REG - Savannah Energy Plc - 2021 Annual Report and Audited Accounts
08/06/2022 07:00
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RNS Number : 1235O Savannah Energy Plc 08 June 2022
8 June 2022
Savannah Energy PLC
("Savannah", "the Company" or "the Group")
2021 Annual Report and Audited Accounts
Savannah Energy PLC, the British independent energy company focused around
the delivery of Projects that Matter in Africa, is pleased to announce that
the 2021 Annual Report and audited Accounts ("Annual Report") and investor
presentation are now available to download from the Company's website and can
be found here
https://wp-savannah-2020.s3.eu-west-2.amazonaws.com/media/2022/06/Savannah_AR21_Proof-7-_08_06_22.pdf
(https://wp-savannah-2020.s3.eu-west-2.amazonaws.com/media/2022/06/Savannah_AR21_Proof-7-_08_06_22.pdf)
and here www.savannah-energy.com/investors/reports-presentations/
(http://www.savannah-energy.com/investors/reports-presentations/)
respectively.
A summary of the financial and operational performance is shown below (as
previously reported on 7 June 2022), together with the Chairman's Statement,
CEO Shareholder Letter and Financial Review from the Annual Report.
Key FY 2021 Financial Highlights
· FY 2021 Total Revenues 1 (#_ftn1) of US$230.5m (+7% on FY 2020
Total Revenues of US$215.9m(2)). This is ahead of the Company's previously
issued FY 2021 guidance of 'Total Revenues of greater than US$205m';
· Average realised gas price of US$4.19/Mscf (+6% on the 2020
average realised gas price of US$3.96/Mscf) and an average realised liquids
price of US$69.9/bbl (+51% compared to the 2020 average realised liquids price
of US$46.2/bbl);
· Total cash collections from the Company's Nigerian assets of
US$208.2m (+24% on FY 2020 cash collections of US$167.4m 2 (#_ftn2) );
· Adjusted EBITDA of US$175.0m (+7% on FY 2020 Adjusted EBITDA of
US$163.2m(2));
· Adjusted EBITDA margin remained broadly unchanged at 76%;
· Group operating expenses plus administrative expenses 3 (#_ftn3)
of US$49.9m (FY 2021 initial guidance of US$55-65m);
· Group Depreciation, Depletion and Amortisation of US$36.2m (FY
2021 initial guidance of US$38.3m based on the actual produced volumes);
· Capital Expenditure for the year of US$32.5m (FY 2021 initial
guidance of up to US$65m);
· Group cash balances of US$154.3m 4 (#_ftn4) as at 31 December
2021 (+46% versus FY 2020 year-end Group cash balances of US$106.0m);
· Group net debt of US$370.0m as at 31 December 2021 (-9% versus FY
2020 year-end Group net debt of US$408.7m);
· Leverage 5 (#_ftn5) was 2.1x, (20% improvement on 2020 leverage
of 2.5x), and an interest cover ratio 6 (#_ftn6) of 2.8x (FY 2020 ratio of
2.4x);
· Total Group assets amounted to US$1,349m at year-end (2020:
US$1,207m); and
· Successfully announced a proposed placing to raise US$65.8m of
equity financing and secured up to US$432m of debt financing for the proposed
Chad and Cameroon Asset Acquisitions. The equity financing completed in
January 2022.
Key FY 2021 Operational Highlights
· FY 2021 average gross daily production from the Nigerian
operations was 22.3 Kboepd, a 14% increase from the average gross daily
production of 19.5 Kboepd in FY 2020;
· Of the FY 2021 total average gross daily production of 22.3
Kboepd, 88% was gas, including a 15% increase in gas production from the Uquo
gas field, from 103 MMscfpd (17.1 Kboepd) in FY 2020 to 118 MMscfpd (19.7
Kboepd) in FY 2021;
· Successful drilling and completion of the Uquo-11 gas production
well;
· Publication of an updated Competent Person's Report ("CPR") 7
(#_ftn7) for Nigeria, with an organic 2P reserve upgrade on the Uquo field,
resulting in a 20% increase in Nigeria 2P reserves to 77.7 MMboe (net);
· Uquo compression project progressed with compressor packages
acquired, completion of Front End Engineering & Design studies and
long-lead items specified ready for ordering;
· New gas sales agreement ("GSA") signed with Mulak Energy Limited
in Nigeria in February 2021, representing Savannah's first Gas-to-CNG sales
agreement;
· Commencement of gas sales to First Independent Power Limited's
("FIPL") power plant, FIPL Afam, in Nigeria, in November 2021, marking
Savannah's first entry into the high growth Port Harcourt Industrial area.
Followed by the extension of the FIPL GSA in April 2022 post-year end, almost
doubling the maximum contracted volume to up to 65 MMscfpd and extending
coverage to a total of three of FIPL's power stations in Rivers State,
Nigeria;
· Post-year end, in February 2022, a new GSA was signed with the
Central Horizon Gas Company, a major gas distribution company situated in the
South-South region of Nigeria;
· Post-year end, in June 2022, a further new GSA was signed with
TransAfam Power Limited ("TAPL"), a subsidiary of Transnational Corporation of
Nigeria plc, for the provision of gas to its power plants in Rivers State,
Nigeria;
· Niger Production Sharing Contract contractual and commercial
framework completed and finalised with commercial terms agreed and announced
in September 2021;
· Savannah's Renewable Energy Division was established in 2021,
with the announcement in March 2022 of the Company's inaugural renewable
energy project, the up to 250 megawatts ("MW") Parc Eolien de la Tarka wind
farm project in 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; and
· This was followed in May 2022 with the signing of an agreement
with the Ministry of Petroleum and Energy of the Republic of Chad for the
development of up to 500 MW of renewable energy projects. The up to 300 MW
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 up to 200 MW Centrales d'Energie
Renouvelable de N'Djamena in Chad 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%.
Financial Guidance Reiterated for FY 2022
Savannah reiterates its financial guidance for the full year 2022 as follows:
Total Revenues(1) ≥US$215 million
Group Operating expenses plus administrative expenses(3) ≤US$75 million
Depreciation, Depletion and Amortisation US$21 million + US$2.3/boe
Capital Expenditure ≤US$85 million
Update on Savannah's Sustainability Strategy
Savannah's focus in 2021 was on articulating the level of ambition across the
four pillars of our sustainability strategy: (1) Promoting socio-economic
prosperity; (2) Ensuring safe and secure operations; (3) Supporting and
developing our people; and (4) Respecting the environment. We conducted an
exercise to benchmark the Company's performance against industry peers and
leaders, which helped us to develop our strategy and link key performance
metrics to our ambitions and to the 13 relevant United Nations Sustainable
Development Goals which anchor our strategy. In particular, the following key
performance metrics were identified to measure performance and progress, many
of which are industry-leading:
· Continued our strong health & safety record with a zero Lost
Time Injury Rate ("LTIR") (2020: zero) and a 0.34 Total Recordable Incident
Rate ("TRIR") in 2021 (2020: 0.28);
· Increased our Total Contributions(( 8 (#_ftn8) )) to host
nations Nigeria and Niger by 12% to US$55.1m (2020: US$49.3m);
· Increased our investment in social impact projects in Nigeria and
Niger by more than 50% to US$246,000 in 2021 (2020: US$161,000);
· Number of transport related incidents remains exceptionally low
with two in 2021 covering over 1.6 million transport kilometres travelled
(2020: five incidents);
· Maintained senior management female gender diversity at 35%
(2020: 35%);
· Established a multimillion-dollar, world class training scheme
across our whole business for 2021-23, resulting in a 22% increase in training
hours per employee and a 32% increase in total working hours of training;
· Maintained a low carbon intensity of 13.3 kg CO2e/boe (2020: 12.8
kg CO2e/boe) compared to our industry peer group;
· Maintained our zero hydrocarbon spills record defined as not
greater than one barrel reaching the environment (2020: zero);
· Measured our freshwater use for the first time, recording usage
of approximately 5,359 m3 of freshwater from boreholes and mains supply; and
· Minimised our negative impacts on biodiversity, putting in place
Biodiversity Action Plans at our four operational sites to minimise any impact
from our operations.
During 2021 and 2022, we have implemented the Company's new sustainability
performance and reporting framework across the Group. We implemented a digital
tool to track our performance on our key sustainability indicators on a
month-by-month and country-by-country basis and have integrated seven leading
sustainability reporting standards into our reporting framework. We plan to
publish the respective detailed disclosure reports setting out our alignment
to each standard during H2 2022.
Savannah is pleased to have been recognised for the progress in our
sustainability reporting to date, having been shortlisted for 'ESG Initiative
of the Year' at the Chartered Governance Institute UK & Ireland ("CGI")
Awards in November last year and, more recently, shortlisted for 'Best ESG
Materiality Reporting (Small Cap)' at the IR Magazine Awards - Europe 2022.
For further information, please contact:
Savannah Energy +44 (0) 20 3817 9844
Andrew Knott, CEO
Nick Beattie, CFO
Sally Marshak, Head of IR & Communications
Strand Hanson (Nominated Adviser) +44 (0) 20 7409 3494
James Spinney
Ritchie Balmer
Rob Patrick
finnCap Ltd (Joint +44 (0) 20 7220 0500
Broker)
Christopher Raggett
Tim Redfern
Panmure Gordon (UK) Ltd (Joint +44 (0) 20 7886 2500
Broker)
John Prior
Hugh Rich
James Sinclair-Ford
Camarco +44 (0) 203 757 4980
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 (EU) No. 596/2014, which forms part of United Kingdom 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 and is 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 (http://www.savannah-energy.com) .
Chairman's statement
Delivering Projects that Matter in Africa
Steve Jenkins
Chairman of the Board
Dear fellow shareholders,
2021 was a year of substantial delivery for Savannah, driven by our corporate
mission of developing and investing in Projects that Matter in Africa, namely
delivering energy projects that change peoples' lives for the better. Many
countries in Africa suffer from energy poverty, and Savannah is very proud to
be part of the effort to alleviate this and create a more sustainable future
for all.
In June 2021, we announced our proposed acquisitions of the Chad and Cameron
Assets(m). The transactions were approved by shareholders on 24 January 2022
and are expected to complete later this year. In order to finance these
acquisitions, in December 2021, we raised US$65 million via an oversubscribed
equity placing and subscription, alongside new debt facilities. I would like
to thank and welcome all existing and new investors who participated,
especially those who were so patient and supportive during the seven-month
share suspension.
Corporate governance and stakeholder engagement
The Board is committed to ensuring Savannah's sustainable success for the
benefit of our shareholders whilst also having regard to all our other
stakeholders' interests. We continue to use the 2018 Quoted Companies Alliance
Corporate Governance Code (the "QCA Code") as the basis of the Group's
governance framework and the Corporate Governance Report in our 2021 Annual
Report and Accounts explains how we applied the principles of the QCA Code in
2021.
I am delighted with the progress the company has made since its listing in
2014. After eight years as Chairman, I have decided to step down at or prior
to the 2023 Annual General Meeting. It has been a privilege to lead the Board
during this phase of the Group's development and I look forward to continuing
as a Non-Executive Director. The search for a Chair-Designate has commenced
and there will be a period of handover in order to ensure a smooth transition.
In the meantime, I am pleased to welcome Nick Beattie to the Board, following
confirmation of his appointment as Group Chief Financial Officer.
Similarly, I look forward to welcoming three new, highly experienced Directors
to the Board following completion of the proposed ExxonMobil transaction. The
incoming Directors all have successful backgrounds in a diverse range of
industries and will significantly strengthen the Board's experience. I would
also like to recognise the significant contribution which David Jamison has
made to the Group as a Director. David will be retiring from the Board at the
end of June 2022, and I am delighted that he has agreed to assume the role of
Honorary President of Savannah.
The Board continues to place great emphasis on engagement with all our
stakeholder groups and more information on this is provided in our Section 172
Statement on page 31 of our 2021 Annual Report and Accounts.
Outlook
Savannah has the ambition and focus to be the leading African energy company,
in particular the operating partner of choice for both companies and
governments. The proposed acquisitions of the Chad and Cameroon Assets(m)
together with the new renewable energy projects in Niger and Chad, demonstrate
the magnitude of the deals we are capable of achieving. Savannah is
exceptionally well-positioned and I look forward to the future with great
confidence.
Steve Jenkins
Chairman of the Board
7 June 2022
CEO Shareholder Letter
Championing the African energy transition
Andrew Knott
Chief Executive Officer
Dear fellow shareholders
I would like to welcome you to our eighth Annual Report as a listed company. I
have divided this year's letter into three sections. The first section
discusses our Company's continued industry leading financial, operational and
sustainability performance. The second discusses our key focus areas for 2022
and 2023. The third section discusses the "how" and the "why" we see the
African energy transition evolving, explaining the relevance and power of our
hydrocarbon AND renewables business model.
Before turning to the first section, I would like to draw your attention to
two guest authored articles in this year's Annual Report. The first article is
authored by His Excellency Professor Yemi Osinbajo SAN, Vice President of the
Federal Republic of Nigeria and Chairman of Niger Delta Power Holding Company,
and highlights his views (shared by many in Africa, including myself) as to
the inadequacies and hypocrisy of rich countries' climate policies. The second
article authored by NJ Ayuk, Chairman of the African Energy Council, argues
for meaningful solutions to combat energy poverty in Africa, including the
urgent need for the provision of greater finance to the sector. We are
extremely grateful to both of our guest authors for their contributions.
Section three of this letter builds on many of their ideas.
Savannah's 2021 performance
2021 saw the global economy begin to recover from the impacts of the Covid-19
pandemic. Global GDP rose by 5.5%1, while benchmark oil and gas prices
increased by over 50%2. The financial performance of the global energy
industry reflected this rebound with the seven Supermajors recording a
combined US$96 billion profit in 2021 as compared to their record US$88
billion3 financial loss in 2020.
In line with this trend, Savannah performed strongly. Our Total Revenues(a)
and Adjusted EBITDA(c) increased by 7% year-on-year to US$230.5 million and
US$175 million respectively. At the Nigerian business unit level, we recorded
Adjusted EBITDA(c) of US$193 million. Our Nigerian business has now delivered
five consecutive years of Total Revenues(a) growth at a compound annual growth
rate ("CAGR") of 20%. 93% of this revenue stream was derived from fixed price
gas sales contracts with no cyclical exposure to oil prices or international
gas prices. This revenue growth compares favourably to the long-term trend
CAGR of the wider UK stock market constituents (6%)4.
The US$18 million difference between our Group and Nigerian business Adjusted
EBITDA(c) numbers reflects the central costs of running our business and the
investments we have made to build the corporate infrastructure to enable our
future organic and in-organic growth plans. We will continue to invest in our
growth going forward as we target a potential quadrupling of the scale of our
business over the course of the coming years.
Operationally, the key workstream of note was the drilling of the Uquo-11 gas
well in Nigeria. This well was a major financial and technical success for our
business. It was drilled at a total cost of approximately US$18 million, US$8
million less than the last well to be drilled on the Uquo field prior to
Savannah assuming ownership. This performance continued our track record of
delivering operational projects safely, on target and in line with, or ahead
of, budget. The well result, combined with various technical workstreams,
enabled us to upgrade our group 2P reserves by 20% and report a three-year
organic reserve replacement ratio of 107% (versus the industry average of
57%5). Put simply, despite approximately three years of production, our
Nigerian business now has more oil and gas reserves than when we bought it.
From a business development perspective, the year was dominated by our
proposed acquisition of the Chad and Cameroon Assets(m). for a consideration
of up to US$700 million. These transactions are expected to be
transformational for our Company. For example, upon completion it is estimated
that our post-deal reserves and resources would increase by 108% to 359 MMboe,
while our nine-year average forward asset level revenues and free cash flows
are projected to increase by 96% to US$279 million.
We see strong upside potential across the asset portfolio we are acquiring. I
am, therefore, hopeful that in future shareholder letters, I will be able to
write about the achievement of these organic upside cases in the Chad and
Cameroon Assets(m). in the same way we have been writing about the
transformation of our Nigerian business since announcing our intention to
acquire it in 2017.
In 2021, we announced the formation of our Renewable Energy Division and, post
period, signed agreements for the development of large-scale greenfield solar
and wind projects up to a total of 750 MW with the Governments of Niger (Parc
Eolien de la Tarka) and Chad (Centrale Solaire de Komé and Centrales
d'Energie Renouvelable de N'Djamena). The scale of our future ambition in this
area is clear. The up to 250 MW Parc Eolien de la Tarka would increase Niger's
on-grid power generation capacity by up to 40%. The up to 300 MW Centrale
Solaire de Komé would represent the largest solar plant in sub-Saharan Africa
(excluding South Africa) and potentially the largest battery storage project
on the continent.
The up to 200 MW, the Centrales d'Energie Renouvelable de N'Djamena alone
would more than double the existing installed generation capacity supplying
the capital city and increase total installed on-grid power generation
capacity in Chad by an estimated 63%.
For both Chad and Niger the projects represent potentially substantial foreign
direct investments that would make significant contributions to the economic
development of the regions where they will be situated. I am excited to be
writing about the progress we have made on these initial renewable energy
projects and hope to be writing much more about them and many others in future
shareholder letters.
In Niger, we successfully renewed and amalgamated our R1/R2 and R3/R4 PSCs,
extending the exploration term for up to another 10 years. This has paved the
way for us to hopefully proceed to the next phase in the 35 MMstb R3 East
development and recommencement of exploration activities in Niger.
As always, we maintained our strong focus around safe operational delivery. We
recorded a zero incident Lost Time Injury Rate ("LTIR") and a Total Recordable
Incident Rate ("TRIR") of 0.34 per 200,000 person hours. Our performance
against key sustainability metrics, such as carbon intensity (13.3kg
CO2e/boe), senior management gender diversity (35% female) and local employee
ratios (99%) all remained equally industry-leading in 2021.
We also continued to strengthen our sustainability performance and reporting
framework, implementing a Group-wide digital tool to track our performance on
key sustainability indicators on a month-by-month and country-by-country
basis, and fully integrating this with our chosen seven leading sustainability
reporting standards. Not only is this progress reflected in the Sustainability
Review section of this year's Annual Report but we plan to publish separate
ESG disclosure reports later this year setting out our alignment to our chosen
ESG standards.
Key focus areas for 2022 and 2023
Over the course of the next two years, I expect there to be several key focus
areas for the business. These include:
• The planned refinancing of our US$371m Accugas debt
facilities during H2 2022. Our intention is to redenominate the facility from
US dollars to a multi-tranche Naira denominated facility, extending the
average maturity to be beyond 2030 and significantly reducing the facility
cost in dollar equivalent terms. The effect of this would be to significantly
increase the quantum of cash flows available for re-investment in other
opportunities; AND
• Adding new gas sales agreements in Nigeria. Our
midstream assets in Nigeria continue to have significant excess transportation
capacity and we will continue to seek to add new, or modify, existing
contracts to increase asset throughput over time. In this regard, it should be
noted that prior to Savannah acquiring our Nigerian Business unit, it had not
signed a new customer in over five years. Since acquisition three years ago,
we have increased the number of facilities we are contracted to sell gas to
from three to seven; AND
• Recommencing field operations in Niger. Delivery of
the 35 MMstb R3 East development project and further exploration activity on
the new R1234 PSC area is a focus for the company; AND
• Completion and integration of the proposed acquisition
of the Chad and Cameroon Assets(m). As discussed above, these acquisitions are
expected to be transformational for Savannah; AND
• Further hydrocarbon acquisitions. We believe there are
asset divestment programmes valued in excess of US$100 billion likely to take
place, a significant portion of which are in Africa. Savannah is strongly
positioned to successfully participate in these divestment programmes, given
our operating capabilities, regional reputation and access to capital.
Post-deal we would expect to act as strong asset stewards, delivering better
underlying operational performance and improvements in unit carbon intensity
(within the limitations of the underlying assets) than the previous asset
owners; AND
• Expansion of our renewable energy business. Savannah
believes the African renewables energy market represents a potentially vast
target market of over 310 GW by 2030 and that our hydrocarbon asset
operational management skills are directly transferrable to this space.
As can be seen from the above list, we are unequivocally an "AND" company. We
are seeking to deliver strong performance both for the short AND long-term
across multiple fronts. We are pursuing growth opportunities in both the
hydrocarbon and renewable energy areas. This approach permeates our entire
business and how we have built, and will continue to build, our corporate
infrastructure.
How we see the African energy transition
Energy is critical to enabling and sustaining people's quality of lives.
People without access to energy are dramatically poorer than those with access
to energy. For example, Niger is ranked 178 out of 178 on the UN Human
Development Index ("UNHDI") with a GDP/head of US$622 and power consumption
per capita of 451/Kwh. The US on the other hand is ranked 17 out of 178 on the
UNHDI with GDP/head of US$62,631 and power consumption per capita of
80,106/Kwh, 5,015% and 17,653% higher7. A similar pattern emerges when we look
at the relationship between power consumption and other key quality of life
barometers such as life expectancy and life-time health outcomes.
83.2%8 of today's global energy mix is provided by hydrocarbons. 56% of this
is provided by oil and gas. The scale of investment required to sustain the
"status quo" global quality of life is immense, with approximately 30% of all
global capital expenditures (estimated at US$341 billion in 20219) being
attributed to the oil and gas industry.
The world clearly, therefore, requires oil and gas today, and is prepared to
pay vast amounts of money to enable this. The extent to which the world
requires oil and gas in the future will depend on the absolute and relative
rate of renewable energy and carbon mitigation technological improvements and
the absolute and relative rate of adoption of these improvements. In this
regard, John Kerry's (the US Climate Change Envoy) quote, which I cited in my
last shareholder letter, remains pertinent - "I am told by scientists that 50%
of the reductions we have to make by 2050 or 2045 are going to come from
technologies we don't have yet."
While the pace of technological evolution and adoption may be argued to be
generally faster today than in earlier periods, I believe that it is important
to recognise that the global energy transition is likely to take a relatively
long time. Previous energy transitions have taken fifty plus years, and the
modern renewable transition only began around 2015. Further, full displacement
of the previous energy sources has not occurred in previous transitions (i.e.
coal is still 27.2%8 of the 2022 global energy mix).
In this regard, when we look at the forecast future energy mix, there is
currently a big difference between the trend case (i.e. what forecasters are
suggesting will actually happen) versus the Net Zero 2050 case. Essentially
the world appears to be on track to have around 45%8 of its energy mix in 2050
to be provided by oil and gas, which, given likely energy demand growth over
the course of the next 28 years, suggests that actual oil and gas demand is
currently not on trend to fall significantly over the period.
The foregoing contrasts dramatically with the many Net Zero demand forecasts
which generally see oil and gas demand fall to below 20% of the global energy
mix by 2050. Further, it is likely that lower income countries, where the
ability to pay for renewable energy infrastructure is lowest, and the need for
low priced energy to deliver life changing economic growth is highest, will
see hydrocarbons form a much greater part of their energy mix in 2050 than in
the developed world. On average, only 56% of Africa's entire population has
access to electricity (falling to 41% if South Africa, Egypt and Algeria are
excluded), with the electricity access rate in our countries of operation
estimated at 11% for Chad, 65% for Cameroon, 19% for Niger and 55% for
Nigeria10. For much of Africa, the primary issue is around people being given
access to reliable and affordable power, period.
From a Savannah perspective, our primary focus is on participating in Projects
that Matter in Africa. We expect to continue to acquire hydrocarbon businesses
and to re-invest the cash flows we generate in both hydrocarbon AND renewable
energy projects. We firmly believe Africa needs both if it is to be given the
opportunity to grow and lift ever more of her citizens out of energy poverty.
Closing thoughts
I would hope that, having read through this letter, my reasons for being
optimistic around the future of our business are clear. We are a purposeful
organisation, doing societally essential work. The opportunities associated
with the African energy transition (hydrocarbon acquisitions from Supermajor
sellers and the build-out of our renewable energy business) represent a once
in a generation opportunity, which we at Savannah are strongly positioned to
take advantage of. We have made significant investments in our people,
infrastructure and capabilities, and have well-developed regional and
financial stakeholder relationships and credibility. We have a strong track
record of "getting things done". I believe that Savannah will achieve great
things over the course of the coming years and look forward to continuing this
journey with you, my fellow shareholders.
Lastly, I would like to express my gratitude to all those who contributed to
our successes in 2021 - 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.
Andrew Knott
Chief Executive Officer
7 June 2022
Footnotes - CEO Shareholder Letter:
1. Source: World Bank: Global Economic Report.
2. Source: U.S. Energy Information Administration (EIA).
3. Source: 2021 annual reports and results announcements for BP,
Chevron, ConocoPhillips, Eni, ExxonMobil, Royal Dutch Shell and Total.
4. Source: Bloomberg.
5. Source: UBS: Global Integrated Oil & Gas Analyser.
6. Forecasts based on Chad/Cameroon CPR, November 2021. Note: Savannah
benefits economically from Acquisition Asset cash flow generation in FY 2021
and FY 2022, given the Transaction effective date of 1 January 2021.
7. Source: United Nations Human Development Report 2020, World Bank.
8. Source: S&P Global IHS Markit, Energy & Natural Resources
Research & Analysis.
9. Source: BP Statistical Review of World Energy 2021.
10. Source: World Bank
Financial review
Delivering strong results for 2021
Nick Beattie
Chief Financial Officer and Company Secretary
Performance against market guidance 2021
Full Year 2021 Full Year 2021
Actuals Guidance
Total Revenues((a)) US$ million 230.5 >205.0
Operating expenses plus administrative expenses((g)), US$ million 49.9 55.0-65.0
Group depreciation, depletion and amortisation US$19 million for fixed assets plus US$2.3/boe US$19 million for fixed assets plus US$2.6/boe
Capital expenditure (cash), US$ million 32.5 Up to 65.0
The year in summary
Savannah produced a strong set of results for 2021, delivering Adjusted
EBITDA((c)) of US$175.0 million (2020(#): US$163.2 million), and surpassing
financial guidance set out at the beginning of the year. The Nigerian assets
continued to perform well, delivering gas to four customers, including first
deliveries to FIPL Afam (a new power station customer) in November 2021.
During the year there was significant capital investment in our Nigerian gas
business to ensure we continue to reliably supply gas to our customers and
this included the drilling of a new gas production well, Uquo 11, and the
installation of compression at the gas processing facility is underway. 2021
was also significant in terms of future growth following the signing of
agreements for the proposed acquisitions of the Chad and Cameroon Assets((m))
- these transformational acquisitions are expected to close in Q3 2022 and
full details of the transactions are contained in the admission document which
was published in December 2021.
The table below summarises the key financial metrics for the business and
these once again show material year-on-year improvement in performance with
increased production, prices, revenues and cash generation as well as improved
Leverage((k)). Of particular note is the improvement seen in Total
Revenues((a)) - this represents the total amount of invoiced sales during the
period and this increased by 7% during 2021. The gas business accounts for 93%
of these Total Revenues((a)) and it is important to note that this business
benefits from long-term, fixed price gas contracts which have an average
weighted remaining contract life of 16 years resulting in a contracted revenue
stream of US$4 billion.
These take-or-pay contracts have no linkage to oil price and provide a stable,
predictable cash flow which can be seen in the record level of Cash
collections((j)) of US$208.2 million during the year (2020(#): US$ 167.4
million). This increase in Total Revenues((a)) combined with continued focus
on cost control, resulted in a 7% increase in Adjusted EBITDA((c)) to US$175.0
million (2020(#) :US$163.2 million).
We have invested heavily during H2 2021 (and continuing into 2022) to scale up
the business ahead of completion of the proposed acquisitions of the Chad and
Cameroon Assets((m)). This has included a substantial increase in headcount
and also a large investment into new systems and processes that will be
required to support the enlarged scale of the Group (including the deployment
of a new SAP platform). This investment is firmly positioning the business
for growth with the right processes, systems, controls and people in place.
Key performance metrics summary
Full Year Full Year
2021 2020
Gross production, Kboepd 22.3 19.5
Total Revenues((a)), US$ million 230.5 215.9 (#)
Revenue, US$ million 185.8 169.0
Average gas sales price, US$/Mscf 4.19 3.96
Average oil sales price, US$/bbl 69.9 46.2
Normalised operating expenses plus administrative expenses((g)), US$ million 49.9 42.5
Normalised operating expenses plus administrative expenses((g)), US$/Mscfe 1.1 1.1
Cash collections((j)), US$ million 208.2 167.4(#)
Total cash, US$ million 154.3 106.0
Trade and other receivables, US$ million 231.6 122.4
Adjusted EBITDA((c)) 175.0 163.2(#)
Adjusted EBITDA((c)) margin 76% 76%(#)
Net debt ((i)), US$ million 370.0 408.7
Leverage((k)) 2.1x 2.5x
(Loss)/profit before tax, US$ million (7.7) 10.4
Profit/(loss) after tax, US$ million 17.1 (6.4)
# In order to compare performance on a like-for-like basis the 2020
figures have been represented to exclude the impact of an advance payment of
US$20 million received from Lafarge Africa on entering an amended and extended
gas sales agreement.
Consolidated Statement of Comprehensive Income
Revenue
Revenue in 2021 was US$185.8 million (2020: US$169.0 million), of which
US$169.1 million (2020: US$157.1 million) was for gas, US$15.0 million (2020:
US$11.1 million) was for oil and condensate sales and US$1.7 million (2020:
US$0.8 million) was for processing of third-party crude oil.
91% of revenue is for gas which is sold under long term gas sales agreements
which have fixed US Dollar prices, adjusted for consumer price escalation. The
average price of gas sold during 2021 was US$4.19/Mscf (2020: US$3.96/Mscf).
95% of our gas sales contracts are supported by investment grade guarantees,
including a World Bank Partial Risk Guarantee for the Calabar power station
gas sales contract.
The average price achieved for oil sales was US$69.9/bbl (2020: US$46.2/bbl)
reflecting the increase in oil prices seen during the year. The weighted
average sales price for the year was US$26.5/boe (2020: US$24.5/boe), or
US$4.42/Mscfe (2020: US$4.08/Mscfe).
Total Revenues((a))
We report Total Revenues((a)) as management believes that this is an
appropriate method of reflecting the cash generation capacity of the business.
During 2021, our customers had on average contracted to buy more gas (132
MMscfpd) than they ultimately requested to be delivered (111 MMscfpd), which
resulted in a difference between invoiced oil and gas sales of US$230.5
million (Total Revenues((a))) and Revenue of US$185.8 million reported in the
Consolidated Statement of Comprehensive Income. Revenue only reflects the
value of oil and gas actually delivered, with the difference of US$44.7
million mainly an increase in Contract liabilities ("deferred revenue") in the
Consolidated Statement of Financial Position, net of make-up gas that is
consumed.
Operating expenses plus administrative expenses((g))
Operating expenses plus administrative expenses((g)) for 2021 were US$49.9
million (2020: US$46.4 million) which compared to 2021 guidance of
US$55.0-65.0 million. These costs were favourable to guidance due to certain
planned maintenance activities being deferred, including a pipeline pigging
programme which was completed during the first quarter of 2022. In addition to
these costs, considerable time and costs were invested in the workstreams
associated with the proposed acquisitions of the Chad and Cameroon
Assets((m)). These Transaction costs, which include third party costs
incurred, amounted to US$7.4 million (2020: nil) and have been shown
separately in the Consolidated Statement of Comprehensive Income.
On a unit cost basis Operating expenses plus administrative expenses((g))
remained flat at US$1.1/Mscfe, which compares favourably with our increased
average sales price of US$4.42/Mscfe for oil and gas during the year.
Depreciation, depletion and amortisation ("DD&A") amounted to US$36.2
million (2020: US$36.3 million) made up of US$17.7 million (2020: US$17.6
million) for infrastructure assets, which are depreciated on a straight-line
basis over their estimated useful life and US$16.7 million (2020:
US$17.2 million) for upstream assets which are depreciated on a unit of
production basis, plus US$ 1.8 million (2020: US$1.5 million) for other
assets and right-of-use assets. The depletion for upstream assets has reduced
on a unit of production basis by 15% as a result of a reserves increase at
the Uquo field. This led to the total DD&A costs in
2021 being US$0.8/Mscfe (2020: US$0.9/Mscfe), a 13%
year-on‑year reduction.
Adjusted EBITDA((c))
Adjusted EBITDA((c)) was US$175.0 million (2020(#): US$163.2 million).
Year ended 31 December 2021 2020 Percentage
US$ million US$ million change
Operating profit 87.7 92.8 -6%
Add back: 36.2 36.3
Depletion, depreciation and amortisation
Adjust for Transaction costs 7.4 -
EBITDA 131.3 129.1 2%
Add: other invoiced amounts 44.7 66.9 -
Deduct: Royalty payable on additional gas volume(11) (1.0) (1.8) -
Exclude impact of expected credit loss and other related adjustments - (11.0) -
Deduct: Advance payment received
- (20)
Adjusted EBITDA(#(c)) 175.0 163.2 7%
Comprising:
Nigeria segment 193.0 167.7
UK and Niger segments (18.0) (4.5)
# In order to compare performance on a like-for-like basis the 2020
Adjusted EBITDA has been represented to exclude the impact of an advance
payment of US$20 million received from Lafarge Africa on entering an amended
and extended gas sales agreement.
Finance income and costs
Finance costs for the year amounted to US$76.6 million (2020: US$75.8
million), of which US$53.4 million (2020: US$58.9 million) related to bank and
loan note interest expense. The average interest rate on debt for the Group
was 10.2% (2020: 11.0%) which reflects lower US Libor rates in 2021.
The interest cover ratio((h)) was 2.8 times, improved from 2.4 times in 2020.
Foreign exchange losses
Foreign exchange losses amounted to US$18.7 million (2020: US$5.4 million).
Unrealised losses are US$9.8 million (2020: US$0.4 million) of which US$8.2
million is the impact on cash balances held in Naira when the official
exchange rate at the Central Bank of Nigeria was devalued. The remaining
unrealised losses are revaluations of other monetary items in the Consolidated
Statement of Financial Position.
Realised losses of US$8.9 million (2020: US$5.0 million) arise 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.
The Calabar power station Gas Sales Agreement includes a foreign exchange
"true-up" clause whereby realised foreign exchange losses on this contract are
subsequently invoiced to Calabar NIPP and recovered and recognised as a
reduction in foreign exchange losses.
The Group continues to have an active contracting strategy to ensure that
wherever possible providers of goods and services, both locally and overseas,
are paid in Naira.
Tax
The tax credit of US$24.8 million (2020: US$16.9 million charge) is made up of
a current tax charge of US$2.6 million (2020: US$4.2 million) and a deferred
tax credit of US$27.4 million (2020: US$12.7 million charge). The current tax
charge principally relates to tax on our operations in Nigeria.
The deferred tax credit is made up of a credit of US$61.7 million principally
arising from a revision of judgments whereby the utilisation of deferred tax
assets is recognised over the expected life of our projects in Nigeria
reflecting observed asset performance since acquisition of the Nigerian assets
(refer to Note 4 in the Financial Statements). There is a charge of US$8.4
million principally relating to our operations in Nigeria, plus a write down
of US$25.9 million in deferred tax assets relating to our upstream oil
business as a result of the introduction of lower tax rates under
the Petroleum Industries Act.
Consolidated Statement of Financial Position
Debt
The Net debt((i)) at year-end for the Group was US$370.0 million (2020:
US$408.7 million), a reduction of 9% compared to year-end 2020. The largest
component of the debt remains the Accugas Term Debt Facility (outstanding
balance at 31 December 2021 of US$371.0 million). The Accugas Facility was
established when the acquisition of the Nigeria assets concluded in November
2019 and Savannah is continuing to progress with a refinancing of this
facility. It remains the intention that this will be refinanced into a
multi-tranche, Naira denominated borrowing structure with an average
anticipated tenor of 11 years. As an initial step in the refinancing, it is
expected that the current facility will be refinanced into a medium-term Naira
bank debt facility and this facility will then be progressively paid down from
the issuance of longer-dated debt instruments. Savannah has been working with
its advisers on the new debt capital structure for Accugas and a number of key
milestones have been achieved in the process to date, including the approval
of the shelf programme registration for the proposed bond issuance by the
Securities and Exchange Commission of Nigeria and obtaining a standalone
investment grade credit rating of Accugas.
Once completed, this refinancing would align the currencies of the Group's
principal revenue streams with its debt service obligations and would
significantly reduce the Group's foreign exchange exposure. It would also
bring further benefits through the increase in tenor and enhancements to the
structure of the debt facilities. Pending completion of the refinancing,
Accugas has agreed with the current lenders to hold a sufficient Naira
equivalent cash balance to cover outstanding debt service requirements - at 31
December 2021 this amounted to US$132.8 million (being interest of US$75.5
million and principal of US$57.3 million). The Group anticipates that the
refinancing will be concluded prior to the year-end.
As shown in the following table, the Leverage((k)) position of the Group has
improved compared to the prior year and this is considered to be a
conservative level given the long-dated (>16 year) gas sales contracts in
place and the high quality, long-life asset base which supports the
supply contracts:
Leverage((k))
2021 2020
US$ million US$ million
Adjusted EBITDA(#(c)) 175.0 163.2
Net debt((i)) 370.0 408.7
Naira held in cash to pay interest 75.5 48.0
Adjusted net debt((f)) 445.5 456.7
Leverage((k)) (times) 2.1 2.5
Adjusted Leverage((l)) (times) 2.5 2.8
In December 2021, two new debt facilities were signed in connection with the
funding of the proposed acquisitions of the Chad and Cameroon Assets((m)), an
up to US$400 million borrowing base facility and a US$32 million junior loan
facility. Details of the debt facilities available to the Group are in Note 29
of the Consolidated Financial Statements in our 2021 Annual Report and
Accounts.
Receivables and payables
The Group has Trade and other receivables of US$231.6 million (2020: US$122.4
million). This largely comprises of US$156.4 million (2020: US$131.1 million)
gross amounts due from gas customers in Nigeria under the current gas sales
agreements in place. Trade and other receivables also include US$65.8 million
receivables from shareholders for the equity placing and US$29.0 million
deposits and finance fees associated with the proposed acquisitions of the
Chad and Cameroon Assets((m)).
The Group has current Trade and other payables of US$116.8 million (2020:
US$106.2 million). During 2021 over US$13.0 million was settled with Nigerian
counter-parties through offsets against receivables; certain payables remain
that we expect to settle in a similar manner.
Cash flow
As at 31 December 2021 2020
US$ million US$ million
Net cash generated from operating activities 128.1 115.6
Net cash used in investing activities(12) (46.4) (11.1)
Net cash used in financing activities (25.2) (46.8)
Impact of exchange rate changes on cash balances (8.3) 0.4
Net increase in cash at bank 48.2 58.1
Cash at bank at end of year 152.7 104.4
Restricted cash 1.6 1.6
Total cash 154.3 106.0
Total cash balances as at 31 December 2021 amounted to US$154.3 million which
included US$1.6 million of restricted cash (2020: US$106.0 million, including
US$1.6 million of restricted cash). Of these cash balances US$132.8 million
(2020: US$78.9 million) is set aside for debt service purposes.
Cash flows from operating activities amounted to US$128.1 million (2020:
US$115.6 million). This represents the continuing robust cash flow generation
of the Nigerian assets with our cash flow generation providing cash for debt
service and capital projects and providing support for the growth of the
business.
Total investing activity(2) spend was US$46.4 million (2020: US$11.1 million),
the two primary components of this being US$9.4 million (2020: US$2.9 million)
for the Uquo-11 gas production well and US$16.1 million (2020: US$1.3 million)
for compression and other facilities at the Accugas gas processing facility.
Financing net outflows for the year amounted to US$25.2 million (2020: US$46.8
million), which was principally made up of US$26.0 million (2020: US$21.8
million) interest costs and fees and a net US$0.8 million (2020: US$24.3
million net repayment) in borrowing proceeds.
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 period to 30 June 2023 (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 as set out in the risk section on page 70 of the Annual
Report. 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. 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.
Please refer to Note 2 of the Consolidated Financial Statements in our 2021
Annual Report and Accounts for further details on the going concern review.
2022 financial guidance and outlook
In 2022, we are providing the following guidance in relation to our business.
This guidance relates only to our Nigerian and Nigerien assets and does not
include the assets that we are proposing to acquire in Chad and Cameroon((m)):
• Total Revenues((a)) of greater than US$215.0 million from upstream
and midstream activities associated with the Company's four active Nigerian
gas sales agreements and liquids sales from the Company's Stubb Creek and Uquo
fields. Any revenues received from additional gas sales agreements would,
therefore, be incremental to this;
• Group Operating expenses and administrative expenses((g)) of up
to US$75.0 million;
• Group Depreciation, Depletion and Amortisation of US$21 million
fixed for infrastructure assets plus US$2.3/boe of production; and
• Group capital expenditure of up to US$85.0 million.
Nick Beattie
Chief Financial Officer and Company Secretary
7 June 2022
Definitions
(a) Total Revenues are defined as the total amount of invoiced sales during
the period. This number is seen by management as appropriately reflecting the
underlying cash generation capacity of the business as opposed to Revenue
recognised in the 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 our 2020 Annual
Report in the Financial Review section on page 56. Note that Total Revenues is
not an audited number. # In order to compare performance on a like-for-like
basis the 2020 Total Revenues have been represented to exclude the impact of
an advance payment of US$20 million received from Lafarge Africa on entering
an amended and extended gas sales agreement.
(b) Remaining life of contact revenues estimated on a maintenance adjusted
Take or Pay basis including contributions from three of our customers: Calabar
Generation Company Limited (owner of the Calabar power station), Ibom Power
Company Limited (owner of the Ibom power station) and the Lafarge Africa PLC
(owner of the Lafarge Mfamosing cement plant). Note this is not an audited
number.
(c) Adjusted EBITDA is calculated as profit or loss before finance costs,
investment revenue, foreign exchange gains or loss, expected credit loss and
other related adjustments, fair value adjustments, gain on acquisition, taxes,
transaction costs, 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. # In order to compare
performance on a like-for-like basis the 2020 Adjusted EBITDA has been
represented to exclude the impact of an advance payment of US$20 million
received from Lafarge Africa on entering an amended and extended gas sales
agreement.
(d) Total contributions to Nigeria and Niger defined as payments to
governments, employee salaries and payments to local suppliers and
contractors. Where total contributions refer to the period 2014-2021 they
include contributions to Nigeria during the period pre-acquisition of the
Nigerian assets by Savannah.
(e) Investment grade indicates credit support from an entity which holds an
investment grade rating from either Standard & Poor's, Moody's or Fitch
Ratings.
(f) Adjusted Net debt is defined as Net debt adjusted for US$75.5 million
(2020: US$48.0 million) equivalent held in Naira that is set aside to cover
interest payments. This measure recognises the fact that when interest is paid
the Net debt will rise.
(g) 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.
(h) Interest cover ratio is Adjusted EBITDA(c) divided by Finance costs
excluding (i) unwinding of a discount on a long-term payable, (ii) unwind of
discount on contract liabilities and (iii) unwinding of decommissioning
discount, less Interest Finance Income.
(i) Net debt is defined as Borrowings less Cash at bank and Restricted cash.
(j) Cash collections are defined as the amount of cash received from
customers. # In order to compare performance on a like-for-like basis the 2020
Cash collections have been represented to exclude the impact of an advance
payment of US$20 million received from Lafarge Africa on entering an amended
and extended gas sales agreement. Definitions Savannah Energy PLC Annual
Report and Accounts 2021 172 Definitions
(k) Leverage is defined as Net debt divided by Adjusted EBITDA.
(l) Adjusted Leverage is defined as Adjusted net debt divided Adjusted EBITDA.
This measure thus excludes sums held to pay interest from the calculation in
parallel with Adjusted net debt.
(m) Chad and Cameroon Assets: means the assets to be acquired on completion of
the Exxon Acquisition (being a 40% participating interest in the Doba OFDA in
Chad, and a 40.19% and 41.06% shareholding interest in Tchad Oil
Transportation Company and Cameroon Oil Transportation Company (respectively)
which own and operate the Chad-Cameroon pipeline and FSO), and the assets to
be acquired on completion of the PETRONAS Acquisition (being a 35%
participating interest in the Doba OFDA in Chad, and a 30.16% and 29.77%
shareholding interest in Tchad Oil Transportation Company and Cameroon Oil
Transportation Company (respectively) which own and operate the Chad-Cameroon
pipeline and FSO). Exxon Acquisition the acquisition of Esso Pipeline
Investments Limited and Esso Exploration and Production Chad Inc. PETRONAS
Acquisition the acquisition of PETRONAS Carigali Chad Exploration
Unaudited Consolidated Statement of Comprehensive Income
for the year ended 31 December 2021
Year ended Year ended
31 December 31 December
2021 2020
Unaudited Audited
Note US$'000 US$'000
Revenue 4 185,799 169,005
Cost of sales 5 (65,011) (72,460)
Gross profit 120,788 96,545
Administrative and other operating expenses (25,675) (14,691)
Transaction expenses (7,374) -
Expected credit loss and other related adjustments (26) 10,992
Operating profit 87,713 92,846
Finance income 490 472
Finance costs 6 (76,604) (75,796)
Fair value adjustment (610) (1,682)
Foreign exchange loss (18,734) (5,396)
(Loss)/profit before tax (7,745) 10,444
Current tax expense 7 (2,589) (4,197)
Deferred tax credit/(expense) 7 27,437 (12,685)
Tax credit/(expense) 7 24,848 (16,882)
Profit/(loss) after tax 17,103 (6,438)
Other comprehensive income
Items not reclassified to profit or loss:
Actuarial gains/(losses) relating to post-employment benefits 1,827 (362)
Tax relating to items not reclassified to profit or loss (609) 308
Other comprehensive profit/(loss) 1,218 (54)
Total comprehensive profit/(loss) 18,321 (6,492)
Profit/(loss) after tax attributable to:
Owners of the Company 768 (6,684)
Non-controlling interests 16,335 246
17,103 (6,438)
Total comprehensive profit/(loss) attributable to:
Owners of the Company 1,742 (6,738)
Non-controlling interests 16,579 246
18,321 (6,492)
Earnings/(loss) per share
Basic (US$) 8 0.00 (0.01)
Diluted (US$) 8 0.00 (0.01)
All results in the current financial year derive from continuing operations.
Unaudited Consolidated Statement of Financial Position
as at 31 December 2021
2021 2020
Unaudited Audited
Note US$'000 US$'000
Assets
Non-current assets
Property, plant and equipment 9 568,201 612,707
Exploration and evaluation assets 161,343 159,572
Deferred tax assets 223,814 196,986
Right-of-use assets 4,724 5,581
Restricted cash 1,635 1,635
Finance lease receivable 722 1,049
Total non-current assets 960,439 977,530
Current assets
Inventory 3,873 2,916
Trade and other receivables 10 231,631 122,400
Cash at bank 11 152,644 104,363
Total current assets 388,148 229,679
Total assets 1,348,587 1,207,209
Equity and liabilities
Capital and reserves
Share capital 1,409 1,409
Share premium 61,204 61,204
Shares to be issued 63,956 -
Treasury shares (58) (59)
Capital contribution 458 458
Share-based payment reserve 8,706 7,104
Retained earnings 157,221 155,308
Equity attributable to owners of the Company 292,896 225,424
Non-controlling interests 13,842 (2,737)
Total equity 306,738 222,687
Non-current liabilities
Other payables 12 3,415 4,648
Borrowings 13 108,652 424,667
Lease liabilities 5,308 7,057
Provisions 68,966 106,606
Contract liabilities 14 213,043 185,172
Total non-current liabilities 399,384 728,150
Current liabilities
Trade and other payables 12 116,771 106,225
Borrowings 13 415,593 89,995
Interest payable 15 80,101 51,544
Tax liabilities 7 2,058 2,539
Lease liabilities 1,475 1,004
Contract liabilities 14 26,467 5,065
Total current liabilities 642,465 256,372
Total liabilities 1,041,849 984,522
Total equity and liabilities 1,384,587 1,207,209
Unaudited Consolidated Statement of Cash Flows
for the year ended 31 December 2021
Year ended Year ended
31 December 31 December
2021 2020
Unaudited Audited
Note US$'000 US$'000
Cash flows from operating activities:
Net cash generated from operating activities 15 128,115 115,569
Cash flows from investing activities:
Interest received 193 110
Payments for property, plant and equipment (31,191) (9,381)
Exploration and evaluation payments (1,327) (2,167)
Payment for financial asset (7,500) -
Acquisition deposits (7,000) -
Lessor receipts 388 113
Cash to debt service accounts (76,800) (30,105)
Cash from restricted cash accounts - 181
Net cash used in investing activities (123,237) (41,249)
Cash flows from financing activities:
Finance costs (25,967) (21,767)
Borrowing proceeds 18,476 7,213
Borrowing repayments (15,818) (31,474)
Lease payments (1,850) (767)
Net cash used in financing activities (25,159) (46,795)
Net (decrease)/increase in cash and cash equivalents (20,281) 27,525
Effect of exchange rate changes on cash and cash equivalents (8,238) 477
Cash and cash equivalents at beginning of year 74,258 46,256
Cash and cash equivalents at end of year 11 45,739 74,258
Amounts held for debt service at end of year 11 106,905 30,105
Cash at bank at end of year as per Statement of Financial Position 11 152,644 104,363
Unaudited Consolidated Statement of Changes in Equity
for the year ended 31 December 2021
Equity
Shares Share-based attributable Non-
Share Share to be Treasury Capital payment Retained to the owners controlling Total
capital premium issued shares contribution reserve earnings of the Company interest equity
US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
Balance at 1,393 61,204 - - 458 6,448 161,099 230,602 (2,983) 227,619
1 January 2020 (audited)
(Loss)/profit for the year - - - - - - (6,684) (6,684) 246 (6,438)
Other comprehensive loss - - - - - - (54) (54) - (54)
Total comprehensive (loss)/profit for the year - - - - - - (6,738) (6,738) 246 (6,492)
Transactions with shareholders:
Equity-settled share-based payments - - - - - 656 - 656 - 656
Share adjustments 16 - - - - - 888 904 - 904
Treasury shares recognition - - (59) - - 59 - - -
-
Balance at 1,409 61,204 - (59) 458 7,104 155,308 225,424 (2,737) 222,687
31 December 2020 (audited)
Profit for the year - - - - - - 768 768 16,335 17,103
Other comprehensive profit - - - - - - 974 974 244 1,218
Total comprehensive profit for the year - - - - - - 1,742 1,742 16,579 18,321
Transactions with shareholders:
Equity-settled share-based payments - - - - - 1,602 - 1,602 - 1,602
Share adjustments - - - 1 - - 171 172 - 172
Shares to be issued - - 63,956 - - - - 63,956 - 63,956
Balance at 1,409 61,204 63,956 (58) 458 8,706 157,221 292,896 13,842 306,738
31 December 2021 (unaudited)
Notes to the Unaudited Financial Information
for the year ended 31 December 2021
1. Corporate information
The Company was incorporated in the United Kingdom on 3 July 2014. Savannah's
principal activity 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 England for tax purposes and is a public company,
and its shares were listed on the Alternative Investment Market ("AIM") of the
London Stock Exchange on 1 August 2014. The Company's registered address is 40
Bank Street, London E14 5NR.
2. Basis of preparation
The unaudited consolidated financial statements of the Company and the Group
have been prepared in accordance with International accounting standards as
adopted by the United Kingdom, with future changes being subject to
endorsement by the UK Endorsement Board. The unaudited consolidated financial
statements have been prepared under the historical cost convention and
incorporate the results for the year ended 31 December 2021. The financial
information contained in this report for the year ended 31 December 2021 (the
"Financial Information") does not constitute full statutory accounts as
defined in sections 435 (1) and (2) of the Companies Act 2006. The statutory
accounts for the year ended 31 December 2021 will be finalised on the basis of
the financial information presented by the Directors in this announcement and
will be delivered to the Registrar of Companies in due course. The statutory
accounts are subject to completion of the audit and may change before the
approval of the Annual Report.
Statutory accounts for the year ended 31 December 2020 have been delivered to
the Registrar of Companies. The auditor's report on those accounts was
unqualified, drew attention by way of emphasis of matter to the material
uncertainty related to going concern without qualifying the accounts and did
not contain a statement under section 498 (2) or (3) of the Companies Act
2006. Statutory accounts for the year ended 31 December 2021 will be delivered
in due course.
The accounting policies applied are consistent with those adopted and
disclosed in the Group's audited consolidated financial statements for the
year ended 31 December 2021. There have been a number of amendments to
accounting standards and new interpretations issued by the International
Accounting Standards Board which were applicable from 1 January 2021, however
these have not any impact on the accounting policies, methods of computation
or presentation applied by the Group. Further details on new International
Financial Reporting Standards adopted will be disclosed in the Annual Report.
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 period to 31 December 2023
(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 receipts of our gas
invoices by our customers, (2) the forecast commodity price environment and
(3) continued access to FX markets for debt refinancing. 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 its 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. These facts indicate that a material
uncertainty exists that may cast significant doubt on the Group's, ability to
continue to adopt 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 Group's unaudited
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 current and
future revenue-generating operations of the Group. The Unallocated segment's
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 revenue and results by reportable
segment in 2021:
Nigeria Niger Unallocated Total
Unaudited Unaudited Unaudited Unaudited
US$'000 US$'000 US$'000 US$'000
Revenue 185,799 - - 185,799
Cost of sales1 (65,011) - - (65,011)
Gross profit 120,788 - - 120,788
Administrative and other operating expenses (6,814) (6,837) (12,024) (25,675)
Transaction expenses - - (7,374) (7,374)
Expected credit loss and other related adjustments (26) - - (26)
Operating profit/(loss) 113,948 (6,837) (19,398) 87,713
Finance income 490
Finance costs (76,604)
Fair value adjustment (610)
Foreign translation loss (18,734)
Loss before tax (7,745)
Segment depreciation, depletion and amortisation 35,402 282 543 36,227
Segment non-current assets2 568,709 162,644 2,915 734,268
Segment non-current asset additions 32,535 1,779 184 34,498
Segment total assets 1,085,486 160,962 102,139 1,348,587
Segment total liabilities (938,513) (31,620) (71,716) (1,041,849)
1. Refer to note 5 for items included within Cost of sales.
2. Includes Property, plant and equipment, Exploration and evaluation
assets and Right-of-use assets.
The following is an analysis of the Group's revenue and results by reportable
segment in 2020:
Nigeria Niger Unallocated Total
Audited Audited Audited Audited
US$'000 US$'000 US$'000 US$'000
Revenue 169,005 - - 169,005
Cost of sales1 (72,460) - - (72,460)
Gross profit 96,545 - - 96,545
Administrative and other operating expenses (9,235) (282) (5,174) (14,691)
Expected credit loss and other related adjustments 10,992 - - 10,992
Operating profit/(loss) 98,302 (282) (5,174) 92,846
Finance income 472
Finance costs (75,796)
Fair value adjustment (1,682)
Foreign translation loss (5,396)
Profit before tax 10,444
Segment depreciation, depletion and amortisation 35,310 328 643 36,281
Segment non-current assets2 613,439 161,147 3,274 777,860
Segment total assets 1,039,653 161,778 5,778 1,207,209
Segment total liabilities (919,067) (34,524) (30,931) (984,522)
1. Refer to note 5 for items included within Cost of sales.
2. Includes Property, plant and equipment, Exploration and evaluation
assets and Right-of-use assets.
4. Revenue
Set out below is the disaggregation of the Group's revenue from contracts with
customers:
2021 2020
Unaudited Audited
Year ended 31 December US$'000 US$'000
Gas sales 169,052 157,080
Oil, condensate and processing sales 16,747 11,925
Total revenue from contracts with customers 185,799 169,005
Gas sales represents gas deliveries made to the Group's customers under
long-term, take-or-pay gas sale agreements. The Group sells oil and
condensates at prevailing market prices.
5. Cost of sales
2021 2020
Unaudited Audited
Year ended 31 December US$'000 US$'000
Depletion and depreciation - oil and gas, and infrastructure assets 34,463 34,789
Facility operation and maintenance costs 26,023 33,682
Royalties 4,525 3,989
65,011 72,460
6. Finance costs
2021 2020
Unaudited Audited
Year ended 31 December US$'000 US$'000
Interest on bank borrowings and loan notes 53,384 58,910
Amortisation of balances measured at amortised cost1 14,557 11,184
Unwinding of decommissioning discount 4,977 1,781
Interest expense on lease liabilities 511 372
Bank charges 327 352
Other finance costs 2,848 3,197
76,604 75,796
1. Includes amounts due to unwinding of a discount on a long-term
payable, contract liabilities (note 14) and amortisation of debt fees.
7. Taxation
Income tax
The tax (credit)/expense recognised in the profit or loss statement for the
Group is:
2021 2020
Unaudited Audited
Year ended 31 December US$'000 US$'000
Current tax
- Current year 2,586 2,903
- Adjustments in respect of prior years 3 1,294
2,589 4,197
Deferred tax
- Current year 9,094 3,808
- Change in tax rates 25,871 -
- Write down and reversal of previous write downs of deferred tax assets (61,657) -
- Adjustments in respect of prior years (745) 8,877
(27,437) 12,685
Total tax (credit)/expense for the year (24,848) 16,882
Corporation tax is calculated at the applicable tax rate for each jurisdiction
based on the estimated taxable profit for the year. The Group's outstanding
current tax liabilities of US$2.1 million (2020: US$2.5 million) principally
relate to the corporation tax liabilities in Nigeria.
8. Earnings per share
Basic earnings per share is calculated by dividing the profit for the year
attributable to owners of the Company by the weighted average number of
ordinary shares outstanding during the year.
Diluted earnings per share is calculated by dividing the profit for year
attributable to owners of the Company by the weighted average number of
ordinary shares outstanding during the year, plus the weighted average number
of shares that would be issued on the conversion of dilutive potential
ordinary shares into ordinary shares. In the prior year, there was a loss
attributable to the owners of the Company, which meant the diluted weighted
average number of shares would reduce the loss per share. Therefore, the basic
weighted average number of shares were used to calculate the diluted loss per
share.
The weighted average number of shares outstanding excludes treasury shares of
41,966,942 (2020: 42,624,837).
2021 2020
Unaudited Audited
Year ended 31 December US$'000 US$'000
Profit/(loss)
Profit/(loss) attributable to owners of the Company 768 (6,684)
Unaudited Audited
Number of shares Number of shares
Basic weighted average number of shares 954,280,611 953,783,575
Add: employee share options 4,766,269 279,565
Diluted weighted average number of shares 959,046,880 954,063,140
Unaudited Audited
US$ US$
Earnings/(loss) per share
Basic 0.00 (0.01)
Diluted 0.00 (0.01)
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 year ended 31 December 2021 (2020: 49,973,168). These options could
potentially dilute basic earnings per share in the future.
9. Property, plant and equipment
Oil and gas Infrastructure Other
assets assets assets Total
US$'000 US$'000 US$'000 US$'000
Cost
Balance at 1 January 2020 (audited) 167,890 457,414 2,879 628,183
Additions 1,757 1,831 534 4,122
Disposals - - (59) (59)
Decommissioning remeasurement adjustment (14,914) 10,236 - (4,678)
Transfer from Receivables from a joint arrangement 30,844 - - 30,844
Transfers to Exploration and evaluation assets - (284) - (284)
Reclassification of assets1 (1,725) 720 1,005 -
Balance at 31 December 2020 (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 (unaudited) 197,768 446,128 4,924 648,820
Accumulated depreciation
Balance at 1 January 2020 (audited) (3,269) (5,671) (957) (9,897)
Depletion and depreciation charge (17,234) (17,555) (751) (35,540)
Adjustment to accumulated depreciation 176 56 (216) 16
Balance at 31 December 2020 (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 (unaudited) (37,069) (40,891) (2,659) (80,619)
Net book value
Balance at 1 January 2020 (audited) 164,621 451,743 1,922 618,286
Balance at 31 December 2020 (audited) 163,525 446,747 2,435 612,707
Balance at 31 December 2021 (unaudited) 160,699 405,237 2,265 568,201
1. Certain assets have been reclassified between the various asset
classes to ensure they are reported in the most appropriate class.
10. Trade and other receivables
2021 2020
Unaudited Audited
As at 31 December US$'000 US$'000
Trade receivables 156,440 131,078
Receivables from a joint arrangement 67 419
Other financial assets 5,237 5,548
161,744 137,045
Expected credit loss (29,345) (17,213)
132,399 119,832
VAT receivables 694 185
Prepayments and other receivables 98,538 2,383
231,631 122,400
The following has been recognised in the Statement of Comprehensive Income
relating to expected credit losses:
2021 2020
Unaudited Audited
Year ended 31 December US$'000 US$'000
Provision for expected credit loss (12,628) (16,782)
Gain on acquired credit impaired assets 12,602 27,774
Expected credit loss and other related adjustments (26) 10,992
For reporting purposes previously acquired assets were shown net of any
related ECL. After acquisition, some of these assets have been fully
recovered. Consequently, the associated ECL has been released, with a credit
of US$12.6 million (2020: US$27.8 million) being recognised in the Statement
of Comprehensive Income. The recoveries on the acquired credit impaired assets
are reflective of management's improved credit control processes since
acquisition. The remaining ECL of US$1.8 million (2020: US$14.4 million) that
was netted within the fair value of the trade receivables at acquisition
remains netted within the trade receivables balance and will only be released
when the associated receivables have been fully realised.
The provision for expected credit loss that has been recognised in the year
relates to an expected credit loss recognised on new invoices raised during
the year as well as changes in expected credit loss rates because of
non-payment of certain invoices. Set out below is the movement in the
allowance for expected credit loss on trade and other receivables:
2021 2020
Unaudited Audited
US$'000 US$'000
As at 1 January 17,213 431
Provision for expected credit loss 12,628 16,782
Other receivables written off (496) -
As at 31 December 29,345 17,213
Included within Prepayments and other receivables as at 31 December 2021 are
amounts for shares to be issued following the
signing of placing agreements with shareholders of the Company in 2021
amounting to US$65.8 million (2020: US$nil), deposits
amounting to US$21.5 million (2020: US$nil) for the Group's proposed
acquisition of the Chad and Cameroon assets as well as
debt fees associated with unutilised debt amounting to US$7.5 million (2020:
US$nil).
11. Cash at bank
2021 2020
Unaudited Audited
As at 31 December US$'000 US$'000
Cash and cash equivalents 45,739 74,258
Amounts held for debt service 106,905 30,105
152,644 104,363
The Directors consider that the carrying amount of cash at bank approximates
their fair value.
Cash and cash equivalents includes US$1.1 million (2020: US$1.2 million) of
cash collateral on the Orabank revolving facility. The cash collateral was at
a value of XOF626.4 million (2020: XOF621.7 million).
Amounts held for debt service represents Naira denominated cash balances which
are held by the Group for 2020 and 2021 debt service which has been separately
disclosed from Cash and cash equivalents. In total, approximately US$132.8
million (2020: US$78.9 million) will be paid for the 2020 and 2021 debt
service from bank accounts designated as Amounts held for debt service, and
from Cash and cash equivalents.
12. Trade and other payables
2021 2020
Unaudited Audited
As at 31 December US$'000 US$'000
Trade and other payables
Trade payables 30,957 40,590
Accruals 62,927 35,565
VAT and WHT payable 13,783 12,075
Royalty and levies 5,196 6,261
Employee benefits 91 74
Deferred consideration - 7,500
Other payables 3,817 4,160
Trade and other payables 116,771 106,225
Other payables - non-current
Employee benefits 3,415 4,648
Other payables - non-current 3,415 4,648
120,186 110,873
The Directors consider that the carrying amount of trade and other payables
approximates to their fair value.
Deferred consideration of US$7.5 million related to a loan note that was
initially acquired via the acquisition of the Nigerian assets in November
2019, and was then acquired by the Company for future settlement. The amount
was repaid in 2021.
13. Borrowings
2021 2020
Unaudited Audited
As at 31 December US$'000 US$'000
Revolving credit facility 9,916 12,998
Bank loans 379,002 376,509
Senior Secured Notes 100,717 106,513
Other loan notes 34,610 18,642
524,245 514,662
2021 2020
Unaudited Audited
As at 31 December US$'000 US$'000
Current borrowings 415,593 89,995
Non-current borrowings 108,652 424,667
524,245 514,662
14. Contract liabilities
Contract liabilities represents the value of gas supply commitment to the
Group's customers for gas not taken but invoiced under the terms of the
contracts. The amount has been analysed between current and non-current
liability, based on the customers' expected future usage gas delivery profile.
This expected usage is updated periodically with the customer.
2021 2020
Unaudited Audited
As at 31 December US$'000 US$'000
Amount due for delivery within 12 months 26,467 5,065
Amount due for delivery after 12 months 213,043 185,172
239,510 190,237
2021 2020
Unaudited Audited
US$'000 US$'000
As at 1 January 190,237 121,994
Additional contract liabilities 61,033 86,881
Contract liabilities utilised (18,345) (23,632)
Unwind of discount on contract liabilities 6,585 4,994
As at 31 December 239,510 190,237
Following the purchase of the Nigerian assets on 14 November 2019, the
contract liabilities balance was adjusted to reflect the fair value at the
acquisition date. Discount amounting to US$6.6 million (2020: US$5.0 million)
has been accreted during the year as make-up gas has been delivered.
15. Cash flow reconciliations
A reconciliation of profit before tax to net cash generated from operating
activities is as follows:
Year ended Year ended
31 December 31 December
2021 2020
Unaudited Audited
US$'000 US$'000
Loss/(profit) for the year before tax (7,745) 10,444
Adjustments for:
Depreciation 1,764 1,492
Depletion 34,463 34,789
Finance income (49) (388)
Finance costs 76,604 75,796
Fair value movement 610 1,682
Unrealised foreign translation loss 9,791 404
Share option charge 1,602 656
Expected credit loss and other related adjustments 26 (10,992)
Operating cash flows before movements in working capital 117,066 113,883
(Increase)/decrease in inventory (956) 1,104
Increase in trade and other receivables (57,744) (49,281)
Increase/(decrease) in trade and other payables 29,455 (11,162)
Increase in contract liabilities 42,689 63,247
Income tax paid (2,395) (2,222)
Net cash generated from operating activities 128,115 115,569
Interest paid during the year amounted to US$22.6 million (2020: US$19.8
million).
The changes in the Group's liabilities arising from financing activities can
be classified as follows:
Interest Lease
Borrowings payable liabilities Total
US$'000 US$'000 US$'000 US$'000
At 1 January 2021 (audited) 514,662 51,544 8,061 574,267
Cash flows
Repayment (15,818) (22,584) (1,850) (40,252)
Proceeds 18,476 - - 18,476
Realised foreign translation 175 - - 175
2,833 (22,584) (1,850) (21,601)
Non-cash adjustments
Payment-in-kind adjustment/accretion of interest 10,544 51,327 511 62,382
Lease liability additions - - 138 138
Net debt fees (2,774) - - (2,774)
Borrowing fair value adjustments 610 - - 610
Working capital movements - - (29) (29)
Foreign translation (1,630) (186) (48) (1,864)
At 31 December 2021 (unaudited) 524,245 80,101 6,783 611,129
Interest Lease
Borrowings payable liabilities Total
US$'000 US$'000 US$'000 US$'000
At 1 January 2020 (audited) 532,052 13,715 5,570 551,337
Cash flows
Repayment (31,474) (19,785) (767) (52,026)
Proceeds 7,213 - - 7,213
(24,261) (19,785) (767) (44,813)
Non-cash adjustments
Payment-in-kind adjustment/accretion of interest 3,991 57,612 372 61,975
Lease liability additions - - 3,050 3,050
Net debt fees 1,049 - - 1,049
Borrowing fair value adjustments 1,682 - - 1,682
Foreign translation 149 2 (164) (13)
At 31 December 2020 (audited) 514,662 51,544 8,061 574,267
16. Events after the reporting period
The Directors are not aware of any events after the reporting date that
require reporting.
1 (#_ftnref1) Total Revenues refers to the total amount invoiced in the
financial year. This number is seen by management as appropriately reflecting
the underlying cash generation capacity of the business compared to Revenue
recognised in the income statement. A detailed explanation of the impact of
IFRS 15 revenue recognition rules on our income statement is provided in the
Financial Review section of our 2020 Annual Report. For reference FY 2021
Revenues were US$185.8 million (up 10% on FY 2020 Revenues of US$169.0
million). 2020 Total Revenues are represented to exclude a one-off advance
payment of US$20 million which was received on entering into an amended and
extended Gas Sales Agreement with Lafarge Africa to enable a like-for-like
comparison with 2021.
2 (#_ftnref2) Adjusted EBITDA is calculated as profit or loss before finance
costs, investment revenue, foreign exchange gains or loss,
expected credit loss and other related adjustments, fair value adjustments,
gain on acquisition, taxes, transaction costs,
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. 2020 cash collections and Adjusted EBITDA are
represented to exclude a one-off advance payment of US$20 million which was
received on entering into an amended and extended Gas Sales Agreement with
Lafarge Africa to enable a like-for-like comparison with 2021.
3 (#_ftnref3) 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.
4 (#_ftnref4) Within cash balance of US$154.3m, US$132.8m is set aside for
debt service, of which US$75.5m is for interest and US$57.3m is for scheduled
principal repayments, and US$1.6m relates to monies held in escrow accounts.
5 (#_ftnref5) Leverage is calculated as Net debt/Adjusted EBITDA
6 (#_ftnref6) Interest cover ratio is Adjusted EBITDA(2) divided by Finance
costs excluding (i) unwind of a discount on a long-term payable, (ii) unwind
of discount on contract liabilities and (iii) unwinding of decommissioning
discount, less Interest Finance Income
7 (#_ftnref7) CPR 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
8 (#_ftnref8) Total Contributions to Nigeria and Niger defined as payments
to governments, employee salaries and payments to local suppliers and
contractors.
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