Member Info for ZENGAS

Porsche we were to truck 1,000 bopd then run a pipeline to the Gounmeri tie in point that would take 5k bopd for phase 2.

My logic was the need to prove up as much reserves as possible. This is what AK said re the value of barrels in the ground at $5-$6 each. Low level production would do for me over 1-2 years but the case for me is prove up the reserves and sell on.

My thoughts re a placing -
Completion of deal was to see a cash injection of $50-$70m which can't be that far off now.
I rule out any divs/share buy back until late next year - what would be the point in giving away $12.5m so early when cash is required.
We know the assumed debt is to be refinanced and at a better rate - perhaps over a longer term than current - that's where the new brokers come in surely in a major way ?
In the absence of a farm in and in view of time scale re licences - is it favourable to raise additional cash or add additional debt to the above cash injection on deal closure to progress Niger ?

A further 5 well programme to the Sokor Alternances including 2 deeper wells perhaps $25m+
Well test on Amdigh $2m+ ?
Seismic programme perhaps $10m+.
Above could account for $40m.
Also what will the $50m loan availability be used for (signed term sheet) - towards EPS/first oil early 2020 ? They talked about leasing equipment for the EPS.
With a 1k bopd from Niger it was supposed to offer up to $10m/yr free cash flow depending on average oil price per bl.
Nigeria monthly free cash flow ?
Might be more than enough to kick off Niger very soon but if they want to get an additional 20-25 wells drilled in a timely fashion means booking at least 2 rigs and perhaps $100m cash needed - either that comes from a farmout or we go it alone and try to spread it across incoming cash flow. I suppose if the price/farmout didn't meet expectations the reasoning may be they don't want to give it away too cheaply and while the brokers are appointed now, it could be something that happens post deal imo perhaps Q1 if no farmout. The risked recoverable figure is 2.8 billion bls so that's a lot of potential to give away at 30-50% if too cheap re farm out price. By end of Q1 i'd like to see a significant drilling programme planned over and above the next 5 prospects.

One of the key goals for completion of the deal was to restructure the debt at much better terms and I see the appointments of Numis and Jeffries in respect of syndicating that. Jeffries as we know from the AEI article charged with the farmout.

In terms of being pressed for time - AEI makes no actual mention of licence periods but more on the fact that Savp planned to have production running by early next year.

"Yet the cash-strapped company is pressed for time. It plans to start production of the 50 million barrels at the Amdigh and Eridal fields on block R3 by 2020."

Agadem - it's a farmout process plain and simple.

Don't get into a flap every time you read something. This has been ongoing for awhile and not today or yesterday.
Of course it's cash strapped (at the minute) until the 7e deal completes as the last accounts have shown. The licence timescale was already discussed not so long ago in terms of extension and relinquishment periods and in terms of where the mapped prospects and leads are situated .

The British junior is pressed for time to lock in partners so it can finance the development of its discoveries.
According to our information, American corporate bank Jefferies International is in charge of finding buyers for at least 50% of Savannah Petroleum's blocks R1, R2, R3 and R4 in exchange for the carry of the oil firm's remaining shares.

The junior has only explored 8% of R1 and R2 and 15% of R3 and R4 and believes the blocks could hold large reserves yet to be discovered. In the presentation brochure sent out to potential investors that Africa Energy Intelligence was able to consult, Savannah notes that its five drills were met with success.

Yet the cash-strapped company is pressed for time. It plans to start production of the 50 million barrels at the Amdigh and Eridal fields on block R3 by 2020. The development programme was submitted for approval in March to the Nigerien ministry of petroleum headed by Pierre Foumakoye Gado. During a first phase, 1,000 bpd will be trucked 120 km to Chinese major CNPC's central processing facility at Goumeri, active since 2011. This serves as the tie-in to the pipeline that will transport Savannah's crude out to the Soraz refinery in Zinder that has been in operation since 2011. After a pipeline from Savannah Petroleum's fields to Gourmeri will be be built, and the target output will increase to 5,000 bpd.

By 2021/2022, part of Savannah Petrolum's production could be exported via the pipeline that CNPC is planning to build through Benin to the port of Seme (AEI 843). Niger's total output would gradually increase from 20,000 bpd today to 110,000 bpd.

The most favoured solution originally had been to take the facility through Chad but was scuppered for political reasons. CNPC has been wary of what Chadian President Idriss Deby might do as he has already had the refinery shut down in the past and issued hefty fines for failure to comply with environmental regulations.

Back in Q1 2018 Savp appointed Sir Stephen O'Brien a former African envoy for David Cameron and ex Tory MP. It was reported in 'Africa Intelligence' that we were using a "discreet" Nigerian lawyer - Muhammadu Dikko Ladan as well as Micheal Watchel head of Clyde and Company (lawyers) Oil and Gas practice.

While i have always beleived in the transaction completing re the Seven Energy assets, it's worth noting some other connections that will imo be extremely advantageous to Savp as i believe it will build out to a circa £2b+ m/cap company.
While Sir Stephen is vice chairman and M Watchel is a NED at Savp, at subsiduary level - M.D Lakan was reported as chairman of Savannah 'Nigeria'.

Katsina state borders Niger.
President Buhari is from Katsina state and a MOU was already agreed between Niger and Nigeria to build a 100-150k bopd refinery at Mashi in Katsina state. This was solely to take Niger Agadem crude. Pres Buhari/Nigeria tried to sway the chinese to supply oil from Agadem but apparently can't because it has signed committment to the Benin government on the coast for most of its oil.
For now the refinery is stalled as a 100-150k bopd refinery needs 36-55 million bls/year. It just needs a sufficient oil supply.
A Nigerian investor Ibrahim Zakari (Blak oil Energy) was in the process of securing $2b worth of funding from international investors for the Katsina refinery.
President Buhari wants the refinery project to go ahead as it will bring something like 2,500 jobs to the Mashi area in Katsina.
Meanwhile Nigers President only recently said, in in a few years they hope to be an OPEC member and producing 500,000 bopd ? Where's it coming from and where's it going to go?
Niger and Nigeria obviously need this mutually beneficial major project or as many as possiblefor Niger to produce those sort of numbers - all good for the likes of Savannah Petroleum.

Back to SAVP -The Savannah Nigeria subsidiary Chairman is lawyer Muhammadu Dikko Ladan and is from a long line of Emirs' in President Buharis home state of Katsina. Muhammadu Dikko stadium in Katsina state is the 5th largest in Nigeria. He was also appointed as an honorary consul by Niger to the UK in 2011. Imo an extremely important figure with significant connections for Savp that we have actually heard little about until i suppose the Seven Energy deal is fully ratified shortly but should prove very positive and helpful for our operations in Niger and turning Savp into a major company.

Thanks H1066,
that's certainly a lot more positive on that front with some of that out of the way.

Going on 2 months since the 15th July seizure by SMP. I would have thought the company would have been quick to announce anything positive from this if the order had been lifted by now ?

The last payment from the Government was 28th June of $850k with a remaining debt of $5.1m

28/6/19 "SNPC has confirmed that it will continue to make payments on a monthly basis".

In light of the issues with the drilling contractor and court case, freezing of assets - does the company have a bank account where the government can actually pay any cash to other than the UK where that might not be permissible ? If the government confirmed 2 and a half months ago that payments would be monthly - why nothing further ?. I can't see them converting the balance into licence equity unless there's a hefty renewal fee built into the discussions which will eat it up.

"The Company is seeking the revocation of the order at a hearing in Pointe Noire this week on several grounds including that the equipment and oil at the site is the joint property of SPNC, the Government (in the case of the oil) and the Company, and therefore has been wrongfully seized. The judgment of the court may take a few days to be delivered. The Company has been advised that its application for the revocation of the order has merit."

While AAOG says the oil and assets also belong to the SNPC/Government, it should be remembered that SNPC/Government/AAOG are the partners in the licence and well - ie SMP was carrying out drilling for them all so perhaps have a right as seen fit by the court to grant a full seizure order. If the government was until recently paying its back drilling costs then surely it's liable as a partner and therefore part of the seizure by SMP as granted by the court. Strange there has been no court update and no further payments made whenever AAOG stated that the government confirmed it would be making further payments only for the court seizure order to blow up 2 weeks later.

Sorry tiptop but that's a poor reference and a starting point needs to be some level of reasonable reserves to be found which imo aren't close enough to warrant anything near that especially with what the original IPO CPR was in terms of payzone estimates. Another thing to bear in mind the Djeno isn't as straight forward as some might think.

"If next door is selling for $800m for 25% of the field, thats only a Djeno discovery with 5000bopd,. So imagine this BB with a 20,000 bopd Vandji discovery plus our Djeno !!!!

It's not $800m based on a 5,000 bopd Djeno reservoir - it's based on 25% of 1.3 bboe P2. (ie circa 325 mmboe) or $2.46/boe which is a producing barrel price.
'.......includes five discovered fields with combined proved and probable resources of 1.3 Bboe.
Nene and Litchendjili currently produce 28,000 b/d of oil (mainly light and low-sulfur) and gas condensate, and 1.7 MMcm/d of gas. '
Jean-Baptiste Bouzard, senior research analyst, said the transaction price is more than $400 million below the consultant’s valuation.
This can be partly explained by New Age’s view of the development costs associated with complex reservoirs,"

https://www.offshore-mag.com/regional-reports/article/14034663/lukoil-farms-into-oilproducing-permit-offshore-congo

I can see three institutions with significant increases since the start of the year and last issued TR1.

Ashmore 28/1/19 = 35,117,945. 11/2/19 = 25,065.235. Now = 38,548,280.

TT International 19/11/18 = 41,176,873. Now = 64,701,403.

J O Hambro 4/1/19 = 40,867,584. Now 57,962,053.

There is an unrisked target of 185p which includes Accugas ahead of 5 Niger frills and Uquo.

Notably it only includes our own Uquo area low risk exploration of 96.5 mmboe gas and just 5 more of the prospects in Niger ie Amdigh deep, Eridal North, Kunama West, Etifal and Mujia.
The 5 Niger wells are targetting a combined 167.4 mmbls unrisked at 60.4p. 3 of these are at least in the sweet spot adjacent to and under existing discoveries.
There is still a further 108 mapped (so far) Niger prospects to drill beyond that.

If 167.4 mmbls unrisked carry a target of 60.4p, then the total 4 billion+ bls unrisked would equate to circa £15.00. (If farmed out at 30-50% = £7.50 - £10.50 unrisked plus Nigeria ops of a further 125p unrisked).

The 2.8 billion bls risked recoverable figure - ie 2660 b/bls net 95% interest would equate to £9.60 (If farmed out at 30-50% = £4.80 - £6.70 target to Savp plus Nigeria ops risked @ 102p) .

An overall risked target on a 30-50% Niger farmout along with Nigeria Ops = 580p - 770p. (For Unrisked see above).

You can see how there is significant room to farm out 30-50% and still have significant upside as well as benefitting from the reduced drilling costs and any net cash inflow it would bring.

Also with significant cash flows this makes no account of any new acquisitions/partnerships in the next 2 years or future share buy backs etc of which i've based my 200p target and using circa 1b shares in issue .

200p target is barely 5 X the average that the institutions have paid and under 5X for the board incentives.

Me too. Those discoveries are in the sweetest spot (100% success rate compared to the Chinese at circa 93%).

With the sheer amount of oil generated from the source kitchen and expelled throughout the basin imo it bodes well for deeper discoveries also.
Savp still want to remain operator one of the reasons they are not at the mercy of someone elses timetable.

Should add that from memory the Chinese were concentrating on the Sokor Alterances because well drilling was an average of 3 weeks and around $3.5m/well.

I think it was 2017 news began to filter out more about the deeper potential and I can remember specifically a broker reporting from an African press article about 2 deeper discoveries made by the chinese with around a couple of hundred million bls.

Agadem

From 109 discoveries, Oil pay was found in -
Upper Sokor = 6.
Sokor Alternances - 103.
Madama 1.
Yogou 14.
Donga 1 (deepest).
1 pinch out stratigraphic oil discovery in trapping shales.

Bushiya targets primary Sokor Alts. Secondary Upper Sokor . (S.A discovery)
Amdigh, Kunama, Eridal, Zomo ditto re targets/discoveries.

From memory and without re-reading the CPR i think it was expected that these were the only viable targets in those wells at anticpated drilling depths at the time. It's possible that the lower yogou (not upper) overlapped as potential Upper Sokor potentail ie secondary target as these are in very close proximity in some of the wells.

What's most interesting is from 3 of the discoveries they said this in October last year "PSDM is also anticipated to significantly enhance the 3D imaging of the as yet un-drilled deeper Cretaceous aged Yogou and Donga exploration targets identified on the existing data set (including potentially significant structures underlying Savanah Niger's Amdigh, Bushiya and Eridal discoveries)." So they definitely didn't drill into all potential targets.

The Yogou is the 2nd biggest in terms of the number of discoveries but it too is only lightly touched to date in the basin.
So additional targets yet to reach as well as potentially 'significant' deeper structures still to drill below the existing discoveries.

Previous presentation (5) highlighted signficant gas sales growth potential upon acquisition of additional upstream gas resource. (Intend to buy more gas assets - current fields most likely guarantee/satisfy long term supply agreements to existing contracted anchor customers). Some use of future free cash flow for additional reserves.
On Significant spare infrastructure capacity (24) -
The gas processing facilities have circa 25% upside for gas throuput versus current contracted volumes. (Beyond that i beleive bolt on/modular expansion system ?).
Pipeline delivery network has 160% additional throughput availability.
40 TCF undeveloped gas located in the surrounding area (6.6 billion boe).
With Siemens etc/contracts awarded recently to deliver more infrastructure - Savp slide 24 shows projected electricity demand to grow significantly under "huge energy demand forecast".
Accugas is the only significant gas processing and transportation system in the South East of the country - would cost in excess of £1 billion just for infrastructure to play catch up for a competitor and likely pointless and why ?.
Compelling switching economics (never mind environmental) from diesel @ $10/mcf equivalent to gas @ $3.50/mcf.
Niger 119 drilling prospects mapped so far.
6 proven play types within many of those prospects yet only 1 materially explored (ie Sokor Alternances).
Oil shows and discoveries have been found across the entire "length and breadth of the entire basin". "All wells drilled have found reservoir in the Sokor Alternances" .
Under the terms of the PSCs, the petroleum code of Niger and its decree, Savp has rights of access to 3rd party infrastructure.
With the English courts due out of recess end September it should be completion in entirety very soon afterwards.
Niger Farm out potential could gather pace now deal closure is imminent.
Over time i expect the risked value for Nigeria to increase from the current 55p to more than double giving the opportunity. It's not being purchased to stand still and is a major growth driver for the company.
The Niger prospects (119 so far) are capable of delivering many multiples in new discoveries to the 100% success rate so far on 5 out of 5.
Solidly backed by blue chip institutional investors and World bank with World bank and Standard Chartered gas payment guarantees.
81p current fair value by Mirabaud which i expect to see steadily increased over the next 24 months particularly with more successes expected to be replicated in Niger. Other than Guyana at the moment where else has such a high consistency for material drilling success and a 2.8 billion bl already risked (4 billion unrisked) mid case recoverable figure.

They intend to pick up further assets and imo they will need to if they are serious about expanding the gas supply business which is part of their goal.

In Nigeria there is some 40 TCF gas in the vicinity of their pipelines that could be tied in. That's some 6.6 billion boe.
There's also opportunities for partnerships and/or acquisitions/marginal oil fields etc so plenty of scope to put some of that free cash to work and create further value in Nigeria.

Well costs to the Sokor Alternances in Niger are circa $4.5m and range from 23 - 30 days.
$100m could drill perhaps 20 per year.

Perhaps with such a high resource number (4 billion unrisked/2.8 billion risked mid case on all plays) they may farm down. Previous talk of $100m+ for a farmout of up to 50% and Savp remaining operator - theoretically at 50% farmout it would reduce the cost of ongoing well drilling accordingly to circa $2.5m. The Sokor Alternances have historic 80% success rate (Savp 100% so far with 5 out of 5).

In the coming weeks, perhaps the company will be better understood at how good the opportunity and potential is and significantly re-rate in the process. Imo should certainly be closer to Mirabauds 81p valuation issued today …. "we believe today should mark the start of a re-rating to our fair value target price of 81p/shr."

Over the next 18-24 months I hope to see 200p as we should have a significant number of new wells drilled (additional oil discoveries) in Niger along with production and new customers added in Nigeria as well as a ramp up in Stubb Creek oil production.

Last time I enquired about what was happening to ongoing cash flow it was supposedly also reducing debt so beneficial to us ultimately anyway as Savp takes it over. From memory I think there was an additional gas pipeline under construction.

In Q1 production was circa 17,700 boepd. There are Take or Pay contracts in excess of this meaning the customers concerned must pay for it whether they take the gas or not versus Daily contract quantities.

2 power stations customers at future full dispatch have the potential to accept up to 45,000 boepd on their own.

1. On completion, there will be a cash injection of $50m-$70m (of which they had previously planned to pay the 1st dividend of $12.5m).

2. Should be ongoing free cash flow of circa $10m/month from Nigeria (circa $120m/yr to start).

3. EP System from Niger on 1st 1k bopd was to give up to $10m/yr (truck).

4. Moving to 5k bopd via pipeline should see that provide potential $50m/yr.

They've also got a $50m facility from an oil trading group.
Unknown is the possibility of a Niger farm out for cash or continue to go it alone.

In the 1st year alone they should have around $200m available cash imo to spend ie from the immediate cash injection and the 7E cash flow. If you add in the $50m available funding from the oil trading group = possible $250m means they might not need or want to do a Niger farm out, but if they do it could attract perhaps a further significant amount of cash.

If they move to the 5k bopd in Niger further down the road and along with the 7E cash flow it might mean ongoing free cash of around $200m/year before any further growth increase in Nigeria.

Re my 200p target that I am following -

Mirabaud valuing the Nigeria portfolio at 56p share.
Also valuing the Niger discoveries to date at 29p.

Savannah beleive there is scope for multiple replication for success given the very high COS rating as evidenced by a 100% drilling success rate.

If the 5 Niger discoveries are replicated to 25 discoveries in total (from over 100 prospects/leads) = 145p + Nigeria portfolio at 56p = 200p which I have always believed is very achievable.