Savannah Petroleum Share Discussion Threads

[zengas] 23/12/2018 12:48

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 instituional 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 . Even with 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 beleive 250p is more realistic considering all of the factors above.

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 favouable exchange rate.

[bushman1] 21/12/2018 15:08

A la maison, irrespective of SAVP on their way to 89 p +. have yourself a good Christmas mate :).

[thomasthetank1] 21/12/2018 13:23

Link to Vox Markets interview with Andrew Knott, CEO of SAVP. Section starts at 1:16.

hxxps://audioboom.com/posts/7124301-savannah-petroleum-savp-w-resources-wres-and-chris-bailey-on-2018-s-winners-and-losers

[bushman1] 21/12/2018 09:52

Malcys interview this morning with Andrew Knott

[bushman1] 21/12/2018 09:52

Malcy's interview this morning with Andrew Knott

[bushman1] 21/12/2018 09:48

SAVP update presentation by Andrew Knott

[bushman1] 21/12/2018 09:47

Andrew Knott : presentation on todays' RNS

[xxnjr1] 21/12/2018 09:41

Back in here. Encouraged AIIM are still involved.

[alamaison5] 21/12/2018 09:10

No deal done until it's done, lol.
Back to 25p. Trap is set.

[plentymorefish] 21/12/2018 08:55

AK must have been up early this morning!

[thomasthetank1] 21/12/2018 08:50

All - please see below a link to an interview of Andrew Knott, CEO of SAVP, and Malcy on Core Finance TV.

[parisv] 21/12/2018 08:39

video presentation

[bushman1] 21/12/2018 08:16

Cantor Fitzgerald note : Positive

Cantor Fitzgerald note Savannah Petroleum ? (SAVP.L, 24.2p, £198m) said that it has made further amendments to the overall acquisition of Seven Energy in Nigeria, with the announced acquisition of a further 55% stake in Accugas, meaning that SAVP will now own 75% of the business.

SAVP has also subsequently agreed to sell a 25% stake in both Accugas and SUGL to African Infrastructure Investment Managers Limited (AIIM) for $70m – boosting liquidity and freeing up cash for the Niger operations.

Revised terms have been agreed with all of the Accugas lenders and noteholders. SAVP has also agreed to acquire the Creek Town to Calabar pipeline in Nigeria, which will allow SAVP full control over the gas flow from Uquo to the transfer point at the Calabar power station.

A new customer has also been added – the Alaoji power station. In Niger the well test of the Amdigh-1 well is expected to take place in 1H/19, with reprocessing to the seismic data over the R3 block well underway.

This deal helps tidy up a very complex structure in Nigeria, and the additional cash freed up will allow for the acceleration of the operations in Niger.

It also grants SAVP more control over Accugas which is a key component in the ability to control the assets and ergo cashflow from the new business.

This latest amendments/agreements means that all of the commercial CPs of the Seven acquisition have now been met, with legals the final outstanding item to clear up.

This is a clearly accretive move and the enlarged business should be throwing off significant cash with which to develop the portfolio.

Positive

[bushman1] 21/12/2018 08:06

Hammam note :

Valuation: increasing our risked NAV by 11% to 89p/sh

As a result of the new structure of the deal, we have upped our risked NAV to 89p/sh from 80p/sh.

[gmr64] 21/12/2018 08:06

Cantor Fitzgerald note

Savannah Petroleum (SAVP.L, 24.2p, £198m) said that it has made further amendments to the overall acquisition of Seven Energy in Nigeria, with the announced acquisition of a further 55% stake in Accugas, meaning that SAVP will now own 75% of the business. SAVP has also subsequently agreed to sell a 25% stake in both Accugas and SUGL to African Infrastructure Investment Managers Limited (AIIM) for $70m – boosting liquidity and freeing up cash for the Niger operations. Revised terms have been agreed with all of the Accugas lenders and noteholders. SAVP has also agreed to acquire the Creek Town to Calabar pipeline in Nigeria, which will allow SAVP full control over the gas flow from Uquo to the transfer point at the Calabar power station. A new customer has also been added – the Alaoji power station. In Niger the well test of the Amdigh-1 well is expected to take place in 1H/19, with reprocessing to the seismic data over the R3 block well underway. This deal helps tidy up a very complex structure in Nigeria, and the additional cash freed up will allow for the acceleration of the operations in Niger. It also grants SAVP more control over Accugas which is a key component in the ability to control the assets and ergo cashflow from the new business. This latest amendments/agreements means that all of the commercial CPs of the Seven acquisition have now been met, with legals the final outstanding item to clear up. This is a clearly accretive move and the enlarged business should be throwing off significant cash with which to develop the portfolio. Positive

[zengas] 21/12/2018 08:00

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 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.

[gmr64] 21/12/2018 07:51

Hannam note:

Further enhancing the Nigerian acquisition

Improving terms of the Seven Energy Transaction

SAVP has recut the terms of its proposed partnership with African Infrastructure Investment Managers (AIIM), as it looks to finalise the acquisition of Nigerian assets previously owned by Seven Energy. Savannah estimates a 67% increase in cash flow as a result over the 2019 – 2022 period. Under the new terms, Savannah will gain control of the Accugas midstream assets while also receiving US$70mm in cash, in exchange for AIIM taking a 25% stake in the Uquo upstream assets. SAVP will now have 75% of the upstream and midstream versus 100% upstream and 20% midstream in the original deal. As well as gaining a larger share of the assets, the unit cashflow generation from the midstream is higher due to lower costs/capex as well as being in a tax loss position for longer. Importantly, now all commercial terms conditions precedent have been agreed, the deal should progress to completion in Q1’19.
The AIIM transaction is accretive to NAV, cashflow and liquidity

The AIIM deal for Uquo provides an implied value for SAVP’s remaining stake in the asset of US$210m, which along with the US$70m cash to be received exceeds SAVP’s current market cap. This effectively implies that the rest of SAVP’s portfolio (Stubb Creek, Niger) is a free option. SAVP’s buy out of the upstream minority partners, along with improved gas market conditions in Nigeria and Accugas’ lenders allowing debt repayment deferral, have allowed Savannah to negotiate from a position of strength, significantly improving the deal it has with AIIM. The deal is beneficial to Savannah in a number of ways: it is value-accretive, on our estimates, as the NAV of the 25% stake in Uquo given up by SAVP is more than offset by the US$70mm cash proceeds and 55% increase in the Accugas stake; the receipt of cash upfront will provide a welcome liquidity boost; and ongoing cash flow generation will also improve.
Accugas growth outlook improving

Accugas has managed to add a new customer to the business - the Alaoji power plant, which comes in under the Calabar GSA. The addition of Alaoji is expected to enable supply to grow beyond the current contracted Calabar quantities (c.250 mmscf/d total supply potential for both plants vs. 131 mmscf/d Calabar DCQ). We estimate that an additional 50mmcf/d would generate ~$75mm in revenue net to SAVP in 2020. We expect SAVP to look to access additional gas resources to meet this and further gas demand. A potential expansion of the Accugas processing facilities provides significant further medium-term expansion potential.
Niger well test by mid-19

In Niger, Savannah is waiting for results of seismic to enable it to recommence all operations (e.g. well test and next drilling campaign). Savannah announced that the planned well test at the Amdigh well is now set to take place in mid-H1’19 meaning subsequent production from the Early Production system is now likely in Q2’19 versus previous expectations of first production in Q1’19. Our 14p/sh risked NAV for the EPS is unchanged.
Valuation: increasing our risked NAV by 11% to 89p/sh

As a result of the new structure of the deal, we have upped our risked NAV to 89p/sh from 80p/sh. The stock trades at <30% of our risked NAV and >50% discount to our core NAV of 55p/sh. SAVP is trading on relatively low cash flow multiples already in 2019 before substantial growth in earnings and cash flow in 2020 puts it on very low multiples (e.g. EV/EBITDA multiple of 4x in 2019, dropping to just 2.5x in 2020). We also note that the valuation of Uquo/Accugas has virtually no exposure to oil prices since contracted gas prices are escalated by some 6% p.a.

[thomasthetank1] 21/12/2018 07:32

Mirabaud note on Savannah Petroleum out today.

Bigger piece of the pie

Savannah Petroleum (SAVP LN) has published a positive update on the Seven Energy transaction, unveiling substantial improvements to the deal. As well as being materially cash flow and NAV accretive, the agreed changes deliver control of the gas value chain and a substantial cash injection upfront.

Revised structure: SAVP will acquire an additional 55% of Accugas lifting its interest in Seven’s midstream arm to 75% – from just 20% previously – for nil cash consideration. Importantly, this gives SAVP control of a key piece of regional infrastructure which acts as the gateway to energy hungry gas customers in southeast Nigeria. In conjunction, SAVP will sell 25% of the Uquo gas field and Accugas to AIIM for US$70m in cash, aligning its interests across the upstream and midstream divisions at 75%. Valuation wise, the deal franks the value of Seven’s integrated gas business at US$280m (gross) – versus SAVP’s market cap of ~US$250m – implying little if any value for the Stubb Creek field or the potential in Niger. To put this in context, our risked NAV for the Niger portfolio alone stands at US$373m.

[honestmarty] 21/12/2018 07:31

Wake up Bushman
Another failed deadline
Can't sign off RTO
More hard cash being siphoned off into Nigeria
Forget the dividend
Failure to deliver the Niger flow test.

[bushman1] 21/12/2018 07:23

Very positive progress being made by SAVP both in Niger and Nigeria. A transformational deal has been brought together by AK. Those with a medium to long term value accretive point view will of course understand this. Those who are shorters will not.

[honestmarty] 21/12/2018 07:18

A nightmare before Xmas.

Another failed deadline.

Completion of the RTO pushed back into Q1 2019.

Is this the 5th or 6th time Andrew has failed to deliver.

And again more hard cash being transferred into Nigeria.

Now we see Niger falling apart.

The December flow test has been abandoned, now a vague mid H1.

YOU CAN FORGET THE PROMISED DIVIDEND.

One man's blind obsession is driving this disaster onto the rocks.

Gingenstein slouches toward Bethlehem.

[timberwolf3] 21/12/2018 07:09

I can't get excited about this until the ink is dry on relevant documentation.

[honestmarty] 20/12/2018 20:05

Haven't said much here recently.

Very concerning no RTO completion.

What happened to the flow testing?

Gingenstein slouches towards Bethlehem