Final Results

RNS Number : 0046R

San Leon Energy PLC

25 June 2020

 

The information communicated within this announcement is deemed to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014. Upon the publication of this announcement, this inside information is now considered to be in the public domain.

25 June 2020

San Leon Energy plc

 ("San Leon" or the "Company")

Final Results

San Leon, the independent oil and gas production, development and exploration company focussed on Nigeria, is pleased to announce its audited final results for the year ended 31 December 2019.  The full annual report for the year to 31 December 2019 is available on the Company's web site and will be posted to shareholders shortly.

 

Highlights

Corporate

• Returned approximately US$66.0 million to shareholders during the year and post year end delivering on the company's commitment to shareholder returns:

-  Tender offer completed in early 2019, repurchasing US$30.5 million of Company shares

-  A share repurchase of US$2.0 million of Company shares was also completed between October 2019 and January 2020

-  A special dividend of US$33.0 million was declared in May 2020, giving a dividend yield of approximately 30% as at the date of dividend announcement

• Appointed Lisa Mitchell as Chief Financial Officer and Executive Director

• Completed the sale of interests in four Polish concessions to Horizon Petroleum Ltd as part of the Company's strategy to dispose of non-core assets

OML 18 Operational

• Eroton Exploration and Production Limited ("Eroton") (the operator of OML 18) received a 20-year lease renewal for OML 18. The lease will now expire in 2039

• Full-field gross oil production before allocated losses was around 39,000 bopd. Removing the effect of field downtime, gross production during uptime was approximately 50,000 bopd (2018: 45,000 bopd)

• Two new wells drilled and completed with the third started (completed in April 2020). 14 workovers were performed during the year (cement packer reservoir zone changes, gas lift installations and retrofits, perforations and hot oil treatments)

• Oil sales averaged approximately 29,500 bopd (2018: 30,000 bopd) after overall downtime of 24% (largely associated with NCTL export pipeline downtime) and pipeline losses of 22% (2018: 12% downtime, 26% pipeline losses)

•     Significant progress on planning new oil export pipeline and offshore storage facility, targeting reduced export downtime and losses - on track to be completed in the coming quarters

 

Financial

• US$43.2 million received in cash from loan notes mechanism in OML 18 in 2019, further strengthening San Leon's financial position and outlook, also enabling the Company to start to deliver its shareholder return commitment - to date the Company has received just over US$190 million in total loan notes payments

• A further US$41.5 million received to date in 2020, with an expected US$10 million to come in Q4

• A further US$103.9 million (approximately) expected in interest and loan note repayments by end 2021

• In January 2019 , the Company reported the restructuring of the Reserves Based Lending ("RBL") facility held by Eroton which frees up near‐term cash resources for operations

• Cash balance of US$36.5 million as at 19 June 2020

• Loss for the financial year of US$38.6 million predominantly associated with non-cash items such as Impairment of non-core assets (Barryroe).

Oisin Fanning, CEO, commented:

"San Leon is in a strong position, currently sitting with US$36.5 million in cash on our balance sheet. The current environment generates challenges which Eroton is addressing well, but at the same time it provides a huge opportunity for our Company to initiate its next stage of growth. We have the cash resources, technical and managerial capability, and established relations to select our next projects.

"OML 18 remains a world class asset and the activities being undertaken by our partners are expected to significantly reduce downtime and losses going forward, benefiting our initial indirect interest of 10.58% in OML 18.  

"Our robust financial position, additional significant funds expected to be received in the in the next 18 months, existing and anticipated new projects, are planned to continue to provide continued shareholder returns. We are proud to have distributed US$66.0 million to shareholders in the past 15 months.

"San Leon is very well placed to continue to deliver its strategy in the year ahead and the Board looks forward to updating shareholders on the Company's progress."

Enquiries:

San Leon Energy plc	+ 353 1291 6292
Oisin Fanning, Chief Executive
Cantor Fitzgerald Europe (Nominated adviser and joint broker to the Company)	[phone]
David Porter, Rick Thompson
Whitman Howard Limited (Joint broker to the Company)	[phone]
Nick Lovering
Brandon Hill Capital Limited (Joint broker to the Company)	[phone]
Oliver Stansfield, Jonathan Evans
Tavistock (Financial Public Relations)	[phone]
Nick Elwes, Simon Hudson, Barnaby Hayward
Plunkett Public Relations	[phone]
Sharon Plunkett

Chairman's statement

San Leon has continued to make significant progress in the last year.  The Company's financial position and outlook has been further strengthened in 2019 through the receipt of US$43.2 million in cash from the loan notes mechanism in its OML 18 investment, enabling us to carry out the inaugural distribution of returns to our shareholders through share repurchases. A further US$41.5 million in cash was received in 2020 after the reporting period.

Last year I reported the significant progress which was being made to address the operational and financial challenges with the Company's involvement in OML 18, onshore Nigeria. This year has seen further progress in this regard. Eroton has continued to drill new wells throughout 2019 as well as ensuring that the new oil export system would become operational during 2020 - this remains on track to be delivered in Q4 2020.  Eroton has also succeeded in restructuring the RBL ("Reserve Based Lending") facility which frees up near-term cash resources for operations, which is again very welcome. The future tenure of the OML 18 block was also secured in 2019 by Eroton with the award of a 20-year licence extension.

West Africa, focusing on Nigeria, is where San Leon's activities and resources will continue to be concentrated, and we expect this focus to continue to deliver value for shareholders.

The Company still retains two non‐Nigerian, non-core assets. These are the Durresi block offshore Albania, for which a farm out is being sought, and the Company's Net Profit Interest ("NPI") in the Barryroe field, offshore Ireland, where the operator, Providence Resources plc, is currently seeking a partner to fund appraisal and development drilling.

During the year, the Company fulfilled its pledge of returning value to shareholders and has now returned approximately US$66.0 million to shareholders since the start of 2019. This was delivered by repurchasing US$30.5 million of its own shares through a tender offer in March 2019, and the repurchase of a further US$2.0 million of Company shares was completed between October 2019 and January 2020. The Company also declared a special dividend of US$33.0 million after the reporting period in May 2020.

In June 2019 we welcomed Lisa Mitchell as Chief Financial Officer and Executive Director. Lisa has extensive and varied financial expertise as well as local Nigerian experience. Lisa worked previously as Chief Financial Officer at Lekoil Limited and Ophir Energy plc, having also held senior financial and Company secretary positions with various other companies both in natural resources and other industries. Post year end, the Company appointed Adekolapo Ademola as a Non-Executive Director. Adekolapo brings a wealth of experience across a variety of disciplines with a strong focus on Nigeria. The Company would also like to thank the previous Finance Director, Ewen Ainsworth and Non-Executive Director, Bill Higgs for their service and wish them both well for the future.

Environment, Social and Governance ("ESG") is an area of increasing importance for businesses and shareholders. This is an area to which San Leon continues to be committed and is in the process of developing its own ESG strategy, which the Company anticipates will meet all the expectations of good international industry practice. As part of this we will continue ongoing engagement with all stakeholders and governments to ensure that we operate our business in a way that is sustainable and benefits the local communities in which we have a presence. The Company implemented several initiatives during the course of 2019 in Nigeria including the provision of educational support for disadvantaged children, the building of a new medical centre, and construction of a new classroom block at a school in Benue State has begun. This is in addition to our ongoing support of small women-led enterprises in Nassarawa and Benue States and the installation of motorised water boreholes.

Subsequent to year end, there has been significant turmoil in the financial markets due to the impact of the Covid-19 pandemic. This, along with certain geopolitical issues, has also led to a sharp fall and continued volatility in the oil price. Although this sharp decline is concerning, we do not expect significant long term impacts to our indirect interest in OML 18 or upon the Loan Notes, due to Eroton taking necessary steps to defer some operational and capital expenditure, observing work from home where possible for office employees, adjusting field location rotations and managing working capital. In addition to this, San Leon is in a strong financial position with cash on hand at 19 June 2020 of US$36.5 million. This allows the Company not only to survive the on-going market turmoil, but to take advantage of potential value-adding opportunities. The Company continues to monitor the situation and managing its financial position accordingly.

On receipt of US$40.0 million in Loan Note repayments in May 2020, the company amended the terms of the Loan Notes, extending the term out to December 2021. The Company anticipates a further cash receipt of US$10.0 million in October 2020, with the remaining outstanding balance, including interest, being repaid in H2 2021. With its increasing technical involvement in OML 18, relationships in-country, and strong balance sheet, San Leon is well-positioned to continue to realise value for shareholders from Nigeria. I look forward with confidence to updating shareholders on the achievement of these aims.

Mutiu Sunmonu

Chairman

 

CEO's statement

 

OML 18 IS POSITIONED FOR ITS NEXT STAGE IN DEVELOPMENT

2019 saw significant progress being made at OML 18 as the partners looked to advance the asset to its next phase of development.

Eroton continued drilling three new wells as well as ensuring considerable progress on the new oil export system (Alternative Crude Oil Evacuation and Storage system, or "ACOES"). Together, these activities are expected to enable Eroton to reap rewards for the partners and shareholders, including San Leon, as historic operational hurdles are overcome.

Downtime and allocated pipeline losses associated with the use of the Nembe Creek Trunk Line ("NCTL") have meant that both gross production at the wellhead and sales oil volumes were lower than expected. Gross oil production, taking out the effect of NCTL downtime, was around 50,000 bopd. Sales oil, including the effects of downtime and allocated losses, was around 29,500 bopd. It is notable that the pipeline losses attributable to OML 18 in 2019 were lower than 2018 (22% in 2019 versus 26% in 2018). This was largely due to the installation of LACT units on most of its production. The higher downtime in 2019 (24% compared with 12% in 2018) reflects a particularly challenging performance from NCTL, highlighting the need for an alternative.

The most positive impact on OML 18 oil sales is expected to be Eroton's agreement with Energy Link Infrastructure (Malta) Limited ("ELI"). ELI will finance and construct the ACOES and once commissioned, this system is expected, by Eroton, to significantly reduce the downtime and allocated pipeline losses currently associated with the NCTL. The NCTL was responsible for the majority of the approximately 20,000 bopd difference between gross production, when the pipeline is running, and average sales oil. In addition, it is anticipated that the FSO project will greatly improve overall well uptime.

In January 2019, San Leon also announced that Eroton had successfully restructured its RBL facility, providing a material boost to cash availability for operations, and reducing the burden of cash required in the DSRA.

San Leon is becoming increasingly involved with the subsurface technical input into OML 18 and has a contract to provide such services on OML 18, providing geoscience and engineering resource into well and reservoir planning. We believe that OML 18 is a world class asset and one that we look forward to developing further with our partners.

 

Other assets

San Leon holds a 4.5% NPI over the whole of the Barryroe oil and gas discovery, offshore Ireland. An NPI structure means that San Leon has no costs whatsoever with regard to Barryroe but has a right to a share of profits from the asset once Barryroe equity holders' costs have been recovered. Providence Resources plc (the operator of Barryroe) continues to seek a farm-in partner to progress appraisal and potential development.

The Company continues to discuss with the Albanian authorities the next phase of exploration on the offshore Durresi licence. The main target of interest on the block has an offset discovery (well A4‐1X), and the recent installation by third parties of major gas pipeline infrastructure in the area provides additional options for asset monetisation. A farm-in partner is currently being sought for this block.

 

Cash flow

The Company has four anticipated sources of cash flow. As of 31 December 2019, cash receipts totalling US$149.1 million have come from the repayment of Loan Notes, including interest. The outstanding balance payable as of 6 April 2020 is US$82.1 million* at par value (US$79.5 million under IFRS), which continues to accrue interest. Final payment of the Loan Notes is anticipated in late 2021.

*Refer to Alternate Performance Measures for full reconciliation of IFRS numbers and Alternative Performance Measures.

The Company will also generate income from the provision of subsurface technical services to Eroton. In addition, future OML 18 rig activity is an opportunity for the Company to generate income from the provision of services under its Master Service Agreement with Eroton.

Cash flow from the Company's indirect shareholding in Eroton is anticipated once OML 18 is generating sufficient free cash flow.

Corporate

The first shareholder returns were provided in 2019 via share buybacks, in line with the Company's announced policy.

During May 2018 the first of several allegations by SunTrust Oil ("SunTrust") were made in the Nigerian press, against San Leon and other entities. The Company made it clear that all such allegations were spurious and would be vigorously defended.  In June 2019 the Company announced that a number of parties, including San Leon and SunTrust had signed binding agreements which terminated all litigation against San Leon, and preclude any future such litigation. No consideration was paid by either party to the other.

Also, in June 2019, Midwestern Oil & Gas Limited, the Company's partner in MLPL, increased their shareholding in San Leon.

The appointment of Lisa Mitchell as Chief Financial Officer and Executive Director in 2019 has provided the Company with considerable financial as well as local Nigerian expertise. In April 2020, the Company added further strength to the Board with the appointment of Adekolapo Ademola as a Non-Executive Director, who brings with him extensive corporate Nigerian experience.

ESG

As discussed in the Chairman's statement ESG is becoming an area of increasing importance.  This is an area in which San Leon is committed to meeting high standards of ESG practices across all aspects of the business.  The Company is committed to the countries in which it operates and is dedicated to promoting sustainable growth as well as providing support to local communities in Nigeria. The Company firmly believes that by providing the younger generation with the valuable skills and education needed to succeed, the whole country will benefit from growth and prosperity.

Outlook

Oil price has been significantly affected since the beginning of Q1 2020, due to the combined effects of Covid-19 affecting demand, and quota disagreements within OPEC regarding how to deal with that reduction in demand. This uncertainty presents the Company with both risks and opportunities. The company's Statement of Financial Position is robust with cash in hand as at 19 June 2020 of US$36.5 million, which we believe puts us in a strong position to continue moving forward with our strategy and capitalise on current market turmoil with accretive opportunities. The Company is monitoring events closely, maintaining its financial strength whilst being ready to pursue any appropriate opportunities that may arise.

I look forward to updating shareholders with news of the planned continued operational activity on OML 18, its effect on net production, and how our various expected cash flow streams are performing. The Company is in a very strong situation armed with such significant cash, and together with its professional relationships and people, believes it is well-positioned to grow and add further value to shareholders.

Oisín Fanning

CEO

Consolidated Income Statement

for the year ended 31 December 2019

	Notes	2019 US$'000	2018 US$'000 (Restated)
Continuing operations
Revenue from contracts with customers	2	266	198
Cost of sales		(148)	(95)
Gross profit		118	103
Share of loss of equity accounted investments	6	(3,204)	(14,693)
Administrative expenses		(14,899)	(16,349)
(Loss) / profit on disposal of subsidiaries	3	(13,770)	(13,133)
Impairment / write off of exploration and evaluation assets		(1,407)	(3,074)
Decommissioning of wells		-	485
Other income		1,400	-
Expected credit losses		-	(3,532)
Loss from operating activities		(31,762)	(50,193)
Finance expense		(144)	(2,417)
Finance income	4	24,123	44,082
Expected credit losses		3,465	4,212
Fair value movements in financial assets	8	(48,373)	2,281
Loss before income tax		(52,691)	(2,035)
Income tax		14,079	(3,777)
Loss for the financial year		(38,612)	(5,812)
Loss per share (cent) - total
Basic loss per share	5	(8.28)	(1.15)
Diluted loss per share	5	(8.28)	(1.15)

The accompanying notes below form an integral part of these financial statements.

Consolidated Statement of
Other Comprehensive Income

for the year ended 31 December 2019

	Notes	2019 US$'000	2018 US$'000 (Restated)
Loss for the year		(38,612)	(5,812)
Items that may be reclassified subsequently to profit or loss
Currency translation differences - subsidiaries		(26)	46
Recycling of currency translation reserve on disposal of subsidiaries	3	13,870	13,567
Fair value movements in financial assets	8	(2,625)	119
Deferred tax on fair value movements in financial assets		40	(39)
Total other comprehensive income		11,259	13,693
Total comprehensive (loss) / profit for the year		(27,353)	7,881

The accompanying notes below form an integral part of these financial statements.

Consolidated Statement of Changes in Equity

for the year ended 31 December 2019

	Share capital reserve US$'000 (Restated)	Share premium reserve US$'000 (Restated)	Other undenominated reserve US$'000 (Restated)	Special reserve US$'000 (Restated)	Currency  translation reserve US$'000 (Restated)	Share based payment reserve US$'000 (Restated)	Shares to be issued  reserve US$'000 (Restated)	Fair value reserve US$'000 (Restated)	Retained earnings US$'000 (Restated)	Attributable to equity holders in Group US$'000 (Restated)
2018
Balance as at 1 January 2018 (Restated) 1	150,600	478,666	-	-	(2,836)	19,778	1,343	-	(395,557)	251,994
Total comprehensive income for year
Loss for the year	-	-	-	-	-	-	-	-	(5,812)	(5,812)
Other comprehensive income
Recycling of currency translation reserve on disposal of subsidiaries	-	-	-	-	13,567	-	-	-	-	13,567
Foreign currency translation differences - subsidiaries	-	-	-	-	46	-	-	-	-	46
Foreign currency translation differences - joint venture	-	-	-	-	-	-	-	-	-	-
Fair value movements in financial assets	-	-	-	-	-	-	-	119	-	119
Deferred tax on fair value movements in financial assets	-	-	-	-	-	-	-	(39)	-	(39)
Total comprehensive income for year	-	-	-	-	13,613	-	-	80	(5,812)	7,881
Transactions with owners recognised directly in equity
Contributions by and distributions to owners
Share-based payment	-	-	-	-	-	519	756	-	-	1,275
Effect of share options cancelled	-	-	-	-	-	(5,320)	-	-	5,320	-
Total transactions with owners	-	-	-	-	-	(4,801)	756	-	5,320	1,275
Balance at 31 December 2018	150,600	478,666	-	-	10,777	14,977	2,099	80	(396,049)	261,150

1 As described in Note 1, the presentation currency for the Group has been changed to USD from 1 January 2019, with retrospective effect on comparative figures. Equity items at 1 January 2018 have been translated to USD using the USD/EUR rate applicable at the transaction date.

The accompanying notes below form an integral part of these financial statements.

	Share capital reserve US$'000			Share premium reserve US$'000	Other undenominated reserve US$'000			Special reserve US$'000		Currency  translation reserve US$'000		Share based payment reserve US$'000		Shares to be issued  reserve US$'000	Fair value reserve US$'000			Retained earnings US$'000		Attributable to equity holders in Group US$'000
2019
Balance as at 1 January 2019 1		150,600		478,666	-			-		10,777		14,977		2,099	80			(396,049)		261,150
Total comprehensive income for year
Loss for the year	-			-	-			-		-		-		-	-			(38,612)		(38,612)
Other comprehensive income
Foreign currency translation differences - subsidiaries	-			-	-			-		(26)		-		-	-			-		(26)
Recycling of currency translation reserve on disposal of subsidiaries	-			-	-			-		13,870		-		-	-			-		13,870
Fair value movements in financial assets	-			-	-			-		-		-		-	(2,625)			-		(2,625)
Deferred tax on fair value movements in financial assets	-			-	-			-		-		-		-	40			-		40
Total comprehensive income for year	-			-	-			-		13,844		-		-	(2,585)			(38,612)		(27,353)
Transactions with owners recognised directly in equity
Contributions by and distributions to owners
Tender offer (Note 10)		(144,871)	(459,721)			-	5,024		-		-		-			-	599,568		-
Reduction of capital (Note 10)		(576)	-			576	-		-		-		-			-	(30,512)		(30,512)
Share buybacks (Note 10)		(47)	-			47	-		-		-		-			-	(1,535)		(1,535)
Share-based payment		-	-			-	-		-		848		-			-	-		848
Issue of shares in lieu of salary		63	2,036			-	-		-		-		(2,099)			-	-		-
Effect of share options exercised		3	96			-	-		-		(72)		-			-	72		99
Effect of repricing of share options		-	-			-	-		-		219		-			-	-		219
Effect of options expired		-	-			-	-		-		(1,680)		-			-	1,680		-
Total transactions with owners		(145,428)	(457,589)			623	5,024		-		(685)		(2,099)			-	569,273		(30,881)
Balance at 31 December 2019		5,172	21,077			623	5,024		24,621		14,292		-			(2,505)	134,612		202,916

1 As described in Note 1, the presentation currency for the Group has been changed to USD from 1 January 2019, with retrospective effect on comparative figures. All comparatives, including equity, have been translated using the rate applicable on the date of the change being 1 January 2019.

The accompanying notes below form an integral part of these financial statements.

Company Statement of Changes in Equity

for the year ended 31 December 2019

	Share capital US$'000 (Restated)	Share premium US$'000 (Restated)	Other undenominated reserve US$'000 (Restated)	Special reserve US$'000 (Restated)	Currency  translation reserve US$'000 (Restated)	Share based payment reserve US$'000 (Restated)	Shares to be issued  reserve US$'000 (Restated)	Fair value reserve US$'000 (Restated)	Retained earnings US$'000 (Restated)	Total equity US$'000 (Restated)
2018
Balance as at 1 January 2018 (restated) 1	150,600	478,666	-	-	-	19,778	1,343	-	(445,540)	204,847
Total comprehensive income
Profit for the year	-	-	-	-	-	-	-	-	24,098	24,098
Fair value movements in financial assets	-	-	-	-	-	-	-	119	-	119
Deferred tax on fair value movements in financial assets	-	-	-	-	-	-	-	(39)	-	(39)
Total comprehensive income for the year	-	-	-	-	-	-	-	80	24,098	24,178
Transactions with owners recognised directly in equity
Contributions by and distributions to owners
Share-based payment	-	-	-	-	-	519	756	-	-	1,275
Effect of share options cancelled	-	-	-	-	-	(5,320)	-	-	5,320	-
Total transactions with owners	-	-	-	-	-	(4,801)	756	-	5,320	1,275
Balance at 31 December 2018	150,600	478,666	-	-	-	14,977	2,099	80	(416,122)	230,300
	Share capital US$'000	Share premium US$'000	Other undenominated reserve US$'000	Special reserve US$'000	Currency  translation reserve US$'000	Share based payment reserve US$'000	Shares to be issued  reserve US$'000	Fair value reserve US$'000	Retained earnings US$'000	Total equity US$'000
2019
Balance as at 1 January 2019 1	150,600	478,666	-	-	-	14,977	2,099	80	(416,122)	230,300
Total comprehensive income
Loss for the year	-	-	-	-	-	-	-	-	(12,284)	(12,284)
Fair value movements in financial assets	-	-	-	-	-	-	-	(2,625)	-	(2,625)
Deferred tax on fair value movements in financial assets	-	-	-	-	-	-	-	40	-	40
Total comprehensive income for the year	-	-	-	-	-	-	-	(2,585)	(12,284)	(14,869)
Transactions with owners recognised directly in equity
Contributions by and distributions to owners
Tender offer and reduction of capital (Note 10)	(144,871)	(459,721)	-	5,024	-	-	-	-	599,568	-
Reduction of capital (Note 10)	(576)	-	576	-	-	-	-	-	(30,512)	(30,512)
Share buybacks (Note 10)	(47)	-	47	-	-	-	-	-	(1,535)	(1,535)
Share-based payment	-	-	-	-	-	848	-	-	-	848
Issue of shares in lieu of salary	63	2,036	-	-	-	-	(2,099)	-	-	-
Effect of share options exercised	3	96	-	-	-	(72)	-	-	72	99
Effect of repricing of share options	-	-	-	-	-	219	-	-	-	219
Effect of options expired	-	-	-	-	-	(1,680)	-	-	1,680	-
Total transactions with owners	(145,428)	(457,589)	623	5,024	-	(685)	(2,099)	-	569,273	(30,881)
Balance at 31 December 2019	5,172	21,077	623	5,024	-	14,292	-	(2,505)	140,867	184,550

1 As described in Note 1, the presentation currency for the Company has been changed to USD from 1 January 2019, with retrospective effect on comparative figures.

The accompanying notes below form an integral part of these financial statements.

Consolidated Statement of Financial Position

as at 31 December 2019

	Notes	2019 US$'000	2018 US$'000 (Restated)	2017 US$'000 (Restated)
Assets
Non-current assets
Intangible assets		-	-	2,864
Equity accounted investments	6	51,866	55,070	69,763
Property, plant and equipment		4,344	1,964	2,745
Financial assets	8	2,963	124,876	134,998
Deferred tax asset		1,718	-	-
Other non-current assets		-	206	206
		60,891	182,116	210,576
Current assets
Inventory		180	272	323
Trade and other receivables		987	2,440	4,976
Financial assets	8	112,252	57,611	70,743
Cash and cash equivalents		36,697	40,762	9,311
		150,116	101,085	85,353
Total assets		211,007	283,201	295,929
Equity and liabilities
Equity
Called up share capital	10	5,172	150,600	150,600
Share premium account	10	21,077	478,666	478,666
Other undenominated reserve		623	-	-
Special reserve		5,024	-	-
Share-based payments reserve		14,292	14,977	18,496
Shares to be issued reserve		-	2,099	2,382
Currency translation reserve		24,621	10,777	(2,836)
Fair value reserve		(2,505)	80	(363)
Retained earnings		134,612	(396, 049)	(385,710)
Total equity attributable to equity shareholders		202,916	261,150	261,235
Non-current liabilities
Lease liability		2,501	-	-
Derivative		128	659	488
Deferred tax liabilities		-	12,404	8,630
		2,629	13,063	9,118
Current liabilities
Trade and other payables		5,406	8,228	17,895
Loans and borrowings		-	-	4,747
Provisions		56	760	1,789
Liabilities classified as held for sale		-	-	1,145
		5,462	8,988	25,576
Total liabilities		8,091	22,051	34,694
Total equity and liabilities		211,007	283,201	295,929

The accompanying notes below form an integral part of these financial statements.

Oisín Fanning, Director  Lisa Mitchell, Director

Company Statement of Financial Position

as at 31 December 2019

	Notes	2019 US$'000	2018 US$'000 (Restated)	2017 US$'000 (Restated)
Assets
Property, plant and equipment		3,066	46	-
Financial assets	8	2,769	124,876	134,998
Financial assets - investment in subsidiaries	7	31,539	31,539	34,608
Deferred tax asset		1,691	-	-
		39,065	156,461	169,606
Current assets
Trade and other receivables		4,068	4,911	3,426
Financial assets	8	112,252	57,611	70,743
Cash and cash equivalents		36,388	40,180	8,950
		152,708	102,702	83,119
Total assets		191,773	259,163	252,725
Equity and liabilities
Equity
Called up share capital	10	5,172	150,600	150,600
Share premium account	10	21,077	478,666	478,666
Other undenominated reserve		623	-	-
Special reserve		5,024	-	-
Share-based payments reserve		14,292	14,977	18,496
Shares to be issued reserve		-	2,099	2,382
Fair value reserve		(2,505)	80	1,408
Retained earnings		140,867	(416,122)	(437,464)
Attributable to equity shareholders		184,550	230,300	214,088
Non-current liabilities
Derivative		128	659	488
Lease liability		2,501	-	-
Deferred tax liabilities		-	12,436	8,670
		2,629	13,095	9,158
Current liabilities
Trade and other payables		4,594	15,768	24,732
Loans and borrowings		-	-	4,747
		4,594	15,768	29,479
Total liabilities		7,223	28,863	38,637
Total equity and liabilities		191,773	259,163	252,725

The accompanying notes below form an integral part of these financial statements.

Oisín Fanning, Director   Lisa Mitchell, Director

Consolidated Statement of Cash Flows

for the year ended 31 December 2019

	Notes	2019 US$'000	2018 US$'000 (Restated)
Cash flows from operating activities
Loss for the year - continuing operations		(38,612)	(5,812)
Adjustments for:
Depletion and depreciation		960	850
Finance expense		144	2,417
Finance income	4	(24,123)	(44,082)
Share-based payments charge		1,069	1,275
Foreign exchange		(403)	(552)
Income tax		(14,079)	3,777
Impairment of exploration and evaluation assets - continuing operations		1,407	3,074
Expected credit losses		(3,465)	(680)
Loss on disposal of subsidiaries		13,770	13,133
Decommissioning costs		-	(485)
Decommissioning payments		(702)	(496)
Fair value movements in financial assets	8	48,373	(2,281)
Decrease / (increase) in inventory		92	50
Decrease / (increase) in trade and other receivables		532	(132)
Increase / (decrease) in trade and other payables		(3,876)	(8,737)
Share of loss of equity-accounted investments	6	3,204	14,693
Tax paid		(18)	(54)
Net cash outflow from operating activities		(15,727)	(24,042)
Cash flows from investing activities
Expenditure on exploration and evaluation assets		(466)	(210)
Purchase of property, plant and equipment		(82)	(75)
Lease - prepaid rental		(231)	-
Loans advanced		-	458
Loans repaid by Directors		727	-
Loans issued to Directors		-	(724)
Interest on Director's loan		1	2
Interest and investment income received		278	101
OML 18 Loan Notes principal payments received	8	23,361	31,572
OML 18 Loan Notes interest payments received	8	19,885	33,032
Net cash inflow from investing activities		43,473	64,156
Cash flows from financing activities
Share buybacks		(32,048)	-
Proceeds from issue of shares		99	-
Repayment of lease liability - principal		(192)	-
Repayment of other loans		-	(5,227)
Dissenting shareholder payment		-	(48)
Loans repaid to Directors		-	(1,911)
Interest and arrangement fees paid		(144)	(2,248)
Net cash outflow from financing activities		(32,285)	(9,434)
Net increase in cash and cash equivalents		(4,539)	30,680
Effect of foreign exchange fluctuation on cash and cash equivalents		474	771
Cash and cash equivalents at start of year		40,762	9,311
Cash and cash equivalents at end of year		36,697	40,762

The accompanying notes below form an integral part of these financial statements.

Company Statement of Cash Flows

for the year ended 31 December 2019

	Notes	2019 US$'000	2018 US$'000 (Restated)
Cash flows from operating activities
Loss for the year		(12,284)	24,098
Adjustments for:
Depletion and depreciation		343	1
Finance income	4	(24,123)	(44,082)
Finance expense		144	2,413
Share based payments charge		1,069	520
(Reversal of impairment) / impairment of investment in subsidiaries and amounts due from Group undertakings		(6,943)	6,183
Fair value movements in financial assets	8	48,373	(2,281)
Expected credit losses		(3,465)	(4,212)
Foreign exchange		(678)	(724)
Income tax		(14,084)	3,702
Decrease in trade and other receivables		130	(123)
Increase / (decrease) in trade and other payables		(2,403)	(4,446)
Tax paid		(18)	(41)
Net cash outflow from operating activities		(13,939)	(18,992)
Cash flows from investing activities
Advances to subsidiary companies		(2,160)	(5,537)
OML 18 Loan Notes principal payments received	8	23,361	31,572
OML 18 Loan Notes interest payments received	8	19,885	33,032
Loans advanced		-	458
Loans issued to Directors		-	(724)
Loans repaid by Directors		727	-
Interest on Director's loan		1	2
Interest and investment income received		278	101
Lease - prepaid rental		(231)	-
Purchase of property, plant and equipment		(82)	(47)
Net cash inflow from investing activities		41,779	58,857
Cash flows from financing activities
Share buybacks		(32,048)	-
Proceeds of issue of shares		99	-
Repayment on lease obligations		(192)	-
Repayment of other loans		-	(5,227)
Loans repaid to Directors		-	(1,911)
Interest and arrangement fees paid		(144)	(2,243)
Net cash outflow from financing activities		(32,285)	(9,381)
Net increase / (decrease) in cash and cash equivalents		(4,445)	30,484
Effect of foreign exchange fluctuation on cash and cash equivalents		653	746
Cash and cash equivalents at start of year		40,180	8,950
Cash and cash equivalents at end of year		36,388	40,180

The Notes to the financial tables are an integral part of the financial statements.

Notes to the Financial Statements

for the year ended 31 December 2019

These Notes are truncated but can be viewed in full in the Annual Report and Accounts for the year ended 31 December 2019. This document is available on the Company's website at www.sanleonenergy.com.

1. Accounting Policies

San Leon Energy plc ("the Company") is a company incorporated and domiciled in the Republic of Ireland. The Company is listed on the Alternative Investments Market ("AIM") of the London Stock Exchange. The Group financial statements consolidate those of the Company and its subsidiaries (together referred to as the "Group"). The registered office address is 2 Shelbourne Buildings, Crampton Avenue, Shelbourne Road, Ballsbridge, Dublin 4.

The accounting policies set out below have been applied consistently to all periods presented in these consolidated financial statements, with the exception of some comparative information. This is due to the adoption of the accounting policy regarding a change in presentation currency, the details of which are explained further below and the adoption of IFRS 16 in the current period using the modified retrospective approach in which comparative amounts were not restated.

Statement of compliance

As required by AIM and ESM rules and permitted by Company Law, the Group financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRS") as adopted by the EU. The individual financial statements of the Company (Company financial statements) have been prepared in accordance with IFRS as adopted by the EU and as applied in accordance with the Companies Act 2014 which permits a Company that publishes its Company and Group financial statements together, to take advantage of the exemption in Section 304 of the Companies Act 2014, from presenting to its members its Company statement of comprehensive income and related notes that form part of the approved Company financial statements. The IFRS adopted by the EU as applied by the Company and the Group in the preparation of these financial statements are those that were effective for accounting periods commencing on or before 1 January 2019 or were early adopted as indicated below.

New standards required by EU companies for the year ended 31 December 2019

The following new standards and amendments were adopted by the Group and the Company for the first time in the current financial reporting period.

New standards and interpretations effective that were adopted

Standard	IASB effective date	EU effective date
IFRS 16: Leases (13 January 2016)	1 January 2019	1 January 2019
IFRIC 23 Uncertainty over Income Tax Treatments (issued on 7 June 2017)	1 January 2019	1 January 2019
Amendments to IFRS 9 Prepayment Features with Negative Compensation	1 January 2019	1 January 2019
Amendments to IAS 28: Long-term interests in Associates and Joint Ventures	1 January 2019	1 January 2019
Amendments to IAS 19: Plan amendment, Curtailment or Settlement (8 February 2018)	1 January 2019	1 January 2019
Annual improvements to IFRS Standards 2015-2017 Cycle (issued on 12 December 2017)	1 January 2019	1 January 2019

The Group has initially applied IFRS 16 (see below) from 1 January 2019. The other standards listed above, are also effective from 1 January 2019 but they do not have a material effect on the Group's financial statements.

Due to the transition method chosen by the Group in applying IFRS 16, the Group has opted for the modified retrospective approach where comparative information throughout these financial statements has not been restated to reflect the requirements of the new standard.

IFRS 16 Leases

IFRS 16 is effective for accounting periods beginning on or after 1 January 2019, and the Group adopted IFRS 16 with effect from 1 January 2019. IFRS 16 sets out the principles for the recognition, measurement, presentation and disclosure of leases for both the lessee and the lessor. For lessees, IFRS 16 eliminates the classification of leases as either operating leases or finance leases and introduces a single lessee accounting model whereby all leases are accounted for in the Statement of Financial Position, with some exemptions for short-term and low-value leases. It also includes an election which permits a lessee not to separate non-lease components (e.g. maintenance) from lease components and instead capitalise both the lease cost and associated non-lease cost. 

The standard primarily affects the accounting for the Group's operating leases. The application of IFRS 16 results in the recognition of additional assets and liabilities in the Consolidated Statement of Financial Position and in the Consolidated Income Statement. It replaces the straight-line operating lease expense with a depreciation charge for the right-of-use asset and an interest expense on the lease liabilities.

The incremental borrowing rate is the rate of interest that the lessee would expect to incur on funds borrowed over a similar term and security to obtain a comparable value to the right-of-use asset in the relevant economic environment. The Group's weighted average incremental borrowing rate pertaining to these leases is 5%.

i. Definition of a lease

Previously, the Group determined at contract inception whether an arrangement was or contained a lease under IAS 17 Leases and IFRIC 4 Determining whether an Arrangement contains a Lease. The Group now assesses whether a contract is or contains a lease based on the new definition of a lease. Under IFRS 16, a contract is, or contains a lease if the contract conveys a right to control the use of an identified asset for a period of time in exchange for consideration.

On transition to IFRS 16, the Group elected to apply the practical expedient to grandfather the assessment of which transactions are leases. It applied IFRS 16 only to contracts that were previously identified as leases. Contracts that were not identified as leases under IAS 17 and IFRIC 4 were not reassessed.

ii. Transition

The Group adopted the new standard by applying the modified retrospective approach.

At transition, for leases classified as operating leases under IAS 17, lease liabilities were measured at the present value of the remaining lease payments, discounted at the Group's incremental borrowing rate as at 1 January 2019. All right-of-use assets were measured at the amount of the lease liability on adoption, adjusted by the amount of any prepaid or accrued interest payments.

Previously under IAS 17 operating lease rentals were charged to the Income Statement on a straight-line basis over the term of the lease.

The Group applied the recognition exemption for short-term and low-value leases and used hindsight when determining the lease term and if the contract contained options to extend or terminate the lease. The Group also elected not to separate non-lease components from lease components and instead capitalise both the lease cost and associated non-lease cost.

The Group has also elected to use the practical expedient which allows for a single discount rate to be applied to a portfolio of leases with reasonably similar characteristics.

The impact on the financial statements on transition to IFRS 16 is outlined below:

	2019 US$'000
Opening lease commitments at 31 December 2018 as disclosed in the 2018 Annual Report	4,045
Impact of discounting	(957)
Recognition exemptions for short term and low value assets	(38)
Lease liabilities recognised at 1 January 2019	3,050

Statement of Financial Position:

The impact of the transition has resulted in higher property, plant and equipment and current and non-current lease liabilities. For short-term leases (lease term less than 12 months) and leases of low-value assets the Group has opted to recognise a lease expense on a straight-line basis as permitted by IFRS 16. Depending on the nature of the lease, this is either recognised as additions to property, plant and equipment as a right-of-use asset or administrative costs as a short-term/low-value lease rental expense.

Property, plant and equipment	1 January 2019 US$'000
Non-current	3,050
Total IFRS 16 transition	3,050

Lease liabilities	1 January 2019 US$'000
Current	333
Non-current	2,717
Total IFRS 16 transition	3,050

Income Statement:

During 2019 depreciation on the right of use assets was US$329,000, associated lease rental charge decreased by US$336,000 and a foreign exchange gain of US$24,000 led to an increase in operating profit of US$31,000. The interest charge on the associated leases was US$144,000 and the aggregate impact of IFRS 16 on profit before tax was a decrease of US$113,000.

	2019 US$'000	2018 US$'000
Lease expense	-	336
Interest on lease liabilities	144	-
Depreciation on right-of-use assets	329	-
Foreign exchange gain	(24)
Loss	449	336

Cash Flow Statement:

Lease payments are currently included in financing cash flows in the cash flow statement. Financing cash flows represent both repayment of principal and interest. In prior periods, operating lease payments were all presented as operating cash flows under IAS 17.

Cash flows from operating activities	2019 US$'000	2018 US$'000
Lease expense	-	336
Cash flows from financing activities
Payment of lease liability - principal	144	-
Payment of lease liability - interest	192	-
Total cash outflow for leases	336	336

iii. Measurement

The Group recognises right-of-use assets representing its right to use the underlying assets and lease liabilities representing its obligation to make lease payments at the lease commencement date. The right-of-use assets are initially measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or before the commencement date, plus any initial direct costs incurred and an estimate of costs to dismantle and remove the underlying asset or to restore the underlying asset or to restore the site on which it is located, less any lease incentives received.

The right-of-use asset is subsequently depreciated using the straight-line method from the commencement date to the end of the lease term, unless the lease transfers ownership of the underlying asset to the Group by the end of the lease term or the cost of the right-of-use asset reflects that the Group will exercise a purchase option. In that case the right-of-use asset will be depreciated over the useful life of the underlying asset, which is determined on the same basis as those of property and equipment. In addition, the right-of-use asset is periodically reduced by impairment losses, if any, and adjusted for certain remeasurements of the lease liability.

The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the Group's incremental borrowing rate. Generally, the Group uses its incremental borrowing rate as the discount rate.

The Group determines its incremental borrowing rate by obtaining interest rates from various external financing sources and makes certain adjustments to reflect the terms of the lease and type of the asset leased.

Lease payments included in the measurement of the lease liability comprise the following:

-  fixed payments, including in-substance fixed payments;

-  variable lease payments that depend on an index or rate, initially measured using the index or rate as at the commencement date;

-  amounts expected to be payable under a residual value guarantee; and

-  the exercise price under a purchase option that the Group is reasonably certain to exercise, lease payments in an optional renewal period if the Group is reasonably certain to exercise an extension option, and penalties for early termination of a lease unless the Group is reasonably certain not to terminate early.

The lease liability is measured at amortised cost using the effective interest method. It is remeasured when there is a change in the Group's estimate of the amount expected to be payable under a residual value guarantee, if the Group changes its assessment of whether it will exercise a purchase, extension or termination option or if there is a revised in-substance fixed lease payment.

When the lease liability is remeasured in this way, a corresponding adjustment is made to the carrying amount of the right-of-use asset, or is recorded in profit or loss if the carrying amount of the right-of-use asset has been reduced to zero.

The Group presents right-of-use assets that do not meet the definition of investment property in 'property, plant and equipment' and lease liabilities in 'loans and borrowings' in the Statement of Financial Position.

Short-term leases and leases of low-value assets

The Group has elected not to recognise right-of-use assets and lease liabilities for leases of low-value assets and short-term leases, including IT equipment. The Group recognises the lease payments associated with these leases as an expense on a straight-line basis over the lease term.

IFRIC 23 Uncertainty over income tax treatment

IFRIC 23 is effective for accounting periods beginning on or after 1 January 2019, and the Group adopted IFRIC 23 with effect from 1 January 2019. IFRIC 23 sets out how to determine taxable profits and losses, tax bases, unused tax losses, unused tax credits and tax rates when there is uncertainty over income tax treatments under IAS 12 - Income Taxes. Where the Group considers it is probable that an uncertain tax treatment will not be accepted by a tax authority the tax risk is measured using either the most likely amount method or the expected value method, as appropriate. The adoption and application of IFRIC 23 did not have a material impact on the Group.

New standards and amendments issued by the IASB but not yet effective

There are a number of new standards, amendments to standards and interpretations that are not yet effective and have not been applied in preparing these consolidated financial statements. These new standards, amendments to standards and interpretations are either not expected to have a material impact on the Group and the Company's financial statements or are still under assessment by the Group and the Company.

The principal new standards, amendments to standards and interpretations are as follows:

Standard	IASB effective date	EU effective date
Amendments to IAS 1 and IAS 8: Definition of material	1 January 2020	1 January 2020
Amendments to references to the Conceptual Framework in IFRS Standards (29 March 2018)	1 January 2020	1 January 2020
Amendments to IFRS 9, IAS 39 and IFRS 7: Interest Rate Benchmark Reform	1 January 2020	1 January 2020
Amendments to IFRS 3: Definition of a Business	1 January 2020	Not endorsed but on track
IFRS 17: Insurance Contracts	1 January 2020	Not endorsed but on track
Amendments to IAS 1: Classification of liabilities as current or non-current	1 January 2020	Not endorsed but on track
Amendments to IFRS 10 and IAS 28: Sale or Contribution of Assets between an Investor and its Associate or Joint Venture	1 January 2020	Not endorsed. No indicative endorsement date provided
IFRS 14: Regulatory Deferral Accounts	1 January 2020	Not endorsed. No indicative endorsement date provided

New standards that came into effect on 1 January 2020 will be applied in the year ending 31 December 2020, first reporting to include these will be for the period ending 30 June 2020. The Directors do not believe that any of these standards will have a significant impact on Group and Company reporting.

Basis of preparation

The Group and Company financial statements are prepared on the historical cost basis, except for financial assets (net profit interests, quoted shares and unquoted shares), which are carried at fair value, and equity settled share option awards and warrants which are measured at grant date fair value.

Going concern

The Directors have prepared a detailed cash flow forecast for the Group and Company for the period from 1 June 2020 to 31 December 2021.

The principal assumptions underlying the cash flow forecast and the availability of finance to the Group are as follows:

· Following completion of a transaction in 2016, the Company paid US$174.5 million to acquire Loan Notes in Midwestern Leon Petroleum Limited ("MLPL"), which are repayable by MLPL to San Leon and a 40% shareholding in MLPL. The economic effect of this structure is that San Leon has an initial indirect economic interest of 10.584% in OML 18. Shareholders will note this is 0.864% higher than the percentage interest anticipated by San Leon at the time of the acquisition in 2016. There have been no further purchases or payments by San Leon but this revised percentage is based on a reassessment and recalculation of the various parties' interests in OML 18 which has resulted in Martwestern Energy Limited's ("Martwestern") economic interest in Eroton now standing at 98%. The Group will receive cash flows from the Loan Notes in the form of interest and capital repayments. This continued to be the case during 2019 and the basis of the forecast for 2020 and 2021. On 6 April 2020, the Company entered into an agreement amending the Loan Notes Instrument. The Amendment extends the term of the Loan Notes to December 2021 and changes the expected loan note repayment schedule. Up to 31 December 2019, Loan Note payments totalling US$149.1 million of both principal and interest have been made on behalf of MLPL. Since reporting date, a further US$41.5 million has been received. US$10.0 million will be due on 6 October 2020, with quarterly repayments starting from July 2021. The Group has assumed that it will receive the respective forecast cash flows during 2020 and 2021 from the Loan Notes and for the purposes of managing the loan, cash flows are allocated to interest and then capital repayments in accordance with the terms of the Loan Notes.

· Income from the provision of subsurface technical and management services of US$3.0 million per year in 2020 and 2021.

· Ongoing exploration and administrative expenditure from the Group's existing activities are in line with current expectations and commitments.

· The cash flow forecast reflects the on-going activity across the Group's exploration asset portfolio which is now substantially reduced but does take into account licence commitments and technical team costs where relevant, administrative overhead, other financial commitments and its available financial resources from existing cash balances.

· Payment of a special dividend of approximately US$33.0 million in May 2020 (Note 9)

Given the Group's well understood cost base, the principal uncertainties relate to the quantum and timing of receipt of interest and capital repayments on the Loan Notes with MLPL. It was originally envisaged that the Loan Note payments due to the Group would be sourced by MLPL from the receipt of dividends through its indirect interest in Eroton via Martwestern. These dividends have not been received and consequently MLPL has entered into loan arrangements in order to be able to make Loan Note payments to the Company. In the absence of the dividend payments, MLPL will be reliant on further advances under the loan arrangement and in turn being able to make Loan Note payments to the Company. The Company has no obligation arising from the loan arrangements entered into by MLPL.

The Directors have concluded, that whilst any Loan Note payment, if delayed or not received, represents an uncertainty, the receipt of any further Loan Note payment(s) is not required given a cash and cash equivalents balance at 31 December 2019 of US$36.7 million and the other cashflow forecast assumptions to continue for a period of at least 12 months from the date of approval of the financial statements.

The Directors have considered the impact of Covid-19 upon the Company's indirect interest in OML 18, and upon the Loan Notes. The field operations of OML 18 will necessarily be slowed by the taking of customary health precautions, but as with most oil operations around the world, the Company are advised by Eroton that operations are continuing on a reasonable basis. The impact of the current low oil price will likely result in the deferral of some operational and capital expenditure, as is prudent to preserve working capital by Eroton. That is expected to delay some production increases from drilling. Eroton's income will also be affected by the lower oil price itself, although that is buffered to some extent by the deferral of costs mentioned and a number of put options in place. The overall effect is likely to be some modest delay in receiving distributions from Eroton via MLPL. The Directors do not expect a material effect on the risk profile of the Loan Notes.

Based on its consideration of Group cash flow projections and underlying assumptions outlined above, the Directors have a reasonable expectation that the Group and Company will have adequate resources to continue in operational existence and to discharge its debts as they fall due for the foreseeable future and for a period of at least 12 months from the date of approval of the financial statements.

Accordingly, the Directors continue to adopt the going concern basis of preparation of the financial statements for the year ended 31 December 2019.

Functional and presentation currency

Items included in the financial statements of each of the Group's entities are measured using the currency of the primary economic environment in which the entity operates (the "functional currency"). These consolidated financial statements are presented in US Dollars (US$), which is the Company's functional currency and the Group's presentational currency, rounded to the nearest thousand.

On 1 January 2019 the Company's presentation and functional currency changed from Euro to US$, given that a significant majority of Group earnings are now denominated in US$. On 1 January 2019 the Group also changed its presentation currency from Euro to US$. The Group believes that the presentation currency change will give investors and other stakeholders a clearer understanding of the Group's performance over time. It was determined appropriate to change from this date, as the Group is now in the process of exiting the majority of its European operations, and focussing on Western Africa.

Following this change in accounting policy, the comparatives in the consolidated financial statements are represented in US$ using the procedures outlined below:

· Assets and liabilities of operations with functional currencies other than US$ (including the Company for periods prior to 1 January 2019) are translated into US$ at closing rates of exchange. Trading results of such operations are translated into US$ at the rates of exchange prevailing at the dates of transaction or average rates where these are a suitable proxy. Differences resulting from the retranslation on the opening net assets and the results for the period have been presented in the currency translation reserve, a component within shareholders' equity.

· Share capital, share premium and other reserves are translated at the rate applicable on the date of the change being 1 January 2019.

· Cumulative currency translation adjustments are presented as if the Group had always used US$ as the presentation currency of its consolidated financial statements.

Use of estimates and judgements

The preparation of financial statements, in conformity with EU IFRS, requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. Actual results may differ from these estimates. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgements about carrying values of assets and liabilities that are not readily apparent from other sources. Estimates and underlying assumptions are reviewed on an on-going basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised and in any future periods affected. In particular, significant areas of estimation uncertainty and critical judgements used in applying accounting policies that have the most significant effect on the amounts recognised in the financial statements include:

Judgements

· Going concern (Note 1)

· Classification of finance income (Note 4)

· Impairment of investment in subsidiary (Note 7)

· Recoverability of equity accounted investments (Note 6)

· Recoverability of financial assets (Note 8)

Estimates

· Measurement of equity accounted investments (Note 6)

· Measurement of financial assets (Note 8)

· Recognition and measurement of derivatives

· Measurement of share-based payments

· Recognition of deferred tax asset for tax losses

Basis of consolidation

The financial information incorporates the financial information of the Company and entities controlled by the Group (its subsidiaries). Control is defined as when the Group is exposed to or has the rights to variable returns from its investment with the entity and has the ability to affect these returns through its power over the entity. The financial statements of subsidiaries are included in the consolidated financial statements from the date control commences until the date that control ceases. Where necessary, adjustments are made to the financial information of subsidiaries to bring their accounting policies into line with those used by other members of the Group. Intra-group balances and any unrealised gains and losses or income or expenses arising from intragroup transactions are eliminated in preparing the Group financial statements.

Business combinations and goodwill

Business combinations are accounted for using the acquisition method as at the acquisition date, which is the date on which control is transferred to the Group. Control is defined as when the Group and Company have the rights to variable returns from its investment with the entity and have the ability to affect these returns through its power over the entity. In assessing control, the Group takes into consideration potential voting rights that currently are substantive.

Acquisitions

The Group and Company measures goodwill at the acquisition date as:

· the fair value of the consideration transferred; plus

· the recognised amount of any non-controlling interests in the acquiree; plus, if the business combination is achieved in stages, the fair value of the existing equity interest in the acquiree; less

· the net recognised amount (generally fair value) of the identifiable assets acquired and liabilities assumed.

When the excess is negative, a bargain purchase gain is recognised immediately in profit or loss.

Costs related to the acquisition, other than those associated with the issue of debt or equity securities, that the Group incurs in connection with a business combination are expensed as incurred.

Any contingent consideration payable is recognised at fair value at the acquisition date. If the contingent consideration is classified as equity, it is not re-measured and settlement is accounted for within equity. Otherwise, subsequent changes to the fair value of the contingent consideration are recognised in profit or loss.

Intangible assets - exploration and evaluation assets

Expenditure incurred prior to obtaining the legal rights to explore an area is recognised in profit or loss as incurred. All other expenditure relating to licence acquisition, exploration, evaluation and appraisal of oil and gas interests, including an appropriate share of directly attributable overheads, is capitalised on a licence by licence basis.

Exploration and evaluation assets are carried at cost until the exploration phase is complete or commercial reserves have been discovered. The Group and Company regularly review the carrying amount of exploration and evaluation assets for indicators of impairment and capitalised costs are written off where the carrying amount of assets may not be recoverable. Where commercial reserves have been established and development is approved by the Board, the relevant expenditure is transferred to oil and gas properties following assessment of impairment.

Impairment of non-financial assets

The carrying amounts of the Group's assets are reviewed at each reporting date and, if there is any indication that an asset may be impaired, its recoverable amount is estimated. The recoverable amount is the higher of its fair value less costs to sell and its value in use.

Estimates of impairment are limited to an assessment by the Directors of any events or changes in circumstance that would indicate that the carrying amount of the asset may not be recoverable.

Any impairment loss arising from the review is recognised in profit or loss to the extent the carrying amount of the asset exceeds its recoverable amount. An impairment loss is reversed only to the extent that the asset's carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised.

Property, plant and equipment

Property, plant and equipment are stated at cost less accumulated depreciation. Depreciation is provided at rates calculated to write off the cost less residual value of each asset over its expected useful life. The residual value is the estimated amount that would currently be obtained from disposal of the asset if the asset were already of the age and in the condition expected at the end of its useful life. The annual rate of depreciation for each class of depreciable asset is:

Office equipment  25% Straight line

Motor vehicles  20% Reducing balance

Plant and equipment  20% - 33% Straight line

Joint operations

The Group has entered into a number of joint arrangements on production and exploration assets that result in joint operations. The Group accounts for only its share of assets, liabilities, income and expenditure in relation to these joint operations.

Inventories

Inventories are valued at the lower of cost and net realisable value.

Joint arrangements

The Group has also entered into a joint venture arrangement which is operated through a joint venture. The Group accounts for its interest in this entity on an equity basis, with Group share of profit or loss after tax recognised in the Income Statement and its share of Other Comprehensive Income ("OCI") of the joint venture recognised in OCI.

Financial fixed assets - investment in subsidiaries

Financial fixed assets in the Company Statement of Financial Position consist of investments in subsidiary undertakings and are stated at cost less provision for impairment where applicable.

Financial assets and financial liabilities

i. Recognition and initial measurement

Financial assets are classified at initial recognition and subsequently measured at amortised cost, Fair Value through Other Comprehensive Income ("FVOCI") or Fair Value Through Profit or Loss ("FVTPL"). The classification of financial assets is determined by the contractual cash flows and where applicable the business model for managing the financial assets.

A financial asset or financial liability is initially measured at fair value plus, for an item not at FVTPL, transaction costs that are directly attributable to its acquisition or issue.

ii. Classification and subsequent measurement

Financial assets

On initial recognition, a financial asset is classified as measured at: amortised cost; FVOCI - debt investment; FVOCI - equity investment; or FVTPL. Financial assets are not reclassified subsequent to their initial recognition unless the Group changes its business model for managing financial assets.

A financial asset is measured at amortised cost if the objective of the business model is to hold the financial asset in order to collect contractual cash flows and the contractual terms give rise to cash flows that are solely payments of principal and interest. Subsequently the financial asset is measured using the effective interest method less any impairment. The amortised cost is reduced by impairment losses in accordance with Group policy set out below. Interest income, foreign exchange gains and losses and impairment are recognised in profit or loss. Any gain or loss on derecognition is recognised in profit or loss.

The business model in which a financial asset is held is assessed at an individual asset level for assets that are individually material, and otherwise at a portfolio level. Financial assets that are held as part of a long-term strategic investment are considered within a business model to collect contractual cash flows.

In assessing whether the contractual cash flows are solely payments of principal and interest, the Group considers the contractual terms of the instrument. This includes assessing whether the financial asset contains a contractual term that could change the timing or amount of contractual cash flows such that it would not meet this condition.

On initial recognition of an equity investment that is not held for trading, the Group may irrevocably elect to present subsequent changes in the investment's fair value in OCI (FVOCI - equity investment). This election is made on an investment ‑ by ‑ investment basis. These assets are subsequently measured at fair value. Dividends are recognised as income in profit or loss unless the dividend clearly represents a recovery of part of the cost of the investment. Other net gains and losses are recognised in OCI and are never reclassified to profit or loss.

All financial assets not classified as measured at amortised cost or FVOCI as described above are measured at FVTPL. This includes all derivative financial assets. These assets are subsequently measured at fair value. Net gains and losses, including any interest or dividend income, are recognised in profit or loss.

On initial recognition, the Group may irrevocably designate a financial asset that otherwise meets the requirements to be measured at amortised cost or at FVOCI as at FVTPL if doing so eliminates or significantly reduces an accounting mismatch that would otherwise arise.

Financial liabilities

Financial liabilities are classified as measured at amortised cost or FVTPL. A financial liability is classified as at FVTPL if it is classified as held ‑ for ‑ trading, it is a derivative or it is designated as such on initial recognition. Financial liabilities at FVTPL are measured at fair value and net gains and losses, including any interest expense, are recognised in profit or loss. Other financial liabilities are subsequently measured at amortised cost using the effective interest method. Interest expense and foreign exchange gains and losses are recognised in profit or loss. Any gain or loss on derecognition is also recognised in profit or loss.

iii. Impairment

The Group recognises loss allowances for expected credit losses ("ECLs") on financial assets measured at amortised cost.

A provision for 12-month ECL is recognised in respect of low risk assets. A provision for the lifetime ECL is recognised in respect of higher risk assets that are not credit impaired. If an asset is credit impaired, the carrying amount of the asset is reduced by its lifetime ECL.

The 12-month ECL represents the weighted average of credit losses that result from default events on a financial instrument that are possible within the 12 months after the reporting date. This requires a number of outcomes to be considered, a probability assigned to each, and a resulting credit loss applied to each. ECLs are discounted at the effective interest rate of the financial asset.

12-month ECL is determined using market data to benchmark expected credit losses of assets held by the Group against default rates for borrowers with similar attributes. The Group also considers financial forecasts and other forward-looking information of borrowers where this is available. Lifetime ECL is extrapolated from the 12-month ECL methodology, assuming that the periodic risk remains constant over the remaining lifetime unless there is objective evidence otherwise.

At each reporting date, the Group assesses whether financial assets carried at amortised cost are credit ‑ impaired. A financial asset is 'credit ‑ impaired' when one or more events that have a detrimental impact on the estimated future cash flows of the financial asset have occurred. The Group considers a financial asset to be in default and presumed credit impaired when contractual payments are outstanding 90 days after their due date, unless there is reasonable information that amounts will be recovered; or when the borrower is unlikely to pay its credit obligations to the Group in full, without recourse by the Group to actions such as realising security including guarantees (if any is held).

The Company has determined that MLPL is likely to meet its credit obligations as evidenced by the preparation of a Competent Persons Report in relation to San Leon's interest in OML 18.

Write-off

The gross carrying amount of a financial asset is written off when the Group has no reasonable expectations of recovering a financial asset in its entirety or a portion thereof. The Group expects no significant recovery from the amount written off. However, financial assets that are written off could still be subject to enforcement activities in order to comply with the Group's procedures for recovery of amounts due.

iv. Derecognition

The Group derecognises a financial asset when the contractual rights to the cash flows from the financial asset expire.

The Group derecognises a financial liability when its contractual obligations are discharged or cancelled or expire.

On derecognition of a financial asset or financial liability, the difference between the carrying amount removed or extinguished and the consideration received or paid is recognised in profit or loss.

Decommissioning provision

A provision is made for decommissioning of oil and gas wells. The cost of decommissioning is determined through discounting the amounts expected to be payable to their present value at the date the provision is recognised and reassessed at each reporting date. This amount is regarded as part of the total investment to gain access to economic benefits and consequently capitalised as part of the cost of the asset and the liability is recognised in provisions. Such cost is depleted over the life of the asset on the basis of proven and probable reserves and charged to the Income Statement. The unwinding of the discount is reflected as a finance cost in the Income Statement over the life of the field or well.

Taxation

Income tax expense comprises current and deferred tax. Income tax expense is recognised in the Consolidated Income Statement except to the extent that it relates to items recognised directly in Other Comprehensive Income or equity, in which case it is recognised in Other Comprehensive Income or equity.

Current tax comprises the expected tax payable or receivable on the taxable income or loss for the year and any adjustment to the tax payable or receivable in respect of previous years. The amount of current tax payable or receivable is the best estimate of the tax amount expected to be paid or received that reflects uncertainty relates to income taxes, if any. It is measured using tax rates enacted or substantively enacted at the reporting date. Current tax also includes any tax arising from dividends.

Current tax assets and liabilities are offset only if certain criteria are met.

Deferred tax is recognised using the liability method, providing for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognised for the following temporary differences: the initial recognition of goodwill, the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit, and differences relating to investments in subsidiaries to the extent that they are controlled and probably will not reverse in the foreseeable future. Deferred tax is measured at the tax rates that are expected to be applied to the temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by the reporting date.

A deferred tax asset is recognised to the extent that it is probable that future taxable profits will be available against which the temporary differences can be utilised. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised.

Foreign currencies

Transactions in foreign currencies are initially translated to the respective functional currencies of Group entities at the exchange rates at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies are retranslated to the functional currency at the exchange rates ruling at the reporting date with gains or losses recognised in profit or loss. Non-monetary items are translated using the exchange rates ruling as at the date of the initial transaction.

Foreign currency differences are generally recognised in profit or loss and presented within finance costs. However, foreign currency differences arising from the translation of the following items are recognised in OCI:

· an investment in equity securities designated as at FVOCI (except on impairment, in which case foreign currency differences that have been recognised in OCI are reclassified to profit or loss);

· a financial liability designated as a hedge of the net investment in a foreign operation to the extent that the hedge is effective; and

· qualifying cash flow hedges to the extent that the hedges are effective.

Foreign operations

The assets and liabilities of foreign operations are translated into US Dollars at the exchange rate at the reporting date and the income and expenses of foreign operations are translated at the actual exchange rates at the date of the transaction or at average exchange rates for the year where this approximates to the actual rate. Exchange differences arising on translation are recognised in Other Comprehensive Income and presented in the foreign currency translation reserve in equity. Details of exchange rates used are set out in Note 32 of the Annual Report and Accounts.

Revenue recognition

For the year ended 31 December 2019 the Group used the five-step model as prescribed under IFRS 15 on the Group's revenue transactions. This included the identification of the contract, identification of the performance obligations under same, determination of the transaction price, allocation of the transaction price to performance obligations and recognition of revenue. The point of recognition arises when the Group satisfies a performance obligation by transferring control of a promised seismic processing service to the customer, which could occur over time.

Finance income and expenses

Interest income is accrued on a time basis by reference to the principal on deposit and the effective interest rate applicable.

The 'effective interest rate' is the rate that at initial recognition exactly discounts estimated future cash payments or receipts through the expected life of the financial instrument to:

· the gross carrying amount of the financial asset; or

· the amortised cost of the financial liability.

In calculating interest income and expense, the effective interest rate is applied to the gross carrying amount of the asset (when the asset is not credit ‑ impaired) or to the amortised cost of the liability. However, for financial assets that have become credit ‑ impaired subsequent to initial recognition, interest income is calculated by applying the effective interest rate to the amortised cost of the financial asset net of impairment provision. If the asset is no longer credit ‑ impaired, then the calculation of interest income reverts to the gross basis.

Finance expenses comprise interest or finance costs on borrowings and unwinding of any discount on provisions using the effective interest rate.

Share capital

Incremental costs directly attributable to the issue of ordinary shares are recognised as a deduction from equity.

Share based payments

The Group has applied the requirements of IFRS 2 'share based payments'. The Group issues share options as an incentive to certain key management and staff (including Directors), which are classified as equity settled share based payment awards. The grant date fair value of share options granted to Directors and employees under the Company's share option scheme is recognised as an expense over the vesting period with a corresponding credit to the share-based payments reserve. The fair value is measured at grant date and spread over the period during which the awards vest.

The options issued by the Group are subject to both market-based and non-market based vesting conditions. Market conditions are included in the calculation of fair value at the date of the grant. Non-market vesting conditions are not taken into account when estimating the fair value of awards as at grant date; such conditions are taken into account through adjusting the number of the equity instruments that are expected to vest.

The proceeds received will be credited to share capital (nominal value) and share premium when options are converted into ordinary shares.

Where the terms of an equity-settled transaction are modified, an additional expense is recognised for any modification that increases the total fair value of the share-based payment transaction, or is otherwise beneficial to the employee as measured at the date of modification.

Where an equity-settled award is cancelled, it is treated as if it had vested on the date of cancellation, and any expense not yet recognised for the award is recognised immediately. However, if a new award is substituted for the cancelled award, and designated as a replacement award on the date that it is granted, the cancelled and new awards are treated as if they were a modification of the original award, as described in the previous paragraph.

Earnings per share

The Group and the Company present basic and diluted earnings per share ("EPS") data for its ordinary shares. Basic EPS is calculated by dividing the profit or loss attributable to equity shareholders of the Company by the weighted average number of ordinary shares outstanding during the period. Diluted EPS is determined by adjusting the profit or loss attributable to ordinary shareholders and the weighted average number of ordinary shares outstanding for the effects of all dilutive potential ordinary shares, which comprise convertible notes, share options granted to employees and warrants.

Cash and cash equivalents

Cash and cash equivalents comprise cash at bank and in hand on demand.

Segmental reporting

A segment is a distinguishable component of the Group that is engaged in business activities from which it may earn revenues and incur expenses which is subject to risks and rewards that are different from those of other segments and for which discrete financial information is available.

All operating segments and results are regularly reviewed by the Board of Directors to make decisions about resources to be allocated to each segment and to assess its performance.

Full details of the Group's operating segments all of which are involved in oil and gas exploration and production are set out in Note 2 to the financial statements.

Defined contribution pension scheme

The Group operates a defined contribution scheme. All contributions made are recognised in the Income Statement in the period in which they fall due.

Fair value movement

The Group has an established process with respect to the measurement of fair values. The finance team regularly reviews significant unobservable inputs and valuation adjustments. If third party information, such as broker quotes or pricing services, is used to measure fair values, then the valuation team assesses the evidence obtained from the third parties to support the conclusion that such valuations meet the requirements of IFRS, including the level in the fair value hierarchy in which such valuations should be classified.

Significant valuation issues are reported to the Board.

Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities.

Level 2: inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).

Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).

For further detail on assumptions made in measuring Level 3 fair values see the following notes:

· Note 8 Financial Assets

· Derivative (Refer to Note 22 of the Annual Report and Accounts)

Assets and liabilities measured at fair value

In accordance with IFRS 13, the Group discloses its assets and liabilities held at fair value after initial recognition in the following categories: FVOCI - equity instrument and FVTPL.

With the exception of shares held in quoted entities, which are classified as Level 1 items under the fair value hierarchy, all assets and liabilities held at fair value are measured on the basis of inputs classified as Level 3 under the fair value hierarchy on the basis that the inputs underpinning the valuations are not based on observable market data as defined in IFRS 13.

Where derivatives are traded either on exchanges or liquid over-the-counter markets, the Group uses the closing price at the reporting date. Normally, the derivatives entered into by the Group are not traded in active markets. The fair values of these contracts are estimated using a valuation technique that maximises the use of observable market inputs, e.g. market exchange and interest rates. All derivatives entered into by the Group are included in Level 3 and consist of share warrants issued.

2. Revenue and Segmental Information

Operating segment information is presented on the basis of the geographical areas as detailed below, which represent the financial basis by which the Group manages its operations. The Board of Directors, which has been recognised as the Chief Operating Decision Maker ("CODM"), regularly receive verbal or written reports at board meetings for each of the segments based on the below criteria which management consider to be appropriate in evaluating segment performance relative to other entities that operate in the industry.

Revenue and Segmental Information

2019		Poland US$'000	Morocco US$'000	Albania US$'000	Nigeria US$'000	Ireland US$'000	Spain US$'000	Unallocated# US$'000	Total US$'000
Total revenue		266	-	-	-	-	-	-	266
Impairment of exploration and evaluation assets		(126)	(150)	(190)	-	-	(941)	-	(1,407)
Segment profit / (loss) before income tax		(15,074)	1,134	(190)	23,575	(48,373)	(1,014)	(12,749)	(52,691)
Property, plant and equipment		32	-	-	1,476	2,836	-	-	4,344
Equity accounted investments		-	-	-	51,866	-	-	-	51,866
Segment non-current assets		32	-	-	53,111	7,554	-	194	60,891
Capital expenditure		-	-	-	-	-	-	-	-
Segment liabilities		(194)	(268)	(804)	-	(2,835)	(739)	(3,251)	(8,091)
	# Unallocated expenditure and liabilities include amounts of a corporate nature and not specifically attributable to a reportable segment.

Revenue relates to the provision of seismic acquisition services in Poland.

2018		Poland US$'000 (Restated)	Morocco US$'000 (Restated)	Albania US$'000 (Restated)	Nigeria US$'000 (Restated)	Ireland US$'000 (Restated)	Spain US$'000 (Restated)	Unallocated# US$'000 (Restated)	Total US$'000 (Restated)
Total revenue		198	-	-	-	-	-	-	198
Impairment of exploration and evaluation assets		-	-	(3,074)	-	-	-	-	(3,074)
Segment (loss) / profit before income tax		(14,075)	-	(3,111)	33,346	2,315	-	(20,510)	(2,035)
Property, plant and equipment		50	-	-	1,867	47	-	-	1,964
Equity accounted investments		-	-	-	55,070	-	-	-	55,070
Segment non-current assets		49	-	-	128,048	53,767	-	252	182,116
Capital expenditure ^		-	-	211	-	-	-	-	211
Segment liabilities		(911)	(661)	(816)	-	-	-	(19,663)	(22,051)
	^ This is the net expenditure incurred by the Group excluding amounts incurred by partners on shared exploration interests. It includes assets acquired through business combinations and equity accounted investments. # Unallocated expenditure and liabilities include amounts of a corporate nature and not specifically attributable to a reportable segment.

Revenue relates to the provision of seismic acquisition services in Poland.

3. Profit OR LOSS on disposal of subsidiaries

	2019 US$'000	2018 US$'000 (Restated)
Gora Energy Sp. z o.o. & Liesa Energy Sp. z o.o. to Gemini Resources Limited (i)	-	1,184
Island Oil & Gas Limited to Ardilaun Energy Limited (ii)	-	(750)
Other, recycling from equity to income statement (iii)	(13,870)	(13,567)
Horizon Petroleum Ltd (iv)	100	-
	(13,770)	(13,133)

(i) Gora Energy Sp. z o.o. & Liesa Energy Sp. z o.o. to Gemini Resources Limited

In 2018, the Group recognised a profit on disposal of US$1.2 million in relation to the sale of two wholly owned subsidiaries, Gora Energy Sp. z o.o. ('Gora') and Liesa Energy Sp. z o.o. ('Liesa'), to Gemini Resources Limited ('Gemini').

The profit related to the Group's derecognition of decommissioning liabilities associated with Gora and Liesa., which had previously been fully provided for. This resulted in a US$1.2 million gain in the Income Statement as at 31 December 2018.

The sale to Gemini has also resulted in the realisation of the cumulative foreign currency losses of US$8.6 million.

(ii) Island Oil & Gas Limited to Ardilaun Energy Limited

In 2018, the Group recognised a further loss on disposal of US$0.8 million in relation to the sale of Island Oil & Gas Limited to Ardilaun Energy Limited in 2014. The loss primarily related to the Group's contribution to the licence fees liability commitment associated with the exploration and evaluation assets disposed of in 2014.

(iii) Other

In 2019 the Company liquidated certain foreign operations that held non-core assets. The Group's investment in the assets held by the subsidiaries has been fully impaired in prior periods. The liquidation or disposal of the foreign operations has resulted in the realisation of cumulative foreign currency losses of US$13.9 million (2018: US$13.6 million), that had previously been recognised in equity. The realisation of the cumulative foreign currency losses does not impact the consolidated assets or liabilities.

(iv) Horizon Petroleum Ltd  

In August 2019, sale and purchase agreements were completed for the sale of a 100% interest in two oil & gas concessions in Poland, known as Bielsko-Biala and Cieszyn (together the "Primary Concessions"), and a 100% interest in two additional oil & gas concessions in Poland, known as Prusice and Kotlarka, (together the "Secondary Concessions") with Horizon Petroleum Ltd. ('Horizon') (TSXV: HPL).

San Leon will receive a 6% net profit interest on the Primary and Secondary Concessions when the concessions are transformed and granted to Horizon. Under revised completion terms, a cash payment of US$1,080,000 is also due to be paid to San Leon if the Bielsko-Biala concession is transformed and granted to Horizon. At the same time, San Leon is also to receive US$769,558 (CAD$1.0 million) in shares of Horizon. A cash payment of approximately US$75,000 is due to be paid to San Leon for each of the Secondary Concessions if granted to Horizon.

The aggregate consideration of US$2.0 million has been noted in Commitments and Contingencies (Refer to Note 28 of the Annual Report and Accounts).

On completion of the sale, a US$100,000 advance received by the Company in 2017 as part of the Memorandum of Understanding became non-refundable.

4. Finance income

	2019 US$'000	2018 US$'000 (Restated)
Total finance income on Loan Notes (Note 8)	23,313	37,613
Foreign exchange gain on Loan Notes, Valuation (Note 8)	-	6,804
Foreign exchange loss on Loan Notes, ECL (Note 8)	-	(438)
Movement in fair value of derivatives	531	-
Deposit interest received	278	101
Interest on Director's loan	1	2
	24,123	44,082

All interest income is in respect of assets measured at amortised cost.

5. LOSS per share

Basic loss per share

Basic loss per share is calculated by dividing the loss attributable to equity holders of the Company by the weighted average number of ordinary shares in issue during the year as follows:

	2019 US$'000	2018 US$'000 (Restated)
Loss for the year	(38,612)	(5,812)

The weighted average number of shares in issue is calculated as follows:

	2019 Number of shares	2018 Number of shares
In issue at start of year (Note 10)	500,256,857	500,256,857
Shares to be issued at start of year	5,590,270	3,052,942
Effect of tender offer and buybacks in the year	(39,697,582)	-
Effect of shares issued and shares to be issued in the year	195,890	1,451,304
Weighted average number of ordinary shares in issue (basic)	466,345,435	504,761,103
Basic loss per ordinary share (cent)	(8.28)	(1.15)

Diluted loss per share

Diluted loss per share is calculated by dividing the loss attributable to equity holders of the Company by the weighted average number of ordinary shares outstanding after adjustment for effects of all dilutive potential ordinary shares as follows:

	2019 US$'000	2018 US$'000 (Restated)
Loss for the year	(38,612)	(5,812)

The diluted weighted average number of shares in issue is calculated as follows:

	2019 Number of shares	2018 Number of shares
Basic weighted average number of shares in issue during the year	466,345,435	504,761,103
Effect of share options and warrants in issue	-	-
	466,345,435	504,761,103
Diluted loss per ordinary share (cent)	(8.28)	(1.15)

The number of options which are anti-dilutive and have therefore not been included in the above calculations is 39,559,074 (2018: 39,304,060).

6. Equity accounted investments

Group	2019 US$'000	2018 US$'000 (Restated)
Cost and net book value
At 1 January	55,070	69,763
Share of loss of equity accounted investment	(3,204)	(14,693)
At 31 December	51,866	55,070

The Group's only joint venture entity at 31 December 2019 is as follows:

Name	Registered office	% held
Midwestern Leon Petroleum Limited	5th Floor Barkly Wharf, Le Caudan Waterfront, Port Louis, Republic of Mauritius	40%

A summary of the financial information of the equity investment is detailed below.
Equity Interest	40%	40%
	2019 US$'000	2018 US$'000 (Restated)
Loss from continuing operations	(8,011)	(32,402)
Total comprehensive loss	(8,011)	(36,734)
Non-current assets	204,312	203,793
Current assets (excluding cash)	262,444	242,749
Non-current liabilities	-	(48,259)
Current liabilities	(337,091)	(260,608)
Net assets	129,665	137,675
Group's interest in net assets of investee at 1 January	55,070	69,763
Share of loss	(3,204)	(14,693)
Group's interest in net assets of investee at 31 December	51,866	55,070

During 2016 the Company acquired a 40% non-controlling interest in MLPL as part of the OML 18 transaction. Full details of the OML 18 transaction are set out in Note 8. The movement during 2019 reflects a share of the loss of MLPL being administrative costs of US$2.1 million (2018: US$1.9 million), other income of US$7.2 million (2018: US$0.1 million), net finance costs of US$5.5 million (2018: US$23.8 million), profit on investment of US$0.5 million (2018: US$0.5 million) and a tax charge of US$8.0 million (2018: US$6.9 million).

The above interest is accounted for as an equity accounted investment as San Leon does not have control over the entity, which is governed under a Joint Venture Agreement requiring the approval of both parties to the Joint Venture Agreement in respect of all operating decisions.

The Group identified potential impairment indicators, being that MLPL is yet to receive a dividend from Eroton, the equity interest is currently loss making, and MLPL has entered into a loan to be able to make Loan Note repayments to the Group. To test for a potential impairment the carrying value of the equity interest in MLPL was compared against the fair value less cost of sale. This was estimated using a discounted cashflow model of the expected future cashflows from MLPL's share of the underlying OML 18 asset. Future cashflows of OML 18 were estimated using the following price assumptions of US$65/bbl in 2020, US$68/bbl in 2021, US$70/bbl in 2022 and a subsequent long term price US$72/bbl escalated at 2% annually, with the cashflows discounted using a post-tax discount rate of 10%. Assumptions involved in the impairment assessment include estimates of commercial reserves, production rates, future oil prices, discount rates and operating and capital expenditure profiles, all of which are inherently uncertain. This analysis identified that the carrying value of the equity interest in MLPL is not impaired.

If the recoverable amount was estimated taking into account a reduction in the oil price to US$35/bbl in 2020, US$45/bbl in 2021 and a long term price of US$60/bbl escalated at 2% annually, then the carrying value of the equity interest in MLPL would still not be impaired.

The Directors recognise that the future realisation of the equity accounted investment is dependent on future successful exploration and appraisal activities and subsequent production of oil and gas reserves.

7. Financial assets - Company

	2019 US$'000	2018 US$'000 (Restated)
Investment in subsidiary undertakings at cost:
Balance at beginning of year	31,539	34,608
Impairment during the year (i)	-	(3,069)
Balance at end of year	31,539	31,539

(i) The impairments to the Company's investment in subsidiary undertakings recorded in 2018 reflects the write down in the carrying value of the Group's exploration and evaluation assets in the year.

At 31 December 2019, the Company had the following principal subsidiaries, all of which are wholly owned through holding all of the issued ordinary shares of the entities:

Name	Registered Office
Directly held:
San Leon Energy B.V.	de Ronge 16, 1852 XB Heiloo, The Netherlands
San Leon (USA) Limited	2 Shelbourne Buildings, Crampton Avenue, Shelbourne Road, Ballsbridge, Dublin 4
San Leon (Morocco) Limited	PO Box 146, Trident Chambers, Tortola, BVI
San Leon (Netherlands) Limited	PO Box 146, Trident Chambers, Tortola, BVI
San Leon Energy Srl	Piazza Vescovio, 700199 Rome, Italy
San Leon Services Limited	12 Castle Street, St. Helier, Jersey JE2 3RT
Aurelian Oil & Gas Limited	36 The Crescent, Bricket Wood, St Albans, AL2 3NF, United Kingdom
San Leon Energy Nigeria B.V.	de Ronge 16, 1852 XB Heiloo, The Netherlands
San Leon Energy (Iraq) Limited	2 Shelbourne Buildings, Crampton Avenue, Shelbourne Road, Ballsbridge, Dublin 4

Indirectly held:
Baltic Oil and Gas Sp. Z o.o.	ul. Zelazna 59, 00-848, Warsaw, Poland
Braniewo Energy Sp. Z o.o.	ul. Zelazna 59, 00-848, Warsaw, Poland
Novaseis Sp. z o.o.	ul. Zelazna 59, 00-848, Warsaw, Poland
San Leon Services Sp. z o.o.	ul. Zelazna 59, 00-848, Warsaw, Poland
Aurelian Oil and Gas Poland Sp. z o.o.	ul. Zelazna 59, 00-848, Warsaw, Poland
Energia Torzym Sp. z o.o.	ul. Zelazna 59, 00-848, Warsaw, Poland
T.K. Exploration Sp. z o.o.	ul. Zelazna 59, 00-848, Warsaw, Poland
San Leon Durresi B.V.	de Ronge 16, 1852 XB Heiloo, The Netherlands
San Leon Morocco B.V.	de Ronge 16, 1852 XB Heiloo, The Netherlands
San Leon Tarfaya Shale B.V.	de Ronge 16, 1852 XB Heiloo, The Netherlands
Seisquest B.V.	de Ronge 16, 1852 XB Heiloo, The Netherlands
Braniewo B.V.	de Ronge 16, 1852 XB Heiloo, The Netherlands.
Realm Energy International Coopteratief U.A.	de Ronge 16, 1852 XB Heiloo, The Netherlands
Realm Energy International Holding B.V.	de Ronge 16, 1852 XB Heiloo, The Netherlands
Frontera Energy Corporation S.L.	Paseo Maria Agustin, 4-6, Esc 3. Piso 4, Zaragoza, 5004, Spain
San Leon Energy (UK) Limited	36 The Crescent, Bricket Wood, St Albans, AL2 3NF, United Kingdom
AOG Finance Limited	36 The Crescent, Bricket Wood, St Albans, AL2 3NF, United Kingdom
Balkan Explorers (Bulgaria) Limited	36 The Crescent, Bricket Wood, St Albans, AL2 3NF, United Kingdom

The Company is continuing the process of liquidating and or selling some of the above companies in line with its strategy to relinquish non-core interests.

8. Financial Assets

Group	OML 18 (i) US$'000	Barryroe 4.5% net profit interest (ii) US$'000	Quoted shares (iii) US$'000	Unquoted shares (iv) US$'000	Total US$'000
	Amortised cost	FVTPL	FVOCI - equity  instrument	FVOCI - equity  instrument
Cost / Valuation
At 1 January 2018 (Restated)	154,374	48,827	34	2,506	205,741
Finance income	37,613	-	-	-	37,613
Loan Notes receipts - principal	(31,572)	-	-	-	(31,572)
Loan Notes receipts - interest	(33,032)	-	-	-	(33,032)
Exchange rate adjustment, Income statement	6,804	-	-	-	6,804
Fair value movement, Income statement	-	2,315	(34)	-	2,281
Fair value movement, Other comprehensive income	-	-	-	119	119
At 31 December 2018 (Restated)	134,187	51,142	-	2,625	187,954
Finance income	23,313	-	-	-	23,313
Loan Notes receipts - principal	(23,361)	-	-	-	(23,361)
Loan Notes receipts - interest	(19,885)	-	-	-	(19,885)
Impairment of unquoted shares, Other comprehensive income	-	-	-	(2,625)	(2,625)
Additions (viii)	-	-	-	194	194
Fair value movement, Income statement	-	(48,373)	-	-	(48,373)
At 31 December 2019	114,254	2,769	-	194	117,217
Expected Credit Loss Provision
At 1 January 2018 (Restated)	-	-	-	-	-
Recognised on transition to IFRS 9	(9,241)	-	-	-	(9,241)
Released in the year	4,212	-	-	-	4,212
Exchange rate adjustment, Income Statement	(438)	-	-	-	(438)
At 31 December 2018 (Restated)	(5,467)	-	-	-	(5,467)
Released in the year	3,465	-	-	-	3,465
At 31 December 2019	(2,002)	-	-	-	(2,002)
Book value at 31 December 2019	112,252	2,769	-	194	115,215
Current	112,252	-	-	-	112,252
Non-current	-	2,769	-	194	2,963
Book value at 31 December 2018 (Restated)	128,720	51,142	-	2,625	182,487
Current	57,611	-	-	-	57,611
Non-current	71,109	51,142	-	2,625	124,876

Net Profit Interests (v) (vi) (vii): These NPIs have a nil value from acquisition.

Company	OML 18 (i) US$'000	Barryroe 4.5% net profit interest (ii) US$'000	Quoted shares (iii) US$'000	Unquoted shares (iv) US$'000	Total US$'000
	Amortised cost	FVTPL	FVOCI - equity  instrument	FVOCI - equity  instrument
Cost / Valuation
At 1 January 2018 (Restated)	154,374	48,827	34	2,506	205,741
Finance income	37,613	-	-	-	37,613
Loan Notes receipts - principal	(31,572)	-	-	-	(31,572)
Loan Notes receipts - interest	(33,032)	-	-	-	(33,032)
Exchange rate adjustment, Income statement	6,804	-	-	-	6,804
Fair value movement, Income statement	-	2,315	(34)	-	2,281
Fair value movement, Other comprehensive income	-	-	-	119	119
At 31 December 2018 (Restated)	134,187	51,142	-	2,625	187,954
Finance income	23,313	-	-	-	23,313
Loan Notes receipts - principal	(23,361)	-	-	-	(23,361)
Loan Notes receipts - interest	(19,885)	-	-	-	(19,885)
Impairment of unquoted shares	-	-	-	(2,625)	(2,625)
Fair value movement, Income statement	-	(48,373)	-	-	(48,373)
At 31 December 2019	114,254	2,769	-	-	117,023
Expected Credit Loss Provision
At 1 January 2018 (Restated)	-	-	-	-	-
Recognised on transition to IFRS 9	(9,241)	-	-	-	(9,241)
Released in the year	4,212	-	-	-	4,212
Exchange rate adjustment, Income Statement	(438)	-	-	-	(438)
At 31 December 2018 (Restated)	(5,467)	-	-	-	(5,467)
Released in the year	3,465	-	-	-	3,465
At 31 December 2019	(2,002)	-	-	-	(2,002)
Book value at 31 December 2019	112,252	2,769	-	-	115,021
Current	112,252	-	-	-	112,252
Non-current	-	2,769	-	-	2,769
Book value at 31 December 2018 (Restated)	128,720	51,142	-	2,625	182,487
Current	57,611	-	-	-	57,611
Non-current	71,109	51,142	-	2,625	124,876

(i) OML 18

In September 2016, the Company secured an indirect economic interest in OML 18, onshore Nigeria.

The Company undertook a number of steps to effect this purchase. 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, a company incorporated in Nigeria. Martwestern holds a 50% shareholding in Eroton, a company incorporated in Nigeria and the operator of OML 18, and Martwestern also holds an initial 98% economic interest in Eroton. The economic effect of this structure is that San Leon has an initial indirect economic interest of 10.584% in OML 18. Shareholders will note that this is higher than the percentage interest anticipated by San Leon at the time of the acquisition in 2016. There have been no further purchases or payments by San Leon but this revised percentage is based on a reassessment and recalculation of the various parties' interests in OML 18.

To partly fund the purchase of 100% of the shares of Martwestern, MLPL borrowed US$174.5 million in incremental amounts by issuing loan notes with an annual coupon of 17% ("Loan Notes") and effective interest rate of 25%, as noted below. Midwestern Oil and Gas Company Limited ("Midwestern") 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 became beneficiary and holder of all Loan Notes issued by MLPL and the holder of an indirect economic interest in OML 18. San Leon is due to be repaid the full amount of the US$174.5 million plus the 17% coupon once certain conditions have been met and using an agreed distribution mechanism. Through its wholly owned subsidiary, San Leon Nigeria B.V., the Company is also a beneficiary of any dividends that will be paid by MLPL as a 40% shareholder in MLPL but the Loan Notes repayments must take priority over any dividend payments made to the MLPL shareholders.

The fair value assessment of the Loan Notes on acquisition was calculated as follows:

	Total US$'000
Total consideration	188,419
Fair value of Loan Notes attributable to equity investment #	(30,889)
Net fair value of Loan Notes	157,530
Arrangement fees	(5,500)
Additions to Financial Assets in 2016 including accrued interest at date of acquisition	152,030
# 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, giving an effective interest rate of 25%.

The key information relevant to the fair value of the Loan Notes on the date they were initially recognised is as follows:

Valuation technique	Significant unobservable inputs*	Inter-relationships between the unobservable inputs and fair value measurements
Discounted cash flows	· Discount rate 25% based on a market rate of interest of 8% above the coupon rate of 17% · MLPL ability to generate cash flows for timely repayment · Loan Notes are repayable in full by 30 September 2020.	The estimated value would increase / (decrease) if: US Dollar exchange rate increased / (decreased)
*Day 1 and considered appropriate at 31 December 2019.

The business model for the MLPL loan is to hold to collect. In 2018 management chose to take the opportunity of the adoption of IFRS 9 to build a new financial model to improve estimation of amounts in respect of the MLPL loan on an IFRS 9 basis. Although the basis of accounting under IFRS 9 should be consistent with IAS 39, the revised calculation provides a better estimate of the effect of small timing differences on the amounts contractually recoverable under the loan agreement, and the amortisation of the discount to the par value initially recognised.

The credit risk is managed via various undertakings, guarantees, a pledge over shares and the mechanism whereby MLPL prioritises payment of sums due under the Loan Notes. Given the size and quality of the OML 18 oil and gas asset the main credit risk is regarded as the timing of payments by MLPL which is dependent on dividend distributions by Eroton rather than being unable to pay the total quantum due under the Loan Notes. To date Eroton have been unable to make a dividend distribution. Consequently, MLPL had to enter into a loan in 2017 and subsequently, in order to be able to meet its obligations under the Loan Notes and make payments to San Leon.

During 2019 San Leon received total payments under the Loan Notes of US$43.2 million (2018: US$64.6 million). The payments received during 2019 represent principal of US$23.3 million (2018: US$31.6 million) and interest of US$19.9 million (2018: US$33.0 million)) on the Loan Notes repaid. As at 31 December 2019 there was US$114.3 million in principal and interest (2018: US$134.2 million), due under the Loan Notes.

In 2020 the Company has received total payments under the Loan Notes of US$41.5 million. On 6 April 2020, the Company entered into an Agreement with MLPL, amending the timing of the remaining payment of the Loan Notes Instrument. At the date of the Agreement, the remaining outstanding balance on the par value was US$82.1 million* (accounted for as US$79.5 million under IFRS). Of this, US$10.0 million will be repaid on or before 6 October 2020, with the balance of the Loan Notes receivable payable in three quarterly instalments, commencing in July 2021 and completing by December 2021. The outstanding loan will continue to have an annual coupon rate of 17% and an effective interest rate of 25% per annum until repaid. All other material terms of the Loan Notes Instrument remain unchanged. 

The Directors of San Leon have considered the credit risk of the Loan Notes at 31 December 2018 and 31 December 2019. Due to the inability of MLPL to make dividend distributions, the Directors continue to consider that the credit risk has significantly increased since initial recognition, and a provision for the lifetime expected credit loss of the Loan Notes has been recognised. As at 31 December 2019 the Directors were not in discussion with MLPL regarding any amendment to the terms of the Loan Notes nor were there any events at this time that warranted an amendment to the terms of the Loan Notes, and so the Agreement entered into on 6 April 2020 was not taken into account at year end. However, under the terms of the Agreement the full principal is to be repaid and interest continues to accrue at the original contractual rate.

The Loan Notes are not considered credit impaired on the basis of operational reports and forward-looking management information of OML 18 which are consistent with successful exploitation of the field over its life, and the funding facilities expected to be available to MLPL over the short to medium term.

In addition, the Directors have reviewed the counterparty credit risk associated with measurement of the expected credit loss and, although this has been assessed as having increased significantly since initial recognition, it is not considered to have increased during the year ended 31 December 2019. Factors that have been considered to reduce overall credit risk include an ongoing guarantee from Midwestern, which guarantees all indebtness and associated obligations of MLPL, with the Loan Notes being the most senior debt within the company and a number of oil price put options in place at the Eroton level, which partially mitigates downside risk to the cashflows of OML 18 arising from a reduction in oil prices. 

The Loan Notes are unique assets for which there is no directly comparable market data. Repayments of the Loan Notes are expected to be made from the underlying cashflows that support MLPL. Accordingly, the lifetime expected credit loss of the Loan Notes has been determined based on publicly available macroeconomic data of 12-month default rates by geography, industry and rating, and considering forward-looking information with regard to oil prices and operational and financial reports of the borrower to determine whether any adjustment to the historical trends is appropriate at 1 January 2019 or 31 December 2019. The Directors have considered the credit risk of MLPL, and determined that, although the credit risk has increased since initial recognition, it remains unchanged from the prior year. An annual expected credit loss of 3.11% was considered to be an appropriate rate from which to extrapolate a lifetime expected credit loss as at 1 January 2019 and 31 December 2019. In management's view the outlook for the OML 18 oil reserves is broadly stable over the term of the loan and does not provide evidence of a change in future risk from the historical trend.

The loss on default has been assumed to be 100% due to the holding and financial structure of the underlying asset which supports the loan notes. Default events are those which will give rise to an economic loss for the Company, rather than just a timing issue of when cash is received, At that point the underlying asset would need to have been substantially underperforming and it is likely that this would precipitate a restructuring between the parties that would be time-consuming, incur additional cost, and from which any ultimate recovery by the Company cannot be reliably assessed.

The Company determined that the expected credit loss provision of US$5.5 million, being 4.0% of the balance at 1 January 2019 was appropriate. This declined to US$2.0 million at year end due to the contractual lifetime of the Loan Notes reducing by 12 months, thereby reducing the expected probability of default over the remaining loan term to 1.8%. The repayments made in 2019 reduced the balance at that date, resulting in a gain of US$3.5 million to the income statement for 2019.

*Refer to Alternate Performance Measures for full reconciliation of IFRS numbers and Alternative Performance Measures.

(ii) Barryroe - 4.5% Net Profit Interest

SLE holds a 4.5% Net Profit Interest in the Barryroe oil field at fair value through profit and loss under IFRS 9. In 2018 the valuation approach was based on assumptions, public information and modelling contained within a broker report (dated 12 December 2018). For the year ended 31 December 2019 the Board has considered this approach, but believe many of the previous assumptions are now out-of-date, and have therefore adopted a market-based valuation approach using the price of the publicly listed shares of Providence Resources plc ("Providence") (operator and holder of an owner of 80% interest in the Barryroe oil field) as its basis. The Directors believe the markets assessment of the current risks and uncertainties of the project have been reflected within the share price of Providence at year end, and it is therefore appropriate to use this to update their valuation.

The 2019 announcements by Providence in relation to Standard Exploration Licence 1/11 which contains the Barryroe oil accumulation indicate an increased project risk given the uncertainty regarding project funding and therefore timing around the development of the asset. While the site survey on the project was achieved, these delays will impact the timing of future cash flows and valuation for San Leon.

Given the latest announcements and incorporating uncertainty regarding project timing and funding, the Directors have reviewed the modelling assumptions regarding timing, oil price, costs and risk, and consider it reasonable and appropriate to impair the Barryroe carrying value by US$48.4 million (Year end 2019: US$30.5 million, 2019 Half year: US$17.9 million) to US$2.8 million to reflect their estimate of the impact of these risks to the future cash flows on the value of the asset.

The key information relevant to the fair value of the Barryroe 4.5% net profit interest is as follows:

Valuation technique	Significant unobservable inputs	Inter-relationships between the unobservable inputs and fair value measurement
Market based approach using share price of Operator (Providence) (2018: Internal management model)	Estimated value of NPI as percentage of total field NPV 9.5% (2018: 9.5%) 2018: First oil 2024 Oil price over the period is to be US$60/BBL Risking applied is 64% Discount rate 10% Capex and opex based upon current and expected market rates Life of field expected to be 17 years Oil production of 311MM BBL over the life of the field on a successful development of the 2C contingent resources case	The estimated fair value would increase / (decrease) if: The oil price per barrel increased / (decreased) The resource estimates increased / (decreased) or the life of the field increased / (decreased) US Dollar exchange rate increased / (decreased)

(iii) Amedeo Resources plc

At 31 December 2019, the Company holds 213,512 ordinary shares at a market value of US$Nil (2018: US$Nil). The value of the investment was written down to nil in 2018 due to the shares of Amedeo Resources plc being de-listed.

(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 to San Leon. 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 2019 and given the length of time to obtain Irish government approval for the transaction, the Directors feel it is prudent to carry the 15% of Ardilaun shares still to be issued to San Leon at a value of US$Nil (2018: US$2.6 million). Consequently, US$2.6 million has been charged to Other comprehensive income.

(v) Poznan 10% Net Profit Interest

In 2016, San Leon sold its 35% interest in the Poznan assets for a consideration of €1 plus a 10% NPI. Until active development commences a nil value has been placed on the NPI. There has been no change in 2019.

(vi) Gora 5% Net Profit Interest

In 2018, San Leon sold its interest in the Gora assets for a consideration of €1 plus a 5% NPI. Until active development commences a nil value has been placed on the NPI. (Notes 3(i)). There has been no change in 2019.

(vii) Liesa 5% Net Profit Interest

In 2018, San Leon sold its interest in the Liesa assets for a consideration of €1 plus a 5% Net Profit Interest ("NPI"). Until active development commences a nil value has been placed on the NPI. (Notes 3(i)). There has been no change in 2019.

(viii) Gemini Resources Limited

In 2019, San Leon converted a debtor of US$192,607 due from Gemini Resources Limited ("Gemini") into 54,818 fully paid ordinary shares in Gemini.

9. Subsequent events

Share buyback programme

On 21 January 2020 the Company announced that it had completed the buyback programme initially announced on 18 October 2019 (the "Buyback Programme"). Under the Buyback Programme which commenced on 18 October 2019, the Company has repurchased 5,709,101 Ordinary Shares at an aggregate value of US$2,041,900. Following cancellation of the shares repurchased during the Programme, the total number of Ordinary Shares in issue with voting rights is 449,913,026.

MLPL Loan Note

The Company has received US$41.5 million in Loan Note repayments since 31 December 2019.

On 6 April 2020 the Company entered into an agreement amending the Loan Notes Instrument (the "Amendment") between San Leon and MLPL. Under the terms of the Amendment, the remaining balance payable is approximately US$82.1 million* at par value (accounted for as US$79.5 million under IFRS). A further US$10.0 million is scheduled to be paid to the Company on or before 6 October 2020, with the balance of the Loan Notes receivable payable in three quarterly instalments, commencing July 2021 and completing by December 2021. Due to the modification of the loan, it is expected that the amortised cost of the loan will change, however this is considered to be a non-substantial change.

The balance will continue to accrue a coupon rate of 17% per annum until repaid. All other material terms of the Loan Notes Instrument remain unchanged.

*Refer to Alternate Performance Measures for full reconciliation of IFRS numbers and Alternative Performance Measures

Appointment of new Director

On 7 April 2020, Adekolapo Ademola joined the Company as a Non-Independent Non-Executive Director on behalf of Midwestern Oil and Gas Company Limited.

Special dividend

On 27 April 2020 the Company announced a special dividend of approximately US$33.0 million (£27.0 million), or 6 pence per ordinary share.

Related Party change in shareholding of Company

On 11 May 2020 the Company was informed that funds managed by Tosca Asset Management LLP had sold 98,000,000 ordinary shares in the Company on 7 May 2020. On completion of the sale funds managed by Tosca Asset Management LLP held 228,771,927 ordinary shares, representing 50.85% of the issued share capital of the Company.

On the same day, the Company was notified that Oisin Fanning, Chief Executive Officer of the Company, acquired 98,000,000 ordinary shares in the Company. Following the purchase, Oisin Fanning has an interest of 107,495,864 ordinary shares, representing 23.89% of the issued share capital of the Company.

Resignation of Director

On 18 May 2020, Bill Higgs stepped down from the Board as an Independent Non-Executive Director.

Covid-19

Subsequent to year end, the oil price has been significantly affected due to the combined effects of Covid-19 affecting demand, and quota disagreements within OPEC regarding how to deal with that reduction in demand, resulting in a period of excess supply. It is not currently possible to predict what the extent of this development is, or for how long it may exist. It is therefore not possible to quantify any potential financial impact. 

10. Share capital - Group and Company

Rights and obligations attaching to the Ordinary Shares

The Company has no securities in issue conferring special rights with regards control of the Company. All Ordinary Shares rank pari passu, and the rights attaching to the Ordinary Shares (including as to voting and transfer) are as set out in the Company's Articles of Association ("Articles").

	Number of New Ordinary shares €0.01 each	Number of Deferred Ordinary shares €0.0001 each	Authorised Equity US$'000
Authorised equity
At 1 January 2019	2,847,406,025	1,265,259,397,525	177,475
At 31 December 2019	2,847,406,025	-	177,475

Issued, called up and fully paid:

	Number of New Ordinary shares €0.01 each	Number of Deferred Ordinary shares €0.0001 each	Share capital US$'000	Share premium US$'000
At 1 January 2018 and 1 January 2019 (Restated)	500,256,857	1,265,259,397,525	150,600	478,666
Issue of shares in lieu of salary (i)	5,590,270	-	63	2,036
Exercise of share options (ii)	250,000	-	3	96
Reduction of capital	-	(1,265,259,397,525)	(144,871)	(459,721)
Tender offer	(50,475,000)	-	(576)	-
Share buybacks	(4,319,113)	-	(47)	-
At 31 December 2019	451,303,014	-	5,172	21,077

* See Consolidated and Company Statements of Changes in Equity

(i). On 25 February 2019, 5,590,270 ordinary shares were issued to Oisín Fanning in lieu of 80% of his salary due to him for the period 1 September 2016 to 30 September 2018.

(ii). On 20 March 2019, the Company issued and allotted 250,000 New Ordinary Shares of €0.01 each in respect of options exercised. The options were exercised at a price of £0.30 (US$0.39) per share.

Reduction of Capital

On 8 February 2019, the Company obtained local statutory approval to cancel all the Deferred Shares of €0.0001 each, this resulted in the release of Share Capital of US$144.9 million, Share Premium of US$459.7 million, a required Special Reserve of US$5.0 million and an increase in retained earnings of US$599.0 million.

Tender offer

On 22 March 2019 the Company announced the result of the Tender Offer, being an offer by the Company to purchase shares from shareholders at 46p per share set out in the shareholder circular published by the Company on 20 February 2019 (the "Circular").

The maximum number of Ordinary Shares authorised by shareholders under the Tender Offer, being 50,475,000 Ordinary Shares, was acquired for a total cost of US$30.5 million. This represented approximately 9.97% of the issued ordinary share capital of the Company, at the date of the announcement.

The Tender Offer was oversubscribed, with a total of 81,177,508 Ordinary Shares validly tendered by Qualifying Shareholders. Qualifying Shareholders who tendered Ordinary Shares equal to or less than their Individual Basic Entitlement had their tender accepted in full. Qualifying Shareholders who validly tendered in excess of their Individual Basic Entitlement had their tender accepted in respect of their Individual Basic Entitlement (being approximately 9.97% of their shareholding) plus approximately 50.23% of the number of Ordinary Shares in excess of their Individual Basic Entitlement that they validly tendered.

All proceeds payable under the Tender Offer to the Company's shareholders were transferred to Computershare on 23 March 2019 for distribution to the shareholders.

As set out in the Circular, the Ordinary Shares were purchased by Cantor Fitzgerald Europe pursuant to the Tender Offer and the Company purchased such Ordinary Shares from Cantor Fitzgerald Europe under the terms of the Repurchase Agreement described in the Circular.

The Company cancelled the Ordinary Shares purchased by it under the Repurchase Agreement, reducing the number of Ordinary Shares in issue from 506,097,127 Ordinary Shares to 455,622,127 Ordinary Shares (the "Cancellation").

Share buyback programme

On 18 October 2019 the Company announced that, pursuant to the shareholder resolutions passed on 27 September 2019 at the Annual General Meeting, it planned to acquire ordinary shares of EUR 0.01 nominal value each ("Ordinary Shares"), up to a total value of US$ 2.0 million (the "Buyback Programme"). In accordance with the shareholder resolutions, the Company is proposed to acquire the Ordinary Shares at a maximum price of the greater of (i) 105% of the average market price of such shares for the previous five days and (ii) the higher of the price quoted for the last independent trade and the highest current independent bid or offer for such shares.

Ordinary Shares acquired as a result of the Buyback Programme were cancelled. The Buyback Programme was funded from the Company's cash balances.

At 31 December 2019 Company had repurchased 4,319,113 Ordinary Shares at an aggregate value of US$1.5 million. Following cancellation of the shares repurchased to 31 December 2019, the total number of Ordinary Shares in issue with voting rights was 451,303,014.

On 22 January the Company announced that it had completed the buyback programme. Under the Buyback Programme, the Company repurchased 5,709,101 Ordinary Shares at an aggregate value of £1,570,085.49. Following cancellation of the final shares repurchased, the total number of Ordinary Shares in issue with voting rights was 449,913,026.

ALTERNATIVE PERFORMANCE MEASURES

The Group monitors the par value of the Loan Notes, which is a non-IFRS measure.

The Group believes that the disclosure of the par value of the Loan Notes will assist investors in evaluating the performance of the underlying Loan Notes. Given that these cash metrics are used by management, they also give the investor an insight into how the Group management review and monitor the Loan Notes on an ongoing basis.

A reconciliation from the value of the Loan Notes under IFRS 9 and the par value is provided below: 

	IFRS 9 Amortised Cost US$'000	IFRS 9 Adjustment US$'000*	Par value US$'000
Loan Notes at 31 December 2019	114,254	4,494	118,748^
Interest accrued on Loan Notes (1 January 2020 to 6 April 2020)	6,783	(1,886)	4,897
Cash receipts (1 January 2020 to 6 April 2020)	(41,500)	-	(41,500)
Loan Notes at 6 April 2020	79,537		82,145

*The effective interest rate is 25% and the coupon rate is 17% (Note 8)

^ Made up of capital balance of US$108.4 million and accrued interest of US$10.3 million

Glossary

2C	Best estimate of Contingent Resources
AIM	The London Stock Exchange's AIM market
AIM Rules	AIM Rules for Companies
BCF or bcf	Billion cubic feet
Bilton	Bilton Energy Limited
B.V.	Dutch private limited company
BVI	British Virgin Islands
CPR	Competent Person's Report
Eroton	Eroton Exploration and Production Company Limited
US$'000	United States Dollars, thousands
ESM	European Stability Mechanism
FSO	Floating Storage and Offloading
Group	San Leon and its subsidiaries
LLP	Limited liability partnership
Loan Notes	$174.5 million principal amount of 17% fixed rate loan notes acquired by San Leon pursuant to the amended and restated loan note instrument dated September 30, 2016 executed and issued by Midwestern Leon Petroleum Limited
Ltd or limited	A private limited company incorporated under the laws of England and Wales, Scotland, certain Commonwealth countries and Ireland
m	Metres
'm	Millions
Martwestern	Martwestern Energy Limited
Midwestern	Midwestern Oil and Gas Company Limited
MLPL	Midwestern Leon Petroleum Limited
MSA	Master Services Agreement
mmbbL	Million barrels
Nomad	A company that has been approved as a nominated advisor for AIM by the London Stock Exchange
NNPC	Nigerian National Petroleum Corporation
NPI	Net Profit Interest
PLC	A publicly held company
San Leon or the Company	San Leon Energy PLC
SEDA	Standby Equity Distribution Agreement
Sp. z o.o.	Polish limited liability company
Sp. z o.o. sp.k	Polish LLP
SPV	Special purpose vehicle

-ends-

 

END

 

 

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