REG - Savannah Energy Plc - Half-year Report
30/09/2022 07:00
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RNS Number : 3103B Savannah Energy Plc 30 September 2022
30 September 2022
--Savannah Energy PLC
("Savannah" or "the Company")
2022 Half Year Results
Savannah Energy PLC, the British independent energy company focused around the
delivery of Projects that Matter in Africa, is pleased to announce its
unaudited interim results for the six months ended 30 June 2022.
Andrew Knott, CEO of Savannah Energy, said:
"Our half year results again demonstrate the continued strong underlying
progress we have made in our existing producing business with a 10%
year-on-year increase reported for both Total Revenues(1) (to US$128.7m) and
Adjusted EBITDA(2) (to US$100.3m). Further, I am pleased to report that our
growth trajectory has continued into H2, with average daily production to 26
September 2022 having increased by 55% to 34.8 Kboepd versus the H1 average of
22.5 Kboepd and 118% versus the 16.0 Kboepd level at the time of acquisition
in November 2019. This H2-to-date growth reflects the impact of the three new
gas sales contracts and the contract extension we have announced in 2022, with
Accugas now supplying gas to approximately 24% of Nigeria's thermal power
generation capacity as compared to approximately 10% at the time of the
original acquisition. In the first half, we also announced agreements for
the development of up to 750 MW of large-scale greenfield solar and wind
projects in Niger and Chad, which have the potential to transform the
electricity access rates in both countries.
Looking forward to the rest of 2022 and 2023, I remain confident in where we
are as a business. We look forward to closing our Proposed Acquisitions of the
Chad and Cameroon Assets in Q4 of this year. We expect to deliver on or exceed
our financial guidance. We expect to announce further hydrocarbon acquisitions
and to expand our Renewable Energy Division with several new large-scale
greenfield opportunities currently under review and negotiation. We continue
to work towards completing the refinancing of our Nigerian debt and to
announce the development and exploration plans for our assets in Niger.
Lastly, I would like to express my gratitude to all of those who contributed
to the progress in our business in H1 - 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."
H1 2022 Financial Highlights
· Total Revenues(1) of US$128.7m (up 10% on H1 2021: US$116.5m);
· Adjusted EBITDA(2) of US$100.3m (up 10% on H1 2021: US$91.5m);
· Operating expenses plus administrative expenses(3) of US$24.5m
(H1 2021: US$22.4m);
· Loss before tax of US$11.3m (H1 2021 profit before tax: US$7.7m);
· Capital expenditure of US$14.0m (H1 2021: US$5.2m);
· Net debt position as at 30 June 2022 of US$327.1m (Year-end 2021:
US$370.0m) with Adjusted Leverage(4) of 2.0x (Year-end 2021: 2.5x); and
· Total cash(5) of US$182.8m as at 30 June 2022 (Year end 2021:
US$154.3m)
H1 2022 Operational Highlights
· New gas sales agreements ("GSAs") were signed with Central
Horizon Gas Company Limited ("CHGC"), a major gas distribution company
situated in the South-South region of Nigeria, and TransAfam Power Ltd, a
licensed power generation company in Nigeria and, post-period-end in August
2022, with Notore Chemical Industries PLC for its fertiliser plant. These
customers are accessed via Accugas' pipeline network to Ikot Abasi and on to
the Port Harcourt area via third party infrastructure, thus no capital
expenditure is required;
· A contract extension was signed with First Independent Power
Limited ("FIPL") to supply gas to its Eleme and Trans Amadi power plants,
bringing the total number of power plants supplied under the contract to
three, including the FIPL Afam power plant;
· During the period, Savannah commenced gas deliveries to three new
customers in Nigeria, FIPL's Trans Amadi power plant, TransAfam's power plants
in Rivers State, and CHGC. Savannah now has operational GSAs with power
plants comprising 24% of Nigeria's thermal generation capacity;
· Average gross daily production, of which 89% was gas, remained
almost constant during H1 2022 at 22.5 Kboepd (H1 2021: 22.6 Kboepd). The
broadening of our customer base during H1 2022 has enabled us to increase gas
deliveries to support Nigeria's power generation needs;
· A new gas production well, Uquo 11, commenced production in April
2022 and produced at an average rate of 68 MMscfpd up to 30 June 2022; and
· Our Renewable Energy Division signed agreements for the
development of up to 750 MW large-scale greenfield solar and wind projects
with the Governments of Niger (Parc Eolien de la Tarka) and Chad (Centrale
Solaire de Komé and Centrales d'Energie Renouvelable de N'Djamena).
Chad and Cameroon Assets
· Work continues to complete our proposed acquisitions of
ExxonMobil's and PETRONAS' assets in Chad and Cameroon (the "Chad and Cameroon
Assets") by the end of the year.
· Savannah has undertaken significant preparation work ahead of
completion including recruitment of the operational team and enhancements to
organisational systems to ensure that the transition of operatorship can be
completed.
FY 2022 Guidance Reiterated
Savannah reiterates full year 2022 guidance as follows:
· Total Revenues(1) greater than US$215.0m;
· Group Operating expenses plus administrative expenses(3) of up to
US$75.0m;
· Group Depreciation, Depletion and Amortisation of US$21m fixed
for infrastructure assets plus US$2.3/boe for oil and gas assets; and
· Capital expenditure of up to US$85.0m.
H1 2022 Corporate Events
· In June 2022, Savannah announced several changes to the Board:
o Nick Beattie was appointed as Chief Financial Officer and was appointed to
the Board of Directors;
o David Jamison retired from the Board at the Annual General Meeting on 30
June 2022, and assumed the (non-board) role as Honorary President of Savannah;
o Steve Jenkins will step down from his role as Non-Executive Chairman at or
prior to the 2023 Annual General Meeting. A search for a Chair-Designate is
underway and it is anticipated that an appointment will be made during H2
2022, and
o It is intended that three new non-executive directors (Sylvie Rucar, Sarah
Clark and Dr Djamila Ferdjani) will be appointed to the Board following
completion of the proposed acquisition of the ExxonMobil upstream and
midstream assets in Chad and Cameroon.
For further information, please refer to the Company's
website www.savannah-energy.com (http://www.savannah-energy.com/) or
contact:
Savannah Energy +44 (0) 20 3817 9844
Andrew Knott, CEO
Nick Beattie, CFO
Sally Marshak, Head of IR & Communications
Strand Hanson (Nominated Adviser) +44 (0) 20 7409 3494
James Spinney
Ritchie Balmer
Rob Patrick
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
Hugo Rich
James Sinclair-Ford
Camarco +44 (0) 20 3757 4983
Billy Clegg
Owen Roberts
Violet Wilson
The information contained within this announcement is considered to be inside
information prior to its release, as defined in Article 7 of the Market Abuse
Regulation No. 596/2014, as it forms part of UK domestic law by virtue of the
European Union (Withdrawal) Act 2018, as amended, and is disclosed in
accordance with the Company's obligations under Article 17 of those
Regulations.
About Savannah Energy:
Savannah Energy PLC is an AIM quoted British independent energy company
focused around the delivery of Projects that Matter in Africa, active in
Cameroon, Chad, Niger and Nigeria.
Further information on Savannah Energy PLC can be found on the Company's
website: www.savannah-energy.com (http://www.savannah-energy.com) .
H1 2022 Operational Review
Nigeria
Average gross daily production was flat in H1 2022 with an average of 22.5
Kboepd (H1 2021: 22.6 Kboepd). During H1 2022, the Company's subsidiary,
Accugas, supplied gas to the Calabar, Ibom, TransAfam, FIPL Afam and FIPL
Trans Amadi power stations. Gas was delivered throughout the period to
Lafarge's Mfamosing cement factory in Cross Rivers State and deliveries to
CHGC, a distributor of gas to industrial and commercial customers in the Port
Harcourt area, commenced in June 2022.
Niger
During H1 2022, the four licence areas in Niger were amalgamated into a single
PSC (R1234) valid for up to a further 10 years. This has laid the foundation
to progress plans for the R3 East Early Production Scheme and we expect to
announce further details of this project later in the year.
Renewable Energy Division
Savannah's Renewable Energy division was established in 2021 and during H1
2022 signed three agreements for the development of a total of up to 750MW
large-scale greenfield solar and wind projects with the governments of Chad
and Niger.
The agreement signed in Chad covers two projects. The first comprises an up
to 300 MW photovoltaic solar farm and battery energy storage system located in
Komé, Southern Chad (the "Centrale Solaire de Komé"). This project is
being developed to provide clean, reliable power generation for the Doba Oil
Project and the surrounding towns of Moundou and Doba. The second involves the
development of solar and wind projects of up to 100 MW each to supply power to
the country's capital city, N'Djamena (the "Centrales d'Energie Renouvelable
de N'Djamena"). The Centrale Solaire de Komé project would represent the
largest solar plant in sub-Saharan Africa (excluding South Africa) and
potentially the largest battery storage project on the continent. The
Centrales d'Energie Renouvelable de N'Djamena would more than double the
existing installed generation capacity supplying the capital city and increase
the total installed on-grid power generation capacity in Chad by up to an
estimated 63%.
In Niger, an agreement was signed with the Ministry of Petroleum, Energy and
Renewable Energies of the Republic of Niger for the construction and operation
of the country's first wind farm, with a proposed installed power generation
capacity of up to 250 MW on an independent power producer basis in the Tahoua
Region of Southern Niger. This is targeted to increase the country's on-grid
electricity supply by up to 40%. Project sanction is targeted for 2023 with
first wind power in 2025.
These projects represent potentially substantial foreign direct investments
that would make significant contributions to the economic development of the
regions where they will be situated.
H1 2022 Financial Review
The Group reports Total Revenues(1) of US$128.7 million for the six months
ended 30 June 2022, up 10% on H1 2021 and an Adjusted EBITDA(2) of US$100.3
million also up 10% on H1 2021, reflecting the quality of our gas producing
assets in Nigeria as we broaden and diversify our customer base.
We have invested heavily during the period to scale up the business ahead of
completion of the proposed acquisition of the Chad and Cameroon Assets and to
enable the delivery of our wider business development plans. This has included
a 21% increase in headcount in H1 2022, alongside a large investment into new
systems and processes that will be required to support the enlarged scale of
the Group.
Summary of results for H1 2022
The table below provides an overview of our results for H1 2022 with a
comparison for H1 2021.
Financial highlights
Six months ended Six months ended
30 June 2022 30 June 2021
US$ million US$ million
Total Revenues(1) 128.7 116.5
Adjusted EBITDA(2) 100.3 91.5
Revenue 85.8 99.4
Operating expenses plus administrative expenses(3) 24.5 22.4
Operating profit 27.9 54.0
(Loss)/profit before tax (11.3) 7.7
(Loss) after tax (20.5) (1.4)
The Group's operating profit for the six months ended 30 June 2022 was US$27.9
million (H1 2021: US$54.0 million). The decrease resulted from a combination
of lower revenues resulting from unscheduled downtime suffered by certain of
our customers (which does not reduce Total Revenues(1) under the terms of the
take-or-pay gas contracts) and a 10% increase in operating expenses plus
administrative expenses(3). The increase in these costs is a result of the
investment being made in growing the business infrastructure in preparation
for completion of the acquisition of the Chad and Cameroon Assets and
continued investment into the efficiency of the Nigerian assets.
The Group's loss before tax was US$11.3 million (H1 2021 profit: US$7.7
million) and the loss after tax was US$20.5 million (H1 2021 loss: US$1.4
million).
Adjusted EBITDA(2) for H1 2022 was US$100.3 million, compared to US$91.5
million for H1 2021.
Revenue
Revenue during the period was 14% lower than the comparable prior year period
at US$85.8 million (H1 2021: US$99.4 million). As previously highlighted, it
is important to note the impact of take-or-pay accounting rules under IFRS 15
on our Income Statement as regards to revenue recognition for our gas sales
agreements. The Revenue shown in the Condensed Consolidated Statement of
Comprehensive Income includes only the gas, oil and condensate that has been
delivered. The Total Revenues(1) of US$128.7 million (H1 2021: US$116.5m)
includes the volume of gas that customers are committed to pay for under the
take-or-pay terms of the gas sales agreements, which includes gas that has
been delivered plus gas invoiced but yet to be delivered, plus oil and
condensate revenues. Total Revenues(1) showed a 10% increase compared to H1
2021. Management believes that Total Revenues(1) is the most appropriate
method of reflecting the underlying cash generation capacity of the business.
Savannah continues to benefit from over US$4 billion of contracted future gas
revenues in Accugas with annual price escalation clauses related to US
consumer price inflation.
Cost of Sales, administrative and other operating expenses
Cost of sales amounted to US$33.1 million (H1 2021: US$34.3 million) which
includes US$13.8 million (H1 2021: US$13.8 million) for facility operating and
maintenance costs, US$2.9 million (H1 2021: US$2.2 million) royalty expenses
and US$16.4 million (H1 2021: US$18.3 million) depletion and depreciation.
Administrative and other operating expenses for the period were US$11.7
million (H1 2021: US$9.5 million), which includes US$0.9 million (H1 2021:
US$0.9 million) of depreciation.
Group Operating expenses plus administrative expenses(3) were US$24.5 million
(H1 2021: US$22.4 million).
EBITDA and Adjusted EBITDA(2)
Presented below is the calculation of EBITDA and Adjusted EBITDA(2).
Management believes that the alternative performance measure of Adjusted
EBITDA(2) more accurately reflects the cash generating capacity of the
business. Adjusted EBITDA(2) includes gas that has been invoiced under
take-or-pay contracts but not yet delivered and is adjusted for transaction
and other related expenses to provide a meaningful comparison between periods.
Calculation of EBITDA and Adjusted EBITDA(2) for the Group
GROUP Six months ended Six months ended 30 June 2021
30 June 2022 US$ million
US$ million
Operating profit 27.9 54.0
Add: depletion, depreciation and amortisation 17.3 19.2
Add: transaction and other related expenses 7.3 2.3
EBITDA 52.5 75.5
Add: other invoiced amounts 42.9 17.1
Deduct: royalty payable on additional gas volume (1.0) (0.4)
Deduct: expected credit loss & other related adjustments 5.9 (0.7)
Adjusted EBITDA(2) 100.3 91.5
Finance Costs
Finance costs were US$36.8 million (H1 2021: US$38.7 million) - of these costs
US$27.9 million (H1 2021: US$26.8 million) related to bank and loan note
interest. The average interest rate was 10.7% (H1 2021: 10.3%) reflecting
the higher US Libor rates during the period compared to prior year. The
remainder of the finance costs are primarily a number of non-cash items which
are itemised in Note 8 of the financial statements.
The interest cover ratio, on an Adjusted EBITDA(2) basis is 3.1 times (H1
2021: 2.9 times).
Foreign Exchange loss
Foreign exchange losses amounted to US$0.8 million (H1 2021: US$10.9
million). These losses were realised losses arising from US Dollar gas sales
invoices which are settled in local currency, and from the translation of
Naira into US Dollars to service US Dollar denominated obligations. Realised
foreign exchange losses can be recovered through the "true up" mechanism in
the Calabar GSA
In order to purchase US dollars to service US dollar obligations, Savannah
accesses foreign exchange at market rates and there is typically a
differential between this rate and the Central Bank of Nigeria exchange rate.
The majority of these losses are recoverable through a foreign exchange
"true-up" clause in the Calabar GSA.
Taxation
The tax charge of US$9.2 million (H1 2021: US$9.1 million) was made up of a
current tax charge of US$2.8 million (H1 2021: US$2.2 million) and a deferred
tax charge of US$6.4 million (H1 2021: US$6.9 million). The current tax
charge principally arises on Nigerian profits and the deferred tax charge is a
result of utilisation of unused losses in Nigeria.
Debt
The Group net debt as at 30 June 2022 was US$327.1 million (31 December 2021:
US$370.0 million). During the period, the leverage ratio, and Adjusted
Leverage ratio, improved as shown in the table below.
Work continues on the proposed refinancing of the Accugas debt facility as was
detailed in the 2021 Annual Report and Accounts.
Leverage
30 June 31 December 2021
2022 US$ million
US$ million
Adjusted EBITDA(2 #) 100.3 175.0
Net debt 327.1 370.0
Naira held in cash for interest 80.9 75.5
Adjusted net debt 408.0 445.5
Leverage (Net debt/Adjusted EBITDA(2)) 1.6 2.1
Adjusted Leverage(4) (Adjusted net debt/Adjusted EBITDA(2)) 2.0 2.5
# Adjusted EBITDA(2) for 6 months to 30 June 2022 and for 12 months to 31
December 2021
Cash flow
A summary of the cash flows for the period is as follows:
Six months ended Six months ended
30 June 2022 30 June 2021
US$ million US$ million
Net cash generated from operating activities 41.9 65.2
Net cash used in investing activities (29.3) ((a)) (4.8) ((a))
Net cash generated from/(used in) financing activities 18.1 (22.8)
Impact of exchange rate changes on cash balances (2.2) (7.9)
Net increase in cash 28.5 29.7
Cash balances at start of period(5) 154.3 106.0
Cash balances at end of period5 182.8 135.7
(a) excludes US$32.2 million (H1 2021: US$31.0 million) transferred to
debt service accounts
The net cash inflow from operating activities was US$41.9 million (H1 2021:
US$65.2 million).
Net cash used in investing activities includes US$14.6 million deposits paid
towards the acquisition of the Chad and Cameroon Assets (H1 2021: nil),
payments for property, plant and equipment of US$9.1 million (H1 2021: US$4.1
million) and US$4.9 million (H1 2021: US$1.1 million) incurred on exploration
and evaluation assets.
The net cash generated from and used in financing activities includes equity
proceeds of US$61.1 million (H1 2021: nil), principal debt repayments of
US$17.1 million (H1 2021: US$8.8 million) and finance costs of US$24.8 million
(H1 2021: US$13.6 million).
Total Cash balances of the Group at the end of the period increased to
US$182.8 million (H1 2021: US$135.7 million).
Nick Beattie
Chief Financial Officer
30 September 2022
Footnotes
(1) Total Revenues are defined as the total amount of invoiced sales during
the period. This number is seen by management as more accurately reflecting
the underlying cash generation capacity of the business as opposed to Revenue
recognised in the Condensed Consolidated Statement of Comprehensive Income. A
detailed explanation of the impact of IFRS 15 revenue recognition rules on our
Consolidated Statement of Comprehensive Income is provided in the Financial
Review section of the Annual Report and Accounts 2020.
2 Adjusted EBITDA is calculated as profit or loss before finance costs,
investment revenue, foreign exchange gains or losses, expected credit loss and
other related adjustments, fair value adjustments, gain on acquisition, taxes,
transaction and other related expenses, depreciation, depletion and
amortisation and adjusted to include deferred revenue and other invoiced
amounts. Management believes that the alternative performance measure of
Adjusted EBITDA more accurately reflects the cash-generating capacity of the
business.
3 Group operating expenses plus administrative expenses are defined as total
cost of sales, administrative and other operating expenses excluding royalty
and depletion, depreciation and amortisation and transaction costs.
(4) Adjusted Leverage is defined as Adjusted net debt/Adjusted EBITDA.
Adjusted net debt is calculated as the net debt balance adjusted for the Naira
held in cash for interest (as shown in the financial review). For the 6 month
period ended 30 June 2022, the Adjusted Leverage calculation is prepared on an
annualised EBITDA basis
5 Within Cash balances, US$1.6m is restricted cash which includes deposits and
stamp duty escrow balances.
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE SIX MONTHS
ENDED 30 JUNE 2022
Six months ended Six months ended
30 June 30 June
2022 2021
US$'000 US$'000
Note Unaudited Unaudited
Revenue 4 85,847 99,386
Cost of sales 5 (33,127) (34,286)
Gross profit 52,720 65,100
Administrative and other operating expenses (11,686) (9,505)
Transaction and other related expenses 6 (7,262) (2,341)
Expected credit loss and other related adjustments 14 (5,918) 739
Operating profit 6 27,854 53,993
Finance income 7 273 328
Finance costs 8 (36,827) (38,732)
Fair value adjustment 9 (1,768) 3,042
Foreign translation loss 10 (846) (10,943)
(Loss)/profit before tax (11,314) 7,688
Current tax expense 11 (2,793) (2,172)
Deferred tax expense 11 (6,438) (6,893)
Tax expense 11 (9,231) (9,065)
Net loss and total comprehensive loss (20,545) (1,377)
Total comprehensive (loss)/profit attributable to:
Owners of the Company (20,264) (3,109)
Non-controlling interests (281) 1,732
(20,545) (1,377)
US cents US cents
Loss per share
Basic 12 (1.77) (0.33)
Diluted 12 (1.77) (0.33)
All results derive from continuing operations.
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 30 JUNE 2022
30 June 31 December
2022 2021
US$'000 US$'000
Note Unaudited Audited
Assets
Non-current assets
Third-party investment 1,182 -
Property, plant and equipment 13 557,368 568,201
Exploration and evaluation assets 166,373 161,343
Deferred tax assets 217,376 223,814
Right-of-use assets 4,180 4,724
Restricted cash 1,635 1,635
Finance lease receivable 581 722
Total non-current assets 948,695 960,439
Current assets
Inventory 5,230 3,873
Trade and other receivables 14 206,667 231,631
Cash at bank 15 181,168 152,644
Total current assets 393,065 388,148
Total assets 1,341,760 1,348,587
Equity and liabilities
Capital and reserves
Share capital 1,749 1,409
Share premium 124,897 61,204
Shares to be issued - 63,956
Treasury shares (135) (58)
Other reserves 8,381 458
Share-based payment reserve 9,042 8,706
Retained earnings 136,957 157,221
Equity attributable to owners of the Company 280,891 292,896
Non-controlling interests 13,561 13,842
Total equity 294,452 306,738
Non-current liabilities
Other payables 16 3,617 3,415
Borrowings 17 107,429 108,652
Lease liabilities 4,553 5,308
Provisions 71,714 68,966
Contract liabilities 18 269,435 213,043
Total non-current liabilities 456,748 399,384
Current liabilities
Trade and other payables 16 86,603 116,771
Borrowings 17 402,497 415,593
Interest payable 85,556 80,101
Tax liabilities 1,633 2,058
Lease liabilities 1,558 1,475
Contract liabilities 18 12,713 26,467
Total current liabilities 590,560 642,465
Total liabilities 1,047,308 1,041,849
Total equity and liabilities 1,341,760 1,348,587
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED 30 JUNE 2022
Six months ended Six months ended
30 June 30 June
2022 2021
US$'000 US$'000
Note Unaudited Unaudited
Cash flows from operating activities:
(Loss)/profit before tax (11,314) 7,688
Adjustments for:
Depreciation 914 888
Depletion 16,432 18,335
Finance income (190) (124)
Finance costs 8 36,827 38,732
Fair value adjustment 1,768 (3,042)
Unrealised foreign exchange (gain)/loss 10 (99) 6,981
Share option charge 336 1,375
Expected credit loss and other related adjustments 14 5,918 (739)
Operating cash flows before movements in working capital 50,592 70,094
Increase in inventory (1,357) (689)
Increase in trade and other receivables (40,703) (15,921)
Decrease in trade and other payables (6,389) (4,467)
Increase in contract liabilities 40,765 16,798
Income tax paid (1,024) (632)
Net cash generated from operating activities 41,884 65,183
Cash flows from investing activities:
Interest received 171 98
Payments for property, plant and equipment (9,104) (4,109)
Payments for exploration and evaluation assets (4,888) (1,118)
Acquisition deposits (14,648) -
Loans provided to third parties (1,067) -
Cash transferred to debt service accounts (32,186) (30,973)
Lessor receipts 196 280
Net cash used in investing activities (61,526) (35,822)
Cash flows from financing activities:
Finance costs (24,758) (13,580)
Proceeds from issues of equity shares, net of issue costs 61,141 -
Sale of Treasury shares 73 -
Borrowing proceeds 19 12,810 -
Borrowing repayments 19 (30,545) (8,794)
Lease payments 19 (527) (335)
Net cash generated from/(used in) financing activities 18,194 (22,709)
Net (decrease)/increase in cash and cash equivalents (1,448) 6,652
Effect of exchange rate changes on cash and cash equivalents (2,214) (7,938)
Cash and cash equivalents at beginning of period 45,739 74,258
Cash and cash equivalents at end of period 15 42,077 72,972
Amounts held for debt service at end of period 15 139,091 61,078
Cash at bank at end of period 15 181,168 134,050
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE SIX MONTHS ENDED 30 JUNE 2022
Share capital Share premium Shares to be issued Treasury shares Other reserves Share-based payment reserve Retained earnings Equity attributable to the owners of the Company Non-controlling interest Total equity
US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
Balance at 1 January 2022 (audited) 1,409 61,204 63,956 (58) 458 8,706 157,221 292,896 13,842 306,738
Loss for the period - - - - - - (20,264) (20,264) (281) (20,545)
Total comprehensive loss for the period - - - - - - (20,264) (20,264) (281) (20,545)
Transactions with shareholders:
Equity-settled share-based payments - - - - - 336 - 336 - 336
Issue of shares, net of costs 340 63,693 (63,956) (77) - - - - - -
Sale of treasury shares - - - - 73 - - 73 - 73
Issue of warrants - - - - 7,850 - - 7,850 - 7,850
Balance at 30 June 2022 (unaudited) 1,749 124,897 - (135) 8,381 9,042 136,957 280,891 13,561 294,452
Share capital Share premium Treasury shares Other reserves Share-based payment reserve Retained earnings Equity attributable to the owners of the Company Non-controlling interest Total equity
US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
Balance at 1 January 2021 (audited) 1,409 62,092 (59) 458 7,104 158,670 229,674 (2,737) 226,937
Profit/(loss) for the period - - - - - (3,109) (3,109) 1,732 (1,377)
Total comprehensive profit/(loss) for the period - - - - - (3,109) (3,109) 1,732 (1,377)
Transactions with shareholders:
Equity-settled bonus payments - 171 1 - - - 172 - 172
Equity-settled share-based payments - - - - 1,375 - 1,375 - 1,375
Balance at 30 June 2021 (unaudited) 1,409 62,263 (58) 458 8,479 155,561 228,112 (1,005) 227,107
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
1. General information
Savannah Energy PLC ("Savannah" or "the Company") was incorporated in the
United Kingdom on 3 July 2014. The principal activity of Savannah and its
subsidiaries (together, the "Group") 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 the UK for tax purposes and its shares were
admitted to trading on the AIM market ("AIM") of the London Stock Exchange plc
on 1 August 2014. The Company's registered address is 40 Bank Street,
London, E14 5NR.
2. Accounting policies
Basis of Preparation
On 31 December 2020, International Financial Reporting Standards ("IFRS") as
adopted by the European Union at that date was brought into UK law and became
international accounting standards as adopted by the United Kingdom
("UK-adopted IAS"), with future changes being subject to endorsement by the UK
Endorsement Board. The Group transitioned to UK-adopted IAS in its
consolidated financial statements from 1 January 2021. There was no impact on
the Group from this transition, nor any changes in accounting policy. These
condensed consolidated financial statements have been prepared in accordance
with UK-adopted IAS. The provisions of IAS 34: Interim Financial Reporting
have not been applied.
The condensed consolidated financial statements do not include all disclosures
that would otherwise be required in a complete set of financial statements and
should be read in conjunction with the Group's 2021 Annual Report and audited
financial statements for the year ended 31 December 2021 ("the Group's 2021
Annual Report"). The financial information for the six months ended 30 June
2022 does not constitute statutory accounts within the meaning of Section
434(3) of the Companies Act 2006 and is unaudited.
The annual financial statements of Savannah for the year ended 31 December
2021 were prepared in accordance with international accounting standards in
conformity with the requirements of the Companies Act 2006. The Independent
Auditors' Report on the Group's 2021 Annual Report was unqualified and did not
contain a statement under 498(2) or 498(3) of the Companies Act 2006. The
Independent Auditors' Report contained a material uncertainty related to going
concern.
The Group's statutory financial statements for the year ended 31 December 2021
have been filed with the Registrar of Companies.
All the Group's subsidiaries' functional currency is US Dollars ("US$"), and
the consolidated financial statements are presented in US Dollars and all
values are rounded to the nearest thousand (US$'000), except when otherwise
stated.
The financial information presented herein has been prepared in accordance
with the accounting policies used in preparing the Group's 2021 Annual Report.
There are no other new or amended standards or interpretations adopted from 1
January 2022 that have a significant impact on the interim financial
information.
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 twelve months from the date of
publication of this Interim Report (including sensitivity analysis of key
assumptions which has been undertaken) and in addition the Directors have
considered the range of risks facing the business on an ongoing basis. The
principal assumptions made in relation to the going concern assessment relate
to: (1) the timely payments of our gas invoices by our customers, (2) the
forecast commodity price environment and (3) continued access to FX markets.
Considering this last point, the Directors are highly confident that the Group
will continue to be able to access US dollars as required to maintain going
concern status. However, a minimal risk exists that the Group may not be able
to continue to do so and/or the Group may not be able to amend its debt
facilities and/or complete its planned debt refinancing as described in the
Group's 2021 Annual Report. These facts indicate that a material uncertainty
exists that may cast significant doubt on the Group's, ability to continue to
apply the going concern basis of accounting. Notwithstanding this, the
Directors have full confidence in the Group's forecasts and have continued to
adopt the going concern basis in preparing the consolidated financial
statements.
3. Segmental reporting
For the purposes of resource allocation and assessment of segment performance,
the operations of the Group are divided into three segments: two geographical
locations and an Unallocated segment. The two geographical segments are
Nigeria and Niger, and their principal activities are the exploration,
development and extraction of oil and gas. These make up the total revenue
generating operations of the Group. The Unallocated segments 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 results by reportable segment for
the six months ended 30 June 2022:
Nigeria Niger Unallocated Total
US$'000 US$'000 US$'000 US$'000
Unaudited Unaudited Unaudited Unaudited
Revenue 85,847 - - 85,847
Cost of sales(1) (33,127) - - (33,127)
Gross profit 52,720 - - 52,720
Administrative and other operating expenses (3,446) (972) (7,268) (11,686)
Transaction and other related expenses - - (7,262) (7,262)
Expected credit loss and other related adjustments (5,918) - - (5,918)
Operating profit/(loss) 43,356 (972) (14,530) 27,854
Finance income 273
Finance costs (36,827)
Fair value adjustment (1,768)
Foreign translation loss (846)
Profit before tax (11,314)
Segment depreciation, depletion and amortisation 16,890 132 323 17,345
Segment non-current assets(2) 553,681 167,667 7,755 729,103
Segment non-current asset additions 1,862 5,035 4,101 10,998
Segment total assets 1,118,014 168,970 54,776 1,341,760
Segment total liabilities (974,629) (33,525) (37,154) (1,047,308)
1. Refer to note 5 for items included within Cost of Sales.
2. Includes Third party investments, Property, plant and equipment,
Exploration and evaluation assets and Right-of-use assets.
The following is an analysis of the Group's results by reportable segment for
the six months ended 30 June 2021:
Nigeria Niger Unallocated Total
US$'000 US$'000 US$'000 US$'000
Unaudited Unaudited Unaudited Unaudited
Revenue 99,386 - - 99,386
Cost of sales(1) (34,286) - - (34,286)
Gross profit 65,100 - - 65,100
Administrative and other operating expenses (2,748) (2,410) (4,347) (9,505)
Transaction and other related expenses - - (2,341) (2,341)
Expected credit loss and other related adjustments 739 - - 739
Operating profit/(loss) 63,091 (2,410) (6,688) 53,993
Finance income 328
Finance costs (38,732)
Fair value adjustment 3,042
Foreign translation loss (10,943)
Profit before tax 7,688
The following is an analysis of the Group's results by reportable segment at
31 December 2021:
Nigeria Niger Unallocated Total
US$'000 US$'000 US$'000 US$'000
Unaudited Unaudited Unaudited Unaudited
Segment depreciation, depletion and amortisation 18,807 153 263 19,223
Segment non-current assets(2) 568,709 162,644 2,915 734,268
Segment non-current asset additions 32,535 1,779 184 34,498
Segment total assets 1,085,486 160,962 102,139 1,348,587
Segment total liabilities (938,513) (31,620) (71,716) (1,041,849)
1. Refer to note 5 for items included within Cost of Sales.
2. Includes Property, plant and equipment, Exploration and evaluation
assets and Right-of-use assets.
4. Revenue
Set out below is the disaggregation of the Group's revenue from contracts with
customers:
2022 2021
US$'000 US$'000
Six months ended 30 June Unaudited Unaudited
Gas sales 72,629 91,675
Oil and condensates sales 13,218 7,711
Revenue from contracts with customers 85,847 99,386
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.
Included within revenue from contracts with customers is revenue of US$83.8
million (30 June 2021: US$89.6 million) relating to four (30 June 2021: two)
of the Group's customers who each contribute more than 10% of revenue US$36.6
million, US$21.7 million, US$13.2 million, and US$12.3 million respectively
(30 June 2021: US$61.3 million and US$28.3 million, respectively).
5. Cost of sales
2022 2021
US$'000 US$'000
Six months ended 30 June Unaudited Unaudited
Depletion - oil and gas, and infrastructure assets (note 13) 16,432 18,335
Facility operation and maintenance costs 13,770 13,794
Royalties 2,925 2,157
33,127 34,286
6. Operating profit
Operating profit has been arrived at after charging:
2022 2021
US$'000 US$'000
Six months ended 30 June Unaudited Unaudited
Staff costs 11,896 12,112
Depreciation - other assets (note 13) 370 380
Depreciation - right-of-use assets 544 508
Transaction and other related expenses(1) 7,262 2,341
1. Included within Transaction and other related expenses are costs
incurred with respect of the Group's proposed acquisitions of the Chad and
Cameroon Assets, integration and IT activities and other business development
opportunities.
7. Finance income
2022 2021
US$'000 US$'000
Six months ended 30 June Unaudited Unaudited
Lease income 19 26
Bank interest income 161 98
Other interest income 93 204
273 328
8. Finance costs
2022 2021
US$'000 US$'000
Six months ended 30 June Unaudited Unaudited
Interest on bank borrowings and loan notes 27,949 26,826
Amortisation of balances measured at amortised cost(1) 3,898 7,004
Unwinding of decommissioning discount 2,749 2,488
Interest expense on lease liabilities 201 262
Bank charges 191 131
Other finance costs 1,839 2,021
36,827 38,732
1. Includes amounts due to unwinding of a discount on a long-term payable, contract liabilities (note 18) and amortisation of debt fees.
9. Fair value adjustment
During 2019 the Group issued a Senior Secured Note of US$20 million that includes a voluntary prepayment option whereby early repayment will result in a discount to the contractual loan value. As an embedded derivative, the option has been separated from the host loan instrument and valued separately and accounted for as fair value through profit or loss. As at 30 June 2022 the option value was approximately US$3.0 million (31 December 2021 audited: US$4.8 million), resulting in a charge of US$1.8 million (30 June 2021: gain of US$3.0 million). The decrease in the option value was due to a worsening in credit bond spreads observed during the period as well as an increase in market expectations around interest rates. The increase in the option value during the prior period was principally due to an improvement in credit bond spreads observed during the period.
10. Foreign translation loss
2022 2021
US$'000 US$'000
Six months ended 30 June Unaudited Unaudited
Realised loss 945 3,962
Unrealised (gain)/loss (99) 6,981
846 10,943
Realised foreign translation loss for the six months ended 30 June 2022 mainly relates to Nigerian trade receivables which are invoiced in US Dollars and where customers are able to pay in Naira. Foreign translation loss for the six months ended 30 June 2021 mainly relate to the translation of Naira into US Dollars to service US Dollar denominated obligations.
Unrealised foreign translation loss relates to the revaluation of monetary items held in currencies other than US Dollars. During the six months ended 30 June 2021 the Nigerian Naira devalued against the US Dollar in May 2021 which created a significant unrealised loss on monetary items held in Naira.
11. Taxation
The tax expense for the Group is:
2022 2021
US$'000 US$'000
Six months ended 30 June Unaudited Unaudited
Current tax
- Adjustments in respect of prior years (1,126) 3
- Current year 3,919 2,169
2,793 2,172
Deferred tax
- Adjustments in respect of prior years 193 15
- Write down and reversal of previous write downs of deferred tax assets 4,353 -
- Origination and reversal of temporary differences 1,892 6,878
6,438 6,893
9,231 9,065
Income tax expense is recognised based on the actual results for the period.
The tax charge for the period of US$9.2 million (30 June 2021: charge of
US$9.1 million) is made up of a current tax charge of US$2.8 million (30 June
2021: US$2.2 million) and a deferred tax charge of US$6.4 million (30 June
2021: charge of US$6.9 million). The current tax charge principally arises on
Nigerian profits. The deferred tax charge principally relates to the
utilisation of losses in Nigeria, as well as a write down of deferred tax
assets.
12. Loss per share
Basic earnings per share amounts are calculated by dividing the profit or loss
for the period attributable to owners of the Company by the weighted average
number of ordinary shares outstanding during the period.
Diluted earnings per share amounts are calculated by dividing the profit or
loss for the periods attributable to owners of the Company by the weighted
average number of ordinary shares outstanding during the period, plus the
weighted average number of shares that would be issued on the conversion of
dilutive potential ordinary shares into ordinary shares. As there is a loss
attributable to the owners of the Company for the six months ended 30 June
2022, the diluted weighted average number of shares would reduce the loss per
share. Therefore, the basic weighted average number of shares has been used to
calculate the diluted loss per share.
The weighted average number of shares outstanding excludes treasury shares of
99,858,893 (30 June 2021: 41,966,942).
2022 2021
US$'000 US$'000
Six months ended 30 June Unaudited Unaudited
Loss
Loss attributable to owners of the Company (20,264) (3,109)
Number of shares Number of shares
Basic weighted average number of shares 1,142,656,405 954,116,177
Add: employee share options 5,243,720 3,840,024
Diluted weighted average number of shares 1,147,900,125 957,956,201
US cents US cents
Loss per share
Basic loss per share 1.77 0.33
Diluted loss per share 1.77 0.33
50,233,574 options granted under share option schemes are not included in the
calculation of diluted earnings per share because they are anti-dilutive for
the six months ended 30 June 2022 (30 June 2021: 50,233,574). These options
could potentially dilute basic earnings per share in the future.
13. Property, plant and equipment
Oil and gas assets Infrastructure assets Other assets
Total
US$'000 US$'000 US$'000 US$'000
Cost
Balance at 1 January 2021 (audited) 183,852 469,917 4,359 658,128
Additions 16,212 15,780 565 32,557
Decommissioning remeasurement adjustment (2,296) (39,569) - (41,865)
Balance at 31 December 2021 (audited) 197,768 446,128 4,924 648,820
Additions 983 854 4,132 5,969
Balance at 30 June 2022 (unaudited) 198,751 446,982 9,056 654,789
Accumulated depreciation
Balance at 1 January 2021 (audited) (20,327) (23,170) (1,924) (45,421)
Depletion and depreciation charge (16,742) (17,721) (735) (35,198)
Balance at 31 December 2021 (audited) (37,069) (40,891) (2,659) (80,619)
Depletion and depreciation charge (8,312) (8,120) (370) (16,802)
Balance at 30 June 2022 (unaudited) (45,381) (49,011) (3,029) (97,421)
Net book value
1 January 2021 (audited) 163,525 446,747 2,435 612,707
31 December 2021 (audited) 160,699 405,237 2,265 568,201
30 June 2022 (unaudited) 153,370 397,971 6,027 557,368
Upstream assets principally comprise the well and field development costs
relating to the Uquo and Stubb Creek oil and gas fields in Nigeria. The
Infrastructure assets principally comprise the Nigerian midstream assets
associated with the Group's network of gas transportation pipelines, oil and
gas processing facilities and gas receiving facilities. Other assets typically
include vehicles, office equipment (including IT software) and building
improvements.
14. Trade and other receivables
30 June 31 December 2021
2022
US$'000 US$'000
Unaudited Audited
Trade receivables 188,969 156,440
Receivables from a joint arrangement 3,645 67
Other financial assets 5,261 5,237
197,875 161,744
Expected credit loss (35,263) (29,345)
162,612 132,399
VAT receivables 677 694
Prepayments and other receivables 43,378 98,538
206,667 231,631
The following has been recognised in the Condensed Statement of Comprehensive
Income relating to expected credit losses for the period:
2022 2021
US$'000 US$'000
Six months ended 30 June Unaudited Unaudited
Provision/(release) of expected credit losses 5,918 (739)
Expected credit loss and other related adjustments 5,918 (739)
15. Cash at bank
30 June 31 December 2021
2022
US$'000 US$'000
Unaudited Audited
Cash and cash equivalents 42,077 45,739
Amounts held for debt service 139,091 106,905
181,168 152,644
Cash and cash equivalents include US$1.2 million (31 December 2021: US$1.1
million) of cash collateral on the Orabank revolving facility. The cash
collateral was at a value of XOF758.3 million (31 December 2020: XOF626.4
million).
Amounts held for debt service represents Naira denominated cash which is held
by the Group for debt service, and this has been separately disclosed from
Cash and cash equivalents. In total, approximately US$149.0 million (31
December 2021: US$132.8 million) will be paid for the debt service from bank
accounts designated as Amounts held for debt service, and from Cash and cash
equivalents.
16. Trade and other payables
30 June 31 December 2021
2022
US$'000 US$'000
Unaudited Audited
Trade and other payables
Trade payables 31,489 30,957
Accruals 30,950 62,927
VAT and WHT payable 16,717 13,783
Royalty and levies 4,471 5,196
Employee benefits 88 91
Other payables 2,888 3,817
86,603 116,771
Other payables - non-current
Employee benefits 3,617 3,415
3,617 3,415
90,220 120,186
The Directors consider that the carrying amount of trade and other payables
approximates to their fair value.
17. Borrowings
30 June 31 December 2021
2022
US$'000 US$'000
Unaudited Audited
Revolving credit facility 11,939 9,916
Bank loans 374,009 379,002
Senior Secured Notes 95,135 100,717
Other loan notes 28,843 34,610
509,926 524,245
30 June 31 December 2021
2022
US$'000 US$'000
Unaudited Audited
Current borrowings 402,497 415,593
Non-current borrowings 107,429 108,652
509,926 524,245
18. Contract liabilities
Contract liabilities represents the value of gas supply commitment to the
Group's customers for gas not taken but invoiced under the terms of the
contracts. The amount has been analysed between current and non-current, based
on the customers' expected future usage gas delivery profile. This expected
usage is updated periodically with the customer.
30 June 31 December 2021
2022
US$'000 US$'000
Unaudited Audited
Amount due for delivery within 12 months 12,713 26,467
Amount due for delivery after 12 months 269,435 213,043
282,148 239,510
30 June 31 December 2021
2022
US$'000 US$'000
Unaudited Audited
As at 1 January 239,510 190,237
Additional contract liabilities 46,175 61,033
Contract liabilities utilised (5,409) (18,345)
Unwinding of discount on contract liabilities 1,872 6,585
As at end of period 282,148 239,510
The unwinding of the discount on contract liabilities relates to the fair
value adjustments made under IFRS 3: Business Combinations following the
acquisition of the Nigerian assets and entities in 2019. The fair value
adjustment was calculated as the discounted, expected cost of the future
deliveries of gas volumes under the terms of customer take-or-pay contracts.
This discounted amount unwinds relative to an apportioned amount of the
contract liabilities volumes at the date of acquisition that have subsequently
been utilised.
19. Cash flow reconciliations
The changes in the Group's liabilities arising from financing activities can be classified as follows:
Borrowings Interest payable Lease liabilities Total
US$'000 US$'000 US$'000 US$'000
At 1 January 2022 (audited) 524,245 80,101 6,783 611,129
Cash flows
Repayment (30,545) (21,050) (527) (52,122)
Proceeds 12,810 - - 12,810
Realised loss on loan repayment 33 - - 33
(17,702) (21,050) (527) (39,279)
Non-cash adjustments
Payment in kind adjustment/accretion of interest 3,764 26,502 201 30,467
Net debt fees (1,236) - - (1,236)
Borrowing fair value adjustments 1,768 - - 1,768
Working capital movements - - 107 107
Foreign translation (913) 3 (453) (1,363)
Balance at 30 June 2022 (unaudited) 509,926 85,556 6,111 601,593
Borrowings Interest payable Lease liabilities Total
US$'000 US$'000 US$'000 US$'000
At 1 January 2021 (audited) 514,662 51,544 8,061 574,267
Cash flows
Repayment (8,794) (10,981) (335) (20,110)
Realised loss on loan repayment 175 - - 175
(8,619) (10,981) (335) (19,935)
Non-cash adjustments
Payment in kind adjustment/accretion of interest 1,380 26,025 262 27,667
Net debt fees 1,752 - - 1,752
Borrowing fair value adjustments (3,042) - - (3,042)
Working capital movements - - (291) (291)
Foreign translation (1,011) (90) 79 (1,022)
Balance at 30 June 2021 (unaudited) 505,122 66,498 7,776 579,396
20. Capital commitments
At 30 June 2022, capital commitments amounted to US$4.8 million (30 June 2021:
US$13.0 million).
21. Events after the reporting date
There are no events after the reporting date other than those described within
this announcement.
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