The latest Investing Matters Podcast with Jean Roche, Co-Manager of Schroder UK Mid Cap Investment Trust has just been released. Listen here.
Oil cartel leader warns of prolonged high prices https://www.bbc.co.uk/news/business-66985654
My wish list in order:-
Debt refinance
Additional 10k - 20k hydrocarbon deal
Niger drill test
South Sudan RTO
New renewable deals announced
Compression project update / new customers
ICC cases with the court in Paris
What would we be worth if all that lot proved to be successful - ker-ching
And conversely…ouch
I wonder if we are exploring compressed natural gas (CNG) options in Nigeria. I assume the have one or two buses knocking around.
Nigeria's President Tinubu increases wages as national strike looms https://www.bbc.co.uk/news/world-africa-66976445
Ian - I’ll have a go in my layman’s terms as I am no expert in this area but my understanding is as follows:-
In simple terms, if a company tries to acquire another company larger that it’s own it is deemed to be a Reverse Take Over (RTO). The rules that determine a RTO seem to be very complicated and there are quite a few of them. However, as a rule of thumb I tend to think of it as being if the market cap of the assets being purchased are larger that the company buying - then this is a RTO.
If a RTO is triggered it comes with a mandatory suspension until a new admission document is issued or the deal fails. Upon either of those two scenarios occurring then trading can resume.
My concern here is that if SS should fail and we immediately sign another SPA with another company larger than ours, we could possible go directly in another back to back RTO and subsequent suspension for another 6 to 12 months.
TiL - I hope so too but having said that PI’s are always hungry for newsflow and never think they get enough. Although I think AK will only release a bare minimum and what he has too. And while he seems to have “an excellent relationship with Nomad” , i think it will be in the main his decisions what news is released.
As I’ve said before at the very TOP of my list is true refinance of debt so that we eliminate the material risk of remaining a going concern.
Amazing really (but I clearly understand the fx issues - well at least I partly understand the complexity of it all) that it’s not more straightforward to restructure $443m of debt when we have $3.7bn of World Bank guaranteed gas contract in place over the next 14/15 years.
LD - maybe a bit early for some of those updates but I would like to see something on RoC. Re dividends, from memory, sometimes we were informed by RNS of the dividend mid-month with payment towards the end of the month. With strong POO and slightly weak AECO compared to revised budget of $2.6 CAD (although I have seen $2.7 CAD quoted elsewhere) i would hope NOI is strong enough for the quarterly dividend to be announced.
With POO strong, I guess we will drill oil wells and not gas, buybacks dead in the water and M&A big question mark for me. Although CEO likes buying production to take out the cost and risk of drilling, I think any current potential assets will have gone up too much in price, unles we buy some cheap gas production with a view to the future.
I think too early for increased divi announcement or special divi.
Personally I would like to see:-
Recent divi announcement executed and maintained
A strong drilling program announced
Bring in a partner to expedite speed of drilling or sell some of our assets
Wipe our hands of North Sea
Move our operations and office all to Canada
PR to increase Canadian liquidity and retain dual listing
SG&A significantly cut due to 2 points above
GLA and I would like and hope to see 18p by YE
Some excellent photos of the vast Accugas infrastructure too:-
“We consider Savannah’s operational performance in the first half to be strong with the company also confirming continued successful expansion of its renewables division,” comments @ShoreCapital in their research note this morning following #SAVE’s half-year 2023 results.
Read more here: bit.ly/3rvJqyW
Strong momentum continued post-period end with #SAVE signing contract extensions with Central Horizon Gas Company Limited, First Independent Power Limited and Notore Chemical Industries PLC in Nigeria for a total of up to 85 MMscfpd.
#SAVE delivered gas to eight customers in H1 2023 and signed a number of new and extended contracts, including an agreement with Amalgamated Oil Company Nigeria Limited to purchase up to 20 MMscfpd of gas for onward sale to our customers, a new agreement with Shell Nigeria Gas Limited for gas supplies, which commenced in August 2023, and a contract extension with Shell Petroleum Development Company of Nigeria Limited for an additional 12-month period.
We are proud to announce the continuation of our strong safety record, with our Nigerian operations recording one million hours without a Lost Time Injury, in line with Pillar 2 of our sustainability strategy “Ensuring safe and secure operations” and UN Sustainable Development Goals 3 (Good health and well-being) and 8 (Decent work and economic growth).
Positive mental thinking!
I know it’s a while from having a decision made but…
Should we win the ICC cases (good initial judgement indicators but a long way to go with a few swings from various court decisions up to decision date) that would be our current net debt of $443m wiped out, so long as we had a credible, reliable way of obtaining the award amounts.
Sp - TY and let’s hope it completes sooner rather than later. The next big thing for me is adding the successful compression project in Nigeria in order that we can continue to to expand our existing customers and add new ones too. I just saw this bit in yesterdays report which is very promising although i do not know when the expected completion date is for the compression project:-
“ Savannah continues to progress its US$45 million compression project at the Uquo Central Processing Facility. Following the front-end engineering and the associated order of long lead items, detailed design work has commenced and is on track to be completed in Q4 2023. The compression project remains within budget and startup is planned for mid-2024.”
Once debt refinance is secured and now I know compression is still on track, I will restart thinking a bit more about M&A. However, I must admit I’d love to see one or two new SPA’s land soon so that we could be working on 2 / 3 M&A targets inc SS simultaneously. This would cushion the blow if a couple of others landed should SS fail.
Am not even thinking about niger or renewables at the moment but I am looking forward to the ICC decisions which I hope will land sometime next year. Not sure how true the rumour is of a June 2025 date being set for the judge led hearing.
Scotpak - getting to a term sheet sounds good to me. From your experience how likely do you think the debt refinance will complete now that we have got this stage? Hopefully we will see some his resolved during the early part of Q4.
PART 2
Finally let’s hope AK has decided to get all the bad stuff (a lot of bad luck), warts and all out in yesterdays update. If so we have a new baseline to work from as we move forward. Let’s secure debt refinance and then build on things from there. If we could complete the debt deal and bring in SS I would be a happy bunny again.
Sorry for the downbeat stuff yesterday but I did find the report very poor on my first assessments of it.
Onwards and upwards and here’s hoping for a strong Q4 and an even better 2024.
PART 1
1 In the interims we announced a $30m CAPEX reduction from $60m to $30 due to re-scheduling of projects in Niger and Nigeria. We know the Niger part will almost certainly be the 2023 Q4 well testing program but does anybody know what has been put back in nigeria?
2 We announced 676MW of renewable projects underway. I know about 450MW in Niger and 75MW in Cameroon. does anybody know what the remaining 151MW relates to?
As we move forward in to Q4, No 1 priority for me is to see the debt restructure RNS and I can’t bloody wait to read a successful outcome. In H1 2022 our average interest rate was 10.7% but due to US LIBOR rose to 13.4% in H1 2023. The difference in rates on $443m of debt is costing us about $12m pa.
Re SS M&A - I can’t really see the SS Government having any other credible options apart from ours. So I would guess it would be a binary decision for them - either they keep the status quo and don’t approve SAVE (I’m biased but that is not a very clever way for them to go) or we win. Obviously I am staying very hopeful on this but I would not want even guess a % win chance.
From what I was told, should SAVE sign an SPA for another M&A deal they would have to RNS it. Having said that they seem to be able to convince NOMAD they don’t need to update the markets on material stuff for some reason. This is a very subjective view of mine but it could possibly be linked to not wanting any info out in the public domain due to SS M&A or the 2/3 ICC cases we are involved in.
Clearly Africa is a tough continent to work in and even tougher at the moment with the political landscape in many countries. However, AK must be mightily frustrated and trying to deliver his main KPI’s for 2023:-
Close SS
Add at least 1 more hydrocarbon M&A
Refinance Accugas
Have 1GW of renewables underway (now slipped to Mid 2024)
With regards production down H1 23 vs H1 22 but revenue and EBITDA both up 8%, could this be due to contracts simply taking less under their TOP contracts but still paying for it? I don’t know how much gas we owe people under these contracts but I am very keen to know more on current throughputs on pipeline and processing and how the compression project is going. I hope none of the $30m CAPEX reduction is due to compression project being put back in the work schedule.
In the RNS it clearly states “ During the period, Savannah also received US$44.9 million from SNH in relation to the sale of a 10% interest in COTCo.” Personally, I found this very surprising and does anybody know how this can have possibly happened?
Has anybody got up to date on the progress on the $4bn Chinese Niger to Benin pipeline progress? Hopefully as Z alludes to the situation in niger will hopefully improve at some point. It seems that completely dislike the French but hopefully the Chinese and ourselves will be seen more favourably as it’s in the countries interests to see the current 100kboepd rise to 100/100kboep
Old news but just to show SAVE active on Twitter with this recent Tweet:-
“We consider Savannah’s operational performance in the first half to be strong with the company also confirming continued successful expansion of its renewables division,” comments @ShoreCapital in their research note this morning following #SAVE’s half-year 2023 results.
Read more here: bit.ly/3rvJqyW
WOW Scotpak - a member on here for 3 years and your 1st ever post today, and what a fantastic post it was. where do you get your vast knowledge from mate - it’s awesome. Thanks for your post today and will you be helping to keep the board balanced and informed by posting a bit more and sharing your knowledge and views with us? I certainly hope so as people like you help keep people like me motivated and sane.
After the great posts from scotpak (welcome and fab post) and Zengas and then I’ll try to get upbeat again but it will be difficult in the short term.
So, if we are struggling to refinance Nigeria debt (and I accept all the bad luck re the peg and Naira issues) are we struggling to finance SS from debt now? In the past we have always been told a big differentiator for SAVE is our access to capital. With the risks associated with the SS deal, given the war in Sudan etc, do we still have the same pulling power with access to capital? May be not.
And if we are struggling to finance through debt, maybe we could not get a large enough placing away either. Maybe one of the key work-streams is our funding of the purchase issue.
So maybe we are dragging the deal out, hoping for elevated POO and a huge reduction to the headline figure of $1.25bn. Could we be trying to wait long enough so that the deal is paid by a huge adjustment + $xxxM paid for from future production.
Maybe this is all pie in the sky and also maybe not. If so and the SS Govermenment would be fully aware of it, maybe that is why they are sniffing around alternative options.
Yes a lot of ‘maybe’s’ in this note put I’m just throwing it out there.
Let’s all hope that a bit of luck goes our way and that we get some positive updates during Q4.
Final point here - if we had re-listed today with this update and an Ad Doc pending shareholder approval and gov sign off what do people think the SP would have been. My guess would be 5p - 10p below suspension price.
Bon soir.
Our CEO needs to lead from the front and show us that he is accountable for where we are at the moment.
When was the last time he appeared at an AGM or even gave PI’s the chance to ask live questions on a WEB cast? To the best of my recollection it was on a call about 5 years ago.
AK needs to show some accountability, deliver a WEB cast to us and allow us an hour to ask live questions. As you know I’ve written to IR and can’t do any more than this.
All I ask for is a 1 hour presentation followed by 1 hour of Q&A.
AK is on a tremendous package and needs to earn his corn by showing some respect to PI’s. I relish the opportunity should it arise and rest assured my questioning techniques will be radically different than Malcy and Justin.
Good weekend to all and let’s see what Q4 brings.
CYB - TY as I don’t understand that stuff very well. Here is another summary note I just found on here. I’m looking hard for some positives here but am struggling to find any:-
Savannah Energy PLC - London-based energy company, with projects in Cameroon, Chad, Niger and Nigeria - For the six months to June 30, pretax loss widens to USD56.9 million from USD11.3 million a year prior. Revenue climbs 44% to USD123.7 million from USD85.8 million. However, expected credit loss increases to USD33.8 million from USD5.9 million. Finance costs increase 41% to USD51.8 million from USD36.8 million. Notably, Savannah incurs a foreign translation loss of USD54.0 million in the first half of 2023, ballooned from USD846,000 a year prior.
TiL - if you were a new potential customer for Accugas to transport your gas and you read todays report, would you pay all the connection costs to the pipeline and sign a contract with Savannah? Or would you bide a bit of time to see how the next few months work out?
On another note, how on earth can we possibly count the $44.9m for the 10% sale of Cotco as received?