REG - Savannah Energy Plc - Q1 2025 Trading Update

Savannah EnergyAnnouncement

19/05/2025 07:00

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RNS Number : 1537J  Savannah Energy Plc  19 May 2025

 

19 May 2025

Savannah Energy PLC

("Savannah" or "the Company")

 

Q1 2025 Trading Update

Savannah Energy PLC, the British independent energy company focused around the
delivery of Projects that Matter, is pleased to announce a Q1 2025 trading
update. All figures are unaudited.

Andrew Knott, CEO of Savannah Energy, said:

"I am pleased to provide a Q1 2025 trading update, highlighting good progress
in our core objectives for the year, including a 19% increase in Total
Revenues(1), and a continued strong trend in cash collections with almost
US$125 million received in the quarter. We are also reporting that, since
completion of the SIPEC Acquisition, production at the Stubb Creek oil field
("Stubb Creek") has increased by approximately 15% and 2P oil reserves have
been upgraded by 29%. Our planned Uquo Field drilling campaign, set to
commence in Q4, has the potential to add further reserves, resources and
production capacity which would be capable of easy and quick monetisation.

2025 continues to be an exciting year for the business and we continue to work
towards "ticking-off" the delivery of the nine focus area projects that we
outlined at the beginning of the year, being: (1) securing a further increase
in our rate of cash collections in Nigeria(2); (2) completion of the
refinancing of our principal Nigerian debt facilities; (3) completion of the
planned acquisition of 100% of Sinopec International Petroleum Exploration and
Production Company Nigeria Limited (the "SIPEC Acquisition") which was
achieved during Q1 2025; (4) commencement of the Stubb Creek expansion project
(which we updated on today); (5) the advancement of our Chad/Cameroon
arbitration processes(3); (6) the commencement of the safe and successful
drilling of our planned Uquo development well and potential Uquo exploration
well; (7) the potential advancement of our R3 East development in Niger(4);
(8) the refinement of our power sector business model; and (9) the delivery of
further transformational acquisitions.

I would also highlight that we anticipate achieving a strong increase in cash
collections in 2025 (even when set against our long-term 13% CAGR(5)), with
significant production capacity growth expected in 2026 once our heavy Uquo
field investment programme is completed.

I look forward to reporting further progress towards the achievement of many
of our focus area projects when we announce our full year 2024 results in
June."

Highlights

·      Q1 2025 Total Revenues(1) of US$73.3 million, up 19% (Q1 2024:
US$61.4 million), which includes a contribution of approximately US$3.6
million from Stubb Creek following completion of the SIPEC Acquisition;

·      Q1 2025 cash collections of US$124.8 million, an increase of 6%
(Q1 2024: US$117.7 million). As at 31 March 2025, cash balances were US$110.4
million (31 December 2024: US$32.6 million) and net debt stood at US$597.8
million (31 December 2024: US$636.9 million). This included debt associated
with the SIPEC Acquisition and, for comparison purposes, if this was excluded,
the net debt would have further reduced to US$570 million;

·      Q1 2025 gross production at Stubb Creek was 2.8 Kbopd (Q1 2024:
2.5 Kbopd) and, following completion of the SIPEC Acquisition during the
quarter, we have commenced an up to 18-month expansion programme anticipated
to increase gross production to approximately 4.7 Kbopd. During April 2025 we
have already seen an increase of 15% in Stubb Creek gross production to an
average of 3.1 Kbopd compared to the average 2024 level;

·      Increases of 197% and 29% in Stubb Creek Gross 1P and 2P oil
Reserves, respectively, due to an improved ultimate field recovery factor, as
determined through the implementation of enhanced field monitoring protocols
and advanced reservoir modelling. This follows a similar 27% increase in Uquo
Field Gross 2P Reserves announced in November 2021;

·      Average gross daily production of 23.6 Kboepd for Q1 2025,
broadly in line with the prior year period (Q1 2024: 24.1 Kboepd);

·      Completion of an equity issuance raising, in aggregate, gross
proceeds of approximately £30.6 million and the signing of a US$200 million
acquisition debt facility providing access to potential funding for future
hydrocarbon asset acquisitions;

·      Procurement process of long lead equipment progressing in Nigeria
in preparation for a potential two-well drilling campaign on the Uquo Field
commencing in Q4 2025. Equipment orders have been placed for a development
well which is expected to add up to 80 MMscfpd of production capacity.  An
additional exploration well remains under consideration targeting an Unrisked
Gross gas initially in place ("GIIP") of 154 Bscf (25.7 MMboe) of incremental
gas resources; and

·      Continuing to seek to progress the 35 MMstb (Gross 2C Resources)
R3 East oil development in South-East Niger, subject to satisfactory
stakeholder agreements being entered into.

Operational update

Hydrocarbons Division

Nigeria Existing Business

Average gross daily production was 23.6 Kboepd for Q1 2025, broadly in line
with the prior year period (Q1 2024: 24.1 Kboepd).

On 10 March 2025, we announced the completion of the SIPEC Acquisition. Since
its completion, we have commenced work on the planned production expansion
with an increase of 15% in production already achieved.  It is anticipated
that this up to 18-month programme will lead to Stubb Creek gross production
increasing to approximately 4.7 Kbopd. The transaction consideration was
funded through a drawdown under a new US$60 million Reserve-Based Lending
("RBL") debt facility. The RBL is fully available to utilise and the current
drawn amount is US$40 million.

The US$45 million compression project at the Uquo Central Processing Facility
is almost complete, with one compressor online and the second to be
commissioned before the end of next month. This project, which will be
delivered under budget, will allow us to maximise the production from our
existing and future gas wells.

We are progressing the procurement process of long lead equipment in Nigeria
in preparation for a potential two-well drilling campaign on the Uquo Field
commencing in Q4 2025. Well site and flowline surveys have been completed for
the Uquo NE development well ("Uquo NE"). This well is forecast to provide gas
volumes of up to 80 MMscfpd. An additional exploration well in the Uquo Field
("Uquo South") is also currently under consideration, which may be drilled
back-to-back with the Uquo NE well. Uquo South is a well targeting an Unrisked
Gross GIIP of 154 Bscf of incremental Prospective gas Resources on the Uquo
licence area.

Niger

We are continuing to seek to progress the 35 MMstb (Gross 2C Resources) R3
East oil development in South-East Niger. The Niger-Benin oil export pipeline,
now fully operational, provides a potential route to international markets for
crude oil produced from the R1234 contract area of our subsidiary, Savannah
Energy Niger SA, with 90 Kbopd reportedly being transported from the China
National Petroleum Corporation-operated Agadem PSC area.

Subject to satisfactory stakeholder agreements being entered into, Savannah
Energy Niger SA may commence a four-well testing programme on the Amdigh-1,
Eridal-1, Bushiya-1 and Kunama-1 discovery wells by the end of 2025, with all
of the required long lead item equipment already in Niger. We are at the
pre-contract award stage of the programme and our initial internal estimate of
the total cost of the well test programme is approximately US$14.5 million
(this will be subject to change as programme progresses and contracts are
awarded). Assuming a successful well test programme, we would look to
accelerate plans to commence commercial oil production from the R3 East Area
and intend to incorporate the data acquired into our field development plan.

Updated Competent Persons Reports

The Company has appointed McDaniel & Associates Consultants Ltd.
("McDaniel"), to prepare updated Competent Person's Reports ("CPRs") for the
oil and gas assets of the Group. These reports are anticipated to be finalised
and published alongside the Company's FY 2024 annual report and accounts.
McDaniel have completed their assessment for Stubb Creek and a summary of the
Gross 1P, 2P, 3P Reserves (prepared in accordance with the 2018 Petroleum
Resource Management System), is set out in the table below, along with a
comparison vs. the numbers presented in the Company's March 2024 Nigeria
CPR, as adjusted for production since its publication. The reduced range
between the 1P and 3P Reserves demonstrates the lower uncertainty in the
Reserves estimates and is a reflection of the maturity of an asset that has
now been on production for over 10 years.

 

              Stubb Creek
              CPR,          McDaniel, March 2025  Change (%)

              March 2024*
 Oil (MMstb)
 1P Reserves  3.3           9.8                   +197%
 2P Reserves  10.7          13.8                  +29%
 3P Reserves  20.4          18.1                  -11%

*Prepared by CGG Services (UK) Ltd

Power Division

As previously announced, Savannah is in the process of refining our Power
Division business model, the remit of which has now been expanded to include
potential thermal as well as potential renewable energy projects. We continue
to progress our existing portfolio of up to 696 MW of wind, solar and
hydroelectric projects, with our principal focus projects being on the up to
250 MW Parc Eolien de la Tarka project in Niger and the up to 95 MW Bini a
Warak hybrid hydroelectric and solar project in Cameroon. It should be noted
that it is not expected that all of the projects currently being progressed in
the portfolio funnel will reach financial close. However, our project funnel
should be viewed as dynamic, and we would expect to replace projects which do
not progress to financial close with other new projects in an organic manner
over time.

Financial update (unaudited)

Q1 Performance Highlights

Q1 2025 Total Revenues(1) were US$73.3 million, an increase of 19% over the
prior year period (Q1 2024: US$61.4 million). Other operating income(6) was
Nil in Q1 2025 (Q1 2024: US$76.6 million) due to the absence of any
requirement to invoice realised foreign exchange losses in the period.

Q1 2025 cash collections were US$124.8 million, an increase of 6% over the
comparable prior year period (Q1 2024: US$117.7 million). As at 31 March 2025,
cash balances were US$110.4 million (31 December 2024: US$32.6 million) and
net debt stood at US$597.8 million (31 December 2024: US$636.9 million). This
included debt associated with the SIPEC Acquisition and, for comparison
purposes, if this was excluded, the net debt would have further reduced to
US$570 million. The Trade Receivables balance as at 31 March 2025 was US$503.0
million (31 December 2024: US$538.9 million) which relates primarily to
amounts due under various gas sales agreements in Nigeria. Delivering an
increase in our rate of cash collections in Nigeria remains a key focus area
for the business in 2025.

2025-2026 Outlook

Given the significant ongoing operation work, including completion of
compression, site and logistical preparations for upcoming material drilling
activity and other ongoing well activities, together with anticipated levels
of customer demand, we expect production to average around 20 Kboepd for the
remainder of the year(7). From Q2 2026, following the drilling and tie-back of
Uquo NE, we expect to materially increase our gas delivery capacity to up to
200 MMscfpd (approximately 33.3 Kboepd) in addition to increased oil
production from Stubb Creek, which is expected to reach 4.7 Kbopd during H2
2026.

Debt Facilities

In March 2025 a subsidiary of the Company signed a US$200 million debt
facility, which is available to support potential future acquisitions of oil
and gas assets and is currently undrawn.

 

In January 2024, a NGN 340 billion term facility was signed by Accugas with a
consortium of five Nigerian banks (the "Transitional Facility"). This facility
is fully utilised with the resulting funds converted to US$, which, along with
cash held, was used to partially prepay the existing Accugas US$ Facility.
There is a remaining principal balance under the US$ Facility as at 31 March
2025 of approximately US$213.1 million. We are in the final stages of agreeing
an increase in the Transitional Facility to enable the remaining outstanding
US$ balance to be converted into Naira, with the current expectation this will
allow the remainder of the Accugas US$ Facility to be fully repaid during
Q2/Q3 2025. This process, when complete, will align Accugas' debt facility
with the currency in which gas revenues are received.

 

 

For further information, please refer to the Company's website
www.savannah-energy.com or contact:

 

Savannah
Energy
 
+44 (0) 20 3817 9844

Andrew Knott, CEO

Nick Beattie, CFO

Sally Marshak, Head of IR & Communications

 

Strand Hanson Limited (Nominated
Adviser)
            +44 (0) 20 7409 3494

James Spinney

Ritchie Balmer

Rob Patrick

 

Cavendish Capital Markets Ltd (Joint
Broker)
            +44 (0) 20 7220 0500

Derrick Lee

Tim Redfern

 

Panmure Liberum Limited (Joint
Broker)
            +44 (0) 20 3100 2000

Scott Mathieson

James Sinclair-Ford

 

Camarco
            +44 (0) 20 3757 4983

Billy Clegg

Owen Roberts

Violet Wilson

 

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

 

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

About Savannah:

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

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.

 

(2.) Internal management estimates assume an increase in the rate of cash
collections in relation to historical receivables, an average oil price of
US$65.88 per barrel for 2025 and US$67.52 for 2026, completion of the SIPEC
Acquisition and the receipt of legacy payments in Nigeria.

 

(3.) As previously disclosed in Savannah's 2023 Annual Report, our wholly
owned subsidiary, Savannah Chad Inc ("SCI"), commenced arbitral proceedings in
2023 against the Government of the Republic of Chad and its instrumentalities
in response to the March 2023 nationalisation of SCI's rights in the Doba
fields in Chad, and other breaches of SCI's rights. Another wholly owned
subsidiary, Savannah Midstream Investment Limited ("SMIL"), commenced arbitral
proceedings in 2023 in relation to the nationalisation of its investment in
Tchad Oil Transportation Company, the Chadian company which owns and operates
the section of the Chad-Cameroon pipeline located in Chad. SMIL has also
commenced arbitral and other legal proceedings for breaches of SMIL's rights
in relation to Cameroon Oil Transportation Company ("COTCo"), the Cameroon
company which owns and operates the section of the Chad-Cameroon pipeline
located in Cameroon. We expect these arbitral proceedings to be concluded no
later than the first half of 2026.

 

(4.) Subject to satisfactory stakeholder agreements being entered into.

 

(5.) 2017 -2024 cash collections CAGR.

 

(6.) Other operating income primarily relates to the re-billing of foreign
exchange losses incurred through the conversion of Naira paid invoices into US
dollars.

 

(7.) Note that gas production levels are largely driven by customer nomination
levels, while cash collections are largely driven by contractual maintenance
adjusted take-or-pay provisions of 117 MMscfpd in aggregate.

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