Member Info for Porschefund

The decision to move the funding from Maddox DMCC to an Exxon Facility Agreement is a surprise and on the face of it a concern because of the risk of reducing the term from 7 years to 2 years but perhaps this also reflects the confidence in the speed that production can be increased.

Also worth highlighting is the fact that the Maddox DMCC facility was to Savannah Chad and the Exxon Facility Agreement is to Savannah Energy Finance Ltd, a company formed only 11 days ago.
I do not believe there is any mention in the Supplemental Admission Document that the Maddox DMCC facility has been withdrawn and the second tranche of $135m may still be needed when the Petronas deal is concluded. Perhaps Exxon agreed to the revised funding because there is another Exxon acquisition following on in short order funded by the unused $165m Maddox DMCC facility?

AK’s quote from the RNS certainly suggests we wont be waiting long before the next acquisition is announced.

“We expect our investments in these projects to provide significant increased tax revenues and electricity access for the people of Chad. In Cameroon, we hope to see the COTCo and TOTCo businesses grow further over the course of the coming years through additional third-party customer throughput volumes. We are also actively considering investments in other opportunities to pursue Projects that Matter in country.
Outside of Chad and Cameroon, we expect that, in the coming months, we will further augment our corporate growth profile through the announcement of additional hydrocarbon asset acquisitions and the initiation of new utility-scale renewable energy projects”

The conclusion of the Exxon tranche of the CC deal is a major step forward for SAVE. To acquire an asset with a two-year payback based on current production and 12-month low oil prices speaks for itself but the opportunity to increase production of this neglected asset by workovers and infill drilling must be viewed by the market as accretive.

The Exxon CC development Project 2016 report highlights the extent of Exxon’s capital investment reduction and the identified workover opportunities.
“The restructuring program began in early 2015 following EEPCI’s decision to reduce both capital and operational expenses by suspending the drilling of new wells. The company’s focus shifted to maximizing oil recovery from the project’s producing wells. By the start of 2016, the project had transitioned from operating multiple drilling and completion rigs to one well work rig. The demobilization of equipment was accompanied by a reduction in contractor and employee staffing. These actions resulted ina 95% decrease in EEPCI’s 2016 capital expenses compared to 2014, the last year of substantial drilling. Recognizing that 30%, or 200, of its 600+ wells produce 75% of its oil output, EEPCI opted to give maintenance and well enhancement procedures priority to this top 200 A recent pilot project has shown promise in enhancing crude recovery from the project’s asset base and potentially extending the project’s life. Mixing specially designed polymers with the reinjected water can improve the recovery of oil. The process, called polymer waterflooding, increases the viscosity of the water to push oil like a plunger towards the producing wells, thousands of feet below the ground. Because polymer waterflooding can significantly increase the amount of oil that is recoverable from a reservoir, it is used around the world. However, the process requires certain well conditions to be effective. The project’s reservoirs in the Doba Basin have the right combination of factors, including reservoir pressure and temperature, to make this a promising technique for extending the life and profitability of the project. ExxonMobil is closely following this project to see if there are learnings which can be applied in its fields around the world.”

I agree Corryvreckan on reflection it probably isn't a coincidence.
I believe the sale to Phoenix included Standard Life Aberdeen receiving consideration partly in paper that Abrdn may still hold, from which a close working relationship would have probably developed but I take comfort from the belief that the transfer of a large chunk of SAVE to a new legal owner would not have been effected without due diligence.

My understanding is that the TR-1 was from the Standard life Assurance Ltd that was sold in 2018 by Standard Life Aberdeen Ltd to (and is still part of) Phoenix Group (PHNX).
Standard Life Aberdeen PLC subsequently became part of Abrdn PLC so I am not sure the two TR-1 s are linked.
Happy to be corrected.

Water is possible NtM but could it also be West?
OPL310 is in Western Nigeria, is on the West Africa Transform Margin and is within proximity of the West Africa Gas Pipeline. The three year OPL310 licence extension granted to Lekoil had an expiry date of 2nd August. All speculation but it links the three Directorships of Todor Emilov Trifonov.

I am not sure Savannah Energy WN ltd indicates a renewables project.
When Savannah Energy RN Ltd was formed in March and Savannah Energy RC Ltd formed in April the third director appointed in addition to Finance and HR was Julian Horn (Head of Renewables).
The third director of Savannah Energy WN Ltd is Todor Emilov Trifonov who was made a director of Accugas Holdings UK PLC in October and was previously appointed a director when Savannah Energy Investments Ltd was formed in February ahead of the March Lekoil announcement.
RN appears to stand for Renewables Niger and RC Renewables Chad. I can’t work out what WN stands for but my guess is something Nigeria.

Some interesting background information on the Zafiro field.

The offshore technology article was updated in April 2022 and states the field is expected to recover 124.2 Mmbbl of crude oil & condensate.

https://www.nsenergybusiness.com/projects/zafiro-oil-field-gulf-guinea/

https://www.offshore-technology.com/marketdata/zafiro-conventional-oil-field-equatorial-guinea/

KS - I do not know if the contracts carry a cut off date earlier than the contract end date by which customers can request the make-up gas, but the small positive movement in the contractual liabilities provision suggests there is.

I accept your point in terms of profit recognition and believe it’s a reason that the share price is lower than I believe it should be, a situation that I believe will change with increased diversification of income. It is however only of concern to me if, as you speculate, receivables is increasing because of slow/non payment.
I am of the opinion that receivables are increasing for a couple of reasons, firstly gas sales growth over the last couple of years and more recently the timing of the growth in H1.
AK reported that daily production to 26/9 had increased by 55%, it would be a coincidence if such an increase started on 1/7 but perhaps indicates low production/ delivered gas in the early part of H1 compensated by significant growth/ delivered gas starting later in H1. This will distort receivables at the end of H1 as the debt may not yet be due for payment.

The ECL provision calculation (note 33e)in the 2021 AR shows a 99.98% provision against debts 271 days or older. If the policy has been consistently applied against receivables at 30/06/22 the debts cannot be that old without creating a significant increase in the ECL provision. Arguably IFRS9 requires the ECL provision to be even higher as its adoption ignores old debts collected since the half year end.

KS – I disagree with your statement

“so SAVE are only going to get paid what they deliver UNTIL possibly the very end of the contract”

The objective of the take or pay contracts is to enable SAVE to invoice for the contractually committed gas regardless of whether the customer takes it now or in 20+ years time. I agree that it would be a bone of contention and probably makes debt collection more difficult, but the customer is contractually obligated to pay and does.
Between the two Balance Sheet reporting dates trade receivables has increased by $33m and expected credit loss has increased by $6m, as a percentage provision it is roughly flat. If the customers were not paying the expected credit loss provision would be much higher.

Because of the high gross margin, the obligation under IFRS 15 to recognise the invoiced value of the undelivered gas on the Balance Sheet (contract liabilities), in my opinion exaggerates the liabilities. The liability for the supply of gas paid for but not yet delivered now stands at $282m. An increase of $42m. If the liability for undelivered gas (that may not ever be delivered) was valued at marginal cost (say 20%), the six months P & L would improve by $34m and the BS would improve by $225m. We are however stuck with IFRS 15.

This is a confident and upbeat statement that yet again has franked the company’s guidance of continued growth in its core business. In addition to that growth the agreements for the development of up to 750 MW of large-scale greenfield solar and wind projects in Niger and Chad give the potential to transform the electricity access rates in both countries.

In addition the company are confident of closing the proposed acquisitions of the Chad and Cameroon Assets in Q4 of this year with further acquisitions in hydrocarbons trailed and of course the expansion of the renewables division continues.

Things are always on the move at Savannah and there is little doubt that the team are continuing to develop the company on many levels. Like other shares since the oil price tipped over Savannah has fallen recently but now offers significantly more value and I’m very happy to keep it in the Bucket List.

https://www.investorschronicle.co.uk/ideas/2022/09/26/three-small-caps-on-steroids/

I suspect SAVE PR input with this article, if so I am a little surprised to see the subtle criticism of the Nigeria govt in suggesting there is more to be done to help gas companies.
I don't recall seeing stats of responsibility for 19% rising to 24% of power grid generation, 10% of cement manufacture or 0.5% of the country's GDP.

https://leadership.ng/boosting-gas-supply-to-improve-power-generation/

The quantum of Accugas’ contribution to the Nigerian economy is significant and this continues to grow. For example, Accugas is currently responsible for around 19% of Nigeria’s grid power generation, with capacity to increase this to 24%. In addition, the gas supplied by Accugas currently enables about 10% of the cement produced in the country. Overall, it is estimated that Savannah contributes approximately 0.5% to Nigeria’s GDP.

Is it possible accessing the required US Dollars as part of the refinancing of the Accugas debt is holding up completion of the CC deal? Although the debt is not cross guaranteed the CC lenders may want the Accugas refinanced before completing.

From 2021 AR. “The refinancing process has taken longer than previously anticipated and is currently expected to complete during the second half of 2022. As at 31 December 2021, Accugas agreed with its lending banks to set aside approximately US$132.8 million for debt service purposes, pending completion of the proposed refinancing. Completion of the refinancing requires access to appropriately priced US dollars (any FX loss incurred in this transaction would be recoverable under the terms of the Calabar GSA through the true up mechanism). It is anticipated that the refinancing will complete at the point in time that these US dollars are accessed.”

The effect of not being able to access the required US Dollars and Accugas not having a long-dated extension for delaying conversion of the Naira to US Dollars at the reporting date beyond the period of the going concern review has resulted in the balance of the Accugas facility being reflected as current borrowing with technical going concern implications for the group.

If AK is able to refinance the whole of the Accugas debt in Naira, the US Dollar equivalent Naira set aside could then be used for future debt servicing or Accugas expansion.

I cannot see the whole article as it is behind a paywall, but the Google Alert I received relating to the article includes the following line.
“Savannah Energy eyes expansion. The Africa-focused independent is looking for additional projects, says CEO Andrew Knott”
The author of the article appears to recognise Savannah’s involvement and reached out for a quote.

8 x 500k sales showing on ADVFN but not showing here yet will have had an impact.

Smaller companies are doing extremely well from deals in the same country: Savannah Energy (SAVE)has seen its operating profit go from negative figures in 2019 to $90mn in 2020 and 2021, and consensus forecasts put this figure at $246mn for 2022.

https://www.investorschronicle.co.uk/news/2022/07/07/renewed-focus-on-africa-in-global-oil-and-gas-rush/

Don’t forget to register to attend and ask questions at Thursday’s AGM via Zoom, registration ends at 9.00am this morning.
https://www.savannah-energy.com/investors/gm/register/

My understanding is that the COVID deadline was temporarily relaxed to allow PLC’s an extra 3 months from 6 months to 9 months but that relaxation has now been lifted. So unless SAVE are late filing, the deadline will be 30th June for filing. The accounts will need to be approved by members at the AGM, the notice to call an AGM is 21 days.
If we get notice of the date the accounts will be released, the notice should be this week. If not the results could be released as late as the end of next week together with notice of the date of the AGM, but that would be cutting it very fine.

Tom - I agree, and he didn’t. He merely reassured patient shareholders who had not been able to access their capital for the previous six months that SAVE had no intention of instigating an event that would require suspension for the forthcoming six months. My interpretation of what could happen after six months is based on the company’s stated inorganic growth aspirations and media reports.

Didn’t AK say in an interview that followed the return to trading that there wouldn’t be another RTO suspension for six months? I interpreted the statement as there is another acquisition lined up after the completion of the CC deal and it will be big.