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Interesting article in the Daily Telegraph today on oil prices

Vladimir Putin has drawn up a draft decree prohibiting the sale of Russian oil exports to any country or any entity participating in the G7 oil price cap.

Unless he backs down, the world will soon face a critical shortfall in crude and liquid products, adding an acute oil crisis on top of the gas crisis that we already have.

It is widely assumed that the Kremlin will find some way to circumvent the western stranglehold and redirect 4pc of global oil supply from Europe to customers in Asia, happy to take his exports at a stiff discount.

Yet Russia does not have enough tankers of its own and cannot obtain sufficient numbers from the international “shadow fleet”, a motley cast of shell companies on the global margins.

The West controls over 90pc of the world’s tankers through direct ownership or financing and insurance, above all the P&I (protection and indemnity) club that covers complex spill liability for shipowners – at $1bn (£820m) per ship.

Without that you cannot take these floating firebombs through the Bosphorus, the Danish straits, the Suez Canal, or enter respectable ports, even in China.

“If the tankers don’t have the requisite insurance, no terminal is willing to accept them,” said Liu Gan from the Eurasia Institute of China’s State Council.

Putin’s decree may be bluster. There are many ways of complying quietly with the $60 cap while chest-beating at home for nationalist consumption. But he may equally be tempted to play his oil card in a last-ditch effort to destabilise the democracies and pressure the West into accepting a shameful deal in Ukraine, one that lets him swallow the Donbas and the occupied land corridor to Crimea.

“He could squeeze the global market by shutting in two to three million barrels a day (b/d) if he chooses to. Russia is a systemically-important exporter of oil,” said Professor Craig Kennedy, an expert on Russian energy at Harvard University and author of a forthcoming book on the Russian oil industry.

“You can see that they are agonising about it in Moscow: should they risk weaponising oil exports to trigger a price spike, or might it backfire?” he said.

Putin needs oil revenue as the Russian budget dives into a deep deficit. It is becoming harder for the Kremlin to raid the country’s rainy-day reserve funds and there is no domestic bond market to speak of. But his money woes can be overstated.

“He has a very strong hedge: if prices jump enough, he can recoup what he loses on volume,” said Christopher Granville from TS Lombard.

Brent crude is currently well-behaved at $80 as the global economy flirts with recession. The picture will look very different once China fully reopens and global aviation recovers.

You certainly are, especially given the stock market will be closed on 02/01 as the 1st is a Sunday :-)

Could well be Moho and I certainly think that securing acquisitions is much the quicker way to increasing the MCap (assuming we do eventually complete them, and 7 deal notwithstanding!). Certainly AK has reiterated that this is a once in a generation opportunity so not surprising he is more focused on these than Niger at the moment. Long term it does make sense as Niger isn't going anywhere. Save do have to, in the first four years of the PSC, drill five (as opposed to two) exploration wells to a minimum depth of 2,000 metres, with at least one exploration well on R1, R2 or R4, as well as acquiring 250km2 of 3D seismic. So I don't think it's as much about not being enthusiastic, just that acquisitions have jumped to the top of his to do list.

Tier, we are suspended until they publish the admission document. Last year the SPA's were signed on the 13th Dec and we were suspended. The admission doc. was published on the 30th so we resumed trading on the 31st. So we need the admission doc. to be published. Will AK only publish when they have govt. sign off this time, so hence mention of H1 next year. If we have sign off from the govt. at the time they publish the admission document we should see a quick jump in sp imo.

More than likely O&W, though if Exxon/Save have nailed this down legally, which I suspect they have, then Chad can't do much without cutting off their own nose etc. No doubt we'll see more bluster and bravado from them in the media but what goes on behind the scenes is what matters. Might have to wait a while but I'm sure Exxon/Save are confident that they have this in the bag. Does suggest that there are possible different factions in the govt. with Chad happy to award the renewables contract at the same time. Overall I'm not that worried to be honest. If we get the South Sudan gig, and Petronas seem to be more than willing to be working with us, we'll see the value of the company far in excess of where we are at the moment. Does sound as if Exxon/Petronas have all been working closely with SAVE on this strategy. It's not great that we are suspended - my Xmas pressie budget is in here ;-) - but if this comes off we'll all most likely say it will have been worth it.

Agadem, could be wrong but as I suggested and you sort of confirmed with “Andrew will re-list when he had SS Government signatures”, that could explain an AIM cancellation notice to move to a different market. Seems plausible but as ever we'll just have to wait and see.

I'm not sure anyone knows 100% on this one K1W1HR. Some have suggested it was just to reference the cancellation of the existing 'non-Exxon' listing in readiness to accept the new Exxon-added entity on the stock exchange (which then never happened due to the suspension). I personally don't think that was the case as we haven't seen that wording used in previous acquisitions. So my personal view is that AK was preparing to relist somewhere off the AIM market. If you subscribe to that theory then it's possible that he has no intention of re-listing until the Petronas deal is signed, and with an subsequent MCAP much larger than previously, then that makes sense. That does assume that he is 100% certain of the deal going through. Now given it's a year since the Exxon/Petronas SPA's he's had a lot of time to progress the South Sudan transaction, so maybe it's a lot closer to being signed than maybe we think. Could be wrong but nothing else comes to my mind that explains it.

Agree with you on that TiL that's my thinking too. Very eloquently put :-)

The last press article suggesting the petronas deal had been scuppered by the govt didn't lead to a RNS rebuttal, which possibly suggests the statement from the govt is true. Either way, not a lot we can do for a while yet anyway until we get the Petronas SPA anyway. Not expecting to hear much more on this for a while, possibly via the court case the govt have intimated they would pursue.

The website doesn't seem to be updated that regularly and most of the news items seem to flow through the FB page. Note the rebuttal RNS didn't say it was fake news or they had permission from the govt, rather that they had met all the requirements etc, so to my mind suggests they have done it without the ok of the govt. but they believe they are legally entitled to.

I think it's reasonable to assume they took extensive legal advice on this before making the announcement so although not ideal I'm not thinking it's a deal breaker, personally. They had litigation over the 7 deal from disgruntled ex-shareholders of 7 and AK always said it was just noise, as it turned out to be in the end.

Yes, quite a few of the different ministerial departments have FB pages which they use to put out news of events / meetings with important people etc. so it's genuine for sure. It's been in operation for as long as I've been looking at Chad so at least a year and probably much longer without scrolling back through all their posts.

For anyone interested and on FB, this is the Ministry of Energy page where the notice and discussions have been posted

https://www.facebook.com/M.P.Mines2020/

It's been posted on the Chadian Ministry for Energy Facebook page so unfortunately looks like it is genuine.

Ex-Exxon employees in Chad on LinkdIn have started posting remarks about first day for Savannah Energy. Seems bizarre and pretty unlikely if this article is true i.e. the govt. didn't know anything about it till the RNS.

Interesting post from Thommie on ADVFN in relation to $2b market cap

I dont think anyone can be sure about that, but it sounds like a very possible scenario. Andrew also spoke about such a target in the past. I guess at some point save might enter the ftse. depending on their market cap ofc. If you use tullow as comparison that zengas likes to compare save with you can clearly see where a company of that market cap might end up.
If all deals close like anticipated save would produce between 100 000 - 120 000 boepd. Tullow is producing around 65 000 bopd in 2022. So you can see that this assumption is sort of valid. I guess after completion of all deals save should be able to produce around 800m$ of free cashflow per annum at current oil prices. I expect the net debt for that to be between 1-1,5b$ at the end of 2023, more in the 1b direction of oil prices stay where they are and south Sudan would have an effective date of at least 1.1.2022. (I believe it to be even earlier, as talks must have already started in Q3 or q4 2021 as by that time AI already mentioned the interest by save in aquiring this asset)
I dont have any clue how that translates to enterprise value. But as a comparison tullow traded between an enterprise value of 2,5-3,5b$ in the past 2 years. Currently having around 2b$ net debt. (they only expect to produce around 200m$ free cash flow in 2022 and struggle to pay down their debt). So if you assume double production is worth double the market cap compared to tullow plus debt, the figures become somewhat magical. If we just half this best case scenario we would still be looking at 3b enterprise value, with in worst case 1,5b debt, that would mean a market cap of 1,5b$, translating into around 100p share price. In the case debt by end 2023 is lower, production higher, etc this figure has much upside ofc... Another thing is, that free cash flow for save should rise fast over the coming years, as I expect that petronas might be open to such a prepayment facility Exxon agreed on. Yes, you have to pay similar interest rates on that, but you can repay it at any time you wish and it directly reduces your interest payments when you keep paying it down. Not like the long financed tullow debt structure. Their gross debt stays around 3b$ where they have to pay interest for till they refinance it in 2025... (ok, they can repay 100m/year if I remember right...)

So every $ save pays down should in theory translate to a higher market cap. Lets see if that happens :)

Yes TiL, that stood out for me in the FinnCap note 'Despite a price tag of US$407m, Savannah expects to repay the cash acquisition cost from cash flow generated by the new assets in just 3-6 months.'

Just send them this https://nxts-blog.nationalexpress.com/blog/uk-sports-calendar

They can ignore any tennis ;-)

Yes, probably a good call on Niger. Pipeline seems to be progressing on schedule at any rate :-)

Have to disagree with you Agadem. AK needs to pay more attention to RNS timing imo. Why the hell is he putting it out just before the WC quarter final? Been trying to read snippets since I woke up this morning but the test match is on. Then we've got Cheltenham racing before more World Cup games. Think it'll be Monday before I get to concentrate assuming the test match hasn't finished!

Hopefully the market makers aren't sports fanatics and have time to read and price it up as you have indicated. No idea where the sp will go after this so it's a watch and see for me. Long term this can only trend up though. Niger seems to be waiting on some sort of finance and market conditions (whatever that may be) and doesn't appear to be dependant on CC as I thought it may be, which is disappointing. Looks like we'll have to wait longer into next year before they move on that. Still, they obviously have the cash for another acquisition so hopefully the ENI deal wasn't the only one near to agreement and we get something sooner rather than later. All in all it's good that we've closed this off and at a good price.

Tier, the Exxon acquisition was $372m plus $50m contingent on oil price, so to only be paying max $170m seems pretty good to me. Not impossible to see the Petronas acquisition to be reduced by a similar percentage as well.