Malcy has just blogged.....8 Aug 2018 12:48
Savannah Petroleum
A red letter day today for SAVP as they announce that they have signed a legally binding MOU with the Republic of Niger with a ‘commitment to realisation of the proposed early production scheme (EPS) utilising recent oil discoveries in the R3 portion of the R3/R4 PSC in the Agadem Rift Basin’. The agreement binds both parties to work together to ensure the EPS is realised.
The EPS envisages oil from Savannah’s recent discoveries being delivered to the SORAZ refinery (owned by a joint venture of CNPC and the Niger Government) through the Agadem-Zinder pipeline (owned by CNPC), and the Government of Niger have agreed to facilitate commercial arrangements between Savannah and both SORAZ and the pipeline owner in order for Savannah’s first production to be delivered, of course subject to the compatibility of Savannah’s oil which will be addressed when they commence their well testing campaign (I expect later this year).
SAVP will provide a pre-feasibility study to the Government in relation to the discovered crude oil resources in the R3 area anticipated to be included in the EPS, and then within 90 days of finalising agreements between themselves, SORAZ and the third party infrastructure owner will submit to the Government an application for an Exclusive Exploitation Authorisation.
SAVP CEO Andrew Knott has in his statement indicated that with its significant bank of drill-ready exploration prospects that have similar risk profiles to those already drilled, the company should see significant reserve addition potential. This agreement is of such significance as it takes away a good deal of the worries of potentially stranded oil that some naysayers predicted, and whilst I expect ramp-up of production to be gentle it will indeed mean modest cash flow, quite possibly by the end of this year. What is more the exit route for crude is now via a 60km truck journey to the pipeline rather than a 700km one which was a possibility in earlier plans. This makes the crude discovered already in Niger to be much more profitable than the original study envisaged.
With the final note in the RNS stating that the completion of the Seven Energy assets is ‘on track for this quarter’ these announcements should have gone a long way to demonstrating that the significant upside at SAVP should be converted in the share price reaction especially as Eridal-1 is drilling ahead at the moment.
Sign In
Follow the stocks
