Member Info for ZENGAS

I've been criticalof the company at times in getting on with things but would just like to acknowledge Jessica at IR when i asked earlier in the year what was happening to the cash flow that was being generated while the delay went on in closing the deal - was told that it was paying down debt and ultimately beneficial for us.

Certainly the case with debt reduced by $40m and cash of $15m.

The plan was to refinace that debt at a cheaper rate post deal.

Looking through the CPR ,
Dec 2019 -Nigeria

2P Net = 80 mmboe
2C Net = 78 mmboe.
2P NPV = $945m (Does not include Stubb Creek 2C).
Outstandindg debt reduced by $40m to $409m.
Year end cash in Nigerian Subsiduaries assets = $15m.
Net free cash for 2020 expected = $104m based on take or pay (not DCQ) from 3 main customers only (Ibom, Unicem & Calabar).
Calabar gas pricing increases by 43% over next 4 years
Production anticipated to increase significantly in H1 2020 with Alaoji Power station.
New customers also expected to be announced over the coming months.
That should increase the net free cash significantly over the $104m TOP level.

My interpretation is $74m in from recent deal completion + $15m = circa $89m cash - less some costs for deal completion.

Looks pretty good and new customers and Alaoji will really change the numbers above from H1 2020 onwards (also Stubb Creek oil debottle necking from 3,000 to 5,000 bopd happens in 2021)

happysparrow i'd be very surprised if that happened and couldn't see it working like that to be honest.

In the October 2019 presentation out of 132 discoveries,
6 in the Upper Sokor.
110 in Sokor Alternances.
1 in Madama.
14 in Yogou.
1 in Donga.
I don't see how or why they would want to commit potential exploration suicide by selling off so early what is decsribed as the very low risk Sokor Alternances to be left with much higher risk stuff. The Sok.Alt is where the chinese have predominantly booked over 1 billion barrels reserves. They're found mainly in that geological sequence as set out above (shallow to deep) so why would they try to sell that geological setting within a prospect that has been the lowest risk of all - and what Savp themselves describe as highly repeatable for success and still much low hanging fruit/not yet creamed etc as evidenced by 5 discoveries to date bringing supposedly 50 mmbls. I don't think that's right or possible - the only thing maybe is that if they made very sizeable discoveries in the different prospect play types then perhaps they might sell/relinquish smaller prospects.
It would be extremely risky so soon to sell off the Sokor Alternances plays where there's north of 92% COS in places compared to higher risk plays as low as 15%. If those higher risk plays did not come in, there'd be some serious questions to answer imo about the strategy and use of capital.
The brokers have estimated they have 50 mmbls from the Sokor Alternances discoveries with the Amdigh prospect being the best. Hannam and Partners in late August stated Amdigh as being deepened to target another 20 mmbls. The next 4 prospects in fairly close proximity have the possibility to add similar (if successful) to what they've already supposedly found.

Great new presentation and on track to generate some serious cash at current oil price range.

Stating they are fully funded.

Appears to be 2 things that could drive a substantial increase in reserves towards 80 mmbls (not counting the potential 3P case).
Recovery factory similarities to analogue fields and higher net to gross pay ratio in wells drilled.

Netherland Sewells CPR 2P reserves is based on a 68% Net to Gross and just 3 wells + a core and a 12% recovery factor.
2XD well was almost 20% greater in net to gross pay and on that "recent wells" support a recovery factor of up to 24%.

With 3 previous targets achieved, on track in next few weeks to reach target no 4 and over the course of the next year the year end exit is for 20,000+ bopd.

12,500 bopd on $60-$65/b oil = $33.50 - $38.50/b net backs.
That's $152m - $175m of net back. (At 20,000 bopd = $244m - $280m).
Also have $310m to offset against future taxation.

From the last conference call CEO stated - "turn this into a cashflow machine for years to come".

Imo this offers the potential to farm into other prospects/buy up assets and significantlly grow the company.

With block 107 extended to late 2021 (2 years) gives ample time if no farm in partner, to drill on their own.

Two that i bought he later plugged - Jadestone (JSE) and Petrotal (PTAL). Up 110% and 60% in 14 and 6 months respectively.

Dyor and never rely on anyone else but imo it's always good to see people like Malcy covering those same companies you've researched yourself and come to the same conclusion that they've significant potential. Very high hopes for LBE.

7E deal firmly closed and over with.

Gas to new customers at/around $7.50 versus equivalent diesel price of $15/mcf.
1 new customer pre christmas + more in the coming months. Couldn't sign any deals due to awaiting deal closure and especially not with distressed 7E still with the assets at the time.

I suppose it will be interesting to see the make-up of the soon to be announced first deal and we may get a clue as to what future ones could entail given the huge and environmentally unclean/noisy diesel set-up not to mention cost advantages.

Again mention of opportunity now for adding more assets including oil.
If share price remains weak in future, then no or small div and would start a share buy back instead of Div.

Although Niger drilling plans not elaborated on - a bit more explanation on the number of plays and more upside potential than previous. Hard to beleive there wouldn't be significant repeat success up those flanks which he described and which they expect.

Re stabilistation of assets - nothing reuired other than normal ongoing maintenance of assets for good working order etc.

Said Niger production of 5k bopd would depending on oil price range give $30m - $50m free cash flow. (Think this was the EPS phase 1-2 reaching 5k bopd to Zinder).

Company has access to export pipeline and amount depends on spare capacity. It's supposedly a 200,000 bopd pipeline and expandable. Last report was CNPC planning 90,000 bopd and Niger expecting to export hundreds of thousands of bopd you so would think 20k bopd would be possible at least and very attractive for any farm-in partner on top of the Zinder supply.

Former bondholders who got shares firm holders. Think he said one had been buying more and these were significant investors in the old 7E before. He thinks its PI holders who are main sellers and expects to attract new/additional Institutional holders when he does the investment case presentations with them shortly.

Calls it a severe disconnect in valuation. Always potential to be taken out/offers which like any board would have to consider.

First gas deal, followed by CPR, Niger plans etc is what i beleive was the rough guide of coming newsflow.

As i see it, Now the deal is closed and first new gas customer imminent, nothing else but to get on with it and grow the business and deliver.

I honestly don't know Agadem. Maybe some expected a full detailed plan of all the work coming up or the completion of the supplementary admission document other than just a basic statement saying deal completed. I don't know what the previous short position was/is now or if there was any link to the new shares being issued which has weighed on the share price in some way. Either way i'm just glad to see this milestone acheived and know that's it's delivering cash and that it will offer a lot of new opportunities as we are a major producing company.

For 2020 the expected net asset cash flows were expected to be one of the following or somewhere between the two.
Daily Contract Quantity (DCQ) = $153.5m or $120m under Take or Pay (ToP).

These were defined on 31/5/19 RNS (note 8) as Savps economic share of post-tax operating cash flows less capital expenditure.

The Mirabaud note of 15/11/19 estimates Savp for 2020 will generate revenue of $235m of which $174m being EBITDA.
In the worst case under ToP of $120m post tax opex, Savp should have $30m quarterly before any new business (at least one new gas sales contract mentioned as expected in the coming months).

It's just recieved $54m from its partner AIIM and $20m from some of the former senior note holders - so $74m in as of now less whatever costs- maybe $10m given that's the max we were borrowing ? plus there's also still the possibility of a further 5% sale for $16m to AIIM.

Savp also stated it was $5m net to first oil now in Niger. (1k bopd estimated to yield up to $10m/yr cash flow).
No mention of any drawdown from the $50m facility obtained from the Oil Trading Group or what that might be used for but it entitles the provider to have first offer on handling the Nigerian or Niger oil.
Now that the deal has been signed off and completed, we should hear at some point on the refinancing under proposed better terms for the debt which would free up more cash for Savp.
In the absence of a partner for Niger, the above might see Savp with around $100m cash at the end of its first quarter and an ongoing $30m/quarterly.
So maybe as they take control now of the assets, a few months bedding in before any sign off on the next Niger work programme - but come it most definitely will.

Finally complete and a brand new era now for the company.
World class assets - enough said !

Re the chat about Amerisur yesterday - recoommedned cash offer this am of 19.21p per share and no 50-100p as some were stating with no explanation why.

I can't see any reason to value Amerisur at 50p or a £1 with 1215m shares in issue - ie £600m - £1.2 billion. 19p is circa £230m.
Unless i've missed it but last time i looked they had around 22 mmbo P2/6,900 bopd and $46m cash so unless theres going to be a material change in reserves, i can't see those kind of targets though it's easy to say 50p and 100p without explaining why. You only have to look at the valuations of Parex, GeoPark and GranTierra and what Amer has doesn't come close to either three, so can't see either of those targets.
Back to Savp - i think i've given a fair explanation of where i see it, doesn't bother me if anyone has different opinions and doesnt want to sift through the chaff for the wheat.
If someone had said it was fanciful to think we would have 100% drilling success so far - it's reality and once we get going again in Niger, i beleive similar ongoing success will be achieved and those reserves will add up whether oil is $40 or $70/b and we get $4-$6/b for it in terms of reserves.
One of the best basins with world class potential and as many have said, opportunities for ***multiple repeatable success***. I haven't been remotely counting on the entire risked mid case 2.8 billion bls coming in.
Likewise i'm not here for major production, wasn't in IEC or Cove and some others - the opportunity is to find low risk bls that can be transformational to the company valuation whether it produces significantly or not.
To be midly bearish on oil and gas in that 2 year window is completely fine, but part of the investment rationale here is that gas is largely unaffected due to contracts and built in price escalation with investment grade payment guarantees and there is also a significant opportunity to slash the use of very expensive diesel while selling gas at even greater prices than present so i don't share the view to be bearish on gas. In fact we've got one of the biggest market opportunities for gas in Nigeria.
Lastly i'll say SAVPs got all the ingredients for a £2b+ value company. Maybe some posters should say why it hasn't. There's plenty of £2b+ m/cap companies and some with debt in the $2-$3b level out there.

Thanks older.
I think there could be plenty to come from Nigeria over and above what they are starting with there. They intend to acquire further assets there over time but until they do it's hard to quantify what that potential could be. Gas business is a huge opportunity on its own given the capacity of Accugas.

Materially undervalued imo

PetroTals updated estimate for OOIP on Bretana is 367 mmbo (Page 10).
If the recovery factor is in line with some of the closest comparable analogue fields which range up to 36.4% re API similarities only (page 11), then the RF might increase towards 30%. At 24% RF this would represent 88 mmbo reserves. (The 3P is 500 mmbo in place and at 24-30% RF = potential 120 - 150 mmbo reserves).
Current broker valuation is 45p and will no doubt be higher on increased production and reserves increases from the RF.

Net backs at $60 and $65 Brent = $30 -$34.75.
10k bopd = $110m - $126m/yr whereas when they hope to and expect to reach 15k bopd mid year at similar oil prices, see $165m - $188m year.

14 months from now the target is hoped to be 20,000 bopd which would see $220-$250m/yr in the current oil price range.

Farm out process is underway for 1.8 - 4.5 bbo mid-high case recoverable oil.
Looking at synergistic projects to drive additional value (and could be material given high cash generation).

As a comparrison - Parex latest October 2019 presentation
M/cap £1.73 billion. (142.5m shares @ c$18.40 = c$2.62b)
Debt free (as PTAL).
One country of operations - Colombia.
Reserves P2 = 185 mmboe.
Production exit estimate for 2019 = 53,000 boepd.
Similar net backs as Ptal.
https://parexresources.com/wp-content/uploads/2019/10/Parex-Corporate-Presentation-October-27-2019.pdf

Ptal on a 25% pro-rata valuation to Parex (£1.73b/185 mmboe reserves/53,000 bopd) = 46 mmbo + 13,250 bopd = £430m (673m shares) = 64p comparable target with continuing ongoing growth/exploration upside and new projects funded from cash generation.
If December targets are met going into new year i'd expect to see an uplift to the current broker target of 45p.

Given the expected cash generation and use of same, exploration upside and farm in opportunities/synergies it could be worth much more and grow in the same vein as Parex.

Don't see any reason why this should be off anyones radar. Absolutely great prospects and the company is delivering on its targets. Stacking up for some serious cash generation/dividends plus a major increase in reserves and and debt free. Been a holder here for a number of months but this bb light on discussion

$40m cash end of Sept. $19m of expenditure to end Q4 will leave around $21m. Maybe they can come in under budget again with this current well.

6500 bopd expected for Q4 at netbacks of $25-$30/b should deliver $14m - $18m.

They are expecting to exit December at 10,000+ bopd which at current oil prices should see $23m -$27m per quarter net back.

It's interesting that the $5m sanctioned today for additional production facilities will see that yield 5,000 bopd capacity within 6 months from December - so a possible 15,000 bopd on the cards in a relatively short space of time. If oil prices remain in this range, then that could see netbacks of $34m-$40m per quarter before a production rise again to up to 20,000 bopd and a further increase in quarterly netbacks.

Farmout process still ongoing for multi billion bl oil exploration, but at a cost of roughly $12m/well on one of the shallower prospects, the compnay is in a strong position to start on it's own as production really ramps up here.

A few things that may be of interest/beneficial to us and drive future acquisitions to us in terms of additional gas.
We know there is a huge pool of 40 TCF gas within tie-in distance of Savps Accugas network. That's some 6.5 billion boe of stranded gas - some of which they will pick up no doubt.

There are numerous oil fields and like all have licences that must be renewed at some point.
Everyone is probably aware of the gas flaring problems.
When Elands OML-40 licence came up for renewal last year - it was granted 11 months ago for a further 20 years but one of the conditions built into it was they had to have a gas sales agreement of 25 mmcf/d signed within 5 years (4 years left). This imo will be a feature of many licences/renewals where producers will require to have a market for produced gas or else they can't produce oil and breach their licence and gas flaring regs.

Seplat obviously a big gas distributor (just as Accugas) so ideal for Eland to sell up at this point perhaps . Imagine if Eland didn't recommend the offer - where would they possibly sell gas to in 4 years in that area - they'd have to build a pipeline and some sort of facility to somewhere so Seplat an obvious but limited choice. If they didn't accept now, then perhaps in 4 years maybe no route for them available to sell anyone their gas to if Seplat are already well supplied.
This is what i see as a big opportunity for Savp - there'll be many smaller Nigerian companies that will not have the financial capability to deal with their gas and the more of them looking for a sales market that is tight could in theory mean a reasonably cheap resource just to get a sales outlet or risk their oil business in terms of licence conditions and especially flaring restrictions.

Eland 12-11-2018 Confirmation of Licence Renewal
"The consent is conditional on payment of a Renewal bonus of US$6.3 million within 90 days and a commitment from the OML 40 JV to gas monetisation and additional sale 25MMSCF/Day with the gas sales agreement to be signed within 5 years."

The takeover of NewAge should be completed this month. All, or most senior mangement going.

Diversified, i've had a look at Eland from time to time and this is my take from their results and presentations.
Seplats takeover of Eland @ 166p = £382m/$475m.
45% of OML40 498km2. Gross 2P oil = 82.2m mmbo (net 37 mmbo).
40% of Ubima 65 km2. Gross 2P oil = 9.3 mmbo (net 3.7 mmbo).
Further gross 2C of 54.9 mmbo combined (net 24.4 mmbo).
Half year results to end of June
Gross production 22,106 bopd (9,948 bopd net).
Net revenues $106m.
Net debt stood at $30.9m.

So $475m for a growing 10,000 bopd Nigeria only focus producer (all oil) with 40 mmbo 2P + 24 mmbo 2C.
Roughly $7.50/b for 2P/2C combined or $12/b for 2P only.

https://www.elandoilandgas.com/media/1400/eland-oil-gas-plc-standard-bank-africa-investors-conference-june-2019.pdf

https://www.elandoilandgas.com/investors/results-reports-and-presentations/

Why would the holders of Marine III want Tilapia - it was already hived off out of Marine III as pretty insignificant (proven by its drilling/production to date).

"The licence is located on the coast, covering an area of 50 km2, mostly offshore, in water depths of less than 10 m. The licence is limited by the Tilapia field boundary, part of the Marine III exploration licence, Lower Congo Basin."

At the end of the day we as investors have no say and it's up to any contracts that Savp sign in nailing down any deal. We are not in India. OGNC have a number of subsiduaries including their buy out of Russian Imperial Energy for $2.5b 12 yrs ago. There are plenty of Asian Companies but don't get hung up on one name specifically mentioned. Delonex a private energy company bought in to the next door block barely 2 years ago - maybe they'll be interested in in seeking to gain a foothold. They are backed by huge financial conglomerate Warburg Pincus who invested $600m to find projects. Maybe with the Agadem pipeline it would be helpful to them with ther Block H discoveries looking for an exit route. Nigeria was one country of focus for Delonex in seeking new projects and late last year farmed (25%) into a $1.25b project in Nigeria along with Vitol (we all know the connections to us re Vitol). If anyone cares to look, Delonex has also showed Niger as an area of focus. Maybe that will come sharper in to focus given the pipeline and what it says this month about its discoveries in the adjacent block to Savp/CNPC. World Bank Arm also an investor in Delonex.

It's said to be a healthy process, ONGC partner many oil companies and are involved in some substantial multi billion dollar projects. Pttep from Thailand bought out Cove Energys stake in Mozambique in 2012 for over £1.2b - pushed back now again to 2025 for development. They didn't run an offshore Australian oil field to the best it should have been. We don't know who we'll get if any or what any of their management style is. Can we also say we don't like this or that on any big firms previous black marks. In addition it has to be acceptable to the government.
Bottom line is GWD has rigs in country rigs and engineering is available from Chinas BGP.

As for Amer -no one with certainty can't honestly say what any wider issues are or not. Amer hasn't delivered its best imo. Some of Amers people are also at Ironveld which was meant to have been a substantial profit making mine a number of years ago and still haven't got it off the ground and gained zilch. After about 7 years they are basically throwng in the towel there too by hoping for an offer for the assets as they stand.

The oil finds continue and why i beleive we'll find multiple new discoveries. Also what price a farmin for Savp with 5 discoveries made, 140+ targets (significant number drill ready), substantial seismic conducted etc compared to what Delonex paid for a 3 well committement and seismic for $35m cash/$65m spend and substantial future payments given the high COS in the area.

3-10-2019
Privately-owned explorer Delonex Energy has made four oil discoveries in Chad’s frontier Termit basin and will begin drilling appraisal wells next year to also target a deeper, higher potential play.
“In the last year, we have drilled six exploration wells and have made four discoveries — these are exciting times,” said Lorna Blaisse, senior exploration geologist at Delonex, at the Africa E&P conference in London this week.
A possible export route could open in 2021 when a pipeline due to take oil from Niger’s Agadem basin to Benin’s coast is set for completion.
Block H abuts the Chad-Niger border and is immediately adjacent to the oil-rich blocks controlled by China National Petroleum Corporation and Savannah Petroleum in the Agadem basin.
Delonex gained control of Block H in late 2017 by acquiring Bermuda-registered United Hydrocarbon.
Delonex has identified three oil plays in the block — two Cretaceous and one Tertiary.
The Tertiary reservoirs are fluvial, deltaic and lacustrine in nature, said Blaisse, with porosities over 25% and permeabilities up to six Darcies permeabilities “in very quartz-rich sands with minimal clays”.
Delonex — headed by chief executive Rahul Dhir — has found mature Cretaceous source rocks right across the block and at many levels and with a total oil content of up to 20%.
The real intrigue for us,” said Blaisse, “is porosity preservation in over-pressured Cretaceous shales, a play which has the potential to open up huge new reserves in the basin and a broader variety of deeper traps.
https://www.upstreamonline.com/weekly/delonex-makes-four-oil-hits-in-chads-termit-basin/2-1-682041

I posted 2 years ago re Delonex farming into United Hydrocarbons blocks in Chad by acquiring their subsiduary UHCL Chad Ltd for $35m cash, plus $65m minimum spend which included 2D and 3D sesmic and drill 3 wells (over a 2 year period).
https://www.delonexenergy.com/2017/05/10/delonex-energy-enters-agreement-with-united-hydrocarbons-for-a-significant-exploration-and-appraisal-programme-in-chad/

Deal was closed in late September 2017.
$35m was paid on closing, plus $65m committed spend plus $50m additional to be paid if first oil achieved.
United Hydrocarbon (seller of subsiduary) to get 10% and 5% royalties from 2 of the blocks as long as oil is never below $45/b for more than one continuous quarter.
https://www.delonexenergy.com/2017/09/22/delonex-announce-closing-of-transaction-with-united-hydrocarbon/