Investments Update

RNS Number : 6845K

Scirocco Energy PLC

09 May 2022

 

9 May 2022

Scirocco Energy plc

("Scirocco Energy" or "the Company")

Investments Update

Scirocco Energy (AIM: SCIR), the AIM investing company  targeting attractive assets within the European sustainable energy and circular economy markets, is pleased to provide the following update on its investments:

EAG Joint Venture

The Company recently supported Energy Acquisitions Group Ltd ("EAG"), the specialist acquisition and operating vehicle in the sustainable energy sector, to acquire its first cash generative anaerobic digestion asset, Greenan Generation Limited ("GGL"), in which Scirocco Energy holds a 50% interest:

Financial

In Q1 2022 the revenue received for the quarter by GGL totalled £323k (unaudited) supported by high power prices through the period. This compares to the same period in 2021 where revenue was £240k (unaudited) - a 34.5% year on year increase. EBITDA for Q1 2022 was £158k and at current power prices, EBITDA for the first 12 months of EAG's ownership of GGL is on target to exceed £600k.

Operational

During Q1 2022, in order to future proof the plant at its Greenan site, the EAG team completed the replacement and recommissioning of a number of elements of critical equipment, at a total cost of c. £230k funded from operational cash flow:

· all mixers in the premix tank

· all primary digester mixers, and refurbishment of all mixer infrastructure including winches, winch motors and guide rails

· Full Edina CHP (Combined Heat & Power) engine block change, and completing major service

· Upgrade and replacement of augers and pumps in feed and recirculation system including installation of automatic recirculation system

Other than some minor planned upgrades, and preventative maintenance which is contracted long term with service providers, there are no further major upgrade projects planned in the next 24 months. Following these upgrades, and the recommissioning of the CHP, the plant is expected to operate at over 95% efficiency for the foreseeable future, with no further downtime.

Business Development

From a business development perspective, EAG is currently carrying out due diligence on three additional AD plants. Under the arrangement with SEM (announced by Scirocco in an RNS dated 9 December 2021) the Company and EAG gained exclusive access to a technical solution for the processing of digestate into a nutrient dense organic fertiliser. The EAG team is engaged in discussions regarding up to seven merchant installations of the SEM equipment on third party AD plants. This is in addition to the planned nutrient recovery system at Greenan, which is expected to increase EBITDA for the entire Greenan complex to c. £1,500k per annum once operational.

Tom Reynolds, Scirocco Energy CEO commented :

"I am delighted with the progress made by the EAG team on all fronts during the first quarter with strong operational performance on EAG's current asset and the development of a very attractive list of follow-on investments.

The investments targeted by EAG seek to deliver two valuable resources: sustainable energy from biogas and sustainably sourced organic fertiliser. EAG has positioned itself in two very exciting markets and we look forward to supporting the company's growth going forward.

With respect to funding, the Scirocco team has been investigating parallel funding options which would support the pace of capital investment into EAG operated projects while reducing the call on Scirocco's balance sheet in the near term."

Tanzania Operations

As communicated to the market in an RNS on 8 April 2022, operational activities under the Ruvuma PSA in Tanzania, where Scirocco Energy owns a legacy 25% working interest, have progressed under the supervision of operator, ARA Petroleum Tanzania ("APT"):

· Progress continues to be made by the contractor Africa Geophysical Services Limited ("AGS") to acquire approximately 338 km² of 3D seismic data focusing on the primary area of interest including the Ntorya discovery. The Joint Venture intend to complete this acquisition and early processing of the data ahead of spudding the Chikumbi-1 well ("CH-1").

· APT has further advanced the well planning for the CH-1 well with all long lead items contracts now executed

· APT reports a target spud date for the CH-1 well in November 2022

· APT's revised mapping and internal management estimates suggest a risked prospective gas in place ("GIIP") for the Ntorya accumulation of 3,024 Bcf (gross basis, mean case), and a prospective, risked recoverable gas resource of 1,990 Bcf (gross basis, mean case) considerably in excess of the Joint Venture's carried resource assessment  

As per the Tanzania Operations Update issued to the market on 8 April 2022, the operator (Aminex) of the Kiliwani North Development Licence ("KNDL"), in which Scirocco holds an 8.39% working interest, noted that any future drilling is contingent upon an improved seismic resolution of the prospective target structures.

· The operator has reached an agreement with Pan African Energy Tanzania ("PAET") to utilise their high-resolution 3D seismic campaign, targeting a mid-year start, to receive approximately 12.5km² of valuable new high-resolution 3D coverage over KNDL, at no cost to the Kiliwani North joint venture

· This coverage, which represents over 40% of the critical area of the licence, will enable the operator to link the new high-resolution 3D data to its existing 2D seismic legacy data which currently covers the KNDL with an irregular seismic grid. This should significantly improve both fault resolution and reservoir horizon mapping

Commenting on the update, Tom Reynolds said :

"Ruvuma Operator APT continues to move the work programme forward to better characterise and enhance understanding of the potential resource, and we remain excited about the schedule of work on our Tanzanian assets as we approach key operational milestones.

As previously communicated, the Company is progressing discussions and exploring options with interested parties for possible divestment and/or farm-down of Scirocco's interest in both assets, while maintaining our funding options in the event we retain our 25% interest in Ruvuma at the time of drilling CH-1.

The priority of management remains to progress the ongoing, material discussions on the sale of the company's interest in Ruvuma, to remove the funding requirement and to achieve our stated strategy to pivot to sustainable energy and circular economy markets, where EAG represents a robust, scalable platform primed for growth in an exciting sector.

We look forward to providing further updates to the market in due course."

This announcement contains inside information for the purposes of Article 7 of EU Regulation No. 596/2014, which forms part of United Kingdom domestic law by virtue of the European (Withdrawal) Act 2018.

For further information:

Scirocco Energy plc Tom Reynolds, CEO Doug Rycroft, COO	[phone]
Strand Hanson Limited, Nominated Adviser Ritchie Balmer / James Spinney / Rory Murphy	[phone]
WH Ireland Limited, Broker Harry Ansell / Katy Mitchell	[phone]
Buchanan, Financial PR Ben Romney / Jon Krinks / James Husband	[phone]

 

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