Savannah Energy Regulatory News (SAVE)

29 September 2023

Savannah Energy PLC

("Savannah" or "the Company")

2023 Half-Year Results

Average Gross Daily Production up 12% YoY and Total Revenues1 & Adjusted EBITDA2 both up 8% YoY

Savannah Energy PLC, the British independent energy company focused around the delivery of Projects that Matter, is pleased to announce its unaudited half-year results for the six months ended 30 June 2023.

Andrew Knott, CEO of Savannah Energy, said:

"I am pleased to report robust results for the first six months of 2023, which demonstrate our continuing ability to deliver strong operational performance. Average gross daily production increased by 12% to 25.3 Kboepd, while Total Revenues1 and Adjusted EBITDA2 both increased by 8% during the first half of the year.

The expansion of our Renewable Energy division has continued apace, with several new projects added to our development portfolio in the first half of the year. We now have up to 676 MW of projects in motion across three countries as we quickly move towards the achievement of up to 1 GW+. At the same time, we continue to progress our proposed acquisition of PETRONAS International Corporation Limited's energy business in South Sudan, with the intention to publish an AIM Admission Document in Q4 2023.

We continue to deliver on our strategy and remain unequivocally an "AND" company, seeking to deliver strong performance both for the short AND long term across multiple fronts, and pursuing growth opportunities in both the hydrocarbon AND renewable energy areas."

Operational Highlights

· Average gross daily production from Nigerian operations was 25.3 Kboepd, a 12% increase from 22.5 Kboepd during H1 2022. Robust customer demand led to a 15% increase in gas production from the Uquo Field to 138.5 MMscfpd (H1 2022: 120.3 MMscfpd);

· Strong safety record, with our Nigerian operations recording one million working hours without a Lost Time Injury;

· Gas sold to eight principal customers, with a number of new and extended gas contracts agreed, including:

o  An agreement with Amalgamated Oil Company Nigeria Limited ("AMOCON"), whereby Savannah's Accugas subsidiary agreed to purchase up to 20 MMscfpd of gas from AMOCON over the course of the next ten years for onward sale to our gas customers (with deliveries having commenced in May); and

o  New gas sales agreement with Shell Nigeria Gas Limited ("SNG") and a contract extension with Shell Petroleum Development Company of Nigeria Limited ("SPDC");

· This strong momentum continued post-period end with contract extensions signed with Central Horizon Gas Company Limited ("CHGC"), First Independent Power Limited ("FIPL") and Notore Chemical Industries PLC ("Notore") for a total of up to 85 MMscfpd;

· Up to 676 MW of renewable energy projects now in motion, including agreements signed during the period for the up to 75 MW Bini a Warak Hydroelectric Project in Cameroon and for the development of two proposed solar photovoltaic power plants in Niger with combined capacity of up to 200 MW; and

· First disclosure report for Sustainability Accounting Standards Board ("SASB") published today here.

Financial Highlights3

· Total Revenues1 increased by 8% to US$138.7 million (H1 2022: US$128.7 million);

· Adjusted EBITDA2 increased by 8% to US108.2 million (H1 2022: US$100.3 million);

· Adjusted EBITDA2 margin strong and stable at 78% (H1 2022: 78%);

· Operating expenses plus administrative expenses4 of US$27.4 million (H1 2022: US$24.5 million);

· Profit after tax (including contribution from discontinued operations) of US$46.8 million (H1 2022 loss after tax: US$20.5 million); and

· Net debt position at period end of US$443.4 million (FY22: US$404.9 million) with Leverage5 broadly stable at 1.9x (Year-end 2022: 1.8x).

2023 Guidance

· Total Revenues1 guidance reiterated at 'greater than US$235 million';

· Group Operating expenses plus administrative expenses4 guidance reiterated at 'up to US$75 million'; and

· Total capital expenditures guidance reduced from 'up to US$60 million' to 'up to US$30 million', reflecting the rephasing of certain planned capital projects in Niger and Nigeria.

South Sudan Acquisition Update

Further to the Company's announcement on 27 July 2023, the Company continues to advance the various workstreams required to complete the acquisition of PETRONAS International Corporation Limited's energy business in South Sudan (the "PETRONAS Acquisition") and now intends to publish an AIM Admission Document in respect of the PETRONAS Acquisition on or before 15 December 2023, following such point the Company will seek restoration to trading on AIM of its ordinary shares.

Niger Update

Savannah remains committed to the 35 MMstb (Gross 2C Resources) R3 East oil development in South East Niger. As previously announced, the intention was to carry out a well test programme on our principal discoveries in Q4 2023. However, following recent political events, this timeline will be subject to further revision due to restrictions imposed by the Economic Community of West African States on Niger, which has resulted in the closure of the border between Benin and Niger. This has created logistical challenges for companies operating in Niger and, specifically for Savannah, in relation to the importation of the necessary equipment to complete our planned well test programme. A further update in relation to timing will be provided in Q4 2023.

Savannah continues to progress the up to 250 MW Parc Eolien de la Tarka wind farm project, with all key required studies either complete or at an advanced stage. Savannah also announced the signing of an agreement for the development of two proposed solar photovoltaic power plants, each up to 100 MW in scale, during the period and work is at an initial stage on these projects.

Divestment of Interest in COTCo

On 20 April 2023, Savannah announced that its wholly owned subsidiary, Savannah Midstream Investment Limited ("SMIL"), had signed a Share Purchase Agreement with the national oil company of Cameroon, Société Nationale Des Hydrocarbures ("SNH") for the sale of 10% of the issued share capital in Cameroon Oil Transportation Company ("COTCo"). The cash consideration for the shares was US$44.9 million and SMIL also retained the right to the dividend attaching to the shares up to the payment date of the consideration. Formal completion of the sale shall occur upon satisfaction of certain conditions precedent related to amendments to the bylaws of COTCo. Please refer to Note 20 of the interim financial statements for further information on the accounting treatment of the transaction.

Board Update

Following the Annual General Meeting held on 30 June 2023, Steve Jenkins retired as Chair but remains on the Board as an independent Non-Executive Director. Joseph Pagop Noupoué was appointed Non-Executive Chair, having joined the Board as a Non-Executive Director in April 2023. Sylvie Rucar retired as a Non-Executive Director from the Board post-period end due to personal reasons.

Fenikso Limited ("Fenikso")

As previously detailed, in 2022 Savannah invested approximately US$1 million ("the Initial Investment") in Fenikso (previously known as Lekoil Limited) and, under the terms of the restructuring agreements negotiated between Savannah and Fenikso entered into in December 2022, the Company will receive payments of up to US$16.3 million over the course of the next nine years. Post-period end, Savannah has fully recovered the Initial Investment with the receipt from Fenikso of payments totalling US$1.3 million to date.

Chad Assets Update

As previously disclosed in the Group's 2022 Annual Report, the Republic of Chad nationalised the Group's interests in Chad owned by its subsidiaries, Savannah Chad Inc ("SCI") and Savannah Midstream Investment Limited ("SMIL"), (the "Chad Assets") by way of a law passed on 31 March 2023 (the Nationalisation"). This confirmed an announcement of the President of Chad of 23 March 2023.

The actions of the Republic of Chad are in breach of the upstream conventions to which SCI and the Republic of Chad are, amongst others, party, together with a breach of the convention between Tchad Oil Transportation Company ("TOTCo") and the Republic of Chad. Further details are provided in Notes 2, 22 and 23 of the financial statements. Disputes under the upstream conventions and the TOTCo convention are subject to the jurisdiction of ICC arbitral tribunals, seated in Paris. SCI and SMIL have commenced ICC arbitral proceedings against the Republic of Chad to seek full recompense for the loss that they have and will suffer as a result of the nationalisation of the Chad Assets.

Following the period end, a dispute has also arisen among the shareholders of COTCo. SMIL has initiated appropriate court and ICC arbitral proceedings to protect its interests as a shareholder in COTCo.

For further information, please refer to the Company's website www.savannah-energy.com or contact:

The information contained within this announcement is considered to be inside information prior to its release, as defined in Article 7 of the Market Abuse Regulation No. 596/2014, as it forms part of UK domestic law by virtue of the European Union (Withdrawal) Act 2018, as amended, and is disclosed in accordance with the Company's obligations under Article 17 of those Regulations.

About Savannah Energy:

Savannah Energy PLC is an AIM quoted British independent energy company focused around the delivery of Projects that Matter in Africa.

Operational Review

Nigeria

Average gross daily production was 12% higher in H1 2023 with an average of 25.3 Kboepd (H1 2022: 22.5 Kboepd).

In the first half of 2023 a number of new agreements have been concluded, including:

· An agreement with AMOCON for gas produced in the OML 156 sole risk petroleum lease area. Under the terms of the agreement, Accugas has agreed to purchase up to 20 MMscfpd of gas from AMOCON over the course of the next ten years for onward sale to our customers. Deliveries commenced in April 2023, with an average of approximately 18 MMscfpd of gas purchased from AMOCON since commencement to 30 June 2023;

· An extension of the contract with SPDC was signed for an additional 12-month period, whereby Accugas is supplying gas to SPDC for use in off-grid power generation at the Shell Industrial Area, Port Harcourt, Nigeria; and

· A new agreement with SNG for gas supplies which commenced post-period end in August 2023. SNG is a fully owned Shell PLC company, incorporated for the downstream distribution of gas to industries in Nigeria, and currently operates a gas transmission and distribution network of over 138 km, together with several distribution systems in Nigeria.

This strong momentum continued post-period end with additional contracts finalised, including:

· An extension of the agreement with CHGC for an additional 12-month period, whereby Accugas is supplying CHGC with up to 10 MMscfpd of gas on an interruptible basis. CHGC is a major gas distribution company situated in the South-South region of Nigeria, operating a 17 km gas pipeline infrastructure network providing natural gas to industrial and commercial customers in the Trans Amadi Industrial Area of Port Harcourt as well as the Greater Port Harcourt Area, Nigeria;

· An extension of the agreement with Notore for up to 10 MMscfpd was signed for an additional 12-month period, and post-period end deliveries from July to September have averaged more than twice this at 26.3 MMscfpd. Notore is a Nigeria-based integrated agro-allied, chemicals and infrastructure company located in the Onne Oil and Gas Free Zone area of Rivers State in southern Nigeria. Notore's primary business is the production of urea, ammonia and NPK blend fertilisers; and

· An extension of the agreement with FIPL was signed for an additional 12-month period, whereby Accugas is supplying FIPL's FIPL Afam, Eleme and Trans Amadi power stations with up to 65 MMscfpd of gas. FIPL is an affiliate company of the Sahara Group, a leading international energy and infrastructure conglomerate with operations in over 42 countries across Africa, the Middle East, Europe and Asia.

Savannah continues to progress its US$45 million compression project at the Uquo Central Processing Facility. Following the front-end engineering and the associated order of long lead items, detailed design work has commenced and is on track to be completed in Q4 2023. The compression project remains within budget and startup is planned for mid-2024.

Chad

As noted, nationalisation of the Chad Assets occurred on 31 March 2023. Average (gross) production from 9 December 2022 until 31 March 2023 was 29.3 Kbopd.

Cameroon

COTCo owns and operates the 903 km Cameroon oil export pipeline and the Kome Kribi 1 floating storage and offloading unit, which transport and store oil on behalf of its customers who are in turn charged a transportation tariff. During H1 2023, COTCo transported approximately 135,705 bopd, with 26 liftings completed on behalf of its customers.

Renewable Energy Division

The Renewable Energy division has made significant progress during the first half of the year, with up to 676 MW of renewable energy projects in motion. Savannah continues to advance towards its short-term target of having up to 1 GW+ of projects in motion and it is expected this will be achieved in mid-2024.

Bini a Warak Hydroelectric Project, Cameroon

Progress has continued on the Bini a Warak Hydroelectric Project since the signing of the Memorandum of Agreement with the Government of the Republic of Cameroon on 20 April 2023. The up to 75 MW project involves the construction of a hydroelectric dam on the Bini River, located in the northern Adamawa region of Cameroon, and is expected to increase current on-grid electricity generation in northern Cameroon by over 50%.

Savannah hosted a successful site visit in May 2023 for key stakeholders and distinguished guests, including representatives from the Ministry of Water Resources and Energy, H.E. Kildadi Taguieke Boukar, the Governor of the Adamawa Region, together with local paramount and village chiefs. A drone-based topographic survey has been completed and hydrological measurements have been restarted. Design optimisation will be completed during Q4 2023 as we work towards finalising the development and resumption of construction of the project. Project sanction is currently anticipated in 2024, with first power targeted in the 2027 to 2028 window.

Niger Projects

Savannah's up to 250 MW Parc Eolien de la Tarka wind farm project in Niger, which has the potential to increase Niger's on-grid electricity supply by over 40%, made significant progress in H1 2023. All key studies required to achieve project sanction (including wind measurement, environmental and social impact, grid integration, security, cartography, road and aviation studies) were either completed or made significant progress. The preliminary on-site wind speed data measurements have proven to be highly encouraging.

On 11 May 2023, Savannah announced the signing of an agreement for the development of two proposed solar photovoltaic power plants, with a combined installed power generation capacity of up to 200 MW. During H1 2023 site identification work was undertaken and a grid integration study initiated.

Sustainability

In line with our previous commitments, Savannah is today publishing our first disclosure report in accordance with the SASB which is available to download from our website here.

We continue to progress our 2023 sustainability performance measurement and reporting in line with our sustainability strategy.

Financial Review

The table below provides an overview of our results for H1 2023 with a comparison for H1 2022 (from continued operations, unless otherwise stated):

Financial highlights

The Group reports increased Total Revenues1 of US$138.7 million and an increased Adjusted EBITDA2 of US$108.2 million. The 8% increase in both metrics is a reflection of the quality of the assets in Nigeria where we see continued strong demand for gas supply.

The Group's operating profit was 33% higher than the prior year at US$37.3 million (H1 2022: US$27.9 million). The increase resulted from a combination of the increase in revenues resulting from strong customer offtake partially offset by a 12% increase in operating expenses plus administrative expenses4. The increase in these costs is a result of the investment being made to further enhance the resilience, reliability and efficiency of the Nigerian assets and to support the ongoing growth across the Group in both hydrocarbons and renewable energy.

Revenue

Revenue during the period was 44% higher than the comparable prior year period at US$123.7 million (H1 2022: US$85.8 million).

As previously highlighted, it is important to note the impact of take-or-pay accounting rules under IFRS 15 on our Income Statement as regards to revenue recognition for our gas sales agreements. The Revenue shown in the Condensed Consolidated Statement of Comprehensive Income includes only the gas, oil and condensate that has been delivered. The Total Revenues1 of US$138.7 million (H1 2022: US$128.7 million) includes the volume of gas that customers are committed to pay for under the take-or-pay terms of the gas sales agreements, which includes gas that has been delivered plus gas invoiced but yet to be delivered, plus oil and condensate revenues.

Savannah continues to benefit from over US$3.7 billion of contracted future gas revenues in Accugas with annual price escalation clauses related to US consumer price inflation.

Cost of Sales, administrative and other operating expenses

Cost of sales amounted to US$35.5 million (H1 2022: US$33.1 million) which includes US$14.9 million (H1 2022: US$13.8 million) for facility operating and maintenance costs, US$2.7 million (H1 2022: US$2.9 million) royalty expenses and US$17.8 million (H1 2022: US$16.4 million) depletion and depreciation. 

Administrative and other operating expenses for the period were US$14.3 million (H1 2022: US$11.7 million), which includes US$1.8 million (H1 2022: US$0.9 million) of depreciation and amortisation of intangibles. The increase in these costs was driven by the investment into new business activities and the increased scale of the business as it grows to support the operations across both hydrocarbons and renewable energy.

Adjusted EBITDA2

Adjusted EBITDA2 increased to US$108.2 million (1H 2022: US$100.3 million) with the increase being driven by higher overall Total Revenues and continued strong management of costs.

Finance Costs

The increase in Finance costs to US$51.8 million (H1 2022: US$36.8 million) is a result primarily of higher underlying interest rates combined with an increase in average debt year-on-year and. The average interest rate was 13.4% (H1 2022: 10.7%) reflecting the higher US LIBOR rates during the period compared to prior period. 

Foreign Exchange loss

Foreign exchange losses amounted to US$54.0 million (H1 2022: US$0.8 million). These losses are unrealised losses which occurred following the harmonisation of the various exchange rates which was implemented by the Central Bank of Nigeria in June. The impact of this decision saw the official Naira/US$ exchange rate move from approximately 460 to 755 at 30 June 2023 and this required Savannah to revalue its Naira denominated assets and liabilities at this new rate when preparing US$ denominated financial statements.

The principal Naira denominated asset on the balance sheet was cash and this reduced in US$ terms by US$66.5 million when it was translated. This was partially offset by the reduction in Naira denominated liabilities which included borrowings and trade payables.

Whilst the harmonisation resulted in a material unrealised loss, the Naira devaluation which has occurred will be positive overall as it is anticipated that this will lead to enhanced market liquidity which will assist with the Accugas debt refinancing process.

Cash flow

The cash flow results are for the consolidated group (including discontinued operations).

As noted above, cash balances reduced in the period to US$135.7 million. This reduction arose despite the strong operating performance during the period and was primarily due to a combination of debt repayments of US$74 million (H1 2022: US$30.5 million) and the unrealised foreign exchange loss following Naira exchange rate harmonisation of US$66.5 million (H1 2022: US$2.2 million). Capital and exploration expenditure for the period totalled US$4.2 million (H1 2022: US$14.0 million). During the period, Savannah also received US$44.9 million from SNH in relation to the sale of a 10% interest in COTCo.

Debt

The net debt at 30 June 2023 was US$443.4 million an increase of 9% from year-end position (31 December 2022: US$404.9 million). During the period US$74 million of debt was repaid however, there was an overall increase seen in net debt due to the revaluation of Naira cash balances (as discussed above). This has resulted in a marginal increase in leverage5 from 1.8x to 1.9x.

Work continues on the proposed refinancing of the Accugas US$ debt facility (as was detailed in the 2022 Annual Report). A detailed term sheet has been executed with a consortium of lenders for the provision of a Naira-denominated Transitional Facility and it is anticipated this will be finalised in Q4 2023.

Discontinued Operations

As disclosed in the Group's 2022 Annual Report, the Republic of Chad passed a law on 31 March 2023 confirming the nationalisation of the Group's Chad Assets. Following this nationalisation, all of the Groups' operations for the Chad Assets have been recognised as discontinued operations in line with IFRS 5 for the current period. The net profit and total comprehensive profit from discontinued operations amounted to US$92.0 million, which is shown as a single line in the Condensed Consolidated Statement of Comprehensive Income. A breakdown of this is shown in Note 22 of the Notes to the Condensed Consolidated Interim Financial Statements.

COTCo

Following the period end, a dispute has arisen among the shareholders of COTCo. Savannah has initiated appropriate court and ICC arbitral proceedings to protect its rights under the relevant agreements.

Going Concern

The results have been presented on a going concern basis. Details of the Group's assessment of going concern for the period can be found in note 2.

Footnotes

1 Total Revenues are defined as the total amount of invoiced sales during the period. This number is seen by management as more accurately reflecting the underlying cash generation capacity of the business as opposed to Revenue recognised in the Condensed Consolidated Statement of Comprehensive Income. A detailed explanation of the impact of IFRS 15 revenue recognition rules on our Consolidated Statement of Comprehensive Income is provided in the Financial Review section of the Annual Report and Accounts 2020.

2 Adjusted EBITDA is calculated as profit or loss before finance costs, investment revenue, foreign exchange gains or losses, expected credit loss and other related adjustments, fair value adjustments, gain on acquisition, taxes, transaction and other related expenses, depreciation, depletion and amortisation and adjusted to include deferred revenue and other invoiced amounts. Management believes that the alternative performance measure of Adjusted EBITDA more accurately reflects the cash-generating capacity of the business.

3 From continuing operations unless otherwise stated.

4 Group operating expenses plus administrative expenses are defined as total cost of sales, administrative and other operating expenses excluding royalty and depletion, depreciation and amortisation and transaction costs.

5 Leverage is defined as net debt/Adjusted EBITDA. For the 6-month period ended 30 June 2023, the Leverage calculation is prepared on a rolling 12-month basis.

INDEPENDENT REVIEW REPORT TO SAVANNAH ENERGY PLC

Qualified conclusion

We have reviewed the condensed set of financial statements of Savannah Energy plc (the "Company") included in the interim financial report for the six months ended 30 June 2023 which comprise the condensed consolidated statement of comprehensive income, the condensed consolidated balance sheet, the condensed consolidated statement of changes in equity, the condensed consolidated cash flow statement and the notes to the interim financial statements.

Except for the adjustments to the interim financial information of which we might have become aware of had it not been for the situation described below, based on our review, nothing has come to our attention that causes us to believe that the accompanying interim financial information for the six months ended 30 June 2023 is not prepared, in all material respects, in a form consistent with that which will be adopted in the Company's annual accounts having regard to the accounting standards applicable to such annual accounts, and in accordance with the London Stock Exchange AIM Rules for Companies.

Basis for Qualified Conclusion

As explained in note 2, the impact of the Republic of Chad's nationalisation of the Group's interest in the Chad assets resulted in these assets being impaired and accounted for as a discontinued operation in the current period. The resulting accounting impact is included in the net profit and total comprehensive profit from discontinued activities in the income statement totalling $91.9m and is derived from the financial records and supporting documents that were available to the Group before the nationalisation date of 31 March 2023. The evidence available in respect of these assets was limited due to the Directors not being able to access all the underlying financial information, nor have access to the relevant Chad-based employees of the affected entities subsequent to 31 March 2023. This has a consequential impact on our ability to perform the required review procedures on this balance. Had we been able to complete our review of the balance of $91.9m presented as net profit and total comprehensive profit from discontinued operations, matters might have come to our attention indicating that adjustments might be necessary to the interim financial information.

We conducted our review in accordance with International Standard on Review Engagements 2410 (UK), "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" ("ISRE (UK) 2410"). A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

As disclosed in note 1, the annual financial statements of the Group are prepared in accordance with UK adopted international accounting standards. The condensed set of financial statements included in this interim financial report have been prepared in a form consistent with that which will be adopted in the Company's annual accounts having regard to the accounting standards applicable to such annual accounts.

Material uncertainty related to going concern

We draw attention to note 2 of the condensed set of financial statements which explains that the Group's ability to continue as a going concern is dependent on either the ongoing support from its lenders to amend the terms of the Accugas US$ debt facility or a refinancing of that the facility. As stated in note 2, these conditions, along with the other matters referred to in note 2, indicate that a material uncertainty exists that may cast significant doubt on the Group's ability to continue as a going concern. Our conclusion is not modified in respect of this matter.

Based on our review procedures, which are less extensive than those performed in an audit as described in the Basis for conclusion section of this report, nothing has come to our attention to suggest that the directors have inappropriately adopted the going concern basis of accounting or that the directors have identified material uncertainties relating to going concern that are not appropriately disclosed. 

This conclusion is based on the review procedures performed in accordance with ISRE (UK) 2410, however future events or conditions may cause the Group to cease to continue as a going concern.

Responsibilities of directors

The directors are responsible for preparing the interim financial report in accordance with the London Stock Exchange AIM Rules for Companies which require that the interim report be presented and prepared in a form consistent with that which will be adopted in the Company's annual accounts having regard to the accounting standards applicable to such annual accounts.

In preparing the interim financial report, the directors are responsible for assessing the company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the company or to cease operations, or have no realistic alternative but to do so.

Auditor's responsibilities for the review of the financial information

In reviewing the interim report, we are responsible for expressing to the Company a conclusion on the condensed set of financial statement in the interim financial report. Our conclusion, including our Conclusions Relating to Going Concern, are based on procedures that are less extensive than audit procedures, as described in the Basis for Qualified Conclusion paragraph of this report.

Use of our report

Our report has been prepared in accordance with the terms of our engagement to assist the Company in meeting the requirements of the rules of the London Stock Exchange AIM Rules for Companies for no other purpose. No person is entitled to rely on this report unless such a person is a person entitled to rely upon this report by virtue of and for the purpose of our terms of engagement or has been expressly authorised to do so by our prior written consent. Save as above, we do not accept responsibility for this report to any other person or for any other purpose and we hereby expressly disclaim any and all such liability.

BDO LLP

Chartered Accountants

London

28 September 2023

BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127).

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE SIX MONTHS ENDED 30 JUNE 2023

CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION

AS AT 30 JUNE 2023

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE SIX MONTHS ENDED 30 JUNE 2023

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE SIX MONTHS ENDED 30 JUNE 2023

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

1. General information

Savannah Energy PLC ("Savannah" or "the Company") was incorporated in England and Wales on 3 July 2014. The condensed consolidated financial statements of Savannah and its subsidiaries (together the "Group") for the six months ended 30 June 2023 were approved and authorised for issuance by the board of directors on28 September 2023.

The Group's principal activities are the exploration, development and production of natural gas and crude oil and development of other energy related projects in Africa.

The Company is domiciled in the England for tax purposes and its shares were listed on the Alternative Investment Market ("AIM") of the London Stock Exchange on 1 August 2014. The Company's registered address is 40 Bank Street, London, E14 5NR.

2. Accounting policies

The condensed set of financial statements included in this interim financial report have been prepared in a form consistent with that which will be adopted in the Company's annual accounts having regard to the accounting standards applicable to such annual accounts, and in accordance with the London Stock Exchange AIM Rules for Companies. The provisions of IAS 34: Interim Financial Reporting have not been applied.

The interim condensed consolidated financial statements do not include all disclosures that would otherwise be required in a complete set of financial statements and should be read in conjunction with the Group's 2022 Annual Report and audited financial statements for the year ended 31 December 2022 ("the Group's 2022 Annual Report"). The financial information for the six months ended 30 June 2023 does not constitute statutory accounts within the meaning of Section 434(3) of the Companies Act 2006 and is unaudited.

The annual financial statements of Savannah for the year ended 31 December 2022 were prepared in accordance with UK-adopted international accounting standards in conformity with the requirements of the Companies Act 2006. The Independent Auditors' Report on the Group's 2022 Annual Report contained a disclaimer of opinion and as such contained a statement under 498(2) or 498(3) of the Companies Act 2006.

The Group's statutory financial statements for the year ended 31 December 2022 have been filed with the Registrar of UK Companies'.

All the Group's subsidiaries' functional currency is US Dollars ("US$"), and the consolidated financial statements are presented in US Dollars and all values are rounded to the nearest thousand (US$'000), except when otherwise stated.

The financial information presented herein has been prepared in accordance with the accounting policies used in preparing the Group's 2022 Annual Report. There are no other new or amended standards or interpretations adopted from 1 January 2023 that have a significant impact on the interim financial information.

As previously disclosed in the Group's 2022 Annual Report, the Republic of Chad nationalised the Group's interests in Chad owned by its subsidiaries, Savannah Chad Inc ("SCI") and Savannah Midstream Investment Limited ("SMIL"), (the "Chad Assets") by way of a law passed on 31 March 2023 (the Nationalisation"). This confirmed an announcement of the President of Chad of 23 March 2023. As a result of the Nationalisation, the Group has not been able to fully access all the underlying financial information, nor have access to the relevant Chad-based employees of the affected entities SCI and SMIL in order to prepare the financial information for audit purposes to be consolidated into the Group's financial statements for the year ended 31 December 2022 and for the unaudited interim condensed consolidated financial statements for the six months ended 30 June 2023. 

As stated in the Group's 2022 Annual Report, as a result of the Nationalisation, the activities of the Chad Assets will be considered as a discontinued operation in accordance with IFRS 5 - Non-current Assets for Sale and discontinued operations from 31 March 2023 and this will be reflected in the Group Financial Statements for the year ending 31 December 2023 and for the unaudited condensed consolidated financial statements for the six months ended 30 June 2023. This is without prejudice to Group's claims for compensation in respect of the Nationalisation. More detail of the discontinued operations is set out at Note 22 of this report.

Despite the limitation noted above, the financial information that has been disclosed for the Chad Assets in the period was primarily sourced from bank statements and any financial records and supporting documents that were available before the date of Nationalisation. Given the limited information available, the Directors considered the best way to record and present transactions during the period and agreed that the most reliable basis to record any transactions was on a cash accounting basis supported by bank statements. During the period there was an oil lifting which resulted in a cash inflow and this was recorded within revenue within discontinued operations. For cash out flows, these were mainly considered to be settlement of outstanding payables.

Included within discontinued operations is an impairment of the net balance sheet position as at the date of Nationalisation, on the basis that the Republic of Chad nationalised all the interests and rights pertaining to the Chad Assets. Also, included within the Chad Assets is the Group's interest in TOTCo held as an equity investment. This investment has also been fully impaired. Note 23 sets out the position of any potential contingent liabilities in connection with Chad Assets and the Nationalisation.

The Group continues to trade strongly with revenues increasing significantly over the same period last year. The Group's cash balance amounted to US$135.7 million at the reporting date and a significant volume of receivables are anticipated to be collected from customers during over the next year. The Directors have considered the factors relevant to support a statement of going concern; in assessing the going concern assumption the Directors have reviewed the Group's forecasted cash flows as well as the funding requirements of the Group for at least the 12-month period from the date of publication of this Interim Report.

This forecast was prepared on a "bottom-up" basis, at each major asset and corporate level, and it reflects the Group's best estimate of costs and revenues for the period. The capital expenditure and operating costs used in this forecast are initially based on the Group's approved corporate budget, and then revised for expected trading performance, customer demand, timing of capital expenditures, debt refinancing and any new corporate transactions that have an impact on the Group's cash flows. The principal assumptions made in relation to the going concern assessment relate to the timely payments of our gas invoices by our customers, the forecast commodity oil price environment and continued access to FX markets (specifically in relation to financing of US Dollar denominated costs and the refinancing of the Accugas US$ Facility).

A detailed credit-approved term sheet has been executed with lenders for a new Naira denominated debt facility (the "Transitional Facility"). Whilst the process continues apace, Accugas did not have a long-dated extension for the refinancing process at the reporting date beyond the period of the going concern review. As such the balance outstanding of the Accugas US$ Facility continues to be reflected within current borrowings until the Transitional Facility is in place. The Group remains highly confident that the Group will continue to access the FX markets as required to maintain its operational needs and following the harmonisation of the exchange rates conducted by the Central Bank of Nigeria in June 2023 (and the unrealised foreign exchange loss which resulted from the resulting devaluation) increased liquidity has seen in the FX markets. Notwithstanding, a minimal risk exists that the Group may not be able to continue to do so and/or Accugas may not be able to complete its planned debt financing or to continue to receive support from its lenders to amend the Accugas US$ Facility to defer conversion of Naira balances to US Dollars. These facts indicate that a material uncertainty exists that may cast significant doubt on the Group's ability to continue to apply the going concern basis of accounting.

The Directors are confident in the Group's forecast and have a reasonable expectation that the Group will continue in operational existence for the going concern assessment period and believe it is appropriate to continue to adopt the going concern basis in preparing these consolidated financial statements. As mentioned above, it is recognised there is a material uncertainty, however, this has not altered the Directors view on the basis of preparation as a going concern.

3. Segmental reporting

For the purposes of resource allocation and assessment of segment performance, the operations of the Group are divided into four segments: three geographical locations and an Unallocated segment. The current geographical segments are Nigeria, Cameroon and Niger. All these geographical segments' principal activities are exploration, development and extraction of oil and gas. The Unallocated segment's principal activities are the governance and financing of the Group, as well as undertaking business development opportunities. Items not included within Operating profit/(loss) are reviewed at a Group level and therefore there is no segmental analysis for this information.

The following is an analysis of the Group's continuing operations results by reportable segment for the six months ended 30 June 2023:

1. Refer to Note 5 for items included within Cost of Sales.

2. Includes Third party investments, Property, plant and equipment, Exploration and evaluation assets and Right-of-use assets.

The following is an analysis of the Group's results by reportable segment for the six months ended 30 June 2022:

1. Refer to Note 5 for items included within Cost of Sales.

2. Includes Third party investments, Property, plant and equipment, Exploration and evaluation assets and Right-of-use assets.

The following is an analysis of the Group's financial position by reportable segment for continuing operations as at 30 June 2023:

The following is an analysis of the Group's financial position by reportable segment as at 31 December 2022:

1 Refer to the Note 2, Accounting Policies - Basis of Preparation; Note 22, Discontinued operations and Note 23, Contingent Liabilities, which collectively sets out the Company's position with respect to the Chad Assets.

4. Revenue

Set out below is the disaggregation of the Group's revenue from contracts with customers:

Gas sales represents gas deliveries made to the Group's customers under gas sale agreements. The Group sells oil and condensates at prevailing market prices.

Included within Revenue from contracts with customers is revenue of US$101.5 million (30 June 2022: US$83.8 million) relating to two (30 June 2022: four) of the Group's customers who each contribute more than 10% of revenue US$78.1 million, and US$23.4 million respectively (30 June 2022: US$36.6 million, US$21.7 million, US$13.2 million, and US$12.3 million respectively).

5. Cost of sales

6. Operating profit

Operating profit has been arrived at after charging:

1. Prior period Transaction and other related expenses pertain to costs incurred in respect to the Group's acquisition of the Chad and Cameroon Assets, integration and IT activities and other business development opportunities. Current period Transaction and other related expenses relate to costs incurred as part of the Group's proposed acquisition of assets in South Sudan and other business development opportunities.

7. Finance income

8. Finance costs

1. Includes amounts due to unwinding of a discount on a long-term payable, contract liabilities (Note 18) and amortisation of debt fees.

9. Fair value adjustment 

During 2019 the Group issued a Senior Secured Note of US$20 million that includes a voluntary prepayment option whereby early repayment will result in a discount to the contractual loan value. As an embedded derivative, the option has been separated from the host loan instrument and valued separately and accounted for as fair value through profit or loss ("FVTPL"). As at 30 June 2023 the option value was approximately US$2.3 million (31 December 2022 audited: US$2.8 million), resulting in a charge of US$0.5 million (30 June 2022: gain of US$1.8 million). The decrease in the option value was due to a worsening in credit bond spreads observed during the period as well as an increase in market expectations around interest rates.

Warrants (recognised as a financial instrument), were issued to LCP4L on 24 January 2022. The financial liability is valued at each reporting period with the changes in the fair value being recognised in the Consolidated Statement of Comprehensive Income. The warrants were valued using a European option pricing model with a value as at 30 June 2023 of US$20.2 million (31 December 2022 audited; US$19.7 million), resulting in a charge of US$0.5 million.

Contingent consideration relates to oil-price related contingent payments which arose from the acquisition of the Chad and Cameroon assets. This amount was measured at fair value at the completion date and is remeasured at fair value at every reporting date. As discussed in Note 2, due to the Nationalisation of the Chad Assets by the Chad Government, the remaining value of this consideration was fair valued to nil and resulted in a gain of US$9.2 million.

During the reporting period, the Group entered into hedging arrangements to provide protection against adverse oil price movements. The option was not exercised prior to expiry and the premiums were fair valued to nil resulting in a fair value loss of US$1.7 million through the profit and loss.

10.  Foreign translation loss

Unrealised loss relates to the revaluation of monetary items held in currencies other than US Dollars. During the six months ended 30 June 2023, the Nigerian Naira materially devalued against the US Dollar which created an unrealised loss on monetary items held in Naira.

11.  Taxation

The tax expense/(credit) for the Group is:

Income tax expense is recognised based on the actual results for the period. 

The tax credit for the period of US$11.7 million (30 June 2022: charge of US$9.2 million) is made up of a current tax charge of US$9.8 million (30 June 2022: US$2.8 million) and a deferred tax credit of US$21.5 million (30 June 2022: charge of US$6.4 million). The current tax charge principally arises on Nigerian profits.

The deferred tax credit during the period principally relates to the ECLs and unrealised foreign exchange losses, which are expected to be reversed in line with expected forecasts.

12.  Profit/(loss) per share

Basic earnings per share amounts are calculated by dividing the profit or loss for the period attributable to owners of the Company by the weighted average number of ordinary shares outstanding during the period.

Diluted earnings per share amounts are calculated by dividing the profit or loss for the periods attributable to owners of the Company by the weighted average number of ordinary shares outstanding during the period, plus the weighted average number of shares that would be issued on the conversion of dilutive potential ordinary shares into ordinary shares.

As there is a profit attributable to the owners of the Company for the six months ended 30 June 2023, the diluted weighted average number of shares has been calculated. In the comparative period, the basic average number of shares was used to calculate the diluted loss per share given there is a loss attributable to the owners of the Company, meaning the diluted weighted average number of shares reduces the loss per share. Therefore, the basic weighted average number of shares was used to calculate the diluted loss per share.

The weighted average number of shares outstanding excludes treasury shares of 99,858,893 (30 June 2022: 99,858,893).

1. The earnings per share calculation only takes into account profit/(loss) attributed to owners of the Company.

23,853,457 options granted under share option schemes are not included in the calculation of diluted earnings per share because they are anti-dilutive for the six months ended 30 June 2023 (30 June 2022: 50,233,574). These options could potentially dilute basic earnings per share in the future.

To calculate the EPS inclusive of discontinued operations (Note 21), the weighted average number of ordinary shares

for both the basic and diluted EPS is as per the table above. The following table provides the profit/(loss) amount in addition to the above used:

13.  Property, plant and equipment

Upstream assets principally comprise the well and field development costs relating to the Uquo and Stubb Creek oil and gas fields in Nigeria. Infrastructure assets principally comprise the Nigerian midstream assets associated with the Group's network of gas transportation pipelines, oil and gas processing facilities and gas receiving facilities. Other assets include vehicles, office equipment (including IT software) and building improvements.

Decommissioning remeasurement adjustments reflect updated cost estimates for the year. The new asset values will be depreciated over the remaining life of the respective assets.

Each year, management performs a review of each CGU to identify potential impairment triggers. During 6 months ended 30 June 2023 and the year ended 31 December 2022, no such triggers were identified. 

14.  Trade and other receivables