Roundtable Discussion; The Future of Mineral Sands. Watch the video here.
I did a spreadsheet table this afternoon looking at the gas contracts we have shame I can't post the table on here for all. Our H1 2023 run rate was H1 2023 with an average of 25.3 Kboepd. Here is some of my highlights:
1) Notore Chemical Industries PLC - 10 MMscfd (1,772 BOEPD) Contract July to September 23 have averaged more than twice this at 26.3 MMscfpd (4,661 BOEPD) 12 Months Extension in H1 2023 + 16.3 MMscfd (+2,889 BOEPD)
2) Shell Petroleum Development Company of Nigeria Limited - 6 MMscfd (1,063 BOEPD) Added +3 MMscfd (+532 BOEPD) August 2023
3) Amocon - 20 MMscfpd (3,545 BOEPD) -Delivery Commenced April 2023 at 18 MMscfpd (3,190 BOEPD)
4) Ibom Power Company Limited (owner of the Ibom power station) - Contract till December 2023 (Extension Discussion Ongoing Potential opportunity to increase supply materially here I reckon as we are working with the local government to make this power station efficient and stable so as part of our assistance we could perhaps increase the current 20 MMscfpd (3,545 BOEPD) Take / Pay materially would be nice to double it to 40 MMscfpd (7,090 BOEPD)
https://thesouthernexaminer.com/why-eno-is-seeking-partnership-to-enhance-nigerias-epileptic-power-sector-p11079-202.htm
"Then we also have the Savannah Energy that supplies gas, they are willing to assist by coming up with solutions."
I would expect our H2 2023 average to be a lot closer to 30,000 boepd (H1 2023 (25,300 BOPED + Notore increase (+2,889 BOEPD)+ Shell increase (+532 BOEPD) + Amocon (3,190 BOEPD) = 31,911 BOEPD or circa 180 MMscfpd
I believe there is still additional scope sell more processed gas up to 200 MMscfpd (35,448) or 240 MMscfpd (42,538 BOEPD) as per Rocky IR update, and that's without the CPF facility to come in H1 2023 next year so in theory we can add anywhere between 20 MMscfpd (3,545 BOEPD) - 60 MMscfpd (10,634 BOEPD)
Would love to get daily production stable and in the range of 35,000 - 40,000 BOEPD, prior to CPF facility. Let's hope the company is hunting for additional gas customers aggressively perhaps we might get it through number 4 above Ibom Power Company Limited (owner of the Ibom power station) contract up fro renewal December 2023
The Africa Energy quote I was referring to below was an article from April 2023 - "African Energy understands the expropriation of Savannah’s upstream assets in Chad should not affect the deal, as financing for the South Sudan deal is ring-fenced."
It's clear the chad nationalisation as not affected our ability to raise finance for Petronas deal, that quote was April 2023 and we are in December so one would imagine with economic interest date the debt needed would be even lower thus making in more easier to access financing.
Clearly the challenges for this deal lies elsewhere and not related to companies ability to access capital.
As for financing is concerned for this deal. My understand is that the financing for Petronas deal is ring fenced meaning the chad revenues and fx loss has not affected our ability to finance the Petronas deal and this was highlighted in the Africa energy article earlier this year
So with African energy being quite a credible news source it’s safe to say funding this acquisition is not what’s holding this deal up.
Rockyride - I for one believe the company should have reasonable inclination of whether government consent is forthcoming or not as one would imagine that there is some financial incentive tied to this deal for SS government as well and by that I mean a signing bonus and not just revenues from an incremental production by a new operator. If government approval is only thing outstanding that you would like to hope that the South Sudan government have agreed commercial terms as I am sure there are payments to them attached to this deal.
Personally If I was AK I would use every day of extension period to secure another deal and walk away from SS deal if we are going no where but obviously it’s hard for me to say when we don’t have all the facts from the company
I was just carefully reading the wording written on the Thursday RNS and they have purposely omitted the word “admission document”. I could be wrong but I reckon from our side the admission document is complete and until we get explicit government consent I believe savannah will not come to the market with the Admission document without approval as they don’t want another chad situation potentially so hence I believe Admission document is complete and we have got an extension till 1st February to get explicit consent so we can release admission document / feel comfortable enough to release AD or if SS government don’t give Explicit consent or if they drag their feet than I don’t see us releasing the admission document and perhaps we will just walk away at that point without admission document actually being brought to the market.
The above scenario might be credible considering rocky has always insisted in his IR updates that AK only wants to come to market with admission document and government consent.
Personally and being very realistic something drastic would have to happen in the space of 5-6 weeks for government to grant approval so is this extension more speculative hope that government of South Sudan approves or is it backed by genuine and credible expectation and progress made in firm approval timeline backed by pre-conditional agreements already which are binding toward explicit consents we will see…………….
“Further to the Company's announcement on 29 September 2023, the Company continues to advance the various workstreams required to complete the acquisition of PETRONAS International Corporation Limited's energy business in South Sudan. In this regard, a further extension to the Company's cancellation date has been granted to 1 February 2024. Further updates will be provided as and when appropriate.”
Rocky SCAP update alluding to a shorter timeframe “ Given the relatively close proximity of the prior 15 December 2023 extension deadline, and the beginning of February 2024, we maintain confidence in Savannah's ability to publish the related AIM admission document within this newly updated timetable”
The above comment from SCAP is interesting - the use of the word “confidence”. I am hoping their “confidence” is credible and backed with genuine expectation as they might have better insight and access to the stage the company are at with this transaction and hopefully they know how approvals are progressing or whether we have made significant progress i.e if we had to get 10 approvals in total than we have secured 7 is what I mean.
Also this is interesting “ within this newly updated timetable”. That says to me that admission document should be published much earlier than 1 Feb 24. The use of the word within the timetable. So if we start to head into the final 1.5 - 2 weeks of Jan approaching the 1 Feb 24 deadline than it would be safe to assume we haven’t made any progress s
Let's hope positive things to come in Niger with export pipeline potentially starting Jan 2024 and potential ease of sanctions
https://www.reuters.com/world/africa/niger-junta-agrees-plan-restore-democracy-togo-minister-says-2023-12-15/
Thanks for sharing Rockyride - I do truly believe the downside risk is limited Accugas going from strength to strength. You have to remember that we would have been suspended for a whole year and Accugas has continued to grow with Amocon gas contract as well all of that will be factored in when we return, plus if they finally get the debt restructuring out the way than that will contribute to the sp as well alongside the CPF facility completion in a matter of months, if Niger and CNPC start pipeline export i can see some positive sentiment filtering through from that as well as the market will anticipate a potential higher chance of us starting work in Niger.
I remember us being interested in Zafiro at one point, one thing is for certain there is a growing theme amongst African countries is they are not to keen on oil majors selling to other international independents and most assets will become either state owned or local players
Oil divestments will happen in africa but i reckon national oil companies or local players will end up with the assets in 95% of the cases. Only 5% of the cases you may see a small incremental deals go through but the bulk of the big deals will be hard to close from an approvals perspective.
The project that matter strategy in Africa may need to be reviewed if Savannah is unable to land hydrocarbon deals in Africa there will come a point where the company might need to pivot and look for assets elsewhere around the globe if possible, or just continue to maximise accugas assets and work up an aggressive exploration, development and production plan for Niger when possible to get to 20,000 bopd per day from Niger.
As far a hydrocarbon deals in Africa go most deals will be similar drag unless consents are granted when SPA is struck otherwise these deals become pointless.
Equatorial Guinea
Teodorin puts finishing touches to ExxonMobil's departure
The US major is selling off all its assets to the Equatorial Guinean government, which is in the process of selecting its future oil partners.
ExxonMobil could sell the Zafiro oil field to Equatorial Guinea as early as 2024. Africa Intelligence understands that Antonio Engonga Oburu's oil ministry is on the point of wrapping up exclusive negotiations with Petrofac to create a partnership to operate Zafiro. The choice is surprising given the British company's plummeting share price following liquidity problems.
According to the terms of the deal, Petrofac would act as technical partner and would have to provide a new floating production storage and offloading (FPSO) platform to collect the crude oil, as the current FPSO is damaged. The state-owned GEPetrol would be the official operator of the field (which produces 25,000-30,000bpd), a solution strongly supported by the vice president and heir to the throne, Teodorin Obiang Nguema. He took over responsibility for oil and gas after his half-brother Gabriel Obiang Lima left the oil ministry in February and now decides on everything in the sector along with Antonio Oburu, with whom he maintains friendly relations.
in 2019-2020, the Equatorial Guinean government - and in particular Nguema - refused to accept Trident Energy as a buyer of (see our previous coverage), and since then ExxonMobil has failed to find an alternative.
ExxonMobil quits exploration
Besides Zafiro, ExxonMobil in early December put the finishing touches to the sale of its two exploration blocks in the Equatorial Guinean offshore fields EG-06 (obtained in 2015) and EG-11 (2017). Chevron will take over these two licences, where gas discoveries have been made, notably in EG-06 in 2017 (Avestruz-1).
Chevron has become a key player in Equatorial Guinea since it took over Noble Energy in 2020. The company owns producing fields at Aseng (oil) and Alen (gas) as well as discovered but as yet undeveloped fields at Yoyo (on the Cameroon side) and Yolanda (Equatorial Guinea), both rich in gas and condensates. An agreement was signed on 17 March in Yaoundé between Cameroon President Paul Biya and his Guinean counterpart Teodoro Obiang Nguema on the sidelines of the 15th summit of the Central African Economic and Monetary Community (Cemac) to jointly develop these deposits.
Https://careers.savannah-energy.com/job/Victoria-Island-Senior-Electrical-Engineer-LA/849288555/
Zengas - It's definitely not the usual wording so you could be right, this time they haven't referenced the admission document date. Could the following be possible:
1) Admission Document is complete except with the formal government approvals. ?
2) Do they want to only release the admission document with approval and not without ?
3) Could they release the admission document still before the 1 Feb 24 i.e this month but still remain suspended for 4 weeks until 1 Feb 24, by pushing the cancellation date. Perhaps this allows them to publish and put pressure on other parties for approval whilst still staying suspended ?
Definitely interesting choice of words used and surely intentional choice of words
All in all extension is not a bad outcome as it will give company time to bring clarity on other areas of the business, whilst they still continue to pursue acquisitions.
1) Debt re-structure RNS hopeful that this completes between now and proposed admission document. Seems like they are drawing up documents forever so it really should be close or shouldn't take that long.
2) If we can squeeze a few more gas contracts that would be a bonus.
3) Clarity and operational plan on Niger, if export pipeline does commence early next year as reported in the media this week than Savannah has to find a way to get equipment into Niger to commence work, i am sure we can work with CNPC in achieving this if they are able to start and ramp up production to 90,000 bopd, than surely they must be getting in equipment into the country somehow so we show explore piggy backing of them. Afterall it's in there interest that we ramp up production seen as we are going to be eventually using their pipeline meaning tariff revenue for them.
4) If out of court settlement can be reached on Doba than that should be the preferred route. Even if it means that we sell the asset onto chad government. We paid $407m for the Exxon Chad asset with economic adjust at closing the outstanding balance was circa $175m outstanding to Exxon, so effectively $232m difference. There was talk that chad will compensate Exxon for the asset if they compensate the full $407m if not more and with Exxon outstanding balance of $175m at closing, we should pocket the difference of circa $200m. Obviously retaining the asset would be ideal but if we are getting a decent exit with a cash lump sum than I think we should take it as the cash could be used to pay down debt, share buybacks or any other potential acquisitions.
Personally I wouldn't even mind if we were suspended beyond 1 Feb 2024 to let's say April 2024 (i.e when Q1 2024 results) or June 2024 (i.e FY2023 full year results). This will sure up the company further, through additional cash collections, potential new gas contracts, compression facility completion, Niger progress, Chad progress.
I have always maintained and still continue to main that Savannah Energy, the board and AK have this window of suspension to deliver a transformational deal in which they can bring to market through an admission document, the confidence on M&A deals that have become a core part of it's strategy hinges on this suspension window, so whether they deliver SS towards admission document or another deal elsewhere simply put a deal via an admission document has to come to market. There are many reasons for this first of all they wouldn't want to waste a significant suspension window which has turned to over 1 year now to come to market with nothing as the strategy than get's put to question, second i don't think the board or institutional shareholders, nomad, regulator will be willing to grant another speculative long and drawn out suspension if this
JD - Personally SS or not I would hope that during the 12 months they have had the opportunity to work up other value accretive updates. Perhaps going for development assets might be easier rather than producing assets in africa who knows. Here is hoping to Savannah under promising throughout the year with limited updates turns to over delivering in reality.
I am sure there is plenty of proved up oil and gas reserves in Africa that are at development stage which requires capital to bring on stream, these assets may be easier to go for as governments are likely to approve development assets which are not producing yet as it drives new capital as supposed to investment in already producing assets.
Separately as for SS can an alternative deal be done, i.e a partial acquisition or perhaps a a joint acquisition with the government as supposed to the entire acquisition. Even if we are to end up with 10,000 - 20,000 bopd of the 50,000 - 60,000 bopd which is the entire petronas portfolio it would still be a good deal for us....................
Zenith Energy - is another company wanting to gain entry into South Sudan - https://www.lse.co.uk/rns/ZEN/mou-22683648220-south-sudan-3bzbhpeiubyz8oo.html
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