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I have held both in size for over 18 months now. Whilst I fully expect to make further sizeable gains in Eco they get taken out of their Guyana holding, I do think that now after the gains in Eco over the last year, that SAVp offers by far the better risk/reward. I say that only after certainty that the deal is going ahead with the signing this week.
Thanks for reply
For the short term chance of a boost in the sp, ECO. Also a chance of a dramatic fall if this current well is a duster but that is unlikely in my view.
For the long term I'd say they offered about the same in terms of value.
The outlook for success in Guyana against success in Niger, most definitely Guyana. That's why the likes of Exxon are in Guyana and the Chinese are in Niger. Saying that though, the modus operandi of companies like Savannah is to find lots of smaller discoveries at cheaper cost and Niger works well with that in mind.
What do you or anyone else think is better value : ECO or SAVP?
ZENGAS......great Posts, thank you!!!
I was aware of each of those opportunities you mentioned, but with no awareness of the magnitude! Thank you for enumerating!
NK
They intend to pick up further assets and imo they will need to if they are serious about expanding the gas supply business which is part of their goal.
In Nigeria there is some 40 TCF gas in the vicinity of their pipelines that could be tied in. That's some 6.6 billion boe.
There's also opportunities for partnerships and/or acquisitions/marginal oil fields etc so plenty of scope to put some of that free cash to work and create further value in Nigeria.
Well costs to the Sokor Alternances in Niger are circa $4.5m and range from 23 - 30 days.
$100m could drill perhaps 20 per year.
Perhaps with such a high resource number (4 billion unrisked/2.8 billion risked mid case on all plays) they may farm down. Previous talk of $100m+ for a farmout of up to 50% and Savp remaining operator - theoretically at 50% farmout it would reduce the cost of ongoing well drilling accordingly to circa $2.5m. The Sokor Alternances have historic 80% success rate (Savp 100% so far with 5 out of 5).
In the coming weeks, perhaps the company will be better understood at how good the opportunity and potential is and significantly re-rate in the process. Imo should certainly be closer to Mirabauds 81p valuation issued today …. "we believe today should mark the start of a re-rating to our fair value target price of 81p/shr."
Over the next 18-24 months I hope to see 200p as we should have a significant number of new wells drilled (additional oil discoveries) in Niger along with production and new customers added in Nigeria as well as a ramp up in Stubb Creek oil production.
Thanks for your reply Zengas. A reduction in seven's debt will be most welcome. I look forward to reading the full details in the not too distant future. The potential here is very impressive. Where on earth will the sp be in a year or 2?
So SAVP at 18p is trading at a prospective 1 times free cash flow, when Niger ramps up to 5k bopd. Interesting. Either it never happens, or the market will value those cash flows at a much higher multiple, say 4-5 times, conservatively, in line with industry metrics.
My money, already down says the latter.
Last time I enquired about what was happening to ongoing cash flow it was supposedly also reducing debt so beneficial to us ultimately anyway as Savp takes it over. From memory I think there was an additional gas pipeline under construction.
In Q1 production was circa 17,700 boepd. There are Take or Pay contracts in excess of this meaning the customers concerned must pay for it whether they take the gas or not versus Daily contract quantities.
2 power stations customers at future full dispatch have the potential to accept up to 45,000 boepd on their own.
1. On completion, there will be a cash injection of $50m-$70m (of which they had previously planned to pay the 1st dividend of $12.5m).
2. Should be ongoing free cash flow of circa $10m/month from Nigeria (circa $120m/yr to start).
3. EP System from Niger on 1st 1k bopd was to give up to $10m/yr (truck).
4. Moving to 5k bopd via pipeline should see that provide potential $50m/yr.
They've also got a $50m facility from an oil trading group.
Unknown is the possibility of a Niger farm out for cash or continue to go it alone.
In the 1st year alone they should have around $200m available cash imo to spend ie from the immediate cash injection and the 7E cash flow. If you add in the $50m available funding from the oil trading group = possible $250m means they might not need or want to do a Niger farm out, but if they do it could attract perhaps a further significant amount of cash.
If they move to the 5k bopd in Niger further down the road and along with the 7E cash flow it might mean ongoing free cash of around $200m/year before any further growth increase in Nigeria.
It will be very interesting to see how much money will come our way once seven deal is finally completed. I've heard 90 million quoted but that was a long time ago. Hopefully that has increased; has anyone any thoughts on this?