WTI $119.41 +91c, Brent $120.57 +$1.06, Diff -$1.16 +15c. 

USNG $9.29 -3c, UKNG 131.04p -14.16p, TTF €80.0, + €0.392

Oil price

A modest rally in crude after Libya announced a shut-in of Sharara field crude, after my on-off comments from yesterday off was the conclusion. The API stats were a bit odd showing a big build in stocks, will see what the EIA numbers are like later today.

Savannah Energy

Savannah Energy PLC, the British independent energy company focused around the delivery of Projects that Matter in Africa, is pleased to announce its preliminary unaudited results for the year ended 31 December 2021. 

Key FY 2021 Financial Highlights

·      FY 2021 Total Revenues[1] of US$230.5m (+7% on FY 2020 Total Revenues of US$215.9m2).  This is ahead of the Company’s previously issued FY 2021 guidance of ‘Total Revenues of greater than US$205m’;

·      Average realised gas price of US$4.19/Mscf (+6% on the 2020 average realised gas price of US$3.96/Mscf) and an average realised liquids price of US$69.9/bbl (+51% compared to the 2020 average realised liquids price of US$46.2/bbl);

·      Total cash collections from the Company’s Nigerian assets of US$208.2m (+24% on FY 2020 cash collections of US$167.4m[2]);

·      Adjusted EBITDA of US$175.0m (+7% on FY 2020 Adjusted EBITDA of US$163.2m2);

·      Adjusted EBITDA margin remained broadly unchanged at 76%;

·      Group operating expenses plus administrative expenses[3] of US$49.9m (FY 2021 initial guidance of US$55-65m);

·      Group Depreciation, Depletion and Amortisation of US$36.2m (FY 2021 initial guidance of US$38.3m based on the actual produced volumes);

·      Capital Expenditure for the year of US$32.5m (FY 2021 initial guidance of up to US$65m);

·      Group cash balances of US$154.3m[4] as at 31 December 2021 (+46% versus FY 2020 year-end Group cash balances of US$106.0m);

·      Group net debt of US$370.0m as at 31 December 2021 (-9% versus FY 2020 year-end Group net debt of US$408.7m);

·      Leverage[5] was 2.1x, (20% improvement on 2020 leverage of 2.5x), and an interest cover ratio[6] of 2.8x (FY 2020 ratio of 2.4x);

·      Total Group assets amounted to US$1,349m at year-end (2020: US$1,207m); and

·      Successfully announced a proposed placing to raise US$65.8m of equity financing and secured up to US$432m of debt financing for the proposed Chad and Cameroon Asset Acquisitions. The equity financing completed in January 2022.

 

Key FY 2021 Operational Highlights

·      FY 2021 average gross daily production from the Nigerian operations was 22.3 Kboepd, a 14% increase from the average gross daily production of 19.5 Kboepd in FY 2020;

·      Of the FY 2021 total average gross daily production of 22.3 Kboepd, 88% was gas, including a 15% increase in gas production from the Uquo gas field, from 103 MMscfpd (17.1 Kboepd) in FY 2020 to 118 MMscfpd (19.7 Kboepd) in FY 2021;

·      Successful drilling and completion of the Uquo-11 gas production well;

·      Publication of an updated Competent Person’s Report (“CPR”)[7] for Nigeria, with an organic 2P reserve upgrade on the Uquo field, resulting in a 20% increase in Nigeria 2P reserves to 77.7 MMboe (net);

·      Uquo compression project progressed with compressor packages acquired, completion of Front End Engineering & Design studies and long-lead items specified ready for ordering;

·      New gas sales agreement (“GSA”) signed with Mulak Energy Limited in Nigeria in February 2021, representing Savannah’s first Gas-to-CNG sales agreement;

·      Commencement of gas sales to First Independent Power Limited’s (“FIPL”) power plant, FIPL Afam, in Nigeria, in November 2021, marking Savannah’s first entry into the high growth Port Harcourt Industrial area. Followed by the extension of the FIPL GSA in April 2022 post-year end, almost doubling the maximum contracted volume to up to 65 MMscfpd and extending coverage to a total of three of FIPL’s power stations in Rivers State, Nigeria;

·      Post-year end, in February 2022, a new GSA was signed with the Central Horizon Gas Company, a major gas distribution company situated in the South-South region of Nigeria;

·      Post-year end, in June 2022, a further new GSA was signed with TransAfam Power Limited (“TAPL”), a subsidiary of Transnational Corporation of Nigeria plc, for the provision of gas to its power plants in Rivers State, Nigeria;

·      Niger Production Sharing Contract contractual and commercial framework completed and finalised with commercial terms agreed and announced in September 2021;

·      Savannah’s Renewable Energy Division was established in 2021, with the announcement in March 2022 of the Company’s inaugural renewable energy project, the up to 250 megawatts (“MW”) Parc Eolien de la Tarka wind farm project in Niger. This is targeted to increase the country’s on-grid electricity supply by up to 40%. Project sanction is targeted for 2023 with first wind power in 2025; and

·      This was followed in May 2022 with the signing of an agreement with the Ministry of Petroleum and Energy of the Republic of Chad for the development of up to 500 MW of renewable energy projects. The up to 300 MW Centrale Solaire de Komé project would represent the largest solar plant in sub-Saharan Africa (excluding South Africa) and potentially the largest battery storage project on the continent. The up to 200 MW Centrales d’Energie Renouvelable de N’Djamena in Chad would more than double the existing installed generation capacity supplying the capital city and increase the total installed on-grid power generation capacity in Chad by up to an estimated 63%.

 

Financial Guidance Reiterated for FY 2022

Savannah reiterates its financial guidance for the full year 2022 as follows:

 

Total Revenues1

≥US$215 million

Group Operating expenses plus administrative expenses3

≤US$75 million

Depreciation, Depletion and Amortisation

US$21 million + US$2.3/boe

Capital Expenditure

≤US$85 million

 

Update on Savannah’s Sustainability Strategy

Savannah’s focus in 2021 was on articulating the level of ambition across the four pillars of our sustainability strategy: (1) Promoting socio-economic prosperity; (2) Ensuring safe and secure operations; (3) Supporting and developing our people; and (4) Respecting the environment. We conducted an exercise to benchmark the Company’s performance against industry peers and leaders, which helped us to develop our strategy and link key performance metrics to our ambitions and to the 13 relevant United Nations Sustainable Development Goals which anchor our strategy. In particular, the following key performance metrics were identified to measure performance and progress, many of which are industry-leading:

·      Continued our strong health & safety record with a zero Lost Time Injury Rate (“LTIR”) (2020: zero) and a 0.34 Total Recordable Incident Rate (“TRIR”) in 2021 (2020: 0.28);

·      Increased our Total Contributions[8] to host nations Nigeria and Niger by 12% to US$55.1m (2020: US$49.3m);

·      Increased our investment in social impact projects in Nigeria and Niger by more than 50% to US$246,000 in 2021 (2020: US$161,000);

·      Number of transport related incidents remains exceptionally low with two in 2021 covering over 1.6 million transport kilometres travelled (2020: five incidents);

·      Maintained senior management female gender diversity at 35% (2020: 35%);

·      Established a multimillion-dollar, world class training scheme across our whole business for 2021-23, resulting in a 22% increase in training hours per employee and a 32% increase in total working hours of training;

·      Maintained a low carbon intensity of 13.3 kg CO2e/boe (2020: 12.8 kg CO2e/boe) compared to our industry peer group;

·      Maintained our zero hydrocarbon spills record defined as not greater than one barrel reaching the environment (2020: zero);

·      Measured our freshwater use for the first time, recording usage of approximately 5,359 m3 of freshwater from boreholes and mains supply; and

·      Minimised our negative impacts on biodiversity, putting in place Biodiversity Action Plans at our four operational sites to minimise any impact from our operations.

During 2021 and 2022, we have implemented the Company’s new sustainability performance and reporting framework across the Group. We implemented a digital tool to track our performance on our key sustainability indicators on a month-by-month and country-by-country basis and have integrated seven leading sustainability reporting standards into our reporting framework. We plan to publish the respective detailed disclosure reports setting out our alignment to each standard during H2 2022.

Andrew Knott, CEO of Savannah Energy, said:

“2021 was a fantastic year for Savannah. Our Total Revenues12 and Adjusted EBITDA2 grew by 7% year-on-year to US$231m and US$175m respectively. We organically increased our Net 2P reserves by 20% to 77.7 MMboe. We announced our potentially transformational acquisition of a large portfolio of upstream and midstream assets in Chad and Cameroon, which upon completion we now expect will more than double our corporate free cashflow. We established a Renewable Energy Division which, post period, has signed agreements for up to 750 MW of large scale greenfield solar and wind projects. We successfully renewed and amalgamated our Niger PSC areas, paving the way for the progression of our intended 35 MMstb R3 East development and a return to exploration activity in the licence areas. Our performance against key industry sustainability metrics relating to HSE performance, carbon intensity, senior management gender diversity and local employee ratios remain industry leading.

Looking forward to the rest of 2022, I am confident in where we are as a business. We expect to deliver on our financial guidance. We expect to complete our entry to Chad and Cameroon during Q3 2022 and to likely announce further hydrocarbon acquisitions. We expect to further grow our Renewable Energy Division, with several new large-scale greenfield opportunities under review and negotiation. We expect to finalise the refinancing of our Nigerian debt and to announce the development and exploration plans for our assets in Niger.

I would urge shareholders to spend time reading through my CEO Letter to Shareholders which will be in the Annual Report, and which discusses our 2021 performance and 2022 plans in more detail, while also discussing our views of the “how” and the “why” we see the African energy transition evolving and how this relates to Savannah’s hydrocarbon AND renewables business model.

Most of all we will maintain our focus around the delivery of Projects that Matter in Africa. I would like to express my gratitude to all of those who contributed to our success in 2021 – my incredibly dedicated and passionate colleagues, our host governments, communities, local authorities and regulators, our shareholders and lenders, and our customers, suppliers and partners. Thank you all.”

Not much to add to these excellent figures that beat the guidance and with new GSA’s guaranteeing the years to come. My interview with CEO Andrew Knott shows that he is happy with increase in revenues and reserves to come from deals in the pipeline. Niger is now on the move and will commence soon. 

A number of board changes see the excellent Nick Beattie confirmed as CFO and Chairman Steve Jenkins stepping down and 3 new NED’s on the way. 

I was delighted that CEO Andrew Knott was able to join me for an interview on my Core London CEO interview slot. The Link is below.

Core Finance CEO interview: Andrew Knott of Savannah Energy

Challenger Energy Group

Challenger notes the announcement issued by Predator Oil and Gas Holdings Plc  yesterday regarding its alleged intention to initiate a litigation process regarding the Inniss-Trinity Well Participation Agreement between FRAM Exploration Trinidad Ltd, a wholly owned subsidiary of Challenger Energy, and Predator.

FRAM denies that any amount is owing to Predator pursuant to the WPA, and considers the various assertions made by Predator in yesterday’s announcement to be devoid of any technical justification or legal basis. Accordingly, FRAM will vigorously defend any legal proceedings should they be issued by Predator, and will seek recovery of any costs incurred by FRAM in doing so.

Nuff said, let battle commence…

Sound Energy

Sound Energy, the transition energy company, is pleased to announce that it has conditionally raised £4 million (before expenses) by way of a placing and subscription of a total of 200,000,000 new ordinary shares of 1 pence each in the Company at a price of 2.0 pence per share.

Highlights of the Fundraising

·    Total of £4 million raised at 2.0 pence per share to progress a number of key value creating projects, principally the pre-development work on the Tendrara Phase 2 pipeline to FID, corporate new ventures activities and corporate G&A

o £2.88 million raised via a placing with institutional and other investors through the issue of 144,225,000 Fundraise Shares 

o £1.12 million raised via a direct subscription with the Company through the issue of 55,775,000 Fundraise Shares 

·    Sound Energy directors participated in the Subscription, subscribing for an aggregate of  £60,000 of Fundraise Shares

·    The Fundraise Shares have been placed with/subscribed for by institutional and other investors and included participation by Sound Energy’s existing shareholder, Afriquia Gaz S.A.

Graham Lyon, Sound Energy’s Executive Chairman, commented:

Today’s Fundraise provides Sound Energy with a stronger financial base in order to progress our activities to deliver planned business growth, including enabling pre-development work up to a final investment decision on our Phase 2 gas pipeline development, and complements the project financing that we have secured for our Phase 1 micro LNG development.”

This is good news for Sound who have made this first public raise in two years and with a very good addition to the register from institutions and of course Afriquia Gas. The money will enable them to prepare for FID, new activities and corporate G&A. 

Before today’s raise Sound had achieved a very creditable 133% rise in the share price in less than a year and therefore justifies the 20% discount it is money that will ensure the future is very strong for Sound. I am confident that management who recently held a great investor presentation will do well in the coming months.