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Anyone see a pattern here on Naira devaluation? This is not new, or a one off, so to me SAVE should have mitigated this issue a long time ago:
2023 Half year:
“ Foreign Exchange loss
Foreign exchange losses amounted to US$54.0 million (H1 2022: US$0.8 million). These losses are unrealised losses which occurred following the harmonisation of the various exchange rates which was implemented by the Central Bank of Nigeria in June. The impact of this decision saw the official Naira/US$ exchange rate move from approximately 460 to 755 at 30 June 2023 and this required Savannah to revalue its Naira denominated assets and liabilities at this new rate when preparing US$ denominated financial statements.”
2022 Half Year Results
“ The interest cover ratio, on an Adjusted EBITDA(2) basis is 3.1 times (H1 2021: 2.9 times).
Foreign Exchange loss
Foreign exchange losses amounted to US$0.8 million (H1 2021: US$10.9 million). These losses were realised losses arising from US Dollar gas sales invoices which are settled in local currency, and from the translation of Naira into US Dollars to service US Dollar denominated obligations. Realised foreign exchange losses can be recovered through the "true up" mechanism in the Calabar GSA
In order to purchase US dollars to service US dollar obligations, Savannah accesses foreign exchange at market rates and there is typically a differential between this rate and the Central Bank of Nigeria exchange rate. The majority of these losses are recoverable through a foreign exchange "true-up" clause in the Calabar GSA.”
2021 Half year results
“ Foreign exchange losses amounted to US$10.9 million (H1 2020: US$7.1 million).
An unrealised loss of US$7.0 million (H1 2020 gain: US$1.7 million) was mainly a result of revaluation of monetary items held in Nigerian Naira following the devaluation of the Naira from approximately 380 Naira/US$ to 410 Naira/US$ in May 2021. The realised losses of US$4.0 million (H1 2020: US$8.8 million) arise mainly from US dollar gas sales invoices which are collected in local currency and then converted at the Central Bank of Nigeria ("CBN") official rate to settle US dollar invoices. In order to purchase US dollars to service US dollar obligations, Savannah accesses foreign exchange at market rate and there is typically a differential between this rate and the CBN rate. The majority of these losses are recoverable through a foreign exchange "true-up" clause in the Calabar GSA.”
2020 Half year results
“ Foreign Translation Loss
The net foreign exchange loss of US$7.1 million (H1 2019: nil) comprises a realised loss of US$8.8 million and an unrealised gain of US$1.7 million. The realised loss arises mainly from the fact that US dollar denominated gas sales are collected in local currency converted at the Central Bank of Nigeria ("CBN") official rate. In order to purchase US dollars to service US dollar obligations, Savannah is obliged to use the Nigerian Autonomous Fore
The FX losses themselves were not the "one-off". The one-off was the massive Naira devaluation enacted by the Nigerian central bank. Please see my previous post for more info one why this was done.
In terms of what the company are doing to reduce this risk. The main thing is completing the refinancing of the $300m+ Accugas bank facility (matures in Dec 2025) using a Naira denominated local bank facility. Once this is achieved, the companies largest debt liabilities will have a currency which will match the local currency gas invoices (main source of revenues).
Yes, until this done, FX risk will remain, but the recent huge FX loss is definitely a "one-off". Not in terms of frequency but in terms of size.
Scotpak - getting to a term sheet sounds good to me. From your experience how likely do you think the debt refinance will complete now that we have got this stage? Hopefully we will see some his resolved during the early part of Q4.
A termsheet will usually specify the applicable interest rate, loan maturity, any amortisation payments, loan collateral and any associated loan covenants (rules the company must abide by to maintain availability of the loan). If they already have a termsheet complete with a consortium of lenders, then usually completion is only 5-10 days away max. But thats from my own experience. Dont want to give anyone false hope.
Sp - TY and let’s hope it completes sooner rather than later. The next big thing for me is adding the successful compression project in Nigeria in order that we can continue to to expand our existing customers and add new ones too. I just saw this bit in yesterdays report which is very promising although i do not know when the expected completion date is for the compression project:-
“ Savannah continues to progress its US$45 million compression project at the Uquo Central Processing Facility. Following the front-end engineering and the associated order of long lead items, detailed design work has commenced and is on track to be completed in Q4 2023. The compression project remains within budget and startup is planned for mid-2024.”
Once debt refinance is secured and now I know compression is still on track, I will restart thinking a bit more about M&A. However, I must admit I’d love to see one or two new SPA’s land soon so that we could be working on 2 / 3 M&A targets inc SS simultaneously. This would cushion the blow if a couple of others landed should SS fail.
Am not even thinking about niger or renewables at the moment but I am looking forward to the ICC decisions which I hope will land sometime next year. Not sure how true the rumour is of a June 2025 date being set for the judge led hearing.
Brilliant insight Scotpak thanks let hope we get some news on accugas debt restructure in October...............
Rocky - If the benin starts the pipeline that means ecowas restrictions will be lifted so continue to look out for what happens there..................................................
1) restructure accugas debt
2) If benin start the pipeline than I hope savnnah aggressively move to drill and flow testing well in short order and work up plans to connect 5,000 bopd to pipeline.
3) I believe they will be working on other deals in the background we know they are looking at Nigeria and Congo both being offshore assets, and i am sure there is plenty of other opportunities they have already worked the technicals on.............