REG - Savannah Energy Plc - Consolidation of Stubb Creek Field Interest

Savannah EnergyAnnouncement

19/03/2024 07:00

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RNS Number : 3865H  Savannah Energy Plc  19 March 2024

19 March 2024

Savannah Energy PLC

("Savannah" or "the Company")

Consolidation of Stubb Creek Field Interest

Share Purchase Agreements Signed to Acquire a 49% Participating Interest in

Stubb Creek Field, Nigeria and Updated Nigerian CPR Published

 

Savannah Energy PLC, the British independent energy company focused around the
delivery of Projects that Matter, announces that it has signed separate Share
Purchase Agreements ("SPAs") with Sinopec International Petroleum Exploration
and Production Corporation ("SIPC") and Jagal Ventures Limited ("Jagal") to
acquire 100% of the outstanding share capital of Sinopec International
Petroleum Exploration and Production Company Nigeria Limited ("SIPEC") (the
"SIPEC Acquisition").

 

Savannah also announces that it has today published an updated Competent
Persons Report ("CPR"), compiled by CGG Services (UK) Ltd, covering its assets
in Nigeria.

 

SIPEC Acquisition

 

SIPEC's principal asset is a 49% non-operated interest in the Stubb Creek oil
and gas field ("Stubb Creek"), located in Akwa Ibom State, Nigeria. An
affiliate of Savannah, Universal Energy Resources Limited, is the 51% owner
and operator.

 

The SIPC SPA will see Savannah Energy SC Limited (a wholly owned subsidiary of
Savannah) acquire a 75% equity interest in SIPEC for cash consideration of
US$52 million, payable on completion and subject to customary adjustments for
a transaction of this nature from 1 September 2023. The Jagal SPA will see
Savannah Energy SC Limited acquire a 25% equity interest in SIPEC for cash
consideration of US$7.5 million (without adjustment), payable on completion,
plus US$2 million in deferred cash consideration payable in eight equal
quarterly instalments post-completion. The transaction consideration is
expected to be funded through a new bank debt facility arranged by The
Standard Bank of South Africa Limited and the existing cash resources of the
Company. Completion under each of the SPAs is subject to the parties'
satisfaction of customary conditions precedent, including certain regulatory
approvals, as well as a mechanism ensuring that completion under both SPAs
occurs simultaneously.

 

As at year end 2023, SIPEC had an estimated 8.1 MMstb of 2P oil reserves and
227 Bscf of 2C Contingent gas resources. SIPEC oil production is estimated at
an average for 2024 of 1.4 Kbopd. Savannah's Reserve and Resource base will
increase by approximately 46 MMboe following completion of the SIPEC
Acquisition.

 

It is anticipated that, within 12 months following completion of the SIPEC
Acquisition, Stubb Creek gross production should increase by approximately 2.7
Kbopd to approximately 4.7 Kbopd through implementation of a de-bottlenecking
programme.

 

The SIPEC Acquisition will secure significant additional feedstock gas
available for sale to Savannah's 80% owned Nigerian gas processing and
distribution subsidiary, Accugas Limited ("Accugas"). At present, Accugas has
eight principal gas customers, including large thermal power stations, such as
Calabar Generation Company Limited, as well as key industrial players, such as
Lafarge Africa PLC and the Central Horizon Gas Company Limited. With a
weighted average remaining contract life of 14 years, Savannah's natural gas
supplies are a critical enabler of the Nigerian economy and currently support
approximately 20% of Nigeria's thermal power generation.

 

Since Savannah announced its intention to acquire Accugas in late 2017: (i)
volumes of gas transported; (ii) the number of significant customers served;
and (iii) the Company's contribution to thermal power generation in Nigeria
have each more than doubled.

 

The following information in relation to the SIPEC Acquisition is included in
accordance with the disclosure requirements of Schedule Four to the AIM Rules
for Companies:

 

For the financial year ended 31 December 2022, SIPEC audited accounts show
income after tax of US$27.8 million (excluding exceptional income of US$42.3
million) and total assets of US$136.5 million.

 

Nigeria CPR Summary

 

The Nigerian CPR has been published by CGG and is available to download on the
Company's website
(https://wp-savannah-2020.s3.eu-west-2.amazonaws.com/media/2024/03/Nigeria-Competent-Persons-Report-18-March-2024.pdf
(https://nam02.safelinks.protection.outlook.com/?url=https%3A%2F%2Fwp-savannah-2020.s3.eu-west-2.amazonaws.com%2Fmedia%2F2024%2F03%2FNigeria-Competent-Persons-Report-18-March-2024.pdf&data=05%7C02%7CFergus.Young%40camarco.co.uk%7Caee8e209b3e74b9b250408dc47e0faba%7C77a5f6209d7747dba0cd64c70948d532%7C1%7C0%7C638464279436003739%7CUnknown%7CTWFpbGZsb3d8eyJWIjoiMC4wLjAwMDAiLCJQIjoiV2luMzIiLCJBTiI6Ik1haWwiLCJXVCI6Mn0%3D%7C0%7C%7C%7C&sdata=y4Tjd3OllqjZsNh6qXnZLKr1IkURmHtVp%2FCVGYq%2B4nM%3D&reserved=0)
). A summary of the gross reserves and contingent resources associated with
the Uquo and Stubb Creek fields, in accordance with the 2018 Petroleum
Resource Management System, is set out in the table below. For an explanation
of the defined and technical terms in this announcement, readers should refer
to the updated Nigeria CPR.

 

Summary of Nigeria Gross Reserves and Contingent Resources as per the Updated
Nigeria CPR

 

                               Gross 2P Reserves  Gross 2C Resources

 Oil & Condensate (MMstb)
 Stubb Creek                   11.9               -
 Uquo                          0.6                -
 Gas (Bscf)
 Uquo                          456.2              82.8
 Stubb Creek                   -                  515.3
 Total (MMboe)                 88.6               99.7

All Reserves presented above are as at 1 January 2024.

 

Andrew Knott, CEO, Savannah Energy, said:

"Savannah remains committed to growing our core business in Nigeria through a
combination of both value accretive acquisitions and organic projects. This is
reflected in this morning's announcement of the SIPEC Acquisition. The base
case acquisition has been priced in line with our expected returns criteria,
with the identified upside cases (the oil de-bottlenecking and new gas sales
to Accugas projects) hoped to add significant value to the Stubb Creek field
over time.

 

I would like to take the opportunity to thank the members of our team who have
worked diligently on this transaction to make it happen. Thank you all."

 

For further information, please refer to the Company's website
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 Broker)
+44 (0) 20 7220 0500

Derrick Lee

Tim Redfern

 

Panmure Gordon (UK) Ltd (Joint Broker)                +44 (0)
20 7886 2500

Hugh Rich

James Sinclair-Ford

 

Camarco
+44 (0) 20 3757 4983

Billy Clegg

Owen Roberts

Violet Wilson

 

This announcement contains inside information for the purposes of Article 7 of
the Market Abuse Regulation (EU) 596/2014 as it forms part of UK domestic law
by virtue of the European Union (Withdrawal) Act 2018, as amended ("MAR").

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

About Savannah Energy:

Savannah Energy PLC is a British independent energy company focused around the
delivery of Projects that Matter in Africa.

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