Sapan Gai, CCO at Sovereign Metals, discusses their superior graphite test results. Watch the video here.
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RR, the interest rate and maturity are important considerations. Obviously a longer maturity and lower rate are preferable but do bear in mind, current local currency Nigerian government bonds trade at around 16%, so we are very unlikely to be below those levels. But what I think is much more important is that we are taking away a huge FX mismatch issue. We saw the negative ramifications of this given the recent huge devaluation in NAIRA and the resultant FX losses we incurred given our need to hold large local currency balances (to pay local wages, other local costs) whilst at the same time having to service USD debt. Post this refinancing, those large local currency (Naira) balances (derived from USD-linked long term gas contracts) will be matched to new Naira debt.
Given Nigeria inflation is currently running at 26%, the Naira will continue to depreciate, thus the sooner we get this debt refinance complete, the better. My view is that this would be a big positive for the stock.
TiL - apart from extending the term to match our >$3.5bn of contracted revenues, what would you deem to be good terms and how do you calculate it adding 4/5p to the share price?
Thanks Sajy - I guess the main takeaway for me is getting the debt restructuring completed that in itself would be worth 4-5p to our share price perhaps more depending on the terms of the restructure especially if the restructure is fully aligned with our contracted revenues over 15yrs etc……
I hope there is not a long-stop date that can’t be extended. Alternatively there is also a possibility that Savannah know that the NOMAD will not grant another extension. My thoughts are changing to be that we issue an AD with workstreams outstanding or the deal fails. I hope the former but then the next question would be what would the SP return at and I’d hope for anything above the suspended price. If the later I’d hope return higher than my 15p average.
Much appreciated Sajy. Fingers crossed.
I had a long chat with IR yesterday and it's too long to post everything so will mention what I think were the important points.
Company are still on track to publish AD for South Sudan on or before 15th December. I asked if the company could extend the deadline if work streams not completed and stay suspended. Response was we have not sought advice on that. This was very interesting for me as I asked the same question in September and the answer was we have sought advice and been told we can extend deadline and stay suspended. So the questions arises why have they not sought advice this time.
I asked what the work streams are and was told it is gaining approval from various different departments and then Government approval. AK has been and is still in SS and that is what he has been doing.
Accugas debt refinance is still expected to complete before end of 2023 and will issue an Rns.
Re Chad, some major changes would have to take place for Save to start discussions with the Chad Government and preferred route is still via ICC.
No plans to issue a trading update before the end of 2023.
Not much happening in Niger, it is a wait and see situation for now.
Https://www.africabusinessplus.com/en/817705/chad-minister-abdelkerim-mahamat-abdelkerims-london-roadshow-launches-80m-mining-sector-project/
I wonder if the minister had to field any questions regarding unexpected nationalisation.....
I'm not talking about approval of the deal but in reality it shouldn't take more than six months to sort out a ADM document. Normal practice is to then publish , relist and then wait for approval.. The first extension to 9 months I could except but the last 3 month extension taking us to 12 months is just a poor excuse and I'm surprised the nomad allowed it. Basically in my opinion things are not going well and they are just using it to delay the inevitable bad news.
I do hope they manage to perform some mimical and it isn't bad news but I've resigned myself that it isn't going to be good news on or before the 15th December and if we relist I'm expecting to be down 50% on the day e.g 13p.
As bad as that may be at least it would give me the option to sell up and reinvest what remaining capital I have left from this investment else where as I no longer have confidence in this company.
On the face of it one would think that perhaps 15th December would be the deal or no deal date, being a year from the PSA announcement but even that doesn't hold water as the rns was released on 12th December last year.
The mind boggles.
I had thought that just maybe the 1st Dec could have been Saves own internal hoped for date to publish the adm doc.
After a year, what is it that’s really holding it up and taking it closer to the 15th. What is there that hasn’t been concluded to date that can be done suddenly in the next 14 days to get an adm doc issued ? It was to be issued giving details of the conditions necessary to conclude the acquisition.
It’s baffling after so long that we know so little from the company. They string out the same standard responses but can’t say what exactly the P2 reserves or net production was/is and refer only on query, to the original RNS which gives a gross figure of production but no reserves.
I also think that with all the bad luck SAVE have had that AK maybe consolidating what we have and biding a bit of time. We’ve spent circa $30m - $40m on Doba / Totco / Cotco / Agadem and SS for now hing at the moment. I think AK will be very nervous of committing to another potential large deal until we see some reward from the above. You can only spend $20m CAPEX adding >$300m to debt with no production so many times and I think we are at our limit ATM. Yes Accugas is stunning but it can only support so much. We need to see red lots from something ASAP as we all know so well.
The biggest winners of the oil major divestment in Africa will be local African independents not international independents. May seem like a small difference but quite material in terms of getting government approvals.
Strange thing is Chappal Energies is a newcomer and if they are able to acquire assets producing 25,000 bopd, it just goes to show deal making is art form and not science majors are willing to sell to local new players, it does not matter whether they have previous experience or any of the other criteria
Plus I feel majors might be willing to sell to new african independents if it means the likelihood of government approval is higher regardless of there is experience, as long as they are able to put the capital for acquisition up.
Rocky - would love a deal in Nigeria, I know we had reviewed the Equinor assets in Nigeria OML 128 & OML 129.
Looks like those assets are being sold to a local player Chappal Energies in Nigeria.
https://www.offshore-energy.biz/equinor-disposes-of-its-nigerian-business-and-stake-in-chevrons-offshore-oil-field/
I am sure there are other assets that we could go for.......
I’d like to see us buy in to an oil play in Nigeria with a chunk of renewable projects bolted on to sweeten the Government.
Nigeria budget: President Tinubu says budget offers 'renewed hope' https://www.bbc.co.uk/news/world-africa-67567480
Licence extensions beyond 2026 are surely key. We can hardly sign up if the licence expires in three years' time. This uncertainty exists for ONGC and CNPC too, of course.
I do hope Mr Kiir manages to stay on for a bit...
Komakino - If we go down the route of deemed vs explicit consent it will all depend on the perception of investment climate South Sudan wants to create in it's oil and gas industry and also it's appetite for a long and drawn out arbitration process and also it will highly depend on the banking structure and how the funds are distributed to all shareholders in the holding companies.
When the government which is highly dependent on the oil industry for it's economy, having funds frozen in the event or arbitration and going into a election year could be a political gamble to far, and safe option may be an approval.
However lets wait and see, of course I am still expecting approval to come after the admission document and not in tandem as many have suggested, but nevertheless will not complain if it came all in one although it's not the usual course of how oil and gas deals are completed.
Thanks TiL,
The 2012 Petroleum act states this on pre-emption rights
' 23.Pre-emption
(1) Where a contractor decides to dispose of all or part of its interest under a petroleum agreement, the National Petroleum and Gas Corporation shall have the right of first option to acquire the interest on the same terms as agreed to with the potential buyer.
(2)If the agreed consideration is not a monetary value, the National Petroleum and Gas Corporation shall have the right to pay the corresponding monetary value of the agreed consideration.
(3)The National Petroleum and Gas Corporation's right of pre-emption shall lapse unless exercised within sixty (60) days after receiving notice of the acquisition.'
The recent Caltech fiasco will have ocurred after the 60 days notice so suspect that there's an element of the SS Govt. making it up as they go along. Hopefully the recent court ruling around the Chad situation will caution the SS govt. on trying something similar and will enable us to get this over the line.
Did a bit of research in the approvals process and here is my summary:
The 2012 Petroleum Act of South Sudan outlines the key terms and governance of PSAs in the country, and the roles of companies and the government entities.
On assignments, Article 41(6) states that any assignment of rights/interests requires prior written consent from the Minister of Petroleum. No timeframe is specified.
However, the 2013 Model Production Sharing Agreement issued under this Act does contain more detailed provisions:
Article 1.6 specifies a 90 working day period for the Minister of Petroleum and other authorities to respond to requests for assignment consent, also providing for "deemed consent" if no response after this period.
So in summary:
The South Sudan Petroleum Act requires government approval for PSA interest transfers
While the law itself doesn't specify a response timeframe, the model PSA template under this legislative framework gives 90 working days for explicit denial/consent from the government, after which deemed approval applies, which is standard sellers right's protection in most production sharing agreements.
No not at all Scotpak. It was merely pointing out that the adm doc should be able to come out whether S Sudan completion is imminent or not as in the case of Accugas.
Maybe it’s actually some of the work streams and the data on 64 different fields that’s needs to be agreed over and include in that document hence the delay ????
For me there are 2 big things that need to happen for any chance of price rising on re admission , i SS Deal is done , 2 Acugas finance has been restructured on very favourable terms. We will also be including negatives which will impact SP that have occured since last traded.
Chad nationalisaition and ICC case ( we spent alot of money on this and at present have no sight of a cash return or generation)
Niger: Again spent alot of money here including fund raises at higher sp (some people say the broker put no value into SP for Niger, however the market will be all over the fact that we will have missed another deadline albeit not our fault)
Our debt position has increased (was it a one off currency conversion (we are still getting paid alot in dollars)
I have been in this share along time and the areas in which we operate currently offer more risk than reward and that needs to change.
So AK pull your F--kin finger out
He isn't suggesting that at all, just stating a fact that we waited nearly 2 years for Govt approval after adm doc issued and resumed trading.
You are suggesting we should brace ourselves for a 2yr wait for completion of south sudan?
On the Save website media section.
Adm doc for Accugas acquisition released and resumption of trading in Dec 2017.
Completion November 2019.