A flash blog today as I am in London meeting companies. As usual anything gleaned after publication today I will add to tomorrow’s blog.

Savannah Energy

Savannah Energy PLC, the British independent energy company focused around the delivery of Projects that Matter is pleased to announce the signing of a Memorandum of Agreement by Savannah Energy Niger Solar Limited, a wholly owned subsidiary of Savannah, with the Government of the Republic of Niger for the development of two solar photovoltaic power plants with a combined installed power generation capacity of up to 200 megawatts. A signature ceremony was held yesterday in Niamey attended by His Excellency Ibrahim Yacoubou, Minister of State for Energy and Renewable Energies, Her Excellency Catherine Inglehearn, British Ambassador to the Republic of Niger, and Yacine Wafy, Savannah’s Vice President West Africa.

The two proposed solar plants are expected to be located within 20 km of the cities of Maradi and Zinder, respectively, in southern Niger. Each plant is expected to have an installed capacity of between 50 and 100 MW, for a total potential installed capacity of up to 200 MW. The Solar Projects are expected to: generate reliable, affordable energy for Niger; increase overall grid connected power generation in the country by over 20%; and avoid an estimated up to 260,000 tonnes of annual CO2 emissions[1]. The Solar Projects are expected to be connected to the South Central section of Niger’s electricity grid, which is forecast to be interconnected to the Western electricity grid zone (which serves Niamey) by 2026, as part of a World Bank funded project. Following the anticipated completion of the required project feasibility studies over the course of the next 12 months, the Solar Projects are expected to receive project sanction in 2024, with first power targeted in the 2025 to 2026 window.

Savannah expects to fund the Solar Projects from a combination of its own internally generated cashflows and project specific debt.

His Excellency Ibrahim Yacoubou, Minister of State for Energy and Renewable Energies for the Republic of Niger, said:

“I am delighted to participate in today’s signature ceremony for a Memorandum of Agreement with Savannah Energy for the construction and operation of two new solar power plants, up to 200 MW in scale, to be located in the Maradi and Zinder regions of Niger. These projects are an example of the Republic of Niger’s strategy to increase electricity access for our people at an affordable cost through an expanding energy mix, as we have outlined in our National Strategy of Energy Access  and our National Policy Document on Electricity.

These projects come in addition to the up to 250 MW Parc Eolien de la Tarka, the wind farm project signed with Savannah last year, which has strong momentum and is expected to start construction in 2024. In aggregate, the wind and solar projects Savannah is developing in partnership with the Government of Niger have the potential to increase the on-grid power supply in country substantially. These projects are crucial for Niger’s economy, potentially improving the lives of millions of Nigeriens by providing them with life changing benefits from energy access.

I would like to warmly welcome the support of the British Ambassador to Niger for these projects. Today we have witnessed her personal commitment to mobilising British companies to come and invest in Niger; with the UK’s wider commitment to Niger evidenced by the investment round table that His Excellency President Bazoum spearheaded recently in London.

Lastly, I would like to wish every success for these projects. May God help us achieve the goals we have set ourselves, and both personally and on behalf of the Government of Niger, Savannah can count on our wholehearted support for the development of the Tarka wind farm and the Maradi and Zinder solar power plants, to ensure they can be brought to fruition.”

Her Excellency Catherine Inglehearn, British Ambassador to the Republic of Niger, said:

“I am pleased that Savannah, as a British company, continues to make significant investments in Niger’s energy industry. Foreign investment such as this is crucial for Niger’s continued social and economic development and we welcome Savannah’s support. Following the investor roundtable with President Bazoum in London on 5 May 2023, this is evidence of the United Kingdom’s strong continued commitment to Niger.”

Andrew Knott, CEO Savannah Energy said:

“I am delighted that we are announcing the signing of our Niger Solar Projects MOA. These are exactly the sort of high developmental impact projects our renewable energy division is seeking to deliver, with the potential to increase on-grid electricity supply in country by over 20%. We look forward to working with the Government of Niger as we seek to advance these projects through their development and construction phases towards first power in the 2025 to 2026 window.

I would like to thank His Excellency Ibrahim Yacoubou, Minister of State for Energy and Renewable Energies, the wider Nigerien Government and the British Embassy in Niger for their support for these projects. We look forward to working with Niger and our developmental finance partners over the course of the coming years as we move the projects through the feasibility and construction phases towards our planned first power dates in the 2025 to 2026 window.

As a company, Savannah has successfully created a large portfolio of high quality greenfield renewable energy development projects in the hydro, solar and wind sectors over the course of the past 18 months. We will continue to work towards achieving our target of having up to 1GW+ of renewable energy projects in motion by end 2023 and expect to update on further progress towards achieving this goal over the course of the coming months.”

This is another successful move by SAVE in Niger as it continues to build up its solar presence across Africa. With moves across the energy network the company is proving that a combination of financial and personnel investment, along with Governmental support and of course no little technical expertise is proving beneficial to all parties.

Genel Energy

Genel has issued the following trading and operations update relating to Q1 2023, ahead of the Company’s Annual General Meeting, which is being held today.

Paul Weir, Chief Executive of Genel, said:

“The prolonged closure of the Iraq-Turkey pipeline is very disappointing and, although there continues to be speculation regarding the timing of resumption of exports, we cannot predict with any certainty when exports will recommence. In anticipation of exports resuming we are seeking clarity on future arrangements and a mechanism in place for regular and predictable payments going forward.

Delays in payments and the suspension of exports have resulted in significant cash generation being deferred and we are scaling back our planned activity accordingly. We continue to reduce costs so that the size and shape of the organisation matches the needs of the business.

Our financial position is robust, and we remain focused on using our significant liquidity to add new assets to the portfolio that will fund the long-term payment of our established dividend.”

The closure of the pipeline, which was initially thought to have been over within days or weeks has already gone on for longer than expected and whilst most observers believed that it was in no one’s interest to be delayed seems to be just that. 

Fortunately Genel does come from a position of significant strength and using the CEO’s word is ‘robust’, that is good as although the pipeline should be re-opened before too long it has already been, too long. Investors are probably sanguine enough to realise that it really isn’t in anyone’s interest to keep the pipeline shut, but for how long?

Q1 2023

  • Zero lost time incidents in 2023, with over four million hours worked since the last incident
  • Net production of 26,000 bopd in Q1 2022 (30,520 bopd in Q1 2022)
  • Pending approval at the AGM today, a dividend distribution of 12¢ (9.6588 pence) per share will be paid on 19 May 2023
  • $61 million of cash proceeds were received from the Kurdistan Regional Government (‘KRG’) in Q1 2023, relating to August and September 2022
  • Capital expenditure of $24 million in Q1 2023, of which $21 million was cost recoverable spend at Tawke and Taq Taq
  • Cash of $496 million at 31 March 2023 ($495 million at 31 December 2022)
  • Net cash under IFRS of $229 million at 31 March 2023 ($228 million at 31 December 2022)
    • Total debt of $274 million at 31 March 2023 ($274 million at 31 December 2022)

2023 OUTLOOK AND GUIDANCE

  • Due to the closure of the Iraq-Turkey Pipeline on 25 March 2023 and resulting impact on production, Genel’s production guidance of 27-29,000 bopd is no longer valid. New guidance will be issued once the pipeline reopens and investment plans are confirmed
  • Genel now expects capital expenditure to be below $100 million (previous guidance $100-125 million)
  • Payments totalling $80 million are outstanding relating to production from October 2022 to January 2023, with $110 million of total sales invoices submitted up to and including March 2023

PRODUCTION BUSINESS

  • Tawke PSC (25% working interest)
    • Gross production averaged 93,880 bopd in Q1 2023 (106,470 bopd in Q1 2022), due to planned well intervention operations temporarily constraining overall production
    • Given the uncertain timing of export resumption and the delays in payments, spend at the Tawke licence has been scaled back, with the number of active rigs to drop from four at the start of 2023 to none in H2 2023
    • Five wells were completed and another three wells spudded in Q1 2023, with Tawke licence drilling to end in May
  • Sarta (30% working interest and operator)
    • Gross production averaged 3,160 bopd in Q1 2023 (5,590 bopd in Q1 2022)
    • As previously stated, Genel’s focus is on making ongoing production from Sarta profitable
  • Taq Taq PSC (44% working interest and joint operator)
    • Gross production averaged 3,610 bopd in Q1 2023 (5,070 bopd in Q1 2022)
    • Taq Taq continues to produce into storage, with around one week of storage capacity remaining

PRE-PRODUCTION BUSINESS

  • Somaliland
    • Preparation continues for the drilling of the Toosan-1 well on the highly prospective SL10B13 block (51% working interest and operator)
    • The Toosan prospect contains stacked Mesozoic reservoir objectives, with multiple individual prospective resource estimates each ranging from 100 to 200 MMbbls
    • Civil work at the wellsite is set to get underway shortly, and the Environmental, Social and Health Impact Assessment is nearing completion
    • Genel continues to target a spud date in H1 2024, acknowledging the challenges of operating in such a frontier area with limited existing infrastructure
  • Morocco
    • The farm-out programme on the Lagzira block (75% working interest and operator) is ongoing

ESG

  • Genel’s 2022 Sustainability Report has been issued today, detailing our environmental performance and the positive impact that we strive to have on the communities in which we operate. Highlights include:
    • Zero LTIs across all Genel operations with 3 million hours worked incident free
    • Zero waste to landfill from operations at Sarta, with 91% recycled
    • Solar panel and battery storage unit operational at Sarta
    • Improvement in both CDP climate change and water security score

ARBITRATION

  • The London-seated international arbitration regarding Genel’s claim for substantial compensation from the KRG following the termination of the Miran and Bina Bawi PSCs is progressing. The trial remains scheduled for February 2024

PetroTal Corp

PetroTal has reported its operating and financial results for the three months  ended March 31, 2023.

Selected financial and operational information is outlined below and should be read in conjunction with the Company’s unaudited consolidated financial statements and management’s discussion and analysis (“MD&A”) for the three months ended March 31, 2023, which are available on SEDAR at www.sedar.com and on the Company’s website at www.PetroTal‐Corp.com. All amounts herein are in United States dollars unless otherwise stated.

Manuel Pablo Zuniga-Pflucker, President and Chief Executive Officer, commented:

“I am pleased to report that the Company has achieved production in excess of 20,000 bopd for over 74 days since late February 2023.  Q1 2023 was a transformational quarter for our business, as we repaid our corporate bonds in full, reinitiated a material and rewarding return of capital program, and upsized the barging fleet.  With the recent permit approval of the L2 West Platform, the Company can now drill for more than two years ahead, allowing for increasing production levels to be achieved.  Our value proposition is very clear; we can deliver both material production growth per share and a significant free cash flow yield, instead of having to prioritize one over the other.”

PetroTal go into the 2nd quarter in a very strong position indeed, growing production in Q1 of 12,618 b/d was up 21% on Q4 2022 and March was a record with 660/- barrels though Brazil and Iquitos.

This has meant that they have fully repaid the corporate bonds and can move ahead with a ‘significant’ dividend expected to produce a yield of c.10% and of course a share buy-back. I have never been more confident of my price target, currently 150p which can only go wrong if the company gets taken over, something that cannot be ruled out as it is so cheap. 

Q1 2023 Selected Highlights

·    Achieved average quarterly sales of 12,618 barrels (“bbls”) of oil per day (“bopd”), up 21% from the fourth quarter (“Q4”) of 2022;

·    Delivered monthly record sales in March 2023, with over 660,000 bbls of oil sold through Brazil and to the Iquitos refinery;

·    Fully repaid the remaining $80 million in corporate bonds in the first quarter of 2023, paving the way for a significant dividend and share buyback program to commence in the second quarter of 2023;

·    Reinstated a return of capital program, including a USD$0.015 per share quarterly eligible dividend  payable in June 2023, representing an annualized yield of 10% based on a US$0.60/share trading price and intends to commence a normal course issuer bid (“NCIB”) share buyback program in the second quarter of 2023, subject to approval by the Toronto Stock Exchange (“TSX”);

·    Generated $53.5 million ($47.12/bbl) and $47.9 million ($42.23/bbl) of net operating income and EBITDA, respectively over Q1 2023, an average 10.5% increase from the Q4 2022 net operating income and EBITDA, as a result of higher sales volumes in Q1 2023 compared to Q4 2022;

·    In conjunction with the oil trading company handling Bretana oil exports through Brazil, negotiated an upsized barging fleet, thereby allowing the Company to have access to over 1.5 million bbls of barging capacity, an increase of approximately 25% from the previous capacity of 1.2 million bbls;

·    Completed well 14H on March 27, 2023.  The well has produced at a constrained average rate of 2,880 bopd during May 2023 to date, in line with expectations;

·    Completed a fourth water disposal well in late January 2023, increasing the Company’s disposal capacity to over 150,000 bbls of water per day (“bwpd”) when fully tied into the Company’s field disposal system; and,

·    Exited Q1 2023 with $71.6 million in total cash and a $71.1 million net surplus. (see note 9 below)

Selected Q1 2023 Financial and Operational Highlights

 

Q1-2023

 

Q4-2022

 

($ thousands)

$/bbl

$ thousands 

$/bbl

$ thousands 

Average Production (bopd) (1)

 

12,193

 

10,374

Average sales (bopd)

 

12,618

 

10,420

Total sales (bbls)

 

1,135,611

 

958,624

Average Brent price

$82.51

 

$88.61

 

Contracted sales price, gross(1)

$80.32

 

$88.22

 

Tariffs, fees and differentials

($20.01)

 

($21.71)

 

Realized sales price, net

$60.31

 

$66.51

 

Oil revenue

$60.31

$68,494

$66.51

$63,755

Royalties(2)

$5.49

$6,238

$6.08

$5,824

Operating expense

$5.60

$6,354

$7.42

$7,115

Direct Transportation:

 

 

 

 

Diluent

$1.20

$1,368

$1.33

$1,274

Barging

$0.80

$906

$0.86

$824

Diesel

$0.10

$113

$0.15

$144

Storage

$0.00

$0

$0.16

$152

Total Transportation

$2.10

$2,387

$2.50

$2,394

Net Operating Income(4)

$47.12

$53,515

$50.51

$48,422

G&A

$4.90

$5,559

$5.57

$5,339

EBITDA(3)

$42.22

$47,956

$38.78

$43,083

Adjusted EBITDA(3)

$35.92

$40,825

$37.91

$36,338

Net Income

$14.82

$16,979

$38.78

$37,176

Basic Shares Outstanding

 

883,800

 

862,209

Market Capitalization(6)

 

$521,046

 

$431,104

Net Income/Share

 

$0.019

 

$0.043

Capex

 

$32,919

 

$32,024

Free Funds Flow(3) (7)

$8.13

$7,906

$3.80

$4,314

% of Market Capitalization(6)

 

2%

 

1%

Total Cash(8)

 

$71,635

 

$119,969

Net Surplus (Debt) (3) (9)

 

$71,117

 

$74,225

 

1.  Approximately 86% of sales over Q1 2023 were through the Brazilian route vs 84% in Q4 2022.

2.  Royalties in Q1 2023 include the impact of the 2.5% community social trust.

3.  Non-GAAP (defined below) measure that does not have any standardized meaning prescribed by GAAP and therefore may not be comparable with the calculation of similar measures presented by other entities. See “Selected Financial Measures” section.

4.  Net operating income represents revenues less royalties, operating expenses, and direct transportation; See “Selected Financial Measures” section.

5.  Adjusted EBITDA is net operating income less general and administrative (“G&A”) and plus/minus realized derivative impacts. See “Selected Financial Measures” section.

6.  Market capitalization for Q1 2023 and Q4 2022 assume share prices of US$0.59 and US$0.50, respectively.

7.  Free funds flow is defined as adjusted EBITDA less capital expenditures. See “Selected Financial Measures” section.

8.  Includes restricted cash balances.

9.  Net Surplus/Debt = Total cash + all trade and VAT receivables + short and long term net derivative balances – total current liabilities – long term debt – non current lease liabilities – deferred tax – other long term obligations.

Financial and Operating Highlights Subsequent to March 31, 2023

Drilling Commencement of Well 15H.  The Company commenced drilling well 15H on April 11, 2023.  The well is expected to cost approximately $15 million with completion anticipated in mid June 2023.  The well will reach approximately 4,550 meters in total depth with an expected 1,100 meter lateral section.

Approval of the L2 West Platform.  On April 15, 2023, PetroTal received approval from Perupetro to install and finalize construction of a new west drilling platform (“L2 West Platform”) at Bretana.  This project is budgeted at approximately $11 million and will allow Q3 and Q4 2023 drilling locations to commence as scheduled in addition to locations in the 2024 and 2025 long range plan.  

Robust Current Oil Production.  Production was approximately 21,000 bopd for the month of April 2023 and has averaged 21,140 bopd in May 2023, to date.  Near the end of April 2023, the Company fully recovered constrained production volumes from January and February 2023 and now is slightly ahead of plan year to date. 

ONP Reopening.  The Northern Peruvian Pipeline (“ONP”) resumed pipeline operations on April 12, 2023, after over a year of being shut down for maintenance and social unrest related reasons.  The Company expects that an estimated 270,000 bbls of oil already in the pipeline will be exported in late Q2 2023 at the Bayovar port by Petroperu, generating between $5 and $6 million in net revenue for the Company at current oil prices. PetroTal has not re-commenced shipping oil through the ONP.  It will consider that option once Petroperu’s full credit lines are reopened and functioning normally.

Return of Capital Policy.  The Company has formalized its dividend and share buyback policy.  Subject to maintaining a minimum liquidity level of $60 million, including unused credit facility capacity, the Company will a).  pursue a share buyback program of approximately $3 million per quarter and b).  pay eligible dividends in 2023 equal to the sum of USD$0.015 per share per quarter and incremental amounts from available cash consistent with maintaining the minimum liquidity level.  

Strong Liquidity.  The Company continues to receive regular scheduled payments from Petroperu and Brazil export revenue payments are current.  Following payment of the June 2023 dividend, the Company anticipates having approximately $60 to $70 million of total cash.   

2023 Virtual and in Person AGM

The Company is pleased to announce its 2023 annual general and special meeting of shareholders (“AGM”) will be held on June 15, 2023 (10:00am MT/15:00 UK) at the offices of Stikeman Elliott LLP in Calgary, Alberta.  The Company’s Management Information Circular and Proxy Statement in respect of the AGM is available on SEDAR (www.sedar.com) and the Company’s website (www.petrotal-corp.com)