REG - Savannah Energy Plc - 2023 Half-Year Results
29/09/2023 07:00
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RNS Number : 0883O Savannah Energy Plc 29 September 2023
29 September 2023
Savannah Energy PLC
("Savannah" or "the Company")
2023 Half-Year Results
Average Gross Daily Production up 12% YoY and Total Revenues(1) & Adjusted
EBITDA(2) both up 8% YoY
Savannah Energy PLC, the British independent energy company focused around the
delivery of Projects that Matter, is pleased to announce its unaudited
half-year results for the six months ended 30 June 2023.
Andrew Knott, CEO of Savannah Energy, said:
"I am pleased to report robust results for the first six months of 2023, which
demonstrate our continuing ability to deliver strong operational performance.
Average gross daily production increased by 12% to 25.3 Kboepd, while Total
Revenues(1) and Adjusted EBITDA(2) both increased by 8% during the first half
of the year.
The expansion of our Renewable Energy division has continued apace, with
several new projects added to our development portfolio in the first half of
the year. We now have up to 676 MW of projects in motion across three
countries as we quickly move towards the achievement of up to 1 GW+. At the
same time, we continue to progress our proposed acquisition of PETRONAS
International Corporation Limited's energy business in South Sudan, with the
intention to publish an AIM Admission Document in Q4 2023.
We continue to deliver on our strategy and remain unequivocally an "AND"
company, seeking to deliver strong performance both for the short AND long
term across multiple fronts, and pursuing growth opportunities in both the
hydrocarbon AND renewable energy areas."
Operational Highlights
· Average gross daily production from Nigerian operations was 25.3
Kboepd, a 12% increase from 22.5 Kboepd during H1 2022. Robust customer demand
led to a 15% increase in gas production from the Uquo Field to 138.5 MMscfpd
(H1 2022: 120.3 MMscfpd);
· Strong safety record, with our Nigerian operations recording one
million working hours without a Lost Time Injury;
· Gas sold to eight principal customers, with a number of new and
extended gas contracts agreed, including:
o An agreement with Amalgamated Oil Company Nigeria Limited ("AMOCON"),
whereby Savannah's Accugas subsidiary agreed to purchase up to 20 MMscfpd of
gas from AMOCON over the course of the next ten years for onward sale to our
gas customers (with deliveries having commenced in May); and
o New gas sales agreement with Shell Nigeria Gas Limited ("SNG") and a
contract extension with Shell Petroleum Development Company of Nigeria Limited
("SPDC");
· This strong momentum continued post-period end with contract
extensions signed with Central Horizon Gas Company Limited ("CHGC"), First
Independent Power Limited ("FIPL") and Notore Chemical Industries PLC
("Notore") for a total of up to 85 MMscfpd;
· Up to 676 MW of renewable energy projects now in motion,
including agreements signed during the period for the up to 75 MW Bini a Warak
Hydroelectric Project in Cameroon and for the development of two proposed
solar photovoltaic power plants in Niger with combined capacity of up to 200
MW; and
· First disclosure report for Sustainability Accounting Standards
Board ("SASB") published today here
(https://wp-savannah-2020.s3.eu-west-2.amazonaws.com/media/2023/09/SASB-Report-2022.pdf)
.
Financial Highlights(3)
· Total Revenues(1) increased by 8% to US$138.7 million (H1 2022:
US$128.7 million);
· Adjusted EBITDA(2) increased by 8% to US108.2 million (H1 2022:
US$100.3 million);
· Adjusted EBITDA(2) margin strong and stable at 78% (H1 2022:
78%);
· Operating expenses plus administrative expenses(4) of US$27.4
million (H1 2022: US$24.5 million);
· Profit after tax (including contribution from discontinued
operations) of US$46.8 million (H1 2022 loss after tax: US$20.5 million); and
· Net debt position at period end of US$443.4 million (FY22:
US$404.9 million) with Leverage(5) broadly stable at 1.9x (Year-end 2022:
1.8x).
2023 Guidance
· Total Revenues(1) guidance reiterated at 'greater than US$235
million';
· Group Operating expenses plus administrative expenses(4) guidance
reiterated at 'up to US$75 million'; and
· Total capital expenditures guidance reduced from 'up to US$60
million' to 'up to US$30 million', reflecting the rephasing of certain planned
capital projects in Niger and Nigeria.
South Sudan Acquisition Update
Further to the Company's announcement on 27 July 2023, the Company continues
to advance the various workstreams required to complete the acquisition of
PETRONAS International Corporation Limited's energy business in South Sudan
(the "PETRONAS Acquisition") and now intends to publish an AIM Admission
Document in respect of the PETRONAS Acquisition on or before 15 December 2023,
following such point the Company will seek restoration to trading on AIM of
its ordinary shares.
Niger Update
Savannah remains committed to the 35 MMstb (Gross 2C Resources) R3 East oil
development in South East Niger. As previously announced, the intention was to
carry out a well test programme on our principal discoveries in Q4 2023.
However, following recent political events, this timeline will be subject to
further revision due to restrictions imposed by the Economic Community of West
African States on Niger, which has resulted in the closure of the border
between Benin and Niger. This has created logistical challenges for companies
operating in Niger and, specifically for Savannah, in relation to the
importation of the necessary equipment to complete our planned well test
programme. A further update in relation to timing will be provided in Q4 2023.
Savannah continues to progress the up to 250 MW Parc Eolien de la Tarka wind
farm project, with all key required studies either complete or at an advanced
stage. Savannah also announced the signing of an agreement for the development
of two proposed solar photovoltaic power plants, each up to 100 MW in scale,
during the period and work is at an initial stage on these projects.
Divestment of Interest in COTCo
On 20 April 2023, Savannah announced that its wholly owned subsidiary,
Savannah Midstream Investment Limited ("SMIL"), had signed a Share Purchase
Agreement with the national oil company of Cameroon, Société Nationale Des
Hydrocarbures ("SNH") for the sale of 10% of the issued share capital in
Cameroon Oil Transportation Company ("COTCo"). The cash consideration for the
shares was US$44.9 million and SMIL also retained the right to the dividend
attaching to the shares up to the payment date of the consideration. Formal
completion of the sale shall occur upon satisfaction of certain conditions
precedent related to amendments to the bylaws of COTCo. Please refer to Note
20 of the interim financial statements for further information on the
accounting treatment of the transaction.
Board Update
Following the Annual General Meeting held on 30 June 2023, Steve Jenkins
retired as Chair but remains on the Board as an independent Non-Executive
Director. Joseph Pagop Noupoué was appointed Non-Executive Chair, having
joined the Board as a Non-Executive Director in April 2023. Sylvie Rucar
retired as a Non-Executive Director from the Board post-period end due to
personal reasons.
Fenikso Limited ("Fenikso")
As previously detailed, in 2022 Savannah invested approximately US$1 million
("the Initial Investment") in Fenikso (previously known as Lekoil Limited)
and, under the terms of the restructuring agreements negotiated between
Savannah and Fenikso entered into in December 2022, the Company will receive
payments of up to US$16.3 million over the course of the next nine years.
Post-period end, Savannah has fully recovered the Initial Investment with the
receipt from Fenikso of payments totalling US$1.3 million to date.
Chad Assets Update
As previously disclosed in the Group's 2022 Annual Report, the Republic of
Chad nationalised the Group's interests in Chad owned by its subsidiaries,
Savannah Chad Inc ("SCI") and Savannah Midstream Investment Limited ("SMIL"),
(the "Chad Assets") by way of a law passed on 31 March 2023 (the
Nationalisation"). This confirmed an announcement of the President of Chad of
23 March 2023.
The actions of the Republic of Chad are in breach of the upstream conventions
to which SCI and the Republic of Chad are, amongst others, party, together
with a breach of the convention between Tchad Oil Transportation Company
("TOTCo") and the Republic of Chad. Further details are provided in Notes 2,
22 and 23 of the financial statements. Disputes under the upstream conventions
and the TOTCo convention are subject to the jurisdiction of ICC arbitral
tribunals, seated in Paris. SCI and SMIL have commenced ICC arbitral
proceedings against the Republic of Chad to seek full recompense for the loss
that they have and will suffer as a result of the nationalisation of the Chad
Assets.
Following the period end, a dispute has also arisen among the shareholders of
COTCo. SMIL has initiated appropriate court and ICC arbitral proceedings to
protect its interests as a shareholder in COTCo.
For further information, please refer to the Company's
website www.savannah-energy.com (http://www.savannah-energy.com/) or
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
Cavendish Capital Markets Ltd (Joint +44 (0) 20 7220 0500
Broker)
Derrick Lee
Tim Redfern
Panmure Gordon (UK) Ltd (Joint +44 (0) 20 7886 2500
Broker)
John Prior
Hugo Rich
James Sinclair-Ford
Camarco +44 (0) 20 3757 4983
Billy Clegg
Owen Roberts
Violet Wilson
The information contained within this announcement is considered to be inside
information prior to its release, as defined in Article 7 of the Market Abuse
Regulation No. 596/2014, as it forms part of UK domestic law by virtue of the
European Union (Withdrawal) Act 2018, as amended, and is disclosed in
accordance with the Company's obligations under Article 17 of those
Regulations.
About Savannah Energy:
Savannah Energy PLC is an AIM quoted British independent energy company
focused around the delivery of Projects that Matter in Africa.
Operational Review
Nigeria
Average gross daily production was 12% higher in H1 2023 with an average of
25.3 Kboepd (H1 2022: 22.5 Kboepd).
In the first half of 2023 a number of new agreements have been concluded,
including:
· An agreement with AMOCON for gas produced in the OML 156 sole
risk petroleum lease area. Under the terms of the agreement, Accugas has
agreed to purchase up to 20 MMscfpd of gas from AMOCON over the course of the
next ten years for onward sale to our customers. Deliveries commenced in April
2023, with an average of approximately 18 MMscfpd of gas purchased from AMOCON
since commencement to 30 June 2023;
· An extension of the contract with SPDC was signed for an
additional 12-month period, whereby Accugas is supplying gas to SPDC for use
in off-grid power generation at the Shell Industrial Area, Port Harcourt,
Nigeria; and
· A new agreement with SNG for gas supplies which commenced
post-period end in August 2023. SNG is a fully owned Shell PLC company,
incorporated for the downstream distribution of gas to industries in Nigeria,
and currently operates a gas transmission and distribution network of over 138
km, together with several distribution systems in Nigeria.
This strong momentum continued post-period end with additional contracts
finalised, including:
· An extension of the agreement with CHGC for an additional
12-month period, whereby Accugas is supplying CHGC with up to 10 MMscfpd of
gas on an interruptible basis. CHGC is a major gas distribution company
situated in the South-South region of Nigeria, operating a 17 km gas pipeline
infrastructure network providing natural gas to industrial and commercial
customers in the Trans Amadi Industrial Area of Port Harcourt as well as the
Greater Port Harcourt Area, Nigeria;
· An extension of the agreement with Notore for up to 10 MMscfpd
was signed for an additional 12-month period, and post-period end deliveries
from July to September have averaged more than twice this at 26.3 MMscfpd.
Notore is a Nigeria-based integrated agro-allied, chemicals and infrastructure
company located in the Onne Oil and Gas Free Zone area of Rivers State in
southern Nigeria. Notore's primary business is the production of urea, ammonia
and NPK blend fertilisers; and
· An extension of the agreement with FIPL was signed for an
additional 12-month period, whereby Accugas is supplying FIPL's FIPL Afam,
Eleme and Trans Amadi power stations with up to 65 MMscfpd of gas. FIPL is an
affiliate company of the Sahara Group, a leading international energy and
infrastructure conglomerate with operations in over 42 countries across
Africa, the Middle East, Europe and Asia.
Savannah continues to progress its US$45 million compression project at the
Uquo Central Processing Facility. Following the front-end engineering and the
associated order of long lead items, detailed design work has commenced and is
on track to be completed in Q4 2023. The compression project remains within
budget and startup is planned for mid-2024.
Chad
As noted, nationalisation of the Chad Assets occurred on 31 March 2023.
Average (gross) production from 9 December 2022 until 31 March 2023 was 29.3
Kbopd.
Cameroon
COTCo owns and operates the 903 km Cameroon oil export pipeline and the Kome
Kribi 1 floating storage and offloading unit, which transport and store oil on
behalf of its customers who are in turn charged a transportation tariff.
During H1 2023, COTCo transported approximately 135,705 bopd, with 26 liftings
completed on behalf of its customers.
Renewable Energy Division
The Renewable Energy division has made significant progress during the first
half of the year, with up to 676 MW of renewable energy projects in motion.
Savannah continues to advance towards its short-term target of having up to 1
GW+ of projects in motion and it is expected this will be achieved in
mid-2024.
Bini a Warak Hydroelectric Project, Cameroon
Progress has continued on the Bini a Warak Hydroelectric Project since the
signing of the Memorandum of Agreement with the Government of the Republic of
Cameroon on 20 April 2023. The up to 75 MW project involves the construction
of a hydroelectric dam on the Bini River, located in the northern Adamawa
region of Cameroon, and is expected to increase current on-grid electricity
generation in northern Cameroon by over 50%.
Savannah hosted a successful site visit in May 2023 for key stakeholders and
distinguished guests, including representatives from the Ministry of Water
Resources and Energy, H.E. Kildadi Taguieke Boukar, the Governor of the
Adamawa Region, together with local paramount and village chiefs. A
drone-based topographic survey has been completed and hydrological
measurements have been restarted. Design optimisation will be completed
during Q4 2023 as we work towards finalising the development and resumption of
construction of the project. Project sanction is currently anticipated in
2024, with first power targeted in the 2027 to 2028 window.
Niger Projects
Savannah's up to 250 MW Parc Eolien de la Tarka wind farm project in Niger,
which has the potential to increase Niger's on-grid electricity supply by over
40%, made significant progress in H1 2023. All key studies required to achieve
project sanction (including wind measurement, environmental and social impact,
grid integration, security, cartography, road and aviation studies) were
either completed or made significant progress. The preliminary on-site wind
speed data measurements have proven to be highly encouraging.
On 11 May 2023, Savannah announced the signing of an agreement for the
development of two proposed solar photovoltaic power plants, with a combined
installed power generation capacity of up to 200 MW. During H1 2023 site
identification work was undertaken and a grid integration study initiated.
Sustainability
In line with our previous commitments, Savannah is today publishing our first
disclosure report in accordance with the SASB which is available to download
from our website here.
(https://wp-savannah-2020.s3.eu-west-2.amazonaws.com/media/2023/09/SASB-Report-2022.pdf)
We continue to progress our 2023 sustainability performance measurement and
reporting in line with our sustainability strategy.
Financial Review
The table below provides an overview of our results for H1 2023 with a
comparison for H1 2022 (from continued operations, unless otherwise stated):
Financial highlights
Six months ended Six months ended
30 June 2023 30 June 2022
US$ million US$ million
Total Revenues(1) 138.7 128.7
Adjusted EBITDA(2) 108.2 100.3
Revenue 123.7 85.8
Operating expenses plus administrative expenses(4) 27.4 24.5
Operating profit 37.3 27.9
The Group reports increased Total Revenues(1) of US$138.7 million and an
increased Adjusted EBITDA(2) of US$108.2 million. The 8% increase in both
metrics is a reflection of the quality of the assets in Nigeria where we see
continued strong demand for gas supply.
The Group's operating profit was 33% higher than the prior year at US$37.3
million (H1 2022: US$27.9 million). The increase resulted from a combination
of the increase in revenues resulting from strong customer offtake partially
offset by a 12% increase in operating expenses plus administrative
expenses(4). The increase in these costs is a result of the investment being
made to further enhance the resilience, reliability and efficiency of the
Nigerian assets and to support the ongoing growth across the Group in both
hydrocarbons and renewable energy.
Revenue
Revenue during the period was 44% higher than the comparable prior year period
at US$123.7 million (H1 2022: US$85.8 million).
As previously highlighted, it is important to note the impact of take-or-pay
accounting rules under IFRS 15 on our Income Statement as regards to revenue
recognition for our gas sales agreements. The Revenue shown in the Condensed
Consolidated Statement of Comprehensive Income includes only the gas, oil and
condensate that has been delivered. The Total Revenues(1) of US$138.7 million
(H1 2022: US$128.7 million) includes the volume of gas that customers are
committed to pay for under the take-or-pay terms of the gas sales agreements,
which includes gas that has been delivered plus gas invoiced but yet to be
delivered, plus oil and condensate revenues.
Savannah continues to benefit from over US$3.7 billion of contracted future
gas revenues in Accugas with annual price escalation clauses related to US
consumer price inflation.
Cost of Sales, administrative and other operating expenses
Cost of sales amounted to US$35.5 million (H1 2022: US$33.1 million) which
includes US$14.9 million (H1 2022: US$13.8 million) for facility operating and
maintenance costs, US$2.7 million (H1 2022: US$2.9 million) royalty expenses
and US$17.8 million (H1 2022: US$16.4 million) depletion and depreciation.
Administrative and other operating expenses for the period were US$14.3
million (H1 2022: US$11.7 million), which includes US$1.8 million (H1 2022:
US$0.9 million) of depreciation and amortisation of intangibles. The increase
in these costs was driven by the investment into new business activities and
the increased scale of the business as it grows to support the operations
across both hydrocarbons and renewable energy.
Adjusted EBITDA(2)
Adjusted EBITDA(2) increased to US$108.2 million (1H 2022: US$100.3 million)
with the increase being driven by higher overall Total Revenues and continued
strong management of costs.
Finance Costs
The increase in Finance costs to US$51.8 million (H1 2022: US$36.8 million) is
a result primarily of higher underlying interest rates combined with an
increase in average debt year-on-year and. The average interest rate was 13.4%
(H1 2022: 10.7%) reflecting the higher US LIBOR rates during the period
compared to prior period.
Foreign Exchange loss
Foreign exchange losses amounted to US$54.0 million (H1 2022: US$0.8 million).
These losses are unrealised losses which occurred following the harmonisation
of the various exchange rates which was implemented by the Central Bank of
Nigeria in June. The impact of this decision saw the official Naira/US$
exchange rate move from approximately 460 to 755 at 30 June 2023 and this
required Savannah to revalue its Naira denominated assets and liabilities at
this new rate when preparing US$ denominated financial statements.
The principal Naira denominated asset on the balance sheet was cash and this
reduced in US$ terms by US$66.5 million when it was translated. This was
partially offset by the reduction in Naira denominated liabilities which
included borrowings and trade payables.
Whilst the harmonisation resulted in a material unrealised loss, the Naira
devaluation which has occurred will be positive overall as it is anticipated
that this will lead to enhanced market liquidity which will assist with the
Accugas debt refinancing process.
Cash flow
The cash flow results are for the consolidated group (including discontinued
operations).
As noted above, cash balances reduced in the period to US$135.7 million. This
reduction arose despite the strong operating performance during the period and
was primarily due to a combination of debt repayments of US$74 million (H1
2022: US$30.5 million) and the unrealised foreign exchange loss following
Naira exchange rate harmonisation of US$66.5 million (H1 2022: US$2.2
million). Capital and exploration expenditure for the period totalled US$4.2
million (H1 2022: US$14.0 million). During the period, Savannah also received
US$44.9 million from SNH in relation to the sale of a 10% interest in COTCo.
Debt
The net debt at 30 June 2023 was US$443.4 million an increase of 9% from
year-end position (31 December 2022: US$404.9 million). During the period
US$74 million of debt was repaid however, there was an overall increase seen
in net debt due to the revaluation of Naira cash balances (as discussed
above). This has resulted in a marginal increase in leverage(5) from 1.8x to
1.9x.
Work continues on the proposed refinancing of the Accugas US$ debt facility
(as was detailed in the 2022 Annual Report). A detailed term sheet has been
executed with a consortium of lenders for the provision of a Naira-denominated
Transitional Facility and it is anticipated this will be finalised in Q4 2023.
Discontinued Operations
As disclosed in the Group's 2022 Annual Report, the Republic of Chad passed a
law on 31 March 2023 confirming the nationalisation of the Group's Chad
Assets. Following this nationalisation, all of the Groups' operations for the
Chad Assets have been recognised as discontinued operations in line with IFRS
5 for the current period. The net profit and total comprehensive profit from
discontinued operations amounted to US$92.0 million, which is shown as a
single line in the Condensed Consolidated Statement of Comprehensive Income.
A breakdown of this is shown in Note 22 of the Notes to the Condensed
Consolidated Interim Financial Statements.
COTCo
Following the period end, a dispute has arisen among the shareholders of
COTCo. Savannah has initiated appropriate court and ICC arbitral proceedings
to protect its rights under the relevant agreements.
Going Concern
The results have been presented on a going concern basis. Details of the
Group's assessment of going concern for the period can be found in note 2.
Footnotes
(1) Total Revenues are defined as the total amount of invoiced sales during
the period. This number is seen by management as more accurately reflecting
the underlying cash generation capacity of the business as opposed to Revenue
recognised in the Condensed Consolidated Statement of Comprehensive Income. A
detailed explanation of the impact of IFRS 15 revenue recognition rules on our
Consolidated Statement of Comprehensive Income is provided in the Financial
Review section of the Annual Report and Accounts 2020.
( )
(2) Adjusted EBITDA is calculated as profit or loss before finance costs,
investment revenue, foreign exchange gains or losses, expected credit loss and
other related adjustments, fair value adjustments, gain on acquisition, taxes,
transaction and other related expenses, depreciation, depletion and
amortisation and adjusted to include deferred revenue and other invoiced
amounts. Management believes that the alternative performance measure of
Adjusted EBITDA more accurately reflects the cash-generating capacity of the
business.
(3) From continuing operations unless otherwise stated.
(4) Group operating expenses plus administrative expenses are defined as total
cost of sales, administrative and other operating expenses excluding royalty
and depletion, depreciation and amortisation and transaction costs.
(5) Leverage is defined as net debt/Adjusted EBITDA. For the 6-month period
ended 30 June 2023, the Leverage calculation is prepared on a rolling 12-month
basis.
INDEPENDENT REVIEW REPORT TO SAVANNAH ENERGY PLC
Qualified conclusion
We have reviewed the condensed set of financial statements of Savannah Energy
plc (the "Company") included in the interim financial report for the six
months ended 30 June 2023 which comprise the condensed consolidated statement
of comprehensive income, the condensed consolidated balance sheet, the
condensed consolidated statement of changes in equity, the condensed
consolidated cash flow statement and the notes to the interim financial
statements.
Except for the adjustments to the interim financial information of which we
might have become aware of had it not been for the situation described below,
based on our review, nothing has come to our attention that causes us to
believe that the accompanying interim financial information for the six months
ended 30 June 2023 is not prepared, in all material respects, in a form
consistent with that which will be adopted in the Company's annual accounts
having regard to the accounting standards applicable to such annual accounts,
and in accordance with the London Stock Exchange AIM Rules for Companies.
Basis for Qualified Conclusion
As explained in note 2, the impact of the Republic of Chad's nationalisation
of the Group's interest in the Chad assets resulted in these assets being
impaired and accounted for as a discontinued operation in the current period.
The resulting accounting impact is included in the net profit and total
comprehensive profit from discontinued activities in the income statement
totalling $91.9m and is derived from the financial records and supporting
documents that were available to the Group before the nationalisation date of
31 March 2023. The evidence available in respect of these assets was limited
due to the Directors not being able to access all the underlying financial
information, nor have access to the relevant Chad-based employees of the
affected entities subsequent to 31 March 2023. This has a consequential impact
on our ability to perform the required review procedures on this balance. Had
we been able to complete our review of the balance of $91.9m presented as net
profit and total comprehensive profit from discontinued operations, matters
might have come to our attention indicating that adjustments might be
necessary to the interim financial information.
We conducted our review in accordance with International Standard on Review
Engagements 2410 (UK), "Review of Interim Financial Information Performed by
the Independent Auditor of the Entity" ("ISRE (UK) 2410"). A review of interim
financial information consists of making enquiries, primarily of persons
responsible for financial and accounting matters, and applying analytical and
other review procedures. A review is substantially less in scope than an audit
conducted in accordance with International Standards on Auditing and
consequently does not enable us to obtain assurance that we would become aware
of all significant matters that might be identified in an audit. Accordingly,
we do not express an audit opinion.
As disclosed in note 1, the annual financial statements of the Group are
prepared in accordance with UK adopted international accounting standards. The
condensed set of financial statements included in this interim financial
report have been prepared in a form consistent with that which will be adopted
in the Company's annual accounts having regard to the accounting standards
applicable to such annual accounts.
Material uncertainty related to going concern
We draw attention to note 2 of the condensed set of financial statements which
explains that the Group's ability to continue as a going concern is dependent
on either the ongoing support from its lenders to amend the terms of the
Accugas US$ debt facility or a refinancing of that the facility. As stated
in note 2, these conditions, along with the other matters referred to in note
2, indicate that a material uncertainty exists that may cast significant doubt
on the Group's ability to continue as a going concern. Our conclusion is not
modified in respect of this matter.
Based on our review procedures, which are less extensive than those performed
in an audit as described in the Basis for conclusion section of this report,
nothing has come to our attention to suggest that the directors have
inappropriately adopted the going concern basis of accounting or that the
directors have identified material uncertainties relating to going concern
that are not appropriately disclosed.
This conclusion is based on the review procedures performed in accordance with
ISRE (UK) 2410, however future events or conditions may cause the Group to
cease to continue as a going concern.
Responsibilities of directors
The directors are responsible for preparing the interim financial report in
accordance with the London Stock Exchange AIM Rules for Companies which
require that the interim report be presented and prepared in a form consistent
with that which will be adopted in the Company's annual accounts having regard
to the accounting standards applicable to such annual accounts.
In preparing the interim financial report, the directors are responsible for
assessing the company's ability to continue as a going concern, disclosing, as
applicable, matters related to going concern and using the going concern basis
of accounting unless the directors either intend to liquidate the company or
to cease operations, or have no realistic alternative but to do so.
Auditor's responsibilities for the review of the financial information
In reviewing the interim report, we are responsible for expressing to the
Company a conclusion on the condensed set of financial statement in the
interim financial report. Our conclusion, including our Conclusions Relating
to Going Concern, are based on procedures that are less extensive than audit
procedures, as described in the Basis for Qualified Conclusion paragraph of
this report.
Use of our report
Our report has been prepared in accordance with the terms of our engagement to
assist the Company in meeting the requirements of the rules of the London
Stock Exchange AIM Rules for Companies for no other purpose. No person is
entitled to rely on this report unless such a person is a person entitled to
rely upon this report by virtue of and for the purpose of our terms of
engagement or has been expressly authorised to do so by our prior written
consent. Save as above, we do not accept responsibility for this report to
any other person or for any other purpose and we hereby expressly disclaim any
and all such liability.
BDO LLP
Chartered Accountants
London
28 September 2023
BDO LLP is a limited liability partnership registered in England and Wales
(with registered number OC305127).
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE SIX MONTHS
ENDED 30 JUNE 2023
Six months ended Six months ended
30 June 30 June
2023 2022
US$'000 US$'000
Continuing operations Note Unaudited Unaudited
Revenue 4 123,728 85,847
Cost of sales 5 (35,464) (33,127)
Gross profit 88,264 52,720
Administrative and other operating expenses (14,284) (11,686)
Transaction and other related expenses 6 (2,833) (7,262)
Expected credit loss and other related adjustments 14 (33,840) (5,918)
Operating profit 6 37,307 27,854
Finance income 7 1,440 273
Finance costs 8 (51,752) (36,827)
Income related to 20 3,580 -
associates
Fair value adjustment 9 6,519 (1,768)
Foreign translation loss 10 (54,016) (846)
Loss before tax (56,922) (11,314)
Current tax expense 11 (9,756) (2,793)
Deferred tax credit/(expense) 11 21,489 (6,438)
Tax credit/(expense) 11 11,733 (9,231)
Net loss and total comprehensive loss from continuing operations (45,189) (20,545)
Discontinued operations
Profit after tax for the period from discontinued 22 91,962 -
operations
Net profit/(loss) and total comprehensive profit/(loss) 46,773 (20,545)
Net profit/(loss) and total comprehensive profit/(loss) attributable to:
Owners of the Company 54,428 (20,264)
Non-controlling interests (7,655) (281)
46,773 (20,545)
US cents US cents
Loss per share for continuing operations
Basic 12 (3.09) (1.77)
Diluted 12 (3.09) (1.77)
Profit/(loss) per share including discontinued operations
Basic 12 4.48 (1.77)
Diluted 12 4.48 (1.77)
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 30 JUNE 2023
30 June 31 December
2023 2022
US$'000 US$'000
Note Unaudited Audited
Assets
Non-current assets
Property, plant and equipment 13 508,449 623,118
Intangible assets 175,042 183,013
Investments in associates 20 142,105 188,350
Deferred tax assets 257,703 234,666
Right-of-use assets 3,136 3,658
Restricted cash 29 28
Other non-current receivables 9,981 7,032
Total non-current assets 1,096,445 1,239,865
Current assets
Inventory 6,715 40,374
Trade and other receivables 14 278,365 239,346
Cash at bank 15 135,657 240,888
Total current assets 420,737 520,608
Total assets 1,517,182 1,760,473
Equity and liabilities
Capital and reserves
Share capital 1,835 1,828
Share premium 126,802 124,819
Treasury shares (136) (136)
Other reserves 531 531
Share-based payment reserve 9,900 9,974
Retained earnings 150,835 96,407
Equity attributable to owners of the Company 289,767 233,423
Non-controlling interests 2,991 10,646
Total equity 292,758 244,069
Non-current liabilities
Other payables 16 2,104 7,712
Borrowings 17 155,565 102,392
Lease liabilities 3,194 3,453
Deferred tax liabilities 7,631 27,607
Provisions 68,936 94,845
Contract liabilities 18 321,138 314,018
Total non-current liabilities 558,568 550,027
Current liabilities
Trade and other payables 16 98,315 279,448
Borrowings 17 423,462 543,397
Interest payable 19 109,634 105,600
Tax liabilities 14,896 18,514
Lease liabilities 1,757 1,626
Contract liabilities 18 17,792 17,792
Total current liabilities 665,856 966,377
Total liabilities 1,224,424 1,516,404
Total equity and liabilities 1,517,182 1,760,473
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED 30 JUNE 2023
Six months ended Six months ended
30 June 2023 30 June 2022
US$'000 US$'000
Note Unaudited Unaudited
Cash flows from operating activities:
Profit/(loss) before tax including discontinued operations 2,825 (11,314)
Adjustments for:
Depreciation 1,805 914
Depletion 17,832 16,432
Finance income (1,350) (190)
Finance costs 8 51,752 36,827
Income related to associates (4,155) -
Fair value adjustment (6,519) 1,768
Unrealised foreign exchange loss/(gain) 10 54,689 (99)
Share option (credit)/charge (74) 336
Expected credit loss and other related adjustments 14 33,840 5,918
Impairment loss on discontinued operations 22 12,350 -
Operating cash flows before movements in working capital 162,995 50,592
Increase in inventory (1,521) (1,357)
Increase in trade and other receivables (83,517) (40,703)
Decrease in trade and other payables (54,209) (6,389)
Increase in contract liabilities 1,843 40,765
Income tax paid (1,975) (1,024)
Net cash generated from operating activities 23,616 41,884
Cash flows from investing activities:
Interest received 668 171
Payments for property, plant and equipment (2,379) (9,104)
Payments for exploration and evaluation assets (1,824) (4,888)
Acquisition deposits - (14,648)
Proceeds from disposal 44,900 -
Loans provided to third parties (2,512) (1,067)
Cash transferred from/(to) debt service accounts 83,633 (32,186)
Lessor receipts 147 196
Net cash generated from/(used in) investing activities 122,633 (61,526)
Cash flows from financing activities:
Finance costs (29,099) (24,758)
Proceeds from issues of equity shares, net of issue costs 2,013 61,141
Sale of Treasury shares - 73
Borrowing proceeds 19 - 12,810
Borrowing repayments 19 (73,783) (30,545)
Lease payments 19 (484) (527)
Net cash (used in)/generated from financing activities (101,353) 18,194
Net increase/(decrease) in cash and cash equivalents 44,896 (1,448)
Effect of exchange rate changes on cash and cash equivalents (66,493) (2,214)
Cash and cash equivalents at beginning of period 104,147 45,739
Cash and cash equivalents at end of period 15 82,550 42,077
Amounts held for debt service at end of period 15 53,107 139,091
Cash at bank at end of period 15 135,657 181,168
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE SIX MONTHS ENDED 30 JUNE 2023
Share capital Share premium Treasury shares Other reserves Share-based payment reserve Retained earnings Equity attributable to the owners of the Company Non-controlling interest Total equity
US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
Balance at 1 January 2023 (audited) 1,828 124,819 (136) 531 9,974 96,407 233,423 10,646 244,069
Profit/(loss) for the period - - - - - 54,428 54,428 (7,655) 46,773
Total comprehensive profit/(loss) for the period - - - - - 54,428 54,428 (7,655) 46,773
Transactions with shareholders:
Equity-settled share-based payments - - - - (74) - (74) - (74)
Issue of shares, net of costs 7 1,983 - - - - 1,990 - 1,990
Balance at 30 June 2023 (unaudited) 1,835 126,802 (136) 531 9,900 150,835 289,767 2,991 292,758
Share capital Share premium Shares to be issued Treasury shares Other reserves Share-based payment reserve Retained earnings Equity attributable to the owners of the Company Non-controlling interest Total equity
US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
Balance at 1 January 2022 (audited) 1,409 61,204 63,956 (58) 458 8,706 157,221 292,896 13,842 306,738
Loss for the period - - - - - - (20,264) (20,264) (281) (20,545)
Total comprehensive loss for the period - - - - - - (20,264) (20,264) (281) (20,545)
Transactions with shareholders:
Equity-settled share-based payments - - - - - 336 - 336 - 336
Issue of shares, net of costs 340 63,693 (63,956) (77) - - - - - -
Sale of treasury shares - - - - 73 - - 73 - 73
Issue of warrants - - - - 7,850 - - 7,850 - 7,850
Balance at 30 June 2022 (unaudited) 1,749 124,897 - (135) 8,381 9,042 136,957 280,891 13,561 294,452
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
1. General information
Savannah Energy PLC ("Savannah" or "the Company") was incorporated in England
and Wales on 3 July 2014. The condensed consolidated financial statements of
Savannah and its subsidiaries (together the "Group") for the six months ended
30 June 2023 were approved and authorised for issuance by the board of
directors on
28 September 2023.
The Group's principal activities are the exploration, development and
production of natural gas and crude oil and development of other energy
related projects in Africa.
The Company is domiciled in the England for tax purposes 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. Accounting policies
Basis of Preparation
The condensed set of financial statements included in this interim financial
report have been prepared in a form consistent with that which will be adopted
in the Company's annual accounts having regard to the accounting standards
applicable to such annual accounts, and in accordance with the London Stock
Exchange AIM Rules for Companies. The provisions of IAS 34: Interim Financial
Reporting have not been applied.
The interim condensed consolidated financial statements do not include all
disclosures that would otherwise be required in a complete set of financial
statements and should be read in conjunction with the Group's 2022 Annual
Report and audited financial statements for the year ended 31 December 2022
("the Group's 2022 Annual Report"). The financial information for the six
months ended 30 June 2023 does not constitute statutory accounts within the
meaning of Section 434(3) of the Companies Act 2006 and is unaudited.
The annual financial statements of Savannah for the year ended 31 December
2022 were prepared in accordance with UK-adopted international accounting
standards in conformity with the requirements of the Companies Act 2006. The
Independent Auditors' Report on the Group's 2022 Annual Report contained a
disclaimer of opinion and as such contained a statement under 498(2) or 498(3)
of the Companies Act 2006.
The Group's statutory financial statements for the year ended 31 December 2022
have been filed with the Registrar of UK Companies'.
All the Group's subsidiaries' functional currency is US Dollars ("US$"), and
the consolidated financial statements are presented in US Dollars and all
values are rounded to the nearest thousand (US$'000), except when otherwise
stated.
The financial information presented herein has been prepared in accordance
with the accounting policies used in preparing the Group's 2022 Annual Report.
There are no other new or amended standards or interpretations adopted from 1
January 2023 that have a significant impact on the interim financial
information.
As previously disclosed in the Group's 2022 Annual Report, the Republic of
Chad nationalised the Group's interests in Chad owned by its subsidiaries,
Savannah Chad Inc ("SCI") and Savannah Midstream Investment Limited ("SMIL"),
(the "Chad Assets") by way of a law passed on 31 March 2023 (the
Nationalisation"). This confirmed an announcement of the President of Chad of
23 March 2023. As a result of the Nationalisation, the Group has not been
able to fully access all the underlying financial information, nor have access
to the relevant Chad-based employees of the affected entities SCI and SMIL in
order to prepare the financial information for audit purposes to be
consolidated into the Group's financial statements for the year ended 31
December 2022 and for the unaudited interim condensed consolidated financial
statements for the six months ended 30 June 2023.
As stated in the Group's 2022 Annual Report, as a result of the
Nationalisation, the activities of the Chad Assets will be considered as a
discontinued operation in accordance with IFRS 5 - Non-current Assets for Sale
and discontinued operations from 31 March 2023 and this will be reflected in
the Group Financial Statements for the year ending 31 December 2023 and for
the unaudited condensed consolidated financial statements for the six months
ended 30 June 2023. This is without prejudice to Group's claims for
compensation in respect of the Nationalisation. More detail of the
discontinued operations is set out at Note 22 of this report.
Despite the limitation noted above, the financial information that has been
disclosed for the Chad Assets in the period was primarily sourced from bank
statements and any financial records and supporting documents that were
available before the date of Nationalisation. Given the limited information
available, the Directors considered the best way to record and present
transactions during the period and agreed that the most reliable basis to
record any transactions was on a cash accounting basis supported by bank
statements. During the period there was an oil lifting which resulted in a
cash inflow and this was recorded within revenue within discontinued
operations. For cash out flows, these were mainly considered to be
settlement of outstanding payables.
Included within discontinued operations is an impairment of the net balance
sheet position as at the date of Nationalisation, on the basis that the
Republic of Chad nationalised all the interests and rights pertaining to the
Chad Assets. Also, included within the Chad Assets is the Group's interest
in TOTCo held as an equity investment. This investment has also been fully
impaired. Note 23 sets out the position of any potential contingent
liabilities in connection with Chad Assets and the Nationalisation.
Going concern
The Group continues to trade strongly with revenues increasing significantly
over the same period last year. The Group's cash balance amounted to US$135.7
million at the reporting date and a significant volume of receivables are
anticipated to be collected from customers during over the next year. The
Directors have considered the factors relevant to support a statement of going
concern; in assessing the going concern assumption the Directors have reviewed
the Group's forecasted cash flows as well as the funding requirements of the
Group for at least the 12-month period from the date of publication of this
Interim Report.
This forecast was prepared on a "bottom-up" basis, at each major asset and
corporate level, and it reflects the Group's best estimate of costs and
revenues for the period. The capital expenditure and operating costs used in
this forecast are initially based on the Group's approved corporate budget,
and then revised for expected trading performance, customer demand, timing of
capital expenditures, debt refinancing and any new corporate transactions that
have an impact on the Group's cash flows. The principal assumptions made in
relation to the going concern assessment relate to the timely payments of our
gas invoices by our customers, the forecast commodity oil price environment
and continued access to FX markets (specifically in relation to financing of
US Dollar denominated costs and the refinancing of the Accugas US$ Facility).
A detailed credit-approved term sheet has been executed with lenders for a new
Naira denominated debt facility (the "Transitional Facility"). Whilst the
process continues apace, Accugas did not have a long-dated extension for the
refinancing process at the reporting date beyond the period of the going
concern review. As such the balance outstanding of the Accugas US$ Facility
continues to be reflected within current borrowings until the Transitional
Facility is in place. The Group remains highly confident that the Group will
continue to access the FX markets as required to maintain its operational
needs and following the harmonisation of the exchange rates conducted by the
Central Bank of Nigeria in June 2023 (and the unrealised foreign exchange loss
which resulted from the resulting devaluation) increased liquidity has seen in
the FX markets. Notwithstanding, a minimal risk exists that the Group may
not be able to continue to do so and/or Accugas may not be able to complete
its planned debt financing or to continue to receive support from its lenders
to amend the Accugas US$ Facility to defer conversion of Naira balances to US
Dollars. 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.
The Directors are confident in the Group's forecast and have a reasonable
expectation that the Group will continue in operational existence for the
going concern assessment period and believe it is appropriate to continue to
adopt the going concern basis in preparing these consolidated financial
statements. As mentioned above, it is recognised there is a material
uncertainty, however, this has not altered the Directors view on the basis of
preparation as a going concern.
3. Segmental reporting
For the purposes of resource allocation and assessment of segment performance,
the operations of the Group are divided into four segments: three geographical
locations and an Unallocated segment. The current geographical segments are
Nigeria, Cameroon and Niger. All these geographical segments' principal
activities are exploration, development and extraction of oil and gas. 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 continuing operations results by
reportable segment for the six months ended 30 June 2023:
Nigeria Niger Unallocated Total
US$'000 US$'000 US$'000 US$'000
Unaudited Unaudited Unaudited Unaudited
Revenue 123,728 - - 123,728
Cost of sales(1) (35,150) (120) (194) (35,464)
Gross profit 88,578 (120) (194) 88,264
Administrative and other operating expenses (3,748) (107) (10,429) (14,284)
Transaction and other related expenses - - (2,833) (2,833)
Expected credit loss and other related adjustments (33,840) - - (33,840)
Operating profit/(loss) 50,990 (227) (13,456) 37,307
Finance income 1,440
Finance costs (51,752)
Income related to associates 3,580
Fair value adjustment 6,519
Foreign translation loss (54,016)
Loss before tax (56,922)
Segment depreciation, depletion and amortisation 19,030 112 495 19,637
Segment non-current asset additions(2) 2,816 3,211 29 6,056
1. Refer to Note 5 for items included within Cost of Sales.
2. Includes Third party investments, Property, plant and equipment,
Exploration and evaluation assets and Right-of-use assets.
The following is an analysis of the Group's results by reportable segment for
the six months ended 30 June 2022:
Nigeria Niger Unallocated Total
US$'000 US$'000 US$'000 US$'000
Unaudited Unaudited Unaudited Unaudited
Revenue 85,847 - - 85,847
Cost of sales(1) (33,127) - - (33,127)
Gross profit 52,720 - - 52,720
Administrative and other operating expenses (3,446) (972) (7,268) (11,686)
Transaction and other related expenses - - (7,262) (7,262)
Expected credit loss and other related adjustments (5,918) - - (5,918)
Operating profit/(loss) 43,356 (972) (14,530) 27,854
Finance income 273
Finance costs (36,827)
Fair value adjustment (1,768)
Foreign translation loss (846)
Loss before tax (11,314)
Segment depreciation, depletion and amortisation 16,890 132 323 17,345
Segment non-current assets additions(2) 1,862 5,035 4,101 10,998
1. Refer to Note 5 for items included within Cost of Sales.
2. Includes Third party investments, Property, plant and equipment,
Exploration and evaluation assets and Right-of-use assets.
The following is an analysis of the Group's financial position by reportable
segment for continuing operations as at 30 June 2023:
Nigeria Cameroon Niger Unallocated Total
US$'000 US$'000 US$'000 US$'000 US$'000
Unaudited Unaudited Unaudited Unaudited Unaudited
Non-Current assets
Property, plant and equipment 506,851 - 1,155 443 508,449
Intangible assets 3,337 - 170,873 832 175,042
Investments in associates - 142,105 - - 142,105
Deferred tax assets 257,703 - - - 257,703
Right-of-use assets 1,316 - - 1,820 3,136
Restricted cash 29 - - - 29
Other non-current assets 2,500 - - 7,481 9,981
Total non-current assets 771,736 142,105 172,028 10,576 1,096,445
Current assets
Inventory 6,715 - - - 6,715
Trade and other receivables 244,450 1,250 43 32,622 278,365
Cash at bank 98,199 - 1,185 36,273 135,657
Total current assets 349,364 1,250 1,228 68,895 420,737
Total assets 1,121,100 143,355 173,256 79,471 1,517,182
Non-current liabilities
Other payables 2,104 - - - 2,104
Borrowings 101,978 53,587 - - 155,565
Lease liabilities 835 - - 2,359 3,194
Deferred tax liabilities 7,631 - - - 7,631
Provisions 67,172 - 1,764 - 68,936
Contract liabilities 321,138 - - - 321,138
Total non-current liabilities 500,858 53,587 1,764 2,359 558,568
Current liabilities
Trade and other payables 40,351 - 17,071 40,893 98,315
Borrowings 352,526 58,529 12,407 - 423,462
Interest payable 102,378 - 7,256 - 109,634
Tax liabilities 14,896 - - - 14,896
Lease liabilities 815 - - 942 1,757
Contract liabilities 17,792 - - - 17,792
Total current liabilities 528,758 58,529 36,734 41,835 665,856
Total liabilities 1,029,616 112,116 38,498 44,194 1,224,424
The following is an analysis of the Group's financial position by reportable
segment as at 31 December 2022:
Nigeria Cameroon Niger Unallocated Sub-total Chad(1) Total
US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
Audited Audited Audited Audited Audited Audited Audited
Property, plant and equipment 501,387 - 1,180 488 503,055 120,063 623,118
Exploration and evaluation assets 4,072 - 169,242 792 174,106 8,907 183,013
Investments in associates - 183,425 - - 183,425 4,925 188,350
Deferred tax assets 228,582 - - - 228,582 6,084 234,666
Right-of-use assets 1,621 - - 2,037 3,658 - 3,658
Restricted cash 28 - - - 28 - 28
Other non-current assets - - - 7,032 7,032 - 7,032
Total non-current assets 735,690 183,425 170,422 10,349 1,099,886 139,979 1,239,865
Current assets
Inventory 5,194 - - - 5,194 35,180 40,374
Trade and other receivables 188,881 379 24 37,669 226,953 12,393 239,346
Cash at bank 205,456 - 1,441 33,991 240,888 - 240,888
Total current assets 399,531 379 1,465 71,660 473,035 47,573 520,608
Total assets 1,135,221 183,804 171,887 82,009 1,572,921 187,552 1,760,473
Non-current liabilities
Other payables 3,225 - - - 3,225 4,487 7,712
Borrowings 102,392 - - - 102,392 - 102,392
Lease liabilities 835 - - 2,618 3,453 - 3,453
Deferred tax liabilities - - - - - 27,607 27,607
Provisions 44,444 - 1,622 - 46,066 48,779 94,845
Contract liabilities 314,018 - - - 314,018 - 314,018
Total non-current liabilities 464,914 - 1,622 2,618 469,154 80,873 550,027
Current liabilities
Trade and other payables 43,935 18 17,372 60,804 122,129 157,319 279,448
Borrowings 369,110 162,023 12,264 - 543,397 - 543,397
Interest payable 98,582 1,243 5,775 - 105,600 - 105,600
Tax liabilities 7,824 - - - 7,824 10,690 18,514
Lease liabilities 755 - - 871 1,626 - 1,626
Contract liabilities 17,792 - - - 17,792 - 17,792
Total current liabilities 537,998 163,284 35,411 61,675 798,368 168,009 966,377
Total liabilities 1,002,912 163,284 37,033 64,293 1,267,522 248,882 1,516,404
(1) Refer to the Note 2, Accounting Policies - Basis of Preparation; Note 22,
Discontinued operations and Note 23, Contingent Liabilities, which
collectively sets out the Company's position with respect to the Chad Assets.
4. Revenue
Set out below is the disaggregation of the Group's revenue from contracts with
customers:
2023 2022
US$'000 US$'000
Six months ended 30 June Unaudited Unaudited
Gas sales 115,887 72,629
Oil and condensates sales 7,841 13,218
Revenue from contracts with customers 123,728 85,847
Gas sales represents gas deliveries made to the Group's customers under gas
sale agreements. The Group sells oil and condensates at prevailing market
prices.
Included within Revenue from contracts with customers is revenue of US$101.5
million (30 June 2022: US$83.8 million) relating to two (30 June 2022: four)
of the Group's customers who each contribute more than 10% of revenue US$78.1
million, and US$23.4 million respectively (30 June 2022: US$36.6 million,
US$21.7 million, US$13.2 million, and US$12.3 million respectively).
5. Cost of sales
2023 2022
US$'000 US$'000
Six months ended 30 June Unaudited Unaudited
Depletion - oil and gas, and infrastructure assets (Note 13) 17,832 16,432
Facility operation and maintenance costs 14,928 13,770
Royalties 2,704 2,925
35,464 33,127
6. Operating profit
Operating profit has been arrived at after charging:
2023 2022
US$'000 US$'000
Six months ended 30 June Unaudited Unaudited
Staff costs 18,275 11,896
Depreciation - other assets (Note 13) 261 370
Depreciation - right-of-use assets 522 544
Amortisation of intangibles 1,021 -
Transaction and other related expenses(1) 2,833 7,262
1. Prior period Transaction and other related expenses pertain to
costs incurred in respect to the Group's acquisition of the Chad and Cameroon
Assets, integration and IT activities and other business development
opportunities. Current period Transaction and other related expenses relate to
costs incurred as part of the Group's proposed acquisition of assets in South
Sudan and other business development opportunities.
7. Finance income
2023 2022
US$'000 US$'000
Six months ended 30 June Unaudited Unaudited
Lease income 11 19
Bank interest income 666 161
Other interest income 763 93
1,440 273
8. Finance costs
2023 2022
US$'000 US$'000
Six months ended 30 June Unaudited Unaudited
Interest on bank borrowings and loan notes 41,350 27,949
Amortisation of balances measured at amortised cost(1) 5,667 3,898
Unwinding of decommissioning discount 2,119 2,749
Interest expense on lease liabilities 136 201
Bank charges & other finance costs 2,480 2,030
51,752 36,827
1. Includes amounts due to unwinding of a discount on a long-term payable, contract liabilities (Note 18) and amortisation of debt fees.
9. Fair value adjustment
During 2019 the Group issued a Senior Secured Note of US$20 million that includes a voluntary prepayment option whereby early repayment will result in a discount to the contractual loan value. As an embedded derivative, the option has been separated from the host loan instrument and valued separately and accounted for as fair value through profit or loss ("FVTPL"). As at 30 June 2023 the option value was approximately US$2.3 million (31 December 2022 audited: US$2.8 million), resulting in a charge of US$0.5 million (30 June 2022: gain of US$1.8 million). The decrease in the option value was due to a worsening in credit bond spreads observed during the period as well as an increase in market expectations around interest rates.
Warrants (recognised as a financial instrument), were issued to LCP4L on 24 January 2022. The financial liability is valued at each reporting period with the changes in the fair value being recognised in the Consolidated Statement of Comprehensive Income. The warrants were valued using a European option pricing model with a value as at 30 June 2023 of US$20.2 million (31 December 2022 audited; US$19.7 million), resulting in a charge of US$0.5 million.
Contingent consideration relates to oil-price related contingent payments which arose from the acquisition of the Chad and Cameroon assets. This amount was measured at fair value at the completion date and is remeasured at fair value at every reporting date. As discussed in Note 2, due to the Nationalisation of the Chad Assets by the Chad Government, the remaining value of this consideration was fair valued to nil and resulted in a gain of US$9.2 million.
During the reporting period, the Group entered into hedging arrangements to provide protection against adverse oil price movements. The option was not exercised prior to expiry and the premiums were fair valued to nil resulting in a fair value loss of US$1.7 million through the profit and loss.
10. Foreign translation loss
2023 2022
US$'000 US$'000
Six months ended 30 June Unaudited Unaudited
Realised (gain)/loss (673) 945
Unrealised loss/(gain) 54,689 (99)
54,016 846
Unrealised loss relates to the revaluation of monetary items held in currencies other than US Dollars. During the six months ended 30 June 2023, the Nigerian Naira materially devalued against the US Dollar which created an unrealised loss on monetary items held in Naira.
11. Taxation
The tax expense/(credit) for the Group is:
2023 2022
US$'000 US$'000
Six months ended 30 June Unaudited Unaudited
Current tax -
- Adjustments in respect of prior years (42) (1,126)
- Current year 9,798 3,919
9,756 2,793
Deferred tax
- Adjustments in respect of prior years (989) 193
- Write down and reversal of previous write downs of deferred tax assets 5,300 4,353
- Origination and reversal of temporary differences (25,800) 1,892
(21,489) 6,438
Total tax (credit)/expense for the period (11,733) 9,231
Income tax expense is recognised based on the actual results for the period.
The tax credit for the period of US$11.7 million (30 June 2022: charge of
US$9.2 million) is made up of a current tax charge of US$9.8 million (30 June
2022: US$2.8 million) and a deferred tax credit of US$21.5 million (30 June
2022: charge of US$6.4 million). The current tax charge principally arises on
Nigerian profits.
The deferred tax credit during the period principally relates to the ECLs and
unrealised foreign exchange losses, which are expected to be reversed in line
with expected forecasts.
12. Profit/(loss) per share
Basic earnings per share amounts are calculated by dividing the profit or loss
for the period attributable to owners of the Company by the weighted average
number of ordinary shares outstanding during the period.
Diluted earnings per share amounts are calculated by dividing the profit or
loss for the periods attributable to owners of the Company by the weighted
average number of ordinary shares outstanding during the period, plus the
weighted average number of shares that would be issued on the conversion of
dilutive potential ordinary shares into ordinary shares.
As there is a profit attributable to the owners of the Company for the six
months ended 30 June 2023, the diluted weighted average number of shares has
been calculated. In the comparative period, the basic average number of shares
was used to calculate the diluted loss per share given there is a loss
attributable to the owners of the Company, meaning the diluted weighted
average number of shares reduces the loss per share. Therefore, the basic
weighted average number of shares was used to calculate the diluted loss per
share.
The weighted average number of shares outstanding excludes treasury shares of
99,858,893 (30 June 2022: 99,858,893).
2023 2022
Unaudited Unaudited
Six months ended 30 June US$'000 US$'000
Loss from continuing operations (45,189) (20,545)
Loss attributable to owners of the Company(1) (37,534) (20,264)
Loss attributable to non-controlling interests (7,655) (281)
(1. ) The earnings per share calculation only takes into
account profit/(loss) attributed to owners of the Company.
Number of shares Number of shares
Basic weighted average number of shares 1,214,693,115 1,142,656,405
Add: employee share options 63,727,684 5,243,720
Diluted weighted average number of shares 1,278,420,799 1,147,900,125
US cents US cents
Loss per share for continuing operations
Basic loss per share (3.09) (1.77)
Diluted loss per share (3.09) (1.77)
23,853,457 options granted under share option schemes are not included in the
calculation of diluted earnings per share because they are anti-dilutive for
the six months ended 30 June 2023 (30 June 2022: 50,233,574). These options
could potentially dilute basic earnings per share in the future.
To calculate the EPS inclusive of discontinued operations (Note 21), the
weighted average number of ordinary shares
for both the basic and diluted EPS is as per the table above. The following
table provides the profit/(loss) amount in addition to the above used:
2023 2022
Unaudited Unaudited
Six months ended 30 June US$'000 US$'000
Profit/(loss) for the period including discontinued operations
Profit/(loss) attributable to owners of the Company 54,428 (20,264)
US cents US cents
Profit/(loss) per share including discontinued operations
Basic profit/(loss) per share 4.48 (1.77)
Diluted profit/(loss) per share 4.48 (1.77)
13. Property, plant and equipment
Oil and gas assets Infrastructure assets Other assets
Total
US$'000 US$'000 US$'000 US$'000
Cost
Balance at 1 January 2022 (audited) 197,768 446,128 4,924 648,820
Additions 896 1,068 478 2,442
Transfer to intangible assets - - (390) (390)
Recognised on acquisition of subsidiary 121,672 - - 121,672
Decommissioning remeasurement adjustment (5,162) (24,856) - (30,018)
Balance at 31 December 2022 (audited) 315,174 422,340 5,012 742,526
Additions 355 2,523 85 2,963
Transfer to discontinued operations (121,672) - - (121,672)
Decommissioning remeasurement adjustment 2,027 18,611 - 20,638
Balance at 30 June 2023 (unaudited) 195,884 443,474 5,097 644,455
Accumulated depreciation
Balance at 1 January 2022 (audited) (37,069) (40,891) (2,659) (80,619)
Transfer to intangibles - - 231 231
Depletion and depreciation charge (22,176) (16,227) (617) (39,020)
Balance at 31 December 2022 (audited) (59,245) (57,118) (3,045) (119,408)
Depletion and depreciation charge (10,618) (7,214) (261) (18,093)
Transfer to discontinued operations 1,495 - - 1,495
Balance at 30 June 2023 (unaudited) (68,368) (64,332) (3,306) (136,006)
Net book value
1 January 2022 (audited) 160,699 405,237 2,265 568,201
31 December 2022 (audited) 255,929 365,222 1,967 623,118
30 June 2023 (unaudited) 127,516 379,142 1,791 508,449
Upstream assets principally comprise the well and field development costs
relating to the Uquo and Stubb Creek oil and gas fields in Nigeria.
Infrastructure assets principally comprise the Nigerian midstream assets
associated with the Group's network of gas transportation pipelines, oil and
gas processing facilities and gas receiving facilities. Other assets include
vehicles, office equipment (including IT software) and building improvements.
Decommissioning remeasurement adjustments reflect updated cost estimates for
the year. The new asset values will be depreciated over the remaining life of
the respective assets.
Each year, management performs a review of each CGU to identify potential
impairment triggers. During 6 months ended 30 June 2023 and the year ended 31
December 2022, no such triggers were identified.
14. Trade and other receivables
30 June 31 December 2022
2023
US$'000 US$'000
Unaudited Audited
Trade receivables 332,442 244,288
Receivables from a joint arrangement 6,834 8,673
Other financial assets 3,227 11,518
342,503 264,479
Expected credit loss (102,680) (68,840)
239,823 195,639
Loan receivable 2,210 2,194
VAT receivable 1,289 1,385
Prepayments and other receivables 35,043 40,128
278,365 239,346
The following has been recognised in the Condensed Statement of Comprehensive
Income relating to expected credit losses for the period:
2023 2022
US$'000 US$'000
Six months ended 30 June Unaudited Unaudited
Provision of expected credit losses 33,840 5,918
Expected credit loss and other related adjustments 33,840 5,918
15. Cash at bank
30 June 31 December
2023 2022
US$'000 US$'000
Unaudited Audited
Cash and cash equivalents 82,550 104,147
Amounts held for debt service 53,107 136,741
135,657 240,888
Cash and cash equivalents includes US$1.3 million (31 December 2022: US$1.2
million) of cash collateral on the Orabank revolving facility. The cash
collateral was at a value of XOF760.3 million (31 December 2022: XOF750.9
million).
Amounts held for debt service represents Naira denominated cash balances which
are held by the Group for debt service, and this has been separately disclosed
from Cash and cash equivalents.
16. Trade and other payables
30 June 31 December 2022
2023
US$'000 US$'000
Unaudited Audited
Trade payables 28,551 159,068
Accruals 24,612 50,045
VAT and WHT payable 15,945 16,229
Royalty and levies 6,051 5,542
Employee benefits 42 71
Contingent consideration - 14,680
Financial liability 20,207 19,739
Other payables 2,907 14,074
98,315 279,448
Other payables - non-current
Employee benefits 2,104 7,712
2,104 7,712
100,419 287,160
The Directors consider that the carrying amount of trade and other payables
approximates to their fair value.
17. Borrowings
30 June 31 December 2022
2023
US$'000 US$'000
Unaudited Audited
Revolving credit facility 12,432 11,223
Bank loans 347,162 367,249
Senior Secured Notes 93,251 91,383
Other loan notes 126,182 175,934
579,027 645,789
30 June 31 December 2022
2023
US$'000 US$'000
Unaudited Audited
Current borrowings 423,462 543,397
Non-current borrowings 155,565 102,392
579,027 645,789
18. Contract liabilities
Contract liabilities represent the value of gas supply commitment to the
Group's customers for gas not taken but invoiced under the terms of the
contracts. The amount has been analysed between current and non-current, based
on the customers' expected future usage gas delivery profile. This expected
usage is updated periodically with the customer.
30 June 31 December 2022
2023
US$'000 US$'000
Unaudited Audited
Amount due for delivery within 12 months 17,792 17,792
Amount due for delivery after 12 months 321,138 314,018
338,930 331,810
30 June 31 December 2022
2023
US$'000 US$'000
Unaudited Audited
As at 1 January 331,810 239,510
Additional contract liabilities 16,543 101,117
Contract liabilities utilised (14,700) (13,461)
Unwinding of discount on contract liabilities 5,277 4,644
As at end of period 338,930 331,810
The unwinding of the discount on contract liabilities relates to the fair
value adjustments made under IFRS 3: Business Combinations following the
acquisition of the Nigerian assets and entities in 2019. The fair value
adjustment was calculated as the discounted, expected cost of the future
deliveries of gas volumes under the terms of customer take-or-pay contracts.
This discounted amount unwinds relative to an apportioned amount of the
contract liabilities volumes at the date of acquisition that have subsequently
been utilised.
19. Cash flow reconciliations
The changes in the Group's liabilities arising from financing activities can be classified as follows:
Borrowings Interest payable Lease liabilities Total
US$'000 US$'000 US$'000 US$'000
At 1 January 2023 (audited) 645,789 105,600 5,079 756,468
Cash flows
Repayment (73,783) (28,545) (484) (102,812)
(73,783) (28,545) (484) (102,812)
Non-cash adjustments
Payment in kind adjustment/accretion of interest 9,723 32,694 136 42,553
Net debt fees 56 - - 56
Borrowing fair value adjustments 543 - - 543
Working capital movements - - 80 80
Foreign translation (3,301) (115) 140 (3,276)
Balance at 30 June 2023 (unaudited) 579,027 109,634 4,951 693,612
Borrowings Interest payable Lease liabilities Total
US$'000 US$'000 US$'000 US$'000
At 1 January 2022 (audited) 524,245 80,101 6,783 611,129
Cash flows
Repayment (30,545) (21,050) (527) (52,122)
Proceeds 12,810 - - 12,810
Realised loss on loan repayment 33 - - 33
(17,702) (21,050) (527) (39,279)
Non-cash adjustments
Payment in kind adjustment/accretion of interest 3,764 26,502 201 30,467
Net debt fees (1,236) - - (1,236)
Borrowing fair value adjustments 1,768 - - 1,768
Working capital movements - - 107 107
Foreign translation (913) 3 (453) (1,363)
Balance at 30 June 2022 (unaudited) 509,926 85,556 6,111 601,593
20. Investments in associates
The Group holds investments in two midstream pipeline entities in Chad and
Cameroon used for the distribution of oil to the market from oil fields in
Chad. In addition, the Cameroon entity operates a floating storage and
offloading ("FSO") facility which stores the transported oil for delivery to
oil tankers. Further details about the entities are shown below:
Name Principal place of business
30 June 2023 31 December 2022
Group shareholding Group shareholding
COTCo Cameroon *41.06% 41.06%
TOTCo Chad - 40.19%
(a) Income related to associates
Income related to associates relates to COTCo, from continuing operations:
COTCo COTCo
2023 2022
US$'000 US$'000
Six months ended 30 June Unaudited Unaudited
Share of profit 4,400 -
Loss on disposal (820) -
Income related to associates 3,580 -
*In April 2023, an agreement was signed with Société Nationale Des Hydrocarbures ("SNH"), regarding the sale of a 10% shareholding in COTCo for a cash payment of US$44.9 million, as set out below. There are conditions remaining to the completion of the sale however, under the terms of the sale agreement SNH is entitled to the economic benefit of the 10% shareholding from the date of payment for the shares. Therefore, in accordance with IAS 28 - Investment in Associates, this has been recognised as a
disposal for reporting purposes and results in a decrease in the shareholding from 41.06% (as at 31 December 2022) to 31.06% (as of 30 June 2023):
US$'000
Unaudited
Consideration 44,900
Share of carrying value at disposal (45,720)
Loss on disposal (820)
Following this transaction, the fair value of the remaining investment in
COTCo is considered to be in excess of the carrying value at the reporting
date.
(b) Movement in Investment in associates
The following table shows the movements in Investments in associates during
the period:
TOTCo COTCo
US$'000 US$'000
Unaudited Unaudited
Balance at 1 January 2022 (audited) - -
Acquired investment at fair value 5,020 183,265
Share of profit (95) 160
Balance at 31 December 2022 (audited) 4,925 183,425
Share of profit 575 4,400
Impairment of TOTCo (5,500) -
Share of carrying value at disposal - (45,720)
Balance at 30 June 2023 (unaudited) - 142,105
The income statement movements related to TOTCo are disclosed within
discontinued operations in Note 22. As reported at Note 2 the Chad Assets
were nationalised in March 2023 and the carry value at the date of
Nationalisation was fully impaired.
21. Capital commitments
At 30 June 2023, capital commitments amounted to US$6.6 million (30 June 2022:
US$4.8 million).
22. Discontinued Operations
As outlined in Note 2 Accounting Policies - Basis of Preparation, because of
the Nationalisation of the Chad Assets and having the unavailability of
essential financial data and access to the pertinent employees of the affected
entities, the Group has classified all of its activities associated with the
Chad Assets as a discontinued operation in accordance with IFRS 5.
Additionally, the Group has concluded that all amounts should be provided for
in full. Further details on the position of the Chad Assets are set out in
Note 23. This is without prejudice to Group's rights to compensation as a
result of the Nationalisation.
This has resulted in a total pre-tax impairment loss of US$12.4 million (and
excludes an associated tax credit write-off which amounted to US$32.2
million). This amount and the results from the Chad Assets up to the date of
the Nationalisation have been recognised as a single line in the Condensed
Statement of Comprehensive Income, which has been summarised in the table
below. The Condensed Statement of Financial Position for the Chad Assets was
fully provided for and therefore no remaining balances are disclosed at the
reporting date.
30 June
2023
US$'000
Six months ended 30 June Unaudited
Revenue 76,560
Cost of sales (4,452)
Gross profit 72,108
Administrative and other operating expenses (84)
Operating profit 72,024
Share of profit from associates 575
Foreign translation loss (501)
Net impairment of Savannah Chad Inc. (6,850)
Impairment of associate - TOTCo (5,500)
Profit before tax 59,748
Tax credit 32,214
Net profit and total comprehensive profit from discontinued operations 91,962
The net cash flows from the discontinued operations are as follows:
2023
US$'000
Six months ended 30 June Unaudited
Net cash generated from operating activities 33,738
Net cash used in investing activities (10,441)
Net cash used in financing activities (16,779)
Net cash inflow 6,518
23. Contingent liabilities
As set in Note 2, the impact of the Nationalisation of the Chad Assets has resulted in the Group not being able to determine liabilities within its subsidiary, SCI, as to both type and quantum. The Directors have sought legal advice which has confirmed that the scope of Law No. 003/PT/2023 promulgated by the President of Chad on 31 March 2023 ("Nationalisation Law") is not specific in relation to SCI's liabilities in Chad. The consequences of the Nationalisation law for SCI will be established by an arbitration which SCI has commenced against the Republic of Chad. Based upon the legal advice received and the Group's inability to sufficiently identify and quantify, through any reasonable means, the liabilities associated with SCI or the Chad Assets, the Directors believe that these should be considered as contingent liabilities in line with the requirements of IAS 37 - Provisions, Contingent Liabilities and Contingent Assets. As previously reported, for the year ended 31 December 2022, the Group consolidated the Chad Assets from the date of completion of their acquisition on 9 December 2022 to 31 December 2022 in accordance with Note 2 of the Financial Statements, as set out in the Group's 2022 Annual Report. The financial position of the assets and liabilities of the Chad Assets as at 31 December 2022 is reproduced at Note 3 of this report.
One of the Group's subsidiaries ("the Subsidiary") had previously received approval from the Nigerian Investment Promotion Commission ("NIPC") that granted it an exemption from certain corporate taxes for a period of five years from February 2014 ("Pioneer Relief"). Subsequently, NIPC reduced the exemption period to three years with the remaining two years subject to a further extension request, which the Subsidiary submitted and subsequently received certificates for the periods. During a tax audit by the Nigerian tax authorities ("FIRS"), the validity of the extension request was queried. The Group is of the view that it has fully complied with all requirements necessary to obtain the extension and has received certificates confirming the status from NIPC. However, if FIRS are ultimately successful, an additional US$61.0 million of gas profits would be subject to corporate taxes of approximately US$3.9 million together with a deferred tax charge of approximately US$15.5 million reflecting the utilisation of capital allowances.
24. Events after the reporting date
There are no events after the reporting date other than those described within
this announcement.
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