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Interesting stance by the Nigerian regulator, they are willing to expediate oil major divestment plans if they commit to paying clean up costs
https://www.reuters.com/world/africa/oil-majors-offered-faster-nigerian-exit-if-they-pay-cleanup-2024-05-03/
The South Sudan National oil company is in serious need of cash by the looks of it as it has currently implemented 50% salary cuts leading to some protests
https://x.com/PatrickHeinisc1/status/1787148306507862178
https://x.com/ssemtv/status/1787134822747361341
https://t.co/SHLFwcI7QN
Clearly the South Sudan National oil company as an entity struggles with operational stability, and a very good example of why they are not ready to takeover the Petronas assests.
A strong market signal needs to be given by the government to increase investments and materially increase production from fields
A couple of follow ups:
Re point number 4 on Cameroon, I think I was incorrect: on reflection, I expect the cash won't be booked, but rather a receivable (booked against the liability of deferred revenue that I mentioned before). At least, that's my hope.
The other thing well worth looking out for is a mention of the metrics associated with gross and net debt and any related comments on bank covenants.
South Sudan dismisses allegation of shady oil deal with UAE
The alleged agreement, negotiated on the sidelines of the COP28 climate change summit in December, would see the Hamad Bin Khalifa Department of Projects (HBK DOP) lend South Sudan the money in exchange for discounted oil supplies over two decades.
May 3, 2024
UBA – South Sudan has dismissed accusations of an opaque oil-for-cash deal with the UAE, calling them “unfounded” and “an attempt to damage relations between the two countries.”
The alleged agreement, negotiated on the sidelines of the COP28 climate change summit in December, would see the Hamad Bin Khalifa Department of Projects (HBK DOP) lend South Sudan the money in exchange for discounted oil supplies over two decades.
This is according to a copy of the term sheet seen by Sudans Post and an unpublished U.N. report.
Speaking to reporters following a weekly cabinet meeting in Juba on Friday, deputy information and communication minister Jacob Mijok Korok dismissed the reports as “social media allegations” that don’t require comment.
“There is nothing credible about $13 billion or whatever this figure is. It’s circulating on social media,” Korok told reporters after the meeting shared by President Salva Kiir Mayardit.
The term sheet, however, states that the agreement was signed on Dec. 28 by former finance minister Bak Barnaba and HBK DOP chairman Hamad Bin Khalifa Al Nahyan.
It remains unclear if the initial $5.24 billion tranche of the loan has been received.
Bloomberg reported that under the deal, South Sudan would receive $10 less per barrel of oil compared to the international benchmark.
The U.N. document cited by Bloomberg states that 70% of the loan would be directed towards infrastructure projects in South Sudan.
HBK DOP has previously been involved in a halted bid to buy a stake in Beitar Jerusalem Football Club due to concerns over Sheikh Khalifa’s finances.
https://www.sudanspost.com/south-sudan-dismisses-allegation-of-shady-oil-deal-with-uae/
Should be noted that Pres Kiir fired the above finance minister in March.
"President Salva Kiir fired Barnaba Bak Chol in March after a surge in consumer prices, a decline in the local currency’s value, and a shortage of supplies."
https://sudantribune.com/article285051/
Title should, of course, read FY23 financials.
Muppet.
4. Cameroonian income
I seem to recall (from all that Lower Manhattan Court filing stuff) that cash from Cameroonian midstream revenue is accumulating in a branch account of Citibank NA in Libreville, pending distribution after the arbitral proceedings are concluded (expected mid-2025). It will be very interesting indeed to see how the Company accounts for this. I assume they cannot recognise the revenue but (hopefully clearly!) this is a Savannah Asset. So I suspect we have another category of Contract Liabilities in lieu of revenue and that we recognise the cash in the balance sheet (our proportion of what is held in the Libreville bank accounts). The CL then gets released to P&L on successful completion of the arbitration. Clearly, if the arbitration goes against us (unlikely, I think) then we just unwind the balance sheet gross-up: no P&L impact, again it’s conservative. Of course, the Company may be directed by the auditors to recognise nothing at all and flag that this is without prejudice to the arbitral proceedings.
This begs another question concerning the Exxon debt facility which was originally attributed to the expropriated Chadian assets but was amended in early 2023 (“Following the Nationalisation [Chad], the terms of this facility were amended in 2023.” Note 30, page 169) and included in the FY22 segmental reporting under the Cameroonian business at USD162m. How is that now being serviced or is interest simply rolling up on it?
5. Revenue growth
The encouraging addition of customers in 2022 in Nigeria should begin to have a positive impact on revenue in the 2023 accounts. Too many moving parts to assess the impact but I am cautiously optimistic about this.
6. Transaction fees
These might be rather large given all that is going on. I wonder if they will be separately disclosed.
7. Audit opinion
This is in the FY22 report (page 87): “With respect to the opinion of the Group’s external auditors we do not anticipate that there will be any disclaimer opinion required for 2023 - this has only arisen for 2022 due to the specific and exceptional set of circumstances discussed above.” Let’s hope this holds true.
I’d expect a reported FY23 loss of around USD150m (admittedly, a guess). This belies the great asset base and contingent asset base of the company. I remain as positive on future prospects and I am highly critical of Company engagement with its equity providers.
Here's to some good news and a recommencement of trading soon.
Given the lack of investor engagement, the last meaningful update having been the 29 September interims, I thought I’d flag some key issues to look out for in the FY23 numbers. I am deliberately not commenting here on SS, CC, Niger, renewables: we’ve collectively discussed all those at length. Rather, I wanted to refocus on the financial aspects of the business. I am really hoping some of you will add to this and give your perspective on it.
A detailed update on the entire liability side of the balance sheet is clearly needed and I hope Nick Beattie will discuss matters up to the reporting date, rather than just to the balance sheet date.
Foreign exchange losses
USDNGN started the year at about 450 and ended it at 900-ish.
The reported net exposure in NGN at 31 December 2022 was USD177m (note 35(d) to the financial statements). Obviously payments in NGN in lieu of USD for FY23 will have been made across the board: these should amount to an invoiced dollar equivalent of USD300m or so for the year, perhaps a little more.
I’m envisaging unrealised FX losses for the year in the region of USD80-100m for the year (USD54m was reported for the first half when NGN finished at about 760). If unrealised losses were reported to current date now that USDNGN is around 1,380, I’d expect cumulative unrealised losses of up to USD150m-ish. These are guesses.
This is clearly a significant issue.
2. Debt service burden.
From page 90 of the FY22 financials: “The average interest rate on debt for the Group was 12.0% (2021: 10.2%), due to higher US LIBOR rates in 2022.”
Financing costs were USD79m in FY22 (page 88).
I’d guess the blended rate was perhaps 2.5% higher on average for 2023: so 14.5%. Given we still don’t seem to be able to swing our NGN into USD (see my note on FX losses above) the interest burden is likely to be a bit higher, I guess in the region of USD100m. Until we can switch our USD revenue, paid in NGN, for USD and apply it to the debt, the interest burden will remain a significant drag.
3. TOP contract impact on financials
Contract Liabilities for FY21 were USD213m, for FY22 USD314m (see note 32, page 170). It’s hard to know whether our customers will have begun to take the as-yet-untaken-but-paid-for gas or whether they will have continued to pay for contractual obligations in FY23 and continued to leave the gas in the ground. I’d hazard a guess that Contractual Liabilities will go up again for FY23, given Nigeria’s volatile year. It will be interesting to see what comment the Company offers on the commercial impact here if this is the case. The accounting treatment adopted is conservative anyway (we aren’t recognising profit on gas left in the ground but already paid for).
markel ceo tom ***nor at the annual 2024 meeting in omaha today, 5 may’24, following the berkshire hathaway 2024 meeting 4 may’24:-
“we couldn’t do what we do without you, our investors, putting in your capital and leaving it with us. we want to treat you as important partners and treat you in the way we would like to be treated if the roles were reversed”
An article in the Guardian about US and Russian troops together in Niger airport. Speaking purely about the current affairs, it feels to me like Niger is now a dead duck, with western influence on the wane I hope I’m wrong, and that we can work together with CNPC but I have a sick feeling we will be leaving Niger with little or nothing.
So essentially there won’t be any news until at least end of June? Back to 😴
Even if we do have approval, we wouldn’t be coming back from suspension on the 17th May (unless the deal is scrapped).
Fair to say there’s been no progress since their first deadline 30/6/23.
Does anyone really think May 17th we will come back with SS approval? If not why next?
Ditto on AJ Bell account
Tipped to become a future leader of the Scottish Green Party.
Yeah, I also noticed that yesterday when I was doing my end-of-month accounts.
Https://polaris.brighterir.com/public/savannah_energy_plc/news/rns/story/xq8nklx/export
Also what about this from the RNS on 28th March?
The Company will provide a more detailed update regarding the ongoing process to complete the transaction during the course of next week.
Apologies to you, RockyRide: I wrote RockyRoad in my note below.
I also left out the need for a detailed update on the entire liability side of the balance sheet. Step up, Nick, please.
I fully concur on IR: I feel more knowledgeable than they are, tbh.
AGM might end up like the Smithfield Market scene out of The Long Good Friday; or an old Eurotunnel AGM. Sadly, I won't be there in person.
But after many months of my SAVE shares showing a nil value in my AJ Bell accounts, they’re now showing at the SP of around where they were suspended all those months ago (circa 26p). Perhaps we’re about to re-list? I live in hope. To think I originally invested shortly after the company came to market with promises of riches in Niger & a dividend to start to be paid in 2019 (from memory). How things have changed & I share many of the frustrations recently posted here. I really don’t think AK gives tuppence for his retail shareholders. Prove us wrong AK please!
CYB Excellent and thanks for conveying this on all of our behalfs.
CYB - brilliant and I’ve been pushing back to IR quite hard in recent times. Sally does not like the hard questions and has disengaged now. The comms from the company has been disgraceful IMO. If there is a reason why they have had to go radio silence with NOMAD agreement - then simply let us know.
Yes it’s a big wish, but if there is a reason they’ve been allowed to go silent on EVERYTHING, maybe just maybe, there could be some fantastic news that they have not put out yet such as signing of other large SPA’s for example.
All we can do is wait and use the AGM as a mechanism for getting our points over and using our votes. Nothing that it will make a great deal of difference with >60% of shares held by II’s / BOD but maybe a few of us get together to put our concerns forward to the AGM and also to agree on how we will contest on each resolution.
2/2
The current level of engagement is woeful. Management need to respect shareholders if they want their support.
Ends.
1. You have a large number of long-term shareholders who are deeply dissatisfied with business progress and level of engagement on a number of fronts. Read recent comments on this bulletin board from me, TrustILie, RockyRoad, Zengas and StreetsOfGold, amongst others.
2. Suspension from trading is not an excuse for lack of communication on operating businesses and financial updates.
3. In AK's 31 Dec 2021 presentation to shareholders, quarterly operational updates were proposed. There have been none. Who has advised you to stop communication with investors? Why?
4. It is understood that South Sudan and Chad-Cameroon updates are not possible. This does not give you an excuse not to update on Nigeria and Niger. It does not give you an excuse not to provide operational and financial updates.
5. I (together with another shareholder) wrote to you at length in April with a list of questions and requested an operational update in May. The very short response from IR, flagging the publication of the 2023 financials and little more was wholly inadequate. I do not even know if either Andrew or Nick has read my letter.
6. If all we can expect is more of the same in terms of communication, I propose saving the overhead of an IR team and putting the money to work elsewhere.
7. I'll be voting against the reappointment of the NEDs in the AGM (except the incoming chairman) for failing to hold management to account on investor communication.
8. As Zengas pointed out on this BB, the Niger assets have been there for years and we still have close to zero visibility to first oil.
9. What, if anything, is going on with the renewables projects?
10. Where is the detailed explanation of the highly material impact of Naira volatility on cash held and on future receivables? Where on Earth are we on the debt restructuring? A single sentence that it remains wip is unacceptable.
11. The AGM will rightly be deeply dysfunctional if these issues aren't addressed in advance. Filibustering will not do. Andrew and Nick should both be there in person and both should make presentations.
12. Finally, I'm reposting an excerpt from Zengas' recent post. Please take note.
"Seriously, come results/agm there needs to be a credible plan of action. Six months of this year will be gone. We are not a charity no matter how much the company claims societal good. It's just no longer credible or acceptable to be doing nothing of meaningful size. To go back to my opening lines, 10 years is shameful and any further waffling about future intended plans will no longer wash. Management need a collective boot in the hole re this fiasco of a situation not to mention their divergence to wind and solar while the oil assets there go nowhere fast. I intend to voice this directly to them and i urge other shareholders to do the same that this situation in my view is no longer acceptable and can't be dodged come results/agm."
The current level of
Z - what ever it is - I can only take it as a slight positive. As we know we only do large deals as small deals come with just as much hassle…