REG - Scirocco Energy PLC - Investments Update

Scirocco EnergyAnnouncement

09/05/2022 07:00

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RNS Number : 6845K  Scirocco Energy PLC  09 May 2022

9 May 2022

Scirocco Energy plc

("Scirocco Energy" or "the Company")

Investments Update

Scirocco Energy (AIM: SCIR), the AIM investing company targeting attractive
assets within the European sustainable energy and circular economy
markets, is pleased to provide the following update on its investments:

EAG Joint Venture

The Company recently supported Energy Acquisitions Group Ltd ("EAG"), the
specialist acquisition and operating vehicle in the sustainable energy sector,
to acquire its first cash generative anaerobic digestion asset, Greenan
Generation Limited ("GGL"), in which Scirocco Energy holds a 50% interest:

Financial

In Q1 2022 the revenue received for the quarter by GGL totalled £323k
(unaudited) supported by high power prices through the period. This compares
to the same period in 2021 where revenue was £240k (unaudited) - a 34.5% year
on year increase. EBITDA for Q1 2022 was £158k and at current power prices,
EBITDA for the first 12 months of EAG's ownership of GGL is on target to
exceed £600k.

Operational

During Q1 2022, in order to future proof the plant at its Greenan site, the
EAG team completed the replacement and recommissioning of a number of elements
of critical equipment, at a total cost of c. £230k funded from operational
cash flow:

·    all mixers in the premix tank

·    all primary digester mixers, and refurbishment of all mixer
infrastructure including winches, winch motors and guide rails

·    Full Edina CHP (Combined Heat & Power) engine block change, and
completing major service

·    Upgrade and replacement of augers and pumps in feed and recirculation
system including installation of automatic recirculation system

 

Other than some minor planned upgrades, and preventative maintenance which is
contracted long term with service providers, there are no further major
upgrade projects planned in the next 24 months. Following these upgrades, and
the recommissioning of the CHP, the plant is expected to operate at over 95%
efficiency for the foreseeable future, with no further downtime.

 

Business Development

From a business development perspective, EAG is currently carrying out due
diligence on three additional AD plants. Under the arrangement with SEM
(announced by Scirocco in an RNS dated 9 December 2021) the Company and EAG
gained exclusive access to a technical solution for the processing of
digestate into a nutrient dense organic fertiliser. The EAG team is engaged in
discussions regarding up to seven merchant installations of the SEM equipment
on third party AD plants. This is in addition to the planned nutrient recovery
system at Greenan, which is expected to increase EBITDA for the entire Greenan
complex to c. £1,500k per annum once operational.

Tom Reynolds, Scirocco Energy CEO commented:

"I am delighted with the progress made by the EAG team on all fronts during
the first quarter with strong operational performance on EAG's current asset
and the development of a very attractive list of follow-on investments.

The investments targeted by EAG seek to deliver two valuable resources:
sustainable energy from biogas and sustainably sourced organic fertiliser. EAG
has positioned itself in two very exciting markets and we look forward to
supporting the company's growth going forward.

With respect to funding, the Scirocco team has been investigating parallel
funding options which would support the pace of capital investment into EAG
operated projects while reducing the call on Scirocco's balance sheet in the
near term."

 

Tanzania Operations

As communicated to the market in an RNS on 8 April 2022, operational
activities under the Ruvuma PSA in Tanzania, where Scirocco Energy owns a
legacy 25% working interest, have progressed under the supervision of
operator, ARA Petroleum Tanzania ("APT"):

·    Progress continues to be made by the contractor Africa Geophysical
Services Limited ("AGS") to acquire approximately 338 km² of 3D seismic data
focusing on the primary area of interest including the Ntorya discovery. The
Joint Venture intend to complete this acquisition and early processing of the
data ahead of spudding the Chikumbi-1 well ("CH-1").

·    APT has further advanced the well planning for the CH-1 well with all
long lead items contracts now executed

·    APT reports a target spud date for the CH-1 well in November 2022

·    APT's revised mapping and internal management estimates suggest a
risked prospective gas in place ("GIIP") for the Ntorya accumulation of 3,024
Bcf (gross basis, mean case), and a prospective, risked recoverable gas
resource of 1,990 Bcf (gross basis, mean case) considerably in excess of the
Joint Venture's carried resource assessment

As per the Tanzania Operations Update issued to the market on 8 April 2022,
the operator (Aminex) of the Kiliwani North Development Licence ("KNDL"), in
which Scirocco holds an 8.39% working interest, noted that any future drilling
is contingent upon an improved seismic resolution of the prospective target
structures.

·    The operator has reached an agreement with Pan African Energy
Tanzania ("PAET") to utilise their high-resolution 3D seismic campaign,
targeting a mid-year start, to receive approximately 12.5km² of valuable new
high-resolution 3D coverage over KNDL, at no cost to the Kiliwani North joint
venture

·    This coverage, which represents over 40% of the critical area of the
licence, will enable the operator to link the new high-resolution 3D data to
its existing 2D seismic legacy data which currently covers the KNDL with an
irregular seismic grid. This should significantly improve both fault
resolution and reservoir horizon mapping

Commenting on the update, Tom Reynolds said:

"Ruvuma Operator APT continues to move the work programme forward to better
characterise and enhance understanding of the potential resource, and we
remain excited about the schedule of work on our Tanzanian assets as we
approach key operational milestones.

As previously communicated, the Company is progressing discussions and
exploring options with interested parties for possible divestment and/or
farm-down of Scirocco's interest in both assets, while maintaining our funding
options in the event we retain our 25% interest in Ruvuma at the time of
drilling CH-1.

The priority of management remains to progress the ongoing, material
discussions on the sale of the company's interest in Ruvuma, to remove the
funding requirement and to achieve our stated strategy to pivot to sustainable
energy and circular economy markets, where EAG represents a robust, scalable
platform primed for growth in an exciting sector.

We look forward to providing further updates to the market in due course."

 

This announcement contains inside information for the purposes of Article 7 of
EU Regulation No. 596/2014, which forms part of United Kingdom domestic law by
virtue of the European (Withdrawal) Act 2018.

 

For further information:

 Scirocco Energy plc                            +44 (0) 20 7466 5000

 Tom Reynolds, CEO

 Doug Rycroft, COO

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

 Ritchie Balmer / James Spinney / Rory Murphy

 WH Ireland Limited, Broker                     +44 (0) 207 220 1666

 Harry Ansell / Katy Mitchell

 Buchanan, Financial PR                         +44 (0) 20 7466 5000

 Ben Romney / Jon Krinks / James Husband

 

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