The latest Investing Matters Podcast episode featuring financial educator and author Jared Dillian has been released. Listen here.
South Sudan Acquisition Update
Further to the Company's announcement on 1 February 2024, the Company confirms that it remains suspended from trading on AIM, with a revised cancellation date of 17 May 2024, whilst it continues to advance the various workstreams, including receipt of in-country approvals, required to complete the acquisition of PETRONAS International Corporation Limited's energy business in South Sudan.
The Company will provide a more detailed update regarding the ongoing process to complete the transaction during the course of next week.
Yesterday’s rise was down to Russia announcing that they were cutting production again in order to meet their Opec commitments, read and repeat…
Also around 150/- b/d is off the market as they still can’t use the export route through Sudan due to the Civil War there. Finally in the USA, retail gasoline averaged $3.523 which is up 7 cents on the week, 27.4c on the month and 10.2c y/y ahead of the Easter holiday.
TiL - great work again matey. I’m away for 3 weeks now so will only be popping on now and again and will only post if I can’t resist commenting on hot news LOL
GLA & CIAO
PS I see a 50/50 chance of being out of suspension by the time I return.
PPS - I would hope or lat published net debt of $443m has reduced by at least $60m which in turn would, in theory add 3.6p to our SP. Even with a failed SS deal and the ‘Chad debacle’, I really can’t see us returning
Down another 50 basis points from 1,420 earlier today to 1,370 and was 1,624 at the beginning of the week. Let’s hope this momentum continues and I wonder what number AK is looking for before he pushes the Accugas debt refinance button?
1.3bn shares
$440m net debt
30mboepd production in Nigeria
88mboe 2P Nigeria
1.5mboepd production in Niger
33m 2P Niger
$500m on the way from ICC awards (one off dividend or large buy-back)
0boepd production in South Sudan (worst case)
300m 2P South Sudan
Balance payment for SS deal from future production
Debt re-financed in Nigeria
No raise of equity
CPF completed
Renewables back in focus
1 or 2 more M&A for oil production + 2P
Lots of possibilities eh and good food for thought!
The Niger section is copied below and we were told we’d see a further update on Niger in Q4 2023. We did not see an update in Q4 and after the relaxing of boarders etc, we surely are due one soon. Also CAPEX was reduced by $30m, so let’s hope to see that CAPEX put back in. I think the majority of the $30m was for the tie-in pipeline to the newly commissioned export pipeline.
Niger Update
Savannah remains committed to the 35 MMstb (Gross 2C Resources) R3 East oil development in South East Niger. As previously announced, the intention was to carry out a well test programme on our principal discoveries in Q4 2023. However, following recent political events, this timeline will be subject to further revision due to restrictions imposed by the Economic Community of West African States on Niger, which has resulted in the closure of the border between Benin and Niger. This has created logistical challenges for companies operating in Niger and, specifically for Savannah, in relation to the importation of the necessary equipment to complete our planned well test programme. A further update in relation to timing will be provided in Q4 2023.
Z -TY and great summary as ever. Surely at some point we will see some of this being reflected in the SP. I’d dearly like to see the 33m 2C move to 2P TY as a bare minimum additional bit of business to todays news along with at least 1.5k production. Then CPF and debt deals completing would give us some decent trajectory.
Although it would make sense to extend the suspension again if there’s a fighting chance of completion, I’m getting bored now and just want to see SAVE listed again.
3 Tweets out today and worth a quick look as there are 3 decent photos on there. ‘Here is one of the Tweets:-
The SIPEC acquisition will increase Savannah’s Reserve and Resource base by approximately 46 MMboe following completion, with 2P Reserves to increase by 13% to 73.3 MMboe and 2C Resources by 41% to 130.2 MMboe.
Stubb Creek gross production is expected to increase by approximately 2.7 Kbopd to 4.7 Kbopd, following the implementation of a planned de-bottlenecking programme within 12 months of completion of the SIPEC acquisition.
The SIPEC Acquisition will also secure significant additional feedstock gas available for sale to Savannah’s 80% owned Nigerian gas processing and distribution subsidiary, Accugas Limited, which currently has eight principal gas customers. With a weighted average contract life of 14 years, Savannah’s natural gas supplies are a critical enabler of the Nigerian economy and currently support approximately 20% of Nigeria’s thermal power generation.
Maybe the giant is stirring. We now have new numbers for 2P and 2C which can be added to this year from Niger and or South Sudan. We could have quite large increases to the reserve numbers in a few months time.
Here’s hoping anyway…
I’d like to see a few more deals of this size, especially like this one as the financials look extremely attractive. Let’s hope its all signed sealed and delivered in short order now and no later than September.
Malcys note FWIW:-
This acquisition is very smart indeed, getting 100% of the rest of Sinopec Nigeria comes with a number of bonuses. Savannah buys a 75% interest in SIPEC from Sinopec and 25% from Jagal for a 49% interest in the Stubb Creek field which makes a good fit with the other 51% owned by UER, a Savannah affiliate and operator.
They will pay $52m and $7.5m respectively and the transaction should complete on the 1st September. As at year end 2023, SIPEC had an estimated 8.1 MMstb of 2P oil reserves and 227 Bscf of 2C Contingent gas resources. Also SIPEC oil production is estimated at an average for 2024 of 1.4 Kbopd. Savannah’s Reserve and Resource base will increase by approximately 46 MMboe following completion of the SIPEC Acquisition.
There’s more, it is anticipated that, within 12 months following completion of the SIPEC Acquisition, Stubb Creek gross production should increase by approximately 2.7 Kbopd to approximately 4.7 Kbopd through implementation of a de-bottlenecking programme.
Another added financial advantage comes through the significant additional feedstock gas available for sale to Accugas, 80% owned by Savannah and who sell to eight principal gas customers across Nigeria where they have a weighted average contract life of 14 years. Savannah supply some 20% of Nigeria’s thermal power generation.
My conclusion is that for $61.5m the deal adds material 2P reserves and 2P resources made more valuable by their application by providing feedstock and offsetting declines at Uquo. The deal is accretive and at C. $7.50/ bbl very cheap given the current price deck.
Noix - I’m with you mate, let’s get the smallest good news out of the way and clear the path for a big RNS.
TiL - I’m happy to stay suspended as the intrinsic value of the company is growing day by day.
Hopefully today’s news will mitigate a lot of the bad luck we’ve suffered should we need to return with a failed SS deal. And should SS fail, I now feel quite confident that we would resume no worse than the suspended price.
This SCAP note brings the RNS to life and makes me realise what a great little this deal is for us. PS thank you - you know who you are…
SAVE LN Equity } Savannah (SAVE) is buying out its partner (SIPC) from the Stubb Creek oil and gas field in Nigeria, raising its exposure to a strategically important asset for the company with strong oil production enhancement and gas development potential at an attractive price.
Savannah will pay US$61.5m in total for the 49% of Stubb Creek it does not already own. This equates to an acquisition price of just US$1.3/2P+2C boe and is well below our US$102m valuation for 49% of Stubb Creek at US$70/bbl Brent.
The acquisition is expected to be funded through a new debt facility and existing cash resources. The transaction has an effective date of 1 September 2023 and completion requires regulatory approvals, but this is expected to be relatively straight forward over the coming months.
Savannah is acquiring reserves and resources of 46 mmboe, boosting its resource base by almost 30%. Of this, the 227 bcf (38 mmboe) of gas resource is especially important with development anticipated in c2033 as the Uquo field gas production comes off plateau, helping to satisfy Savannah’s growing Nigerian mid-stream gas requirements.
SIPC 2024 oil production is estimated at 1,400 bopd. However, management plan to implement a low-cost debottlenecking programme within 12 months of the deal completion that is expected to more than double Stubb Creek gross production to 4,700 bopd.
The acquisition has strong strategic and commercial rationale. It looks attractively priced and gives Savannah total operational control over a producing asset it knows well where oil production can be rapidly increased at modest cost. It brings a complimentary gas development asset into the portfolio that can support Savannah’s long-term midstream gas distribution ambitions. For investors frustrated by the South Sudan RTO, this smaller ‘bolt-on’ transaction should be welcome, demonstrating that management has not neglected its core business in Nigeria.
And clearly SAVE deem it more important to wish people happy Ramadan on X than to promote a nice piece of new M&A. Wonder if we will be wished a peaceful Easter next week and Happy Christmas and New Year later in 2024?
PS 48.1% of Africans are Christian!
CYB - indeed and re your point 4, I notice AK has written Projects That Matter in BOLD on the first line today. Maybe he thinks Kiir has impaired eyesight too - LOL
Re the Naira - I note it’s started to improve a tad and gone from an all time low of 1,624 to 1,560 - baby steps but a strong trajectory towards 700 - 900 would be hugely beneficial to us all IMHO.
Let’s hope SAVE’s 5 x 2023 KPI’s are delivered in 2024 and I’d take that all day long.
Very interested to see Z’s views on the production increase, additional 2P and financial structure of this little deal.
Summary of Nigeria Gross Reserves and Contingent Resources as per the Updated Nigeria CPR
Gross 2P Reserves
Gross 2C Resources
Oil & Condensate (MMstb)
Stubb Creek
11.9
-
Uquo
0.6
-
Gas (Bscf)
Uquo
456.2
82.8
Stubb Creek
-
515.3
Total (MMboe)
88.6
99.7
All Reserves presented above are as at 1 January 2024.
Andrew Knott, CEO, Savannah Energy, said:
"Savannah remains committed to growing our core business in Nigeria through a combination of both value accretive acquisitions and organic projects. This is reflected in this morning's announcement of the SIPEC Acquisition. The base case acquisition has been priced in line with our expected returns criteria, with the identified upside cases (the oil de-bottlenecking and new gas sales to Accugas projects) hoped to add significant value to the Stubb Creek field over time.
I would like to take the opportunity to thank the members of our team who have worked diligently on this transaction to make it happen. Thank you all."
The following information in relation to the SIPEC Acquisition is included in accordance with the disclosure requirements of Schedule Four to the AIM Rules for Companies:
For the financial year ended 31 December 2022, SIPEC audited accounts show income after tax of US$27.8 million (excluding exceptional income of US$42.3 million) and total assets of US$136.5 million.
Nigeria CPR Summary
The Nigerian CPR has been published by CGG and is available to download on the Company's website (https://wp-savannah-2020.s3.eu-west-2.amazonaws.com/media/2024/03/Nigeria-Competent-Persons-Report-18-March-2024.pdf). A summary of the gross reserves and contingent resources associated with the Uquo and Stubb Creek fields, in accordance with the 2018 Petroleum Resource Management System, is set out in the table below. For an explanation of the defined and technical terms in this announcement, readers should refer to the updated Nigeria CPR.
Bscf of 2C Contingent gas resources. SIPEC oil production is estimated at an average for 2024 of 1.4 Kbopd. Savannah's Reserve and Resource base will increase by approximately 46 MMboe following completion of the SIPEC Acquisition.
It is anticipated that, within 12 months following completion of the SIPEC Acquisition, Stubb Creek gross production should increase by approximately 2.7 Kbopd to approximately 4.7 Kbopd through implementation of a de-bottlenecking programme.
The SIPEC Acquisition will secure significant additional feedstock gas available for sale to Savannah's 80% owned Nigerian gas processing and distribution subsidiary, Accugas Limited ("Accugas"). At present, Accugas has eight principal gas customers, including large thermal power stations, such as Calabar Generation Company Limited, as well as key industrial players, such as Lafarge Africa PLC and the Central Horizon Gas Company Limited. With a weighted average remaining contract life of 14 years, Savannah's natural gas supplies are a critical enabler of the Nigerian economy and currently support approximately 20% of Nigeria's thermal power generation.
Since Savannah announced its intention to acquire Accugas in late 2017: (i) volumes of gas transported; (ii) the number of significant customers served; and (iii) the Company's contribution to thermal power generation in Nigeria have each more than doubled.