WTI $56.23 +54c, Brent $58.84 +38c, Diff -$2.61 -16c, NG $2.93 +15c, UKNG 48.35p +1.35p

Oil price

Another up day with WTI at $56.85 and Brent at $59.49 as I write, this makes a near 5 bucks a barrel or short 10% rise just on the week if it stays like this. Nothing much has changed, the vaccine news gets better with J&J adding today, US data is improving subject of course to the NFP at lunchtime and today the Senate voted the aid bill using the Vice President’s casting vote.

Savannah Energy

SAVE has announced this morning Accugas’ first Gas-to-CNG Sales Agreement with Mulak Energy, part of the Mansour Group, with customers in Nigeria expected to benefit from a 40% saving in energy costs and 30% reduction in carbon footprint.

 ‘The GSA is initially for a seven-year term. It envisages the supply of gas produced by Savannah’s majority-owned Uquo field for an initial two-year period on an interruptible basis (the “Interruptible Gas Delivery Period”) and the subsequent five years on a firm contract basis (the “Firm Delivery Period”). During the Interruptible Gas Delivery Period, Mulak is able to nominate a maximum daily quantity of up to 2.5 MMscfpd’.

Volumes in the Firm Delivery Period will be agreed by the parties before the end of the Interruptible Gas Delivery Period. The GSA is priced to reflect Mulak’s status as an industrial customer; Accugas, therefore, expects to see its weighted average gas sales price realisation increase as a result of this contract, without the need for any incremental capital expenditure beyond Savannah’s previously announced plans. Sales under the GSA benefit from a bank guarantee arrangement from an investment grade credit rated international bank.

Mulak is a member of the Mansour Group, the leading Egyptian multinational conglomerate with operations in more than 100 countries and annual revenues exceeding US$7.5 billion. The agreement for the supply of gas to Mulak’s Compressed Natural Gas (“CNG”) Nigerian project represents Savannah’s first Gas-to-CNG sales agreement. Mulak initially plans to distribute CNG to its industrial customers in Rivers State with the CNG to be substituted for diesel in generators supplied by the Mantrac Group, also a member of the Mansour Group.

Sales under the GSA are expected to commence in 2022 and, following the initial two-year period, Mulak has indicated that it is seeking to expand its CNG sales on a pan-Nigeria basis to Mantrac customers. Accugas continues to make good progress in relation to agreeing further potential new gas sales agreements with new customers, further updates of which will be provided as appropriate in due course.

Andrew Knott, CEO of Savannah Energy, said:

“We are delighted to announce this new gas sales agreement with Mulak Energy and the Mansour Group. This recognises, Accugas’ status as the most reliable supplier of natural gas in Nigeria. Our first Gas-to-CNG agreement is hugely exciting as it represents Savannah’s entry into the compressed natural gas market, which we see as offering strong growth potential for our business over the course of the next decade. The CNG market significantly extends the reach of our existing 260km pipeline network into light industrial and even domestic power generation without the need for further investment in pipelines. For example, the Mansour Group subsidiary, Mantrac, currently has an installed customer base of approximately 400MW of diesel-fuelled power generation, which has grown every year for the last decade. I would like to thank the Mansour Group for choosing to partner with Accugas and we look forward to providing them, and their customers, with a reliable, lower cost source of energy for power generation with an estimated 30% reduction in the carbon footprint of their existing diesel generators.”

To me this is a highly important step for Savannah which should add significant added value to its model for a number of reasons. The point about it being Savannah’s first gas-to-CNG sales agreement should not be missed, the CNG will initially substitute diesel in Mantrac’s (part of Mansour Group) generators who are also one of the world’s largest dealers in Caterpillar machinery, power systems and equipment.

However, more is expected as Mantrac has synergies in Nigeria through conversion of its existing customer base of C. 400MW of diesel-fuelled generators. Overall this is expected to provide Mantrac customers with ‘up to a 40% saving in energy costs and a 30% reduction in their carbon footprint’. This looks to be a profitable win-win contract with a major league customer and will be just the start for SAVE in its gas sales in Nigeria and importantly I predict long term, substantially rising volumes and profits.

The shares may have doubled since the low last year but this constant flow of  excellent news must surely make the price today a bargain when the market gets to grips with the massive upside potential. A market cap of only £163.41m is surely a travesty given the upside on offer and this has only just started…


And finally…

This is a weekend of sport to wish for, the 6 Nations is back, England are playing India in the first test of 4, Sunday sees the Super Bowl and good racing at Sandown including one over from Cheltenham last week. Oh and Liverpool v the Noisy Neighbours on Sunday.

England won the toss against India on Joe Root’s 100th test and he left the field at the end of the day on 128* of England’s 263-3 aided by Sibley who was very unlucky to be out to the last ball of the day for 87.

A great card at Sandown Park which includes the Cotswold Chase carried over from Cheltenham last week, also a few good races at Leopardstown…

In the 6 Nations the season opener is in Rome where Italy host France followed by England v Scotland at Twickenham and on Sunday Wales host Ireland.

Of course the Prem carries on, tomorrow sees Villa host the Gooners, the Seagulls go to Turf Moor, the Magpies entertain the Saints, the Hammers visit the Cottagers and the Toffees go to the Theatre of Dreams. On Sunday Spurs host the Baggies, the Foxes are at the Wolves, the Blades entertain Chelski and of course the piece of resistance is the visit of the Noisy Neighbours to Fortress Anfield…

The Tampa Bay Buccaneers will host the Super Bowl this weekend as they go up against the Kansas City Chiefs at Raymond James Stadium on Sunday night. 94 year old Tom Brady will be playing in his tenth Super Bowl and will be hoping to make it seven victories. Patrick Mahomes leads the Chiefs in their second consecutive appearance and and they will start as slight favourites in the season finale.