Member Info for ZENGAS

Article yesterday on bank lending for oil/gas assets in Africa and one prominent bank still lending regardless but in tandem expects to lend over $14b in the next 2-3 years alone for African Renewables projects so imo i don't see a problem on FinnCaps expectation of 75% financing.

Seperately FT article today on $5.2b of outstanding debt as of 2022 to China from Sudan but that doesn't include $billions in prepayments to Sudan for oil to be shipped.

Sudans state oil Co SudaPet) owes about $2.5b to CNPC. Chinese state backed entities loaned Sudan $15.5b to 2020 alone with $5.5b new loans pending.

"Deborah Brautigam, director of the China Africa Research Initiative at John Hopkins University, pointed to Chinas hectic 'shuttle diplomacy' that helped keep the oil flowing following the split between South Sudan and Sudan in 2011. Sudan is where Chinese diplomats first got involved in shuttle diplomacy, and at the time got grudging praise from their American counterparts" she said and "wouldn't be surprised if they returned to help sort out these problems".

Saves 3 acquisitions

Exxon Chad for the sum of US$360 million (with a further oil-price contingent payment of up to US$50 million), subject to other adjustments ie $410m.

Petronas Chad for the sum of US$266 million, subject to working capital and customary adjustments

Petronas South Sudan for a *total* cash consideration of *up to* US$1.25 billion, subject to certain completion adjustments.

As for South Sudan - information has been light. The price is stated as 'up to' and 'total consideration.

'

There remains a possibility that perhaps as much as 20% of that headline price could be inclusive of contingencies - ie for certain production levels being met as well as the oil price for x years.

Taking that into consideration along with whatever effective start date is used, there could be a very substantial discount to apply when you look at the make up of other deals and SAVEs use of the term 'up to'.

Panoro Feb 2021

Equatorial Guinea and Gabon oil producing assets (up to $180m)

for an initial aggregate cash consideration of up to US$ 140 million and aggregate contingent consideration of up to US$ 40 million, based on an effective date of 1 July 2020.

The EG Contingent Consideration is up to US$ 16 million in aggregate payable only in years where the average annual net production of the acquired interests is in excess of 5,500 bopd. Once this initial net production threshold has been reached, in that year, and for the four consecutive subsequent annual periods, annual contingent consideration of US$ 5.5 million will be payable to Tullow provided that the production threshold is met in such annual period and the average daily Dated Brent oil prices in respect of the annual period is in excess of US$ 60/bbl, subject to the aforementioned cap of US$ 16 million.

The consideration for the Dussafu Acquisition consists of an initial cash consideration of US$ 46 million (to be adjusted at completion for working capital and other customary adjustments) and a contingent consideration of up to US$ 24 million (the “Dussafu Contingent Consideration”).

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Afentra April 2022

Sonagol transaction $80.5m upfront with a $50m contingency (Contingency is $5m annually for 10 years subject to above $65/b oil price and being over 15k bopd gross production).

INA transaction $12m cash upfront plus $21m contingency (Contingency is $10m licence extension, plus $2m/yr x 3 yrs on 30% of the revenue upside if oil price above $65/b. Further $5m if any new discovery subject to it being developed.

Savannah Energy RN2 registered today at Companies House.

We seem to forget that the top partners in South Sudan are South Sudans state NilePet, Chinas CNPC, Indias ONGC Videsh. I still beleive Chinas Sinopec and Tri-Ocean Energy may still be there also.

All these other participants need to see alternative export routes rather than just depending solely on Sudan while we worry about Save/Petronas. The others have to drive alternative options and not solely all our own worry if this deal goes ahead or not. Imo there are alot more strategies and angles weighing on the deal than we can be aware of.

So although some time away it's good to see that Chinas CNPC subsiduary will construct the EACOP project. Imo these are details that will affect the strategy of Save/Petronas deal financing terms and who might our backer be (Refer again to the Vitol report last year and the high potential rewards for an oil marketer).

We are a partner of Sinopec in S.Creek. We work closely with CNPC in Niger re pipeline access and we have used their subsiduary for drilling all 5 wells so far. This comes on top of S.Sudan having bought land for oil export facilities in Djibouti. Save also sending a renewables development analyst to the Ethiopian investment conference last week.

EACOP (Oil Pipeline)

20/1/23 "The pipeline would also tap South Sudan's Oil, which according to the report, is of higher quality due to its low Sulphur, and also cheaper to extract. This would help South Sudan to reduce its decades of reliance on the Republic of Sudan(Sudan) for its oil exports. The UKCOP's initial prospects would enable Juba to ship an estimated 130,000 barrels of oil per day before including the Ugandan and Kenyan crude export volumes. "

https://www.pipeline-journal.net/news/geopolitical-intrigues-decimated-planned-uganda-kenya-pipeline-eacop-report

8/5/23

"China is likely to take over financing of the 1,443km East African Crude Oil Pipeline (EACOP) project following withdrawal by several top lenders amid pressure from environmental activists. This shift in financing follows a string of EACOP deals signed with several Chinese firms including an agreement between the project’s lead investor, oil and gas major TotalEnergies, and pipeline contractor and China National Petroleum Corporation subsidiary, China Petroleum Pipeline Engineering (CPP), to carry out the engineering, procurement, and construction (EPC) works for the project.

Set to become the longest heated oil pipeline in the world, China’s financing is poised to offer new life to the mega project, which is expected to transport 216,000 barrels of oil per day from the Tilenga and Kingfisher oilfields in the Lake Albert Basin of Uganda to Tanzania’s Tanga Port.

TotalEnergies and Ugandan Government officials maintain that the project remains on track, with the project expected to undertake land acquisition planning; contract awards; and detailed EPC works between 2022 and 2025, with first oil production and export due for 2025."

https://energycapitalpower.

See my 24th April post. Perenco for one still waiting a year almost to get a deal signed off re Etinde Cameroon.

Re should or shouldn't SAVE walk away from the S.Sudan deal.

First of all i believe any deal has to be non recourse to the parent group/other asset holdings just like Chad, Cameroon and Accugas Nigeria. Therefore i don't see it as putting the group at risk and no one would be that reckless least of all AK without ring-fenced financing.

If anyone is likely to pull the deal it could be the actual entity that is/was there to finance it and not so much Save.

It could be Petronas themselves who finance it - do or will they offer a financing agreement like Exxon and on what terms. They may be even keener to leave more than ever especially as they also operate in Sudan where their complex/office in Sudan has been damaged in recent days with people unable to leave.

Any opportunist will see the potential in S.Sudan. Perenco themselves were reported as interested. Things continue as normal so far and the main worry is going to be relying on one export route - so yes i see now as the time for S.Sudan to address and develop an alternative route faster than ever. They have land bought at Djibouti for this purpose.

Can any deal be structured in a way that Save can continue say if oil exports were offline for 3-6-12 months at any point ? and it might not happen - totally unknown but i'm sure that risk has been considered.

AI reports Save will predominantly only be a partner in S.Sudan - they won't have anyone to pay as they need little staff, it all comes down to the loan financing and perhaps length of it. Seplat managed to survive in a one country jurisdiction with its oil exports severely constrained for a number of times over many months while alternatives were found and the original export route re-instated.

What about the breaking story back on 18/1/22 when AI reported that it was a grand plan by the Vitol - Savannah duo for S.Sudan. Vitol is awash with serious cash and more so this past few years of high oil prices, and somebody like them could be more than willing to see this through with Save as they gain access to marketing the oil.

I may be wrong but to leave S.Sudan high and dry because of what's going on with it's neighbour would be a big blow for the South Sudanese (not their fault) and anyone thinking of investing in S.Sudan pre June if the Savannah Petronas deal collapsed - so again i'd be surprised if Save decided to pull the deal on neighbouring instability. Yes they could delay it or suspend it but i think that would open the deal to other potential buyers

I do not want to see the deal collapse and i don't think Save will either but it will be more so in the hands of the right financing terms relative to the above.

Re South Sudan valuation if successful yet to be added to the valuation

"we would expect South Sudan to have a material impact on our valuation following forthcoming publication of the AIM Admission Document. "

I think the new Risked core valuation should add about 30p and worth about 15p/yr in net debt reduction at least.

Re todays ShoreCaps risked NAV of 45p.

I did this exercise on the back of the FinnCap note on 3/4/23 (post 1079 on the other board) so in comparing the two here's my take.

I got core risked value 44.8p. Since then Save have sold 10% of their COTCo shares so i'd remove another 1.6p so overall 43.2p versus todays ShoreCaps 45p so i'm more than happy. I think the rest of the figures below will play out on S.Sudan & ongoing debt reduction plus the end of year small figure attributed to the renewables.

Post 1079

Post Chad nationalisation, FinnCaps note didn't take into account the impact of the TOTco loss (Chad Pipeline).

They attributed 17.6p risked to the combined pipeline. If you go to the CPR valuation on the 2 pipeline sections re valuation/revenue. TOTCo worth $10.8m/COTCo $277.5m.

Likewise ShoreCap say TOTCo only generates a 'small proportion' whereas they say COTCo "generates the vast majority" - Again refer to the CPR of a combined $88.5m revenue and $34.4m cash flow for the 2 pipeline interests. I assume and believe it will be a loss of about $4m cash flow.

On that basis i believe FinnCaps valuation for the pipeline should drop from a risked 17.6p to about 15.8p.

All from FinnCap -
Accugas 31p, Nigeria 2P reserves 24.8p, COTCo 15.8p, Warrants if excercised 1.7p = 73.3p.
Net debt is 21.3p. G&A takes away 6.9p = minus 28.2p.

Core risked valuation = 73.3p less net debt & G&A of 28.2p = 44.8p. (VERSUS 26p now).

That's without anything of the contingent value included. In 2 years approx while there may still be debt on the Nigerian assets, the net debt position should be neutral or moving into a net cash position so from 44.8p there's up to 21.3p of the net debt to add to this if Accugas keeps performing as it does - ie meaning core value of 66p is possible on that.

The Nigeria and and Niger contingent resources add 11.7p and the TOTCo upside about 0.5p.

A further 8.1p is attributed to a fraction of prospective resources being discovered plus 1.4p at this stage for the Niger windfarm.

That takes the total to 66.5p (instead of last weeks F/Cap risked valuation of 69.6p).

As of now, forgetting about S.Sudan - if the net debt of 21.3p reduces on a net cash position in 24 months approx = 87.8p risked. (Unrisked is 29.3p higher to 117p if they find a further 76 mmbls net in Niger - lets hope that the upside hoped for in Amdigh alone representing those barrels could be already there from the other segments beleived to be in contact with the existing discovery).

Let's hope things are defused somewhat as too much at stake for the region.

I see two things of interest in the October 2021 AI article that might make a material positive difference here.

The SPA with Petronas for Chad was signed in Dec 2021 and with an effective date from 1/1/21. No indication prior to this of any negotiation with Save for the Petronas Chad assets.

Although no effective date given for the South Sudan SPA signed in Dec 2022, it's not beyond the realm of possibility that the effective date could be 1/1/22 giving Save a year and a half discount to the closing price if completed in June. If so, this could make a real difference to my net debt assumptions come the end of this year.

In the Africa Intelligence article of 20 October 2021 - this is where they say Petronas was seeking a buyer for it's South Sudan interest.

It's also noteworthy that AI stated production is "now at around 154,000 bopd "(gross) "compared to 400,000 bopd at the time of independence" with the reason being Petronas no longer investing in S. Sudan. (Save corroborate this figure by saying in the SPA RNS announcement in Dec 2022 that it was 153,200 bopd for 2021 ).

"The reason for this rather dismal outlook is that one of the long-standing investors in the oil sector, Malaysian state-owned company Petronas, no longer intends to invest in South Sudan. The oil company has made it quite clear to President Salva Kiir's government that it plans to leave the country and that its teams are looking for new buyers as soon as possible" - AI 20/10/21.

If even half of that fall is down to Petronas not investing then the Oil Minister may well be right when he said in 2019 he expected production to be back up at 270,000 bopd (Petronas circa 106k bopd) within a year only for Covid to hit later that year and no significant recovery in oil prices to later in 2021 and into 2022.

The oil minister was confident that the blocks would return to 350-400,000 bopd gross.

Unbeleivable the interference the Chadian oil minister gets up to over Save.

"In a correspondence from Djerassem Le Bemadjiel, the Minister of Hydrocarbons and Energy of Chad, the latter requests the postponement of these two events."

Yet barely 2 years ago the same oil minister was in prison and behind all the Glencore deals according to AI.

(Glencore recently fined $1b in the US and £281m last year for bribes across Africa https://www.sfo.gov.uk/2022/11/03/glencore-energy-uk-ltd-will-pay-280965092-95-million-over-400-million-usd-after-an-sfo-investigation-revealed-it-paid-us-29-million-in-bribes-to-gain-preferential-access-to-oil-in-africa/ )

AI 18/1/21 "As the country gears up to April's presidential election, former oil minister Djerassem Le Bemadjiel remains detained awaiting trial following his arrest in September. He was arrested at his home in September following a complaint by Chad's State General Inspectorate (IGE) about his approval of the payment of 25 invoices totalling $16.9m to consultancy Alex Stewart International (Africa Intelligence, 19/07/16). He served as Déby's chief oil advisor in 2012 and negotiated all the deals between Chad and Glencore."

After SAVEs new Chairman elect comments about Cameroon - have they any plans for oil/gas acquistions. I see Perenco waiting a year now on its Cameroon deal.
7/6/22 RNS
Bowleven, the Africa focused oil and gas, Exploration and Production Company with key interests in Cameroon, today announces that it has been informed by New Age (African Global Energy) Limited ('New Age'), the operator of the Etinde JV, that New Age has signed a definitive conditional agreement with a subsidiary of Perenco S.A. ('Perenco') to transfer all of New Age's participating interests in the Etinde permit, and operatorship of the Etinde JV, to Perenco (the 'Transaction').
The Transaction is subject to a number of approvals, including the customary regulatory approvals by the Cameroon government and the approval of the Etinde JV partners.
8/7/22 RNS
Neither LUKOIL nor Bowleven exercised their right of pre-emption over New Age's interest.
A number of conditions to Perenco's acquisition of New Age's interest in the Etinde permit remain outstanding, including customary regulatory approvals by the Cameroon government, competition approval and, exclusive exploitation authorisation (EEA) Titulaire confirmation (by way of a letter issued by the Minister). Bowleven will provide a further update in due course.
7/3/22 AI " Perenco stuck waiting on New Age's share of Etinde
Perenco has strong ties to Cameroon's powers-that-be, but is still waiting for the authorities to approve its acquisition of New Age's share in Etinde. Should it be able to begin work on this permit, it would become the country's top gas producer.
Early last year, Perenco and New Age signed an agreement for developing Etinde, but authorities in Cameroon have not yet approved it. Perenco wants to buy out New Age's 37.5% stake in the 58 million barrels of oil equivalent permit from a junior company owned by the Chinese fund Hopu Investment Management Co, with a view to becoming the operator and starting production as soon as possible.
Perenco could then produce liquid natural gas with the material from Etinde at the Hilli Episeyo FLNG it operates at the Port of Kribi. Or it could send the gas through a pipeline to the EGLNG plant in Equatorial Guinea, operated by US firm Marathon Oil and located on the island of Bioko. However, since Gabriel Obiang Lima's removal from his position as Equatorial Guinea's oil minister in early February, Perenco may opt to keep the production in Cameroon rather than move it across borders (AI, 13/02/23).
Why all the waiting?
In terms of volume, Perenco is Cameroon's top producer and is reputed to have close ties to Paul Biya's administration, notably with the National Hydrocarbons Corporation (SNH). The SNH has been run for decades by Adolphe Moudiki, a close friend of Biya's. In terms of the other shareholders - British Bowleven has little available cashflow and Russia's Lukoil was slapped with sanctions following Russia's invasion of Ukraine last February. '

Trustilie, i thought it had to be issued within 6 months from date of suspension and if so that would be 26 weeks so i assumed by the 12th June but still a guess on my part.

Bar one year for Covid, the results are always May - early June and the agm has always been end of June so im still going for within the 26 week window and thats the week of the conference 14-16 June.

If they were going to announce anything at the conference i would have expected the addmission document to be out before it.

Looking at Page 5 of the Dec 2021 presentation on the asset level FCF from the Chad/Cameroon acquisitions.

The 22,500 bopd from Exxon & Petronas at $60/b oil was to contribute $125m FCF for 2022 (or $5.55m FCF per 1k bopd).
Exxon FCF pipeline interest = $34.4m
Accugas before the new contracts kicked in = $81m.

Taking a simplistic approach but

if you were to pro-rata say 55 - 60,000 bopd for S.Sudan on the above at $5.5m per 1k bopd production - then S.Sudan could be worth $305m - $330m FCF/yr.
$81m from Accugas (but surely circa $100m now on the new contracts as most costs taken for).
The Exxon Pipeline interest was only marginal (TOTCo) on the Chad side and they have since sold 10% (COTCo) to Cameroon - so imo what's remaing ie 30% worth perhaps $25m FCF/Yr.

On the above and on S.Sudan being successful - overall combined FCF possibly $425m - $450m range. The actual spend for the first of the renewables on a 75% financed/25% internal provision is at least 12-24 months away.

I'd say they want to ring fence the S.Sudan debt as non recourse like the other assets.
Risk on S.Sudan is building in a scenario of say coping with oil off line worse case for 6 months in managing repayment. (Seplat have managed it more than twice in Nigeria).

Also versus risk - if production could get back up to where the S.Sudan oil minister expected, there's potential for the S.Sudan FCF to go up by 100-150% i would think.

S.Sudan oil investment conference not too far away and will need investors as much as ever who in turn i would think will want promises on other future sales routes.

Block 1, 2 & 4 is a 28” pipeline with 6 pump stations and 500,000 bopd capacity (Petronas 40%).

Block 3 & 7 is a 32” pipeline with 6 pump stations and 750,000 bopd capacity (Petronas 30%).

The oil terminal has 4.8 million bls storage capacity.

South Sudan believes it can get those blocks to produce a combined 350 - 400,000 bopd which would be about 125-150k bopd to Petronas if achieved.

Would like to hear more about alternative export route plans rather than sole reliability on Sudan itself.

Trustilie not impossible on your thoughts of being a 150k boepd producer.

My post on 2/4/23 where ' WBG estimated production in 2021-22 across the relevant blocks to us at a gross 156k bopd which would have been 59,000 bopd.
Petronas blocks 3 & 7 = 40%. Blocks 1, 2 & 4 = 30%. Block 5A 67.9%. '

We know Covid hit late 2019 and Petronas then was mulling a sale.

This report from Feb 2019 by the South Sudan oil minister " By the end of the year, block 3 and 7 will be hitting 180,000 bpd, blocks 1, 2 and 4 will be producing 70,000 bpd, and block 5A will be producing 20,000 bpd,” Gatkuoth said."

If that was achievable this would equate to Petronas (Save) interest being a net 106,000 bopd or 270,000 bopd gross.

He also said that in the following year they expected to get back to the 350-400,000 bopd gross level. https://www.reuters.com/article/us-south-sudan-oil-idUSKCN1PZ09W

So certainly a big prize on offer relevant to risk. They agreed to have a refinery built on the Ethiopian border (5 refineries in total) as well as address further pipelines.

Re your thoughts on the renewables not moving the needle much in the short term, I don't disagree at all but imo they will continue to put building blocks in place and i feel will be part of the plan to make Save not only attractive to institutional investors relative to not being solely invested in hydrocarbons but a lucrative buy out at some point and why the intention to direct some FCF to alternative energy projects.

Previously FinnCap had just 7.9p risked for the 740 MW of Niger/Chad projects and 12.6p unrisked.
With the Chad issues that has now come down to 325 MW of projects.

20/4/23 "targeted 1GW of renewable energy projects in motion by the end of 2023." - If so i expect the risked to rise to over 10p and the unrisked to over 16p

They also expected a split of 75% financed versus 25% internally funded.

Might not seem a lot but if you have 3-4 GW of projects in development/agreed it all adds up and i would think the value for those in production will be even greater - so worth looking back at acquisition values of African Energy companies that had a portfolio of producing -in development/agreed assets.

It will be interesting to see what our net debt is if S.Sudan successfully completes. I'd be happy if we are under $1.2b come this year end. Can't rule out further acquisitions and if S.Sudan completes i can't see anything greater to warrant any future suspension. Tucked away in 5:15 i think is the ability to borrow up to $2.5b so it wouldn't surprise me to see a few acquisitions of 10-20k bopd region being snapped up (ENI had agreed to sell to them an asset. Also mentioned re Petronas Egypt 20k bopd).

Last costings from Jing & Partners was about $300m so if 70% financeable on a long term PPA over 20+ years, we'd need to find $90m. These deals are all going to be part paid for by the reinvestment of FCF from oil/gas production rather than any major dividends in the short term.

Building a transitioning company that has something other than pure reliability on hydrocarbons.

If we have the right oil/gas assets throwing off decent cash (of which on the Chad/Cameroon deal at 22.5k bopd + Accugas was intended to give about $270m/yr FCF), there's no reason why another £1 billion minimum value can't be created from a decent combined size mix of renewables.

Isn't CM the two letter abbreviation for Cameroon ?

RCM = republic of Cameroon or possibly Renewables Cameroon ??

The net debt was $412m end Q1 2023.

With the sale of 10% of COTCo for $44m - it shows the pro rata value of our 41% COTCo interest as $184m if sold entirely.

The pipeline goes all the way from S.Sudan to Khartoum. There is a major refinery about 50km outside the city of 6m. The pipeline takes oil from both countries to Port Sudan at the Red Sea. The pipeline was damaged in Sept 2019 for 2 weeks and again that November and brought back online again. Let’s hope that it doesn’t escalate into a prolonged or wider conflict. This coming on the back of the last coup in 2021. Wagner rumours around the support of the militia which was hoped to be integrated into the Sudanese army which the army is now treating as rebel group. Up to last week the army general was seen as leader of the country towards transitional government with the militia leader his deputy. Never a dull moment.

Regarding the net debt position.

I posted on 17/2/23 what the analysts had previously guided the net debt would be year end 2022 before the Chad acquisitions ie on Nigeria alone = $296m.

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My 17/2/23 post
"Save net debt end 2022 on Accugas forecast at $296m. I reckon we may have contributed $50m from our cash reserves for Exxon Chad and borrowed up to another $170m from Exxon against the $407m completion price less pro-rata adjustment to 1/1/21.

That would push net debt end 2022 to about $500m region."
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Pleased to see yesterday at end Q1 2023 net debt reported as $412.2m. They also re-iterated closing on the entirety of the S.Sudan assets.

From my post 17/2/23 on S.Sudan - "If they gain the entire portfolio i expect the price on completion may be around $900m so i expect total net debt to be about $1.4b and under $1.2b by this year end."
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If so we could be on target for that net debt range and maybe better without factoring in any further acquisitions or cash flow diverted to the renewables which are likely to be 70%+ financed and still 1-2 years out before any capex.
Finally if AI is correct about the S.Sudan production/reserves figures - It's somewhere i beleive between 50 - 60,000 bopd and circa 300 mmbo P2 + whatever 2C.

Without Chad, the current 2P is about 75 mmboe and with development sanction for R3 east in Niger, i expect the 33 mmbo 2C will be classified as 2P so overall our 2P should be in the 400 mmboe range with S.Sudan and production somewhere between 75-85,000 boepd net + Niger to start and reach 5,000 bopd.

As ever Dyor.