- ----------- ----------- ---------

17. Provisions


Decommissioning   Arbitration      Other      Total
EUR'000 EUR'000 EUR'000 EUR'000
----------------------------- ---------------- ------------ --------- ---------
Cost
At 1 January 2016 4,291 20,561 1,355 26,207
Paid during the
period - (2,231) (705) (2,936)
Provision during
the period 274 3,628 1,125 5,027
Exchange rate
adjustment - - 89 89
Transfer of decommissioning
liability (1,809) - - (1,809)
Transfer to liabilities
held for sale (1,000) - - (1,000)
------------------------------- ---------------- ------------ --------- ---------
At 31 December
2016 1,756 21,958 1,864 25,578
Paid during the
period - (4,976) (1,864) (6,840)
Provision during
the period - 968 - 968
-------------------------------
At 30 June 2017 1,756 17,950 - 19,706
------------------------------- ---------------- ------------ --------- ---------
Current 476 17,950 - 18,426
------------------------------- ---------------- ------------ --------- ---------
Non-current 1,280 - - 1,280
------------------------------- ---------------- ------------ --------- ---------
At 30 June 2016 4,291 20,561 1,425 26,277
------------------------------- ---------------- ------------ --------- ---------
Current 415 - 1,425 1,840
------------------------------- ---------------- ------------ --------- ---------
Non-current 3,876 20,561 - 24,437
------------------------------- ---------------- ------------ --------- ---------
At 31 December
2016 1,756 21,958 1,864 25,578
Current 476 21,958 1,864 24,298
------------------------------- ---------------- ------------ --------- ---------
Non-current 1,280 - - 1,280
------------------------------- ---------------- ------------ --------- ---------

Decommissioning



The provision for decommissioning costs is recorded at the value of the expenditures expected to be required to settle the Group's future obligations on decommissioning of previously drilled wells. As part of the sale of TSH and Poznan to Palomar, EUR1.8 million of the decommissioning provision was transferred with the sale.

Arbitration



On 7 November 2016, Avobone N.V. and Avobone Poland B.V. ('Avobone') (together, 'Avobone') and the Company settled a number of ongoing disputes between them and between Avobone and certain of San Leon's subsidiaries, including Aurelian Oil & Gas Limited, Aurelian Oil & Gas Poland Sp. z.o.o, Energia Zachod Holdings Sp. z.o.o and AOG Finance Limited, in Poland, Netherlands, Ireland, England & Wales in respect of various matters including a final award in an ICC arbitration dated 21 May 2015. The total settlement amounts to EUR23.3 million plus interest to be paid to Avobone. Interest will accrue at a rate of 5% per annum on instalments until paid.

As announced by San Leon on 5 June 2017 an Extension Agreement was entered into with Avobone along with a revised payment schedule in respect of sums owed to Avobone.

A payment of EUR8,175,000 (inclusive of an extension fee) has been made during 2017 so far.

Further payments are due as follows:


--     During October 2017, San Leon shall pay to Avobone, a further sum of EUR8,000,000
-- During November 2017, San Leon shall pay to Avobone, a further sum of EUR6,694,840

Payments totalling EUR22,869,840 are expected during 2017 (inclusive of extension fees and interest since the 31 December 2016) approximately adding an additional EUR0.9 million to the provision.

Other



Certain Realm Energy International Corporation shareholders exercised rights of dissent under Canadian law not to accept the terms of acquisition in 2011. Under Canadian law, these dissenting shareholders are eligible to receive a cash payment equal to the fair value of their shareholding at acquisition. The provision represents the Directors' estimate of the cash consideration to be paid to those shareholders taking account of the market price of the Realm shares at acquisition.

In Q1 2017 the amount provided at 31 December 2016 was fully paid in cash to the shareholders.

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18. Share capital


Number
of Number
New Ordinary of Deferred Authorised
shares shares equity
EUR0.01 EUR0.0001 '000
each each
'm
------------------- --------------- -------------- -------------
Authorised equity
At 1 January 2016 15,500,000,000 1,265,259 155,000
--------------------
At 31December
2016 15,500,000,000 1,265,259 155,000
--------------------
At 30 June 2017 15,500,000,000 1,265,259 155,000
-------------------- --------------- -------------- -------------
Number Number of Share Share
of new Deferred capital premium
Ordinary Ordinary EUR'000 EUR'000
Shares Shares
EUR0.01 EUR0.0001
each each 'm
--------------------- ------------ ----------- --------- ---------
Issued called
up and fully paid:
At 1 January 2016 61,809,052 1,265,259 127,145 205,126
Issue of shares 378,400,000 - 3,784 194,926
Issue of shares
in lieu of salary 2,816,668 - 28 1,451
----------------------
At 31 December
2016 443,025,720 1,265,259 130,957 401,503
Issue of shares
(i and ii) 13,254,905 - 132 4,538
---------------------- ------------ ----------- --------- ---------
At 30 June 2017 456,280,625 1,265,259 131,089 406,041
---------------------- ------------ ----------- --------- ---------
At 30 June 2016 61,809,052 1,265,259 127,145 205,126
---------------------- ------------ ----------- --------- ---------

(i) On the 17th January 2017 San Leon issued and allotted 3,000,000 new ordinary shares to Robin Management Services and 4,000,000 new ordinary shares to DSA Investments Inc. in respect of options exercised. The options were exercised at a price of 30 pence per share.

(ii) Under an agreement with Yorkville, as announced on the 22 June 2017, San Leon issued 6,254,905 new ordinary shares at a price per share of 32 pence with a value of US$2.6m.

On 21 September 2016, the Company issued 378,400,000 EUR0.01 New Ordinary Shares as a cash equity placing.

Costs directly attributable to the equity placing amounted to EUR1,974,311. These costs have been recognised as a deduction from equity.

2,816,668 ordinary shares were issued to Oisíe;n Fanning in lieu of 80% of his salary due to him for the period 1 January 2015 to 31 August 2016. 1,167,485 ordinary shares for the year to 31 December 2015 and 1,649,485 ordinary shares for the period 1 January 2016 to 31 August 2016.

This information is provided by RNS

The company news service from the London Stock Exchange

END

IR FVLLLDKFZBBE

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San Leon Energy plc published this content on 29 September 2017 and is solely responsible for the information contained herein.
Distributed by Public, unedited and unaltered, on 29 September 2017 06:14:12 UTC.

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