Make a bid for San Leon

But while this flurry of activity all points to a sale, shares in the Aim-traded company have spent all of 2017 trading below 60p. Now, at 49p, the share price not only represents 60 per cent upside to the indicative Geron proposal, but is also half the net-asset-based valuation broker SP Angel has ascribed. Whether or not a definitive bid materialises, we think investors have a value opportunity on their hands.

We should state up front that the industry and geography San Leon is involved in make this a high-risk stock. There are also two important caveats to the picture above. The first is that Geron's 80p bid was floated when talks were at a preliminary stage, and no binding commitments have since materialised. Nonetheless, it is clear that Geron remains interested, as management recently visited OML 18, San Leon's prized asset in the Niger Delta, as well as anearby chemical plant.

The second caveat involves concerns around OML 18, the major producing field in which San Leon acquired a 9.72 per cent economic interest last August. There is little doubt about the quality and scale of the asset, which boasts gross proven and probable resources of 576m barrels of oil and condensate, 4.2 trillion cubic feet of gas, and enormous "exploration upside".

Last month, San Leon told the market that pipeline losses and interruptions to exports meant sales averaged 30,969 barrels per day (bpd) in 2016, a third below expectations. That's well below current production of 56,000 bpd, and partly explains why San Leon has only received $5m (£3.9m) for its share to date. But San Leon's OML 18 ownership structure provides some reassurance. Most profits this year and next are expected to come from the repayment of the $175m loan note, which carries a 17 per cent annual interest charge, and San Leon has guarantees covering payment by 1 October of an initial $58m now due.