Half-year Report

RNS Number : 3103B

Savannah Energy Plc

30 September 2022

 

30 September 2022

--Savannah Energy PLC

("Savannah" or "the Company")

2022 Half Year Results

Savannah Energy PLC, the British independent energy company focused around the delivery of Projects that Matter in Africa, is pleased to announce its unaudited interim results for the six months ended 30 June 2022.

Andrew Knott, CEO of Savannah Energy, said:

"Our half year results again demonstrate the continued strong underlying progress we have made in our existing producing business with a 10% year-on-year increase reported for both Total Revenues ¹ (to US$128.7m) and Adjusted EBITDA² (to US$100.3m). Further, I am pleased to report that our growth trajectory has continued into H2, with average daily production to 26 September 2022 having increased by 55% to 34.8 Kboepd versus the H1 average of 22.5 Kboepd and 118% versus the 16.0 Kboepd level at the time of acquisition in November 2019. This H2-to-date growth reflects the impact of the three new gas sales contracts and the contract extension we have announced in 2022, with Accugas now supplying gas to approximately 24% of Nigeria's thermal power generation capacity as compared to approximately 10% at the time of the original acquisition.  In the first half, we also announced agreements for the development of up to 750 MW of large-scale greenfield solar and wind projects in Niger and Chad, which have the potential to transform the electricity access rates in both countries.

Looking forward to the rest of 2022 and 2023, I remain confident in where we are as a business. We look forward to closing our Proposed Acquisitions of the Chad and Cameroon Assets in Q4 of this year. We expect to deliver on or exceed our financial guidance. We expect to announce further hydrocarbon acquisitions and to expand our Renewable Energy Division with several new large-scale greenfield opportunities currently under review and negotiation. We continue to work towards completing the refinancing of our Nigerian debt and to announce the development and exploration plans for our assets in Niger.

Lastly, I would like to express my gratitude to all of those who contributed to the progress in our business in H1 - my incredibly dedicated and passionate colleagues, our host governments, communities, local authorities and regulators, our shareholders and lenders, and our customers, suppliers and partners. Thank you all."

H1 2022 Financial Highlights

· Total Revenues¹ of US$128.7m (up 10% on H1 2021: US$116.5m);

· Adjusted EBITDA² of US$100.3m (up 10% on H1 2021: US$91.5m);

· Operating expenses plus administrative expenses³ of US$24.5m (H1 2021: US$22.4m);

· Loss before tax of US$11.3m (H1 2021 profit before tax: US$7.7m);

· Capital expenditure of US$14.0m (H1 2021: US$5.2m);

· Net debt position as at 30 June 2022 of US$327.1m (Year-end 2021: US$370.0m) with Adjusted Leverage⁴ of 2.0x (Year-end 2021: 2.5x); and

· Total cash⁵ of US$182.8m as at 30 June 2022 (Year end 2021: US$154.3m)

H1 2022 Operational Highlights

· New gas sales agreements ("GSAs") were signed with Central Horizon Gas Company Limited ("CHGC"), a major gas distribution company situated in the South-South region of Nigeria, and TransAfam Power Ltd, a licensed power generation company in Nigeria and, post-period-end in August 2022, with Notore Chemical Industries PLC for its fertiliser plant.  These customers are accessed via Accugas' pipeline network to Ikot Abasi and on to the Port Harcourt area via third party infrastructure, thus no capital expenditure is required;

· A contract extension was signed with First Independent Power Limited ("FIPL") to supply gas to its Eleme and Trans Amadi power plants, bringing the total number of power plants supplied under the contract to three, including the FIPL Afam power plant;

· During the period, Savannah commenced gas deliveries to three new customers in Nigeria, FIPL's Trans Amadi power plant, TransAfam's power plants in Rivers State, and CHGC.  Savannah now has operational GSAs with power plants comprising 24% of Nigeria's thermal generation capacity;

· Average gross daily production, of which 89% was gas, remained almost constant during H1 2022 at 22.5 Kboepd (H1 2021: 22.6 Kboepd). The broadening of our customer base during H1 2022 has enabled us to increase gas deliveries to support Nigeria's power generation needs;

· A new gas production well, Uquo 11, commenced production in April 2022 and produced at an average rate of 68 MMscfpd up to 30 June 2022; and

· Our Renewable Energy Division signed agreements for the development of up to 750 MW large-scale greenfield solar and wind projects with the Governments of Niger (Parc Eolien de la Tarka) and Chad (Centrale Solaire de Komé and Centrales d'Energie Renouvelable de N'Djamena).

Chad and Cameroon Assets

· Work continues to complete our proposed acquisitions of ExxonMobil's and PETRONAS' assets in Chad and Cameroon (the "Chad and Cameroon Assets") by the end of the year.

· Savannah has undertaken significant preparation work ahead of completion including recruitment of the operational team and enhancements to organisational systems to ensure that the transition of operatorship can be completed.

FY 2022 Guidance Reiterated

Savannah reiterates full year 2022 guidance as follows:

· Total Revenues¹ greater than US$215.0m;

· Group Operating expenses plus administrative expenses³ of up to US$75.0m;

· Group Depreciation, Depletion and Amortisation of US$21m fixed for infrastructure assets plus US$2.3/boe for oil and gas assets; and

· Capital expenditure of up to US$85.0m.

H1 2022 Corporate Events

· In June 2022, Savannah announced several changes to the Board:

o  Nick Beattie was appointed as Chief Financial Officer and was appointed to the Board of Directors;

o  David Jamison retired from the Board at the Annual General Meeting on 30 June 2022, and assumed the (non-board) role as Honorary President of Savannah;

o  Steve Jenkins will step down from his role as Non-Executive Chairman at or prior to the 2023 Annual General Meeting. A search for a Chair-Designate is underway and it is anticipated that an appointment will be made during H2 2022, and

o  It is intended that three new non-executive directors (Sylvie Rucar, Sarah Clark and Dr Djamila Ferdjani) will be appointed to the Board following completion of the proposed acquisition of the ExxonMobil upstream and midstream assets in Chad and Cameroon.

For further information, please refer to the Company's website  www.savannah-energy.com  or contact:

Savannah Energy   [phone] Andrew Knott, CEO Nick Beattie, CFO Sally Marshak, Head of IR & Communications Strand Hanson (Nominated Adviser) [phone] James Spinney Ritchie Balmer Rob Patrick finnCap Ltd (Joint Broker)  Christopher Raggett Tim Redfern [phone] Panmure Gordon (UK) Ltd (Joint Broker)  John Prior Hugo Rich James Sinclair-Ford [phone] Camarco   [phone] Billy Clegg Owen Roberts Violet Wilson

The information contained within this announcement is considered to be inside information prior to its release, as defined in Article 7 of the Market Abuse Regulation No. 596/2014, as it forms part of UK domestic law by virtue of the European Union (Withdrawal) Act 2018, as amended, and is disclosed in accordance with the Company's obligations under Article 17 of those Regulations.

 About Savannah Energy: 

Savannah Energy PLC is an AIM quoted British independent energy company focused around the delivery of Projects that Matter in Africa, active in Cameroon, Chad, Niger and Nigeria.

Further information on Savannah Energy PLC can be found on the Company's website: www.savannah-energy.com .

H1 2022 Operational Review

Nigeria

Average gross daily production was flat in H1 2022 with an average of 22.5 Kboepd (H1 2021: 22.6 Kboepd). During H1 2022, the Company's subsidiary, Accugas, supplied gas to the Calabar, Ibom, TransAfam, FIPL Afam and FIPL Trans Amadi power stations.  Gas was delivered throughout the period to Lafarge's Mfamosing cement factory in Cross Rivers State and deliveries to CHGC, a distributor of gas to industrial and commercial customers in the Port Harcourt area, commenced in June 2022.

Niger

During H1 2022, t he four licence areas in Niger were amalgamated into a single PSC (R1234) valid for up to a further 10 years. This has laid the foundation to progress plans for the R3 East Early Production Scheme and we expect to announce further details of this project later in the year.

Renewable Energy Division

Savannah's Renewable Energy division was established in 2021 and during H1 2022 signed three agreements for the development of a total of up to 750MW large-scale greenfield solar and wind projects with the governments of Chad and Niger.

The agreement signed in Chad covers two projects.  The first comprises an up to 300 MW photovoltaic solar farm and battery energy storage system located in Komé, Southern Chad (the "Centrale Solaire de Komé").  This project is being developed to provide clean, reliable power generation for the Doba Oil Project and the surrounding towns of Moundou and Doba. The second involves the development of solar and wind projects of up to 100 MW each to supply power to the country's capital city, N'Djamena (the "Centrales d'Energie Renouvelable de N'Djamena").  The Centrale Solaire de Komé project would represent the largest solar plant in sub-Saharan Africa (excluding  South Africa ) and potentially the largest battery storage project on the continent. The Centrales d'Energie Renouvelable de N'Djamena would more than double the existing installed generation capacity supplying the capital city and increase the total installed on-grid power generation capacity in  Chad  by up to an estimated 63%.

In Niger, an agreement was signed with the Ministry of Petroleum, Energy and Renewable Energies of the Republic of Niger for the construction and operation of the country's first wind farm, with a proposed installed power generation capacity of up to 250 MW on an independent power producer basis in the Tahoua Region of Southern Niger. This is targeted to increase the country's on-grid electricity supply by up to 40%. Project sanction is targeted for 2023 with first wind power in 2025.

These projects represent potentially substantial foreign direct investments that would make significant contributions to the economic development of the regions where they will be situated. 

H1 2022 Financial Review

The Group reports Total Revenues¹ of US$128.7 million for the six months ended 30 June 2022, up 10% on H1 2021 and an Adjusted EBITDA² of US$100.3 million also up 10% on H1 2021, reflecting the quality of our gas producing assets in Nigeria as we broaden and diversify our customer base.

We have invested heavily during the period to scale up the business ahead of completion of the proposed acquisition of the Chad and Cameroon Assets and to enable the delivery of our wider business development plans. This has included a 21% increase in headcount in H1 2022, alongside a large investment into new systems and processes that will be required to support the enlarged scale of the Group.

Summary of results for H1 2022

The table below provides an overview of our results for H1 2022 with a comparison for H1 2021.

Financial highlights

	Six months ended  30 June 2022 US$ million	Six months ended  30 June 2021 US$ million
Total Revenues1	128.7	116.5
Adjusted EBITDA2	100.3	91.5
Revenue	85.8	99.4
Operating expenses plus administrative expenses3	24.5	22.4
Operating profit	27.9	54.0
(Loss)/profit before tax	(11.3)	7.7
(Loss) after tax	(20.5)	(1.4)

The Group's operating profit for the six months ended 30 June 2022 was US$27.9 million (H1 2021: US$54.0 million). The decrease resulted from a combination of lower revenues resulting from unscheduled downtime suffered by certain of our customers (which does not reduce Total Revenues¹ under the terms of the take-or-pay gas contracts) and a 10% increase in operating expenses plus administrative expenses³. The increase in these costs is a result of the investment being made in growing the business infrastructure in preparation for completion of the acquisition of the Chad and Cameroon Assets and continued investment into the efficiency of the Nigerian assets.

The Group's loss before tax was US$11.3 million (H1 2021 profit: US$7.7 million) and the loss after tax was US$20.5  million (H1 2021 loss: US$1.4 million). 

Adjusted EBITDA² for H1 2022 was US$100.3 million, compared to US$91.5 million for H1 2021. 

Revenue

Revenue during the period was 14% lower than the comparable prior year period at US$85.8 million (H1 2021: US$99.4 million). As previously highlighted, it is important to note the impact of take-or-pay accounting rules under IFRS 15 on our Income Statement as regards to revenue recognition for our gas sales agreements. The Revenue shown in the Condensed Consolidated Statement of Comprehensive Income includes only the gas, oil and condensate that has been delivered. The Total Revenues¹ of US$128.7 million (H1 2021: US$116.5m) includes the volume of gas that customers are committed to pay for under the take-or-pay terms of the gas sales agreements, which includes gas that has been delivered plus gas invoiced but yet to be delivered, plus oil and condensate revenues. Total Revenues ¹ showed a 10% increase compared to H1 2021. Management believes that Total Revenues¹ is the most appropriate method of reflecting the underlying cash generation capacity of the business.

Savannah continues to benefit from over US$4 billion of contracted future gas revenues in Accugas with annual price escalation clauses related to US consumer price inflation.

Cost of Sales, administrative and other operating expenses

Cost of sales amounted to US$33.1 million (H1 2021: US$34.3 million) which includes US$13.8 million (H1 2021: US$13.8 million) for facility operating and maintenance costs, US$2.9 million (H1 2021: US$2.2 million) royalty expenses and US$16.4 million (H1 2021: US$18.3 million) depletion and depreciation. 

Administrative and other operating expenses for the period were US$11.7 million (H1 2021: US$9.5 million), which includes US$0.9 million (H1 2021: US$0.9 million) of depreciation. 

Group Operating expenses plus administrative expenses³ were US$24.5 million (H1 2021: US$22.4 million). 

EBITDA and Adjusted EBITDA²

Presented below is the calculation of EBITDA and Adjusted EBITDA². Management believes that the alternative performance measure of Adjusted EBITDA² more accurately reflects the cash generating capacity of the business.  Adjusted EBITDA² includes gas that has been invoiced under take-or-pay contracts but not yet delivered and is adjusted for transaction and other related expenses to provide a meaningful comparison between periods.

Calculation of EBITDA and Adjusted EBITDA² for the Group

GROUP	Six months ended 30 June 2022 US$ million	Six months ended 30 June 2021 US$ million
Operating profit Add: depletion, depreciation and amortisation Add: transaction and other related expenses	27.9 17.3 7.3	54.0 19.2 2.3
EBITDA Add: other invoiced amounts Deduct: royalty payable on additional gas volume Deduct: expected credit loss & other related adjustments	52.5 42.9 (1.0) 5.9	75.5 17.1 (0.4) (0.7)
Adjusted EBITDA 2	100.3	91.5

Finance Costs

Finance costs were US$36.8 million (H1 2021: US$38.7 million) - of these costs US$27.9 million (H1 2021: US$26.8 million) related to bank and loan note interest.  The average interest rate was 10.7% (H1 2021: 10.3%) reflecting the higher US Libor rates during the period compared to prior year.  The remainder of the finance costs are primarily a number of non-cash items which are itemised in Note 8 of the financial statements. 

The interest cover ratio, on an Adjusted EBITDA² basis is 3.1 times (H1 2021: 2.9 times).

Foreign Exchange loss

Foreign exchange losses amounted to US$0.8 million (H1 2021: US$10.9 million).  These losses were realised losses arising from US Dollar gas sales invoices which are settled in local currency, and from the translation of Naira into US Dollars to service US Dollar denominated obligations. Realised foreign exchange losses can be recovered through the "true up" mechanism in the Calabar GSA

In order to purchase US dollars to service US dollar obligations, Savannah accesses foreign exchange at market rates and there is typically a differential between this rate and the Central Bank of Nigeria exchange rate. The majority of these losses are recoverable through a foreign exchange "true-up" clause in the Calabar GSA.

Taxation

The tax charge of US$9.2 million (H1 2021: US$9.1 million) was made up of a current tax charge of US$2.8 million (H1 2021: US$2.2 million) and a deferred tax charge of US$6.4 million (H1 2021: US$6.9 million).  The current tax charge principally arises on Nigerian profits and the deferred tax charge is a result of utilisation of unused losses in Nigeria.

Debt

The Group net debt as at 30 June 2022 was US$327.1 million (31 December 2021: US$370.0 million).  During the period, the leverage ratio, and Adjusted Leverage ratio, improved as shown in the table below.

Work continues on the proposed refinancing of the Accugas debt facility as was detailed in the 2021 Annual Report and Accounts.

Leverage

	30 June 2022 US$ million	31 December 2021 US$ million
Adjusted EBITDA2 #	100.3	175.0
Net debt	327.1	370.0
Naira held in cash for interest	80.9	75.5
Adjusted net debt	408.0	445.5
Leverage (Net debt/Adjusted EBITDA 2 )	1.6	2.1
Adjusted Leverage4 (Adjusted net debt/Adjusted EBITDA 2 )	2.0	2.5

# Adjusted EBITDA² for 6 months to 30 June 2022 and for 12 months to 31 December 2021

Cash flow

A summary of the cash flows for the period is as follows:

	Six months ended 30 June 2022 US$ million	Six months ended 30 June 2021 US$ million
Net cash generated from operating activities	41.9	65.2
Net cash used in investing activities	(29.3) (a)	(4.8) (a)
Net cash generated from/(used in) financing activities	18.1	(22.8)
Impact of exchange rate changes on cash balances	(2.2)	(7.9)
Net increase in cash	28.5	29.7
Cash balances at start of period 5	154.3	106.0
Cash balances at end of period 5	182.8	135.7

(a)  excludes US$32.2 million (H1 2021: US$31.0 million) transferred to debt service accounts

The net cash inflow from operating activities was US$41.9 million (H1 2021: US$65.2 million).

Net cash used in investing activities includes US$14.6 million deposits paid towards the acquisition of the Chad and Cameroon Assets (H1 2021: nil), payments for property, plant and equipment of US$9.1 million (H1 2021: US$4.1 million) and US$4.9 million (H1 2021: US$1.1 million) incurred on exploration and evaluation assets.

The net cash generated from and used in financing activities includes equity proceeds of US$61.1 million (H1 2021: nil), principal debt repayments of US$17.1 million (H1 2021: US$8.8 million) and finance costs of US$24.8 million (H1 2021: US$13.6 million).

Total Cash balances of the Group at the end of the period increased to US$182.8 million (H1 2021: US$135.7 million). 

Nick Beattie

Chief Financial Officer

30 September 2022

Footnotes

¹ Total Revenues are defined as the total amount of invoiced sales during the period. This number is seen by management as more accurately reflecting the underlying cash generation capacity of the business as opposed to Revenue recognised in the Condensed Consolidated Statement of Comprehensive Income. A detailed explanation of the impact of IFRS 15 revenue recognition rules on our Consolidated Statement of Comprehensive Income is provided in the Financial Review section of the Annual Report and Accounts 2020.

2 Adjusted EBITDA is calculated as profit or loss before finance costs, investment revenue, foreign exchange gains or losses, expected credit loss and other related adjustments, fair value adjustments, gain on acquisition, taxes, transaction and other related expenses, depreciation, depletion and amortisation and adjusted to include deferred revenue and other invoiced amounts. Management believes that the alternative performance measure of Adjusted EBITDA more accurately reflects the cash-generating capacity of the business.

3 Group operating expenses plus administrative expenses are defined as total cost of sales, administrative and other operating expenses excluding royalty and depletion, depreciation and amortisation and transaction costs.

⁴ Adjusted Leverage is defined as Adjusted net debt/Adjusted EBITDA. Adjusted net debt is calculated as the net debt balance adjusted for the Naira held in cash for interest (as shown in the financial review). For the 6 month period ended 30 June 2022, the Adjusted Leverage calculation is prepared on an annualised EBITDA basis

5 Within Cash balances, US$1.6m is restricted cash which includes deposits and stamp duty escrow balances.

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVEINCOME FOR THE SIX MONTHS ENDED30JUNE2022

		Six months ended 30 June 2022 US$ ' 000	Six months ended 30 June 2021 US$ ' 000
	Note	Unaudited	Unaudited
Revenue	4	85,847	99,386
Cost of sales	5	(33,127)	(34,286)
Gross profit		52,720	65,100
Administrative and other operating expenses		(11,686)	(9,505)
Transaction and other related expenses	6	(7,262)	(2,341)
Expected credit loss and other related adjustments	14	(5,918)	739
Operating profit	6	27,854	53,993
Finance income	7	273	328
Finance costs	8	(36,827)	(38,732)
Fair valueadjustment	9	(1,768)	3,042
Foreign translation loss	10	(846)	(10,943)
(Loss)/profit before tax		(11,314)	7,688
Current tax expense	11	(2,793)	(2,172)
Deferred tax expense	11	(6,438)	(6,893)
Tax expense	11	(9,231)	(9,065)
Net loss andtotalcomprehensiveloss		(20,545)	(1,377)
Total comprehensive (loss)/profit attributable to:
Owners of theCompany		(20,264)	(3,109)
Non-controlling interests		(281)	1,732
		(20,545)	(1,377)
Loss per share		US cents	US cents
Basic	12	(1.77)	(0.33)
Diluted	12	(1.77)	(0.33)

All results derive from continuing operations.

CONDENSED CONSOLIDATED STATEMENT OF FINANCIALPOSITION

AS AT 30 JUNE 2022

		30 June	31 December
		2022	2021
		US$'000	US$'000
	Note	Unaudited	Audited
Assets
Non-current assets
Third-party investment		1,182	-
Property, plantandequipment	13	557,368	568,201
Exploration and evaluation assets		166,373	161,343
Deferred tax assets		217,376	223,814
Right-of-use assets		4,180	4,724
Restricted cash		1,635	1,635
Finance lease receivable		581	722
Total non-current assets		948,695	960,439
Current assets
Inventory		5,230	3,873
Trade and other receivables	14	206,667	231,631
Cash at bank	15	181,168	152,644
Total current assets		393,065	388,148
Total assets		1,341,760	1,348,587
Equity and liabilities
Capital andreserves
Share capital		1,749	1,409
Share premium		124,897	61,204
Shares to be issued		-	63,956
Treasury shares		(135)	(58)
Other reserves		8,381	458
Share-based payment reserve		9,042	8,706
Retained earnings		136,957	157,221
Equity attributable to ownersof the Company		280,891	292,896
Non-controlling interests		13,561	13,842
Total e quity		294,452	306,738
Non-current liabilities
Other payables	16	3,617	3,415
Borrowings	17	107,429	108,652
Lease liabilities		4,553	5,308
Provisions		71,714	68,966
Contract liabilities	18	269,435	213,043
Total non-current liabilities		456,748	399,384
Current l iabilities
Trade and other payables	16	86,603	116,771
Borrowings	17	402,497	415,593
Interest payable		85,556	80,101
Tax liabilities		1,633	2,058
Lease liabilities		1,558	1,475
Contract liabilities	18	12,713	26,467
Total currentliabilities		590,560	642,465
Total liabilities		1,047,308	1,041,849
Total e quity and liabilities		1,341,760	1,348,587

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE SIX MONTHS ENDED30JUNE2022

		Six months ended 30 June	Six months ended 30 June
		2022	2021
		US$'000	US$'000
	Note	Unaudited	Unaudited
Cash flows from operating activities:
(Loss)/profit before tax		(11,314)	7,688
Adjustments for:
Depreciation		914	888
Depletion		16,432	18,335
Finance income		(190)	(124)
Finance costs	8	36,827	38,732
Fair value adjustment		1,768	(3,042)
Unrealised foreign exchange (gain)/loss	10	(99)	6,981
Share option charge		336	1,375
Expected credit loss and other related adjustments	14	5,918	(739)
Operating cash flows before movements in working capital		50,592	70,094
Increase in inventory		(1,357)	(689)
Increase in trade and other receivables		(40,703)	(15,921)
Decrease in trade and other payables		(6,389)	(4,467)
Increase in contract liabilities		40,765	16,798
Income tax paid		(1,024)	(632)
Net cash generated from operating activities		41,884	65,183
Cash flows from investing activities:
Interest received		171	98
Payments for property, plant and equipment		(9,104)	(4,109)
Payments for exploration and evaluation assets		(4,888)	(1,118)
Acquisition deposits		(14,648)	-
Loans provided to third parties		(1,067)	-
Cash transferred to debt service accounts		(32,186)	(30,973)
Lessor receipts		196	280
Net cash used in investing activities		(61,526)	(35,822)
Cash flows from financing activities:
Finance costs		(24,758)	(13,580)
Proceeds from issues of equity shares, net of issue costs		61,141	-
Sale of Treasury shares		73	-
Borrowing proceeds	19	12,810	-
Borrowing repayments	19	(30,545)	(8,794)
Lease payments	19	(527)	(335)
Net cash generated from/(used in) financing activities		18,194	(22,709)
Net (decrease)/increase in cash and cash equivalents		(1,448)	6,652
Effect of exchange rate changes on cash and cash equivalents		(2,214)	(7,938)
Cash and cash equivalents at beginning of period		45,739	74,258
Cash and cash equivalents at end of period	15	42,077	72,972
Amounts held for debt service at end of period	15	139,091	61,078
Cash at bank at end of period	15	181,168	134,050

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE SIX MONTHS ENDED30JUNE2022

	Share capital	Share premium	Shares to be issued	Treasury shares	Other reserves	Share-based payment reserve	Retained earnings	Equity attributable to the owners of the Company	Non-controlling interest	Total equity
	US$'000	US$'000	US$'000	US$'000	US$'000	US$'000	US$'000	US$'000	US$'000	US$'000
Balance at 1 January 2022 (audited)	1,409	61,204	63,956	(58)	458	8,706	157,221	292,896	13,842	306,738
Loss for the period	-	-	-	-	-	-	(20,264)	(20,264)	(281)	(20,545)
Total comprehensive loss for the period	-	-	-	-	-	-	(20,264)	(20,264)	(281)	(20,545)
Transactions with shareholders:
Equity-settled share-based payments	-	-	-	-	-	336	-	336	-	336
Issue of shares, net of costs	340	63,693	(63,956)	(77)	-	-	-	-	-	-
Sale of treasury shares	-	-	-	-	73	-	-	73	-	73
Issue of warrants	-	-	-	-	7,850	-	-	7,850	-	7,850
Balance at 30 June 2022 (unaudited)	1,749	124,897	-	(135)	8,381	9,042	136,957	280,891	13,561	294,452

	Share capital	Share premium	Treasury shares	Other reserves	Share-based payment reserve	Retained earnings	Equity attributable to the owners of the Company	Non-controlling interest	Total equity
	US$'000	US$'000	US$'000	US$'000	US$'000	US$'000	US$'000	US$'000	US$'000
Balance at 1 January 2021 (audited)	1,409	62,092	(59)	458	7,104	158,670	229,674	(2,737)	226,937
Profit/(loss) for the period	-	-	-	-	-	(3,109)	(3,109)	1,732	(1,377)
Total comprehensive profit/(loss) for the period	-	-	-	-	-	(3,109)	(3,109)	1,732	(1,377)
Transactions with shareholders:
Equity-settled bonus payments	-	171	1	-	-	-	172	-	172
Equity-settled share-based payments	-	-	-	-	1,375	-	1,375	-	1,375
Balance at 30 June 2021 (unaudited)	1,409	62,263	(58)	458	8,479	155,561	228,112	(1,005)	227,107

NOTES TO THE CONDENSEDCONSOLIDATEDINTERIMFINANCIALSTATEMENTS

1.  General information

Savannah Energy PLC ("Savannah" or "the Company") was incorporated in the United Kingdom on 3 July 2014. The principal activity of Savannah and its subsidiaries (together, the "Group") is the exploration, development and production of natural gas and crude oil and development of other energy related projects in Africa.

The Company is domiciled in the UK for tax purposes and its shares were admitted to trading on the AIM market ("AIM") of the London Stock Exchange plc on 1 August 2014.  The Company's registered address is 40 Bank Street, London, E14 5NR.

2.  Accounting policies

Basis of Preparation

On 31 December 2020, International Financial Reporting Standards ("IFRS") as adopted by the European Union at that date was brought into UK law and became international accounting standards as adopted by the United Kingdom ("UK-adopted IAS"), with future changes being subject to endorsement by the UK Endorsement Board. The Group transitioned to UK-adopted IAS in its consolidated financial statements from 1 January 2021. There was no impact on the Group from this transition, nor any changes in accounting policy. These condensed consolidated financial statements have been prepared in accordance with UK-adopted IAS. The provisions of IAS 34: Interim Financial Reporting have not been applied.

The condensed consolidated financial statements do not include all disclosures that would otherwise be required in a complete set of financial statements and should be read in conjunction with the Group's 2021 Annual Report and audited financial statements for the year ended 31 December 2021 ("the Group's 2021 Annual Report"). The financial information for the six months ended 30 June 2022 does not constitute statutory accounts within the meaning of Section 434(3) of the Companies Act 2006 and is unaudited.

The annual financial statements of Savannah for the year ended 31 December 2021 were prepared in accordance with international accounting standards in conformity with the requirements of the Companies Act 2006. The Independent Auditors' Report on the Group's 2021 Annual Report was unqualified and did not contain a statement under 498(2) or 498(3) of the Companies Act 2006. The Independent Auditors' Report contained a material uncertainty related to going concern.

The Group'sstatutoryfinancialstatementsfor the year ended 31December2021 have beenfiledwith the Registrar of Companies.

All the Group's subsidiaries' functional currency is US Dollars ("US$"), and the consolidated financial statements are presented in US Dollars and all values are rounded to the nearest thousand (US$'000), except when otherwise stated.

The financial information presented herein has been prepared in accordance with the accounting policies used in preparing the Group's 2021 Annual Report. There are no other new or amended standards or interpretations adopted from 1 January 2022 that have a significant impact on the interim financial information.

Going concern

The Group places significant importance in managing its liquidity position and ensuring that all parts of the business have appropriate funding as needed to meet their obligations. The Directors have considered the Group's forecasted cash flows and funding requirements for the twelve months from the date of publication of this Interim Report (including sensitivity analysis of key assumptions which has been undertaken) and in addition the Directors have considered the range of risks facing the business on an ongoing basis. The principal assumptions made in relation to the going concern assessment relate to: (1) the timely payments of our gas invoices by our customers, (2) the forecast commodity price environment and (3) continued access to FX markets. Considering this last point, the Directors are highly confident that the Group will continue to be able to access US dollars as required to maintain going concern status. However, a minimal risk exists that the Group may not be able to continue to do so and/or the Group may not be able to amend its debt facilities and/or complete its planned debt refinancing as described in the Group's 2021 Annual Report. These facts indicate that a material uncertainty exists that may cast significant doubt on the Group's, ability to continue to apply the going concern basis of accounting. Notwithstanding this, the Directors have full confidence in the Group's forecasts and have continued to adopt the going concern basis in preparing the consolidated financial statements.

3.  Segmental reporting

 

For the purposes of resource allocation and assessment of segment performance, the operations of the Group are divided into three segments: two geographical locations and an Unallocated segment. The two geographical segments are Nigeria and Niger, and their principal activities are the exploration, development and extraction of oil and gas. These make up the total revenue generating operations of the Group. The Unallocated segments principal activities are the governance and financing of the Group as well as undertaking business development opportunities. Items not included within Operating profit/(loss) are reviewed at a Group level and therefore there is no segmental analysis for this information.

The following is an analysis of the Group's results by reportable segment for the six months ended 30 June 2022:

	Nigeria	Niger	Unallocated	Total
	US$'000	US$'000	US$'000	US$'000
	Unaudited	Unaudited	Unaudited	Unaudited
Revenue	85,847	-	-	85,847
Cost of sales1	(33,127)	-	-	(33,127)
Gross profit	52,720	-	-	52,720
Administrative and other operating expenses	(3,446)	(972)	(7,268)	(11,686)
Transaction and other related expenses	-	-	(7,262)	(7,262)
Expected credit loss and other related adjustments	(5,918)	-	-	(5,918)
Operating profit/(loss)	43,356	(972)	(14,530)	27,854
Finance income				273
Finance costs				(36,827)
Fair value adjustment				(1,768)
Foreign translation loss				(846)
Profit before tax				(11,314)
Segment depreciation, depletion and amortisation	16,890	132	323	17,345
Segment non-current assets2	553,681	167,667	7,755	729,103
Segment non-current asset additions	1,862	5,035	4,101	10,998
Segment total assets	1,118,014	168,970	54,776	1,341,760
Segment total liabilities	(974,629)	(33,525)	(37,154)	(1,047,308)

1.  Refer to note 5 for items included within Cost of Sales.

2.  Includes Third party investments, Property, plant and equipment, Exploration and evaluation assets and Right-of-use assets.

The following is an analysis of the Group's results by reportable segment for the six months ended 30 June 2021:

	Nigeria	Niger	Unallocated	Total
	US$'000	US$'000	US$'000	US$'000
	Unaudited	Unaudited	Unaudited	Unaudited
Revenue	99,386	-	-	99,386
Cost of sales1	(34,286)	-	-	(34,286)
Gross profit	65,100	-	-	65,100
Administrative and other operating expenses	(2,748)	(2,410)	(4,347)	(9,505)
Transaction and other related expenses	-	-	(2,341)	(2,341)
Expected credit loss and other related adjustments	739	-	-	739
Operating profit/(loss)	63,091	(2,410)	(6,688)	53,993
Finance income				328
Finance costs				(38,732)
Fair value adjustment				3,042
Foreign translation loss				(10,943)
Profit before tax				7,688

The following is an analysis of the Group's results by reportable segment at 31 December 2021:

	Nigeria	Niger	Unallocated	Total
	US$'000	US$'000	US$'000	US$'000
	Unaudited	Unaudited	Unaudited	Unaudited
Segment depreciation, depletion and amortisation	18,807	153	263	19,223
Segment non-current assets2	568,709	162,644	2,915	734,268
Segment non-current asset additions	32,535	1,779	184	34,498
Segment total assets	1,085,486	160,962	102,139	1,348,587
Segment total liabilities	(938,513)	(31,620)	(71,716)	(1,041,849)

1.  Refer to note 5 for items included within Cost of Sales.

2.  Includes Property, plant and equipment, Exploration and evaluation assets and Right-of-use assets.

4.  Revenue

Set out below is the disaggregation of the Group's revenue from contracts with customers:

	2022	2021
	US$'000	US$'000
Six months ended 30 June	Unaudited	Unaudited
Gas sales	72,629	91,675
Oil and condensates sales	13,218	7,711
Revenue from contracts with customers	85,847	99,386

 

Gas sales represents gas deliveries made to the Group's customers under long term take or pay gas sale agreements. The Group sells oil and condensates at prevailing market prices.

Included within revenue from contracts with customers is revenue of US$83.8 million (30 June 2021: US$89.6 million) relating to four (30 June 2021: two) of the Group's customers who each contribute more than 10% of revenue US$36.6 million, US$21.7 million, US$13.2 million, and US$12.3 million respectively (30 June 2021: US$61.3 million and US$28.3 million, respectively).

 

 

5.  Cost of sales

	2022	2021
	US$'000	US$'000
Six months ended 30 June	Unaudited	Unaudited
Depletion - oil and gas, and infrastructure assets (note 13)	16,432	18,335
Facility operation and maintenance costs	13,770	13,794
Royalties	2,925	2,157
	33,127	34,286

 

6.  Operating profit

Operating profit has beenarrived at aftercharging:

	2022	2021
	US$'000	US$'000
Six months ended 30 June	Unaudited	Unaudited
Staff costs	11,896	12,112
Depreciation - other assets (note 13)	370	380
Depreciation - right-of-use assets	544	508
Transaction and other related expenses1	7,262	2,341

1.  Included within Transaction and other related expenses are costs incurred with respect of the Group's proposed acquisitions of the Chad and Cameroon Assets, integration and IT activities and other business development opportunities.

7.  Finance income

 

	2022	2021
	US$'000	US$'000
Six months ended 30 June	Unaudited	Unaudited
Lease income	19	26
Bank interest income	161	98
Other interest income	93	204
	273	328

 

8.  Finance costs

 

	2022	2021
	US$'000	US$'000
Six months ended 30 June	Unaudited	Unaudited
Interest on bank borrowings and loan notes	27,949	26,826
Amortisation of balances measured at amortised cost1	3,898	7,004
Unwinding of decommissioning discount	2,749	2,488
Interest expense on lease liabilities	201	262
Bank charges	191	131
Other finance costs	1,839	2,021
	36,827	38,732

1.  Includes amounts due to unwinding of a discount on a long-term payable, contract liabilities (note 18) and amortisation of debt fees.

 

9.  Fair value adjustment 

 

During 2019 the Group issued a Senior Secured Note of US$20 million that includes a voluntary prepayment option whereby early repayment will result in a discount to the contractual loan value.  As an embedded derivative, the option has been separated from the host loan instrument and valued separately and accounted for as fair value through profit or loss. As at 30 June 2022 the option value was approximately US$3.0 million (31 December 2021 audited: US$4.8 million), resulting in a charge of US$1.8 million (30 June 2021: gain of US$3.0 million). The decrease in the option value was due to a worsening in credit bond spreads observed during the period as well as an increase in market expectations around interest rates. The increase in the option value during the prior period was principally due to an improvement in credit bond spreads observed during the period.

 

10.  Foreign translation loss

 

	2022	2021
	US$'000	US$'000
Six months ended 30 June	Unaudited	Unaudited
Realised loss	945	3,962
Unrealised (gain)/loss	(99)	6,981
	846	10,943

 

Realised foreign translation loss for the six months ended 30 June 2022 mainly relates to Nigerian trade receivables which are invoiced in US Dollars and where customers are able to pay in Naira. Foreign translation loss for the six months ended 30 June 2021 mainly relate to the translation of Naira into US Dollars to service US Dollar denominated obligations.

 

Unrealised foreign translation loss relates to the revaluation of monetary items held in currencies other than US Dollars. During the six months ended 30 June 2021 the Nigerian Naira devalued against the US Dollar in May 2021 which created a significant unrealised loss on monetary items held in Naira.

11.  Taxation

The tax expense for the Group is:

	2022	2021
	US$'000	US$'000
Six months ended 30 June	Unaudited	Unaudited
Current tax
- Adjustments in respect of prior years	(1,126)	3
- Current year	3,919	2,169
	2,793	2,172
Deferred tax
- Adjustments in respect of prior years	193	15
- Write down and reversal of previous write downs of deferred tax assets	4,353	-
- Origination and reversal of temporary differences	1,892	6,878
	6,438	6,893
	9,231	9,065

 

Income tax expense is recognised based on the actual results for the period. 

 

The tax charge for the period of US$9.2 million (30 June 2021: charge of US$9.1 million) is made up of a current tax charge of US$2.8 million (30 June 2021: US$2.2 million) and a deferred tax charge of US$6.4 million (30 June 2021: charge of US$6.9 million). The current tax charge principally arises on Nigerian profits. The deferred tax charge principally relates to the utilisation of losses in Nigeria, as well as a write down of deferred tax assets.

 

12.  Loss per share

Basic earnings per share amounts are calculated by dividing the profit or loss for the period attributable to owners of the Company by the weighted average number of ordinary shares outstanding during the period.

Diluted earnings per share amounts are calculated by dividing the profit or loss for the periods attributable to owners of the Company by the weighted average number of ordinary shares outstanding during the period, plus the weighted average number of shares that would be issued on the conversion of dilutive potential ordinary shares into ordinary shares. As there is a loss attributable to the owners of the Company for the six months ended 30 June 2022, the diluted weighted average number of shares would reduce the loss per share. Therefore, the basic weighted average number of shares has been used to calculate the diluted loss per share.

The weighted average number of shares outstanding excludes treasury shares of 99,858,893 (30 June 2021: 41,966,942).

	2022	2021
	US$'000	US$'000
Six months ended 30 June	Unaudited	Unaudited
Loss
Loss attributable to owners of the Company	(20,264)	(3,109)

	Number of shares	Number of shares
Basic weighted average number of shares	1,142,656,405	954,116,177
Add: employee share options	5,243,720	3,840,024
Diluted weighted average number of shares	1,147,900,125	957,956,201

	US cents	US cents
Loss per share
Basic loss per share	1.77	0.33
Diluted loss per share	1.77	0.33

50,233,574 options granted under share option schemes are not included in the calculation of diluted earnings per share because they are anti-dilutive for the six months ended 30 June 2022 (30 June 2021: 50,233,574). These options could potentially dilute basic earnings per share in the future.

13.  Property, plant and equipment

	Oil and gas assets	Infrastructure assets	Other assets	Total
	US$'000	US$'000	US$'000	US$'000
Cost
Balance at 1 January 2021 (audited)	183,852	469,917	4,359	658,128
Additions	16,212	15,780	565	32,557
Decommissioning remeasurement adjustment	(2,296)	(39,569)	-	(41,865)
Balance at 31 December 2021 (audited)	197,768	446,128	4,924	648,820
Additions	983	854	4,132	5,969
Balance at 30 June 2022 (unaudited)	198,751	446,982	9,056	654,789
Accumulated depreciation
Balance at 1 January 2021 (audited)	(20,327)	(23,170)	(1,924)	(45,421)
Depletion and depreciation charge	(16,742)	(17,721)	(735)	(35,198)
Balance at 31 December 2021 (audited)	(37,069)	(40,891)	(2,659)	(80,619)
Depletion and depreciation charge	(8,312)	(8,120)	(370)	(16,802)
Balance at 30 June 2022 (unaudited)	(45,381)	(49,011)	(3,029)	(97,421)
Net book value
1 January 2021 (audited)	163,525	446,747	2,435	612,707
31 December 2021 (audited)	160,699	405,237	2,265	568,201
30 June 2022 (unaudited)	153,370	397,971	6,027	557,368

Upstream assets principally comprise the well and field development costs relating to the Uquo and Stubb Creek oil and gas fields in Nigeria. The Infrastructure assets principally comprise the Nigerian midstream assets associated with the Group's network of gas transportation pipelines, oil and gas processing facilities and gas receiving facilities. Other assets typically include vehicles, office equipment (including IT software) and building improvements.

14.  Trade and other receivables

	30 June 2022	31 December 2021
	US$'000	US$'000
	Unaudited	Audited
Trade receivables	188,969	156,440
Receivables from a joint arrangement	3,645	67
Other financial assets	5,261	5,237
	197,875	161,744
Expected credit loss	(35,263)	(29,345)
	162,612	132,399
VAT receivables	677	694
Prepayments and other receivables	43,378	98,538
	206,667	231,631

The following has been recognised in the Condensed Statement of Comprehensive Income relating to expected credit losses for the period:

	2022	2021
	US$'000	US$'000
Six months ended 30 June	Unaudited	Unaudited
Provision/(release) of expected credit losses	5,918	(739)
Expected credit loss and other related adjustments	5,918	(739)

15.  Cash at bank

 

	30 June 2022	31 December 2021
	US$'000	US$'000
	Unaudited	Audited
Cash and cash equivalents	42,077	45,739
Amounts held for debt service	139,091	106,905
	181,168	152,644

 

Cash and cash equivalents include US$1.2 million (31 December 2021: US$1.1 million) of cash collateral on the Orabank revolving facility. The cash collateral was at a value of XOF758.3 million (31 December 2020: XOF626.4 million).

Amounts held for debt service represents Naira denominated cash which is held by the Group for debt service, and this has been separately disclosed from Cash and cash equivalents. In total, approximately US$149.0 million (31 December 2021: US$132.8 million) will be paid for the debt service from bank accounts designated as Amounts held for debt service, and from Cash and cash equivalents.

16.  Trade and other payables

	30 June 2022	31 December 2021
	US$'000	US$'000
	Unaudited	Audited
Trade and other payables
Trade payables	31,489	30,957
Accruals	30,950	62,927
VAT and WHT payable	16,717	13,783
Royalty and levies	4,471	5,196
Employee benefits	88	91
Other payables	2,888	3,817
	86,603	116,771
Other payables - non-current
Employee benefits	3,617	3,415
	3,617	3,415
	90,220	120,186

The Directors consider that the carrying amount of trade and other payables approximates to their fair value.

17. Borrowings

	30 June 2022	31 December 2021
	US$'000	US$'000
	Unaudited	Audited
Revolving credit facility	11,939	9,916
Bank loans	374,009	379,002
Senior Secured Notes	95,135	100,717
Other loan notes	28,843	34,610
	509,926	524,245

	30 June 2022	31 December 2021
	US$'000	US$'000
	Unaudited	Audited
Current borrowings	402,497	415,593
Non-current borrowings	107,429	108,652
	509,926	524,245

18. Contract liabilities

Contract liabilities represents the value of gas supply commitment to the Group's customers for gas not taken but invoiced under the terms of the contracts. The amount has been analysed between current and non-current, based on the customers' expected future usage gas delivery profile. This expected usage is updated periodically with the customer.

	30 June 2022	31 December 2021
	US$'000	US$'000
	Unaudited	Audited
Amount due for delivery within 12 months	12,713	26,467
Amount due for delivery after 12 months	269,435	213,043
	282,148	239,510

	30 June 2022	31 December 2021
	US$'000	US$'000
	Unaudited	Audited
As at 1 January	239,510	190,237
Additional contract liabilities	46,175	61,033
Contract liabilities utilised	(5,409)	(18,345)
Unwinding of discount on contract liabilities	1,872	6,585
As at end of period	282,148	239,510

The unwinding of the discount on contract liabilities relates to the fair value adjustments made under IFRS 3: Business Combinations following the acquisition of the Nigerian assets and entities in 2019. The fair value adjustment was calculated as the discounted, expected cost of the future deliveries of gas volumes under the terms of customer take-or-pay contracts. This discounted amount unwinds relative to an apportioned amount of the contract liabilities volumes at the date of acquisition that have subsequently been utilised.

19. Cash flow reconciliations

 

The changes in the Group's liabilities arising from financing activities can be classified as follows:

	Borrowings	Interest payable	Lease liabilities	Total
	US$'000	US$'000	US$'000	US$'000
At 1 January 2022 (audited)	524,245	80,101	6,783	611,129
Cash flows
Repayment	(30,545)	(21,050)	(527)	(52,122)
Proceeds	12,810	-	-	12,810
Realised loss on loan repayment	33	-	-	33
	(17,702)	(21,050)	(527)	(39,279)
Non-cash adjustments
Payment in kind adjustment/accretion of interest	3,764	26,502	201	30,467
Net debt fees	(1,236)	-	-	(1,236)
Borrowing fair value adjustments	1,768	-	-	1,768
Working capital movements	-	-	107	107
Foreign translation	(913)	3	(453)	(1,363)
Balance at 30 June 2022 (unaudited)	509,926	85,556	6,111	601,593

 

 

 

 

 

	Borrowings	Interest payable	Lease liabilities	Total
	US$'000	US$'000	US$'000	US$'000
At 1 January 2021 (audited)	514,662	51,544	8,061	574,267
Cash flows
Repayment	(8,794)	(10,981)	(335)	(20,110)
Realised loss on loan repayment	175	-	-	175
	(8,619)	(10,981)	(335)	(19,935)
Non-cash adjustments
Payment in kind adjustment/accretion of interest	1,380	26,025	262	27,667
Net debt fees	1,752	-	-	1,752
Borrowing fair value adjustments	(3,042)	-	-	(3,042)
Working capital movements	-	-	(291)	(291)
Foreign translation	(1,011)	(90)	79	(1,022)
Balance at 30 June 2021 (unaudited)	505,122	66,498	7,776	579,396

 

20. Capital commitments

At 30 June 2022,capitalcommitmentsamounted to US$ 4.8 million (30 June 2021: US$13.0 million).

21. Events after the reporting date

There are no events after the reporting date other than those described within this announcement.

 

END

 

 

IR EBLBXLKLBBBQ