TIDMSAVP
RNS Number : 4375W
Savannah Petroleum PLC
11 December 2019
11 December 2019
Savannah Petroleum PLC
("Savannah" or "the Company")
Publication of Nigerian CPR and Nigeria Operational and Trading
Update
Savannah Petroleum PLC, the British independent oil & gas
company focused around activities in Nigeria and Niger, is pleased
to announce the publication of a Competent Person's Report ("CPR")
covering the Uquo and Stubb Creek fields as well as the Accugas
midstream business (together the "Nigerian Assets") recently
acquired from Seven Energy, along with an operational and trading
update covering the Nigerian Assets.
Key Highlights
-- Confirmation by CGG Services (UK) Ltd ("CGG"), the author of
the CPR, of previously announced Nigerian Assets' 2P reserves and
2C resources (subject to an adjustment for produced volumes), with
gross and net 2P reserves of 99.6 mmboe and 71.0 mmboe
respectively, and gross and net 2C resources position of 98.0 mmboe
and 58.6 mmboe respectively;
-- Nigerian Assets gross NPV10, on a maintenance adjusted
take-or-pay basis, of US$1.2bn assessed by CGG (NPV10 net to
Savannah of US$957m);
-- Net asset-level free cash flow generation, on a maintenance
adjusted take-or-pay basis, by the Nigerian Assets assessed by CGG
as an average of c.US$130m p.a. (2020 - 2023);
-- Gross 2019 year-to-date production from the Nigerian Assets
of 17.3 kboepd (+33% year-on-year);
-- 2019 guidance for cash collections from the Nigerian Assets
of c. US$190m, leading to a US$40m reduction (2019 vs. 2018) in
total third-party debt outstanding at the Nigerian Assets and a
forecast YE'19 cash position within the Nigerian Assets of a
minimum of US$15m; and
-- Forecast 2020 capital expenditure at the Nigerian Assets of c.$41.5m.
Andrew Knott, CEO of Savannah Petroleum, said:
"I am pleased to provide this morning's update, which
demonstrates the high quality and robust performance of our
Nigerian Assets. I am also happy to report that we have seen a
reduction in production costs at the Nigerian Assets of c.18% over
the 2016-19 period. We continue to view these assets as a strong
platform from which we will deliver further growth. In this regard,
we continue to make good progress in relation to the supply of gas
to potential new customers, and are investing in additional well
stock to ensure anticipated future production levels are capable of
being met. I look forward to providing further updates on this in
the near-term."
CPR Summary[1]
The Nigerian CPR has been issued 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 Company's 21 December 2017 CPR.
Summary of Nigeria Gross Reserves and Contingent Resources
---------------------------------------------------------------------------------------------------------
Gross 2P Reserves Gross 2C Resources
------------------------------------------------- ------------------------------
Dec 2017 Production* Dec 2019 Dec 2017 Dec 2019
-------------- ----------------- -------------- -------------- --------------
Oil & Liquids
(mmbbls)
-------------- ----------------- -------------- -------------- --------------
Stubb Creek 17.1 (1.7) 15.4 - -
-------------- ----------------- -------------- -------------- --------------
Uquo Condensate 0.7 (0.1) 0.7 - -
-------------- ----------------- -------------- -------------- --------------
Gas (bscf)
-------------- ----------------- -------------- -------------- --------------
Uquo 565.0 (56) 500.9** 72.5 72.5
-------------- ----------------- -------------- -------------- --------------
Stubb Creek - - - 515.3 515.3
-------------- ----------------- -------------- -------------- --------------
Total (mmboe) 112.0 (11.1) 99.6 98.0 98.0
-------------- ----------------- -------------- -------------- --------------
* Production numbers are for the period between 1 November 2017
and 31 October 2019.
** Includes an economic cut-off which was not applied in the
Company's December 2017 CPR.
A summary of the net present values ("NPVs") of future cash
flows derived from the exploitation of the certified reserves, as
well as from the Accugas midstream business, is set out in the
table below. Key assumptions used in the analysis below include
Brent futures oil price (inflated at 2% p.a. from 2027)[2],
contracted gas prices and a discount date of 1(st) November 2019.
The NPVs are shown on a "take or pay" basis, i.e. based on the
amount of gas that Accugas' customers are obliged to purchase, take
and pay for (or pay for if not taken).
A summary of the expected gross asset-level free cash flows from
the Uquo and Stubb Creek fields as well as from Accugas is also
presented in the table below, based on the same assumptions as the
NPV analysis discussed above.
Nigerian Assets Gross 2P NPV102
----------------------------------------------------------------------------------
Asset December 2018 December 2019 Change (Dec.
US$m US$m '19 vs. Dec.
18) US$m
------------------- ------------------- -------------------
Accugas 818.5 840.9 22.4
------------------- ------------------- -------------------
Uquo 315.9 284.6 (31.3)
------------------- ------------------- -------------------
Stubb Creek* 69.1 56.7 (12.4)
------------------- ------------------- -------------------
Total 1,203.5 1,182.2 (21.3)
------------------- ------------------- -------------------
* Note that Stubb Creek NPV10 does not include value for
contingent gas resources at the field.
Key differences in the December 2019 CPR NPV10 values vs. those
set out in the Company's 21 December 2018 RNS include, inter alia,
the change in oil price assumptions and the deferral of Stubb Creek
debottlenecking plans from 2020 to 2021.
Summary of Expected Net Asset Free Cash Flows from Nigerian
Assets(2)
--------------------------------------------------------------------
Year US$m
-----------------------------
2020 104.2
-----------------------------
2021 128.1
-----------------------------
2022 141.3
-----------------------------
2023 141.3
-----------------------------
Average 128.7
-----------------------------
Production Update
Average gross daily production from the Nigerian Assets for the
2019 year to date period is shown in the table below. Gas from the
Uquo field is sold via Accugas to three principal customers through
gas sales agreements ("GSAs"), with maintenance adjusted gross
take-or-pay volumes under the GSAs set at 141 mmscfd (23.5 kboepd)
in 2019.
Oil and condensate production from the Uquo and Stubb Creek
fields is transported to ExxonMobil's Qua Iboe oil export terminal
and is sold under a crude offtake agreement with MPN (a subsidiary
of ExxonMobil).
2018 & 2019 YTD Nigeria Gross Production
--------------------------------------------------------------------------------------------------------------
Stubb Creek Uquo Condensate Uquo Gas (mmscfd) Total (kboepd)
Oil (kbopd) (blpd)
------------------ --------------------- ----------------------- --------------------
2018 2.3 105 63.8 13.0
------------------ --------------------- ----------------------- --------------------
January -
October 2019 2.5 135 87.8 17.3
------------------ --------------------- ----------------------- --------------------
% Increase 7% 22% 38% 33%
------------------ --------------------- ----------------------- --------------------
Nigeria production levels are largely driven by customer
nomination levels, while cash collections are largely driven by
contractual maintenance adjusted take-or-pay provisions which in
2019 amount to 129 mmscfd. Production is anticipated to increase
significantly in 1H 2020 after the addition of the Alaoji power
station as a new Accugas customer (following completion of the
relevant technical and commercial workstreams). Accugas also
expects to be able to announce additional new customers over the
course of the coming months.
2020 Forward Plans
As part of the ongoing gas field development plan at Uquo, in
2020 Savannah plans to drill and complete a gas production well,
recomplete an oil well as a gas producer and to work over one of
the current gas production wells at an estimated cost of US$34.5m.
The well operations are expected to commence in H1 2020 and in
addition c. US$7m is intended to be invested by Accugas for
continued facility upgrades.
Financial Update
Cash collections at the Nigerian Assets in 2019 are expected to
be c.US$190m3, with cash generated by these assets having been
directed to funding operating and maintenance costs and debt
service.
Production costs over the 2016-2019 period have decreased by a
total of c.18%. An asset integrity investment programme was also
undertaken at the Nigerian Assets in 2019, focusing on the Uquo and
Accugas facilities, in order to ensure that high-level operational
delivery can continue. This investment programme is expected to
continue into 2020.
At year-end 2019, the Company expects a reduction in total
leverage at the Nigerian Assets of US$40m with cash within
Savannah's Nigerian Asset holding subsidiaries of US$15m.
Total expected third-party debt outstanding at the Nigerian
Assets as at year end 2019 is summarised in the table below.
Debt Outstanding, US$m Gross Net Savannah Interest
SUGL (Uquo)4 109.3 87.4
---------------- ---------------------------
UERL (Stubb Creek) - -
---------------- ---------------------------
Accugas5 402.1 321.7
---------------- ---------------------------
Total 511.4 409.1
---------------- ---------------------------
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.
Mr Ribeiro is a qualified geoscientist with 20 years' experience
in the oil and gas industry. He holds a MSc in Geophysics from
the Institut de Physique du Globe de Paris and a PhD in Reservoir
Geophysics from Heriot-Watt University. Mr Ribeiro is a member
of the European Association of Geoscientists and Engineers
(EAGE) and Petroleum Exploration Society of Great Britain (PESGB).
For further information contact:
+44 (0) 20 3817
Savannah Petroleum 9844
Andrew Knott, CEO
Isatou Semega-Janneh, CFO
Jessica Ross, VP Corporate
Affairs
Strand Hanson (Nominated +44 (0) 20 7409
Adviser) 3494
Rory Murphy
James Spinney
Ritchie Balmer
+44 (0) 20 7878
Mirabaud (Joint Broker) 3362
Peter Krens
Ed Haig-Thomas
Numis Securities (Joint +44 (0) 20 7260
Broker) 1000
John Prior
Emily Morris
Alamgir Ahmed
Jefferies International +44 (0) 20 7029
Limited (Joint Broker) 8000
Tony White
Will Soutar
+44 (0) 20 8434
Celicourt Communications 2754
Mark Antelme
Jimmy Lea
Ollie Mills
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.
Notes to Editors:
About Savannah Petroleum
Savannah Petroleum PLC is an AIM listed oil and gas company with
exploration and production assets in Niger and Nigeria. Savannah's
flagship assets include the R1/R2 and R3/R4 PSCs (which cover c.50%
of the highly prospective Agadem Rift Basin ("ARB") of South East
Niger) and acquired interests in the cash flow generative Uquo and
Stubb Creek oil and gas fields and the Accugas midstream gas
business in South East Nigeria.
Further information on Savannah Petroleum PLC can be found on
the Company's website:
http://www.savannah-petroleum.com/en/index.php
[1] Net interests in the CPR represent Savannah's net interests
in the Nigerian Assets following completion of the Seven Energy
Transaction and associated Frontier Transaction, as defined in
previous announcements.
[2] Futures price of US$59.3/bbl 2020, US$57.4/bbl 2021,
US$56.9/bbl 2022, US$57.1/bbl 2023, US$57.7/bbl 2024, US$58.2/bbl
2025, US$58.9/bbl 2026.
2 NPVs shown on "take or pay" basis, i.e. based on the amount of
gas that Accugas' customers are obliged to purchase, take and pay
for (or pay for if not taken).
3 In accordance with applicable accounting standards, Savannah
will report revenues on both the income statement (in relation to
delivered gas volumes) and on the balance sheet (as deferred
revenue, in relation to the difference between delivered gas
volumes and take-or-pay volumes).
4 Includes the SUGL 10.50% Notes and the Working Capital
Facility which was previously at the Accugas level.
5 Includes the Accugas IV Term Facility, the DSA Facility, the
Promissory Note and the SSN Notes.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
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