Gordon Stein, CFO of CleanTech Lithium, explains why CTL acquired the 23 Laguna Verde licenses. Watch the video here.
Https://dockets.justia.com/docket/new-york/nysdce/1:2023cv07771/605569
https://globalarbitrationreview.com/article/chad-pipeline-dispute-reaches-new-york
Goodness....
I think end of September is aspirational. We've no sense of what the outstanding issues may be. The Chinese and the Indians have to sign off, as well as the South Sudanese and Malaysians (who I still assume are the financiers).
White smoke at the Vatican appears when we all stop looking, perhaps.
Good afternoon.
Thanks for the great posts, SOG and for reviewing mine so thoughtfully.
Unallocated admin and other operating expenses were just short of $30m for FY22 (p151). I have $35m p.a. for 2023 to 2028 in my model (which eats over 10 pence of net present value): possibly not conservative enough given business expansion and wage inflation.
Transaction expenses of $14.4m (for CC acqn) are shown unallocated in the 2022 financials. I've included $15m in my model for SS, but allocated it to SS directly as (we hope) it will be an ongoing business.
I have been pretty brutal in Nigeria in including generous capex for compression project etc, but only a 6% increment p.a. to the revenue line. I imagine that revenue from transporting some third party gas may begin, but I've not modelled this. Also, finding creditworthy customers in region, or ones with the ability and willingness to credit-enhance is possibly difficult now "low-hanging fruit" has been addressed.
You are quite correct that my net debt figures come out pretty similarly to ZEN. There was over $205m of NGN on the books at year end and I am hoping very much that a decent chunk of this has been used to pay down debt now that the currency floats (I believe fx loss will have a big impact, mind): your "dragging a dead horse" analogy is bang-on. Debt restructuring may simply be too difficult right now if key protagonists in Nigeria have largely closed the door: I'd love to be surprised here.
I've got a decent chunk in this share and I am very positive for the long-term, but given recent history (as you've quite-rightly flagged) patience will be needed.
Best wishes
Rocky, to continue:
Chad and Cameroon upstream production and midstream throughput net to Savannah for the Exxon deal were disclosed in the Dec 2021 presentation. That's my starting point. I agree though; Chad does look a bit rich - I'll have another look. I haven't included and erosion of production nor any increase. One could argue that production will go down as not workovers will be undertaken, but in that case I can drop all the capex numbers from the Chad model.
Throughput is constant in my model too. Cameroon is based on 41% effectively, cos it's the net throughput expected in 2022 for the Savannah share which was 41% at the time.
SS: debt starts at $1.25b and then 2022 estimated profit (after tax) is deducted, as is 2023 assuming a 30 Sep 23 closure and a 1 Jan 2022 effective date. This is probably the punchiest part of the model, tbf.
Uses actual brent prices, adjusted down by $10 for a Dar blend discount. No dilution factored in to model, just includes my estimates of Savannah share of the bbls.
Delist: highly unlikely, I agree...but not impossible. I just thought I'd cheekily throw it in to see what others might think.
EOY 2023 debt for Nigeria and Niger is $448m. I guess I'd deduct the NGN cash balance from that (by now used to pay off the USD loan, I assume) and add another $50m for FX loss (I may be totally wrong on that point, of course...and on allllllll this!)
Renewables....nothing (not even the costs of staff).
I think the Fenikso number was about $14m - it's in the RNS if I remember right.
I hope all this is clear and answers your questions. Your posts are great - keep them coming, please!
Best wishes
Hi Rocky!
I'll try to answer your points - hope it's clear!
Nigeria production: based on 2022 MMscfpd from the financials in 2022 and our 80% Uquo interest. Then incremented at 1.5% per quarter. No inflation in gas prices or midstream revenue included (despite inclusion of the capex for the compression project which may well add to the later, if not the former).
Corporate overhead USD35m p.a. based on segmental reporting from FY22 financials. No inflation or further increase included (perhaps it should be!) FTEs not included as an input.
Niger: 1,500 bopd from Q4 2024, 5,000 bopd from Q4 25. Capex total $48m to Q4 2025. A bit brutal, perhaps, but intended to reflect building pipeline, tie-in, overall establishment of operations from...sand.
No 2Ps in the model at all: it's only a cashflow model. A 2P alternative model would be interesting. I guess given where we're operating, a barrel of 2P might not be particularly highly prized by the market (sorry for cynicism).
Chad and Cameroon: I've made the assumption that we get an award based on the actual cashflows to expropriation date and estimates based on estimated production and pipeline throughput (flexed for crude pricing circumstances) thereafter. So they're done pretty much in the same way as the other segments. Capex, opex, admin, interest, tax, discounted at 15%.
Second post follows...
Thanks for that, komakino: good to know as the AGM dial-in failed for me so I missed the meeting.
Any fx loss actually isn't in my model: one reason Nigeria looks so lowly is because all the unattributable central costs have to go somewhere so I decided to lump them in with the only business with ongoing revenue-generation.
Re point number 3 in my list, CNPC isn't in block 5A, of course. We'd be majority there.
8. If we have to relist absent SS, or another major hydrocarbon deal, then the company may stop looking like a growth stock. The market may be more inclined to value the company based on the financials as none of the inorganic growth plays seem to be coming off. That is likely to leave us back at perhaps 15 pence. That said, if IIs stay loyal, support may come via expectation of a CC settlement and the company’s reassurances that there’re other attractive deals to be struck.
9. CC and SS confidentiality (and in my opinion the Dec 21 presentation which has turned into a bit of hostage to fortune) seem to have caused corporate comms to go to ground in 2022 and 2023. That cannot be allowed to continue. The next update needs to focus on actual operations and initiatives as well as “why we do what we do”.
These posts are just my own thoughts and assessments, not based on anything mot in the public domain. DYOR, or course.
That's it.
Best wishes
4. Goodness knows if SS ever gets over the line, but I suspect outstanding receivables and governance of the OCs going forward may well be playing into the delays as well as (perhaps) a government approval. All this assumes that our funding (Petronas PXF or otherwise) for the project is standing by patiently as global yields continue to march ever higher.
5. I suspect that the timing of the Niger coup and the completion of the pipeline to Benin may not be entirely unrelated. Not read this anywhere, but it’s possible. Hopefully the company now does sufficient to fulfil its contractual obligations in Niger in order to continue to secure the R1234 concession, but doesn’t spend a fortune in the process. My model has Niger as less than worthless in the short-to-medium term.
6. For those expecting something approaching $1bn on the Chad ruling, I’d direct you to the Dec 21 company presentation showing 9-year asset-level average FCF of $76.6m p.a.: this includes Cameroon too. NPV10 was estimated at $533.7m: again, that’s the sum for Exxon’s share of both countries. NPV15 looks a bit more relevant than NPV10 in today’s environment. I’d expect a ruling about 12 months from now.
7. The interims, due end of September, are going to be ugly. Nigeria has progress on take-or-pay gas and we will probably see the payment come through on the Lekoil deal. But we now have:
Interest on debt nearer 15% than last year’s 12%
A hefty FX loss associated with Naira peg removal - I know AK said some was hedged out, but I’m finding it difficult to believe that we got $200m of NGN hedged out just prior to the float.
Transactional and legal fees associated with CC and SS to be booked.
Increased staff numbers and the resultant increased cost base.
One positive may be that the NGN float should have allowed us to pay down some of the USD debt in Nigeria using the NGN cash balance brought forward, thus reducing the interest expense going forward.
Of course, it’ll be interesting to see what revenue is booked for Chad prior to expropriation. And will Cameroon revenue be booked given the dispute over opco governance? Will payment of Cameroon dividends (or non-payment of same) be disclosed?
Some other thoughts:
1. I think the most likely outcome in the short-term is that SS gets pushed further down the road. Whether the only hold is government approval, we don’t know (thanks, Rocky, for recent insights here which I understand are via the Nomad). If it does get approved and an RNS in this respect were to come on 29 September, then I think that’s purely coincidental. It gets done when it gets done (or not!)
2. If the Nomad says that the company has to relist absent deal completion, then does management simply delist? I doubt it. It’s an extreme move and it would need the tacit blessing of IIs, which would be highly unlikely to be granted. This with a view to a relisting on an exchange that isn’t quite so NVG (not very good). This is highly unlikely and conjecture…but perhaps not impossible. Could the exchange force it? I doubt that they would, but still…
3. As recently as 2018, Petronas was apparently considering investing in further blocks in SS. See here: https://www.worldoil.com/news/2018/9/11/petronas-may-invest-in-south-sudan-oil-blocks-presidency-says Something changed. I wonder what.
ONGC Videsh recently received an arbitral ruling in its favour re (North) Sudan receivables outstanding: https://www.moneycontrol.com/news/companies-2/ongc-videsh-wins-190-million-arbitration-awards-against-sudan-10377401.html I believe they claimed considerably more, but am having difficulty piecing together the entire story. So I wonder if part of the delay is horse-trading around who owes what to whom.
ONGC’s most recent reporting makes it clear that the SS blocks are operated between the parties involved by joint operating companies, so I suspect we are involved in addressing the governance of those going forward. https://ongcindia.com/web/eng/about-ongc/subsidiaries/ongc-videsh-limited This doesn’t look like a non-operating interest to me. I imagine the Chinese are leading (has this been made clear anywhere?)
It’s all gone very quiet from the company.
My model shows the following valuation.
Nigeria (including central corporate overhead) 9.4p
Niger -2.4p
Chad 16.2p
Cameroon 9.1p
South Sudan 54.8p
Total 87.2p
It’s a discounted cashflow model. Here are some of the inputs.
All cashflows cease on 1 January 2029.
Interest rate on debt 15%
Discount factor on future cashflows 15%
Crude price USD80/bbl
Direct cost USD40/bbl
South Sudan closes effective 1 Jan 2022
Nigerian gas sales grow at 6% p.a.
All renewables ignored.
There’re a range of other assumptions around capex and costs. I have, where possible, based these on the FY22 financials and the presentation which AK made on New Years Eve 2021 when CC was announced. The latter has subsequently been removed from the website, I believe.
Clearly there’s huge margin for playing with inputs here. And huge margin for error. I believe I have been reasonably conservative (except perhaps wrt the SS close date).
May be of interest to some of you.
https://m.youtube.com/watch?v=Y6Nu62pLodg&feature=youtu.be
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.
We had a Q1 operational update on 13 April this year; but to the best of my knowledge, we've never previously had quarterly updates, certainly not in the last two years.
Given all the matters currently in flux, I expect nothing until material, company-specific events (good or bad) force an RNS. Interims for the last two years were published on 30 September.
The 28 June date previously advertised on SS and much discussed here was strangely specific and I conclude that it may somehow have been tied to the recent South Sudanese visit to London that TrustILie sleuthed out so well. We've now had expectations managed back to "Q3".
Recent political events in our chosen jurisdictions show why companies like Savannah, once they are making profits, will be valued on extremely modest multiples or 2P projections. Savannah's country diversification and renewables initiatives may add a very modest premium, I suppose.
We can at least have some certainty of interims around 30 September.
The company gets a pass on disclosure re Chad, Cameroon and South Sudan for now. But that will have to change eventually and regular operational updates across the geographies will be required when confidentiality around political and legal issues is lifted.
A slightly less frivolous post: here's a background summary on how Bazoum got in to the presendential seat in the first place.
https://www.bbc.com/news/world-africa-56613931
Blimmin' heck. Cue Shirley Manson and Garbage.
https://m.youtube.com/watch?v=GpBFOJ3R0M4&pp=ygUNR2FyYmFnZSByYWlucw%3D%3D
While we await news, in no particular order, here is my (highly-entitled and presumptuous) wishlist for Savannah’s achievements over the next twelve months and its position a year from now. Some are obvious, others less so. Some are transformative, others somewhat smaller. This is armchair CEO stuff: these things are easy to wish for, much harder to deliver. And, goodness, it’s a long list…and most items are worthy of an RNS in their own right. There must be fairly significant elements of capital constraint to this list too.
There’s obviously an element of Walter Mitty to this, but it does at least give a sense of what is underway. If half of this happened…wow. I wanted to give myself a sense of the tasks in hand.
1. South Sudan closed with full government approval. No distribution impact from Sudan conflict. Revenue being booked.
2. Another hydrocarbon deal (as advertised by AK) closed with full government approval.
3. ICC final ruling on Chad.
4. If ICC rules in Savannah’s favour, and Chad fails to pay up, the beginning of injunctive proceedings by Savannah over Chadian oil delivered to Kribi.
5. If ICC rules in Savannah’s favour, repayment of the Exxon facility in its entirety.
6. 10% sale of COTCo portion to SNH completed.
7. Dividends from COTCo flowing to Savannah.
8. Project sanction from Cameroonian government on Bini A Warak hydro.
9. Completion of the Transitional Facility for Accugas.
10. Significantly reduced currency exposure to NGN (I still believe we’re booking a hefty fx loss for 2023 even though the floating Naira improves matters going forward).
11. Material progress on pay down of Accugas debt such that the burden of interest expense on the P&L starts to meaningfully reduce.
12. A couple more creditworthy Accugas customers added.
13. Accugas customers taking more of their catch-up gas such that deferred revenue starts to reduce, rather than grow and the statutory revenue numbers start to look more attractive.
14. Completion of Uquo compression project.
15. Niger R3 spur pipeline completed, tied in commissioned.
16. Completion and commissioning of the Amdigh EPF.
17. Timetable for construction of gathering system from neighbouring fields to Amdigh.
18. First oil from Amdigh and a clear roadmap to first revenue.
19. A CPR as far as is possible on R3E to give some 2P visibility.
20. Project sanction on Tarka wind and a costed roadmap to commissioning.
21. Relisting. Company big enough that a further suspension for RTO reasons highly unlikely.
22. Meaningful measures to reduce key-man risk on AK. Only the company can determine how this is best addressed.
23. A return to (reasonably) regular video presentations and Q&A from AK. But also including NB giving the input on the finance and accounting side.
24. A more visible Chairman; especially in terms of driving the B to G elements of Savannah’s business.
Good point, OAW. Thanks.
I was of the view that 28 July was do-or-die: less so now, though.
I think I should probably just relax until there's a meaningful update.
In the meantime, if anyone knows where I can buy McVities Rich Tea biscuits in Bangkok, please let me know.