Siekierki Update

RNS Number : 6035F

San Leon Energy PLC

28 April 2014

 



28 April 2014

San Leon Energy Plc

("San Leon" or the "Company")

Siekierki Update

San Leon Energy is pleased to announce it has agreed key commercial terms with Baker Hughes Poland Sp. Z.o.o. ("Baker") (together "the Companies") on the Siekierki gas field development on Polish Blocks 206, 207 and 208. The Companies are now moving forward to finalising transaction documents.

In February 2014, Baker signed a Letter of Intent ("LOI") to bring the Siekierki gas field into production. Commercial discussions and operational planning have progressed significantly since then in an effort to ensure workovers on the four Trzek wells are carried out in the summer and production is established as quickly as possible.

The work will be divided into three phases, with Phase Two dependent on the results of the first phase. Phase 1 encompasses the workover and testing of the Trzek-2ZH and Trzek-3H wells, permitting and commercialisation planning. Phase 2 includes the workover and testing of the Trzek-1 well and construction of a water disposal well, plus well permitting and commercialisation planning. The Krzesinki-1 well will be subject to further evaluation and will be included in Phase 2 at Baker Hughes' sole discretion. Phase 3 includes the design and installation of facilities and transport infrastructure necessary to begin sale of hydrocarbons from Phase 1 and Phase 2 wells.

In return for its funding of the above phases in the form of cash, in-kind oilfield services, or a combination of both, Baker will receive an undisclosed return on this risked investment from 75% of profits generated from production until Baker's investment has been fully recovered. Baker will also receive a net profit interest ("NPI") of 10% in any wells that they fund during Phase 1 and Phase 2, with the NPI to begin as soon as full recovery of Baker's costs has occurred. The duration of the NPI is expected to constitute the large majority of the wells' production period. The Companies will explore cost-effective solutions for funding Phase 3, which may include Baker funding the facilities.

Baker services will be provided at their standard prices and based upon a Master Service Agreement to be agreed between the Companies.

Baker will also receive a right of first refusal to provide services at competitive market rates for the full development of the Siekierki Field. The Companies may also agree to Baker providing the funding for a full field development (post Phase 3), which if invoked, will be on the same terms as provided for in Phase 1 and Phase 2.

Permissions are already in place for much of the Phase 3 development and associated infrastructure, meaning a fast-track route to production is planned. The Company also has permission for water disposal wells at Siekierki.

Oisin Fanning, San Leon Executive Chairman, commented:

"The goodwill and co-operation on this venture has been remarkable and we would like to thank all the people at Baker for their commitment and dedication to this project. We have agreed key commercial terms and are now finalising transaction documents. We expect a joint press release will be issued in the near future when final documents are signed. In the meantime, technical and operational teams from both companies are putting plans in place for Phase 1 testing and completion."

For further information contact:

San Leon Energy plc  Oisin Fanning, Executive Chairman	[phone]
finnCap Ltd  Corporate Finance Matt Goode Christopher Raggett Corporate Broking Elizabeth Johnson Joanna Weaving	[phone]
Fox-Davies Capital Limited Daniel Fox-Davies Oliver Stansfield Jonathan Evans	[phone]
Macquarie Capital (Europe) Limited Steve Baldwin Nicholas Harland	[phone]
Westhouse Securities Ltd Nominated Adviser Richard Johnson Antonio Bossi	[phone]
Vigo Communications Financial Public Relations Patrick d'Ancona Chris McMahon	[phone]
Instinctif Partners Investor Relations Adviser David Simonson Catherine Wickman	[phone]
Plunkett Public Relations Sharon Plunkett	[phone]

Qualified person

Joel Price, who has reviewed this update, has 20 years' experience in the oil & gas industry and is a member of the Society of Petroleum Engineers. He holds a BA in Natural Sciences from Cambridge University, an MEng from Heriot-Watt University, and an MBA from Durham University. Joel is Chief Operating Officer for San Leon Energy and is based in San Leon's London office.

 

END

 

 

MSCBDLLLZZFEBBD