Savannah Energy PLC, the African-focused British independent energy company sustainably developing high quality,
high potential energy projects in Nigeria and Niger, is pleased to announce its unaudited interim results for the six
months ended 30 June 2020 together with a trading update up to 31 August 2020 and outlook for the FY 2020.
Andrew Knott, CEO of Savannah Energy, said:
“I believe that our first half results clearly demonstrate the transformation Savannah has undergone to become a
cash generative business, benefitting from a long-dated, gas-biased revenue stream with no meaningful oil price
exposure. I am pleased that we are able to reiterate our core FY 2020 Total Revenues (US$200m+) and cost
guidance (US$68.0 – US$72.0m) today, while also reporting cash collections in the period to end of August of
US$133.1m. Over 94% of our forward revenue guidance is derived from three gas sales agreements with a weighted
average contracted life of 15 years.
As a company we are extremely cognisant of the challenging macro-economic backdrop and the critical role our
projects play in our countries of operation. While we believe our business is strongly positioned at this time, we fully
understand the importance of working in partnership with our project stakeholders to ensure “win-win” outcomes
as we continue to develop our business. In this regard we continue to see strong growth potential in both of our
core business units, with gas sales to new customers expected in Nigeria and new oil sales from the R3 East project
in Niger following the installation of an Early Production System (“EPS”) which is expected to commence by the end
of FY 2021.”
Key Highlights
• Total cash collections from the Nigerian Assets in the year-to-date period ended 31 August 2020 were US$133.1m (year-to-date period ended 31 August 2019: US$103.8m);
• Group cash balance of US$84.7m1 and net debt of US$426.8m as at 31 August 2020;
• We reiterate our FY 2020 Total Revenues, Group Administrative and Operating Costs and Capital Expenditure guidance:
o Total Revenues2 of greater than US$200.0m;
o Group Administrative and Operating Costs3 of US$68.0m to US$72.0m;
o Capital expenditure of up to US$45.0m;
• We reduce our FY 2020 Group Depreciation, Depletion and Amortisation guidance to US$35.0m – US$37.0m (from US$43.0m – US$45.0m), reflecting an increase in the estimated useful life of our infrastructure assets.
H1 2020 Financial Highlights
• H1 2020 Revenue of US$91.7m comprising US$83.6m of gas sales and US$8.1m of liquids sales (H1 2019 Revenue: Nil, Pro-forma5 H1 2019 Revenue: US$70.3m);
• Contract liabilities (or “Deferred Revenue”) related to invoiced sales and recognised in the Statement of Financial Position as at 30 June 2020 increased by US$22.9m in H1 2020, resulting in Total Revenues2 of US$114.6m in H1 2020, in line with FY 2020 guidance of Total Revenues greater than US$200.0m;
• Average realised gas price of US$3.9/Mscf and an average realised liquids price of US$48.3/bbl;
• Group Administrative Expenses and Operating Costs3 of US$22.7m (H1 2019: US$4.3m). With our original FY 2020 guidance having anticipated cost expenditures weighted into H2 2020 and an associated FY contingency, FY guidance of US$68.0m-US$72.0m has been maintained;
• EBITDA6 of US$66.8m (H1 2019: negative US$10.5m, Pro-forma H1 2019 EBITDA: US$30.0m);
• Group Depreciation, Depletion and Amortisation of US$18.9m (H1 2019: US$0.4m);
• H1 2020 maiden profit after tax of US$1.8m (H1 2019: loss US$3m);
• Capital expenditure of US$1.8m (H1 2019: US$2.5m). With our original FY 2020 guidance envisioning a number of capital projects which may be implemented in H2 2020, FY guidance of up to US$45m has been maintained;
• Total cash collections from the Nigerian Assets in H1 2020 were US$82.1m compared to US$55.3m in H1 2019;
• Group cash balance of US$53.3m7 as at 30 June 2020 (31 December 2019: US$48.1m); and
• Group net debt of US$460.5m as at 30 June 2020, after a fair value adjustment of US$3.7m (see Note 10 in the Condensed Consolidated Interim Financial Statements) (31 December 2019: US$484.0m).
H1 2020 Operational Highlights
Nigeria
• Average gross daily production, of which 88.8% was gas, increased 17.7% during H1 2020 to 21.3 Kboepd (H1 2019: 18.1 Kboepd). This includes a 22.4% increase in production from the Uquo gas field compared to the same period last year, from 92.7 MMscfpd (15.4 Kboepd) to 113.5 MMscfpd (18.9 Kboepd);
• Achievement of an all-time Nigerian Assets gas production record of 177 MMscfpd on 30 May 2020;
• Accugas’ customers achieved an all-time record peak contribution of 11.5% of Nigeria’s electricity generation or 486MW on 23 May 2020, with the contributed electricity being exclusively generated from Accugas sales gas;
• On 31 January 2020, Accugas entered into the first new gas sales agreement for the business in over five years with First Independent Power Limited (“FIPL”), an affiliate company of the Sahara Group, for the provision of gas to the FIPL Afam power plant. Accugas is in the process of working with FIPL to validate the third-party infrastructure required to enable the commencement of gas sales under this contract; and
• In June 2020, Accugas signed a term sheet with a significant new industrial gas sales customer, a subsidiary of a well-respected international company, for an initial quantity of up to 5 MMscfpd of gas for an initial five-year period.
Niger
• Updated Competent Person’s Report for the Niger assets compiled by CGG Services (UK) Ltd was published on 1 May 2020, certifying 35MMstb of Gross 2C Resources for the R3 East discoveries with an additional 90MMstb of Gross Unrisked Prospective Resources (Best case) within tie-in distance of the planned R3 East facilities, and a 2C case economic break-even oil price estimated at US$26.0/bbl;
• Agreement reached with the Niger Ministry of Petroleum to combine the R4 area with the R1/R2 PSC Area into a new R1/R2/R4 PSC, extending the licences for a further 10 years and retaining the full acreage position previously covered by the R1/R2 PSC and the R3/R4 PSC, and that the R3 PSC area will continue as a stand-alone PSC area. Ratification of these changes is subject to Council of Minister approval andpayment of the associated fee;
• Plans for delivering the R3 East development continue to progress with the intention to commence installation of an EPS by the end of FY 2021, market conditions and financing permitting; and
• Significant further potential on the Savannah PSC areas remains, with 146 further potential exploration targets having been identified for future drilling consideration.
Post Period Summary/2020 YTD Trading Update
• Average gross daily Nigeria production in the year-to-date period ended 31 August 2020 of 20.4 Kboepd (2019: 17.6 Kboepd), of which 88.2% was gas, including a 19.3% increase in production from the Uquo gas field compared to the same period last year, from 90.5 MMscfpd (15.1 Kboepd) to 108.0 MMscfpd (18.0 Kboepd);
• Group cash balance of US$84.7m1 and net debt of US$426.8m as at 31 August 2020;
• In August 2020 the Company announced that a total of 10,998,844 Savannah ordinary shares (1.1% of total issued shares) were purchased by directors of the Company, thereby demonstrating their confidence in the significant future potential of the business; and
• Savannah published its first sustainability review as part of the 2019 Annual Report and commented on plans to undertake a review of its approach to Environmental, Social and Governance (“ESG”) reporting during 2020 with a view to developing and implementing a new ESG performance reporting framework for the group.
Guidance for FY 2020
• We reiterate our FY 2020 Total Revenues, Gross Production, Group Administrative and Operating Costs and Capital Expenditure guidance:
o Total Revenues of greater than US$200.0m;
o Gross Production of 21.0 Kboepd to 23.0 Kboepd;
o Group Administrative and Operating Costs3 of US$68.0m to US$72.0m;
o Capital expenditure of up to US$45.0m;
• We reduce our FY 2020 Group Depreciation, Depletion and Amortisation guidance to US$35.0m – US$37.0m (from US$43.0m – US$45.0m), reflecting an increase in the estimated useful life of our infrastructure assets.
