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My timeline expectations and the patience timeframe I am willing to give for suspension to continue until maximum timeframe is 30th June 2024. My reasons are as follows:
1) Q1 2024 results released by than - usually comes 2nd week of April 24
2) Full year 2023 results released by than - usually comes 2nd week of June 24
3) Hopefully update on accugas debt re-structure by than
4) Hopefully update on ICC cases by than.
5) CPF completion + material increase in accugas contracts
6) Time to execute an additional deal or alternative deal whatever the SS outcome.
7) South Sudan oil and power 2024 oil conference last week of June so it will either support or expose SS government to drive investment. Our deal decision eill sway investor interest and confidence on event and investment environment in SS
8) Progress and update on Niger work programme and Niger export pipeline.
I believe in my mind 30th June 2024 is the upmost period I am willing to accept in my mind, which allows enough time for the company to progress all of the above but also underpin the company and protect and enhance shareholder value beyond our suspended price.
After 30th June 2024, I don’t believe there is any sensible justification for the company to remain suspended beyond this date if they aren’t able to progress a few of the above items and would happily accept coming to market whatever the status of progress on above.
Some may disagree but I believe that timeframe allowed is the ideal timeframe in my mind
Thanks Rockyride - I am still of the opinion that with accugas with CPF completion will transform the company into another level in a few months time. One thing I will say is that all deals in Africa are difficult even Nigeria as we witnessed first hand how long it took for the accugas deal to reach conclusion that being said we have 3 offices in Nigeria and big Nigeria staff base we should still pursue another asset base in Nigeria to fully utilize our Nigerian staff and maximise efficiency
(Great to see the effective date of 1/1/22 mentioned as we have not seen that in print before. This date was mentioned to me by David Clarkson at the AGM but he did say he was not certain of it which I found very strange for a director to say - although he is definitely only a back seat passenger nowadays.)
01/02/2024, 11:59 am
Photo of Ed Reed
© Supplied by Savannah EnergySavannah Energy team in red overalls stand in the desert, in front of drilling rig
Picture shows; Savannah's drilling team. Niger. Supplied by Savannah Energy Date; Unknown
Savannah Energy has pushed back closing on its South Sudan acquisition yet again, although Shore Capital has set out some grounds for positivity.
The operator said it remained suspended from trading on London’s AIM. It has pushed back the cancellation date to April 2 this year.
However, Savannah said it is still making progress on the various parts of the deal. These include “in-country approvalsâ€, which are required to complete the deal for Petronas’ assets.
Shore Capital analyst Craig Howie said it can be “realistically expected†that Savannah publish its AIM admission document within this time.
Savannah announced the deal in December 2022. It agreed to pay $1.25 billion to Petronas for the Malaysian company’s assets in South Sudan. At that point, it aimed to publish its admission document within the first half of 2023.
Shore’s Howie said “we continue to sense that Savannah is pressing on to ensure that this can occur as soon as possible – noting AIM’s granting of the further extension announced todayâ€.
Once the documents are published, he said, it will be easier to assess the South Sudan. In the meantime, Howie said, “we continue to forecast material organic revenues and cash flowâ€.
Petronas has a 40% stake in Block 3/7, 30% in Block 1/2/4 and 67.9% in Block 5A. In 2019-21, the Petronas unit reported an average post-tax profit of $130.6 million.
The deal has an effective date of January 1, 2022. Thus, while the delays are inconvenient, cash flow from the assets will go to paying down the final price paid by Savannah.
Interesting PF, thanks for researching. Given the keeness that AIM seem to have for SAVE to relist, then one would think they could show some flexibility. For instance, if we signed an SPA for a new acquisition which would ordinarily result in a RTO, once we came back after acquiring SS (fingers crossed) then the likelihood is that the new enlarged company would no longer require an RTO for the new acquisition, so we could be back trading straightaway.
All conjecture but we have another 2 months to while away now so there's not much else to do :-)
Thanks SOG and Porschefund - One of the the many reasons why AK has remained in the AIM market is so there is more flexibility on the rules
TIL
From the LSE rules for AIM companies link below:
"A reverse takeover is any acquisition or acquisitions in a twelve month period which for an AIM company would exceed 100% in any of the class tests.".
Whilst the Gross Assets test allows a pro-forma (enlarged group) Balance Sheet included in the Admission Document to be used as part of the 100% equation, the Profits and Turnover class tests do not, and the relevant figures in the last published accounts would be used.
It would therefore seem logical that if another acquisition completes ahead of the SS deal the enlarged group would still fail the class tests and suspension would continue.
https://docs.londonstockexchange.com/sites/default/files/documents/aim-rules-for-companies.pdf
The class tests definitions start on page 19.
The following paragraph does however suggest some flexibility:
"Substitute Tests
In circumstances where the above tests produce anomalous results or where the tests are inappropriate to the sphere of activity of the AIM company, the Exchange may (except in the case of a transaction with a related party), disregard the calculation and substitute other relevant indicators of size, including industry specific tests. Only the Exchange can decide to disregard one or more of the class tests, or substitute another test"
Share price is holding up nicely despite the delay.
Apologies SOG for ruining your observation that the BB continues to be high quality!
Hi TIL
I’m not an expert in the matter but in the spirit of brainstorming on this bb ( ie not advice/dyor), on scanning the below FCA link
https://www.handbook.fca.org.uk/handbook/LR/5.pdf
And quickly scanning reading other googled articles, I couldn’t see such a restriction.
In openly signaling a possible second hydrocarbon transaction and pursuing other transactions for quite some time while suspended for SS the company (SAVE) seems to not be acting as if this were the case either. So anecdotally this doesn’t seem to be an actual issue; or perhaps another way to look at is it’s not an issue in practice? I don’t know if this helps.
Personal opinion: It would be difficult to imagine being able to credibly approach other sellers to enter into a transaction if this material restriction in completing a transaction were the case.
Again, I’m not an expert, just my 4 penn’orth!
It’s been an exciting week on this share / bb - really appreciated everyone’s posts. This bb continues to be high quality. I’m optimistic on SAVE, and wish the Management Team Godspeed in getting the deals across the line!
RockyRide - So you mean summary we cannot complete another deal like Assala Energy or another prior to SS is that correct ?
I have asked the NOMAD this before and he said (the normal standard party line) that any material information needs to be declared in the same way whether a share is suspended or not. I probed further and he said, the point any other deal would be deemed material would be at the point of SPA being signed. If my memory serves me correctly, Z has said he’s seen SPA’s being signed very late in the total cycle and completion happening in a matter of weeks. But in this scenario, while we are delisted with no company currently existing on the stock market, I wold think that this kind of think would be impossible and we have not seen a SPA being signed anyway. However, I would be hoping that we are ready to sign one very soon after re-list either with or without a SS deal. But if it is without, I think we will see a lot of PI’s bailing as they would be in fear of another RTO and subsequent lang suspension again.
I just had a thought this morning and wondered if anyone had a view on this and whether it's technically and legally possible. Could we complete another deal whilst we wait out decisions on SS government prior to the SS Deal. What I mean is return to market with another deal which enlarges the company so it doesn't need to stay suspended prior to the SS Deal, than the SS deal can play out in it's own time with the deal still intact in the background if it continues to take longer.....................
I wonder if that's actually possible in this same suspension window and whether legally and technically allowed given that we were suspended for the SS Deal in the first place so would be able to re-order the running order and execution of deals ?
Probably a legal or a Nomad question one would think ?
And I wouldn’t be surprised for some sort of deal being done with the Government to give them more skin in the game. Maybe they take a higher percentage of revenues from the extensions to the PSC’s. Could they benefit by taking a slightly larger share from ourselves, CNPC and the other partner (can’t remember who they are).
Or could we sell a bit of our share back to the Government, similar to us trying to sell 10% of COTCO back. I know the SS would not have the funds to pay but could it all be done from production revenues with an economic interest date of dd/mm/yyyy. The other 2 partners may do the same if it enhances the chance of the PSC extensions and would reduce any threats of Nationalising the oil fields as happened in Chad.
One way or another we need to take the Government with us and not by dropping suitcases out of planes.
As with all deal making there is an escrow process so folks can google it, so all parties to transaction feel comfortable to commit to each other using a third party a legal firm. So the South Sudan government can feel comfortable that Savannah can finance the acquisition and has backers and the debt providers can feel comfortable that they have assurance on government approvals, It's a matching process and it happens in tandem, you can have the approvals happen later but in this case I believe Savannah and Debt providers would want approvals and debt execution to happen concurrently to give assurance to both parties, so the escrow process allows for this and both parties can not say you are not providing debt or you are not providing approvals, they can both satisfy each other through escrow.
It really comes down to SS government will to complete this deal and let's be frank that's the only thing that matters with this acquisition and nothing else really
It's hard to say Ian.
Some of these institutions have major funds under management and while holdings in SAVE for the top 9 including the EBT are just shy of 60% it might not register that high at all on their overall FUM.
For a few weeks to a few months this either going to transform from $280m to nearly $1.8b yearly revenues with a significant debt reduction (we hope) on the transaction cost 2.25 years on ? and IIs seeing a more realistic valuation/re-rating with perhaps further deals in the pipeline in the short-medium term for continued growth ?.
If they were to pay a $50m div (from $1.8b revs) it's about 12% at the current valuation at 26p to 4% at 78p which imo would be affordable relative to low debt and a $70/b oil price.
Maybe a need to wait and see the expansion plans re reneweables - would IIs pull their money without seeing the details of that growth arm/performance next few years. On the above they'd have to now pull that money and look for opportunities anew and success while Save might be on the cusp of transformation. They may not react in the same way as PIs re access to capital. Just imo.
I’m inclined to agree to a certain extent, but when II’s see then opportunity cost of having capital tied up in a business where they can’t trade to another opportunity, particularly when in 2022 the NASDAQ is up more than 20%, II’s will be mindful of dead money taking oxygen from performance.
To me it looks like they want govt approval prior to even issuing the adm document given the wording this morning. In no deals have i seen approval needed prior to an adm document so perhaps that's SAVEs stipulation ?
From Trustilies AI article yesterday, i wonder where did AI pck up on completion expected in the next few weeks to print thar re S.Sudan -
"In the next few weeks, moreover, it is also expected to complete the purchase of the interests of Malaysia's Petronas group in South Sudan in an operation it announced in 2022."
I still don't think it necesarily means though that it could take right up to the 2nd April and could come through before that.
If there's already 2 years to be deducted from the settlement at 50k bopd using $20/b it's $30m/month or $720m to the end of December 2023 with another $90m this quarter to end of March imo. I still think that up to $250m may have been allowed for contingencies on higher oil prices and/or production rates spread over x years.
NtM - I agree and on reflection I retract that comment. I now think that if SAVE have made enough progress in country to be granted a 2 month extension by AIM, it’s probably enough progress for the finance provider/s (if we are taking debt on) to put all their wheels in motion. I genuinely think we have a decent chance of a Q2 completion now.
I'm fine wit this extension.. and if there's another similar duration one thereafter then ok by me too. Thereafter again probably sees me say it's realms of the ridiculous now though.
You add much value here RR. Thanks v much for all of it !
ps: I really identified with your - RR - post of 8.55 am.. but - also - somewhat strongly disagree with one part of it :
''By the way, should we get the in Country approvals by 2nd April, there is not a cat in hell’s chance we will be trading again before 1/7/24.''
Ian - I think quite the opposite. After all this time II’s will see huge growth and yield potential should SS close. They unlike PI’s in many respects but to mention 3:-
They don’t get bored
They don’t need to take cash off the table
They don’t forget the reasons they bought in
Yes there will PI’s who sell but I see far more demand if and when we land a big one.
And when we do close an incremental accretive deal I’m sure we will see a significant dividend initiated. AK has already previously mentioned $12m and $10m. This will be the number 1 reason II’s are still here and AK will now need to pay them back for their unwavering support as soon as the big fat lady sings!
Cavendish are joint brokers to the company, but have been largely silent since the suspension. They had been bulls of the company with a target price of 85p pre the SS deal.
All brokers and the NOMAD will need to play a crucial in the run up to the relisting, keeping the big institutions onside and potentially buyers of more stock.
My feeling is there may be a pent up order book of sell orders ( I’ve been an inadvertent large holder of this for too long and may want to rebalance) so if the SS deal is completed we’d need an orderly deal flow on both sides.
Until then, the waiting game continues.
Hi RR
Good colour on your chat from the NOMAD. Fingers crossed for all those projects you listed.
With reference to the Shore Capital note, they are just a sponsored broker, hence why their notes always have a disclaimer for investors to view it as marketing communication. ("This material is considered to be a marketing
communication and accordingly it has not been prepared in accordance with legal requirements designed to promote the independence of investment research nor is it subject to any prohibition on dealing ahead of the dissemination of investment research. This material is issuer sponsored and has been prepared pursuant to an agreement between
Shore Capital and the issuer in relation to the production of research".)
Thus would not attached too much significance to it.
The other brokers who seem to cover SAVE are "Cavendish" and "Hannam & Partners" who might be independent and not hired by Savannah directly however cannot see anything published by them (which I guess is not a surprise as we have no data/ financials to analyse!)
And a big fat juicy $50m distribution announced with a fx of 1.27 = BANG ON 3p per share or 18.2% based on my average buy price.
Tick tock…
TiL - thank you. and based on a 2 month further extension I see this as very positive. I spoke to the NOMAD in early Jan and AIM were asking for some very solid reassurances on significant progress being made in SS. If they did not get those strong reassurances, a further extension from today was highly debatable. We must have made progress in country.
If Shore are saying a realistic chance of AD in next 8 weeks, either the debt financiers are also happy with in country progress to incur their legal costs putting the deals together or as my previous note, we are not taking on debt for the deal.
Granted Shore will know some decent stuff to put that note together but we were also told from IR very clearly that Accugas debt re-finance deal would be closed before end of December 2023!!!
Anyway, based on where we are at, we could not have wished for a better note from Shore.
Return price on or before 8th April ……………………wait for it…………
89p
Thanks for your post RR, However i don't agree with your resumption date of 1.07.2024 for trading upon approvals, if we get approvals pre 2nd April we will be back up trading within days of admission doc submission in my opinion .