Irish independent oil and gas company San Leon has announced an investment of $15m in Energy Link Infrastructure (ELI), which owns the Alternative Crude Oil Evacuation System (ACOES) project in Nigeria.
The ACOES project, which comprises a new pipeline along with a floating storage and offloading vessel, is expected to start operations in few quarters.
The project is planned to be constructed to facilitate a dedicated oil export route from OML 18 asset, which includes a new pipeline from OML 18 and a floating storage and offloading vessel (FSO).
ELI expects the pipeline component of ACOES to have a throughput capability of approximately 100,000 barrels of oil per day, while the FSO has a storage capacity of 2 million barrels of oil.
San Leon Energy chief executive officer Oisin Fanning said: “We are delighted to make this investment, which is in line with our strategy of investing in assets with near-term cash flow, where the initial investment is considered to be of limited risk and where there is material upside.
“The ACOES is expected to generate regular cash flow once commissioned in the coming quarters, whilst also providing the significant benefits to downtime and losses reduction for OML 18 which we have previously described.”
San Leon will receive a 10% equity interest in ELI
As part of the investment, San Leon will receive a 10% equity interest in ELI.
ELI will also receive a $15m shareholder loan at a coupon of 14% per annum over 4 years, and repayable quarterly following a one-year moratorium from the date of investment.
Under the terms of the transaction, San Leon will make the payment to ELI in two instalments, paying the first $10m in this week, and the second $5m planned for fourth quarter 2020 after Midwestern Leon Petroleum receiving the next repayment of loan notes.
The ACOES project is expected to have a major effect on the operation of OML 18, mainly through the reduction of downtime and losses associated with the existing export route.
Through its Nigerian subsidiary, ELI will earn fees for transporting and storing crude oil from OML 18 and potential third parties.
Fanning added: “The structure of the transaction, which combines an equity investment in the project together with a loan, gives us the opportunity to generate a meaningful return from loan repayments in the coming years as well as looking forward to a longer-term dividend return from our shareholding in ELI.
“Following the recent maiden special dividend paid to San Leon shareholders, the Company anticipates that equity income from the ELI shareholding will contribute to further future dividends to San Leon shareholders.”
