focusIR May 2024 Investor Webinar: Blue Whale, Kavango, Taseko Mines & CQS Natural Resources. Catch up with the webinar here.
All - please see below a link to an interview with Andrew Knott on Vox Markets today. The Savannah Petroleum section starts at 1:40.
https://www.voxmarkets.co.uk/blogs/savannah-petroleum-savp-prospex-oil-gas-pxog-nuformix-nfx-african-battery-metals-abm/
Savannah Petroleum (SAVP LN) has announced the spudding of its fourth well in the Agadem Basin, onshore Niger. This latest well is targeting the Eridal-1 prospect, and is situated between Savannah’s previous two discoveries Amdigh and Kunama in the R3 East region. As with the previous wells, Savannah has budgeted 30-35 days for drilling, however it will undoubtedly hope to continue its success in completing the wells comfortably ahead of schedule.
All - please see below a link to an interview with Scott McGregor, CEO of redT energy, on Vox Markets today. The section on redT starts at 26:30.
https://www.voxmarkets.co.uk/blogs/europa-metals-euz-reabold-resources-rbd-redt-energy-red/
All - please see below a link to an interview with Scott McGregor, CEO of redT energy, on yesterday's announcement.
https://www.brrmedia.co.uk/broadcasts/5b59dac406c7f84227ae974a/redt-energy-deal-for-700mwh-of-german-grid-projects
Vox Markets podcast with Andrew Knott, CEO of Savannah Petroleum. Link below.
https://www.voxmarkets.co.uk/blogs/savannah-petroleum-savp-chris-bailey-itv-itv-vodafone-vod-indivior-indv/
Savannah Petroleum (SAVP LN) has confirmed that it attended yesterday the signing of an MoU between Niger and Nigeria for the construction of a new export pipeline to service the Agadem Rift Basin (which includes Savannah’s R1/R2 and R3/R4 permits), as well as a dedicated refinery in Katsina State, northern Nigeria. The MoU was witnessed by Presidents Issoufou of Niger and Buhari of Nigeria, with CNPC delegates also present at the signing, indicating the high level of support for the project from both governments and industry participants. The pipeline is reportedly being designed to handle in the region of 110 kbopd, and could be operational in as little as two years, with the Steering and Technical Committees already inaugurated, and CNPC no stranger to the construction of international pipelines. In our opinion, yesterday’s news addresses one of the key hurdles which have hampered development of the basin hitherto. It clearly demonstrates that momentum is building around the full scale development of the basin, and, with Savannah recently recording its third discovery (out of three), could not be more timely.
Savannah Petroleum has launched a Twitter feed. Keep up to date on news by following @SavannahPetrol at the below web address:
https://twitter.com/SavannahPetrol
All - article by Newsbase (AfrOil) on recent Savannah discovery in Niger. Full article is in AfrOil Week 28 issue:
https://newsbase.com/publications/afroil-africa-oil-gas
Niger, the new frontier oil territory
A series of new oil discoveries in landlocked Niger has spurred hopes of an unlikely economic advance in what remains one of the world’s poorest nations, writes Martin Clark
News of an oil discovery is always exciting, but when it comes in remote Niger – a landlocked country in central Africa ranked among the world’s poorest nations – then the impact is all the more significant. And when it is the third discovery in as many months, the industry sits up and takes notice.
Last week, UK-listed explorer savannah Petroleum said it had made its third discovery in Niger since April with the Kunama-1 well. The company expects to provide a more detailed resource and volumes report after a well test pro- gramme has been completed.
Its operations are centred around the Agadem Rift Basin (ARB) in the country’s south- east, which could, say geologists, hold around 1 billion barrels of crude. The area is adjacent to the border with Chad, now an established pro- ducer itself, exporting crude from its southern Doba fields via a pipeline to Cameroon and the port of Kribi on the Atlantic coast.
Savannah is aiming to emulate the earlier success of China National Petroleum Corp. (CNPC) in its broad Agadem block area, which yielded 95 discoveries from 129 exploration wells. As a result, Niger is now producing around 20,000 bpd, which is mostly sold domestically, with some limited sales to importers in Mali, Burkina Faso and northern Nigeria.
Interview with Connie Mixon, CEO of MYCELX, on VOX Markets podcast today. Section starts at 30:50.
https://www.voxmarkets.co.uk/blogs/asiamet-resources-ars-mycelx-technologies-corporation-myx-barney-gray-uog/
Savannah Petroleum
Three out of three in Niger
Stock Rating/Industry View: Overweight/Positive
Price Target: GBp 38
Price (10-Jul-2018): GBp 30
Potential Upside/Downside: 29%
Tickers: SAVP LN / SAVP.L
Our view: The oil discovery at Kunama further demonstrates the prospectivity of Savannah’s acreage within the R3 Area of the proven Agadem basin. Unsurprisingly, management have exercised the first option (of six) on its rig contract to add a fourth well to the campaign, while planning for an early production scheme is underway. The company’s three discoveries are not included within our current 38p price target, but the drilling results to date are rapidly showing that there is a commercial resource base to be proven-up and developed. We rate the stock Overweight.
Kunama-1 discovery
Result: The well found 9m of net oil pay within the primary Eocene Sokor Alternances target. Initial log data indicates good reservoir quality and light oil similar to the Amdigh-1 discovery.
Next steps: Kunama-1 is suspended for re-entry and a batch testing campaign for all three discoveries is being planned for later in H2/18. We do not expect resource volumes to be updated until testing is completed.
Faster, cheaper wells: Kunama-1 took 14 days to reach target depth vs. the budgeted 22 days, continuing the trend of Savannah being able to drill faster than it had planned. This performance indicates well costs are likely to remain lower than management’s original budget of $6-8m/well.
Eridal-1 next: Savannah has taken the first one-well option to extend the rig contract and drill the Eridal-1 prospect. The well is targeting a total P(mean) resource of 28mmbbls in the primary Upper Sokor target and likely to start drilling in late July. The company has the option to extend the rig contract by up to a further five wells.
Valuation: The pace and scale of any future development remain to be determined, but our current working assumptions result in an unrisked valuation of ~$6/bbl for Savannah’s Niger discoveries. Assuming 40mmbbls gross across the three discoveries would imply an unrisked valuation of ~10p/shr net to Savannah’s stake.
Savannah Petroleum (SAVP LN) this morning announced its third successive discovery in Niger, maintaining its 100% record with the drillbit. Like the two preceding wells, Kunama-1 encountered light oil in a good quality reservoir at the primary Sokor Alternances target interval. The well encountered two discrete reservoir sand packages (zones E1 and E5), with combined net pay of 9 metres – compared to 10 metres at Bushiya-1 and 22 metres at Amdigh-1. Oil samples have been recovered from both horizons and will be sent for lab analysis, however the indications are that qualities are good, consistent with other finds in the basin. ‎ As with the prior two discoveries, Savannah is refraining from updating volumetric estimates until it has flow test results. Still, following three consecutive successes, we expect total discovered resources to have surpassed the c.35 mmbbls threshold required for a commercial hub development (including Bushiya, Amdigh and Kunama). Exploration drilling will continue in the region, with Eridal-1 due to spud next c.6km to the east of Amdigh (which will likely serve as the region hub), and each satellite discovery incrementally improving the economics of the hub and the robustness of a development. We note that Savannah has recently labelled a new prospect (Zomo - see the figure below), which is situated close to the Amdigh and Bushiya discoveries and may be another satellite target for a future well in the programme. After exercising its first option slot on the rig for Eridal, Savannah is left with five remaining options, meaning that it has plenty of running room before it will need to negotiate a new rig contract. With discovered volumes on an upward trajectory, Savannah is naturally considering its options to best monetise the finds. A dedicated test and completion rig is due to undertake a batch campaign later this year, which will allow for more accurate volumetric calculations, as well as the installation of completion assemblies in preparation for commercial production. More detail on an early production scheme centred on R3 East is expected to be announced in the next couple of months, however the company has previously talked about a leased 'off the shelf' production facility for early phases of development, which could provide a fast track to first oil at minimal upfront cost. This is quite an achievement for a company which only spudded its first exploration well in late Q1 this year.
Nigeria’s state oil companies NNPC/ NPDC have sealed a flurry of agreements to develop fallow gas resources as the West African nation seeks to bridge a supply shortage to the domestic market. According to a press statement by NNPC, seven Critical Gas Developments (rumoured to be worth US$3.7bn) have been signed with a variety of Oil Majors and local independents. Interestingly, one the projects is said to involve the expansion of the Uquo gas processing facilities, owned by Accugas, which is in the process of being jointly purchased by Savannah Petroleum (SAVP LN) and PE group AIIM (African Infrastructure Investment Managers) as part of the Seven Energy deal.
The proposed project is expected to involve the development of a cluster of gas fields (containing some 5 Tcf) by NPDC in neighbouring OML13 (see map below) which would deliver incremental volumes alongside the Uquo field itself. Such a move would be in-line with Savannah’s strategy of increasing gas throughput over the Uquo facilities (we note that the cost of any expansion would be fully carried by AIIM under the terms of the Accugas deal with Savannah). It also highlight the potential strategic value of Uquo as a regional infrastructure hub, being the only major gas processing and distribution network in this part of the Niger Delta.
Alongside solid cash flow generation in Nigeria, we also note that SAVP has completed the cancellation of its share premium account to enable it to create distributable reserves. This demonstrates intent around its stated dividend policy which is expected to include a US$12.5m maiden pay-out in December 2018 (placing the stock on a respectable yield of 3.7%). Taken as a whole, today's update should provide additional comfort to the market around current trading activity in Nigeria and the all-important Seven Energy transaction, which now looks on the cusp of being consummated.
Savannah Petroleum (SAVP LN) has announced an update on the Seven Energy transaction and recent trading activity in Nigeria. Following the US$282m acquisition of Seven’s gas assets in late 2017, the company appears to be on the home straight to closing the transaction. The implementation agreement detailing the final legal terms and steps to completion is expected to be signed in July by the interested parties. This will facilitate closing of the transaction in Q3, subject to Government consent, which has been worked up in parallel and, in our view, should be a formality. Encouragingly, despite market nerves around the hold up (completion had been scheduled for Q2), all parties remain fully committed to the process as evidenced by the willingness of African Infrastructure Investment Managers (SAVP's partner in Accugas, Seven’s midstream division) and the Accugas banking syndicate to provide supportive quotes for today's RNS. Furthermore, we note that SAVP benefits from all cash flow built up within the Seven portfolio since striking the deal in late 2017 so the timing of completion has little economic impact.
Operationally the Seven assets continue to perform well with production and cash flow on an upward trajectory, underpinned by the World Bank risk payment guarantee. Production during the period from Jan to May 2018 averaged 18.8 kboepd (gross), comprising 95 mmscf/d of gas and 2.9 kbpd of liquids. Whilst this is lower than the run-rate reported in Q1 (due to a maintenance shut-down in Q2 at the Calabar power station, Accugas's largest customer), volumes are expected to recover strongly in H2. Furthermore, as Accugas sells gas under take or pay contracts (totalling ~152 mmscf/d) SAVP is protected in the event of customer outages. Indeed, based on the take or pay contract volumes and an upstream sales price of US$1.75/mcf, we estimate gas revenue for Jan to May of ~US$35m net to SAVP. This places the company on course to hit our FY18 gas revenue target of US$76m. Meanwhile, despite the fact the deal is yet to close, we note that Accugas is progressing plans to tie-back new gas customers, starting right of way work to extend its pipeline network into the Calabar Tree Trade Zone. The rationale here is to assess new, higher paying industrial customers which are currently burning diesel for power (at an equivalent price of >US$10/mcf) and are prepared to pay a material premium to Accugas’s current sales price of US$3.5/mcf.
All - please see below Cantor's note on this morning's announcement.
Savannah Petroleum ↑ (SAVP.L, 29.05p, £237m) updates on its acquisition of Seven Energy, with the Implementation Agreement (which documents final legal terms and steps to completion) to be executed by the end of July 2018 and completion now expected in Q3 (with a supplemental Ad Doc to follow). Average production from the Seven assets was 18.8kboepd (15.9kboepd of gas) from Jan-May, with gas in April/May down vs Q1 due to maintenance at a power plant which is one of the three main customers, but expected to return to Q1 levels during H2. Uptime at the Uquo and Stubb Creek facilities was 100%, with gross gas capacity of at least 176mmcfd (29.3kbboepd). Seven has sought permission to extend its existing pipeline network into the Calabar Free Trade Zone, to allow supply of gas to new industrial customers at a higher pricing point than the $3/mcf currently being achieved (with the incumbent diesel equating to >$10/mcfe). Coy also confirms that it has cancelled its share premium account, which will allow the paying of dividends and share buybacks. Positive – while the transaction has dragged on, investors will no doubt be pleased to hear it is nearing completion, while output is strong output and the near-term addition of new customers and improved pricing could see a step-change in cashflow.
All - please see below a recent interview with Miton's Gervais Williams on his recent move into energy stocks, including Savannah Petroleum.
https://www.investmentweek.co.uk/investment-week/news/3034192/mitons-williams-eyes-dividend-opportunities-in-energy-stocks
Investment Week
Miton's Williams drops consumer names as he eyes dividend opportunities in energy stocks
By Laura Dea
14 June 2018
Focus shifting towards sustainability
Miton's Gervais Williams has rotated his £1.2bn UK Multi Cap Income fund, selling out of consumer stocks and moving into energy and materials to take advantage of more sustainable dividends.
The exposure to consumer discretionary stocks in the fund has reduced from 15.7% a year ago to 8.8%, reflecting Williams' uncertain outlook on the sector.
Disposals included pub group Greene King, TV production company ITV Group and housebuilder Taylor Wimpey.
Williams said: "A number of consumer stocks were sold completely and the capital raised from the sale of our existing holdings has been reallocated to a number of companies where we believe the scope for dividend growth is better.
The UK consumer has pulled back and this could last for some time, while there has been a devaluation of the pound, the rising oil price is hitting consumers at the petrol pump and the savings ratio could go up."
This theme has also been implemented in the manager's £394m Diverse Income trust where the exposure to consumer discretionary stocks has declined from 16.9% in early 2017 to 10.2%.
Instead, the manager is rotating into energy and materials stocks including gold mining companies and oil firms.
His open-ended fund has 13.6% in materials, up from 6.7% at the end of 2016, and 11.2% in energy, up from 5.7%.
New holdings include Diversified Gas and Oil, Savannah Petroleum, Royal Dutch Shell and Rio Tinto, the weightings of which range between 1.1% and 1.3%.
According to the latest Dividend Monitor from Link Asset Services, almost a quarter of the total dividends in Q1 2018 were paid by Royal Dutch Shell and BP.
Meanwhile, miners saw a 66% year-on-year rise in their dividend payments in the first quarter, while the oil price has begun rising towards $100 per barrel again after years of decline, with the price of crude currently around $76 per barrel.
Williams said: "These companies have been out of fashion, have sustainable dividends and the outlook is less correlated with world growth. Our sector view also reflects the sustainability of dividends following commodity price recovery and actions taken by the companies to constrain capex."
The LF Miton UK Multi Cap Income fund has returned 9.1% over one year to 13 June, according to FE, versus returns of 5.5% by the Investment Association's UK Equity Income sector.
Despite delivering a knock out success on its second Niger well, shares in Savannah Petroleum (SAVP LN) edged up just 4.8% yesterday to 32.5p by close of play. We find this surprising given the potential value that has been unlocked and the importance of the Amdigh-1 discovery for moving the project towards commercial viability. On a back of the envelope basis, we believe the find could hold between 20-40 mmbbls of recoverable oil � placing it towards the upper end of discoveries in the wider basin (typical discovery size is 1-50 mmbbls). On the basis that each barrel in the ground is worth ~US$4.5/bbl (at US$70/bbl Brent prices), this implies an unrisked valuation for the discovery of US$90-180m � equivalent to 7.5-15p � versus the share price move yesterday of less than two pence.
Interview with Andrew Knott, CEO of Savannah Petroleum, on Vox Markets today. Andrew's section starts at 13:45. https://www.**********.co.uk/blogs/seeing-machines-see-savannah-petroleum-savp-premier-african-minerals-prem-alan-green-pdz-imcp-bon/
Next steps. Looking ahead, as previously outlined, the company plans to re-enter the Amdigh well at a later date to conduct testing using a separate workover rig. This batch drilling and testing approach is the same as that adopted by CNPC elsewhere in the basin and has the advantage of using a cheaper workover rig for testing activities. We expect the company to update the market in the coming weeks on the timing of testing which will provide more information around reservoir deliverability and enable it to put some resource numbers on the discoveries (which it is yet to do). Additionally, on the back of the Amdigh success, we believe it is high likely that the campaign will be extended beyond the three firm wells (with funding from existing cash and future Nigeria cash flow). In the meantime, the GW-215 rig will now be mobilised to the Kunama-1 well site, around 12km to the northeast of Amdigh-1, which is expected to take between 10-15 days. The Kunama-1 well will target a simple horst block structure, much like CNPC�s Goumeri discovery over the R3 border (currently on production). The well will target 35 mmbbls of mean prospective resources across the primary Sokor Alternances and secondary Upper Sokor horizons. Drilling is expected to take 30-35 days suggesting a result in late July.
Two and counting Following its first strike at Bushiya-1, Savannah (SAVP LN) has announced a significant oil discovery at its second exploration well in the R3/R4 licence in Niger�s Agadem rift basin. The Amdigh-1 well encountered some 22m of net oil pay in the primary target, more than twice the pay thickness at Bushiya-1. Although further work is required to determine the resource size, our back of the envelope calculations suggest a discovery in the order of 20-40 mmbbls, using approximate gross rock volume, reservoir and fluid property assumptions. We also note that SAVP has engaged consultants to commence detailed development concept evaluation in the belief that Amdigh-1 has the potential to unpin a future development hub in the East R3 area. With a third well planned at Kunama and the drilling campaign likely to be extended beyond the three firm wells, we anticipate further positive newsflow from Niger in the weeks ahead. Amdigh-1 strikes oil The Amdigh-1 well is located a few kilometers to the north of Bushiya-1 in the eastern portion of the R3 block (see Figure 1, above). The well was drilled to a target depth of 2,469m in 24 days and encountered the main target objectives at or close to prognosis. A substantial dataset has been collected from the well (including wireline logs, pressure data and fluid sampling), confirming the presence of 22m of net oil pay across two horizons (E1 and E2) in the primary Sokor Alternances objective. The wireline logs confirm the reservoir properties to be good to excellent (high 20% porosity) and available pressure data indicates the presence of light oil, consistent with discoveries elsewhere in the basin. Furthermore, two 10 litre oil samples were successfully recovered to surface � a better outcome than Bushiya-1 where mechanical issues hampered sampling in one of the zones. In our minds, the significance of the Amdigh-1 result is two-fold. Firstly, it proves beyond doubt that the tilted fault block play drilled so successfully by CNPC extends into Savannah�s acreage, and that exploration success rates (75%) and discovery sizes (1-50 mmbbls) are likely to be comparable. Secondly, whilst it is still early days, Amdigh appears to be an important step towards establishing commercial viability. Indeed, we believe that a standalone development hub, trucking crude to refineries in northern Nigeria, would require just 35 mmbbls of aggregate recoverable reserves to be viable at prevailing oil prices.