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A, your latest update from the company? Thanks.
SAVE and Petronas pushed hard to get the deal over he line by 28th July but that clearly did not happen. I don’t know how many or what the outstanding work streams are but there are more than one. I do know that South Sudan were still a bit twitchy about losing a major in their country and being replaced with a junior. I can’t find out why that is but find it a little surprising as we are not operator and are prepared to reinvest heavily in field development, something Petronas had not done for some time.
I am told that things literally grind to a halt in South Sudan which is their main holiday month. Additionally our City boys disappear for the same month for 4 or 5 weeks.
Therefore, as I he deal did not close by the end of July, SAVE decided to give new guidance of end September, allowing them a good 4 weeks to tie everything up when South Sudan re-opens for business and our City boys come back to their 6 hour working days.
SS gov, Petronas and SAVE need to come up with something meshing that gives some reassurance to the SS gov that all will be OK when Petronas depart. I’ve not been told anything about a leaving fee as in Chad but I suspect a package is being worked on.
SAVE are working as hard as they can and are confident they will get this over to he line. Whether it will be before the end of September or after is anybodies guess.
RR - My post on 21/7/23 12:45 i gave no mention to Niger in it and unaware of the Coup which was to happen a week later.
That post still reflects my main concern at the moment and also closing the next deal.
On Niger i was consigned to at least a further year of waiting after they said at the agm no new exploration drilling until self funding or a partner.
S.Sudan at 55k bopd on $70/b oil = some $1.4b + $300m from Nigeria = $1.7 billion.
Reaching a full 5k bopd in Niger even at that rate mid-late next year when fisrt commercial oil is up and running (different to test oil) is roughly $128m revenue using the same $70/b oil so would have brought us to around $1.83b.
In all Niger at 5k bopd would be 7% of total revenue and i didn't envisage that kind of revenue kicking in until H2 next year - so at most perhaps represents 3% in Q1 2024 so right now it's no major concern to me. I expect if the next hyrocarbon asset is closed this year it may be 1-2X that of what Niger would be bringing on stream.
It's in that context i am not worried in the next 6-12 months re Niger and i'd rather see ECOWAS sort it out and take whatever strong action is necessary as it may render them pointless.
Temper that with no spend being made in Niger in that time if things can't continue as normal. That would actually mean net debt reduces all the more in the meantime if those renewable deals can't be sanctioned as the cash wouldn't be spent. We were to put up an expected 25% of the costs thereby incresasing net debt.
Renewables this years a/ report P34
Windfarm Niger expected to sanction in 2024 generate first power 2025-26 window (P72)and therefore revenue. Cameroon Hydro sanction sometime in 2024 with first power in 2027-28.
My worry isn't Niger or the renewables that can be pegged back - it's completing on S. Sudan and the following hydrocarbon acquisition.
The renewables team aren't much of a drain in context. The staff numbers were built up for hydrocarbon and potential renewables acquistions. Weigh that up to with the added gas contracts that came on along with Amocon in late May.
Rockyride - whether we get acquistions over the line remains to be seen however i have always said they need to be more aggressive. I would call 2023 a success if we can add another 100 mmscfd worth of gas contracts to our current production as that would take us to 40,000 - 50,000 boepd. I honestly think that should be as a priority as new acquistions and don't think it should be sidelined. If I was andrew I would be working towards maximising the pipeline.
So all in all I don’t feel very comfortable at the moment. This is not me blowing hot and cold, it’s just a couple of posts as how I genuinely see our situation. Maybe Zengas (hopefully) will come back with a more upbeat view of life here. I have been happy overall with AK’s strategy, as risky as it is but at the end of the day he has been bloody unlucky and that is the risk we all take - most of all him personally.
So in the meantime I think we need to see in the short to medium term:-
Compression project successfully completed at Accugas
Nigeria to remain a stable nation and more new gas customers added and existing customers taking more
Debt re-finance to be completed. We’ve been promised this for years now and inflation / interest rates have risen exponentially over recent times
Hopefully the democratic administration will be restored in Niger but who knows
If the above happens, well test and first oil would be great to see along with the continuation of the renewable projects
South Sudan to close ASAP and resumption of trading
At least one more M&A this calendar year in the hydrocarbon space
I think we will see more renewable deals signed but as a medium term holder, these do not personally excite me
I’ve always wanted to see a dividend and this has not happened due to failed deals and nationalisation of oil in Chad
If South Sudan closes, I think we could see a dividend announcement in the 2023 finals but if it fails we are a long time off
No doubt there will be other things that people would like to see but that’s just a quick brain dump from myself. At the moment, we are definitely a one-trick pony and we need two ponies doing tricks very very soon.
Clearly with the understandable lack of RNS’s we have no idea what is going on in the company. However, outside South Sudan and Nigeria, the other countries of interest seem to be fraught with problems. Whilst this is the nature of the beast, we could not have envisaged Doba being Nationalised or the trouble arising in Niger. We all know, or at least should know that investing in companies operating in Africa is towards the higher risk of investments but we do seem to be having our unfair share of luck. We are very lucky to have a crown in the jewel still running well in Nigeria but at the end of the day, that is all we have until hopefully South Sudan closes within the next 2 months or so.
We need to close a revenue generating deal as a matter of urgency in my opinion. AK has modelled the company FTE to be a very large power generating company in Africa with an aspiration to be No 1. The headcount number in London is now huge and all paid extremely high salaries. What will all the people do in the renewable team if much more goes wrong there? Where are we left witht he projects in Niger at the moment? I know for a fact that many many staff have being flying to a large number of countries in Africa for 12 months plus now and the cost of travel and subsistence is very significant.
All this added to our M&A transaction costs must be causing a drag on the profitability of the company. To throw a few very rough figures out there, this could well be what some of our cash burn looks like:-
Exxon Chad transaction cost circa $20m + was it $170m of debt and large dilution? Looks like we’ve lost the Doba and Totco assets now and will hopefully be awarded a large sum by the ICC sometime within the next 18 months. But it’s a bit like filing a CCJ against somebody or organisation, they are often won but getting your cash is a different story. In the UK you can apply to the high court to appoint a bailiff who will then try and get your cash. However, if Chad lose the case and decide not to pay, who is the bailiff? Hopefully we could take the cash from listings in Cameroon but who knows?
Transaction cost for the failed Petronas Chad deal $10m to $20m spent for nothing!
A large renewable team set up on very high salaries. Hopefully we will see new renewable deals signed but when will we see any revenue from these. More MW seem to be falling off the books than going on. We have taken on a 75MW project in Cameroon that the Chinese walked away from mid-project, no smoke without fire eh? And where will we be left with the 450MW of deals in Niger. We have been working on these for over a year now and were hoping for project sanction next year. Hopefully our ARB oil will still be OK but I think there is a big question mark over the 450MW.
SS must be costing around $20m to date and there is huge pressure on the company to close. Some of the legal team being used can be charging $5k per day here and should it fail we will be hit hard.
"The presence of Western forces was far from universally popular but the country was receiving hundreds of millions of euros in annual financial aid and military assistance. That has now stopped. "
This is the problem in a nutshell isn't it?
For a country as resource-rich as Niger and which powers the French nuclear industry, it should do well enough to get a fair price for what it extracts and sells.
A reason why African countries like Burkina Faso are turning to Putin, is because they have had enough of being labelled basket cases while France reaps the benefits.
The protests are not anti-western, they are anti-French. Whilst the Wagner group may want to take advantage of the situation, that does not mean it will happen. The coup leaders will probably want protection from Islamist incursions, but Britain and America (if willing) can fulfil that role. Time will tell, but Wagner group are not as strong as they used to be.
It’s too early to know how this will play out. But if things continue at they are, I think the best we could hope for is that the Chinese / CNPC and the ARB oil production are left to be business as usual. Would the Jaunta / Wagner / Russia take on the Chinese here and the $4bn pipeline they are due to complete within the next 5 months?
Even though technically we have no value attributed to the share price for Niger you can bet your bottom dollar that this will have a negative impact through pure sentiment when trading resumes unless SS Government sign is in the AD.
At some point The West will have to step up or completely abandon Africa which bearing in mind the Migration issues (would be a stupid thing to do) These Juntas are in it for themselves and Wagner are willing to facilitate that for mineral contracts.
I believe France will finally step up here they have Everthing and Nothing to lose but inaction again will show weakness.
There are no good options in Niger. The West looks set to lose its strategic counter-terror bases there and military intervention by Ecowas would almost certainly lead to a civil war.
The current evacuation of French nationals is quite likely to be followed by the abandonment of US and French military bases and the departure of their 2,500 troops that have been engaged in helping Niger fight jihadist insurgents.
So who benefits from all this? Certainly not the population of Niger.
The presence of Western forces was far from universally popular but the country was receiving hundreds of millions of euros in annual financial aid and military assistance. That has now stopped.
Russian flags have appeared on the streets suspiciously quickly, so it is likely that Russia's Wagner mercenary group will be looking to fill in behind the departing troops.
And for the jihadists of Boko Haram and the al-Qaeda and Islamic State groups active across the Sahel, all this disruption and uncertainty is a strategic gift.
Spain, Italy, France and Germany tell their people to leave Niger and rescue flights are being arranged. The UK tell people to stay indoors while the Foreign Office assess the situation. Our Government are pathetic.
If wagner go in to Niger there will be a price to pay by the Junta in terms of minerals and oil we will be vulnerable, China won't , they have already arrested the mines and oil ministers.
You'd hope China's interests and presence in country would stop things going too far.
Appears to be escalating, i can see the French going in hard here as it is there last hope in the Saheel, what does ECOWAS do now after the threat of war from russian backed Mali and burkina faso. Will this become the Proxy war between russia and the west ?
Guess the Q4 well testing will become embroiled in this mess.
Niger coup: France to evacuate citizens after embassy attack https://www.bbc.co.uk/news/world-africa-66370002
The author, Emmanuel Njoh, has shown to be very pro-Savannah in their previous articles so makes you wonder how balanced the article is. There could well be some connection to Savannah it is so flattering!
Ultimately it is what the tribunal decide that will determine the outcome for us all, good or bad. Hopefully it's sooner rather than later, as well as being positive.
Meanwhile here's a short note from Bloomberg on the news, as posted by ice31 on ADVFN:
Chad’s Bid to Block Savannah From Pipeline Rejected by Court
Monday, July 31, 2023 05:12 PM
By Katarina Hoije
(Bloomberg) --An international court rejected Chad’s bid to block members of Savannah Energy Plc from the board of the Cameroon Oil Transportation Co.
The African nation has challenged a $407 million purchase by London-based Savannah of assets including a stake in Cotco, saying the final terms were inconsistent with those shared with the authorities a year earlier. The dispute escalated in March, when Chad nationalized the assets on its side of the border, including Savannah’s share of the more than 900-kilometer (560-mile) Chad-Cameroon oil pipeline.
In its July 28 ruling, the Paris-based International Court of Arbitration annulled decisions taken without the participation of Savannah.
Chad, which owns 54% of Cotco, had asked banks that manage the company’s accounts not to act on instructions from Savannah directors to transfer any funds and voted for the board to be replaced.
“Savannah Energy’s mercantile aims cannot outweigh Chad’s vital economic stakes,” the government said Monday in a statement after the ruling.
Savannah declined to comment.
Chad has been under military rule since 2021, when Interim President General Mahamat Deby replaced his father, former President Idriss Deby, who the army says was killed fighting rebels in northern Chad.
Https://www.237online.com/la-transaction-petroliere-savannah-exxonmobil-un-tournant-decisif-dans-le-litige-tchad-cameroun/?utm_source=dlvr.it&utm_medium=twitter&utm_campaign=la-transaction-petroliere-savannah-exxonmobil-un-tournant-decisif-dans-le-litige-tchad-cameroun
In the heart of Africa, Cameroon and Chad play a vital role in the field of hydrocarbons. Savannah Energy, a British oil company specializing in Africa, recently found itself involved in a dispute with Cotco, a major player in the oil industry in the region. The case, which has garnered international attention, highlights the challenges of governance and investment in Africa.
The oil dispute explained
Savannah Energy has reached an agreement to acquire 41.06% of the shares of Cotco held by ExxonMobil, with a clear intention to improve oil activities in the region. This bold move led to legal and administrative disputes, notably with the Chadian government. The dispute came to a head during a hearing at the International Chamber of Commerce in Paris.
The acquisition contract, concluded in December 2021, was of key importance for the region. With a total amount of more than 359 million USD, the transaction promised to breathe new life into local economies. Savannah Energy, proactive and transparent in its actions, followed all the necessary steps to ensure a smooth transition.
Savannah Energy's Position
Savannah Energy, in its quest to strengthen the African oil industry, has acted with integrity and professionalism. Despite the obstacles encountered, Savannah Energy maintained its position and worked closely with the governments of Cameroon and Chad.
By showing unwavering resilience and commitment to the region, Savannah Energy positions itself as a reliable and enduring partner. Their approach, focused on growth and development, is helping to build a more prosperous future for Africa.
The role of Cameroon
Cameroon, a key partner in this business, has a unique opportunity to show its commitment to growth and innovation. By supporting responsible and ethical investments like the one offered by Savannah Energy, Cameroon can usher in a new era of economic prosperity.
The dispute between Savannah Energy and Cotco is more than just a trade dispute. It is a symbol of change and evolution in Africa. By standing firm for its rights and acting ethically and transparently, Savannah Energy represents the future of the oil industry in Africa.
The world is watching, and Africa has a chance to shine. Savannah Energy's determination to pursue this project despite the obstacles demonstrates a commitment to development that deserves respect and admiration.
For more information on this case and other relevant news, visit 237online.com.
Great stuff Zengas - cheers. And hey wouldn’t it be spooky if we resumed at the SP I’ve banged on about for years, the magical 89p?
I’d be over the moon with that and I’m sure it would be seriously life-changing for a few peeps on here.
When might we see the stock "un-suspended" do you think ?
RR -
On the 14th July 2023 post at 15:44 I was using a net debt figure range of $1b - $1.2b for Save and was getting 71-82p against Tullow.
'If' it were to be as low as $700m by year end it would increase my basis to 87p - 98p.
It was much more against KOS. which today has a m/cap of £2630m f/diluted + £1.650b net debt = £4.28 billion EV.
Save at £1 = £1420m f/diluted + £530m net debt = £1.95 billion EV - so is still discounted by 55% versus KOS (and which i don't expect to equal any time soon).
I would see fair value north of 85p on South Sudan if thats the case on net debt.
If the net debt is that low by year end it might explain why a further (at least one) material acquisition is on the cards by year end.
On the basis of all the other deals mentioned by us and others re cost - we should be able to realistically add 20,000 bopd production and 100 mmbls 2P for another $400m - less effective date discount.
The really outstanding possibility i see for substantial share price advancement beyond the above is that it could become possible that we could add that amount of production/reserves (after effective date discount) purely from cash. I don't think PIs have thought of this potential scenario. These in turn throw off cash flow and its just possible that we would be an ultra low net debt or net cash company by comparrison to those mentioned.
So as i see it imo, definitely exciting times going forward.
(Re watching for gas contracts - we should see some income flowing in from the Amocon one that started on 31/5/23. Also the gas compression project is underway page 83 - Roger Wilbrew head of operations - completes next year).
Thanks Rocky - A bit disappointed that they are not issuing an opps update seems odd to release Q1 and not continue to adhere to regular quarterly updates..........................................
Did you get any indication as to whether it may be earlier than that date as Sajy alluded to last week ? or do you get the feeling that it will go all the way and perhaps beyond that date, I know you can't answer that question with certainty but would be good to see if you picked up a vibe which could help you ascertain
Also I’ve been in a bit of dialogue with IR today and nothing of much significance of note. I don’t think we will see any ops / finance updates before the interims which will probably be issued on 29th September as a separate RNS to the SS Ad Doc RNS should that be issued on 29th Sept too. Maybe new gas customers announced prior to then and maybe more renewable deals too but they could also come post end September as well. So not a lot to get excited about here for a while me thinks. Guess in the meantime we need to rely on the top posters on here and industry papers / AI etc. Seeming like a bloody eternity now being suspended and hope it’s all worth it. Guess if we come back above, let’s say 40p, everybody will be happy though. At least I’ve got 2 holidays to look forward before end of September and also one in October should we get suspension extension for a bit longer. Sweet dreams to one and all for 9 weeks.
Great posts again Zengas. What would you see a high and low SP being based on production of 85k (55k SS + 30k Nigeria), net debt of 700m 23YE, 1.4bn fully diluted share base and 2P reserves? Am not sure of our Nigeria or SS 2P numbers but am hoping we get 35m 2P bookable number from Niger later this year / early next year. I’m no expert in converting these numbers in to SP but surely we much be looking at over 80p.