Member Info for ZENGAS

It was a 3 day strike which started last Monday. The incidents that then happened prompted the Exxon letter on the 7th (Friday) to clear all workers from the site by bus/plane until the issues are resolved. There’s no doubt in my mind that Save are not up to speed with the situation given they’re in Chad and supposedly waiting to visit the site.

If ever there was a reason to make the switch to gas, it's now more compelling than ever.
The cost of 1mcf/gas at even $7.50 now compares to a diesel equivalent price of around $24.

In addition the subsidy is due to be done away with. About $2b has been forked out in subsidies over 8 months alone.

Energy crisis set to push petrol, diesel prices above N350/litre
By Kingsley Jeremiah, Abuja
11/10/21

The Nigerian National Petroleum Corporation (NNPC) had last week disclosed that it spent a total of N905.27 billion on petrol subsidy in eight months amid rising global oil prices.
The price of diesel has already skyrocketed to N350 per litre, an indication that may further worsen plight of local manufacturers and businesses, which largely rely on the product for power generation in the face of erratic power supply in the country.

Diesel, mainly used as alternative for power generation in the industrial sector and small scale businesses, has equally risen exponentially to about N350 per litre across fuel stations in the country.

The Guardian gathered that the skyrocketing oil price, expected to hit $100 per barrel before the end of this year, will also push prices of petroleum products to a record high.

https://guardian.ng/news/nigeria/national/energy-crisis-set-to-push-petrol-diesel-prices-above-n350-litre/

In the context of a rising oil price maybe there could be a possible similar arrangement as below re an oil price cap and/or increased production.

Panoros West African acquisition was announced on 9/2/21. The effective date was 1/7/20 so just over 7 months to take into account on the purchase price adjustment. The price was $140m with a contingency for up to a further $40m if oil went over $60/b and if production was successfully increased.

It was based on an oil price of $55/b working out at $5.60 per P2 & $2.60 per 2C and 6,900 bopd of production.
Block G was producing a net 4500 bopd. The contingency was $16m.
If production averaged 5500 bopd in the next 3 years then they had to pay a max of an additional $16m spread over 3 years and/or if the oil price went/stayed over $60/b, then $5.5m per year had to be paid but the entire cap with one or both combined was no more than $16m in total.
Dussafu was producing a gross 15,000 bopd and if production grew to or over 33,000 bopd then a $24m contingency payment had to be made spread over 4 years. The same applied if oil went above $60/b but the entire cap in both scenarios was $24m max.
Over a period of approx 3-4 years and any increase in production or oil price, the contingent payment was $40m max. All in all i think it barely registers more than a few dollars a barrel at most.
In the context of paying for the new asset - FinnCap expected the acquisition to be largely debt financed. So maybe not too much dilution with new shares if any issued.

If like Panoro, SAVE with the starting time maybe from Jan 1 this year or earlier so there might be a positive cash adjustment by now from that start period as if we were already there so the timeline doesn't particularly bother me in closing the deal.

Save has cash of $100m when accounting for present net debt ?
Could there be a partner injection or trade off for the Exxon acquistion by giving up 30-50% of Niger now a new 10 year sinngle PSC has been sorted out - ie the partner that AK always thought he could bring in. Could he trade off $100m+ here in an overall deal to help with buying Exxons assets.? (given we are also rumoured to be after an ENI asset.). There's now 33 mmbo 2C net here and AK was able to secure a previous oil trading unused loan of $50m 3 years ago.
Maybe the gross debt load on Accugas/Nigeria will be refinanced at an overall better/longer/ rate ? Their debt/interest payments shows $108m for this year and $100m next. Can they free up future cash by shaving $20-$30m/yr off this via lower interest/longer term. At the same time modest new gas contracts inside the present processing limit could add $25m+ to the bottom line on top of significant cashflow from the new acquisition.

Yes and 3 of those drills are on existing discoveries.
They drilled about 50-100m into the madama zone on all the discoveries but 3 are now going deeper in Amdigh, Eridal and Bushiya and you'd have to wonder the reason to do so/what have they seen from first time around - yet the other 2 discoveries deeper potential is ruled out (for now).

This point from the CPR after discovery and it relates to Amdigh. It was Amdigh that was getting them excited. Out of the 33 mbbo net 2C, over half of this so far belongs to Amdigh.

The reason that the current 33 mmbo 2C could potentially be over 100 mmbls is the '6 segments' in Amdigh.
"The discovery is drilled in segment 1& 2".
"It is considered that segment 3 is very likely to be in pressure communication due to the low displacement of the bounding fault especially towards the top of the structure".
"It is less clear if segments 4, 5 & 6 also form part of the discovery".

NOT COUNTING the deep potential, these 6 segments on further work when you read the CPR could move the Amdigh discovery much higher from the current 18.4 mmbls (The figure is potentially as high as 83 mmbls). CGG says 'the estimate show the discovery to be one of the ten largest in the basin'.

Sorry Porsche just seen your post. My internet paying up all week.

" Rival candidates for the purchase of ENI's Tunisian offshore and onshore assets, the family-owned French firm Perenco and UAE-Norwegian firm Petronor have decided to join forces. According to our sources, if they win the two firms will split the assets between them. But there is no guarantee they will as competition for these assets is fierce.

British entrepreneur Andrew Knott's Savannah Energy, owner of assets in Nigeria and Niger, is also in the race and has deployed considerable means to try and convince ENI's brokers to look its way. ENI has hired Lazard bank to oversee the sale, which has already been postponed several times (AI, 15/06/21). During a first failed attempt in 2018, the Italian major selected Trident Energy, an offshoot of the US investment fund Warburg Pincus, to buy the blocks but the Tunisian authorities rejected its offer.

ENI's offshore and onshore asset currently make up for nearly a quarter of Tunisia's entire output. "

01/10/2021
Savannah bides its time over Doba deal as ExxonMobil contends with staff revolt

Though they have now been in N'Djamena for nearly a month, executives from the British junior Savannah Energy have still not been able to visit ExxonMobil's sites.
Currently in exclusive negotiations with Esso Tchad (an ExxonMobil subsidiary) to acquire its assets in Chad, executives at the British junior Savannah Energy had not been expecting their trip to N'Djamena to visit the sites for sale would drag on for so long. Having been prevented by ExxonMobil staff from landing at Komé 5 airport in late August (AI, 07/09/21), Savannah's director of operations Yannick Le Bloa and its "technical" vice president Christophe Ribeiro have, according to our sources, decided to bide their time in the Chadian capital until the situation calms down. Holed up at the Radisson Blu hotel in N'Djamena for nearly a month now, they are reluctant to leave before they have had to a chance to visit the ExxonMobil sites.
Meanwhile, Esso Tchad has informed the three employees whom it considers to have been behind the occupation of Komé 5 airport of the suspension of their contracts of employment. Tensions between the supermajor's management and its staff are running at an all-time high over the issue of transfer and severance bonuses, and the two parties have not convened for talks since 2 September.
If the deal does go ahead, Savannah would acquire a 40% stake in several deposits in Doba in the south of the country that ExxonMobil has been managing with Petronas and Société des hydrocarbures du Tchad (SHT). The transaction would also involve a 40% share in the export pipeline running between Doba and the Cameroonian port of Kribi, which is also used by Glencore (Caracal Energy) and CNPC. Any deal will also need to be approved by the Chadian authorities.

That’s where the ‘S’ of the company’s already strong ESG focus should be paramount without irking shareholders private or institutional.

I wonder if Exxon offerred some kind of mortgage assistance/cheaper loans or guarantees to any oil workers ??
Isn't there a major town that sprang up outside of the oil base when Exxon came to Doba ?

This is from AEI and CNPCs Chad oil workers.

' Chad 27/8/21
While work-leave rotation patterns have returned to normal for the company's Chinese staff, its locally-employed employees are an entirely different boat.
CNPC's long tradition of treating its Chadian and Chinese staff differently shows no signs of abating. The oil giant, which with at an average output of 97,000 bpd in early 2020 represents 60% of the country's total production, recently cited the Covid-19 pandemic to ask its local staff to significantly extend the duration of their on-site rotations. The company has not made the same request of its Chinese staff, who benefit from the usual rotation periods of 35 days.

In an internal acceptance letter that Africa Intelligence was able to consult, the Chinese company asks its Chadian employees if they will accept to "voluntarily work at the oil fields for three to four months until [a] replacement arrives at the site". Compensation will be provided if they work more than 35 days on site. Employees are to receive the modest monthly bonus of 120,000 CFA francs (about $210) if they stay between 36 and 90 days. The CNPC letter goes on to add that this total of three months could be extended to five, with additional financial compensation, under "exceptional circumstances".
The company gives its employees two options: accept the long rotation or "go home and stay on leave". In reality, that leaves them with little choice as they will not be paid under the second option. '

and a 3rd source

Esso Chad employees set conditions before their transfer to Savannah Energy company

29/1/21
Esso Chad employees held a conference on Tuesday, September 28, 2021 at the labor exchange to shed light on the situation that prevails between the oil company and its employees.

On June 2, 2021, the American company Esso, which has been exploiting oil from the Doba basin since 2003, announced to its employees the sale of its assets in Chad and Cameroon to a British company, Savannah Energy.

Since then, the atmosphere between employee and employer has remained tense. Still, Esso has let its employees know that they are moving to the new company Savannah Energy.

“These employees should be transferred as is, without their conditions being taken into account. What has aroused dissatisfaction among the employees since they have the right to know at what price they are transferred to the other side and what is their situation in this new company? Asked the spokesperson for the staff delegation, Dahassal Dekoundou.
These uncertainties led Esso's employees to organize a general meeting which enabled them to highlight a few points of negotiation conditioning their transfer to the new company: the bonus for good separation between the employees and Esso Chad; the retirement savings plan; Esso Chad must repay its share of mortgage loans contracted by employees; respect for the medical care of retired and active staff according to the agreement .

The management of Esso Tchad, who initially did not want to discuss with their employees, returned to the negotiating table. The only point that has been accepted by Esso Chad according to the staff spokesperson is the retirement savings plan.
Employees are asking that everything be settled clearly with Esso Chad before they are transferred to the new company.
"The Esso Chad employees had worked hard to help the company rake in enough profit and when it came time to leave, the employees should be able to be rewarded," argued the staff spokesperson.

https://tchadinfos.com/societe/les-employes-desso-tchad-posent-des-conditions-avant-leur-transferement-vers-la-compagnie-savannah-energy/

and another from Tchad24

'The esso tchad agents, transferred to the company savannah energie, are very upset about the agitation of their esso tchad ex employer. And ask for the involvement of the government so that suitable solutions can be found.

Used google translate for this so careful how you interpret the language as it just may not be the actual word used. In one way you could think it's a done deal and in another interpretation maybe not. A few articles now appearing on f/book today.

Company: Esso-Tchad employees prohibit foreigners from accessing oil installations
September 29, 2021
N'Djaména News
At the end of their lively press conference, this Tuesday, September 28, 2021, at the N'Djaména labor exchange, the representatives of the Esso-Tchad staff are asking for the involvement of the government to clarify their situation so that they can acquire their social rights and other benefits, following the purchase of the assets of Esso-Tchad by Savannah Energy.

They are also asking Esso-Chad for the rehabilitation of their three colleagues, who received, this Monday, September 27, a temporary layoff, for having occupied the airstrip last August.
Delegates also urge their blamed colleagues to be taken into account in order to benefit from the benefits that Esso-Chad employees will receive.
The spokesperson for the staff of Esso-Tchad agents, Mrs. Dahasseal Dekoundou warns that, without the payment of their rights, they will not give up and will not allow foreigners to visit the Komé site and its facilities, to finalize the sale of Esso-Tchad to the company Savannah Energy.
Employees say ExxonMobil’s US $ 1,000 severance package is an insult to them.
For Ms. Dahasseal Dekoundou, the negotiations with their employer were on the spot, while Esso proposed the payment of compensation of two months' salary, as a separation bonus, but none of the points of demands, apart from the savings plan retirement which is validated, is not taken into account.

Thus, the employees conceded two points, in particular, the medical care of retired employees and those in activity, in the perspective that the new buyer will agree to take in the collective agreement of the company. The years of seniority for the employees given that there is a difference for each employee in the company Esso Chad, after negotiations, our general management refuses any other proposal. What we consider to be an insult to us, "she said.
The employees reject all of Esso's proposal, which is not in their favor.

https://www.ndjamenaactu.com/societe-les-employes-desso-tchad-interdisent-lacces-des-installations-petrolieres-aux-etrangers/

Personally, I don't think Exxon will be suddendly changing and looking more money for the assets. These are still mid-late life and non core for Exxon and they still have their green credentials, shareholder pressue to think of regardless and divestment into early stage long life assets like Guyana. Apparently they made no investment since about 2015. Exxon will be looking long term. Buyers aren't that plentiful and there's still more assets than buyers.

I think they will be working on a baseline from perhaps Jan 1 this year or maybe Sept 1 last year. It should be customary if oil prices increase in a few years post deal that there would be a payment clause trigger for oil reaching a certain price level and/or linked to production numbers . No one can ever predict what price oil will be 24 months out, god forbid recessions, credit or a change for the worse from the pandemic.

On the other hand, has the dispute been settled ? Did the dispute cause production to fall ? Did revenues suffer to the downside iresspective of the oil price ? Has it impacted any of the wells ? What's the pipeline throughput ? Did that also fall and what of the others that contribute to throughput. How are they faring/impacted against valuing the pipeline element ?

Those might weigh on the price just as much, so there may be many factors at play rather than just the current oil price.
One things is a lack of any news on Chad whether the pipeline was shut or 30k production was knocked offline continuously as a result of the dispute. I would have thought any prolonged issues would have made the news chanels like Reuters etc by now on the government losing significant revenue if this was the case.

24 September 21, 5:49 pm

Gas crisis shows why we must stop demonising fossil fuels
https://on.ft.com/3zPzf6x

OPEC Secretary General yesterday at the World gastech event
'The world will continue to consume energy. In our forecast to 2045, we project that demand for energy will grow by 28%, and oil (28%) and gas (25-26%) will remain the dominant source of energy in the global energy basket to 2045.'

Tweet from Amena Bakr deputy bereau chief and chief OPEC Correspondent from Energy Intel - 'Qatars energy minister said that by nature oil and gas fields decline over time and there will be a need to bridge that gap and grow even more to meet the worlds energy demand. "We need to be realistic and reasonable" he said.'

Just a thought on Saves webinar with energy expert Dr Richard Norris recently about rich countries and the west's clamber for green energy and move away from fossil fuels. I think he talked a lot of sense about people in poorer countries are not as quick or even at all to clamour for such action when they don't even have access to enough power. I'm wondering how the majority of people here will think about this given now we have gas shortage, high energy bills coming through. Even Ireland has announced that coal is being phased out which is only about 2.5m tons a year, yet by 2025 coal demand is set to surge from 8 to over 9 billion tons/yr elsewhere regardless. The west and current wealthy countries may pay the cost while poorer countries could eventualy leap frog the rest of us. As they watch us, will this be a lesson for them. I wonder will western peoples priorties change when the high cost of it all starts to filter through.

With reports on the news now that not enough wind blew this year and worries about keeping the lights on and possible power shortage. How's that going to look in a few years with increased demand for electric/vehicle charging and no new diesels/petrols after 2030.

Yesterdays FT analysis 'Net zero goals cannot fall victim to the energy crisis' - 'The bigger political challenge runs deeper. It is to convince voters to back ambitious policy packages to deal with climate change which will inevetibably include making fossil energy costlier for users. Brave is the politician who will now tell voters those bills have to become more expensive still. Making progress on climate policy without alienating citizens worried about household budgets just got more difficult. For responsible leaders however there is no alternative'.

Whether you agree or disagree, Peter Hitchens 24/4/21 article on the energy policies is food for thought re turning us into a 3rd world country.
https://www.dailymail.co.uk/debate/article-9507781/PETER-HITCHENS-green-revolution-turn-Britain-World-country.html

Maybe AKs remark of $300 oil even if it was only a third of that doesn't sound impossible in the coming few years.

Part of a larger article 8 weeks ago in the FT 6/7/21 on the energy transition which has unintended consequences so worth reading in full for greater context. My view is that this is how SAVE in part will catapult to the premier league (as mentioned in the finncap note in June) at much lesser cost that those companies before them that expended on much greater levels of debt and time/effort to reach significant production levels.

' A $140bn asset sale: the investors cashing in on Big Oil’s push to net zero
Yet despite the intense spotlight on the energy sector, there are potential buyers for these assets — from smaller private players such as Ineos, independent operators who are backed by private equity, opaque energy traders and state oil companies.
The cash crunch triggered by the pandemic is creating further pressure to offload assets. Major companies have been forced to cut dividends, dramatically reduce capital spending and raise debt. When their share prices tanked last year, they diverted attention to streamlining operations and trimming costs.
The recent spate of deals has been helped by oil prices rising to more than $75 a barrel as lockdowns and travel bans are lifted. But despite this, securing buyers is not an easy task. The pool of buyers able to fill the gap is still relatively shallow and deals are not necessarily simple to execute.

“The list of assets is way higher than the number of buyers out there and particularly for some of the bigger deals,” says Greig Aitken, director of mergers and acquisitions research at Wood Mackenzie.
Not only are the selling companies having to be more flexible about which assets they dispose of, they are also having to concede on price given that they are prioritising cash buyers who will help to pay down debt and finance their push into cleaner forms of energy.
“If others come to us and say an asset is attractive, we will look at it,” says one oil executive. “It’s fair to say — there is definitely an increasing focusing of the portfolio, so you’re going to see more assets out there for sale.”
The oil majors are being pushed to turn away from potential cash generators at a time when demand for fossil fuel products is still robust and necessary to meet global energy needs. Even the IEA has conceded the world will need oil and gas for decades to come as renewable producers play catch-up.
“These operational assets will mint money like you have no idea over the next three to five years,” says Laurent Segalen, a clean energy investment banker and managing partner at Megawatt-X, a platform which aims to enable the funding of the energy transition. “Hedge funds, private equity, companies you have never heard of, will pick these assets off.” '

https://www.ft.com/content/4dee7080-3a1b-479f-a50c-c3641c82c142

Try and apply some rationale O&W instead of one focus at one point in time. There’s lots of factors to consider. Costs in Nigeria are predominantly priced in so any new higher value margin customers (including expected growth from the generator contract would rapidly change the metrics. Who else is doing 78% margin ? Another metric not considered will be actual infrastructure ownership valuation, potential tolling revenues in Nigeria to come and what the actual C-C pipeline fees are which are different to government take. Also increased C-C pipeline throughput upside potential ? These have the opportunity to provide substantial additional income streams. TLW as I see it don’t have those in their mix ? As I see it, we will be more than just an oil & gas production company given the pipeline sides to the business.

Looked at Tullow results today to end June 2021.
Production guidance for full year = 60k boepd.
Revenue half year $726m (on 61,230 boepd)
Debt $2.6b. Cash $301m. Net Debt $2.3b.
6 months debt servicing $157m (pro -rata full year my estimate $314m)
Share price today = 47p = £676m m/cap. (Recently £800m+)
------------------------------------------------
By comparrison for half year SAVE
Net debt $390m
Production circa 20-22k boepd and $102m revenue.
Pro-rata addition of 13k bopd in Chad worth $155m ?
Pipeline interest/revenue $20m+ ?
Total revenue pro-rata for a half year = circa $300m ?

Say $600m max for Chad = $1b total net debt.
Save worth half of Tullow at £340m - £400m ?

Upisde 50% on Chad production (+6.5k bopd). 50% on Nigeria gas (+10k boepd) ?
Production potential moves to 50k boepd - improves valuation further ?

Further acquisition of say 20k bopd production only and more debt of say $600m. Production upside 8-10k bopd.

Net debt moves to about $1.6b but production at 75k+ boepd.
ie net Debt $700m less, but production 20%+ greater than TLW as of today - theorectically then min £800m+ m/cap for Save??

Imagine if TLW today announced it was servicing 30% less debt and had something like 15k extra production.

Above assuming no more shares than present but using maximum debt for buying assets.
Alternatively less net debt and some shares issued to pay for acquisitions ?

Make sense to anyone in seeing the growth /valuation potential ahead via the acquisition strategy ?

Niger upside of production/reserves growth still to come.

If you listen to the many interviews etc this year, AK has let it be known they have access to funding. I don't think he was ever asked what kind of funding Save had access to ?
It is buried away somwehere that they could run a debt load to some $2.5b without needing approval.
In June/July last year Africa Intelligence reported Save were in the running for Occidentals 30,000 bopd interest in Ghana - that was a serious sized asset reported at around $800m. The Chinese and Boru were then reportedly preffered bidders. Vitol were also mentioned in the same article. For Save to be mentioned in that possible deal 15 months ago, then just maybe they've been associated with Vitol a lot longer ?

The Chad deal is similar in size if you count the pipeline interest as well but possibly has a strategic reason to it in the longer term. Then reported recently in AEI again as possibly gearing up to look at the ENI interests in Tunisia.
All the above ties in with AK saying they hope to close "at least 1 deal this year" and reviewing some 20 serious opportunities. I believe there will be more acquisitions down the road in picking up bargain priced production from majors so there could still be 1-2 more big ones to come if you think about their ambitions and the availability of funding.
Vitol was part of a $1.5b consortium to buy an oil interest in Nigeria barely 2 years ago but apparently pulled out because it didn't get access to marketing the oil.
Vitols stake in Save was public from at least last October. It obviously just didn't buy in on an investment whim. If you look at Boru Energy, Carlyle Group made available $1b of funding to it to hunt for assets. It might be possible SAVE could be a type of vehicle of choice for Vitol in acquiring large assets coming to market. Save already has one massive opportunity that many of us have been here for from day one - ie Niger with an already risked recoverable expectation of 2.6 -4 billion bls mid-high case. The u/risked recoverable is 6-10 billion bls mid-high case. That's a major opportunity to market a vast amount of oil if successful even at 1b bls and i think longer term that's where the Chad-Cameroon pipeline is doubly attractive. It would need a link from Agadem but it could open up another major exit route of another 50k+ bopd given the spare capacity and waning other fields in the years ahead. Given Vitol bought 40,000 boepd in the Bakken not that long ago, would they as an investor in Save given their financial muscle really not be interested in taking some kind of bigger stake in Niger ? Could there be a trade off for Niger partnership interest and upcoming asset buying ?

Debt refinance/longer tenure was priority for Accugas as it frees up & saves cash.

Niger requires funding. Phase 1 First oil about $14m with $8m of that leased. Phase 1 & 2 $58m from memory.

Chad about 13,000 bopd production to be funded. Will have reserves so might be part/all RB lending.

Chad Cameroon - pipeline interest to be funded. Might fall under infrastructure like Accugas and wasn't that long ago AK mentioned funders looking for infrastructure projects. I expect the pipeline has a minimum 20+ years life yet as it gets income from multiple operators and significant spare capacity.

Some analsyts put the cost at a gross $1b+ for the 2 oil Cos interest so Esso Chad might be around $600m if that ball park was right ??

Maybe part of the total figure ie pipeline will be funded by an infrastructure investor covered by the tarriff revenue and the oil assets covered by RBL /Oil marketing ?

It wouldn't surprise me to see some sort of placing/injection to bolster the funds to kick start investment in drilling/production or pay for part of the acquisition and at what price if any ?

Regardless of refinancing, net debt was to fall to $296m in 15 months time from the $500m+ at the time of the Nigeria acquisition. So add on any new debt to that level.

The 2P/2C of roughly 157 mmboe will be worth watching to see how much that will increase by if the Chad acquisition goes through - maybe 250 mmboe all in ?

Under Esso/Tchad search, there is a post on f/book on showing a fair sized aeroplane landing on Kome airstrip last friday night.
Translates as 'While Esso/Chad's security protocol prohibits any plane landing on site at night, CEO Carole Gall permits landing a plane surely carrying negotiators for the sale of the consortium'

Other pic is of 7-8 people sittiing around which appears to be outside the security fence of the complex.

Just my opinion, but isn't there a chance that employee details can't be worked out until an offer from Save is agreed/ disclosed because obviously if no offer is made then it would be business as usual for Exxon as owners of Esso Chad. In addition the sale has to be approved by the Chad ministry. Only then would everything have to be in order for the employees once a sale is agreed as Save will want an orderly trouble free transition.

Given Exxon hasn't made any further investment this last number of years, surely it will be attractive to the government to have an operator that wants to expand, secure jobs for the workforce rather than production petering downwards. Potentially also bring oil from Niger at some point into the pipeline boosting government revenues in transit fees and bolstering the economy much greater than of now.