San Leon invests $7.5m in Decklar Petroleum

The AIM-traded firm said Decklar holds a risk service agreement with Millenium Oil and Gas on the Oza field in Nigeria.

It said that until the loan and its interest were repaid, 100% of the available funds that can be distributed from Decklar's risk service agreement proceeds would be paid to San Leon.

San Leon would also subscribe for a 15% equity interest in Decklar.

“Oza is a further transaction in line with our strategy of investing in assets with expected near-term cash flow, where the initial investment is considered to be of limited risk, as this is an existing field with historical production, and San Leon will receive a cash sweep, and where there is material upside,” said chief executive officer Oisin Fanning.

“Our technical team has reviewed the field data and work plans in detail, and is confident of the approach being taken.”

Fanning said the structure of the transaction, with San Leon providing a repayable loan at an “attractive” interest rate and with an additional significant equity kicker, gave the company the opportunity to generate a “meaningful return” from repayments in the coming years, as well as look forward to a longer-term dividend return from its shareholding.

“The option to scale up our investment following receipt of the result of the new drill proof-of-concept well on equivalent terms to the initial investment, also provides San Leon with valuable informed optionality.”

At 0959 BST, shares in San Leon Energy were down 1.01% at 26.33p.