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Welcome back Mr CEO. We’ve been missing your voice, badly. It’s been too long.
End of this month big news?
Thank you again Z etc. for your incredible posts as usual.
Older, very well done on ECO - should be more to come.
Hannam that provided the figures below on the upcoming wells for Savp have today given an unrisked valuation of some £12/share for ECO which on 181m shares in issue is a potential £2.2 billion/$2.8 billion m/cap value after reaching a £380m m/cap value this am. Quote "The unrisked value of all the Guyana prospects and discoveries is around £12/sh".
I'm using a circa £2b m/cap valuation for SAVP but that includes also production, free cash flows, dividends and a much greater oil number target than ECO currently - so I can see the lack of catch up, understanding and disparity in value (all down to the delayed 7E closure imo to create this undervalued situation).
As the CEO said today the price is way lower than the deal announcement. I broke this down before for my £2 target which I believe is reasonable. Niger as the company says should give multiple repeat successes and I believe that will be the case.
Going back to the very recent broker valuations -
There is an unrisked target of 185p which includes Accugas ahead of 5 Niger drills and Uquo.
Notably it only includes our own Uquo area low risk exploration of 96.5 mmboe gas and just 5 more of the prospects in Niger ie Amdigh deep, Eridal North, Kunama West, Etifal and Mujia.
The 5 Niger wells are targeting a combined 167.4 mmbls unrisked at 60.4p. 3 of these are at least in the sweet spot adjacent to and under existing discoveries.
There is still a further 108 mapped (so far) Niger prospects to drill beyond that.
If 167.4 mmbls unrisked carry a target of 60.4p, then the total 4 billion+ bls unrisked would equate to circa £15.00. (If farmed out at 30-50% = £7.50 - £10.50 unrisked plus Nigeria ops of a further 125p unrisked).
The 2.8 billion bls risked recoverable figure - ie 2660 b/bls net 95% interest would equate to £9.60 (If farmed out at 30-50% = £4.80 - £6.70 target to Savp plus Nigeria ops risked @ 102p) .
An overall risked target on a 30-50% Niger farmout along with Nigeria Ops = 580p - 770p. (For Unrisked see above).
You can see how there is significant head room to farm out 30-50% and still have significant upside as well as benefitting from the reduced drilling costs and any net cash inflow it would bring.
Also with significant cash flows this makes no account of any new acquisitions/partnerships in the next 2 years or future share buy backs etc of which i've based my 200p target as being achievable and using circa 1b shares in issue.
200p target is barely 5 X the average that the institutions have paid and under 5X for the board incentives.
Very good and wide-ranging interview on VOX today by AK.
OAW - firstly massive congrats on ECO. And yeah I think you’re right over here. This is an extremely strategic company and it’s all coming together now.
Yeah 5 out of 5 discoveries is great but there was no more point in drilling anymore if they could not be monetised due to lack of infrastructure.
As you say, 7e revenues / large farm in will allow to “many more fish in the barrel to be shot”. And that’s what the shallow targets are. I really can’t see many being dusters now that the 3D seismic etc shows the seals.
I can't wait to see the first deeper well being drilled in due course and hopefully as soon as possible in 2020.
Anyway all fantastic stuff coming together now and things will certainly move at pace after the 7e is finally over the line.
It’s 4 weeks today since we received the MC RNS and we will hopefully get the final sign off RNS of deal closure anytime between now and the end of October.
I just think today's Niger pipeline is brilliant for SAVP, and its ambitions to grow through exploration and initial production there, with a major oil company farm in partner. The scale, and import of this news has not yet sunk into the market's perception of the opportunity here, but it will once the Seven E deal closes and the associated asset backing, and cash flows, give SAVP the clout to sign off with a farm in partner of size over in Niger. Then it's "game on".
So I can see a $1bn business being built BOTH in Nigeria, and in Niger, over time, even with a 50% dilution to its ARB acreage. The growth potential is staggering. The vision is suitably long term and strategic by AK. Even slashing those combined valuations by 50% for the Nigeria risk factor, you have a $1bn prize ahead. That's a 4-bagger right there, from 23p.
I just had to top up here today with some partially freed up funds from my successful ECO investment of the past two years.
After a dearth of good news from Savannah things are looking up, big time, indeed the shares have doubled in exactly a month and will justify going a lot higher again before long. Today they announce the signature of a Niger-Benin pipeline transportation convention between CNPC and the Republic of Niger. The plan is for a 2,000km pipeline from the Agadem Rift Basin to the Atlantic coast in Benin.
The pipeline is expected to be complete by the end of 2021 which should be a huge incentive to domestic exploration and production and will ‘transform Niger into a major regional oil producer and deliver an increase in the country’s growth rate’, according to SAVP CEO Andrew Knott. For Savannah this will mean a significant addition to its options for markets for its crude in the future and adds to the domestic option of the Zinder refinery for existing and future crude discoveries.
(Alliance News) - Savannah Petroleum PLC on Monday said a transportation convention was signed between China National Petroleum Corp and the Republic of Niger in relation to the crude oil export pipeline from the Agadem Rift basin to the Atlantic coast in Benin.
Savannah's flagship asset covers 50% of the "highly prospective" Agadem Rift basin of south east Niger. Therefore, the company said it is entitled to access such third-party infrastructure.
"From a Savannah perspective, it provides our company with a significant additional potential route to market, alongside the existing Zinder refinery, for our existing and future discoveries in Niger," said Savannah Chief Executive Andrew Knott.
The oil & gas company said the pipeline is expected to run for 2,000 kilometres from the Agadem Rift basin in Niger to Port Seme on the Atlantic coast in Benin, and is China National Petroleum's "largest ever" cross-border crude oil pipeline investment. Pipeline construction is expected to be complete by the end of 2021.
"The Niger-Benin export pipeline is expected to transform Niger into a major regional oil producer and deliver a material increase in the country's economic growth rate," added Knott.
Savannah shares were trading 4.1% higher in London on Monday at 23.90 pence each.
SAVANNAH PETROLEUM: NIGER OIL EXPORT PIPELINE CONSTRUCTION STARTS
The greenlight has been given to a major export pipeline which will unlock the oil-rich Agadem rift basin in southeast Niger. Over the weekend, CNPC and Niger's Minister of Petroleum signed the Niger-Benin Export Pipeline Transportation Convention, and an official ceremony is being held this week to mark the start of construction, attended by the good and the great of Niger's oil industry. This follows the signature of a similar deal in August between the Chinese and the Benin side. The pipeline will run ~2,000km from the Agadem basin in Niger, skirting Nigeria, to Benin's Port Seme on the Atlantic coast, and is expected to be completed in 2021 with an initial capacity of ~200 kbopd (expandable with compression). It is CNPC largest ever cross-border crude oil pipeline investment, costing an estimated US$4.5bn.
The agreement between CNPC and Niger is a major milestone for the country and all involved in Agadem's oil development. In our view, it is a key de-risking event for Savannah (SAVP LN), as it provides a second outlet for existing and (any) future oil discoveries in the R1/R2 and R3/R4 PSCs, alongside domestic sales (which are capped at ~5 kbopd). It will also provide more transparency around domestic realisations which are priced off export net backs under local sales contracts. We understand that CNPC will initially produce ~100 kbopd through the new pipeline as part of a phased development of 1bn bbls+ in the basin. This leaves plenty of scope for Savannah to deliver third party volumes, as it has the right to do under the terms of its PSCs. Furthermore, in our view, the formal start of pipeline construction should aid Savannah’s partnering process, with potential farminees more likely to transact on better terms now they know the infrastructure is coming.
Existing GSAs Daily Contract Quantities.
Calabar 131 mmcf/d.
Unicem 38.7 mmcf/d.
Ibom 19.7 mmcf/d
Total = 189.4 mmcf/d/ = 31,500 boepd.
75% = 23,625 boepd net.
New Alaoji Power Station expected to supply 50 mmcf/day = 8,300 boepd (6,250 boepd net).
Total net gas before any new gas customers = 29,875 boepd.
2-3,000 bopd from Stubb Creek oil field (once debottlenecked).
Circa 32,000 boepd in total net from Nigeria to Savp.
Niger Zinder phase 1&2 = circa 5,000 bopd expected.
Pipeline access to Benin maybe 10,000 bopd.
Possible 47,000 boepd expectation before any other uplift or growth.
Worth noting that Calabar and Alaoji power plants could do 45,000 boepd alone at full current spare capacity.
Savp/Accugas pipeline capacity circa 80-100k boepd and intention is to add further customers.
And it improves the chances of a significant farm in with an oil major.
I guess this removes one of the fears that the oil could be stranded or moved only by truck. Let’s see how the market reacts?
Excellent news and when combined with ops in Nigeria, this is gearing up towards a 50,000 boepd producer over the next 2 years.
Savannah Petroleum PLC
("Savannah" or "the Company")
Signature of Niger-Benin Export Pipeline Transportation Convention
Sanction of Agadem Rift Basin crude oil export solution
Savannah Petroleum PLC, the British independent oil & gas company focused around activities in Niger and Nigeria, is pleased to note the signature on 15 September 2019 of a Transportation Convention between China National Petroleum Corporation ("CNPC") and the Republic of Niger in relation to the planned crude oil export pipeline from the Agadem Rift Basin ("ARB") to the Atlantic coast in Benin (the "Niger-Benin Export Pipeline" or the "Pipeline"). The Pipeline is expected to run for c.2,000km from the ARB in Niger to Port Seme on the Atlantic coast in Benin, and is CNPC's largest ever cross-border crude oil pipeline investment.
The Transportation Convention sets out the contractual terms between CNPC and the Republic of Niger under which the Pipeline will be constructed and operated and was signed by Niger's Minister of Petroleum, His Excellency Mr. Foumakoye Gado and the President of CNPC Exploration and Development Company (CNPC's overseas development arm, "CNODC") Mr. Wang Zhong Cai. Savannah and various other project stakeholders and dignitaries were also in attendance at the signature ceremony. Mr. Wang Zhong Cai confirmed that Pipeline construction is expected to be complete by the end of 2021.
Following the signature of the Transportation Convention, His Excellency President Mahamadou Issoufou of Niger is expected to officially launch the surface infrastructure works for the Niger-Benin Export Pipeline at a ceremony in Koulele, Agadem on 17 September 2019. The Transportation Convention follows the signature in August 2019 of the Niger-Benin Pipeline Construction and Operation Agreement between CNPC and the Republic of Benin, as well as the upstream approval granted by the Republic of Niger to CNPC in June 2018 in relation to the Agadem Production Sharing Contract ("PSC") Exclusive Exploitation Area 3, the production from which is expected to be exported from Niger using the Pipeline. Under the terms of Savannah's R1/R2 and R3/R4 PSCs, the Petroleum Code of Niger and its Implementing Decree, Savannah is entitled to access such third-party infrastructure.
Andrew Knott, CEO of Savannah Petroleum, said:
"The Niger-Benin Export Pipeline is expected to transform Niger into a major regional oil producer and deliver a material increase in the country's economic growth rate. From a Savannah perspective, it provides our Company with a significant additional potential route to market, alongside the existing Zinder refinery, for our existing and future discoveries in Niger.
As a Company we would like to congratulate Niger's Ministry of Energy and Petroleum, CNPC and all of the stakeholders who have worked to deliver this key project and we look forward to the planned 2021 first oil export date with great anticipation."
Given the huge amount of oil that's been found and a major pipeline now being built by the Chinese, it shouldn't be forgotten that there are actually 2 National Oil Cos operating in Niger. If they're there, what's to say more of that size and calibre won't follow and buy out the likes of Savp in due course or farm in.
In the background is Niger/Nigerias goal to build a major refinery at Mashi in Katsina state and Nigers goal to become an Opec member and major oil exporter.
'Sonatrach is the national state-owned oil company of Algeria. Founded in 1963, it is known today to be the largest company in Africa with 154 subsidiaries, and often referred as the first African oil "major". https://en.wikipedia.org/wiki/Sonatrach'
'The China National Petroleum Corporation is a major national oil and gas corporation of China PR and one of the largest integrated energy groups in the world. Its headquarters are in Dongcheng District, Beijing. CNPC was ranked fourth in 2017 Fortune Global 500, a global ranking of the largest corporations by revenue.
Number of employees: 1,636,532 (2014)
Subsidiaries: PetroChina, Kunlun Energy.
China National Petroleum is the world's fourth-largest company by revenue.'
"Niger is preparing to become a significant energy exporter. Its electricity deficits are expected to decrease sharply with the start-ups of the Gorou Banda (thermal) and Malbaza (solar) plants, and especially with the future Kandadji dam, with a capacity of 130 megawatts (MW), which should produce electricity ten times cheaper than that obtained with turbines running on fuel.
The good news is also growing in the oil field. Sonatrach has discovered a significant deposit in Kafra on the Algerian border, and the China National Petroleum Corporation (CNPC) is starting a second well at Agadem.
The prospect of completing the production of hydrocarbons from 20,000 to 100,000 barrels per day pushed the Nigerian government to agree with Benin for the construction of a pipeline 2,000 km long, for an estimated cost to $ 2 billion, to export its surpluses in good security.
Development of the oil sector
In January, the government published the broad outlines of its policy aimed at "making the Nigerian oil sector an engine of economic and social development", which implies a more favorable income distribution in Niamey. It intends to expand the number of its partners, now three in number: CNPC, Sonatrach, and the British Savannah Petroleum. "
He probably closed his short and moved on. Hopefully he will have been proved wrong ref 7E deal very soon
Anyone remember this poster from the 2018 days here?
He was negative then on the Seven E deal for Savp, and time has proven him right since, from a sp point of view, and lack of deal closure on the Niger exploration campaign.
I wonder what he thinks now?
Saudi Arabia oil facilities ablaze after drone strikes
Just goes to show how big Saudi oil is, WOW, 1 field producing 1.5m bopd with 20bn barrels of reserves.
Irrelevant to us at present but guess Brent will tick up when oil markets open...
Z - he did say on a previous Q&A that he was happy to remain on AIM, albeit a while ago when he said it. He said that while II’s were not pressing for a move to the main market that he would keep SAVP on AIM. He inferred that he likes the lack of regulation where we are!
Re Niger production
16-11-2016 - "Indicatively, the external financing requirement for the field facilities (i.e. the maximum cashflow drawdown) is estimated at c.US$200m for a c.75 mmbbl development under the new CDS, versus c.US$410m under the prior CDS."
31-5-2019 - "Net capital expenditure to first oil expected to be less than US$5m, with external financing requirement 60% lower vs. the Company's conceptual development solution announced in November 2016;"
If latest figures are correct - it's $5m expenditure for first oil up to 1,000 bopd.
Previously $200m (in Nov 2016) for a development of 75 mmbls. If the cost is now 60% lower, then that's come down to around $80m in total (May 2019).
As regards the farmout, I think it's been further along than just yesterdays announcement re joint brokers imo.
Also I don't believe the farmout will stop SAVP from drilling at least 5 wells as there will be an introduction of $50m-$70m plus ongoing cashflow so I'm looking for them to soon announce a drilling contract for Niger and also get the EPS up and running for first oil sales.
I note that Mirabaud state that completion will immediately propel Savp into the top ten of producers listed in London. I wonder will AK at some future date take the company on to the main market for greater exposure.
Back to that 23p level, whilst it may dip on this I think pretty much it will be strong support here with the amount of buys here.
Agadem - agree the delays have been very frustrating! Hopefully next week we hear something on 7E - I’m expecting RNS’s on (1) the Frontier sign-off, (2) the Accugas sign-off, (3) the UK court date, (4) the UK court approval, and last but not least (5) formal deal completion over the coming 4-6 weeks.
Add to that the interim results (probably not saying much new but likely confirming bridge funding in place through deal completion), the likely initiations by Numis and/or Jefferies, and before year end an update on niger drilling plans (with or without a farmout partner).
On the latter point of the farmout, don’t underestimate the amount of work AK and team have done on this over the past couple of years and the asset and savp are both well known to potential partners... as such I would view the involvement of Jefferies as the end of the beauty parade process rather than the beginning!
With a bit of luck we are in for an exciting end to the year! AIMHO