REG - Savannah Energy Plc - FY2022 Results, Notice of AGM, Posting of Report
08/06/2023 08:00
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RNS Number : 0893C Savannah Energy Plc 08 June 2023
8 June 2023
Savannah Energy PLC
("Savannah" or "the Company"")
FY 2022 Audited Annual Results
Notice of AGM and Posting of the 2022 Annual Report
Savannah Energy PLC, the British independent energy company focused around
the delivery of Projects that Matter, is pleased to announce its audited
results for the year ended 31 December 2022. The Notice of the Annual General
Meeting ("AGM" or "Meeting") is available to download from the Company's
website (www.savannah-energy.com (http://www.savannah-energy.com) ). A copy of
the 2022 Annual Report and Accounts ("Annual Report") will be available to
download from the Company's website later today. The Notice of the AGM has
been posted to those shareholders who have elected to receive postal copies.
Andrew Knott, CEO of Savannah Energy, said:
"2022 was another year of significant progress and growth for our company. Our
Total Revenues(1) grew by 26% to US$290m, our Adjusted EBITDA(2) rose by 27%
to US$222m. To put these numbers into context, since the announcement of our
decision to acquire our Nigerian business in 2017, it has delivered six
consecutive years of Total Revenues(1) growth at a compound annual growth rate
of 21%. This growth has seen us more than double the number of customers the
business serves and increase the share of Nigeria's thermal power generation
capacity that it supplies from 10% to 24%. Our performance against key
industry sustainability metrics relating to HSE performance, carbon intensity,
senior management gender diversity and local employee ratios remain industry
leading.
Looking forward to the rest of 2023, I am confident in where we are as a
business. Key projects we are focused on completing include: (1) the closing
of our proposed acquisition of PETRONAS' assets in South Sudan in Q3; (2) at
least one further hydrocarbon asset deal; (3) reaching our target of having up
to 1GW+ of renewable energy projects in motion by end of year; (4) the flow
testing of our R3 East development in Q4; and (5) the refinancing our Nigerian
debt.
I would urge shareholders to spend time reading through my CEO Letter to
Shareholders and the "Why we do what we do" section of the Annual Report which
discuss our corporate purpose and associated core beliefs which serve to
underpin our hydrocarbons AND renewables strategy and business model. They are
essential reading for anyone trying to understand what Savannah is, where we
are going and why.
I would like to express my gratitude to all of those who contributed to our
success in 2022 - 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."
Key FY 2022 Financial Highlights
· FY 2022 Total Revenues(1) of US$290.4m (+26% on FY 2021 Total
Revenues(1) of US$230.5m). This is ahead of the Company's previously issued
FY 2022 guidance of 'Total Revenues(1) of greater than US$215.0m';
· Adjusted EBITDA(2) of US$222.4m (+27% on FY 2021 Adjusted
EBITDA(2) of US$175.0m);
· Adjusted EBITDA(2) margin remained broadly unchanged at 77%;
· Average realised sales price for 2022 of US$4.14/Mscfe (-6% on
the 2021 average realised price of US$4.42/Mscfe and driven by the broader mix
of gas customers);
· Operating expenses plus administrative expenses(3) of US$66.2m
(FY 2022 guidance of up to US$75.0m);
· Depreciation, Depletion and Amortisation(4) of US$39.0m (FY 2022
guidance of US$41.9m based on the actual produced volumes);
· Capital Expenditure for the year of US$23.6m (FY 2022 guidance of
up to US$35.0m);
· Group cash balance(5) of US$240.9m as at 31 December 2022 (+56%
versus FY 2021 year-end Group cash balance(5) of US$154.3m);
· Group net debt(6) of US$404.9m as at 31 December 2022 (+9% versus
FY 2021 year-end Group net debt(6) of US$370.0m);
· Leverage(7) was 1.8x (2021 leverage(7) of 2.1x) and an interest
cover ratio(8) of 3.4x (FY 2021 ratio of 2.8x); and
· Total Group assets amounted to US$1,760m at year-end (2021:
US$1,349m).
Key FY 2022 Operational Highlights
· FY 2022 average gross daily production from the Nigerian
operations was 26.8 Kboepd, a 20% increase from the average gross daily
production of 22.3 Kboepd in FY 2021;
· Of the FY 2022 total average Nigerian gross daily production of
26.8 Kboepd, 90% was gas, including a 23% increase in gas production from the
Uquo gas field, from 118 MMscfpd (19.7 Kboepd) in FY 2021 to 145 MMscfpd (24.2
Kboepd) in FY 2022;
· Four new gas sales agreements ("GSAs") announced during the year:
o GSA announced with Central Horizon Gas Company Limited on 21 February 2022
to supply up to 5 MMscfpd of gas;
o GSA announced with Trans Afam Power Limited on 6 June 2022 to supply up to
35 MMscfpd of gas;
o GSA announced with Notore Chemical Industries PLC on 16 August 2022 to
supply up to 10 MMscfpd of gas; and
o Interim GSA signed with Shell Petroleum Development Company on 26 October
2022 to supply up to 3 MMscfpd.
· Contract extension announced on 22 April 2022 for the GSA with
First Independent Power Limited, increasing the quantity of gas supplied from
up to 35 MMscfpd to up to 65 MMscfpd and extending supply to cover three of
its power plants, FIPL Afam, Eleme and Trans Amadi;
· In March 2022, Savannah announced its inaugural renewable energy
project, the up to 250 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% with project sanction expected in 2024.
Post-year End Operational Update
· Following the signing of two new renewable energy agreements
post-year end, Savannah currently has up to 525 MW of hydroelectric, solar
photovoltaic and wind projects in motion in Cameroon and Niger:
o On 20 April 2023, Savannah announced the signing of an agreement for the
development of the 75 MW Bini a Warak Hydroelectric Project located in the
northern Adamawa Region of Cameroon. Project sanction is expected in 2024 and
first power targeted in the 2027 to 2028 window.
o On 11 May 2023, Savannah announced the signing of an agreement with the
Government of Niger for the development of two proposed solar photovoltaic
power plants, with the combined installed power generation capacity of up to
200 MW. The project is expected to receive project sanction in 2024, with
first power targeted in the 2025 to 2026 window.
· Following Savannah's acquisition of a 41.06% indirect equity
interest in the Cameroon Oil Transportation Company ("COTCo") from ExxonMobil
on 9 December 2022, post-year end on 20 April 2023 Savannah's wholly owned
subsidiary, Savannah Midstream Investment Limited ("SMIL"), signed a share
purchase agreement with the national oil company of Cameroon, Société
Nationale Des Hydrocarbures ("SNH"), relating to the sale by SMIL and purchase
by SNH of 10% of the issued share capital in COTCo.
· For the five months to end May 2023, COTCo transported an average
of 136.9 Kbopd of crude oil with a total of 21 liftings conducted on behalf of
its customers. Each lifting saw the safe and successful transfer of
approximately 1 MMbbls of crude oil from the FSO to ocean going vessels by
COTCo on behalf of its customers.
Sustainability Highlights
· 0.34 Lost Time Injury Rate (2021: zero) and a 0.68 Total
Recordable Incident Rate in 2022 (2020: 0.34);
· Low carbon intensity metric maintained of 9.7 kg CO(2)e/boe
(2021: 11.2 kg CO(2)e/boe), 48% lower than the industry average of 18.7 kg
CO(2)e/boe;
· Senior management female gender diversity of 32% (2021: 35%);
· Total Contributions(9) to host nations Nigeria and Niger
increased by 3% to US$56.9m (2021: US$55.1m);
· Investment in social impact projects in Nigeria and Niger
increased by 23% to US$304,000 in 2022 (2021: US$246,000);
· The number of transport related incidents remained exceptionally
low with one in 2022 covering over 1.3 million transport kilometres travelled
(2021: two incidents);
· Road Traffic Accident Rate metric reported for the first time
which was 0.14;
· Establishment of a multimillion-dollar, world class training
scheme across the business for 2022-2023, resulting in a 74% increase in
training hours per employee and a 109% increase in total working hours of
training in 2022, respectively;
· Zero hydrocarbon spills recorded (defined as not greater than one
barrel reaching the environment) (2021: zero);
· Freshwater usage reduced to approximately 11,314m(3) of
freshwater from boreholes and mains supply (2021: 11,645m(3), restated
figures); and
· Minimised our negative impacts on biodiversity by establishing
Biodiversity Action Plans at our four operational sites.
Chair Statement from the Annual Report
Ready for the next phase of growth
Dear fellow shareholders,
2022 was another year of substantial achievements for our company as we
continued to develop and invest in Projects that Matter in Africa. Our
Nigerian business recorded yet another year of double-digit revenue growth,
our Niger R3 East project benefited from the strong progress made towards the
construction of the Niger-Benin pipeline and our Renewable Energy division
established a pipeline of utility projects which we hope to develop through to
first power over the course of the coming years. We also announced our
intended acquisition of PETRONAS' assets in South Sudan, which produced an
average gross 153.2 Kbopd in 2021. You will be able to read about all of this
and much more in this year's Annual Report.
As we have grown, our commitment to the highest governance standards has
remained a priority. In this regard, 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 on page
108 of the 2022 Annual Report explains how we applied the principles of the
QCA Code in 2022.
In June 2022, I announced my decision to step down from my role as Chair of
the Board at the 2023 AGM, while remaining a Non-Executive Director of the
Company. It has been an honour to Chair the Board from Savannah's initial
listing to today. I would like to welcome our new Chair Designate, Joseph
Pagop Noupoué, who was announced as my successor in April 2023. I believe
Joseph's leadership skills, deep knowledge of the African business environment
and extensive business, financial and legal expertise will serve Savannah well
over the course of his Chairmanship. Aside from Joseph, we have announced the
appointment of three new Non-Executive Directors over the course of the past
18 months - Sarah Clark, Dr. Djamila Ferdjani and Sylvie Rucar - who
collectively bring a wealth of talent and experience to the Board. Nick
Beattie was also appointed Savannah's permanent Chief Financial Officer in
June 2022, having served in an interim capacity for the previous 10-month
period. I would also like to take this opportunity to thank David Jamison, who
retired from the Board in June 2022, for his dedicated service to the Company
over the previous eight years. We are delighted that David agreed to assume
the role of Honorary President of Savannah, ensuring we continue to benefit
from his considerable wisdom and experience.
The Board continues to place great emphasis on engagement with all our
stakeholder groups and more information on this is provided in Section 172
Statement on page 40 of the 2022 Annual Report.
Outlook
Savannah has the ambition and focus to be the leading African Energy company.
As I pass on the role of Chair to Joseph, I believe that we are exceptionally
well-positioned to achieve this and that we should all look forward to the
future with great confidence.
Steve Jenkins
Chair of the Board, Savannah
7 June 2022
CEO Letter to Shareholders from the Annual Report
Championing the African energy transition
Dear fellow shareholders
I would like to welcome you to our ninth Annual Report as a listed company.
This year's letter follows a similar format to those of recent years. 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 discusses the "how" and the "why" we see
the African energy transition evolving and discusses the relevance of our
hydrocarbon AND renewables business model.
Before turning to the first section, I would like to draw your attention to
three key articles in this year's Annual Report. The first article describes
"Why we do what we do", where we discuss our corporate purpose and the
associated core beliefs which serve to underpin our strategy and business
model. I really believe that this section is essential reading for anyone
seeking to understand our Company. The second, authored by Dr. Richard Norris,
a global energy policy specialist and a Fellow of the Canadian Global Affairs
Institute, discusses the equity of the global energy transition and the
importance of poverty alleviation. The third article, from NJ Ayuk, Executive
Chairman of the African Energy Chamber, focuses on the critical role the
private sector will be required to play in the African energy transition. We
are extremely grateful to our guest authors for their contributions.
2022 in review
For the first time in almost 40 years10 the rich world faced the challenges of
operating in a high inflation, rising interest rate environment with, for
example, the IMF's advanced economy average consumer price index rising 9%
year-on-year, a level 2.5x the 10-year average11, and benchmark US$ interest
rates rising to 5.5% at year end, a level 4.4x the 10-year average12. The
supply chain impacts of the Russia-Ukraine war, particularly in the energy and
food sectors, were the principal drivers, with, for example, oil, Liquified
Natural Gas and European electricity prices rising 42%13, 64%14 and 53%15
respectively and food an estimated 14%16, year-on-year. However, rich world
interest and inflation rates remained much lower than those of Sub-Saharan
Africa which ended the year at 12.0%17 and 17.7%18 respectively.
Boosted by the strength of the macro energy complex, the seven energy
supermajors reported a record US$200 billion of profit in 2022 (+100%
year-on-year), despite a 1.3% aggregate reduction in production volumes.
Savannah too performed strongly, but for very different reasons. Our Total
Revenues(1)rose by 26% year-on-year to US$290 million with our Adjusted
EBITDA(2)rising by 27% to US$222 million. At the Nigerian business unit level,
we recorded Adjusted EBITDA(2) of US$244 million. Our 20% production volume
growth in Nigeria (versus the supermajors' -1.3% noted above) was primarily
driven by the operationalisation of four new gas sales agreements ("GSAs").
89% of our 2022 revenue stream was derived from fixed price GSAs with no
cyclical exposure to oil or international gas prices.
Our Nigerian business has now delivered six consecutive years of Total
Revenues(1) growth at a compound annual growth rate ("CAGR") of 21%. This
Total Revenues(1) growth compares favourably to the long-term trend CAGR of
the wider UK stock market constituents of 3.1%19,20. Further, since the
announcement of our decision to acquire our Nigerian business in 2017, we have
more than doubled the number of customers. We are now contracted to supply gas
to 24% of Nigeria's thermal power generation capacity (up from 10% at the time
of acquisition) as well as key petrochemical and cement factories21. We are
clearly performing a critical service to the Nigerian economy. Over the same
period our operational performance has been equally robust, with an estimated
99% uptime across our asset base.
The US$22 million difference between our Group and Nigerian business Adjusted
EBITDA(2) numbers largely reflects the central costs of running our business
and the investments we have made to build the corporate infrastructure that
will enable our future organic and inorganic growth plans. On a pro forma
basis we increased our headcount by 21% year-on-year and training hours per
employee by 74%. In the coming years we intend to continue to invest in our
people and infrastructure as we continue to pursue our goal of potentially
quadrupling the scale of our business over the course of the coming years.
In Niger, we are looking forward to conducting a comprehensive flow testing
programme in late 2023 of the main oil fields included in our c. 35 MMstb R3
East field development plan (the "FDP"). This flow testing programme is
expected to enable us to fine tune and optimise the FDP, ahead of expected
first commercial oil production in 2024. The key decision we made around R3
East in 2022 was to move towards an export sales-driven development solution
via the new Niger-Benin pipeline, as opposed to our previously intended
initial development solution of selling crude to the domestic Zinder refinery.
This decision followed the strong progress that China National Petroleum
Corporation has made in constructing the Niger-Benin pipeline, which is now
over 75% complete and expected to commence commercial oil transportation in
the fourth quarter of 2023. The operationalisation of the Niger-Benin pipeline
is expected to be transformational for Niger, with exported oil sales forecast
to increase GDP by approximately 24% and exports by 68% in 202522.
In March 2022 we signed an agreement for our up to 250 MW Parc Eolien de la
Tarka wind farm project, located in the Tahoua region of Southern Niger. At
the time of writing all key studies required to achieve project sanction have
either been completed or are in progress. The project's initial on-site wind
speed data measurements have proven to be highly encouraging, and we expect to
sanction the project in 2024 with first power delivery in 2026. Post-year end,
this project has been supplemented with the signing of an agreement for the
development of two solar photovoltaic power plants in the areas around the
cities of Zinder and Maradi, also in southern Niger, with a combined installed
power generation capacity of up to 200 MW. These projects are expected to be
developed on a similar timeline to Parc Eolien de la Tarka: project sanction
is targeted for 2024 and first power delivery in 2026. In aggregate,
therefore, we are expecting to generate up to 450 MW of new clean and
affordable power for Niger, which would equate to an up to 60% increase in
overall on-grid electricity availability.
From a business development perspective, three major events occurred in 2022:
• Announcement of our proposed acquisition of the South Sudan
Assets35. In December, we announced our proposed acquisition of PETRONAS'
assets in South Sudan for a total consideration of up to US$1.25 billion. The
transaction is expected to complete in the third quarter of 2023, alongside
the publication of a new Admission Document23.
• Completion of our US$407 million acquisition of ExxonMobil's
assets in Cameroon and Chad. In Cameroon we acquired a 41.06% interest COTCo,
which owns and operates the 903 km Cameroon section of the Chad-Cameroon
pipeline and related infrastructure. During 2022, COTCo transported an average
of 124 Kbopd of crude oil, valued at an estimated US$4.6 billion at the Brent
crude oil prices prevailing during the year. Post-year end we agreed to sell a
10% interest in COTCo to the national oil company of Cameroon, Société
Nationale Des Hydrocarbures, for consideration of US$44.9 million plus accrued
dividends. In Chad we acquired a 40% interest in the Doba Oil PSC which
produced 28 Kbopd in 2022. Post-year end these assets were impacted by
external events(24). We see our interest in COTCo acting as a potential
catalyst for further growth in Cameroon over the course of the coming years.
Post-year end we entered into an agreement in relation to the up to 75 MW Bini
a Warak Hydroelectric Project in the north-east of the country.
• Growth of our renewable energy business. 2022 saw the first
full year of activity for our Renewable Energy Division. During the year, we
made significant investments in the people side of the business as well as
generating a pipeline of high quality solar, wind and hydro power projects. At
the time of writing this amounted to up to 525 MW of publicly announced
projects in motion. Internally, we believe we have strong visibility on a
range of other projects, which we expect to enable us to meet our target of
delivering up to 1 GW+ of renewable energy projects in motion by year-end
2023. I am, therefore, confident that Savannah will become one of the largest
renewable energy development companies in Africa over the course of the next
two years.
As always, we maintained our strong focus around safe operational delivery. In
2022 we recorded a Lost Time Injury Rate ("LTIR") of 0.34 and a Total
Recordable Incident Rate ("TRIR") of 0.68 per 200,000 working hours. Our
performance against key sustainability metrics remained equally industry
leading. Our carbon emission intensity fell 13% year-on-year to 9.7 kg
CO2e/boe (48% lower than the industry average of 18.7 kg CO2e/boe). Our senior
management female gender diversity was 32%, while our local employee ratios in
our countries of operation was over 95%.
Key focus areas for 2023 and 2024
Over the course of the next two years, I expect there to be several key focus
areas for the business. These include:
• The refinancing of our US$359 million Accugas debt
facilities. Our intention remains to redenominate the current US
dollar-denominated facility to a multi-tranche Naira-denominated facility,
extending the average maturity to beyond 2030 and reducing the facility cost
in dollar equivalent terms;
• Progressing the R3 East Development project. As noted
previously, we intend to commence a flow testing programme on the key R3 East
area fields in the fourth quarter of 2023 with first commercial oil production
anticipated by end 2024;
• Further hydrocarbon acquisitions. The major energy companies
are estimated to have in excess of US$100 billion25 of upstream oil and gas
assets in Africa and most have significant upstream asset divestment
programmes. 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) compared to the previous asset owners;
• Delivery of our renewable energy projects. We have an
aspiration to have our first project(s) fully sanctioned by end 2024 and first
power from our project portfolio in 2026; and
• Expansion of our renewable energy business. Savannah
believes the African renewable energy market represents a potentially vast
target market of over 242 GW by 203026, requiring an investment of over US$40
billion in the 2026-2030 window, and that the Group's hydrocarbon asset
operational management skills are directly transferable to this space. In the
near term we are hoping to have up to 1 GW+ of renewable energy projects in
motion by end of 2023 and up to 2 GW+ of projects in motion by end 2024.
As can be seen from the above list, we remain 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
As in previous years' shareholder letters, I have chosen to discuss how we see
the African Energy transition. Before turning to discuss this, I feel it is
important to emphasise that this is only one of several important contributing
beliefs driving what Savannah does as a company. On pages 8 to 17 of the 2022
Annual Report we have outlined in detail "Why we do what we do". In that
section we discuss our corporate purpose and associated core beliefs which
serve to underpin our hydrocarbons AND renewables strategy and business model.
In simple terms, the section explains why energy poverty in Africa is the
principal problem our company is seeking to help solve and why we believe this
problem is one of the most urgent and important problems facing the world
today. I would urge any reader interested in really understanding our company
to read this section, especially if they are from a rich world background and
perhaps less intuitively understand the realities of the everyday challenges
facing the 600 million people in Sub-Saharan Africa who are defined by the
World Bank as living in extreme poverty (i.e. have incomes of less than
US$2.15/day)27.
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 189 out of 191 on the UN Human
Development Index28 ("UN HDI") with a GDP per capita of US$58429 and power
consumption per capita of 449 kWh30. The United States of America on the other
hand is ranked 21 out of 191 on the UN HDI with GDP per capita of US$76,348
and power consumption per capita of 79,480 kWh, 12,983% and 17,614% higher
respectively. 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 lifetime health outcomes.
Over 80% of today's global energy mix is provided by hydrocarbons with 54% of
this provided by oil and gas31. The scale of investment required to sustain
the "status quo" global quality of life is immense. Global non-financial
capital expenditures for the energy sector amount to 42% of all global
capex32. 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, the quote by John Kerry (The US Climate Change
Envoy), which I have cited in my last two shareholder letters, 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 still provides approximately 26% of the 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 50%33 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 forecasts which
generally see the total share of fossil fuel supply falling to just over 20%
of the global energy mix by 205034. 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 on-grid electricity (falling to 49%
if South Africa, Egypt and Algeria are excluded), with the electricity access
rate in our countries of active operations estimated at 65% for Cameroon, 19%
for Niger and 55% for Nigeria. 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 that 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 Big oil
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, 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 2022 - 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, Savannah
7 June 2023
South Sudan Acquisition Update
Further to the Company's 13 April 2023 Q1 2023 financial and operational
update, the Company continues to advance the various workstreams required to
complete the reverse takeover of PETRONAS International Corporation Limited's
("PETRONAS") entire oil and gas business in South Sudan and intends to publish
an AIM Admission Document by 28 July 2023, following which point the Company
would seek restoration to trading on AIM of its ordinary shares. Further
updates will be provided as and when appropriate.
Chad Assets Nationalisation
As previously announced, on 31 March 2023, the Government of Chad passed a law
confirming the nationalisation of Savannah Chad Inc's ("SCI") upstream
production assets and also providing for the nationalisation of SMIL's c.40%
interest in Tchad Oil Transportation Company ("TOTCo"), the owner and operator
of the Chad section of the ETS.
The actions of the Republic of Chad are in direct breach of the upstream
conventions to which SCI and the Republic of Chad are, amongst others, party,
together with a direct breach of the convention between TOTCo and the
Government of Chad. Disputes under the upstream conventions are subject to the
jurisdiction of an ICC arbitral tribunal, seated in Paris. The Company has
commenced ICC arbitral proceedings against the Government of Chad to seek full
recompense for the loss that it has and will suffer as a result of the
nationalisation of SCI's assets.
As a direct result of the nationalisation, the Company has not been able to
fully access all the underlying information, nor have access to the relevant
Chad-based employees of the impacted entities in order to prepare the
financial information for audit purposes; it has not therefore been possible
to complete an audit of SCI or SMIL. Despite the acquisition of the Chad
assets only having completed approximately three weeks prior to the year end,
the Chad and Cameroon Assets(36) were material to the Group in 2022 and the
limitations on having access to information and people has led to the Group's
external auditors issuing a disclaimer of opinion. With respect to the opinion
of the Group's external auditors, the Company does not anticipate that there
will be any disclaimer opinion required for 2023 - this has only arisen for
2022 due to the specific and exceptional set of circumstances discussed above.
For further information and background, please refer to the Company's 2022
Annual Report.
Board and Board Committee Changes
On 7 June 2022, it was announced that Nick Beattie, Group Chief Financial
Officer and Company Secretary, had been appointed to the Board of Directors.
At the same time, it was announced that David Jamison would retire as a
Non-Executive Director of the Board at the 2022 AGM, which became effective 30
June 2022. Also on 7 June 2022, Steve Jenkins, announced his decision to step
down from his role as Chair of the Board at the 2023 AGM, having completed
eight years in the role, but that he would continue to serve as a
Non-Executive Director of the Company. Post-year end, on 21 April 2023, Joseph
Pagop Noupoué was appointed a Non-Executive Director of the Board and Chair
Designate.
The Board was expanded in 2022 with the appointment of Sarah Clark and Dr.
Djamila Ferdjani as Non-Executive Directors of the Company on 9 December 2022.
Additionally, post-year end on 1 February 2023, Sylvie Rucar was appointed as
a Non-Executive Director of the Company. The Board, therefore, now comprises
10 Directors, which includes the Non-Executive Chair, the Non-Executive Vice
Chair, six Non-Executive Directors and two Executive Directors (the CEO and
the CFO).
AGM
The AGM will be held at 11.00 a.m. on Friday, 30 June 2023 at 40 Bank Street,
London, E14 5NR. Details on how to submit your proxy vote are set out in the
section of the Notice of AGM headed "Voting Arrangements - Action to be
taken". The Notice of the AGM is available to download from the Company's
website (www.savannah-energy.com (http://www.savannah-energy.com) ). For those
shareholders who have elected to receive postal copies, the Notice of the AGM
has been posted to them today.
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
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 ("MAR").
About Savannah Energy:
Savannah Energy PLC is an AIM quoted British independent energy company
focused around the delivery of Projects that Matter, active in Cameroon, Niger
and Nigeria. Further information on Savannah Energy PLC can be found on the
Company's website: www.savannah-energy.com.
Financial review
Laying foundations for growth
Nick Beattie
Chief Financial Officer
Performance against market guidance 2022
Full Year 2022 Full Year 2022
Actuals Guidance
Total Revenues(1) US$ million 290.4 >215
Operating expenses plus administrative expenses(3), US$ million 66.2 <75
Group depreciation, depletion and amortisation(4) US$21 million for fixed assets plus US$2.0/boe US$21 million for fixed
assets plus US$2.3/boe
Capital expenditure, US$ million 23.6 Up to 35
Year in Summary
Savannah delivered strong operational and financial performance in 2022, with
results outperforming the guidance we set for the year, whilst also laying the
foundations to support our ambitious growth plans.
Total Revenues(1) grew by over 25% to US$290.4 million (2021: US$230.5
million) with a resulting rise in Adjusted EBITDA(2) of over 27% to US$222.4
million (2021: US$175.0 million). The improvement seen in financial
performance for 2022 is principally a reflection of the strength of the
Nigerian business where we now deliver gas to eight (2021: seven) customers -
this diversification of the customer base sees Savannah contracted to supply
gas to enable approximately 24% of Nigeria's thermal power generation capacity
(up from 10% at the time of our decision to acquire the Nigerian business in
2017) as well as key petrochemical and cement factories. We are clearly
performing a critical service to the Nigerian economy.
Our Nigerian business continues to be underpinned by long-dated, take-or-pay
contracts which have no linkage to commodity pricing and provide stable,
predictable cashflows. At end 2022 we had over US$3.8bn of future contracted
revenues with contracts having average weighted remaining life of 15 years.
We continued in our substantial investment in scaling up the business to
support the growth ambitions in both the renewable energy and hydrocarbons
businesses. We have made significant investments into new procedures and
systems, and notably this included the successful implementation during the
year of a new Enterprise Resource Planning ("ERP") solution. We also
invested in our people with a growth in headcount of 20% to 277 and we expect
this growth in headcount to continue in 2023. We continued to invest in the
operating businesses with the progression of the compression project in
Nigeria (which is due to complete in 2024) and we progressed plans for
delivering the R3 East development in Niger (with orders for long-lead items
having been placed in H1 2023).
2022 was also a significant year in terms of inorganic growth with key events
including: (i) completion of the acquisition of the Chad and Cameroon
Assets(36) (discussed in more detail below), (ii) signing of agreements to
acquire PETRONAS' South Sudan Assets(35) and (iii) the notable scaling up of
our Renewable Energy Division, which currently has up to 525 MW of projects in
motion in Niger and Cameroon, with a target of reaching up to 1 GW by the end
of 2023. Good progress was also made on the refinancing of the Accugas US$
Facility and this remains a priority for 2023.
Chad and Cameroon Assets(36)
We completed the acquisition of the Chad and Cameroon Assets(36) on 9 December
2022. However, the President of the Republic of Chad issued a Decree on 23
March 2023 nationalising Savannah Chad Inc's ("SCI") upstream production
assets in Chad. Subsequently on 31 March 2023, the Government of Chad passed a
law confirming the Nationalisation of SCI's upstream production assets and
also providing for the Nationalisation of Savannah's c. 40% interest in TOTCo,
the owner and operator of the Chad section of the ETS. The actions of the
Republic of Chad are in direct breach of the upstream conventions to which SCI
and the Republic of Chad are, amongst others, party, together with a direct
breach of the convention between TOTCo and the Government of Chad.
Disputes under the upstream conventions are subject to the jurisdiction of an
ICC arbitral tribunal, seated in Paris. The Company has commenced ICC
arbitral proceedings against the Government of Chad to seek full recompense
for the loss that it has and will suffer as a result of the Nationalisation of
SCI's and TOTCo's assets.
As a direct result of the Nationalisation however, the Company has not been
able to fully access all the underlying information, nor have access to the
relevant Chad-based employees of the impacted entities in order to prepare the
financial information for audit purposes; it has not therefore been possible
to complete an audit of SCI or SMIL. Despite the acquisition only having
completed approximately three weeks prior to the year-end, the Chad and
Cameroon Assets(35) were material to the Group in 2022 and the limitations on
having access to information and people has led to the Group's external
auditors issuing a disclaimer of opinion. As detailed in the Audit & Risk
Committee report in our Annual Report, these matters have been considered by
the Directors and, due to the exceptional circumstances, the Directors agree
that a disclaimer of opinion is unavoidable. We believe it is important to
highlight that it is the impact of the Nationalisation on SCI and SMIL that
has led to this situation. The Group excluding Chad ("GEC"), continues to
operate in the ordinary course and as discussed in this review, 2022 was a
very strong year with the sixth successive year of growth in Total Revenues(1)
and Adjusted EBITDA(2).
Despite the Nationalisation, the Group is still required under UK adopted
International Accounting Standards to present the Financial Statements for the
financial year 2022 without separately identifying the amounts which relate to
the nationalised assets in Chad. To help in providing a clearer description of
the continuing operations of the Group and to assist with understanding of the
performance of the business in 2022, we have shown in the tables on the
following page what we consider to be 'continuing operations' - this excludes
the assets subject to the Nationalisation. This approach is further described
in note 3 of the Financial Statements.
In 2022, the Chad assets were insignificant from a revenue or profitability
perspective with a negligible profit of just US$1.0 million reflected in the
Statement of Comprehensive Income for the Group and nil Revenue.
For the financial year ending 31 December 2023, we expect that these
activities will be considered as a discontinued operation in accordance with
IFRS 5 - Non-Current Assets for Sale and Discontinued Operations. This is
without prejudice to Savannah's claims following the expropriation. With
respect to the opinion of the Group's external auditors we do not anticipate
that there will be any disclaimer opinion required for 2023 - this has only
arisen for 2022 due to the specific and exceptional set of circumstances
discussed above.
Key performance metrics summary - Group excluding Chad
Full Year Full Year
2022 2021
Gross production, Kboepd 26.8 22.3
Total Revenues(1), US$ million 290.4 230.5
Revenue, US$ million 212.5 185.8
Average oil and gas sales price, US$/Mscf 4.14 4.42
Operating expenses plus administrative expenses(3), US$ million 66.2 49.9
Operating expenses plus administrative expenses(3), US$/Mscfe 1.2 1.1
Closing cash balances(5), US$ million 240.9 154.3
Trade and other receivables, US$ million 227.0 231.6
Adjusted EBITDA(2) 222.4 175.0
Net debt(6), US$ million 404.9 370.0
Leverage(7) 1.8x 2.1x
Segmental analysis of results
The following tables are extracted from note 3 in the Financial Statements.
These show the results of the Group excluding Chad ("GEC"). These are
highlighted to allow a useful comparison of performance to prior years and to
provide greater clarity on the financial position and performance of the Group
without the inclusion of the nationalised assets. We do also include the
reported 2022 Group position so that this can be cross referenced with the
Financial Statements.
Summary of Segmental Consolidated Statement of Comprehensive Income
Year ended 31 December 2022 2021 2022 2022
Group Group(2) Chad Group
excluding US$ million US$ million US$ million
Chad((1))
US$ million
Revenue 212.5 185.8 - 212.5
Cost of sales (73.2) (65.0) 1.1 (72.1)
Gross Profit 139.3 120.8 1.1 140.4
Administrative & other operating expenses (39.5) (25.7) (0.1) (39.6)
Gain on disposal 7.4 - - 7.4
Transaction costs (14.5) (7.4) - (14.5)
Expected credit loss and other related adjustments (39.5) - - (39.5)
Operating profit/(loss) 53.2 87.7 1.0 54.2
Finance income 1.1 0.5 - 1.1
Finance costs (78.9) (76.6) (0.1) (79.0)
Share of net income from associates 0.2 - (0.1) 0.1
Fair value adjustment (8.1) (0.6) - (8.1)
Foreign translation loss (21.2) (18.7) - (21.2)
Profit/(Loss) before tax (53.7) (7.7) 0.8 (52.9)
(1) This Financial review refers to the "Group Excluding Chad" column
which excludes the Chad upstream and midstream operations which were subject
to the Nationalisation.
(2) 2021 Group figures are as published in the 2021 Annual Report and
Accounts and are the appropriate comparison for the 2022 Group excluding Chad.
Summary of Segmental Consolidated Statement of Financial Position
As at 31 December 2022 2021 2022 2022
Group Group(2) Chad Group
excluding US$ million US$ million US$ million
Chad((1))
US$ million
Property, plant and equipment 503 568 120 623
Exploration and evaluation 174 161 9 183
Investment in associates 183 - 5 188
Other assets 245 235 42 287
Trade and other receivables 227 231 12 239
Cash at bank 241 153 - 241
Total assets 1,573 1,348 188 1,761
Trade and other payables 125 117 162 287
Borrowings 646 524 - 646
Interest payable 106 80 - 106
Provisions 46 69 49 95
Contract liabilities 332 240 - 332
Other liabilities 13 12 38 51
Total liabilities 1,268 1,042 249 1,517
An abbreviated tabulation of The Consolidated Statement of Financial Position
is shown above consistent with the Consolidated Statement of Consolidated
Income which enables the position for the continuing Group at 31 December 2022
to be compared to 31 December 2021. With effect from 31 March 2023, we
expect that the Chad Assets will be accounted for it in accordance with IFRS 5
- Non‑current Assets for Sale and Discontinued Operations during the year
ending 31 December 2023. This is without prejudice to Savannah's claims
following the expropriation.
Statement of Comprehensive Income - Group excluding Chad
Revenue
Revenue in 2022 was US$212.5 million (2021: US$185.8 million), of which
US$181.1 million (2021: US$169.1 million) was for gas, US$29.8 million (2021:
US$ 15.0 million) was for oil, condensate sales and US$1.6 million (2021:
US$1.7 million) was for processing of third-party crude oil.
85% of 2022 revenue was from the sale of gas, sold under a mixture of short
and long-term gas sales agreements, all of which have individually agreed
prices defined in US Dollars, with certain long-term contracts adjusted
annually for consumer price indexation. 85% of gas sales contracts are
supported by investment grade(36) guarantees, including a World Bank Partial
Risk Guarantee for the Calabar power station gas sales contract.
The weighted average sales price for the year was US$24.9/boe (2021:
US$26.5/boe), or US$4.14/Mscfe (2021: US$4.42/Mscfe), down 6%, mainly driven
by the broader mix of gas customers.
Impact of take-or-pay accounting rules under IFRS 15 - Total Revenues(1)
Revenue recognition for our gas sales agreements is impacted by the
take-or-pay accounting rules under IFRS 15. Under take-or-pay contracts,
customers agree to buy a minimum amount of gas from us each year. This gas is
either delivered to them, or the volume not taken (which is described as
make-up gas) is effectively prepaid for by the customer for potential delivery
in future periods. During 2022, our customers took on average 43 MMscfpd less
gas than they had contracted to buy, so there was a difference between
invoiced oil and gas sales of US$290.4 million (Total Revenues(1)) and Revenue
as reported in our Consolidated Statement of Comprehensive Income of US$212.5
million.
Revenue in our Consolidated Statement of Comprehensive Income of US$212.5
million only reflects the value of oil and gas actually delivered, with the
difference of US$77.9 million reported as an increase in Contract liabilities
("deferred revenue") in the Consolidated Statement of Financial Position, net
of any make-up gas that is consumed, plus other invoiced amounts.
A key point to highlight is the cash neutrality of the take-or-pay accounting
treatment; had our customers requested the make-up gas to be delivered to them
in the accounting year, then all the invoiced sales would have been recognised
as Revenue in the Consolidated Statement of Comprehensive Income and our cash
generation would have been the same in either case (as this reflects receipts
from customers regardless of whether they related to delivered gas or make-up
gas).
We therefore report Total Revenues(1) as management believes that this is a
more accurate method of describing the cash generation capacity of the
business.
To provide further clarity on the take-or-pay accounting rules, please refer
to a theoretical simplified worked example which is shown on page 57 of the
2020 Annual Report and Accounts which can be accessed on our website.
Operating expenses plus administrative expenses(3)
Operating expenses plus administrative expenses(3) for the year were US$66.2
million (2021: US$49.9 million) which compared to 2022 guidance of up to US$75
million. Significant time and resources were invested during the year in both
completing the acquisition of the Chad and Cameroon Assets(36) and in
completing due diligence to get to the point of signing a binding agreement to
acquire the PETRONAS South Sudan Assets(35) in December 2022. These costs are
reported separately as Transaction Costs totalling US$14.5 million (2021:
US$7.4 million) and have been shown separately in the Consolidated Statement
of Comprehensive Income.
Unit cost basis Operating expenses plus administrative expenses(3) increased
by 8% to US$1.2/Mscfe (2021: US$1.1/Mscfe), which compares very favourably
with our average sales price of US$4.14/Mscf for oil and gas during the year.
Depreciation, depletion and amortisation(4) ("DD&A") amounted to US$39.0
million (2021: US$36.2 million) made up of US$18.5 million (2021: US$17.7
million) for infrastructure assets, which are depreciated on a straight-line
basis over their estimated useful life and US$18.3 million (2021: US$16.7
million) for upstream assets, which are depreciated on a unit of production
basis, plus US$2.2 million (2021: US$1.8 million) for other assets and
right-of-use assets.
Total DD&A costs in 2022 on a unit of production basis are down from the
prior year at US$0.7/Mscfe (2021: US$0.8/Mscfe).
Adjusted EBITDA(2)
Adjusted EBITDA(2) was US$222.4 million (2021: US$175.0 million) continuing
the six-year upward trend of performance.
A reconciliation of the calculation of Group excluding Chad Adjusted
EBITDA(2) to Group Adjusted EBITDA(2) is shown below.
Reconciliation of Adjusted EBITDA(2) for Group excluding Chad to Group
2022
US$ million
Group excluding Chad Adjusted EBITDA(2) 222.4
Adjust for: Chad operating profit 1.0
Adjust for: Chad DD&A 1.6
Group Adjusted EBITDA(2) 225.0
Adjusted EBITDA(2) % 77%
Refer to Note 5 and Note 35(g) in our 2022 Annual Report.
Finance costs
Finance costs for the year amounted to US$78.9 million (2021: US$76.6
million), of which US$62.3 million (2021: US$53.4 million) related to bank
and loan note interest expense. The average interest rate on debt for the
Group was 12.0% (2021: 10.2%), due to higher US LIBOR rates in 2022.
The interest cover ratio(8) was 3.4 times, up from 2.8 times in 2021.
Foreign exchange losses
Foreign exchange losses amounted to US$21.2 million (2021: US$18.7 million).
US$12.4 million (2021: US$9.8 million) are unrealised losses on Naira cash
balances held in Nigeria primarily arising from devaluation of the Naira/ US
Dollar exchange rate.
Realised losses of US$8.8 million (2021: US$8.9 million) resulted from US
Dollar gas sales invoices which are settled in local currency and from
translation of Naira to US Dollars to service US Dollar denominated
obligations.
Statement of Financial Position - Group excluding Chad
Receivables and payables
Trade and other receivables amounted to US$227.0 million (2021: US$231.6
million). This primarily consists of amounts due from gas customers in Nigeria
under the gas sales agreements in place.
Trade and other payables amounted to US$122.1 million (2021: US$116.8
million), the majority of which will be settled in the normal course of
business.
Debt
The net debt(6) at year-end was US$404.9 million (2021: US$370.0 million), an
increase of 9% compared to year-end 2021. The increase in net debt(6) is
principally a result of the new debt facility established to support the
acquisition of the Chad and Cameroon Assets(36).
During the course of 2022, US$44 million of debt was repaid across the Group
and combined with increased cash balances(5), resulted in the net debt(6)
increase being limited to just US$34.9 million.
Work continued during the year on the proposed refinancing of the Accugas US$
Facility. The intention remains for this to be refinanced into a
multi-tranche, Naira denominated borrowing structure with an average
anticipated tenor in excess of 10 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 (the "Transitional Facility") and this Transitional
Facility will then be progressively paid down from the issuance of
longer-dated debt instruments. The existing Accugas lenders have agreed terms
for the Transitional Facility and we continue to work with financial advisers
to then enable implementation of the intended final structure. it is expected
that the Transitional Facility will be utilised during 2023 and the existing
US$ Facility repaid. Once fully completed, this refinancing would align the
currencies of Accugas' 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 Transitional Facility, the Group continues to hold
significant Naira denominated cash balances(5) in order to cover US Dollar
denominated debt.
As shown in the following table, the Leverage(7) position of the Group has
improved compared to the prior year and this is considered to be a
conservative level given the long-dated (>15 year) gas sales contracts in
place and the high quality, long-life asset base which supports the supply
contracts:
Leverage(7)
2022 2021
US$ million US$ million
Adjusted EBITDA(2) 222.4 175.0
Net debt(6) 404.9 370.0
Naira held in cash to pay interest 98.3 75.5
Adjusted net debt(38) 503.2 445.5
Leverage(7) (times) 1.8 2.1
Adjusted Leverage(7) (times) 2.2 2.5
Details of the debt facilities available to the Group are in Note 30 of our
2022 Annual Report.
Consolidated Statement of Cash flows - Group Cash flows
The cash flow results are for the Consolidated Group.
During 2022 total cash balances(5) increased by US$88.2 million (2021
increase: US$48.3 million). This increase arises from a combination of
continued strong operating performance in Nigeria and cash balances(5) within
Savannah Chad Inc ("SCI") upon acquisition of the Chad and Cameroon
Assets(36). This is offset by capital expenditures for the year of US$23.6
million (2021: US$32.5 million), deposits advanced for acquisitions of US$19.7
million and taxes paid of US$35.1 million (US$2.4 million). The majority of
taxes paid were in Chad and aside from this payment there was only minimal
other expenditure in Chad during the period following completion of the
acquisition until the year-end. No revenues were received from Chad as no oil
liftings took place in the period.
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 2024. Cash flow
forecasts are prepared on a "bottom-up" basis, at each major asset and at
corporate level, and it reflects the Group's best estimate of its operating
and capital expenditure and revenues for the period. Cash forecasts are
regularly produced, and sensitivities run for different scenarios including,
but not limited to, changes in commodity prices, different production rates
and timing of our customer cash collections. The Directors recognise that the
Group faces a range of risks (including those laid out in the Risk Management
section in our Annual Report) and there are a number of inter-dependencies
across the Group which can create inherent risks and uncertainties - the Group
actively monitors the risks facing the business and implements mitigating
actions when required.
The Group's forecasts show that the Group has sufficient financial headroom
for the going concern assessment period and based on the analysis above, the
Directors have a reasonable expectation that the Group has adequate resources
to continue in operational existence for the foreseeable future. Thus, they
have adopted the going concern basis of accounting in preparing the year end
result.
Please refer to Note 2 of the consolidated Financial Statements for further
details on the going concern review.
2023 Financial Guidance and outlook
In 2023, we are providing the following guidance in relation to the Group.
This guidance does not include any contribution from the proposed acquisition
of the South Sudan Assets(35):
· Total Revenues(1) greater than US$235 million;
· Operating expenses and administrative expenses(3) of up to US$75
million; and
· Capital expenditures of up to US$60 million.
Nick Beattie
Chief Financial Officer, Savannah
7 June 2023
Consolidated Statement of Comprehensive Income
for the year ended 31 December 2022
2022 2021
Note US$'000 US$'000
Revenue 4 212,498 185,799
Cost of sales 5 (72,059) (65,011)
Gross profit 140,439 120,788
Administrative and other operating expenses (39,646) (25,675)
Gain on disposal 7,372 -
Transaction expenses (14,487) (7,374)
Expected credit loss and other related adjustments (39,495) (26)
Operating profit 54,183 87,713
Share of profit from associates 65 -
Finance income 1,068 490
Finance costs 6 (78,970) (76,604)
Fair value adjustment 7 (8,134) (610)
Foreign exchange loss (21,158) (18,734)
Loss before tax (52,946) (7,745)
Current tax expense 8 (7,106) (2,589)
Deferred tax (expense)/credit 8 (4,025) 27,437
Tax (expense)/credit 8 (11,131) 24,848
(Loss)/profit after tax (64,077) 17,103
Other comprehensive income
Items not reclassified to profit or loss:
Actuarial gains relating to post-employment benefits 100 1,827
Tax relating to items not reclassified to profit or loss (33) (609)
Other comprehensive income 67 1,218
Total comprehensive (loss)/profit (64,010) 18,321
(Loss)/profit after tax attributable to:
Owners of the Company (60,867) 768
Non-controlling interests (3,210) 16,335
(64,077) 17,103
Total comprehensive (loss)/profit attributable to:
Owners of the Company (60,814) 1,742
Non-controlling interests (3,196) 16,579
(64,010) 18,321
(Loss)/earnings per share
Basic (US$) 9 (0.05) 0.00
Diluted (US$) 9 (0.05) 0.00
All results in the current financial year derive from continuing operations.
Consolidated Statement of Financial Position
as at 31 December 2022
2022 2021
Note US$'000 US$'000
Assets
Non-current assets
Property, plant and equipment 10 623,118 568,201
Intangible assets 183,013 161,343
Investment in associates 188,350 -
Deferred tax assets 234,666 223,814
Right-of-use assets 3,658 4,724
Restricted cash 28 1,635
Other non-current receivables 7,032 722
Total non-current assets 1,239,865 960,439
Current assets
Inventory 11 40,374 3,873
Trade and other receivables 12 239,346 231,631
Cash at bank 13 240,888 152,644
Total current assets 520,608 388,148
Total assets 1,760,473 1,348,587
Equity and liabilities
Capital and reserves
Share capital 1,828 1,409
Share premium 124,819 61,204
Shares to be issued - 63,956
Treasury shares (136) (58)
Other reserves 531 458
Share-based payment reserve 9,974 8,706
Retained earnings 96,407 157,221
Equity attributable to owners of the Company 233,423 292,896
Non-controlling interests 10,646 13,842
Total equity 244,069 306,738
Non-current liabilities
Other payables 14 7,712 3,415
Borrowings 15 102,392 108,652
Lease liabilities 3,453 5,308
Deferred tax liabilities 27,607 -
Provisions 94,845 68,966
Contract liabilities 314,018 213,043
Total non-current liabilities 550,027 399,384
Current liabilities
Trade and other payables 14 279,448 116,771
Borrowings 15 543,397 415,593
Interest payable 105,600 80,101
Tax liabilities 18,514 2,058
Lease liabilities 1,626 1,475
Contract liabilities 17,792 26,467
Total current liabilities 966,377 642,465
Total liabilities 1,516,404 1,041,849
Total equity and liabilities 1,760,473 1,348,587
Consolidated Statement of Cash Flows
for the year ended 31 December 2022
2022 2021
Note US$'000 US$'000
Cash flows from operating activities:
Net cash generated from operating activities 16 75,693 128,115
Cash flows from investing activities:
Interest received 881 193
Payments for property, plant and equipment and other intangible assets (18,191) (31,191)
Exploration and evaluation payments (5,375) (1,327)
Payment for financial asset - (7,500)
Acquisition deposits (19,648) (7,000)
Loan provided to third party (1,067) -
Lessor receipts 286 388
Cash to debt service accounts (29,836) (76,800)
Cash acquired on acquisition of a subsidiary 95,596 -
Net cash from/(used) in investing activities 22,646 (123,237)
Cash flows from financing activities:
Finance costs (38,528) (25,967)
Proceeds from issues of equity shares, net of issue costs 61,141 -
Sale of treasury shares 73 -
Borrowing proceeds 12,810 18,476
Borrowing repayments (57,008) (15,818)
Lease payments (1,474) (1,850)
Net cash used in financing activities (22,986) (25,159)
Net increase/(decrease) in cash and cash equivalents 75,353 (20,281)
Effect of exchange rate changes on cash and cash equivalents (16,945) (8,238)
Cash and cash equivalents at beginning of year 45,739 74,258
Cash and cash equivalents at end of year 13 104,147 45,739
Amounts held for debt service at end of year 13 136,741 106,905
Cash at bank at end of year as per Statement of Financial Position 13 240,888 152,644
Consolidated Statement of Changes in Equity
for the year ended 31 December 2022
Share Share Shares Other Share-based Retained Equity Non- Total
capital premium to be Treasury reserves payment earnings attributable controlling equity
issued shares reserve to the interest
owners of
the
Company
US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
Balance at 1 January 2021 1,409 61,204 - (59) 458 7,104 155,308 225,424 (2,737) 222,687
Profit for the year - - - - - - 768 768 16,335 17,103
Other comprehensive income - - - - - - 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 31 December 2021 1,409 61,204 63,956 (58) 458 8,706 157,221 292,896 13,842 306,738
Profit for the year - - - - - - (60,867) (60,867) (3,210) (64,077)
Other comprehensive income - - - - - - 53 53 14 67
Total comprehensive loss for the year - - - - - - (60,814) (60,814) (3,196) (64,010)
Transactions with shareholders:
Shares issued 419 63,615 (63,956) (78) - - - - - -
Sale of treasury of shares - - - - 73 - - 73 - 73
Equity-settled share-based payments - - - - - 1,268 - 1,268 - 1,268
Balance at 31 December 2022 1,828 124,819 - (136) 531 9,974 96,407 233,423 10,646 244,069
Notes to the Financial Information
for the year ended 31 December 2022
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 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 consolidated financial statements have been prepared
under the historical cost convention and incorporate the results for the year
ended 31 December 2022.
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 2022, 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.
As a result of the Nationalisation, the Company 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 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. The Group's auditor
has therefore been unable to conduct a complete audit on these entities for
the period from the date of acquisition on 9 December 2022 to 31 December
2022.
Despite this limitation, the Directors are still required to present the
Statement of Consolidated Income, Statement of Consolidated Position and
Statement of Consolidated Cash Flows without separately identifying the
amounts that the Directors believe relate to the Chad Assets within these
primary statements. The financial information that has been disclosed for the
Chad Assets was primarily sourced from the financial records and supporting
documents that were available before the Nationalisation date, and the Group's
assessment of the fair values as required by IFRS 3 - Business Combinations,
for the purposes of acquisition accounting are considered provisional because
the Group has not been able to finalise the purchase price allocation exercise
by the date of this report. This is due to the level of information available
to the Group following the Nationalisation. More information is set out in
note 3 which shows the different segments that make up the Group.
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 2024. Cash
flow forecasts are prepared on a "bottom-up" basis, at each major asset and at
corporate level, and it reflects the Group's best estimate of its operating
and capital expenditure and revenues for the period. Cash forecasts are
regularly produced, and sensitivities run for different scenarios including,
but not limited to, changes in commodity prices, different production rates
and timing of our customer cash collections.
The Directors recognise that the Group faces a range of risks (including those
laid out in the Risk section in the Annual Report) and there are a number of
inter-dependencies across the Group which can create inherent risks and
uncertainties - the Group actively monitors the risks facing the business and
implements mitigating actions when required. The Group's forecasts show that
the Group has sufficient financial headroom for the going concern assessment
period and based on the analysis above, the Directors have a reasonable
expectation that the Group has adequate resources to continue in operational
existence for the foreseeable future. Thus, they have adopted the going
concern basis of accounting in preparing the year end result.
3. Segmental reporting
For the purposes of resource allocation and assessment of segment performance,
the operations of the Group are divided into five segments: four geographical
locations and an Unallocated segment. The current geographical segments are
Nigeria, Cameroon and Niger. The Chad segment has been identified separately
to reflect the events of the Nationalisation as described in note 2. 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 revenue and results by reportable
segment in 2022:
Nigeria Cameroon Niger Unallocated Sub-total Chad Group
US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
Revenue 212,498 - - - 212,498 - 212,498
Cost of sales (72,772) - (128) (256) (73,156) 1,097 (72,059)
Gross profit/(loss) 139,726 - (128) (256) 139,342 1,097 140,439
Administrative and other operating expenses (9,476) - (622) (29,430) (39,528) (118) (39,646)
Gain on disposal - - - 7,372 7,372 - 7,372
Transaction expenses - - - (14,487) (14,487) - (14,487)
Expected credit loss and other related adjustments (39,495) - - - (39,495) - (39,495)
Operating profit/(loss) 90,755 - (750) (36,801) 53,204 979 54,183
Finance income 1,068 - 1,068
Finance costs (78,872) (98) (78,970)
Share of profit from associates 160 (95) 65
Fair value adjustment (8,134) - (8,134)
Foreign translation loss (21,158) - (21,158)
Loss before tax (53,732) 786 (52,946)
Nigeria Cameroon Niger Unallocated Sub-total Chad Total
US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
Segment DD&A 38,144 - 168 723 39,035 1,610 40,645
Segment non-current assets additions 6,533 - 6,324 1,380 14,237 8,907 23,144
Assets
Non-current assets
Property, plant and equipment 501,387 - 1,180 488 503,055 120,063 623,118
Intangible assets 4,072 - 169,242 792 174,106 8,907 183,013
Investments in associates - 183,425 - - 183,425 4,925 188,350
Deferred tax assets 228,582 - - - 228,582 6,084 234,666
Right-of-use assets 1,621 - - 2,037 3,658 - 3,658
Restricted cash 28 - - - 28 - 28
Other non-current receivables - - - 7,032 7,032 - 7,032
Total non-current assets 735,690 183,425 170,422 10,349 1,099,886 139,979 1,239,865
Current assets
Inventory 5,194 - - - 5,194 35,180 40,374
Trade and other receivables 188,881 379 24 37,669 226,953 12,393 239,346
Cash at bank 205,456 - 1,441 33,991 240,888 - 240,888
Total current assets 399,531 379 1,465 71,660 473,035 47,573 520,608
Total assets 1,135,221 183,804 171,887 82,009 1,572,921 187,552 1,760,473
Non-current liabilities
Other payables 3,225 - - - 3,225 4,487 7,712
Borrowings 102,392 - - - 102,392 - 102,392
Lease liabilities 835 - - 2,618 3,453 - 3,453
Deferred tax liabilities - - - - - 27,607 27,607
Provisions 44,444 - 1,622 - 46,066 48,779 94,845
Contract liabilities 314,018 - - - 314,018 - 314,018
Total non-current liabilities 464,914 - 1,622 2,618 469,154 80,873 550,027
Current liabilities
Trade and other payables 43,935 18 17,372 60,804 122,129 157,319 279,448
Borrowings 369,110 162,023 12,264 - 543,397 - 543,397
Interest payable 98,582 1,243 5,775 - 105,600 - 105,600
Tax liabilities 7,824 - - - 7,824 10,690 18,514
Lease liabilities 755 - - 871 1,626 - 1,626
Contract liabilities 17,792 - - - 17,792 - 17,792
Total current liabilities 537,998 163,284 35,411 61,675 798,368 168,009 966,377
Total liabilities 1,002,912 163,284 37,033 64,293 1,267,552 248,882 1,516,404
The following is an analysis of the Group's revenue and results by reportable
segment in 2021:
Nigeria Niger Unallocated Total
US$'000 US$'000 US$'000 US$'000
Revenue 185,799 - - 185,799
Cost of sales (65,011) - - (65,011)
Gross profit 120,788 - - 120,788
Administrative and other operating expenses (6,814) (6,837) (12,024) (25,675)
Transaction expenses - - (7,374) (7,374)
Expected credit loss and other related adjustments (26) - - (26)
Operating profit/(loss) 113,948 (6,837) (19,398) 87,713
Finance income 490
Finance costs (76,604)
Fair value adjustment (610)
Foreign translation loss (18,734)
Loss before tax (7,745)
Segment depreciation, depletion and amortisation(4) 35,402 282 543 36,227
Segment non-current assets 568,709 162,644 2,915 734,268
Segment non-current asset additions 32,535 1,779 184 34,498
Segment total assets 1,085,486 160,962 102,139 1,348,587
Segment total liabilities (938,513) (31,620) (71,716) (1,041,849)
4. Revenue
Set out below is the disaggregation of the Group's revenue from contracts with
customers:
2022 2021
Year ended 31 December US$'000 US$'000
Gas sales 181,125 169,052
Oil, condensate and processing sales 31,373 16,747
Total revenue from contracts with customers 212,498 185,799
Gas sales represents gas deliveries made to the Group's customers under
long-term, take-or-pay gas sale agreements. The Group sells oil and
condensates at prevailing market prices.
5. Cost of sales
2022 2021
Year ended 31 December US$'000 US$'000
Depletion and depreciation - oil and gas, and infrastructure assets 38,403 34,463
Facility operation and maintenance costs 26,232 26,023
Royalties 7,424 4,525
72,059 65,011
6. Finance costs
2022 2021
Year ended 31 December US$'000 US$'000
Interest on bank borrowings and loan notes 62,324 53,384
Amortisation of balances measured at amortised cost 7,314 14,557
Unwinding of decommissioning discount 5,585 4,977
Interest expense on lease liabilities 367 511
Bank charges 233 327
Other finance costs 3,147 2,848
78,970 76,604
7. Fair value adjustment
2022 2021
Year ended 31 December US$'000 US$'000
Fair value adjustment 8,134 610
8,134 610
The fair value adjustment relates to the revaluation of the embedded
derivative within the US$20 million Senior Secured Notes ("SSNs") held by
Accugas Holdings UK Plc, a subsidiary of the Group as well as changes in the
warrant instrument recognised as a financial liability (note 14). The embedded
derivative of the SSN provides a redemption option whereby early repayment of
the principal amount will result in a discount to the contractual loan
value.
8. Taxation
(a) Income tax
The tax expense/(credit) recognised in the profit or loss statement for the
Group is:
2022 2021
Year ended 31 December US$'000 US$'000
Current tax
- Current year 7,198 2,586
- Adjustments in respect of prior years (92) 3
7,106 2,589
Deferred tax
- Origination and reversal of temporary differences 7,610 9,094
- Change in tax rates - 25,871
- Write down and reversal of previous write downs of deferred tax assets (3,959) (61,657)
- Adjustments in respect of prior years 374 (745)
4,025 (27,437)
Total tax expense/(credit) for the year 11,131 (24,848)
9. Earnings per share
Basic earnings per share is calculated by dividing the profit for the year
attributable to owners of the Company by the weighted average number of
ordinary shares outstanding during the year.
Diluted earnings per share is calculated by dividing the profit for year
attributable to owners of the Company by the weighted average number of
ordinary shares outstanding during the year, plus the weighted average number
of shares that would be issued on the conversion of dilutive potential
ordinary shares into ordinary shares. In the prior year, there was a loss
attributable to the owners of the Company, which meant the diluted weighted
average number of shares would reduce the loss per share. Therefore, the basic
weighted average number of shares were used to calculate the diluted loss per
share.
The weighted average number of shares outstanding excludes treasury shares of
99,858,893 (2021: 41,966,942).
2022 2021
Year ended 31 December US$'000 US$'000
(Loss)/profit
(Loss)/profit attributable to owners of the Company (60,867) 768
Number of shares Number of shares
Basic weighted average number of shares 1,202,714,329 954,280,611
Add: employee share options and warrants 60,012,622 4,766,269
Diluted weighted average number of shares 1,262,726,951 959,046,880
US$ US$
(Loss)/earnings per share
Basic (0.05) 0.00
Diluted (0.05) 0.00
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 year ended 31 December 2022 (2021: 50,233,574). These options could
potentially dilute basic earnings per share in the future.
10. 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 2021 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 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 315,174 422,340 5,012 742,526
Accumulated depreciation
Balance at 1 January 2021 (20,327) (23,170) (1,924) (45,421)
Depletion and depreciation charge (16,742) (17,721) (735) (35,198)
Balance at 31 December 2021 (37,069) (40,891) (2,659) (80,619)
Depletion and depreciation charge (22,176) (16,227) (617) (39,020)
Balance at 31 December 2022 (59,245) (57,118) (3,045) (119,408)
Net book value
Balance at 1 January 2021 163,525 446,747 2,435 612,707
Balance at 31 December 2021 160,699 405,237 2,265 568,201
Balance at 31 December 2022 255,929 365,222 1,967 623,118
11. Inventory
2022 2021
Year ended 31 December US$'000 US$'000
Spare parts 21,189 2,776
Crude oil and condensates 19,185 1,097
40,374 3,873
12. Trade and other receivables
Group Group
2022 2021
As at 31 December US$'000 US$'000
Trade receivables 244,288 156,440
Receivables from a joint arrangement 8,673 67
Other financial assets 11,518 5,237
264,479 161,744
Expected credit loss (68,840) (29,345)
195,639 132,399
VAT receivables 1,385 694
Loan receivable 2,194 -
Prepayments and other receivables 40,128 98,538
239,346 231,631
13. Cash at bank
Group Group
2022 2021
As at 31 December US$'000 US$'000
Cash and cash equivalents 104,147 45,739
Amounts held for debt service 136,741 106,905
240,888 152,644
Cash and cash equivalents includes US$1.2 million (2021: US$1.1 million) of
cash collateral on the Orabank revolving facility. The cash collateral was at
a value of XOF750.9 million (2021: XOF626.4 million).
Amounts held for debt service represents Naira denominated cash balances(5)
which are held by the Group for 2020-2022 debt service which has been
separately disclosed from Cash and cash equivalents. In total, approximately
US$174.8 million (2021: US$132.8 million) will be paid for the 2020-2022 debt
service from bank accounts designated as Amounts held for debt service, and
from Cash and cash equivalents.
14. Trade and other payables
Group Group
2022 2021
As at 31 December US$'000 US$'000
Trade and other payables
Trade payables 159,068 30,957
Accruals 50,045 62,927
VAT and WHT payable 16,229 13,783
Royalty and levies 5,542 5,196
Employee benefits 71 91
Contingent consideration 14,680 -
Financial liability 19,739 -
Other payables 14,074 3,817
Trade and other payables 279,448 116,771
Other payables - non-current
Employee benefits 7,712 3,415
Other payables - non-current 7,712 3,415
287,160 120,186
15. Borrowings
Group Group
2022 2021
As at 31 December US$'000 US$'000
Revolving credit facility 11,223 9,916
Bank loans 367,249 379,002
Senior Secured Notes 91,383 100,717
Other loans 175,934 34,610
645,789 524,245
Group Group
2022 2021
As at 31 December US$'000 US$'000
Current borrowings 543,397 415,593
Non-current borrowings 102,392 108,652
645,789 524,245
16. Cash flow reconciliations
A reconciliation of profit before tax to net cash generated from operating
activities is as follows:
Year ended Year ended
31 December 31 December
2022 2021
US$'000 US$'000
Loss for the year before tax (52,946) (7,745)
Adjustments for:
Depreciation 2,242 1,764
Depletion 38,403 34,463
Finance income (948) (49)
Finance costs 78,970 76,604
Fair value movement 8,134 610
Share of profit from associates (65) -
Gain on disposal (7,372) -
Unrealised foreign translation loss 12,374 9,791
Share option charge 1,268 1,602
Expected credit loss and other related adjustments 39,495 26
Operating cash flows before movements in working capital 119,555 117,066
Increase in inventory (6,143) (956)
Increase in trade and other receivables (110,845) (57,744)
Increase in trade and other payables 20,534 29,455
Increase in contract liabilities 87,656 42,689
Income tax paid (35,064) (2,395)
Net cash generated from operating activities 75,693 128,115
17. Business combinations
On 9 December 2022, a subsidiary of the Company acquired the Chad and Cameroon
Assets36 that constituted a business combination. Following the completion of
this acquisition, the Group owned a 40% operated interest in the Doba Oil
Project (the "Doba oil field") in Chad and an effective c.40% indirect
interest in the Chad-Cameroon midstream pipelines, being COTCo and TOTCo. This
acquisition was in line with the Group's strategy to deliver value accretive
inorganic growth.
As these assets and entities are interdependent due to supply agreements
between the upstream and midstream business, the separable assets and
liabilities of these acquired entities have been shown as one single CGU.
Set out below are the provisional fair values of the separable assets and
liabilities of the combined acquired entities together with the fair value of
the purchase consideration. Refer to note 2 for the considerations on why
these amounts are provisional.
9 December 2022
US$'000
Property, plant and equipment 121,672
Investments in associates 188,285
Deferred tax assets 6,084
Inventory 30,358
Trade and other receivables 12,772
Cash at bank 95,596
Total assets 454,767
Deferred tax liabilities 18,782
Other payables 4,487
Provisions 48,683
Trade and other payables 149,986
Tax liabilities 47,315
Total liabilities 269,253
Total identifiable net assets at fair value 185,514
Goodwill/(bargain purchase) arising on acquisition -
Total fair value of consideration transferred 185,514
Consideration satisfied by:
US$'000
Cash 7,593
Contingent consideration 14,680
Debt 162,023
Deferred consideration 1,218
Total fair value of consideration transferred 185,514
18. Events after the reporting period
As set out in note 2, 31 March 2023, the Nationalisation of the assets and
rights of any kind of SCI located in Chad or arising from the conventions
between SCI and the Republic of Chad in respect of the exploration,
exploitation and transportation of hydrocarbons in Chad (the "Conventions")
and the assets and rights of any kind of SMIL, including the shares and rights
held by SMIL in any branch office in Chad and any company having its principal
place of business in Chad occurred. In particular the steps taken by the
Republic of Chad have resulted in the Nationalisation of SCI's upstream
production assets in Chad and SMIL's c.40% interest in Tchad Oil
Transportation Company ("TOTCo"), the owner and operator of the Chad portion
of the Chad-Cameroon midstream pipelines, being the sole oil export
infrastructure for all oil production from Chad. The actions of the Republic
of Chad are in direct breach of the Republic of Chad's undertaking under the
Conventions it has entered into. As disputes under the Conventions are subject
to the jurisdiction of an ICC arbitral tribunal, seated in Paris. SCI and SMIL
will seek full compensation for the losses they have suffered as a result of
Chad's actions. SCI has commenced ICC arbitral proceedings against the
Republic of Chad to seek full recompense for the loss that it has and may
suffer as a result of the Nationalisation of SCI's assets.
On 20 April 2023, the Group announced the sale of a 10% interest in its equity
held investment in COTCo for a consideration of US$44.9 million. Upon
completion of the sale, the Group will retain a 31.06% shareholding in COTCo.
Footnotes:
1. 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.
2. 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 provide a meaningful comparison with 2021, the 2022
figures exclude the impact of Chad operations.
3. Operating expenses plus administrative expenses are defined as
total cost of sales, administrative and other operating expenses, excluding
royalty and depletion, depreciation and amortisation. In order to provide a
meaningful comparison with 2021, the 2022 figures exclude the impact of Chad
operations.
4. The 2022 figure for Depreciation, Depletion and Amortisation
excludes the impact of Chad operations.
5. Within cash balance of US$240.9m, US$136.7m is set aside for debt
service, of which US$98.4m is for interest and US$38.3m is for scheduled
principal repayments.
6. Net debt is defined as Borrowings less Cash at bank and Restricted
cash.
7. Leverage is defined as Net debt divided by Adjusted EBITDA.
8. Interest cover ratio is Adjusted EBITDA 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.
9. Total Contributions to Nigeria and Niger defined as payments to
governments, salaries and payments to local suppliers and contractors.
10. Source: The Economist, 2022 has been a year of brutal inflation.
11. Source: IMF.
12. Fed Prime Rate LIBOR.
13. Source: EIA
14. Source: EIA
15. Source: Eurostat
16. Source: Food and Agriculture Organisation (FAO).
17. Source: Trading Economics.
18. Source: IMF.
19. FTSE 100, 10 years. Source: Factset.
20. Source: Growth Index.
21. Savannah estimate based on Accugas peak contributions to thermal
generation for the time period.
22. Source: Fitch Solutions
23. The document to be published by a company seeking admission of its
securities to trading on AIM in accordance with Rule 3 of the AIM Rules.
24. External Events For further information see the Financial Review
section of this announcement.
25. Source: Word Bank.
26. Source: IEA.
27. Source: World Bank.
28. Source: United Nations Human Development Report 2021.
29. Source: IMF.
30. Source: Our World in Data
31. Source: IEA, World Energy Outlook (2022).
32. Source: S&P Global Market Intelligence, S&P Global Ratings.
Universe is Global Capex 2000.
33. Source: IEA, Net Zero by 2050.
34. Source: EIA, International Energy Outlook. 25. Source: IEA, Net Zero
by 2050.
35. South Sudan Assets means the assets that Savannah proposes to acquire
from PETRONAS International Corporation Ltd,
as announced on 12 December 2022. These assets comprise interests in three
Joint Operating Companies which operate
Block 3/7 (40% working interest ("WI")), Block 1/2/4 (30% WI) and Block 5A
(67.9% WI), in South Sudan.
36. Chad and Cameroon Assets means the assets acquired from ExxonMobil
being a 40% participating interest in the Doba Oil Field Development Area 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)
37. Investment Grade indicates credit support from an entity which holds
an investment grade rating from either Standard & Poor's, Moody's or Fitch
Ratings.
38. Adjusted net debt is defined as Net debt adjusted for US$98.4 million
(2021: US$75.5 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. The figure presented for 2022 is for the Group
excluding Chad (which removes the impact of the Chad operations period of
ownership from 9 December to 31 December 2022) as described in the Financial
Review to provide a meaningful comparison with 2021. Note that the Adjusted
EBITDA presented in Note 35(g) of the Financial Statements is for the Group,
not Group excluding Chad.
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. END MSCDZGGVVRKGFZGRecent news on Savannah Energy
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