Member Info for ZENGAS

Given the high free cash generation and the fact that they are looking at a number of other assets, I would expect that they will acquire another substantial production asset and that guidance figure will have changed significantly long before then.

The CEO talked last month of one way of rewarding shareholders early was through a dividend which he outline at the time of the UK listing. Taking the sheer amount of free cash flow over this year alone, a dividend of just $6m (£4.61m) would pay out 3% at the UK listing price or 1p/share and based on just current production profile.

Production is expected to increase by 25% this year just from 2 infill wells plus a further increase the next 2 years time to 23-24,000 boepd (some 10-11,000 boepd more than now).

Target is to reach 30,000 boepd by 2023 "Balanced portfolio of oil and gas production reaching c.30 mboe/d by 2023" (Page 20 December 2018 presentation).

I posted this on the 1st Jan on ad v fn and my thoughts also on the warrants. I believe it's significant that Hambro have gotten hold of some 40.8m shares at this moment in time given the growth potential on the shares plus serious dividend potential in the context of anticipated free cash flow guidance. Unless a placing (at a premium), there won't be a better time to get significant stock at 35p for both potential capital growth and dividend payout other than trying to buy in the open market. If the institutions are looking at the detail, the original deal has been much improved on in terms of expected free cash flow, so appears much more attractive now in terms of potential returns than 12 months ago. Therefore will they/won't they exercise ?

"My view is, if 950m shares in issue post warrant expiry. Having a 250p target share price is about £2.375b ($3.2b) m/cap target.

Generating target $200m annual free cash flows with future visibility beyond that as production increases. Maiden $12.5m div promised.

If £500m/$650m attributed for 75% Accugas unit (balance of m/cap =£1.875b/$2.55b).

Current 185 mmboe 2P/2C.
Based on $2.90/boe farm out of Uquo x 75 mmboe and $4/b for Niger oil (company using $6/b) and 52 mmbls net currently = $425m (balance of m/cap = $2.1b).

Up to 500 mmbls discoveries at $4/b part from Niger and part from Nigeria 2C conversion to 2P to make up balance of m/cap. (If the company attain $5-$6/b that's 330 - 400 mmbls needed imo).

500 mmbls is less than 20% of mid case Niger risked 2.8 billion bls recoverable. Also known that there is circa of 1b bls recoverable risked in the Sokor alternances alone at up to 93% high COS (100% success rate so far).

Mid case is 6.9 billion bls recoverable unrisked with a risked recoverable of 2.82 billion bls. That's $11-$17 billion of 'risked' oil value in the ground at $4 - $6 per barrel. Imo we need about $2 billion of that to justify 250p target which in the pre Christmas interview was described as "a very large asset, very low risk. See a lot of growth through the drill bit and expanding that resource base out".

High case is 10.32 billion bls unrisked with 4.2 billion bls risked recoverable.

Also likely to buy stranded gas assets cheaply to run into Accugas network thus increasing valuation (from a pool of 40 TCF ie 6 billion boe of discoveries and 2C). With Accugas being the only major outlet in proximity to monetise the gas, i can see them adding a few hundred million boe at some point.

On a future 250p target and 3% dividend ie 7.5p/10c per share = $95m worth of dividends which is about 30% of a future $300m free cash or under 40% of free annual cash flow at $250m/yr.

If the warrants are exercised it will give the company significant additional cash - up to $58m. The warrants at 35p offer exceptional potential for appreciation while also benefitting from strong dividend potential - something for the institutions to ponder this month in the run up to Feb

Huge vote of confidence.

5% = 40.8m.

They've never been on Savps major shareholder list before of those above 3%.

With the CEO saying 2019 is expected to be a transformational year for the company and Malcys interview saying it was one hell of a business being built, worth reflecting on what we are actually now on the cusp off.

Imo this is the NET P2 and 2C and exploration that Savp will now have.

Uquo gas/condensate 2P = 70.6 mmboe.
Stubb Creek oil 2P = 4 mmboe.
Total 2P = 74.6 mmboe.
5 Niger discoveries = 52 mmbo moving to early production.
Uquo 2C = 9 mmboe.
Stubb Creek 2C = 49.5 mmboe.
========================
Total 2P/2C = 185 MMBOE.
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Uquo exploration upside = 72 mmboe.
Also some Stubb Creek reservoirs not included in the original CPR.
Niger exploration of greater than 2.5 billion bls recoverable and that's the risked number.

Going forward -
$50m Oil Trading Group drawdown facility.
$70m from Uqo farmout.
$10m/month approx (free cash flow worth $115m for 2019).
Possible total range of $235m cash availability.

Additional circa $10m free cash flow/yr for eack 1k bopd Niger EPS. (Planning to reach 5k bopd in 2019).

Other cash sources potential 2019 -
Up to $58m from warrants meaning c950m shares in issue, 5 weeks left to exercise.
Farm out a % of Niger - surely worth minimum $70m on par with Uquo.
Perhaps an additional cash pile of over $100m in the wings to the $235m above ?

In 12 months free cash flow could be running at $200m+/yr ie over $16m/month and in turn what might this buy or do ?

Would have thought on the 2019 cash flow and available cash, the company could drill a significant number of wells ($100m/worth ?). CEO did say in Q3/18 he hoped to see 2 rigs back end of the year and latest is currently operations in Niger to start mid Q1 (Mid Feb ?).

Also if a future 25-50% Niger farmout, then this also reduces the cost of a $5m Sokor Alternances well significantly and these are the lowest risk wells (ie down to circa $2.5m - $3.75m per well net).

"One of the things we committed to our investors at the time of the capital raising was to consider and put out a statement around dividends. As a business model, we are generating a lot of cash and that's one of the ways we can give an early reward to our shareholders."

Jadestone CEO interview 11th December 2018

https://www.brrmedia.co.uk/broadcasts-embed/5c08e52e96a7b725bb67c2ce/?event&popup=true

and in backing my investment rationale up -

During these renegotiations, we've seen institutions adding (where the sales came from is anyones guess - forward selling of some minorities/parties to the transaction?). It's also one of the most heavily invested companies by a wide range of institutions. Once the transaction is concluded, hopefully the potential will transform into a future 10 bag opportunity and it's certainly got the forward cash and assets to do so, as well as the promise of a $12.5m 2019 dividend, which should be even better on less shares in issue and favourable exchange rate.

Re Fridays RNS and the $70m cash payment to Savp ($54m + $16m) by Africa Investment Managers. It's through the sale of an interest in Uquo to AIIM and not a placing of shares to them in Savp plc (which i miss read).

I was working on the basis of last Decembers deal document which would have seen circa 1145m shares in issue including warrants.
Currently 817m shares in issue.
Six and a half weeks left for 133m institutional warrants to expire at 35p exercise price.
Warrants would generate £46.5m/$58.5m (£1/$1.26) and equal 950m shares in issue some 200m less than the 1145m originally envisaged. If bulk of those warrants not taken up would mean we are still around the 817m shares in issue.
Transaction closure would see $115m/yr (this current year 2019) from Nigeria ie almost $10m month free cash flow (not counting early production scheme from Niger Q2/19).
Nigeria free cash flow to $153m/yr in 12+ months time = almost $13m/month + Niger at 4-5 X increase.
$70m of near immediate cash ($54m+$16m) re 25% Uquo sale to AIIM.
$50m draw down facility available from Geneva based funder.
$10m monthly free cash from Nigeria.
Warrants = more cash but more shares if exercised (ie upside of circa max $58.5m additional cash + 133m shares = 950m total shares).

So going forward about $120m of cash + $10m/month ie $240m free cash over the next 12 months and surely enough to put a huge future dent in Niger drilling. This is without any allowance of any Niger farmout, or Niger production or warrant exercise.

Given the Niger target of 2.8 billion bls risked recoverable @ $4/b in the ground, a success on under 20% of that - ie 500m bls would mean a share price target for Niger alone of 188p (817m shares) or 162p (950m shares) using an exchange rate of £1 = US$1.30. The company is using a figure of $6/barrel (I've used $4/b) so those share price targets could be 25% more at $5/b and 50% more at $6/b .Without a farmout there is some serious headroom for success based on the 2.8 billion barrel risked number (The unrisked numbers being much higher). Also where else do you get exploration potential with 80% COS (100% so far).

The Nigeria business of both up and downstream should be worth 100p in its own right as it evolves, given the cash flow, reserves, distribution business etc and cost for any competitor to develop a similar foot print.

Previously i was using 200p combined for moderate success, so now believe 250p is more realistic considering all of the factors above.

Enlargement of the acquired assets by 35% NPV from $757m to $1.023 billion.
Forecast cash flows to increase by 58%.

Production/Supply potential = circa 37,500 - 45,000 boepd just for the 2 power stations not counting 9,700 boepd contracted to Ibom and Lafarge.

$54m subscription for shares in Savp by AIIM (Plus possible further $16m to Savp/shares issued). Interesting to see at what price and if these are at the planned 35p level when the deal was first announced. I beleive it was up to $90m then at 35p.

Free cash expected to rise this coming year from $78.5m to $103.7m an increase of 47% (then $120m, $131m and $138m ie increases of 57% to 68%).

Transaction completion expected end of January updated with these changes.

Also worth noting that 133m x 35p warrants expire in 7 weeks. (The less taken up the better in keeping the shares in issue down from the originally envisaged 1145m).

Mid H1 for Niger well test = circa March (after deal completion/AAIM funding/supplemental adm doc).

Good deal for circa $1b of value though has taken time to iron out and Niger in it for free while we still have 100% of upside there at this point in time.

I got 200k in 4 lumps from 23.9 - 24.5p which is 40% upside to the 35p placing.

I see them needing circa 75-95 mmboe at this m/cap ($4-$5/b) and fully diluted on the 7e issue.

From the conference call and for anyone who didn't listen in

Cash $74.3m.
Net Debt $52.7m which excludes $10m used for a supplier guarantee (ie $42.7m).

Oil down at $50/b -self funds everything and cash flow positive.
50% of production hedged at $74.30/b for all of 2019.
50% of poduction hedged at $68.45/b for Q1 2020.

Intend to drive costs down further both at Montara and Stag.

Biggest suprise was that as they understand more from the Montara field is that they may need to drill less wells than actually expected. In an answer to question from Steiffel Europe rep - 'Without question all of our wells are producing ahead of expectations'.

Existing well stock under utilised. Can open up the heel of one well to drain a different area rather than having to drill a new well. Some wells may be worked over to increase production without the need for new wells but there will be at least 2 Montara wells to be drilled - one in the western portion of the Montara field, the other at Skua field which is a crestal well. (Think the current number was 5 new wells so this would represent a massive saving on new wells if down to just 2 + 3 workovers instead). Talked about 3 well workovers where everything is basically ready to go and after Montara back up and running (question by Sexton?).

Sourcing a rig potentially from 2 other suppliers due to current rigs option exercise under contract at current oil company ie Q1 for Stag.

Current shut down works at Montara have a cost of $3.7m but will result in savings of $5.5m/year.

Ogan Komering pencilled for Q2.

Vietnam sanction Q3 for 200 BCF 2C ie 33 mmboe to P2. As they have 100% they may consider farming that down when it will be more valuable post development sanction as they intend to expnad the business.

Describe themselves as significantly undervalued to peers. $1 billion of possible value and without Ogan Komering and some of the other assets. Valued at just 38% of current P2.

Continual buying by TT International taking their holdings to 41.176m as of todays RNS by adding 350,000 but no mention of them picking up a total of almost 8m more since the last RNS on 21/8/18.

On the 21/8/18 TT increased from 32.595m to 33.454m so have added almost 9m shares in 12 weeks.

On 9/10/18 Savps updated shareholder list showed TT Intl holding 36.7m so in the last month have added 4.5m shares alone.

Astute management and nothing lost. By shutting down now it saves having to pay a $10m production contingency to PTTEP by staying under the threshold where that would kick in.

At 10,300 bopd over 12 months and no shut down it would have triggered a $10m payment to PTTEP. (3.75 - 3.95m bls).

Also cancels out the lesser $5m payment (3.55m - 3.75m bls).

335 days of approx 10,300 bopd = 3.45m bls.

Waiting to see the outcome of the Ogan Komering farm-in this quarter.

No reserves given or in JSEs current P2 but an indication of what's there in the June presentation.
Gross production was approximately 2800 - 3000 boepd (65% liquids).

The June presentation showed gross 100 Bcf gas for the Jantung Baru, North Meraska and Bandar Agung discoveries on Ogan Komering ie 16.6 mmboe.

Exploration upside 90 Bcf gas and 20 mmbls oil = 35 mmboe gross.

They needed to back it given they hold £12m worth of Savp shares

Africa Oil and Power

4/11/2018

Fortune Favours the Bold in Niger

The story of oil exploration in Africa is one of many failures and victories, of bold bets in unexplored areas that have brought great returns, of lands where only a bold few decided to venture in the search for riches. This has been the story for many of Africa’s current oil and gas hotspots. It is hard to imagine that at one point in time, no one believed that Equatorial Guinea had oil or was even willing to try to find it. Sudan, Chad, Kenya, Uganda, Tanzania, Senegal, Liberia… they are all in one way or another, nations whose potential was for a long time snubbed by international oil and gas companies, until one bold player took the chance.

The Republic of Niger is the newest country in this list, and one that is attracting more and more attention. Just since April 2018, junior British independent exploration and production company Savannah Petroleum has recorded five consecutive commercially viable oil discoveries in its R3 and R4 Production Sharing Contract areas in the Agadem Rift basin (ARB), in the Southeast of Niger.

Savannah’s successes over the last 8 months have not gone unnoticed by oil players in the region. Just this week, Oranto Petroleum, Africa’s most prominent indigenous oil and gas company, through its chairman, Prince Arthur Eze announced the signing of a memorandum of understanding with the Ministry of Petroleum of the Republic of Niger for the acquisition of blocks R5, R6, Dibella and Dallol in the Tenere and Agadem Basins. Both R5 and R6 border Savannah’s other exploration licenses in the Agadem Basin, R1 and R2

Oranto’s move is symptomatic of the growing profile of the Republic of Niger as an oil and gas frontier market. It is likely that we will witness similar moves by other international oil companies in the months to come. Years from now, we’ll look back and be surprised by how long it took for oil companies to explore a country that was so evidently rich in oil, bordering Chad, Nigeria, Algeria, Libya and Congo, all well established oil nations.

The true player that took the risk of exploring in the Republic of Niger when everyone else had given up was not Savannah or Oranto, but the China National Petroleum Company (CNPC). In fact, history will tell how there was a before and after CNPC in the Nigerien oil industry.

Between 2011 and 2014, CNPC has made 95 discoveries from 129 exploration wells, confirmed over one billion barrels in oil reserves and has completely changed the profile of the Republic of Niger as an oil nation.

Full article https://africaoilandpower.com/2018/11/04/fortune-favours-the-bold-in-niger/

and my personal £2 target (possibly £5 stretching it, if no takeout early such as Caracal by Glencore).

Posted this re my £2 target 21/9/2018 -

As for 200p, I'm using the full diluted share issue in my calculations and the introduction of new money.
New money may happen fully, in part or may not.
Just 4 months now until the warrant exercise for those that want to or not.

Investors are getting excited over at Eco Atlantic at £80m and 15% interest at Guyana for potentially 450+ mmbls net across 9 prospects from memory. No production and of course plenty of upside and good COS on some of those but risk at that m/cap is no asset to fall back on if a dent in drilling results.
In Comparison we won't be far off 30,000 boepd, 100 mmboe 2P (possibly 200 mmboe 2P/2C already given latest 4 Niger discoveries) paying a dividend, generating significant cash and a 20% seperate interest in a significant gas business.

Current m/cap £216m at 26.5p and exposure to 7 billion bls mid case unrisked (2.8 billion bls risked). No other company has that level of exposure to such significant resources.
CPR Valuation on Nigerian assets was $663m/£490m (what value now with 20% greater 2P/2C ?).
Applying the fully diluted 1145m shares - that CPR valuation would be 43p for Nigeria before any pick up in development and bringing both segments of that business forward post takeover. They have told us that basically the company has 2 seperate business operations and no reason that they can't drive the Nigerian side to around 100p of value fully diluted.

There also has to be some value for any additional money brought in as a result of the greater number of shares (if that happens).
That leaves Niger not priced in at all - not even hope value such as Eco has.
Where else do you get 7 billion bls unrisked exposure (2.8 billion risked) mid case and such a high COS as already demonstrated in the 100% exploration drilling success so far with 4 discoveries ?
They are using a valuation of $6-$8/b.
Using $5/b instead, every 100 mmbls = $500m/£370m (using £1=$1.35). On 1145m shares that is 32p/share.
Just 350 mmbls in Niger at my $5/b and not the $6-$8/b used gives 112p.
Even 700 mmbls on a 50-50 farm out basis is only 25% of the risked figure and 10% of the unrisked figure. (There's actually a 450p potential value on a 50-50 farm out on the risked figure using $5/b and not the $6-$8/b that the company and some analysts are using. That's also not valuing the impact of any farmout cash/reducing our costs). So if you add Nigeria to that it's in excess of 500p.

Using the above gives me my £2 investment target with plenty of upside beyond that. I believe in time Savp will become a takeover target.

I posted this on 20/8/18 and again on 12/9/2018.

Since then they have arranged $50m of borrowing with an oil trading firm - so forms part of the up to $100m i beleived they could get access to.
====================================================================

' You have to take into account what effect new money could/will do for the company?

Diversify into additional ssets ? (in turn generating more value or cash if production)
Potential money from Asma of $30m + $60m = $90m.
Potential exercise of institutional warrants = $60m.
Possibility of $150m - $250m Niger farmout and whether they want or need it ? (but doesn't do any harm to derisk, ie take in some cash without all your eggs in one basket there, given there's a huge 2.8 billion bls risked number to go for. You could apply some of that cash to somewhere/something else.

All of the above is $300m - $450m potential new money not counting possible borrowing potential of perhaps up to $100m+ (possible cash availability up to $400-$500m).

Cash value alone could be worth the current share price.

That's why i think AK meant by having plenty of corpporate options or similar to that affect.

In turn if the transaction is signed off that will provide up to $100m/yr cash flow. That cash flow and early start up of production in Niger would more than likely finance all of Savps drilling in Niger.

Drilling another 25 wells in Niger is about $100m minimum to the sokor alternances without flow testing them all. Possibly another $20m+ on 3D and i would expect the EPS up and running from borrowing while it in turn generates revenue. That might eat up $150m minimum of the farm out if it happens. Cost of ongoing wells expensed on a 50-50 basis if it was 50% farmout. '

Not me older. Don't know where that came from.

feelinlucky,

It's supposedly going to Katsina state a much shorter distance than Kaduna (new proposed 150,000 bpd Katsina refinery). This is to capture an oil supply from Niger. Apparently the Nigeria would have to supply a lot more oil just to match 10% of Nigers oil for blending in the Kaduna refinery and apparently wont be done.

Africas richest man, president of Dangote Group has supposedly arranged $4.5b for it including the World bank

This will be in addition to the Niger pipeline route into Benin straight down to the port of Cotonu.

https://guardian.ng/news/nigeria-niger-republic-sign-pact-for-new-refinery-in-katsina-state/

Also the AEI article the other day is more than very interesting given they named Socar Oil Trading as the $50m lender to Savp. The 2 brothers mentioned in the article have stakes in Savp. Socar Trading is a subsidiary of the Azeri state oil giant Socar.

Socar were looking to build an oil terminal in Cotonu Benin. Socar Trading have first call on Savps Niger oil and any other in Nigeria (other than Stubb Creek)

"....the Lender will be granted a right of first refusal for any of Savannah's oil trading activities for a period of five years in Nigeria (excluding those in relation to the Seven Assets) and in Niger (for any oil produced from the R3/R4 PSC and exported to an internationally recognised export terminal only)." So where will the internationally recognised export terminal be ?

Late 2016

Azerbaijan’s energy giant SOCAR may soon expand its activities in the West African countries.

The company reported that it may consider the possibility of constructing an oil terminal in Cotonou, the largest city and economic center of Benin.

The visit is expected to create perspectives for the supplies of Azerbaijani oil and oil production to the markets of West Africa, implementation of energy projects. Moreover, it will strengthen prestige of Azerbaijan and activate commercial operation of SOCAR in the region.

SOCAR expanded its presence in Africa in 2015 by buying a 20 percent stake in Benin's Octogone Stockage de Produits Petroliers that engaged in crude storage. The project became the first direct investment of the SOCAR in West Africa.
https://www.azernews.az/oil_and_gas/105141.html

paralise - see below - Socar Trading. That's the AEI article in a nutshell.

feelinglucky what's Niger State in Nigeria relevance ??

is supposed to be the Geneva based oil trading firm that is behind Savps $50m funding reported by AEI.

Socor Trading is a wholly owned subsidiary of the Azerbaijani National Oil Company Socar.

According to AEI Turab Musayev is an executive of Socar Trading and also a shareholder via his private equity firm Luzon Investments.

Turabs brother Taleh also holds shares in Savp via his firms Aralia Capital and Peleng Holding. His share has reportedly fallen from 9% to around 2.5% but what the AEI article does not say is if this was as a result of selling or if it was due to the subsequent increase in shares from first listing in 2014 to the most recent shares issues that may have diluted his firms holding.