Savannah Petroleum Share Discussion Threads

[thomasthetank1] 11/12/2015 12:32

New website!

Looks like Savannah Petroleum has updated its website.

hxxp://www.savannah-petroleum.com/en/index.php

[thomasthetank1] 17/11/2015 14:05

Mirabaud has issued a note, which names SAVP as one of their top exploration picks in the sector.

Savannah Petroleum - New kids on the block
In terms of specific stocks, we like AIM-listed Savannah Petroleum for its highly prospective, low cost onshore acreage in Niger’s Agadem basin. As the Africa Oil deal reinforces, Africa’s rift basins are currently an industry sweet spot and with Savannah in its own farm-out talks we see potential for a value enhancing deal.

We maintain our BUY recommendation with a target price of 125p/shr.

[thomasthetank1] 16/11/2015 09:39

Good to see Panmure Gordon & Co initiate coverage on SAVP this morning.

They have placed a BUY recommendation on Savannah Petroleum and set a Target Price of 75p on the Company's shares.

[thomasthetank1] 11/11/2015 11:07

Mergermarket article - Savannah Petroleum in talks to close USD 300m Niger licence farmout by 1Q16

Savannah Petroleum [LON:SAVP] has seen a variety of international, independent and national oil and gas companies assess data regarding the sale of between 30% and 50% of its interest in the R1/R2 and R3/R4licences in Niger, a source said.

If a farminee took a 50% interest in the assets, Savannah would likely look for a carry commitment of around USD 250m and USD 50m cash to cover back costs, the source said. Savannah has spent around USD 100m on development so far, he added.

Savannah holds the entire issued equity interest in these licences, with the Niger state retaining the back-in right of 20% of profit oil on R1/R2 and 15% on R3/R4 15%, according to a company presentation.

The deal is expected to close within or before the first quarter of next year, the source added.

It is understood that Jefferies has been mandated to conduct the farm-out sale process.
It is looking for a partner with a strong balance sheet and solid technical experience. Savannah would likely retain operatorship as it has the local knowledge and infrastructure to optimise the field development, he added.

The assets have garnered particular attention from Asian entities, with national oil companies such as ONGC [NSE:ONGC] and Petronas amongst those having shown interest, a person with knowledge of the situation said.

Proceeds from the farm-out will be earmarked for a 20-to-30 well-drilling campaign on the licences over the next 18-to-24 months and to commission further seismic studies, the source said.

R1/R2 is Savannah’s flagship assets and covers around 8,406 square kilometres in south-east Niger. The licence has best estimate gross risked prospective oil resources of 1,191mmbbls, according to a recent CGG[EPA:CGG] re-evaluation.

Savannah signed an agreement with the government of Niger for its interest in the R3/R4 PSC on 31 July, according to a company announcement.

The farmout process began following this agreement, the source said.

Together, R1/R2 and R3/R4 make up 50% of the total Agadem basin acreage, with CNPC holding the remaining 50%, according to Savannah announcements.

Savannah trades on the London AIM stock exchange with a market capitalisation of GBP 56m.

Savannah and Jefferies declined to comment on any ongoing farmout process. Petronas and ONGC did not respond to requests for comment.

[zengas] 09/11/2015 14:50

Savannah estimate the break even on their Agadem R1/R2 blocks as $43/b so one would think this would be very attractive for any farminee.

Given the size of the Maersk farm-in to Africa Oil Corps blocks (and 154 mmbo 2C on Lokichar) today, Mornigstar Inc estimate the breakeven price for oil production "at about $50/b"

[zengas] 09/11/2015 10:12

Africa Oil Corp June 2015 - 4 months prior to farmout and from their own website.

"Kenya has limited oil infrastructure and no export facilities currently in place. The discoveries in Blocks 10BB and 13T are remote and cannot be delivered to market without significant infrastructure investment.

The Lokichar Basin is in a remote part of Kenya, approximately 850 km from the most likely point of export at Lamu. New build pipeline infrastructure and road upgrades will be required to permit field development and production export for these resources. Whilst there may be outline plans for this new infrastructure, there is currently no firm commitment or government approval.

The oil-water contacts for the discoveries are uncertain; the resource estimates consider the uncertainty between the lowest known oil and structural spill-point; however, the true hydrocarbon contacts are yet to be confirmed by well logs and tests. Additional 3D seismic, currently being acquired in the basin, will allow a more precise assessment of the volume of recoverable hydrocarbons. However, further appraisal drilling and well testing is required to reduce the uncertainty in the areal extent of the reservoir pay zones.

The Auwerwer and Lokhone Formations have been penetrated by the wells, drilled by AOC and its co-venturers. However, borehole stability remains an issue, resulting in the borehole being significantly out of gauge in some parts of the reservoir section. This has made log interpretation challenging and there remains significant uncertainty with regard to the average and total thickness of the reservoir pay zones and reservoir quality (porosity, net-to-gross and hydrocarbon saturation). "

[thomasthetank1] 09/11/2015 09:53

Thought I'd share an upbeat analyst note on today's Maersk Oil / AOI farm-out agreement, lots of crossover with SAVP. Also, Apache reportedly received an unsolicited $18bn offer for the Company, so lots of good news in the sector today.

E&P news - Mirabaud Securities

The standout piece of news in the E&P sector today is Africa Oil’s (AOI CN) farm-out deal with Maersk Oil. The shipping giant’s oil arm has agreed to purchase half of Africa Oil primary rift basin real estate (25% of Blocks 10BB, 13T, 10BA in Kenya and 15% of South Omo and 25% of Rift Basin in Ethiopia) for a total consideration of US$845m, comprising US$350m in back costs and a net carry of up to US$495m. The transaction is a significant breakthrough for Africa Oil, enabling it to progress to first oil without requiring further equity and freeing up financial resources to pursue acquisitions at the bottom of the cycle. From a valuation perspective, the terms of the deal highlight the disconnect between the industry and equity markets. As of Friday’s close Africa Oil had an EV of just US$584m while the transaction with Maersk implies a net asset valuation of up to US$1.7bn (on AOI’s assets prior to farm-down) - or around US$5.50 per 2C barrel. Looking more broadly, the deal has positive implications for partner Tullow Oil (TLW LN) which holds an equal position in Africa Oil’s Kenya blocks and has expressed a desire to farm-out its own interest in due course. It also underpins our belief that Africa’s rift basins are something of a sweet spot in the current farm-out market reflecting industry preference for low risk, low cost onshore projects.

[taudelta1] 02/11/2015 08:57

It's November! If implication not understood, with respect I invite you to DYOR! GLA

[zengas] 19/10/2015 09:48

We've paid nearly as much for R3/4 as R1/2, so it will be interesting to see what the potential numbers for R3/4 are which as yet are not factored in.

[taudelta1] 19/10/2015 09:39

Thanks Dalesman .. I also have something up and running in Excel that can instantly adjust as assumptions changed, most often of course the current POO ... am in substantial agreement with you re price targets .. GLA

[dalesman] 16/10/2015 18:32

It’s been a while since I updated my Savannah Petroleum spreadsheets.

A lot has happened in the interval, including a rapidly falling oil price and a downgrading of the long-term oil price assumption.

As with most oil shares the share price has fallen in line with this fall in POO, many companies have fallen much more than the percentage decline in the oil price. In comparison Savannah has done quite well.

Savannah had a recent high of 44p and a low of 28p. Current Share Price is 32.5p at the time of writing this post.

We are now entering an exciting period in the life cycle of this company and some interesting times lie ahead starting with the next 3 months.

Lets have a look at how the company stands right now.

To view the post plus the screenshots of the spreadsheets referred to in this post go to



Screen Shot 2015-10-16 at 16.20.34

A screen shot of the Summary Page sets the scene.

We have 193m shares in issue following a placing that raised $38m to purchase two further blocks, R3 and R4 in the Agadem Rift Basin in Niger. The company raised this money at a premium to the then current share price

The current market cap is 62.7m

We have around 8 million in cash and this works out at around 4p per share.

A competent persons report on the companies R1 and R2 blocks revealed 1.191 million prospective resources, a significant number.

Screen Shot 2015-10-16 at 17.50.34

The Chinese have achieved an 80% success rate using 3D seismic.

Savannah has in addition to 2D and 3D seismic undertaken a Full Tensor Gravimetric Survey carried out by Arkex and this has been integrated into their sub surface model, helping to identify 14 drilling prospects, which they hope to start to drill in Q4 of 2015.

They are actively looking for an industry partner willing and able to inject $150m plus into the partnership.

Lets look at the position before any farm in.

The Summary Page encapsulates all this information.

Savannah has a 95% entitlement on blocks R1 and R2 but the Niger Government has the right to a 20% back in so on success Savannah has 95 x 80 / 100 = 76%.

Without any farmin partner SAVP has a fully diluted 76% entitlement before the details of the PSC are applied. You can view this figure in column P.

The Tax Opex and Capex workbook handles Royalties etc.

Without going into detail regarding the working of the Reserves Analysis Sheet the valuation based on 8 million barrels being achieved from the first five wells comes out at £2.41

Screen Shot 2015-10-16 at 18.10.11

based on a $65 long term oil price assumption.

If the current oil price is applied then this reduces to £1.27

If the company decides to go it alone and raises £25 m to fund a 5 well drilling program, increasing the shares in issue by say 80m then my target reduces to £1.25 with 273m shares in issue and using the current oil price.

All these price target figures include a 25% reduction due to negative sentiment relating to the oil sector as a whole.

The management options vest at £1.14

However…..

It is quite clear that the preferred way forward is to attract a farmin partner willing and able to inject $150 - $200 million into the venture.

I’m assuming that 50% of SAVPs entitlement will be given up to secure this deal so this reduces the entitlement figure from 76% to 38% but increases the cash by say $154m or £100m. This would raise the cash per share from 4p to 56p without raising the shares in issue.

The figure would fund 25 plus wells being drilled in the Agadem Basin.

Double click on the image to see full size.

Screen Shot 2015-10-16 at 18.14.03

The resulting target is now £1.15 based on 8 million barrels found from the 5 wells but a cash injection of $150m would allow 25 wells to be funded with say a 40m target. This raises my initial target to £1.27 at the current share price if a long-term oil price assumption of $65 is applied this figure rises to £1.73 (see above)

This is, IMHO, an ultra conservative initial valuation. Remember over 1 billion barrels are inferred in the CPR. Effectively this valuation only allows for 40m barrels to be moved into the 2P reserves category.

My initial target, giving an upside from the current share price of around 300% is possibly on the cards remembering that when the options vest additional shares will be issued.

The Chinese had an 80% success rate when translating prospective resources into 2P reserves. My figures are using a 60% chance of success for an initial 25 well drilling campaign targeting 40m of 2P reserves. This leaves just short of a billion barrels still to be accessed!

We need only 4.39 mb of 2P reserves to cover the current share price

The nice thing about my software is that it is simple to change the scenarios .

Please do your own research and act accordingly and good luck with your investments.

Hope that helps

Kind regards

Phil

I hold

Dalesmann gives no advice on buying selling and holding this, or any other stock mentioned in his posts. His posts are for education only.

[zengas] 06/10/2015 16:18

Seems like they already have a choice of partner given the CEO comments in this interview.

1:39 - From an operational perspective we will be ready to drill from Q4.

Finding costs $1/b

2:17 - 'I'm very encouraged by the calibre of companies that we are able to partner with so we need to make a decision of who we choose to partner with and when we choose to do it. But we certainly anticipate in Q1 we will recommence operational activity. I'm very confident of that.'

On the subject of why not just raise the capital, go it alone and drill ourselves -

3:00- ' From an equity perspective we clearly have access to capital if we so choose to go ourselves. We won't be ready until Q4 to go ourselves. It is likely from what i see just now that our preferred solution is to introduce an industrial partner and that will enable all the stakeholders to benefit very materially'.

Operationally - 10 seismic firms on our asset on a scout trip. Secondly we need to finalise the engineering work process on the wells we intend to drill.

[proactivest] 06/10/2015 14:52

Video interview with CEO Knott



Andrew Knott, chief executive of Savannah Petroleum (LON:SAVP), says he is encouraged by the calibre of potential partners for the company’s work in Niger's Agadem Rift Basin.

The firm is aiming to complete seismic acquisition planning and tendering work for its R1/R2 and R3/R4 licence areas in the fourth quarter.

Speaking to Proactive, Knott said he anticipates a partner being on board by Q1 2016 at the latest, after which operational exploration can recommence.

[zengas] 30/9/2015 10:15

Thanks for that ttt1.

[thomasthetank1] 30/9/2015 09:56

Hi guys,
Positive update from Savannah this morning. Thought I'd share these upbeat notes from Panmure Gordon and Mirabaud with you.

Panmure Gordon

Savannah Petroleum – Interim Results (SAVP LN, Mkt cap: £60.2m) – Positive

In the first half 36,949km2 of Full Tensor Gradiometry was flown over the Agadem Rift Basin which has been interpreted, substantial ARB technical database gathered and analysed including modern and legacy 2D and 3D seismic, well logs and evaluation studies. Initial R1/R2 evaluation identified 14 3D seismic backed drill-ready exploration prospects and 37 exploration leads. Post period $36m was raised to acquire the R3/R4 PSC increasing the footprint in the Agadem basin, Gross best estimated risked prospective resources were upgraded to 1,191mmbbls by CGG Robertson due to the inclusion of the resource potential from the Yogou formation in addition to the Eocene. Initial geological evaluation of the new R3/R4 licence resulted in 29 leads identified and preliminary engineering studies and economic modelling completed by management but assessed as reasonable by the CP indicate a full-cycle break even cost of US43/bbl which combines with the update from the Niger Ministry of Energy and Petroleum indicating a likely central case export cost of US$16/bbl. Seismic acquisition planning and tendering work for all licences are expected to be completed in Q4 along with well engineering work on the high grade prospects. Environmental authorisations permitting ground operations on R3/R4 are expected by year end.

Management remain confident that a farm in deal will be completed before the end of the year with expectations of a sell-down of 30-50% of Savannah’s interest in the block. With the acreage significantly larger following the R3/R4 acquisition and a greatly enhanced understanding of the licences resulting from analysis of the FTG the attraction for a farm-in partner is growing. The fact that an economically robust monetisation option is also big positive.

Mirabaud Securities - 30 September 2015

Savannah Petroleum (SAVP LN) is another to issue H1 results this morning. The financials clearly are of limited relevance, save that the company is well capitalised with US$9m at period end, which, with no material committed costs, is sufficient to see the company through to at least late next year. Looking at the operations, things are progressing well, with seismic acquisition planning and tendering work expected to complete this quarter, alongside well engineering work on the high graded exploration prospects. The recently acquired FTG data continues to be integrated into the subsurface model, which will be used to high grade various leads and prospects. There was no firm news on the ongoing farm out process (which commenced in mid-July), but we understand that the process remains on-track, and the early signs are very encouraging. Although the macro environment remains challenging, low cost projects with material running room are still attracting significant industry interest. While Savannah is not setting itself any deadlines to announce a deal, the ongoing seismic and drilling preparations are clearly testament to its confidence in striking an agreement in the coming months.

[zengas] 05/8/2015 12:52

Whether it's 193m just after the placing bookbuilding 3 weeks ago I'm not bothered in the slightest given the scale of what's on offer as I posted on lse if we go it alone without a farmin partner. I wish people would state their reasons why, rather than a one line comment.

If we did have to go it alone with raising some capital, we at least would still have 100% control of the asset.

$25m would drill 5 eocence wells and say another $10m for seismic = $35m + the cash they already still have.

If they raised $50m at 38p again = about 85m new shares (enough for circa 8 eocene wells @ $4.25m and say 1 deeper target $4m, plus $10m for seismic = circa $48m which isn't a lot of money to do a decent 1st round of drilling).

Currently 193m shares so we would be diluting less in the overall scheme of things as we would nbe holding onto what we would have given up via a farmout
ie 193m shares now expecting a 50% farmout of 1191 mmbls = circa 575m net potential.

Worst case we raise $50m and don't have a farm out, we get diluted to say 278m shares but keep the 1191 mmbls net (DOUBLE) potential for just that extra 85m shares - i'm sure all the institutions would likely be supportive if that was to be the case.

No farmout is a better deal if we are successful at finding the oil as we would therefore have more of the interest but riskier at the outset of drilling because you would be in a weaker position if you don't and then need more money or a partner at that point. If successfull discoveries from 1st drilling phase, SAVP could then go for the likes of $100-$200m debt funding against the initial reserves. They could even farm out 20-25% at a much more valuable price then imo.

[gray1107] 05/8/2015 10:00

No way will there only be 193m shares in issue.

[thomasthetank1] 31/7/2015 09:50

Morning all - Just seen that Savannah Petroleum put out a very positive RNS this morning, the Company has signed a PSC with the Government of Niger for its recently acquired R3/R4 permits.

R3/R4 Production Sharing Contract Signature

Savannah Petroleum is pleased to announce the signing of a Production Sharing Contract ("PSC") by Savannah Petroleum Niger and the Government of Niger represented by the Ministry of Energy and Petroleum for the R3/R4 license area (the "R3/R4 PSC"). Accordingly, the US$28m payment relating to the R3/R4 PSC signature bonus will shortly be made to the State of Niger.

As previously disclosed at the time of Savannah's recent US$36m placing, the R3/R4 PSC is located in the area Savannah refers to as the "Agadem Rift Basin", and is in close proximity to the R1/R2 PSC area. Savannah has currently mapped 29 leads across the R3/R4 PSC area, with a range of mapped closure sizes similar to existing discoveries in the basin.

The principal terms of the R3/R4 PSC are similar to that of the R1/R2 PSC, with the exception that:

* The free carried State of Niger's Public Participating Interest is set at 15% as compared to the 20% level of the R1/R2 PSC;

* The minimum work programme requires the acquisition of 750 sq km 3D seismic and the drilling of 2 wells during the initial period of the exclusive exploration authorisation (EEA), 500 sq km 3D seismic and 2 wells during the first renewal period of the EAA, and 250 sq km 3D seismic and 2 wells during the second renewal period of the EAA;

* 60% of the signature bonus is deemed to be cost recoverable as compared to 40% for the R1/R2 PSC.


Andrew Knott, CEO of Savannah Petroleum, said:

"The signing of the R3/R4 PSC is another landmark transaction for Savannah. We have now licensed c.50% of the Agadem Rift Basin, which the Board believes places the Company in a very strong position for the future given our assessment of the scale, risk profile and cost structure of our assets. I would again like to thank the Government of Niger for awarding the PSC to us, and for their support over the past three years. Savannah will now move to commence what we expect to be an aggressive exploration programme over our licenses which we hope will deliver material benefits for all of our stakeholders over the coming years."

[dalesman] 30/7/2015 14:03

Hi Cashpile

Sorry for the delay - been on Holiday in Norway and have just discovered your question

Yes I'm currently out of both GKP and LGO

Regards

Phil

[jennifer25] 30/7/2015 13:59

Oops wrong board

[teataster] 25/7/2015 18:32

Appreciate that dalesman, also found your website, great reading, thanks.

[dalesman] 25/7/2015 12:06

Hi teataster

The first milestone will be the announcement of a farmin after which they expect to drill their first well towards the end of Q3 or in Q4