Updated Nigeria CPR & Financial and Ops Update

RNS Number : 1978T

Savannah Energy Plc

23 November 2021

 

23 November 2021

Savannah Energy PLC

("Savannah" or "the Company")

Publication of Updated Nigeria CPR with 27% Gross 2P Reserves Upgrade

Financial and Operational Update Year to Date

Successful Drilling and Completion of Uquo-11 Gas Production Well Below Budget

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 the publication of an updated Competent Person's Report ("CPR") covering the Company's assets in Nigeria, whereby Gross 2P Reserves increased 27%, together with a financial and operational update for the year to date.

The CPR was compiled by CGG Services (UK) Ltd ("CGG"), a well-known independent third-party reserves auditor. For an explanation of the defined terms in this announcement readers should refer to the updated Nigeria CPR, which is available to download from the Company's website at www.savannah-energy.com

Andrew Knott, CEO of Savannah Energy, said:  

"I am extremely pleased to announce the publication of our updated CPR covering the Company's asset in Nigeria, showing a 27% organic increase in Group 2P reserves. This progression shown in the heart of our business has been replicated in our financials as we maintain a positive year of growth with total revenues up 7% against the same period last year as we reiterate guidance for 2021. Operationally we have successfully drilled and completed the Uquo-11 gas production well, below budget and at a significantly lower cost than previous Uquo wells drilled by our subsidiary company. We look forward to continuing our positive progress through the rest of the year and we expect to update shareholders as to progress made in relation to the Proposed Acquisition (as defined below) when appropriate. We remain confident in our Company's outlook."

Key Highlights

Updated Competent Persons Report for Nigeria

·   Certification by CGG of 108.6 MMboe 2P Reserves (2019 CPR[1]: 85.5MMboe) with additional 99.7 MMboe 2C Contingent Resources (2019 CPR¹: 98.0MMboe);

· Significant 27% increase to Gross Uquo 2P Reserves driven by the new Pre-Stack Depth Migration ("PSDM") re-processing/re-interpretation of the Uquo 3D seismic survey and better than prognosis from the newly drilled Uquo-11 well; and

· Nigerian Assets[2] gross NPV10 of US$1.2bn assessed by CGG (NPV10 net to Savannah of US$954m).

Financial Highlights

· Total Revenues[3] up 7% y-o-y to US$192.5m for the 10 months ended 31 October 2021 (year-to-date period ended 31 October 2020: US$180.2m);

· Group cash balance of US$130.8m[4] and net debt of US$382.7m as at 31 October 2021 (as at 31 October 2020: US$80.7m and US$433.3m respectively);

· Total cash collections from the Nigerian Assets up 6% to US$149.2m for the 10 months ended 31 October 2021 (year-to-date period ended 31 October 2020: US$141.1m);

· We reiterate our FY 2021 guidance for the following:

o  Total Revenues³ of greater than US$205.0m from upstream and midstream activities associated with the Company's three active Nigerian gas sales agreements and liquids sales from the Company's Stubb Creek and Uquo fields;

o  Group Administrative and Operating Costs⁵   of US$55.0m - US$65.0m;

o  Group capital expenditure of up to US$65.0m; and

· We are revising our Group Depreciation, Depletion and Amortisation guidance from US$19m fixed for infrastructure assets plus US$2.6/boe, to US$20m fixed for infrastructure assets plus US$2.3/boe primarily as a result of the reserves increase at the Uquo field.

Operational Highlights

· Successful drilling and completion of the Uquo-11 gas production well, below budget;

· Average gross daily Nigeria production in the year-to-date period ended 31 October 2021 was 21.9 Kboepd, a 16% increase from the average gross daily production of 19.0 Kboepd in the same period last year;

· Of the total average gross daily production of 21.9 Kboepd in the year-to-date period, 88% was gas, including a 16% increase in production from the Uquo gas field compared to the same period last year, from 99.5 MMscfpd (16.6 Kboepd) to 115.6 MMscfpd (19.3 Kboepd);

· Front End Engineering Design ("FEED") progressing for the Uquo compression project; and

· On 2 June 2021, Savannah announced that the Company is in exclusive discussions with ExxonMobil Corporation with respect to the proposed acquisition of its entire upstream and midstream asset portfolio in Chad and Cameroon (the "Proposed Acquisition"). The Proposed Acquisition continues to progress, and the Company expects to provide a further update in the coming weeks.

Nigeria CPR Summary

The Nigerian CPR has been published by CGG and is available to download on the Company's website (https://www.savannah-petroleum.com/en/key-documents). A summary of the gross reserves and contingent resources associated with the Uquo and Stubb Creek fields in South East Nigeria, in accordance with the 2018 Petroleum Resource Management System ("PRMS") is set out in the table below, along with a comparison vs. the numbers presented in the Company's December 2019 CPR as adjusted for production since its publication.

Summary of Nigeria Gross Reserves and Contingent Resources

	Gross 2P Reserves			Gross 2C Resources
	CPR Nov-21	CPR Dec-19 (adj.)	Changes (%)	CPR Nov-21	CPR Dec-19 (adj.)	Changes (%)
Oil & Condensate (MMstb)
Stubb Creek	13.4	13.7	(2)%	-	-	-
Uquo	0.6	0.6	-	-	-	-
Gas (Bscf)
Uquo	567.3	427.2	33%	82.8	72.5	14%
Stubb Creek	-			515.3	515.3
Total (MMboe)	108.6	85.5	27%	99.7	98.0	2%

All Reserves presented above are as at 30 September 2021. Please note for comparison purposes, the production between the two CPRs has been deducted from the Reserves in the Nigeria CPR dated December 2019.

 

Operational Update

Average gross daily Nigeria production in the year-to-date period ended 31 October 2021 was 21.9 Kboepd, a 16% increase on the average gross daily production of 19.0 Kboepd in same period last year.

Of the total average gross daily production of 21.9 Kboepd in the year-to-date period ended 31 October 2021, 88% was gas, including a 16% increase in production from the Uquo gas field compared to the same period last year, from 99.5 MMscfpd (16.6 Kboepd) to 115.6 MMscfpd (19.3 Kboepd). Gas production levels are driven by customer nomination levels.

Nigeria Average Gross Daily Production

	Uquo Gas (MMscfpd)	Uquo Condensate (bopd)	Stubb Creek Oil (Kbopd)	Total (Kboepd)
1 January-31 October 2021	115.6	115	2.5	21.9
% of total production	88%	1%	12%	100%
1 January-31 October 2020	99.5	122	2.2	19.0
% of total production	87%	1%	12%	100%
% Increase / (decrease)	+16%	(6)%	+13%	+16%

Accugas commenced first gas sales to FIPL, an affiliate company of the Sahara Group, in November 2021 for the provision of gas to the FIPL Afam power plant.

The Uquo-11 gas producer well has been drilled and was completed in the D1.0 and D1.3/D1.4 reservoirs on 16 November 2021. The well total net pay thickness came 71ft above prognosis, with a total thickness of 355ft for the main reservoirs' targets (i.e. C9.0, D1.0 and D1.3/D1.4 reservoirs).

The Company also started ordering compression equipment for the Accugas gas processing plant during the first half of 2021. Factory Acceptance Tests for the two compressor packages have been successfully carried out, the Front End Engineering Design is in progress and we expect the Long Lead Items to be ordered before the year end. Both the drilling and compression projects will ensure our continued ability to deliver gas at current and anticipated future increased contracted volumes to satisfy customer demand.

ESG Reporting Update

Progress continues to be made in rolling out our new sustainability performance and reporting framework across the Group with a view to reporting on this from 2022 onwards. This reporting framework was presented in our re-focused sustainability strategy published in June 2021 which is based on four key strategic pillars: (1) promoting socio-economic prosperity; (2) ensuring safe and secure operations; (3) supporting and developing our people; and (4) respecting the environment. These four strategic pillars are aligned with 13 key United Nations Sustainable Development Goals ("UN SDGs"), where we believe Savannah can have the biggest economic, environmental, social and governance impact to achieve a better and more sustainable future for all. While anchoring our strategy around these 13 UN SDGs, we have chosen to integrate six additional sustainability reporting standards into our new performance and reporting framework. These have been selected on the basis of those most relevant for our sector and of most importance to our stakeholders and include those for: the Global Reporting Index ("GRI"); the eight International Finance Corporation Performance Standards ("IFC PS"); the International Association of Oil and Gas Producers ("IOGP"); the International Petroleum Industry Environmental Conservation Association ("IPIECA"); the Sustainability Accounting Standards Board ("SASB"); and the Task Force on Climate-related Financial Disclosures ("TCFD").

 

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

Savannah Energy	[phone]
Andrew Knott, CEO
Nick Beattie, Deputy CFO
Sally Marshak, Head of IR & Communications
Strand Hanson (Nominated Adviser)	[phone]
James Spinney
Ritchie Balmer
Rory Murphy
finnCap Ltd (Joint Broker)  Christopher Raggett Tim Redfern	[phone]
Panmure Gordon (UK) Ltd (Joint Broker)  John Prior Hugo Rich	[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, and is disclosed in accordance with the Company's obligations under Article 17 of those Regulations.

Dr Christophe Ribeiro, Savannah's VP Technical, has approved the technical disclosure in this regulatory announcement in his capacity as a qualified person under the AIM Rules. Dr Ribeiro is a qualified geoscientist with 20 years' experience in the oil and gas industry. He holds an MSc in Geophysics from the Institut de Physique du Globe de Paris and an MSc in Petroleum Engineering and a PhD in Reservoir Geophysics from Heriot-Watt University. Dr Ribeiro is a member of the European Association of Geoscientists and Engineers (EAGE) and Society of Petroleum Engineers (SPE).

About Savannah Energy:

Savannah Energy PLC is an AIM listed African-focused British independent energy company sustainably developing high quality, high potential energy projects in Nigeria and Niger, with a focus on delivering material long term returns for stakeholders. In Nigeria, the Company has controlling interests in the cash flow generative Uquo and Stubb Creek oil and gas fields, and the Accugas midstream business in South East Nigeria, which provides gas enabling over 10% of Nigeria's thermal power generation. In Niger, the Company has licence interests covering approximately 50% of the highly oil prolific Agadem Rift Basin of South East Niger, where the Company has made five oil discoveries and seismically identified a large exploration prospect inventory consisting of 146 exploration targets to be considered for potential future drilling activity. 

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

 

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[1]2019 CPR Reserves adjusted for production for the period between the updated and 2019 CPRs.

[2]Nigerian assets defined as the interest in the Uquo Gas Project owned by SEUGL, the interest in the Stubb Creek Field owned by Universal Energy Resources and the interest in the Accugas Midstream Business owned by Accugas Limited.

[3] 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 Savannah Annual Report and Accounts 2020.

^[4] The cash balance of US$130.8m includes US$80.7m set aside to cover interest due and US$1.6m held in escrow accounts for stamp duty relating to loan security packages.

⁵Group 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.

 

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