Member Info for ZENGAS

Brent Oil was last at $27-$28 barrel in Jan 2016. Savp pressed on by acquiring 2 additional blocks in Niger so obviously a low price didn't hinder longer terms outlooks so i would think this period will be similar. Will take time for all the cuts to right the deman picture over time.
I beleive oil will return to circa $50+/b over the next 12-18 months and that must be something that any farminee takes onboard. Goldman on the back of the cuts have also estimated that price range/timescale. Never guaranteed, but severe cuts have begun, expensive production will dry up some and some balance will return just as it did in 2008, and 2015-16.
I would expect Niger to still be on the cards as it's production is still someway down the road. China still needs to get their oil out so i beleive its still an attractive farm out option for those companies that are looking ahead and not just at the here and now. In addition it's a strategic stream of revenue for the countrys government to capture so they need this even if not as lucrative as before. Hopefully costs will be trimmed, renegotiated in such an environment. Delays to activity/farmout more than possible/likely is my expectation. Niger government still needs critical oil investment so perhaps extensions in ongoing negotitaion. Last we heard was that Niger was setting up some kind of national entity for oil so need partners who might be in short supply so i would logically think, need us as much as ever as there are only 3-4 players max.
Whatever the hold up for an update remains to be seen and i certainly would have loved to have gotten a comprehensive update by now. Any negotiations might now be hampered to some degree by lock-ins/movement etc including refinancing.
For Nigeria, If they were not getting paid for their gas and any guarantee had to be called upon for payment, I would have thought that would be a material event and definitely needing an RNS. As for payment terms/time to settle that's something we don't know if it's taking x amount of months but i would have thought even if there was a rolling back log of overdue payments say for 4-6 months always outstanding, we could still be being paid monthly while always being 4-6 months behind - something i honestly don't know but maybe these are acceptable credit terms if thats what AK meant in stabilising the business going forward from the transaction completion ? Also there was to be some gas well drilling and workover activity.
The results may come anytime. Last year was later as they went to late May. Maybe this gives them time to add some material news. Other than that, nothing more i can add until they englighten us.

Paul, i posted this on ad v f n today in reference to an earlier post of mine re demand/supply expectations.

'The IEA have just released their demand for 2020 - Expects demand to be down 9m bopd for the year - which for the year is around 3.285 billion bls drop against 100m bls/day (36.5 billion for the year). Their graph shows the biggest months for loss are March when the lock downs mostly kicked in mid to late of that month, April, May, June as i was expecting.

It shows the balancing effect i mentioned in my post 1578 of 3rd April for my expectation then and why the cuts wouldn't immediately match the deficit but rather balance it over time and not too dissimilar to todays update - graph here = https://twitter.com/IEABirol/status/1250333302268940289

Also SA expects IEA to announce 200 mmbls of oil buying over next 2 months which is about 3m+ bopd in another cut (see Energy Intel).

In addition Texas Railroad commission vote yesterday will be announced by 21st April re voluntary cuts or not.

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ZENGAS - 03 Apr 2020 - 12:01:18 - 1578 of 1799 PetroTal - Growing oil production - PTAL
Maybe some countries can add further to strategic reserves.
Maybe in real terms the cut doesn't have to be as severe if that happens.
Consumption could be down 20-25m day against 100m demand.
If consumption is down this much for 4 months that's about 2.5 billion bls lost demand.
If demand is down 4m/day average for another 8 months that's 1 billion bls lost.
In total that's maybe 3.5 billion bls/yr they might need to balance in supply cuts or just under 10m bopd.

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It's possible the tweets were not intended as any update for actual investors at all.

Yesterday was world health day but on top of that Nigeria just in the last week has seen less power generation and a lot of it blamed on lack of gas delivered to the generating companies. Also on 2nd April Nigeria issued notices to reduce staff at oil/gas installations as the country is in lock down.

Therefore the tweets may be more aimed at reassuring the public/business in Nigeria that Savp are unaffected and as stated have been increasing gas supplies essential for power generation while taking all steps to protect its staff at the same time.

longshorttrade, Gas prices on Savps contracts are fixed long term and generally escalate .

Calabar 2019 $3.53 mcf increasing in steps to $5.04 mcf by 2024 and indexed to US PPI.
Unicem all years $5.0 mcf.
Ibom 2019 $2.18 mcf and escalated with US CPI.
Ifam new customer for Q2 ??

I had a brief look over Seplats results. Ratio of about 50-50 oil/gas production so no doubt the fall off in oil prices will affect them but to date i don't think there's been any issues in getting paid for their gas.
I would expect with budgets undermined, the IMF or World Bank will have to lend support to some countries and i would think that would mean Nigeria paying it's bills for critical utililites such as electricity.
We need to see if there is any effect on adding new higher margin gas customers right now or delay ?
People working from home have said with intermittment power, means the reason for doing so defeats that purpose so power is paramount.
With CV-19 shutdowns the cement factory could maybe call force majeure for a time if it was affected (contract clauses) ?
New/existing power stations - have to be fed from somewhere - recent deal with Afam was to start Q2. I'm hoping therefore that new power station customers balance out any unforseen problems or potential cashflow shortfall.
We are less reliant on Nigeria oil price as we have only small production versus gas.
Niger will undoubtedly be delayed imo. Could always get some kind of farmout but imo no rush or need nor imo expectation to restart operations even if they could in this low oil price and cv restrictions.

Will be interesting to see how 6H comes in as this was to have an even longer horizontal section than previous. If reservoir parameters are the same as in previous wells, then surely the longer horizontals can deliver greater production rates in the short-medium term.

4H 500m horizontal = 6200 bopd.
5H 863m horizontal = 8,250 bopd.
6H ?m horizontal = expected to be on production in the next few weeks.

"The new horizontal wells will have an average cost of $13 million per well, and will include longer lateral sections (more than 1,000 meters) in addition to being completed with automatic inflow control devices ("AICD").

Trading update might help confidence but not necessarily the share price. As for the others mentioned that have done so, including PTAL & JSE (which i hold), WEN, PPC, TRIN all 5 are all back down again to their lows until this is rode out and some kind of normalcy returns.

Re a farm in for Niger - may be parked, delayed or might happen on a reduced work programme but at some time in the future. Obviously the Niger government will want to become a meaningful producer, earn some revenues to invest in the country and the Chinese will want to monetise their oil - so possibility of reduced tarriffs etc may be up for negotiation in a lower oil price environment. Russia saying they see normalcy at $45/b+ returning presumably with some US production knocked out. The breakeven for the prosposed Kaduna/Agadem pipeline was $28/b so a possibility that costs could be shaved for the Niger/Benin pipeline. Everyone will have to take a haircut be they governments, drillers, suppliers, pipeline tarrriffs and not just the producers alone if everyone wants to stay in the game as happened in previous cycles.

Obviously growing the gas business into the expanding electricity market is even more key. They beleived they would be running at full capacity by year end so let's hope that is still the case through new customers - that's one area of growth and if Niger is parked in the short term, well cash won't be immediately needed there.

Certainly would love to see some director buys at these levels. Haven't seen too many oil company directors actually buying that much. Exception was Kosmos Energy down from 500p to 50p and the share price shot back to 90 odd pence.

'I spoke with someone today and will update at some point' - ie meaning the company will update at some point .

I spoke with someone today and will update at some point but i don't think they'll react just because we are sufferring so to speak.
I think it's either Bondholders selling off the remnants, low liquidity, PIs maybe buying what thery thought a bargain at 14-15p only getting shafted as it fell lower and having to offload again making matters worse with fewer buyers around, then the virus/oil price reaction and many more heading for the hills pushing the share price even disproportionately lower ???

For what it's worth has anyone considered that SAVP/AIIM might be in negotiations re potential changes into privatisation and can't comment re the gas customers ?

About 10-11 power plants and stations appear to being privatised in order to make better efficiences, bureacracy and bring in financing for the expansion of the electricity sector. The latest new Accugas customer 5 weeks ago was with Afam Power plant an affiliate company of Sahara Group (so a private entity).
I've seen Calabar mentioned a few times so likely will be new owners (maybe our partners bidding/in discussion for all we know). That asks the question of the Calabar contract for the next 30+ years. Is there a buy out clause or compensation for such a contract up to a the cut off point and privatisation ?? I've no doubt under the sovereign guarantee Savp will get paid its past debts (It's Savp insurers who get paid) up until privatisation. Maybe that explains the uncertainty. Alaoji is also mentioned and Savp announced a supply deal in Dec 2018 with Alaoji Power Station, the same government entity (NDPHC) that holds Calabar. It too is being privatised so imo that's why we havent had any update on Alaoji as a customer yet in the last 15 months but from memory i'm nearly sure AK did mention it as an expected customer soon.
In addition Nigerias InfraCredit is offerring £600m of funding over 15 years. I see the US Government (USAID) has also stepped in with a co-guarantee for a 15 year bond to provide local currency guarantees and mobilize long term debt financing to help develop Nigerias Power sector (1/3/20)

Alaoji Power Station, Abia State,
Omotosho II Power Station, Ondo State,
Olorunsogo II Power Station, Ogun State,
Geregu II Power Station, Kogi State.
Ihovbor Power Station Benin,
Calabar Power Station, Cross River State
Egbema Power Station, Imo State
Gbarain Power Station, Yenagoa
Sapele Power Station
Omoku Power Station, Rivers State, and
Ikot Abasi Power Station, Akwa Ibom
https://nairametrics.com/2019/07/21/investors-to-access-n300-billion-as-fg-sets-to-privatise-power-companies/

The gas contracts on Daily Contract quantity run to 189.4 mmcf/day.
80% is the take or pay volume ie 151.5 mmcf/day.
Calabar is $3.53 mcf rising to $5.04 mcf to 2024 . Unicem is $5/mcf all years and Ibom is inflationary from $2.18 /mcf.
Gross revenues are $204m with 80% of those take or pay revenues attribute to Savp which are $163m.
The oil revenue (not included) will knock about 5% i believe off Savps expected $104m free cash flow.

There was also a 6% forecast decrease for maintenance in 2020 but this was expected to have negligible effect due to the price increase from 2019 into 2020.

There's been a new gas contract signed 5 weeks ago with the Ifam Power station of 35 mmcf/d which would be about a 20% increase in production and possibly similar new revenue increase kicking in Q2 we were told.

In addition - "Accugas continues to make good progress in relation to gas supply to several other potential new customers and further updates will be provided in due course" and were expected to be at full capacity this year.

NicetoMichu
Appreciate the comments. I think everyones a bit wore down with the persistent fall in share price and of course your comments are always welcomed by me.

Well the RNS now confirms no shares were issued and the $5m loan still open to 6th June where they say it is now non material to them .
I understood that the Nigerian free cash flow would be affected by around 5% based on the Nigeria small oil element with gas immune and escalating in price.
AK has met the Akwa Ibom state govenor seeking new fields, signed a a new power station customer and the investment in Nigeria was heavily promoted at the Nigerian-Uk investment body in late January. I would presume with the world bank onboard and the extensive gas/electricity push the company would get full government support to get any issues resolved for fear it would derail further investment for government projects at a time when it's needed most.
So provided there are no payment issues the company should be bringing in that free cash flow as it's 4 months now since the 7E deal closure so if anything there's been time to build some cash flow and get any outstanding issues sorted out.
Not concerned about the current oil price as imo it would be no more than just a medium term outlook if anyone is interested in coming in re Niger. I still beleive that rather being a major producer they would seek to prove up and eventually sell the barrels in the ground.
Seperately 5th March 2020 - "The revenue collected by power distribution companies in the counrty hit a new record high of N473bn in 2019. The number of registered end-users in the Nigerian electricity supply industry keeps increasing, currently at a rate of about 75,000 new customers per month (10 per cent in 2019, resulting in more than 9.5 million customers in total).”
http://www.thetidenewsonline.com/2020/03/05/power-distributors-revenue-collection-rises-to-n473bn/

In addittion - the new gas transportation code was introduced a few weeks ago in Nigeria making it easier for metering and transportation into gas networks previously monopolised by NNPC. I would have thought this would be up Accugas' street for them to supply more gas to more customers. Lets not forget barely 4 weeks ago AK was meeting the Akwa Ibom govenor seeking to exploit idle gas fields in the state.

We are covered by a sovereign guarantee so i tend to agree with what 'itsriskythat' posted earlier. It's almost 4 months since Accugas sent that letter 25/11 saying they would invoke the guarantee if not paid within 7 days. It may be that this is treated as part and parcel of Savps/AIIMs day to day running of Accugas and see no need to update on every matter. That's to do with the actual gas supply but we should be getting some of that revenue because Accugas buys the gas from Savps/AIIMs 80/20% ownership of the Uquo gas field that supplies gas to Accugas even though they are all interconnected businesses . Anyway not to complicate matters, surely there must have been something resolved because yesterday a $2.2 billion sovereign guarantee was put up to honour a major $2.6 billion gas pipeline.

ABUJA, March 4 (Reuters) - Nigeria will issue a sovereign guarantee to back the bulk of a gas pipeline that is a core part of the government’s energy strategy, Finance Minister Zainab Ahmed said on Wednesday.
The Ajaokuta-Kaduna-Kano natural gas pipeline aims to enable Nigeria to develop gas resources that are often burned at the well due to the focus on crude oil.
The sovereign guarantee will back 85% of the $2.59 billion pipeline cost, funded in turn by a loan facility from Chinese lender Sinosure. The loan has an interest rate of libor plus 3.7% with a 12-year repayment period and a three-year moratorium.
State oil company NNPC will cover the remaining 15% of the project’s cost.
“We have done an extensive review of this project and we are satisfied that the cash flows from the Ajaokuta-Kaduna-Kano gas pipeline will be sufficient to repay the facility,” Ahmed said. “This project is one of the cardinal policies of this administration and it is very strategic to national development.”
The government plans to develop gas-fired power plants along the pipeline, and also to use it to encourage companies to capture and sell gas rather than flaring it, which environmentalists say creates a health hazard and contributes to global warming.
Last month, Nigeria launched new regulations aiming to encourage gas development and announced a $1 million grant from the U.S. government to develop a power plant that would be fed by the pipeline.
https://www.reuters.com/article/nigeria-oil-gas/nigeria-to-back-2-59-bln-akk-gas-pipeline-with-sovereign-guarantee-idUSL8N2AX7JU

Yesterday Nigeria issued a sovereign guarantee to the Chinese to build one of the major gas pipelines

lol Munchbox- Wish you could hear yourself with your post - "Future share price projections are the work of a scam artist".
So does that apply to you in LEK - after their CEO and management imo were appallingly lax in DD.

3/1/20 17:16 If we hold through to 20s and the drill turns on the off field in July then I’m expecting the following sp pattern ...Jan -15p Feb-25p March - May will see consolidation around 30-40p July August this will explode to 70p on ogo drilling Year end £1.20 minimum.

5/1/20 12:21 Why you talking about market falling when Lek sp is down 80% ytd? The market can do what it likes ..... won’t effect Lek at all.

6/1/20 12:07 Next stop says 16p after 11.5p broken. 19p after that. By then I think charts go out the window as this could be in the teens b4 we know it.

6/1/20 19:09 don’t even care about the sp movements ..... the mms know it’s real value and are playing you fools to sell low.
8/1/20 08:45 Glad I’ve added today. Average 7.9p

2.8 pence today

NTMU "12.5p to 200p is one hell of a lot of 'bags', even on AIM ? But this one is special, special, of course."

There's absolutely no logic in that observation. Did the value pool suddendly change or just your perception of 'bags' as to how an investment is guaged. Is an investment down to some kind of enforced bag limit ??
My reasons for being in Savp are plain and simple - extremely high rated chance of success for lots of easy to find oil with or without production in Niger. Already demonstrated with 5 out of 5 discoveries from the off which proves one part of the rationale for me investing in the first place.
The Nigerian gas and oil fields and the Accugas ownership are 2 seperate pieces of value in the chain and not small fry.

EEN was one complete dog before it got it's act together and after much delay/dissapointment/financing, finally took off from its reorganistation at 25p built it's reserves/production and was sold for 750p. (30X).
Heritage sold itself as well as returned cash to shareholders through asset sales (discoveries) for circa £2 billion 2014. (7-8 X)
Cove Energy 12p - 240p (20X) and a £1.2b sale of it's gas discoveries despite no in country industry or infrastructure or production in any shape or form.
Imperial Energy 25p - 1250p (50X) sold for £1.4b and people thought it was undervalued being previously 1800p. Built up large reserves and circa 20k production in under 4 years. Share price regularly dropped 50% or more at times.
GKP listed at 48p in 2004. Later placings at 14p and fell away during the forced selling to 4p in 2008 at one point and came back to over 400p and a £3.4 billion pound valuation before debt restructuring hammered it with all the KRG problems a few years later. (8 - 100 X variation)
One thing they all had in common with Savp was easy to find oil/gas and lots of it. They didn't all have to be producers or have major cashflow. So yes when i see a company with 2.8 billion bls/$10billion+ value with very high chance of success and that being the already risked number for just one asset, and enhanced by having the Nigerian assets, i see the potential for 200p/share ($2.6billion). When the deal was done at 35p i was targetting under a 6 bagger. It makes no difference if that is now a 16 bagger just because its share price is where it is. It's meaningless. Unless there is any untoward information to come, all that asset potential is still there.

That's been in my head if a decent farmout fails Older. One or the other, or a combination ?

What's the alternative to move it on in a timely manner as well as deliver first oil production ? Drilling even 1 well a month from Nigeria cashflow using $48m - $60m would be fairly slow and they even said over a year ago the plan was to have 2-3 rigs drilling and that would be in line with really opening the blocks up. They've got some 50m barrels so worth something in leverage ?

I can't see that unless they have Niger sorted as funds will be too precious for other things. If basic wells are $4-$5m each plus further seismic, i can't see that happening unless there is a decent farmout. I thought that was one of the reasons they were holding off on paying a dividend for now.

Worst case - To progress Niger in a sizeable drilling campaign and start to move things along, would they raise cash as an alternative, secure loan finance linked to warrants etc - all if a farmout did not materialise ?

Cons = more shares in issue. Pros = retain all of the Niger upside without giving any percentage away.

Starnge we haven't heard on the extension or relinquishment on any of the 4 blocks which makes me think its all part of the farmout process and the formation of a new supposedly national oil co.

The words i said were "If you can't say something sensible, say nothing at all." and that still stands as i don't care less what your response will be re your Uber Bull terminology and snide comments for anyone suggesting 100p+ blaming people for loss of wealth.

The share price may be where it is but at the end of the day the Fund Managers and those that supported this including myself haven't been wrong about backing this in terms of the geology and discoveries subsequently made after we invested so there was much to be bullish about and proved right on that to this point.

If the bondholders selling are putting a dampener on the share price it's not the fault of your so called Uber Bulls ? (wherever you get that terminology from - i don't see any uber bulls, only cautious investors !).
Likewise when the oil price was lower a few years ago, the share price also sank to new lows at the time of sub 23p due to liquidity and i listened to similar comments then, which was then followed by a placing at 38p - so while we are in this present state whose to say what the next newsflow or updates bring in terms of where the s/p might be. To lay blame at the door of 'Uber bulls' as the most dangerous to your wealth is about the stupidest thing i've heard in the circumstances and if you don't like it, that's your problem. Lek isn't Savp and exactly why i'm not in it or any others that don't fit my strategy. As you say you've been in an awful lot of AIM Oilers this past 5 years - maybe that's your problem - too many !

"and those 100p + shouts seem so so so so so far away at this time.. and reminds me, for the umpteenth time, that it's the uber bulls that are by far the most dangerous to your wealth on AIM"

What's it got to do with being bullish ? What's wrong with being bullish on growth in the gas/electricity sector ?
If AIIM see the potential and invest along with multiple blue chip investors how are you're so called uber bulls dangerous ?
If this is all down to Uber bulls then ever tom, dick and harry investment manager that supported the deal at 35p and with an interim placing at 28p until the deal went through are all wrong.
What about the brokers and those that cover the stocks etc etc.

You're so called Uber bulls aren't to blame for the bond holders selling down or for that matter CV-19 that wiped $1T+ off stocks last week. If you can't say something sensible, say nothing at all.

As far as i can see there's nothing that has diminished the investment case.

8.7% - 9% depending on quantity.
Clean 0.5%. Also meets IMO 2020.
$36/b netback at $65/b Brent.

10,000 bopd = $115m free cash flow at $65/b Brent ($80m fcf at $55/b Brent).
Expectation is 13,500 bopd average for this year and exiting on 20,000 bopd.