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Savannah's Nigerian business continues to deliver strong and consistent operating performance; however, the interims were heavily impacted by the Naira harmonisation since mid-June. The Petronas South Sudan TO is progressing, although publication of the Admission Document and the resumption of trading has slipped into Q4. Our forecasts remain under review ahead of this publication. This is a very substantial transaction for Savannah, especially at US$90+/bbl oil prices, which will be transformational for the company, providing a platform to build a material business through further regional consolidation opportunities while extracting synergies with Savannah's existing operations.
- Solid operational performance offset by sharp currency swing. Savannah's interims to end-June
saw robust operational results from its Nigerian business tarnished by the Nara harmonisatior that has seen the currency tall 40% against the dollar since mid-June. Average gross daily production increased by 12% to 25.3 kboepd. Total Revenues and Adjusted EBITDA both increased by 8% to US$139m and US$108m, respectively. However, a US$54m unrealised FX translation loss due to the devaluation of the Naira saw the net loss from continuing operations widen to US$45m. The Naira devaluation also caused a US$66m dent in cash flow and was responsible for a 9% increase in net debt to US$443m, despite debt repayments of US$74m during the period. The one positive is increased liquidity in Naira FX markets should aid Savannah's refinancing.
- Guidance reiterated. Total Revenue and opex guidance for the year were reiterated at "greater than US$235m" and "up to US$75m", respectively, although capex guidance has been cut from
"up to US$60m" to "up to US$30m" due to capex rephasing, unsurprisingly in Niger following the recent coup which has resulted in logistical challenges importing the necessary equipment
for its planned well test programme. A further update in relation to timing will be provided in 04
2023. A USS12m impairment was taken for the Chad assets that were nationalised - a pity, as these generated a US$60m pre-tax profit in the period.
- Renewables growing rapidly. The expansion into Renewable Energy is moving at pace with several new projects added to the development portfolio, which now totals 676 MW of projects across three countries, with the company pursuing a target of 1 GW+ of projects by mid-2024.
- Petronas acquisition. The TO of Petronas's oil assets in South Sudan is progressing, although the expected publication of an Admission Document (and the subsequent resumption of trading) has slipped to "on or before 15 December 2023". So far, these assets have not been impacted by the civil war in neighbouring Sudan, through which all of the oil is exported.
J.D - Work some magic whilst you are out there buddy................................................
I will be attending TIL.
After all the recent SS speculation coupled with today's disappointing news, drastic action is required methinks. Lets see if I can get the SS deal back on track by treating a certain SS delegate to a trip to Mavericks, buying lots of drinks and having a camera handy......
Just a bit of light-hearted humour to get above the gloom .....
Is it possible that the CHAD situation has affected their ability to close a re-finance deal?
What now the chances of SS completing? Is 50/50 a realistic view or others more/less optimistic.
Hindsight is afine thing but in retrospect is anyone really surprised. I suspect that AKs risk appetite is too high and I have also been like that in my life and have suffered very bad consequences as a result. The strategy should be adjusted to be more conservative and lower risk imo
AIM- much appreciated.
Refinancing the debt... my expectation is due 2 things, to needing to prove to debt providers we have a reliable cash flowing business which we now have and reluctance to provide debt due to no faith in the Niara at an exchange rate of 400. Now after the biggest devaluation in the last 20 years coupled with the fact that oil is being fiercely defended at $80 by Saudi this gives bond holders confidence they will not loose purchasing power on this transaction
AimHardy -Welcome mate..............................
Good to have you on board. I am confident to that we will have another acquisition as well. let's hope with the next one we can actually return to the market with an AD...........................
Can someone please tell me in layman’s terms what the issue is with trying to refinance the debt. Why is it taking so long. AK seems to have been mentioning the refinance for years but nothing materialises.
It has been a very frustrating 12 months and feels as if everything possible has gone against us. IMO If this was trading today it would be a buying opportunity. For traders its painful but for longer term holders its just a bump in the road. Is all the bad news now out the way?
What am I looking at?
-We are now consistently making $200m EBITDA per year
-Terms have been agreed with Niara debt providers and will conclude very soon. This totally transforms the risk profile of Accugas and is the beginning of realising true fair value of 62p for the asset over the next 24 months
-We have to my knowledge been winning the majority of the court rulings regarding CC nationalisation and stands us in good stead to receive compensation and damages for the abrupt nature of the Chadian Govt. I expect roughly $100m net profit from the failed transaction and $500m in total which once materialises (might be 24 months) will be a huge boost to wiping off future debt from acquisitions
- Regarding Niger, Benin has assured China that their pipeline project will be allowed to progress, I expect a delay to first oil but expect 5k bopd within the next 12 months, again just a delay to realising revenues from the asset
[LINK REMOVED]
- Regarding SS its hard to determine what will happen but I would hope AK has learned his lesson from Chad and not to progress unless SS full support is given and the debt payment contract is based on oil flowing and will be halted if flows stop due to sudan war
- I am confident another acquisition is in the pipeline and will be announced within the next 3 months regardless of what happens in SS
Overall, as always when operating in Africa there are bumps in the road and delays with things that could have gone better but slowly and surely we are grinding towards becoming a larger more resilient company and when you zoom out over a 5 year period I have every confidence this will be just another bump in the road on Savannah's journey to becoming a multi billion £ co
ShoreCaps net debt profile was for end 2020 $408m, 2021 $370m, 2022 $404m, 2023 $257m.
"Net debt at the period end" (30/6/23) "admittedly increased to $443m compared to $405m at the end of last year although this appears to reflect in particular the unrealised foreign exchange losses associated wit the Naira devaluation."
It does fluctuate mid year somewhat positively or negatively over the course of the full year but this half year was a tougher one but hopefully and from i can see a short term hurdle.
The FX loss was $54m from the Naira devaluation - which is said to benefit SAVE post devaluation going forward. This has been accounted for in H1.
The payment of $44.9m from SNH in COTCo has been accounted for as recieved as i can see.
The net debt stands at $443m 30/6/23.
Full year end i think with the one of FX devaluation hit it should be below $400m based on the Nigerian/COTCo assets
We gained the Cameroon asset and the remainder of the COTCo interest pro-rata value imo should account for $135m.
Without that COTCo element we would be still on track for about $257m year end - perhaps in time sell it post resolution if no strategic importance without the Chad oil assets.
All in, I still believe we are on track to be net debt free in 24 months as the original envisaged timeline on Nigeria.
Accugas is performing very well and it's fortunate that they added those new gas contracts over the last 18 months and continue to do so.
There's costs that have been added for the acquisition strategy so if these aren't successful, those won't be re-occurring along with the increased head count which could be cut back imo.
On reflection and balance i'm fine with it but i do want to see a a significant acquisition completed to move us up a gear.
PART 2
Are SAVE still looking to undertake new M&A in as I would like to see us sort out our core business before we take on any more risky, very expensive M&A activity? I'd like to see debt sorted, compression completed and new customers added in Nigeria before we take on any other deals. Personally I think we should work on a consolidation plan for a period of time.
3 PR
We are being given very minimal information with regards current activity and current / future strategy. We only hear from Andrew when he feels compelled to do so. Can I ask that you put together a Webcast / presentation to be delivered to PI's with a'live' Q&A and not pre-submitted questions? On this note can I also ask that Andrew speaks a bit slower and more clearly as when he's in Africa, I really struggle to understand what he says. I note that we were promised an informal night (meet the BOD) for PI's with nibbles etc which has not yet materialised. Could I please request that you put something on for us sometime in Q4?
As I say, I have many many more questions but if you could kindly focus on these 3 areas I would greatly appreciate it and look forward to a timely reply.
Kind regards
Xxx
Indeed Moho.. and I didn't say it was in my post? ( suspension extension is now granted .. read Moho's post below instead of calling the Nomad.. as the latter would feedback something along the same lines.. imho)
PART 1
Some might call me Captain Hindsight but I don’t care! On reflection and having read today’s RNS, we are clearly not in a good place and in my opinion, the overall risk profile of the company is way beyond what we should be taking on for the size of company we currently are. I am not the CEO but I seriously think we need to consolidate / secure the companies future before taking on any more M&A. The opportunities we are chasing will be there for a long time. So here goes:-
To Sally Marshak
Cc Andrew Knott
Hi Sally
I hope you are well and I can well imagine how busy you are...
Following today's RNS, I have a few questions if I may? I do in fact have a multitude of questions if the truth be known but I will focus on my main areas of concern. Whilst I accept that we have had bad luck with regards Covid, Ukraine and African country issues, I believe our overall company risk profile is far too high. Many other companies have successfully navigated their way through similar issues far better than ourselves and I'm extremely disappointed where we're currently at. Having been invested for 8 years, this is by far the poorest H1 or final report I have read.
1 Debt
We have known about this issue since the completion of the 7E RTO. We have also been working on it for in excess of two years with several 'expected dates' for closure missed. How on earth have we ended up in this situation whereby failure to renegotiate or refinance our current debt will seriously jeopardise the going concern of the whole company?
Why was this not completed to stabilise, underpin and safeguard the company before we embarked on our very risky M&A activities?
2 M&A
Having had a team of people conducting due diligence on over 20 potential opportunities in multiple countries, why did we decide to go in to 2 (Chad & South Sudan) of the most corrupt, dangerous and untrustworthy jurisdictions in Africa? With only Accugas underpinning the company, why did we not take on lower risk profile M&A opportunities before taking on these very cheap, very high risk deals?
What is going on with the South Sudan deal? After all the recent press speculation, why have SAVE not updated the market? If this press speculation had occurred while we were trading, the share price would have tumbled and I'm sure you'd have had to issue something. Why is this different while we are suspended?
How many cases do we have with the ICC, what is their current status and do any of them have hearing dates listed?
Perhaps we need Sunbed from Advfn to put a call into the Nomad think he has spoken to them before...................
NtoM. Imv, the absence of good news is not a reason to extend the suspension. The only faint glimmer of hope is that AK must have waved something under the Nomads nose to convince them that SS was still potentially on. If it's another deal they are working on then this should totally be disclosed as the reason for another suspension.
I was reasonably confident this suspension would be extended and am -plenty - thankful it has been.
A key thing here is that this relists at a time of decent/good news/sentiment. Now is not that time . And here's hoping AK can manage to achieve meaningful positive outcomeS soon/ish towards finding that time.
Generally, I rate AK highly but understand Africa is a brutal table to play poker at.. and more so around now than previously in Save's existence. He needs firmly luck on his side . It categorically hasn't been so far in 2023.. and fingers crossed this changes soon; it can ...and needs too.
Re lack of news while in suspension from save.l: As per the AIM World over, good news is updated quickly and widely and bad news not updated and buried as much as possible.... And there has been little good news for a fair while.
Still, I expect the second half year in Nigeria to be better than the first half... and believe South Sudan or an other deal has a small towards medium chance of completing in this calendar year.
Good luck to all fellow holders here!
The going concern statement was also made in last years accounts.
The Nigeria devaluation has happened every year around May/June for the last few years, and there’s claw back mechanisms.
Agree with Zengas, we need a presentation and Webinar - the company I think is now hiding behind these suspensions and not being forthright with shareholders.
We do have £45m from Cotco sale to come through, not received yet from these results.
I think this extension will buy us time to complete an SPA where we can release an admission document...............................
We know that the company have worked up all the technicals on assets and it wouldn't surprise me if another deal lands prior to SS and there is plenty of evidence of that from my linkedin post.
I believe if we should ideally strike an SPA on a Nigerian asset and release an admission document covering the new asset and let SS fester in the background.....................................
One thing I still cant get my head around is the SS admission document does not need explicit approval to release the admission document so I get the wish is to come back with approval but not required.
Are we all just assuming that the government approval is the only thing that's blocking this.................................................. who knows...............................................................
Shore’s note hardly touches on anything. Just repeating the numbers. Malcy will do the same. Doubt ak will do any interview. I’m only interested in our real/current core business in Nigeria. Don’t think SS will complete. Millions of reasons the government should say yes but only one word needed: no. Think the company had not been upfront with us on many fronts. Too many unanswered questions. A little worried to say the least.
Looks like yet another of the uber-bull poster's predictions has gone off rails - debt reduction. Where's that net zero debt expectation now, eh?
So glad I disposed of 90% of my holding before suspension. Will be lucky to get 20p'sh for the remainder when it re-lists.
..to say the least, and not many positives to take away. Especially disappointed on the debt issue which is about the one thing within their control and not made any notable progress. I imagine there has been a fair bit of back and forth with BDO and the Board on the nature of the qualification. Hopefully this will push the debt reorg to the top of the priority list. No update on SS and possibly to be expected as they probably haven't got much idea where they stand either. I'm sure SS will want to keep them dangling as long as possible while anyone and everyone in govt is trying to wangle some other deal that benefits them. I can't see it progressing. Time to retrench and focus on Nigeria and debt reduction for a period imo. Also want to see it back trading asap, as I feel shareholders have been left in the dark - even if only on simple ops updates, but the suspension been used as a convenient excuse not to feed the info flow. I'd be astonished if anything changes between now and mid December.
Savannah has released interim results for the six months to June 2023, reporting total revenues and adjusted EBITDA of c.US$139m and c. US$108m, respectively - representing a healthy 8% year-on-year increase on both measures. In our initial trading comment, we erroneously stated that these represented c.47% of our FY23F forecast - the percentage is in fact somewhat lower, although (in the circumstances) we see little reason to revisit numbers at this juncture. Adj. EBITDA margins were ahead of our expectations at 78%, with the only change to prevailing guidance being reduced capex to reflect the rephasing of certain planned projects in Niger and Nigeria.
Supported by robust customer demand and a number of new and extended gas contracts in Nigeria, average gross daily production increased by 12% to 25.3mboepd - comparing very favourably against our forecasts. Net debt at the period end admittedly increased to c.US$443m (compared to c.US$405m at the end of last year), although this appears to reflect in particular unrealised foreign exchange losses associated with Naira devaluation, which we would agree are likely to be of assistance to Savannah's previously-announced refinancing initiatives
Overall, we consider Savannah's operational performance in the first half of this year to be strong, with the company also confirming continued successful expansion of its renewables division.
However, a key takeaway from this morning's results statement is clearly the fact that publication of the AIM admission document relating to the major South Sudanese reverse takeover transaction is now expected to occur on or before 15 December 2023, with the shares to remain suspended in the meantime. We will obviously continue to look forward to admission document publication, forecasting material organic revenues, profits and cash flow in the meantime. Our last-published Risked NAV estimate stands at 45p/share.
Zengas - Shore and Cavendish have posted on research tree so if you have access to those, and happy to share apologies i dont have access to researchtree
https://twitter.com/research_tree/status/1707667828671733776
https://twitter.com/research_tree/status/1707672849341632574
From the 2022 final report:-
FY 2022 average gross daily production from the Nigerian operations was 26.8 Kboepd, a 20% increase from the average gross daily production of 22.3 Kboepd in FY 2021;
·Of the FY 2022 total average Nigerian gross daily production of 26.8 Kboepd, 90% was gas, including a 23% increase in gas production from the Uquo gas field, from 118 MMscfpd (19.7 Kboepd) in FY 2021 to 145 MMscfpd (24.2 Kboepd) in FY 2022
From today:-
Average gross daily production from Nigerian operations was 25.3 Kboepd, a 12% increase from 22.5 Kboepd during H1 2022. Robust customer demand led to a 15% increase in gas production from the Uquo Field to 138.5 MMscfpd (H1 2022: 120.3 MMscfpd)
H1 this year is clearly strong compared to H1 last year but how is H1 this year lower that than the 2022 averages for boepd and UQUO gas? Either H2 last year was extremely strong for some reason or we have had a very poor H1 this year.
I’ve read todays announcement again and being brutally honest, apart from a few crumbs, I am really struggling to take any positives at all. Is it time to put M&A on hold for a bit and straighten out some of the messes we are currently in? Maybe as TiL says just focus on Nigeria 100% for a year or two and bring in a solid deal or two to help Accugas underpin our company before we go in to other countries.
We won’t get it but we really need AK to get on a Webcast with us or as a worst case scenario get an interview with Malcy or somebody.
There’s a Panmure Gordon 8 page note out. I’m not a client and it’s not accessible on research tree.