The latest Investing Matters Podcast with Jean Roche, Co-Manager of Schroder UK Mid Cap Investment Trust has just been released. Listen here.
London South East prides itself on its community spirit, and in order to keep the chat section problem free, we ask all members to follow these simple rules. In these rules, we refer to ourselves as "we", "us", "our". The user of the website is referred to as "you" and "your".
By posting on our share chat boards you are agreeing to the following:
The IP address of all posts is recorded to aid in enforcing these conditions. As a user you agree to any information you have entered being stored in a database. You agree that we have the right to remove, edit, move or close any topic or board at any time should we see fit. You agree that we have the right to remove any post without notice. You agree that we have the right to suspend your account without notice.
Please note some users may not behave properly and may post content that is misleading, untrue or offensive.
It is not possible for us to fully monitor all content all of the time but where we have actually received notice of any content that is potentially misleading, untrue, offensive, unlawful, infringes third party rights or is potentially in breach of these terms and conditions, then we will review such content, decide whether to remove it from this website and act accordingly.
Premium Members are members that have a premium subscription with London South East. You can subscribe here.
London South East does not endorse such members, and posts should not be construed as advice and represent the opinions of the authors, not those of London South East Ltd, or its affiliates.
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.
Clearly the chad press are putting a different spin on the arbitration saying it's bad for Savannah bad they are clutching at straws there
Another article covering the ICC ruling
https://ecomatin.net/controle-de-cotco-savannah-remporte-larbitrage/
Reflecting on that end of April analysis by Shore Capital and if they are close to their Accugas and COTCo assumptions
They show net debt of $257m end 2023 on those assets.
The headline figure is 'UP TO' $1250m for S.Sudan.
The oil price has been $100/b average for 2022 and $80/b average for 2023.
If FCF is an average $20/bl minimum x 55k bopd x 30 days = possible $33m/month.
If the 1/1/22 were to be the effective start date that would be a discount of $33m/month or a reduction of $600m+ by end of Sept 2023.
Further If $150m is based on contingencies in that 'up to' price - it just could mean we need $500m to complete the S.Sudan deal.
If $500m were to be the amount to complete the Accugas deal along with $257m year end expected net debt on Accugas - it's possible overall $750m net debt by this year with at least another $50m+ to knock off for Oct-Dec 2023 production from S.Sudan.
Therefore could Saves' net debt be as low as $700m overall this year end based on 55k bopd S.sudan oil/23k boepd at Uquo and circa $1.8 billion revenue.
May be of interest to some of you.
https://m.youtube.com/watch?v=Y6Nu62pLodg&feature=youtu.be
By contrast Shore Capitals anaylsis 3 months ago on 27/4/23 used $260m for an arbitration award on top of their $200m Chad-Cammeroon ETS valuation.
The paragraphs below suggest Save owed no more than $100m for the deal - not $170m as they have $70m of that cash on their balance sheet (can they use this for S.Sudan?).
Overall that would indicate a value if that award amount was successful along with the pipeline interets less $100m owed to Exxon max = about 19.5p overall net.
"The headline acquisition price for Chad was $407m, although we estimate that the final completion amount was less than $100m due to the presence of effective date and completion adjustments.
Assuming that Savannah drew down an amount apprroaching the maximum $170m under the Exxon facility, this would imply that a significant proportion ie >US$70m continues to sit on Savannahs balance sheet. This would seem consistent with the $217m of reported gross cash held at the end of March 2023. "
On the above basis re Accugas/Cotco revenue - they estimate closing net debt in 5 months (yr/e 23) of $257m.
Hi TIL. In response to your post today at 11:07, this may be of interest.
https://en.m.wikipedia.org/wiki/Asset_freezing
When we relist, shares should trade at a premium just for the entertainment value, tbf.
The pro-Chad press are not talking about Chad giving in, rather enforcing their rights. Here is an example
'The ICC pre-arbitration procedure
After having tried, without success, to interfere with the social life and operations of COTCO and launched multiple procedures in Cameroon which have so far been unsuccessful, Savannah Energy relied on a pre-arbitration procedure, without enforceability, introduced on July 12, 2023.
The order resulting from this emergency procedure on July 28, 2023 purports to review the effect of certain decisions of COTCO's corporate bodies and will, on these points, be vigorously contested by COTCO and the Chad through all possible legal remedies during the arbitral proceedings on the merits. Savannah Energy's mercantile aims cannot outweigh Chad's vital economic stakes.
Moreover, the pre-arbitration order is damning for Savannah Energy. Indeed, the emergency arbitrator refused to acknowledge that the Savannah directors have citizenship on COTCO's board of directors, and stresses that COTCO, represented by its current Cameroonian general manager, must have free access to the all of its funds to avoid any impact on the operation of the Chad-Cameroon pipeline. The arbitrator also confirms that the alleged objections raised by Savannah Energy in relation to the acquisition of Petronas' interests in Chad and in COTCO cannot be taken seriously. The arbitrator also found that Savannah Energy is unable to justify any authorization validating its illicit acquisition of the Esso entities, which invalidates any presence of Savannah Energy in COTCO. So, as the Chadian authorities will demonstrate during the dispute resolution procedure on the merits, it was Savannah Energy that caused its own loss. And it is Savannah Energy which seeks by all means and without success to capitalize on an illicit acquisition.
Pending the resolution of the dispute on the merits, it was necessary for COTCO shareholders to secure the continuity of decision-making within the corporate bodies and operations of the company that operates the pipeline, a strategic asset for the economy of Chad. and security of the sub-region. The shared management of COTCO between Chad and Cameroon makes it possible to envisage the operation of this major infrastructure with full confidence. '
https://www-alwihdainfo-com.translate.goog/Gestion-partagee-du-pipeline-Tchad-Cameroun-Savannah-introduit-une-procedure-pre-arbitrale_a125183.html?fbclid=IwAR3UMIJk3PQvzRJAQu7ldWL4scJGvRARRcRBVd32P_P8aWWFS7l2q9xZa9s&_x_tr_sl=fr&_x_tr_tl=en&_x_tr_hl=en&_x_tr_pto=wapp
At this point I would even be willing to take operatorship of assets and formal approval from chad without any compensation if it came to it and if it meant that the decision was made in swiftly and quickly. That alone would be valuable to us.............................. Plus it will allow Chad a clean break without penalisation after they tried to pull one over us especially if it meant we could continue our renewable projects there.
Saves initial cost for the Exxon assets was put at $372m & up to $50m contingent.
This was for 40% of the Doba Oil project which was approx 12,000 bopd + 55.4 mmbo 2P + 44.1 mmbo 2C. Pipeline interest of 40.2% in TOTCo & 41.1% in COTCo.
Save said they were going after what they had lost and would lose as a result of the nationalisation.
At the minimum in the relisting presentation - Saves 9 year free asset cash flow was estimated at $76.5m/yr average = $688.5m and when added to the purchase price = $1060m before contingencies.
The FCF without re-investment even if it was all profit and taxable at 30% leaves an overall 9 year figure along with the original purchase price coming down to around $850m .
Separately FinnCap on the 27/3/23 had a valaution of $368.2m for the 2P, $297.3m for both pipeline interests, $131.8m for the 2C and $41.2m for pipeline upside = Total $838.5m.
Given Save were prepared to sell 10% of COTCo for $44.9m - strip out a pro-rata 41.06% in total for COTCo and 90% of the upside figure - in total $221m - it should leave some $600m to chase (not counting the 41.06% of COTCo or $221m stripped out which should never have been in doubt as it's not part of Chads remit).
On the basis of 1420m fully diluted shares £1/$1.30
$600m compensation = 32p/share.
COTCo 41.06% valaution pro-rata based on currently intended 10% sale $184m = 10p/share.
$170m owed to Exxon ?? = less 9p/share..
If successful, how it's paid is anyones guess but with access to bank accounts and the country being landlocked it should be possible to recover the cash some way.
LST - I fully appreciate $1bn is a huge number and may be nothing like that. But think of it this way. We had bought 11kboepd of production along with large 2P reserves. The assets were ours and fully funded. Whilst I appreciate we would not receive the full cost of each barrel, from a gross revenue point of view $1bn looks like this:-
$1bn / $80boe POO / 11kboepd = 1136 days which is just over 3 years. I’m sure we’d have stood to gain a lot more than that with further field development.
Personally I’ll be glad and expect to win an award and will be disappointed if it’s much less than $1bn. But let’s see and we may hopefully find out before the end of the year.
Who knows may even get settlement with Chad or from Abitration in AD Doc, though i think $1b is pushing it a bit.
I see this as a very positive development. Whether the cash would have ever benefited the people of chad is a moot point, but the ICC could perceive any delay in judgement would have a negative impact on the lives of the ordinary people of Chad.
Chad may also now see the merit of getting around the negotiating table.
Whether SAVE would want to negotiate is open to question. Talking to SJ at the AGM he reiterated that the Board are very confident of success and guided me to review the outcome of all similar arbitration hearings and quoted claimants 100% success rate.
Considering the aggressive nature in which Chad nationalised the assets one would hope that the ICC are also able to expediate the arbitration process and grant a final ruling to only question that would remain is how would the ICC be able to enforce a ruling on Chad as that would be tricky i am sure that they would have certain powers in place to be able to enforce a ruling one option may be that the ICC is able to do a force majeure on Doba oil field crude liftings from the kribi terminal to force chad arm into complying................................
Absolutely RR, that would be very acceptable for sure. That, along with the closure of the SS transaction and we could all relax at last!
K - would love a quick ruling. And as Chad Gov can’t be trusted and more than likely will never play ball, how about this for an outcome:-
Retain our 41% of COTCo and still sell 10% to SNT for $44.9m
Keep getting paid our dividend from COTCo
Forfeit Doba oil back to Chad Gov / SHT
Be awarded $1bn+ as compensation and be guaranteed payments from liftings in Cameroon
I’d take that all day long pal. What do you think?
Yes, it does, suggesting that the previous Savannah directors replaced by Cotco are in fact the de facto directors. Given the restrictions it has placed on Cotco it possibly suggests that the full tribunal ruling won't be too far away. Hopefully, at any rate.
So Chad won't be getting the $80m it suggested from uplifts this month, that could have an effect on Deby's budget plans
Komakino - I believe it also alludes to Cotco previous general meetings being void as well and re-structure of Cotco will only be permitted following arbitration ruling........... or something along those lines.
It seems to be saying that Cotco can not transfer any monies from their accounts until the arbitration tribunal give their definitive ruling. It's basically an injunction stopping Chad siphoning off any money that may be due to Savannah if the tribunal rule in their favour. So definitely a positive bit of news.