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Not been mentioned much, but I liked: 'we have seen a reduction in production costs at the Nigerian Assets of c.18% over the 2016-19 period.'
This tells me that they have a firm grip on the business, and already are running a tight ship - augurs well for the future. Good management.
Thanks, Zengas. Very helpful.
Some other points:
- Gross 2019 year-to-date production from the Nigerian Assets of 17.3 kboepd (+33% year-on-year);
- we have seen a reduction in production costs at the Nigerian Assets of c.18% over the 2016-19 period.
- Production is anticipated to increase significantly in 1H 2020 after the addition of the Alaoji power station as a new Accugas customer (following completion of the relevant technical and commercial workstreams). Accugas also expects to be able to announce additional new customers over the course of the coming months
- 2020 Forward Plans: As part of the ongoing gas field development plan at Uquo, in 2020 Savannah plans to drill and complete a gas production well, recomplete an oil well as a gas producer and to work over one of the current gas production wells at an estimated cost of US$34.5m. The well operations are expected to commence in H1 2020 and in addition c. US$7m is intended to be invested by Accugas for continued facility upgrades.
- Net debt outstanding (for Savannah) $409.1 m. 2019 guidance for cash collections from the Nigerian Assets of c. US$190m, leading to a US$40m reduction (2019 vs. 2018) in total third-party debt outstanding at the Nigerian Assets.
- Nigerian Assets gross NPV10, on a maintenance adjusted take-or-pay basis, of US$1.2bn assessed by CGG (NPV10 net to Savannah of US$957m);
- Net asset-level free cash flow generation, on a maintenance adjusted take-or-pay basis, by the Nigerian Assets assessed by CGG as an average of c.US$130m p.a. (2020 - 2023);
- a forecast YE'19 cash position within the Nigerian Assets of a minimum of US$15m
- Forecast 2020 capital expenditure at the Nigerian Assets of c.$41.5m.
Thanks Zen, and that’s the point c$1bn of producing assets, cash and a production program and the market values us at a little over £200m! It’s a joke. The new way to invest on aim is take no risk and only buy after the cpr and you can pick your bargains. Imo little in today’s rise for the final 7 deal or our drill program for lth’s
Trek
Looking through the CPR ,
Dec 2019 -Nigeria
2P Net = 80 mmboe
2C Net = 78 mmboe.
2P NPV = $945m (Does not include Stubb Creek 2C).
Outstandindg debt reduced by $40m to $409m.
Year end cash in Nigerian Subsiduaries assets = $15m.
Net free cash for 2020 expected = $104m based on take or pay (not DCQ) from 3 main customers only (Ibom, Unicem & Calabar).
Calabar gas pricing increases by 43% over next 4 years
Production anticipated to increase significantly in H1 2020 with Alaoji Power station.
New customers also expected to be announced over the coming months.
That should increase the net free cash significantly over the $104m TOP level.
My interpretation is $74m in from recent deal completion + $15m = circa $89m cash - less some costs for deal completion.
Looks pretty good and new customers and Alaoji will really change the numbers above from H1 2020 onwards (also Stubb Creek oil debottle necking from 3,000 to 5,000 bopd happens in 2021)
18% reduction in production costs and the capex plan (which was my concern) has continued on track. Excellent numbers surprising to upside and much more to come which in terms of o&g is pretty low risk big upside stuff. If VR Global are still selling we may be held back but they could exit on this news which would also help us longer term.
Trek
Excellent to see this detail and validate just how strong this business is (plus all the Niger assets in top of this, plus new gas customers in the pipeline). SAVP is clearly trading at an astonishing and unsustainable discount to true value (maybe 20-25% of where it should be on any rational, even conservative valuation, 10% of where it could be with a bullish valuation). Expect this to fly today on the back of this RNS