The latest Investing Matters Podcast episode with London Stock Exchange Group's Chris Mayo has just been released. Listen here.
Niger Pipeline will start to export from Jan 2024 according to the below Reuters article. If it happens we need to find a way to get equipment into Niger to do the well test perhaps we can use CNPC to get what we need to carry on with our operations in Niger, as I am sure they will be able to source equipment and get into country considering the bulk of the production of crude will be theirs through the pipeline so if they are due to start production than I am sure there will be certain exceptions to the sanctions.
News from Niger side -
https://www.reuters.com/business/energy/niger-aims-start-oil-exports-benin-pipeline-january-leader-says-2023-12-11/
News from Benin side -
https://www.linkedin.com/posts/adamou-boubacar-572a3016_le-p%C3%A9trole-aplanit-le-contentieux-entre-le-activity-7138588585275834368-aBO1?utm_source=share&utm_medium=member_desktop
Let's hope savannah are quick to progress in any case and are fully able to capitalise on the commencing of the export pipeline.
Rockyride as far as I can tell there is strong demand for our gas, and that demand will continue so i don't see demand tailing off, I think there may be some customers that might wanted treated gas rather than untreated and hence our CPF facility coming online H1 2024 will massively drive additional gas contracts, obviously one would expect the pricing of treated gas to be higher than untreated gas.
However signing additional untreated gas and stranded gas contracts to flow through our pipeline until the CPF facility is online isn't out the question.Personally I would like to get to 300 - 350 MMSCFD at some point next year which would equate to 53,172 - 62,034 BOEPD.
Rocky I refer to your update from IR post on 27 Nov 2023 17:21 where it provide update from accugas contracts
175 MMscfpd (Take or Pay) equates to 31,017 BOEPD. If that's correct and if that's fixed take or pay that means we are getting paid for 31,017 BOEPD per day at present, which is already a massive increment from our full year FY22 average of 25-26K
91 MMscfpd (Interruptible) equates to 16,129 BOEPD. So if you total 31,017 BOEPD take up and pay up + 16,129 BOEPD interruptible = 47,146 BOEPD.
Rocky - If your IR update is accurate than on a full take up basis we could be selling 47,146 BOEPD. Even if you factor in a 30% take up of the interruptible gas quota 16,129 BOEPD * 30% = 4,838 BOEPD + 31,017 BOEPD Take up gas = 35,855 BOEPD.
I am intrigued on the accugas front if that's our current run rate as we are massively outperforming even on FY22 numbers, unless I am missing something or unless there was something that was misinterpreted on the IR update ?
"The nameplate capacity of Accugas’ central processing facility is 200 MMscfpd, although it can process up to 240 MMscfpd. Our current take or pay customers amount to 175 MMscfpd, while our interruptible customers account for up to an additional 91 MMscfpd. The volumes supplied on a daily basis to customers vary based on a number of factors. We also distribute third-party gas, via our 260 km pipeline network, to our customers, following the ten-year agreement signed with Amalgamated Oil Company Nigeria Limited (“AMOCON”) earlier this year for the supply of up to 20 MMscfpd. There may be further opportunities for us to commercialise other stranded gas resources in South East Nigeria in this way, which represents a potentially significant opportunity for Accugas."
I was just looking at the full year report and it has some detail on the proposed intention of how they are planning to re-structure.
Transitional Facility Agreement: The existing Accugas lenders have agreed to terms for a Transitional Facility. This facility is expected to be utilized in 2023 to repay the existing US Dollar Facility. The completion of this refinancing will align Accugas' principal revenue streams with its debt service obligations, reducing the Group's exposure to foreign exchange risks. It will also increase the tenor and enhance the structure of the debt facilities.
Refinancing of the Accugas US Dollar Facility: The company continued to work on refinancing the Accugas US Dollar Facility throughout 2022. The plan is to refinance this into a multi-tranche Naira-denominated borrowing structure with an average tenor of over 10 years. The initial step involves refinancing the current facility into a medium-term Naira bank debt facility (the Transitional Facility). This Transitional Facility will then be progressively paid down through the issuance of longer-dated debt instruments.
Repayment and Cancellation of Accugas US Dollar Facility: The Transitional Facility, which has a term of four years, will assist in fully repaying the Accugas US Dollar Facility. This repayment is planned to be done through a combination of long-dated domestic bond issuances and other bilateral facilities. The Accugas US Dollar Facility is expected to be fully repaid and cancelled in 2023.
If they can execute the above than that would be a brilliant outcome, as it will massively de-leverage our balance sheet to align the accugas debt with reserve life of the asset.
Https://theafricanstime.com/story/South%20Sudan:%20IMF%20Team%20Meets%20Finance%20Minister%20to%20Discuss%20Soliciting%20More%20Funds
"ensuring that South Sudan can solicit more funds from the global financial institutions and channel them to support the national budget and boost developmental activities."
Interesting quote - I am sure approving a transparent deal like Savannah will go along way in soliciting more funds from global financial institutions and bring confidence
Personally don't see CNPC and ONGC wanting to takeover Petronas stake, don't believe they would want to increase their current exposure as it is.
Nilepet meetings with CNPC are not uncommon after all they are partners. They even had a meeting in October where Nilepet execs flew out to China so nothing new.
Interesting take by Anas Alhajji on this, saying increasing production in South Sudan is not a priority for CNPC.
https://twitter.com/anasalhajji/status/1717025605869346933
Looks like we also have a new company secretary, looks like Nick Beattie has stepped down as company secretary and Lauren Kelsall has been appointed company secretary
https://find-and-update.company-information.service.gov.uk/company/09115262/officers
She is assistant general counsel who joined from Bracewell LLP 5 months ago. And we know Bracewell is basically our M&A transaction lawyers.
https://www.linkedin.com/in/lauren-kelsall-a69b258b/
Fingers crossed that positive things are to come whether in the form of south sudan deal or anything else which we may not be aware of..........
Thanks Sajy - I guess the main takeaway for me is getting the debt restructuring completed that in itself would be worth 4-5p to our share price perhaps more depending on the terms of the restructure especially if the restructure is fully aligned with our contracted revenues over 15yrs etc……
The biggest winners of the oil major divestment in Africa will be local African independents not international independents. May seem like a small difference but quite material in terms of getting government approvals.
Strange thing is Chappal Energies is a newcomer and if they are able to acquire assets producing 25,000 bopd, it just goes to show deal making is art form and not science majors are willing to sell to local new players, it does not matter whether they have previous experience or any of the other criteria
Plus I feel majors might be willing to sell to new african independents if it means the likelihood of government approval is higher regardless of there is experience, as long as they are able to put the capital for acquisition up.
Rocky - would love a deal in Nigeria, I know we had reviewed the Equinor assets in Nigeria OML 128 & OML 129.
Looks like those assets are being sold to a local player Chappal Energies in Nigeria.
https://www.offshore-energy.biz/equinor-disposes-of-its-nigerian-business-and-stake-in-chevrons-offshore-oil-field/
I am sure there are other assets that we could go for.......
Komakino - If we go down the route of deemed vs explicit consent it will all depend on the perception of investment climate South Sudan wants to create in it's oil and gas industry and also it's appetite for a long and drawn out arbitration process and also it will highly depend on the banking structure and how the funds are distributed to all shareholders in the holding companies.
When the government which is highly dependent on the oil industry for it's economy, having funds frozen in the event or arbitration and going into a election year could be a political gamble to far, and safe option may be an approval.
However lets wait and see, of course I am still expecting approval to come after the admission document and not in tandem as many have suggested, but nevertheless will not complain if it came all in one although it's not the usual course of how oil and gas deals are completed.
Did a bit of research in the approvals process and here is my summary:
The 2012 Petroleum Act of South Sudan outlines the key terms and governance of PSAs in the country, and the roles of companies and the government entities.
On assignments, Article 41(6) states that any assignment of rights/interests requires prior written consent from the Minister of Petroleum. No timeframe is specified.
However, the 2013 Model Production Sharing Agreement issued under this Act does contain more detailed provisions:
Article 1.6 specifies a 90 working day period for the Minister of Petroleum and other authorities to respond to requests for assignment consent, also providing for "deemed consent" if no response after this period.
So in summary:
The South Sudan Petroleum Act requires government approval for PSA interest transfers
While the law itself doesn't specify a response timeframe, the model PSA template under this legislative framework gives 90 working days for explicit denial/consent from the government, after which deemed approval applies, which is standard sellers right's protection in most production sharing agreements.
Zengas & CYB - Over the last year I believe this question has come up a number of times. I believe rocky did check and the answer was approval is not required for admission document releasing and returning to market, but it was AK's preference to come with approval at hand alongside but not a formal requirement.
As far as my experiences go with all oil and gas deals i have never heard of formal approval being granted the same time as the admission document is released and very unlikely that this is the case here.
There is confusion between preference and requirement based on what we have heard from posters who have spoken to IR.
Like all on here I want to return to market with SS deal completion but another extension till the end of March 2024 wouldn't be so bad it the grand scheme of things...........
1) It would allow us to see if the SS deal still has legs and how serious are the SS government is in approving our deal.
2) Continue to build cash from accugas for when an acquisition finally comes our way.
3) Additional gas contracts.............
3) On the cusp of compression project completing.................... by mid year 24. Transforming the companies capacity to process gas.
4) Niger pipeline probably started and exporting first oil, with hopefully us being able to logistically plan well test in Niger.
5) Hopefully debt restructuring completed Q4 2023.
6) Further clarity on Chad / Cameroon and everything associated with it.
6) Perhaps time to secure an additional acquisition if not in motion already. This remains an interesting one as not sure the level of flexibility they have on this are they able to supersede another acquisition ahead of the SS Deal with the SS Deal still intact, who knows as this is more a practical and legal question which I don't believe anyone has yet asked the company or knows to date.
The RNS even states
"To this end, I am pleased to confirm that we are currently in the advanced phase of negotiating the potential acquisition of certain oil exploration and development licenses located in South Sudan."
If they are willing to do business with a under £10m market cap company and not a few hundred million market cap company than there will be some serious eyebrows, especially with our ability to access capital to develop projects aggressively.......
Interesting to see Zenith sign an MOU in South Sudan and RNS today
https://www.lse.co.uk/rns/ZEN/mou-22683648220-south-sudan-3bzbhpeiubyz8oo.html
Let's just hope the traffic jam and regulatory hurdles in South Sudan oil and gas space are starting to loosen and that they start to approve deals that make a substantial difference to their economy.
Thanks Rocky for keeping up the relationship with IR and for going out of your way to provide updates for us all.
My take from your update and a key one for me is the accugas debt restructuring it seems like the paper work is being drawn up which is a good sign, and let’s hope it completes in the next few weeks