San Leon Energy pulls out of Turkey deal

14th Apr 2014 10:49

San Leon Energy is bowing out of a deal buy interests in Turkish oil and gas production.In September the company had agreed to acquire 75% of Alpay Energi. However, San Leon said it will no longer proceed after technical analysis of the Turkish firm's assets revealed a number of challenges. San Leon identified operational problems in the ramp-up of Alpay's production, relating to the amount of formation water being produced in the Hamman well. It also noted Alpay's loss of customers and a material devaluation of the Turkish lira against the US dollar amid weakening currencies in emerging markets. The group said its capital would be better invested in Poland, following a number of breakthroughs in shale projects in the country."The main rationale for the Alpay transaction was to provide cash flow to the company," Chairman Oisin Fanning said in a statement."However, subsequent deals in Poland, the company's core operating area, have positioned Poland to deliver cash flow and production more efficiently, enabling the group to reach its target of becoming at least break-even on a cash flow basis during 2014."Given the increased risk to achieving the projected Alpay production targets and cash flows envisaged at the signing of the SPA, the board has taken the decision to allow the SPA to lapse."Shares fell 2.87% to 3.38p at 11:00 on Monday. RD