Savannah Petroleum Share Discussion Threads

[xxnjr1] 07/7/2018 00:49

Thank you ZENGAS - makes good reading.

[ifthecapfits] 06/7/2018 15:46

Yep - great analysis - yes share price still languishes. It will come I guess.

[wardrv] 06/7/2018 15:32

Thanks for your analysis Zengas. I liked this sentence from the recent Mirabaud note "Furthermore, we note that SAVP benefits from all cash flow built up within the Seven portfolio since striking the deal in late 2017 so the timing of completion has little economic impact"I wasn't aware of this previously, so there is a nest egg building for SAVP from Accugas already and there has been since the end of last year.

[zengas] 06/7/2018 15:10

Re the Accugas business segment.

On sales of 189.4 mmcf/d to the 3 core customers and an additional 30 mmcf/d to new customers in place of diesel ie total sales of 220 mmcf/d and within their processing capacity 240 mmcf/d and 600 mmcf/d pipeline capacity.

As per previous post -
Gas sales to existing ($3.40 mcf) and new customers ($7.50 mcf) = $317m annual revenue.
Accugas buying gas at $1.70 mcf = $136m.
Accugas Opex (adm doc) = 14c/mcf = $11.2m.
$170m pre tax profit.

2% Education tax = $3.4m + 30% corporation tax = $51m = total $54m.
Should be roughly $120m after tax.

Total Accugas debt is $470m and i expect debt repayment to be deducted first so in real terms generating about $130m/yr net after tax.

Debt repayment is i beleive 10 year term so about $52m/yr including interest - that would leave nearly $80m year after tax.

Plan is to divide profits to investor group and Savp.

The key though is to drive up Accugas utilisation and sales which on the above is less than 40% of it's current pipeline capacity.

Investor group putting in up to $60m with Savp owning and being carried for 20%.
Savp have right to buy a further 10% for 10% cost of what investor group put in - ie cost to Savp $6m + interest so at a future point owning 30% in total.

On the above scenario with Savp owning 20% rising to 30% it could give them an additional $16m - $24m/yr net profit on top of it's oil/gas production.

Currently Savp estimate it's 20% Accugas interest is worth $209m less debt and debt costs representing a base case of $115m.

Using the fully diluted share numbers -
Accugas with the debt is worth 7.5p (Debt free 14p) for 20%.

For a payment of $6m+ interest giving them a total 30% this would rise to 11.25p with debt (circa 17p debt free).

Now if they can drive the gas sales and expansion of Accugas and customers every possibility that this could be worth 35-40p for Savp over the next few years alone given that they are at less than 40% of current pipeline capacity and the demand growth ahead.

If they get to just 60% capacity and that debt is greatly reduced or eliminated Accugas could be making over $180m after tax and over $50m net/yr to Savp alone.

Running at 90% pipeline capacity in future years or increased pipeline expansion could see Savp make a significant amount of profits and there is no bearing/demand for Savp to be the supplier of all the gas as it can be bought from 3rd party suppliers to the network.

This is why it is an important deal to seal and not all about worrying what are the latest production figures and it's seperate oil sales or Niger success which has been great so far. Accugas can be driven forward by adding in sales from 3rd party fields and not just what we produce our selves given it has 100,000 boepd pipeline capacity. From all of the sum of the parts I want to target 200p here.

[zengas] 06/7/2018 12:00

I think some are missing the potential of the Accugas deal and focussing on how much oil/gas we produce and what Niger may deliver.

If you look at the comments re Accugas by AK and the investment partners a few days ago in the last RNS, Accugas is clearly an exciting opportunity. It's also not solely reliant on SAVP producing all it's gas requirements. I believe with 30% (costing us a future circa $10m for the additional 10% stake) it could be worth a future 35-40p share alone allowing for warrants etc. With over $1b invested in it's net work there's every possibility that it could be worth in excess of $2b with us owning 30%. With us fully carried for 20% i expect the investment partners will push that side of the business forward.

Accugas has 600 mmcf/d (100,000 boepd) pipeline distribution capacity and currently 2 processing trains which it owns at Uqo capable of doing and tested at 240 mmcf/d (40,000 boepd).

Our gas is sold to Accugas at $1.70/mcf from the field with a price increase of approx 5% annually.

Accugas sells the gas at an average of $3.40 mcf (Dec Adm Doc). The 3 main contracts for 20, 20 and 10 years take a combined 189.4 mmcf/d (31,500 boepd gross) so Accugas as a seperate business strand generates around $235m/yr revenue. They are buying the gas from us at $1.70/mcf so a gross profit of almost $120m/yr before costs.

From the May 2018 presentation Accugas had signed 3 heads of terms with potential new customers to sell around 5 mmcf/d at an average $7.50/mcf "and has identified a strong pipeline of additional customers to tie in."

My take is if they can tie in an additional 30 mmcf/d at circa $7.50 mcf this would generate an a dditional $82m/yr or $63m gross profit before costs. (From what i recall AK i think said they planned to utilise up to a further 50 mmcf/d).

That would put Accugas on over $300m revenue and circa $180m gross profit after buying the gas. With increased utilisation the costs will significantly reduce also so should be a highly profitable business segment of which we will own 20% (and fully carried) with an option to buy a further 10%. That's based on 220 mmcf/d out of 240 mmcf/d processing and 600 mmcf/d pipeline capacity ie less than 40% of capacity. Further Processing can be added which is a modular system so with the growth in Nigerias gas consumption, Accugas could with so much facilities and capacity in place be capable of doing over $500m at 75% of current capacity.

With over $1b invested in the Accugas business and the boooming needs of both the business and ordinary consumer, Accugas has the potential to grow and make significant profits with us having a share of up to 30%.

[gisjob2] 03/7/2018 23:29

Honestmarty filtered.

[buffythebuffoon] 03/7/2018 22:23

The best paid bashers are much more subtle.

I know I’ve said it before, but it’s worth repeating. When dullards like honestmarty post, I’m reminded of the advice given to low level thinkers like him. It’s better for people to suspect you are an idiot, than open your mouth and remove all doubt.

Buffy

[kinkell] 03/7/2018 15:04

honestmarty - filtered

[honestmarty] 03/7/2018 10:35

LOL
Pot and kettle

[ifthecapfits] 03/7/2018 09:43

Quote from Malcy FWIW "SAVP might have been held back by length of time the completion has taken but with such success in Niger once these technicals have been seen to I consider that the shares should move materially higher."

[zengas] 03/7/2018 08:56

The only one being personal is you Marty.

[thomasthetank1] 03/7/2018 08:55

Mirabaud note on Savannah's announcement this morning.

Savannah Petroleum (SAVP LN) has announced an update on the Seven Energy transaction and recent trading activity in Nigeria. ‎Following the US$282m acquisition of Seven’s gas assets in late 2017, the company appears to be on the home straight to closing the transaction. The implementation agreement detailing the final legal terms and steps to completion is expected to be signed in July by the interested parties. This will facilitate closing of the transaction in Q3, subject to Government consent, which has been worked up in parallel and, in our view, should be a formality. Encouragingly, despite market nerves around the hold up (completion had been scheduled for Q2), all parties remain fully committed to the process as evidenced by the willingness of African Infrastructure Investment Managers (SAVP's partner in Accugas, Seven’s midstream division) and the Accugas banking syndicate to provide supportive quotes for today's RNS‎. ‎Furthermore, we note that SAVP benefits from all cash flow built up within the Seven portfolio since striking the deal in late 2017 so the timing of completion has little economic impact.

Operationally the Seven assets continue to perform well with production and cash flow on an upward trajectory, underpinned by the World Bank risk payment guarantee. Production during the period from Jan to May 2018 averaged 18.8 kboepd (gross), comprising 95 mmscf/d of gas and 2.9 kbpd of liquids. Whilst this is lower than the run-rate reported in Q1 (due to a maintenance shut-down in Q2 at the Calabar power station, Accugas's largest customer), ‎volumes are expected to recover strongly in H2. Furthermore, as Accugas sells gas under take or pay contracts (totalling ~152 mmscf/d) SAVP is protected in the event of customer outages. Indeed, based on the take or pay contract volumes and an upstream sales price of US$1.75/mcf, we estimate gas revenue for Jan to May of ~US$35m net to SAVP. This places the company on course to hit our FY18 gas revenue target of US$76m. Meanwhile, despite the fact the deal is yet to close, we note that Accugas is progressing plans to tie-back new gas customers, starting right of way work to extend its pipeline network into the Calabar Tree Trade Zone. The rationale here is to assess new, higher paying industrial customers which are currently burning diesel for power (at an equivalent price of >US$10/mcf) and are prepared to pay a material premium to Accugas’s current sales price of US$3.5/mcf.

Alongside solid cash flow generation in Nigeria, we also note that SAVP has completed the cancellation of its share premium account to enable it to create distributable reserves. This demonstrates intent around its stated dividend policy which is expected to include a US$12.5m maiden pay-out in December 2018 (placing the stock on a respectable yield of 3.7%). Taken as a whole, today's update should provide additional comfort to the market around current trading activity in Nigeria and the all-important Seven Energy transaction, which now looks on the cusp of being consummated.

[gisjob2] 03/7/2018 08:47

The usual rubbish from someone not invested looking for an entry point but who wets his pants about investing.

[gisjob2] 03/7/2018 08:24

Honestmarty. Think you need to change you name.

Temporary drop in production due to maintenance which always happens.

No failure of RTO just a understandable delay on deal of this nature.

There's always conditions to dividends which personally I don't like anyway (invest in the business until later)

Drilling in Niger will look after itself and has been highly successful to date.

There was never any drilling promised in Nigeria

Gas prices in Nigeria has risen so good news!

The market not seeing it as negative as you. So absolutely no frightening news whatsoever.

Share dealing in oil and gas stocks really not for you if you worry so much about Share price. Particularly when you don't hold.

[bad gateway] 03/7/2018 08:24

Yes but you were wrong about the only important issue here. Pretty sure you stated the expected delay would occur the shareprice would halve and then you'd buy in. Yet so far its slightly up not down massively on this news?

re share price halving...


honestmarty - 27 Jun 2018 - 08:46:12 - 2635 of 2668 ◄ SAVANNAH PETROLEUM PLC ► - SAVP
Buffy you flatter me too much.

Only those exposed to a significant financial loss are denied the insight to appreciate the escalating risk here.

As to the degree of badness, when a third deadline is proffered?

I think a 50% drop would not be beyond reason.

And I would buy back at that point.

[honestmarty] 03/7/2018 08:20

I have been wsrning that the RTO was in difficulty and that the failure to provide production figures as ominous,

The fall in production figures is a problem for Gingernuts, who if anything had said production was up.

[jnbrw] 03/7/2018 08:14

Honestmarty - it's not that tragic, but it is not the RNs we were hoping for

[honestmarty] 03/7/2018 08:05

Profits warning, gas production DOWN significantly, not the promised growth.

Another failure to complete RTO, a third deadline, very vague.

Flagging up conditionality of the heavily promised dividends.

No chance of drilling programme extension, or Nigerian drilling.

A very frightening update.

[jnbrw] 03/7/2018 08:04

Seven deal closure put back again ( to Q3), production at 18000boepd( down from 22boepd) due to maintenance, proposal to extend pipeline in future,

[thomasthetank1] 03/7/2018 08:04

Cantor Fitzgerald note on Savannah Petroleum today.

Savannah Petroleum ↑ (SAVP.L, 29.05p, £237m) updates on its acquisition of Seven Energy, with the Implementation Agreement (which documents final legal terms and steps to completion) to be executed by the end of July 2018 and completion now expected in Q3 (with a supplemental Ad Doc to follow). Average production from the Seven assets was 18.8kboepd (15.9kboepd of gas) from Jan-May, with gas in April/May down vs Q1 due to maintenance at a power plant which is one of the three main customers, but expected to return to Q1 levels during H2. Uptime at the Uquo and Stubb Creek facilities was 100%, with gross gas capacity of at least 176mmcfd (29.3kbboepd). Seven has sought permission to extend its existing pipeline network into the Calabar Free Trade Zone, to allow supply of gas to new industrial customers at a higher pricing point than the $3/mcf currently being achieved (with the incumbent diesel equating to >$10/mcfe). Coy also confirms that it has cancelled its share premium account, which will allow the paying of dividends and share buybacks. Positive – while the transaction has dragged on, investors will no doubt be pleased to hear it is nearing completion, while output is strong output and the near-term addition of new customers and improved pricing could see a step-change in cashflow.

[ifthecapfits] 03/7/2018 07:44

RNS Number : 3348T

Savannah Petroleum PLC

03 July 2018

3 July 2018

Savannah Petroleum PLC

("Savannah" or "the Company")

Seven Energy Transaction and Operational Update

Confirmation of Cancellation of Share Premium Account

Savannah Petroleum PLC, the British independent oil and gas company focused around activities in West Africa, is this morning pleased to announce an update on the Seven Energy Transaction (the "Transaction") and on operations at the Seven Assets in South East Nigeria.

Transaction Update

Good progress continues to be made in relation to the satisfaction of the relevant conditions precedent ahead of the completion of the Transaction, including, inter alia, Ministerial Consent. It is currently anticipated that the Implementation Agreement, which documents the final legal terms and steps which will be taken to effect the Transaction, will be executed by the interested parties by the end of July 2018. Savannah continues to progress the relevant documentation with all relevant stakeholders to achieve this objective. The Transaction is now expected to complete in the third quarter of 2018, and will be followed in due course by the publication of a Supplemental Admission Document.

Production Update

Average daily production from the Seven Assets for the January - May 2018 period has been 18.8 kboepd (gross). Gas production levels in April and May were lower than that achieved in the first quarter of the year due to a maintenance programme conducted at the Calabar National Integrated Power Plant, one of Accugas' three principal gas supply customers. It is anticipated that gas production levels in the second half of the year will return to those achieved in Q1.

Gas from the Uquo field is sold via Accugas to three principal customers through gas sales agreements ("GSAs"), with take-or-pay volumes under the GSAs set at 152 mmscfd (25.3 kboepd). Gas production in the January - May 2018 period averaged 95 mmscfd (15.9 kboepd, gross), with a peak delivery rate of 156 mmscfd (26.0 kboepd, gross).

Strong operational performance at the Seven Assets has been sustained, with uptime at the Uquo CPF and the Stubb Creek EPF of 100% over the five-month period to end May 2018. Field gas production capacity remains capable of delivering at least 176mmscfd (29.3 kboepd, gross).

Accugas Business Development

Accugas continues to progress plans to add additional customers to the pipeline network. To this end, Accugas has sought permission to commence right of way work to extend its existing pipeline network into the Calabar Free Trade Zone, to enable the supply of gas to a new suite of industrial customers. As previously disclosed, the addition of new industrial customers is expected to be at a significantly higher pricing point than that which is currently being realised (c.US$3.5/mcf). There are compelling economics associated with gas replacing diesel, which is currently priced at greater than US$10/mcfe in South East Nigeria.

Confirmation of Cancellation of Share Premium Account

The Company is also pleased to confirm that the High Court of Justice of England and Wales has made an Order confirming the cancellation of the Company's share premium account. Details of the cancellation of the Company's share premium account were set out in the notice convening the Company's recent annual general meeting ("the Notice"), which was sent to all shareholders on 10 April 2018. A copy of the Notice can be found on the Company's website (www.savannah-petroleum.com).

The Order of the Court has been registered with the Registrar of Companies and, accordingly, the cancellation of the Company's share premium account has now become effective. As was stated in the Notice, the cancellation of the Company's share premium account has been effected to create distributable reserves in the Company in order to provide the directors of the Company with maximum flexibility in future to consider (if appropriate): (i) the payment of dividends to shareholders, where justified by the profits; and (ii) the buy-back of the Company's shares or other distributions to shareholders.

Andrew Knott, CEO of Savannah Petroleum, said:

"I am pleased with the markedly improved revenue generation we have seen from the Seven Assets in 2018 vs. previous years, with the impact of the World Bank Partial Risk Guarantee on cashflow generation this year being clear to see. Looking forward, we expect to see production volumes rise significantly in the second half of the year, although would remind our stakeholders the Accugas gas sales agreements are subject to take-or-pay provisions higher than anticipated 2018 production volumes. A major objective for Accugas is to make progress towards better leveraging its gas processing and transportation infrastructure through the addition of new customers which both Savannah and African Infrastructure Investment Managers are keen to progress as quickly as practicable.

We remain keen to progress the Transaction towards closing as soon as practicable and are working closely with the relevant stakeholders to achieve this and thank them for the support we have received throughout the acquisition process."

Hakeem Adedjie, CEO Hydrocarbon Advisors Ltd, Financial Advisor to the Accugas Banking syndicate (provider of c.US$371m debt finance to Accugas), said:

"The Accugas Term Facility Lenders continue to work with Savannah and African Infrastructure Investment Managers to bring the Transaction to financial close."

Olusola Lawson, Investment Director West Africa, African Infrastructure Investment Managers, said:

"Accugas is a unique business, benefitting from its position as owner of the only significant gas processing and transportation infrastructure in the high energy demand growth south eastern region of Nigeria. Working hand in hand with Savannah, and the wider stakeholder group, we look forward to investing in and growing the business over the course of the coming years".

Unless otherwise defined, capitalised terms are as per the Company's Admission Document dated 22 December 2017.