Member Info for ZENGAS

February 01, 2022

From an estimated $259.8 million in 2021, the Nigerian gas genset market revenue is set to rise to $514.4 million by 2030, witnessing a CAGR of 7.9% between 2021 and 2030.
The biggest reason behind it will be the rising population and rapid industrialization and urbanization, which are all driving the demand for electricity. Thus, to keep operations running, individuals and commercial and industrial entities are turning to gas gensets.

The need for generators has been strengthened by the inadequate production of electricity at Nigeria's power plants. Moreover, not all of the power that is produced is delivered to users, as the grid infrastructure of the country is rather poor, which results in large transmission losses. Hence, since electricity cuts are a regular feature in the nation, gas gensets continue to witness high sales.

Key Findings of Nigeria Gas Genset Market Report
Gas gensets of power ratings of 1,000 kilovolt-Amperes (kVA) and above witness the highest sales in the nation because of their importance in the energy, manufacturing, and commercial sectors. Commercial applications will witness the fastest growth in the Nigerian gas genset market on account of the high sales of these machines to entities in the telecom and real estate industries.
The growing construction and oil and gas sectors are a key reason for the rising demand for gas gensets. Construction sites, even those that are located in cities, often lack a grid connection, while most oilfields are located at remote places. Therefore, both these sectors require an alternate source of electricity for keeping the machines and operations running nonstop.
The increasing air pollution levels are another key factor behind the high sale of gas gensets in Nigeria. Although gas gensets do emit greenhouse gases (GHGs), the emissions are a lot lower than those of diesel gensets. Thus, with the implementation of strict emission regulations on diesel engines, people in the country are turning to gas gensets, which are, additionally, cheaper to operate because of their high fuel efficiency.

https://www.businesswire.com/news/home/20220201005934/en/Nigeria-Gas-Genset-Market-Analysis-and-Growth-Forecast-Report-2021-2030-Rising-Carbon-Emission-Booming-Industrial-and-Commercial-Development-Amidst-Long-standing-Energy-Crisis---ResearchAndMarkets.com

GettingBy

It's from A.I and was originally posted up by me on the 18/1/22 if you check back.

I can't post the entire link at any time because it brings up my subscription details.

The same happens re full broker notes require no sharing in any form as they are overstamped with my email address to prohibit it and thus barring future access.

The 'majors' divestments of an estimated $100b+ of assets has been a golden opportunity for companies like SAVE with world class ESG ratings and access to capital to build a major producing company for a fraction of the cost of what others have had to achieve via their much more greater debt by comparrison.

In 2021 it was reported that Petronas were keen to offoad their Chad and South Sudan assets to the same buyer.

Then the 18/1/22 article - Vitol aims for grand slam with Savannah

"The success of the two operations in Chad, which are still subject to the approval of the oil and finance ministries, is however only one step in an even more ambitious plan by the Savannah-Vitol duo. Savannah is also looking with great interest at Petronas shares for sale in South Sudan. The British junior informed Petronas of this during the negotiations in Chad. The assets represent some 75,000 bpd for Petronas, with reserves of 300m barrels."

The 4/1/22 FinnCap coverage estimate the Chad production assets on their own were purchased for about half the $700m total sales figure. (22.5k bopd/108mm 2P). There was also a substantial discount back to the effective date of 1/1/21.

Buyers are in short supply with decent ESG ratings and access to capital for large asset sales - reiterated by AK at the GM on the 25/2/22.

If the sales price was as close to the Chad producing assets, it might mean they could be picked up in the $1.2b-$1.5b range less adjustment to the effective date and overall net debt of circa $2b ?.

S.Sudan 75k, Chad 22.5k, Nigeria 16k+ boepd = 113k+ boepd + midstream, circa $2b net debt for SAVE? Similar net debt but an advantage of significant greater production ?

Tullow 60k production/$2.1b net debt. Kosmos closing in on 75k production/$2.3b net debt.

Still only rumour as is the pursuit of ENIs Tunisian assets, but when you've said you've screened some 27 potential opportunities and also said in mid 2021 that they expected at least one acquisition to be confirmed (2 confirmed) by end 2021 and you're looking at more - it won't surprise me to see a further major deal or two to come through this year in a buyers market regardless of the oil price.

Absolutely, but i suppose they will try and focus on a cautious longer term oil price of $60/b but i can't see why $70/b is not the norm for the next 2 years ?.

FinnCap target risked valuation of 85p at $60/b Brent.
At $70/b their valuation is 99.5p. At $80/b it is 114p (Page 14).

If the same current discount in the case of the Kosmos and Tlw price targets was applied to the SAVE 85p ($60/b oil) price target then SAVE should be closer to 65-68p range.

As i said on 11/1/22, I believe we should be a minimum 40p+ and hopefully we'll continue to close on that and increase to a fairer value if and when the acquisitions are approved. The potential end of Q1 Accugas refinancing could be a further catalyst.

Current average price target for Kosmos is 25% higher than todays price at $5.84/£4.30 (to a high of $8/£5.90)
https://www.wsj.com/market-data/quotes/KOS/research-ratings

Cannacords target for Tullow today is 33% higher at 67p down from 75p after last weeks trading update.
https://www.lse.co.uk/news/TLW/canaccord-genuity-lowers-target-price-on-tullow-oil-ug69trbjqp9lf31.html

My post on 11/1/22

Tullow 1.43b shares @ 50p = M/cap today £726m + $2.3b net debt.
Kosmos 445m shares @ 310p = M/cap today £1380m + $2.3b net debt.
Save 1400m fuly diluted shares + a same $2.3b net debt would imply 50p - 100p.

Save Net debt forecast yr/end = $569m. Another $500m of debt for the right deal would overtake Tlw production/reserves, whereas $700m likely equal Kos production/reserves (less closing adjustments).

As it stands i'd say the price has to move to minimum 40p+ now for even fair comparative value. (FinnCap core value is currently 63p which does not count the 2C of a further 14.5p or the risked target of 85p all after debt of another 30p).
With access to capital and no further dilution intimated, the value discrepancy should become even more clearer as of now and for those knowing that Save conduct deals of material size which will move them up another gear.

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Today 2/2/22 -
Tullow now 51p = M/cap £730m + $2.1b net debt guidance. EV = £2285m
Kosmos now 346p = M/cap £1540m + $2.3b net debt. EV = £3243m
Save now 28.5p = M/cap £371m + forecast yr end debt $569m. EV = £792m.

Re my minimum price on 11/1/22 to 40p. Well a fair comparrison target of 42p would give an EV of £1000m and still at a discount to the current metrics in FinnCaps 4/1/22 coverage. Our revenue alone is about half of Kosmos and my guess 70% of TLW.
We must not forget that while we don't match them fully yet on production, we do have substantial midstream income that they don't have.

Lift net debt by another $6-700m for a further 20-25k production as they seek out further material divestment acquisitions and we should be on a closer footing to Kosmos and substantially ahead of TLW but with an average $1b less debt. That's also not taking any posibile account of increasing production from the assets we have.

On that happening that would equal a SAVE s/p of 97p versus Tullow and 165p versus Kosmos on equal metrics versus 28.5p now. That to me is the looming disparity that we simply must close on. Also remember with a similar production profile and a much lesser net debt figure, we would have a significant saving on debt service compared to the others.

None of the above includes anything re Niger that still has to add to the overall picture.

The oil price assumption is $75/b this year.

Brent has averaged about $84/b for all of January.
Exxon get 25% of above that $75/b assumption (though its based above $50 to max $80/b).
$5/b less 25% = $3.25 + $4/b = $7.25/b additional from Exxon on 12k bopd
From Petronas it's a straight $9/b extra on 10.5k bopd.
Combining the two - it looks like an additional $8/b net based on the $84/b average price for January of which Save estimated that every rise of $1/b on the oil price = $2.5m/yr additional FCF = $20m/yr .
If the acquisition completes by end June and at $84/b price average there should be another $10m knocked off the anticipated price.
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Using the base case from the SAVE presentation for $279m/yr FCF at $65/b.
At $80 and $90/b - this jumps by an extra $43m - $70m or $322m - $349m FCF/yr in total just on existing production.
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The most important thing i'm watching is how quickly the net debt changes for the better as The FinnCap note for THEIR guidance uses $60/b to show net debt falling from $569m this yr/e to $378m next and $134m end '24. If this much higher oil price if it lasted for the next 24 months would do wonders for reducing that net debt forecast before any of the below.
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Add in the possibilty of an additional $7m for every 5% increase in production on the SAVE presentation base case - ie about 3300 bopd = $20m+ FCF/yr @ $65/b.
$27m additional FCF/yr to come from refinancing Accugas debt.
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On Accugas further out re new Ibom P/Plant - Ibom is currently their smallest contract and is 19.7 mmcf/d DCQ. At 80% TOP at $2.24 mcf = approx $13m/yr. If for instance they supply the new plant of 130 mmcf/d DCQ at 80% TOP at the same price it's about $85m revenue with about 80% to the top line or an additional $70m ? In the shorter term, they could get the same revenue/profit at $5.50/mcf though for about supplying 1/3rd of that gas figure to higher margin customers.

There's also no reason also when if bottlenecks in electricity supply are cured, that we wouldn't close from TOP to the full DCQ - this would lift gas revenues by about another $50m ($40m FCF approx).
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Versus the base case, there's multiple routes to significantly increase FCF and why we could be net cash positive perhaps at least 1 year earlier. Dyor as always though.

Brent oil now over $89/b and almost 50% higher than the 4/1/22 FinnCap coverage.

They give their their target risked valuation of 85p at $60/b Brent.
But at $70/b their valuation is 99.5p. At $80/b it is 114p (Page 14).

In addition there is a further 30p of debt that reduces over the next 2-3 years to a cash positive position which would increase those $60-$70-$80/b price targets to 115p/129.5p/144p.

Net debt this yr/end = $569m. End next year $378m. End 2024 = $134m.

In reducing that net debt a year earlier - ***At $75/b*** oil compared to FinnCaps case, would add over $30m/yr approx (every $1 rise adds $2.5m/yr FCF both AK interview + pdf presentation).

Additionally, every 5% increase in Chad production or 1100 bopd approx could add $7m/yr so + 3k of a production hike could add $20m+/yr.

Refinancing of the Accugas facility this half would increase FCF by $27m/yr

Additional gas customers ?

On the current assets Save has 183 mmboe 2P

As posted earlier re FinnCap analysis and the bare base case, it could be possible that by end 2024 Save could be in a net cash position and thereafter generating a substantial cash build from then which is likely to buy/expand into further reserves/production assets that in turn throw off their own cash contribution.

Currently having 176 mmboe 2C makes it a distinct possibility that the company can sell on the business in a near debt free or net cash position with the original P2 valuation intact.

In fact on a 5 year basis without touching on 3C or exploration upside in Chad or Nigeria, the assets could produce 50,000 boepd and only consume 90mm bls reserves and imo should be more than replaced by the current 2C without eating into the original reserves.

I beleive we could add a further 250-300m P2 and 50 -75k of production and still be at a net debt position of only $1-$1.2b while being an 85 - 100k+ boepd producer with upside from their base case and having the benefit of significant midstream assets.

With Niger production still to come, where would that take their production profile ?
Overall, i see the possibility for 1b boe of P2 reserves being achieved.

FinnCap have used $60/b oil in their assumptions and i've compared it to see how it could be improved over AKs so called base case/rubbish scenario .

F/Cap based on the current assets -
Net debt this yr/end = $569m. End next year $378m. End 2024 = $134m.

Refinancing of the Accugas facility this half would increase FCF by $27m/yr.
Every 5% increase in Chad production or 1100 bopd approx could add $7m/yr so even 3k of a production hike could add $20m/yr. (Drilling new wells every month from their own rig end of this year).
At $75/b oil compared to the base case, would add another $30m/yr approx.

If those 3 factors happen that's approx $77m/yr so it's possible by end 2024 Save would be in a net cash position a year earlier and effectively debt free ie F/cap 85p target valuation + 30p debt removed/net cash position = 115p.

FinnCaps analysis has included $10m div paid next year and $11m the following year.

If they can continue to ramp up Chad oil production further than just 3k, the expected debottlenecking of S.Creek next year and even some quality gas customers to come on stream, the above figures could be improved on at $75/b oil (never mind $85/b or better). There's also potential from other operators increased pipeline throughput.

As for new acquisitions i expect these will continue but the above shows how the existing debt for the current assets is rapidly paid down on those F/Cap assumptions into a net cash position.

FinnCap estimate they will have $150m cash on hand at the end of this year and they have $100m remaining from the current facility. Based on the above, i can't see them not being able to go for the likes of something 2-3 times as big in terms of the Chad production & reserves assets.

Even though that level of reserves/production would be greater than what we have, it doesn't necessarily mean another RTO.
You have to factor in the combined value of the Nigeria/Chad production/reserves assets in addition to 2 sets of midstream assets which combined may be more valuable/larger than what S.Sudan is.

There could be an intervening acquisition before then and/or there could be something on the renewable energy front prior to anything as big as that ?

LPs confidence and interpretation of this opportunity has been severely dented and the 1st hint of real caution actually seemed to come in yesterdays results RNS.

12m gross, so what will the 'net' pay result be compared to 80m they were expecting ?

Questionable if even commercial or worth developing even with the leftover oil when it was last shut in ?

The thing is now it won't inspire confidence for investors listening to LP on their processing interpretation pre-drill in any of these Buffalo lookalikes they are hoping to acquire which will require significant additional cash/refinancing to drill after this result.

Sold half and the rest in the bottom drawer but have written them off.

Vitol quietly backs Savannah's purchase of ExxonMobil-Petronas assets

The Swiss commodities trader Vitol has become a trump card in British junior Savannah's game. In exchange for financial support for Savannah's purchase of ExxonMobil-Petronas's Doba assets, it should end up well placed to market the crude produced there.
Vitol has quietly invited itself into the negotiations on Savannah Energy's purchase of ExxonMobil and Petronas's Chadian assets in Doba. Its name appears on page 479 of the reference prospectus required for the resumption of Savannah's stock market listing, which was suspended following the announcement of the transaction. The report, entitled "Savannah-Energy-plc-Admission-Document-Dec21" and dated 21 December, explains how Savannah intends to raise more than $600m to bag 75 percent of the permits that currently produce some 30,000 bpd. The amount to be disbursed includes the shares of two firms in the export pipeline between Doba and the Cameroonian coastal town of Kribi.
In exchange for Vitol providing $20m in financial support for the buyout, the Swiss firm is likely to be in a very favourable position to market the crude oil produced at Doba. ExxonMobil and Petronas, which is owned by the Malaysian state, currently sell Chadian oil through their own usual channels and trading subsidiaries. The rest of the crude produced, corresponding to the 25 percent of the Société des Hydrocarbures du Tchad (SHT) that it bought from Chevron in 2014, is currently in the hands of trading giant Glencore. Glencore had at the time lent $1.45bn so that Chad could acquire these assets from Chevron.

Vitol aims for grand slam with Savannah

The success of the two operations in Chad, which are still subject to the approval of the oil and finance ministries, is however only one step in an even more ambitious plan by the Savannah-Vitol duo. Savannah is also looking with great interest at Petronas shares for sale in South Sudan. The British junior informed Petronas of this during the negotiations in Chad. The assets represent some 75,000 bpd for Petronas, with reserves of 300m barrels.
Vitol could also help Savannah financially in exchange for marketing South Sudanese crude. That would be made easier by the fact that most of Petronas's assets in South Sudan are managed by joint ventures with China's CNPC, which are staffed locally and thus would require the partners to supply little labour.
The French family firm Perenco is also eyeing Petronas in South Sudan. The oil firm tried to take over Petronas's shares in Doba, but in vain (AI, 24/12/21). In Chad, Perenco only holds the former licences of Glencore and its subsidiary Caracal Energy (Badila and Mangara fields), whose acquisition is still awaiting government approval.

The size of the 7 Doba oil fields certainly shine a light on the vast potential for Save in Niger.

Although exploration is supposedly not until next year, it's worth noting the 75% of the 7 Doba oil fields that Save are acquiring have a total oil in place volume of 3.839 billion bls with 631 mmbls recovered so far. Save will have 103.8 mmbo 2P reserves and another 82.7 mmbo 2C from them.

These 7 fields have 880 mmbls recoverable from the same CAR system extending into Niger where CNPC have "2P Reserves of just under 1 billion barrels. Most of the discoveries were made in the Sokor Alternances and demonstrate the low risk profile of this Tertiary play. In addition, several light oil discoveries have been made in the Cretaceous Yogou play directly to the south east of Savannah’s R3 area, which highlight the potential of this under-explored play".

Given the success rate in Niger from predominantly only 1 play type and where deeper prospects are expected to be much larger/filled to spill, the size of the Chad fields etc - how many more fields the size of Doba remain to be found in the CAR/Agadem. It appears feasible to me that Save should build beyond 1 billion bls from the current 359 mmbo 2P/2C from the CAR oil system given that in time i also expect 200+ mmbls 2P/2C from future acquisitions.

Tullow 1.43b shares @ 50p = M/cap today £726m + $2.3b net debt.
Kosmos 445m shares @ 310p = M/cap today £1380m + $2.3b net debt.
Save 1400m fuly diluted shares + a same $2.3b net debt would imply 50p - 100p.

Save Net debt forecast yr/end = $569m. Another $500m of debt for the right deal would overtake Tlw production/reserves, whereas $700m likely equal Kos production/reserves (less closing adjustments).

As it stands i'd say the price has to move to minimum 40p+ now for even fair comparative value. (FinnCap core value is currently 63p which does not count the 2C of a further 14.5p or the risked target of 85p all after debt of another 30p).
With access to capital and no further dilution intimated, the value discrepancy should become even more clearer as of now and for those knowing that Save conduct deals of material size which will move them up another gear.

The potential for the 3C case will be interesting dependent on the oil column (See the CPR).
The 3C Case is 62.8 mmbo (ADV = 22.2 mmbo)

An 80m oil column is estimated to correspond to 34.3 mmbo 2C (net contractor take to ADV = 12.5 mmbls 2C).

In addition a future driver on oil upside would be the difference in the RF after x amount of production that RICs use - ie 40% up to 60%

From the CPR March 2021
"Re-development wells are estimated to find 90 to 113 m oil column (low case 61 to 89 m, high case 106 to 127 m), twice the 47m oil column of the best two original wells. This accounts for the higher oil recovery per well.

Oil recovery factors simulated by Carnarvon Petroleum are high at between 60 and 66%. This is consistent with recovery factors achieved in Laminaria-Corallina but is estimated to represent a high case, as Laminaria-Corallina has a larger oil column, higher permeability, and less reservoir heterogeneity. The Kitan field is estimated to be a low case analogue as it has a smaller oil column, lower permeability, and more reservoir heterogeneity.

Kitan has an estimated recovery factor of 40%. Accordingly, RISC estimate the recovery factor range for the Buffalo field to be 40% to 65% and used this range to estimate resources. We applied a 40% to 60% range in oil recovery factor to the STOIIP range determined by Carnarvon and supported by RISC to estimate the contingent resources."

86% risk is for a development so i'd put the balance down predominantly to executing project finance etc rather than there not being any oil.

The 34 mmbls expectation equates to an 80m oil column so that will be a key figure come news day. Should be at the reservoir level in 12 days.

3 other projects in view. Working on 2 buffalo lookalikes and have moved ahead in some beyond technical to commercial dd.

We are getting ever closer to comparable value to Tullow/Kosmos as i was hoping for from last year and as the F/Cap coverage shows.

Said previously i beleive we have to solely stop valuing Save on production/reserves because of the significant infrastructure income stream.

Figs 4, 5, 8 & 9 show this gap closing/almost closed in places if anyone thinks that was entirely my own assumption from last year.

I'm amazed to see that Saves net debt is forecast as just $569m by yr/end. The current valautions of Kosmos/Tullow are with $2.3b net debt. That is a difference of over $1.7b greater net debt than SAVE.

The next acquisition step where we make a significant leap on those comparables chart (using todays valuations) if of similar scale maybe around $600m (less adjustments) to bring us to par value imo with an ongoing difference of at least $1b lower net debt (worth 50p to Save imo on comparables).
The F/C price target moved from 62p this morning to 85p on the debt and equity deal (+ another 30p tied up in debt) = net debt free target 115p.

If a similar sized acquisition takes place with no equity placing as mentioned, it would then move todays target to about 110p at the very least allowing for increased debt but this continues to fall even faster. We would also have a lower debt valuation to the others by 50p/$1b+ imo to factor in - ie add on some or all of it to be comparable.

This gives me a 150-160p Save s/p valuation on equal metrics to TLW/KOS !

All based on $60/b oil and it doesn't factor in the below -
30p of the valuation is for existing Accugas contracts only so upside possible there by 100% imo if they can utilise the remaining CPF limit with either more customers or/and moving closer to DCQ from TOP.

2.7p risked is attributed to Niger explroration = $48m - assumes just over 10 mmbls (there's 240 times that amount of risked recoverable oil to go after). This should now stay fully intact to go after, if as they say - no more equity and no farmout needed.
At least 6 of the existing institutions added 150m shares and the directors 14.3m.

That's how i see it, where i set my price expectations as maybe unpopular, but more happy to hold than ever as this plays out.

DYOR.

No worries duster. Surely we're all here to help one another.

Good luck and happy new year.