TIDMSAVP
RNS Number : 6831I
Savannah Petroleum PLC
23 March 2018
23 March 2018
Savannah Petroleum PLC
("Savannah" or "The Company")
2017 Audited Annual Results
Savannah Petroleum PLC is pleased to announce its full year
audited results for the period ending 31 December 2017.
Highlights
Seven Energy Transaction
-- Successful placing of US$125m to fund, inter alia, the
expected acquisition by Savannah of certain assets from Seven
Energy International Limited ("Seven") ("the Transaction");
-- As a result of the Transaction, Savannah is expected to hold
working interests in two large, producing onshore oil and gas
fields in Nigeria as well as a 20 per cent. interest in the Accugas
midstream business (the "Seven Assets");
-- The Transaction is expected give Savannah access to 2P
reserves of c. 92 mmboe, 2C resources of c. 44 mmboe and 2018 net
production is expected to be greater than 20 kboepd;
-- Announcement of the Company's intention to commence payment
of an annual dividend, initially expected to be US$12.5m, payable
in 2019.
Niger
-- Safe and successful completion of an 806km(2) 3D seismic
survey over a portion of the R3 PSC Area ("R3 East"), c. US$1.2m
under budget and ahead of schedule;
-- Signature of a rig and other ancillary drilling service
contracts with Great Wall Drilling Company Niger SARL ("GWDC") for
Rig GWDC 215, with a three well campaign confirmed and options
included for a further six wells which can be exercised
individually at Savannah's discretion;
-- Bushiya, Amdigh and Kunama confirmed as prospects (the
"Targets") to be targeted in Savannah's upcoming drilling campaign,
each of which is expected to assess potential oil pay in the Eocene
Sokor Alternances as a primary target, and in the Eocene Upper
Sokor as a secondary target;
-- Savannah's competent person, CGG Robertson ("CGG"), has
assessed total unrisked mean recoverable resources across the
Targets of 110 mmbbls;
-- Logistics camp and pipe yard to be used throughout drilling
operations constructed and operational.
Financial
-- US$125m equity fundraise successfully conducted ("the Placing");
-- US$15m year-end cash position which excludes proceeds from
the second tranche of the Placing (2016: US$23m);
-- Preparations for Niger drilling campaign largely completed.
Post-Period Highlights
-- Rig GWDC 215 on location at the Company's Bushiya well site,
which is fully manned and operational, with drilling preparations
underway and spud expected by the end of March 2018;
-- General Meeting held at which shareholder approval of, inter
alia, the Transaction was granted;
-- Completion of exchange offer with respect to Seven Energy's
10.25 per cent. Senior Secured Notes ("SSNs"). Savannah received
valid instructions in respect of 96.04 per cent. of the outstanding
SSNs, and consequently the Second Tranche Placing Shares, the EBT
Shares and the new Ordinary Shares to be issued to the holders of
the SSNs (which form part of the Consideration Shares) were issued
and allotted;
-- Joint statements by the Niger and Nigeria Ministers of
Petroleum, establishing plans for the formal establishment of a
Niger-Nigeria crude oil export route;
-- Good progress continues to be made on the Transaction, which
is currently anticipated to complete in the second quarter of 2018,
following the satisfaction of relevant conditions precedent which
include, inter alia, the Implementation Agreement being entered
into, the Accugas Transaction and the Accugas Waiver becoming
effective, the Frontier Agreements being entered into and becoming
effective, Ministerial Consent and NSEC Consent.
Unless otherwise defined, capitalised terms are as per the
Company's AIM Admission Document dated 22 December 2017.
Andrew Knott, CEO of Savannah Petroleum, said:
"2017 was a transformational year for Savannah. The acquisition
of assets from Seven Energy creates a full cycle exploration and
production company, capable of paying a dividend from the cash
flows generated by its upstream assets. The deal also enables us to
enhance our operational capabilities and provide the business with
a strong platform to deliver further value accretive organic and
inorganic growth in the future. We are delighted with the strong
performance we have seen from the Seven Assets since our
announcement of the Transaction. In Niger, we are pleased to be on
track to spud our first well, Bushiya, by the end of March 2018,
and continue to make good progress on the ground as we prepare to
start drilling operations. We look forward to providing further
updates over the coming weeks."
Please refer to the Company's website for the 2017 Annual
Report.
For further information contact:
Savannah Petroleum +44 (0) 20 3817 9844
Andrew Knott, CEO
Isatou Semega-Janneh, CFO
Jessica Hostage, VP Corporate
Affairs
Strand Hanson (Nominated Adviser) +44 (0) 20 7409 3494
Rory Murphy
James Spinney
Ritchie Balmer
Mirabaud (Joint Broker) +44 (0) 20 7878 3362
Peter Krens
Ed Haig-Thomas
Hannam & Partners (Joint Broker) +44 (0) 20 7907 8500
Neil Passmore
Alejandro Demichelis
Sam Merlin
Celicourt Communications +44 (0) 20 7520 9266
Mark Antelme
Jimmy Lea
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, and is
disclosed in accordance with the Company's obligations under
Article 17 of those Regulations.
Chairman's Statement
I am pleased to report on Savannah Petroleum's operations and
activities for the year ended 31 December 2017, our third full year
of trading on the London Stock Exchange's AIM market.
From a macro-economic perspective, 2017 was a more encouraging
year for the oil and gas industry. Oil prices stabilised in the $60
- $65 per barrel range, with a resulting increase in activity
across the sector. This trend points to a more positive outlook for
the industry than when I addressed you a year ago. However, the
recent travails of the sector have presented opportunities for the
fleet of foot. I am pleased to say that we were able to capitalise
on one such opportunity with our ongoing Seven Energy transaction,
more details of which you will read throughout this report.
2017 has been a truly transformational year for Savannah. In
Niger, we made significant progress by completing our 3D seismic
campaign over a portion of the R3 part of the R3/R4 PSC which
confirmed our view of the significant prospectivity of the
exploration targets in this area and of our assets in general. At
the time of writing we are making final preparations for our
forthcoming high-impact drilling campaign.
In July we confirmed that we had entered into a binding
exclusivity agreement with Seven Energy International Limited, a
Nigerian focused oil and gas company, in relation to the proposed
acquisition of certain of its assets. 2017 ended for Savannah with
the company raising US$125 million to fund this transaction, which
is expected to give us access to net 2P reserves of 92 mmboe, net
2C resources of 44 mmboe and expected 2018 net production in excess
of 20 kboepd. The Niger Delta is one of the most prolific oil and
gas basins in the world, with an established oil and gas industry,
and this transaction will give our shareholders access to the
upside of Nigeria's rapid industrial growth. I believe the deal has
been struck on very attractive terms and on completion is expected
to add high quality, cash flow generative assets with material
upside to our portfolio. We look forward to shareholders quickly
benefitting from our increased scale as we expect to pay a maiden
dividend of US$12.5 million from FY 2018 (i.e. expected to be
payable in 2019).
We are pleased to have made such significant strides in the
delivery of our clear growth strategy, which is designed not only
to maximise value and generate returns for our shareholders, but
also to afford us some diversity within the portfolio and to
protect us from any future buffeting resulting from the cyclical
nature of the oil and gas industry.
As we become a larger business, it is appropriate to broaden our
corporate expertise. To that end, we were very pleased to have
strengthened the Board at the end of last year. We welcomed the Rt.
Hon. Sir Stephen O'Brien as Vice Chairman, and David Clarkson and
Michael Wachtel as Non-executive Directors, who bring many years of
highly relevant operational, commercial and political experience.
Sir Stephen joins us after a distinguished career in business and
then politics, having held various positions in the UK Government,
including Parliamentary Under-Secretary of State for International
Development and UK Special Representative for the Sahel. He also
served as UN Under-Secretary-General for Humanitarian Affairs and
Emergency Relief Coordinator. David has over 40 years experience in
the oil and gas industry, mainly at BP where he was Senior Vice
President for Projects and Engineering (Upstream) and a member of
BP's leadership team, and he brings a wealth of operational and
technical experience to the Board. Michael is currently a member of
the Management Board of law firm Clyde & Co, where he provides
a full range of services including corporate, mergers and
acquisitions, financing, governance and regulatory compliance. We
were also pleased to welcome our VP Finance, Isatou Semega-Janneh,
to the Board as CFO on an interim basis.
Looking ahead, 2018 will be a key year for Savannah. In the
near-term, the commencement of our high-impact drilling campaign in
Niger is something we are very optimistic about. The completion of
the Seven Energy transaction and the integration of the assets into
our portfolio is expected to transform the company into a fully
funded business that is capable of generating significant cash flow
which can be reinvested in high return opportunities such as our
operations in Niger. We remain open to other value accretive
opportunities that may arise, with our immediate focus firmly
centred around Nigeria.
Savannah will continue to place high priority on our corporate
governance and corporate social responsibility ("CSR"). The Board
fully recognises the importance of corporate governance,
commensurate with the size and nature of the enlarged Company, and
in the interests of its shareholders. We recognise how crucial it
is to make a positive contribution through our operations, not only
as part of our financial license commitments, but also by making a
positive impact on the communities close to our areas of operation.
We continue to work closely with, and build relationships with, our
local stakeholders, in order to bring about sustainable development
in these areas.
Exercising strict capital discipline on our expanded asset
portfolio, supported by an improving macro-economic outlook, I
believe Savannah is well positioned to continue growing and
creating shareholder value. Our excellent team is focused and
strongly aligned with shareholders, and I look forward to reporting
on our progress throughout the year ahead.
Finally, I would like to thank our shareholders (both existing
and new) for their support over the past year. I would also like to
thank the governments of Niger and Nigeria for their support and
trust. On behalf of everyone at Savannah, I look forward to
welcoming our new colleagues from Seven Energy who have been active
participants in progressing the transaction. I thank them, and all
of our staff, for their hard work and dedication over what has been
a hugely important year for our company.
Steve Jenkins
Chairman
22 March 2018
CEO's 2017 Review
Dear fellow shareholders,
I am pleased to report Savannah's 2017 progress to you. Last
year, our busiest yet, was dominated by two major and potentially
transformational events. The first was the finalisation of our
preparations for the commencement of drilling activity on our R3/R4
PSC Area in South East Niger. The second was our planned US$280m
acquisition of interests in two producing oil and gas fields, and
associated infrastructure, from Seven Energy (the "Seven
Transaction"). In this letter I will discuss each of these events
in turn, before going on to describe how we intend to position the
company to deliver future growth and share price performance over
the course of the coming years.
In early 2017 we announced the successful completion of our
806km(2) 3D seismic survey, acquired over a portion of the R3 part
of the R3/R4 PSC Area ("R3 East"), which is located in the Agadem
Rift Basin ("ARB"). The survey was completed safely with no
lost-time incidents, ahead of schedule, with 25 fewer acquisition
days than planned, and c. US$1.2m under budget. This strong
performance was testament to the strong working relationship that
developed between our operational team and our highly experienced
seismic contractor, BGP Niger SARL.
We signed a contract with Great Wall Drilling Company Niger SARL
("GWDC") for use of the GWDC 215 rig ("Rig GW-215") for three firm
wells, with the option to drill up to another six. Rig GW-215 has
successfully drilled over 40 wells in the ARB. In total GWDC has
drilled over 200 wells in the area, and has acquired a deep
knowledge of the geological and technical aspects of drilling on
the ARB. This underpinned the principal reasons for appointing GWDC
as our drilling contractor. To support the drilling operations, we
constructed a logistics camp and pipe yard on R3 using a local
contractor, and completed the procurement of the necessary
long-lead items (including casing and wellheads) for our initial
three wells. At the time of writing, our first well site (Bushiya)
has been fully constructed, is now manned and operational, and Rig
GW-215 is on site and preparing to spud.
The three wells that we have selected to drill are known as
Bushiya, Amdigh and Kunama. Each well is primarily targeting the
Eocene Sokor Alternances (the formation in which the majority of
discoveries have been made in the ARB to date). An additional
"upside case" in the Eocene Upper Sokor Formation has also been
recognised as the secondary target. Each well is expected to take
c.30-35 days from spud to reach target depth. A Competent Person's
Report by CGG Robertson ("CGG") has assessed these targets to carry
a similar risk profile to those drilled elsewhere in the basin to
date (which has seen a c.75% geological success rate) and has
assessed total mean un-risked recoverable resources across the
three wells at 110 mmbbls. CGG has also assessed as reasonable a
Net Present Value per barrel of US$5.5/bbl. Importantly, these
wells are testing only a fraction of the ultimate prospectivity
which sits within our ARB permit areas. We have identified a large
prospect inventory of at least 115 other potential targets to drill
from our existing seismic dataset and we believe that this should
be fully recognised when assessing the value creation potential of
our ARB project.
I would also like to emphasise the focus our company has around
seeking to ensure the timely commercialisation of any discoveries
that we make in Niger. We have commenced various work-streams
relating to this, including an early production concept, and expect
to further advance these over the course of 2018. With respect to
development options, I would highlight the statements by Minister
Gado of Niger and Minister Kachikwu of Nigeria in February 2018,
where they jointly announced their plans for the formal
establishment of a Niger-Nigeria crude oil export route (the most
profitable of the available potential export solutions in our
view). We look forward to further progress on this front being
announced.
We have provided significant levels of detail in relation to the
Seven Transaction on our website, which I would urge shareholders
who have not done so to review. In particular, I would highlight
our most recent corporate presentation and the Seven Transaction
video. Both of these are available on our website, at
www.savannah-petroleum.com, and contain a wealth of information for
shareholders to refer to. The valuation we have agreed to acquire
the Seven assets for (US$3.1/boe upstream acquisition cost and 36%
of capital invested to date) is highly attractive. The deal will
enable us to become one of the larger oil & gas producing
companies listed in London, capable of generating material cash
flows going forward, and the assets to be acquired are expected to
serve as a strong platform for future value accretive growth,
especially in Nigeria. I believe this is a transformational deal
for Savannah which establishes the foundation upon which we can
continue to build shareholder value.
We announced a US$125m equity placing in December, the proceeds
of which were designated for partial consideration and costs of the
Seven Transaction, our Niger drilling campaign, ongoing working
capital requirements and other corporate purposes. The placing was
very well supported by both existing and new shareholders, who I
would like to thank for their support. The placing served as a
clear endorsement of our strategy to expand into Nigeria, and as a
continued vote of confidence in our existing Nigerien assets.
The message I would like to leave shareholders with from this
update is my excitement for Savannah's 2018 activities and plans,
and how pleased we are to have taken major steps in transforming
the company into a full-scale operating business. In the near-term,
we are extremely close to delivering the first results from our
drilling campaign in Niger, and over the course of the year we
expect to continue to demonstrate the high-quality performance from
the Seven Assets in Nigeria. I look forward to sharing updates on
our progress, and again thank all of our shareholders for their
ongoing support.
Finally, I would like to echo our Chairman's sentiment, and
thank our governmental stakeholders in Niger for their support and
trust, as well as the Nigerian authorities as we move forward to
become a participant in the country's oil and gas sector. I would
also like to thank all of the Savannah and Seven Energy staff, our
Board members and advisers, for their indefatigable efforts over
the course of the past year as we work towards making drilling in
Niger and the Seven Transaction a reality.
Andrew Knott
Chief Executive Officer
22 March 2018
Financial Review
Overview
At year end, the Group had cash and cash equivalents of US$15m
(2016: US$23m) and had successfully completed the acquisition of
806km(2) 3D seismic over R3 East. The operation came in c. US$1.2m
under budget and ahead of schedule. The Group recorded an operating
loss of US$27m (2016: US$8m). Net of US$18.5m exceptional business
development costs associated with the Seven Energy transaction, the
year-on-year operating loss remained flat at US$8m, as the Group
remained in the pre-revenue exploration and development phase of
operations.
Analysis of Key Line items
Exploration expenditure
Over the course of the year, exploration and evaluation assets
grew from US$97m at year end 2016 to US$112m at year end 2017. Much
of this increase relates to the safe and successful completion of
the R3 East 3D seismic survey. The Group also incurred expenditure
associated with the signature of its rig contract with Great Wall
Drilling Company Niger SARL, and procurement of the necessary
long-lead tangible equipment in anticipation of its planned
drilling program. A logistics base and pipe yard was constructed on
Agadem for use in the campaign, with most of the drilling equipment
mobilised on site.
General and administration expenses
The Group's year-on-year administration expenses, net of
exceptional business development costs, remained flat at US$8m
(2016: US$8m). The increase in overall general and administrative
expenses during the year was as a result of exceptional business
development costs of US$18.5m in relation to the Seven Energy
transaction.
Cash and short-term investments
The Group had cash and cash equivalents at 31 December 2017 of
US$15m (2016: US$23m). Cash of US$12.6m (2016: US$40m) was raised
through the issue of equity shares in December 2017 (which
comprised the first tranche of the US$125m placing).
Total comprehensive loss
Total comprehensive loss for 2017 was US$27m (2016: US$10m). The
increase in this loss was primarily due to the exceptional
transaction costs associated with the Seven Energy transaction.
Summary statement of financial position
The Group's non-current assets were US$115m at 31 December 2017
(2016: US$98m). The increase in non-current assets is attributable
to additional exploration expenditure relating to seismic
acquisition and drilling program expenditure incurred during the
year. Current assets were US$19m at 31 December 2017 (2016:
US$29m), including cash reserves of US$15m (2016: US$23m). The
decrease in current assets is as a result of significant cash
outflow to support the Seven Energy transaction. Current
liabilities were US$31m (2016: US$9m). The increase in current
liabilities is primarily due to additional payables associated with
the Seven Energy transaction. The Group did not have any
non-current liabilities in 2017 (2016: nil).
Dividend
No dividend has been recommended by the Directors for 2017
(2016: nil), although the Group has announced its intention to
commence payment of an annual dividend assuming the successful
completion of the Seven Energy transaction. This is initially
expected to be US$12.5m, assuming appropriate business performance
during 2018, and payable in 2019.
Accounting policies
The Group's significant accounting policies are disclosed within
the notes to the consolidated financial statements.
Liquidity risk management and going concern
The Group manages liquidity by regularly reviewing cash
requirements by reference to short term cash flow forecasts and
medium-term projections prepared by management. At 31 December
2017, the Group had cash reserves of US$15m.
The Group has reviewed the cash flow forecasts and capital
projections for the next twelve months and has a reasonable
expectation that it can access adequate resources to continue
operating for the foreseeable future. The Group continues to adopt
the going concern basis in preparing its Financial Statements.
Isatou Semega-Janneh
Chief Financial Officer
22 March 2018
Consolidated Statement of Year ended Year ended
Comprehensive Income 31 December 31 December
2017 2016
Note US$'000 US$'000
---------------------------------- ----- ------------- -------------
Operating expenses (27,091) (8,412)
Operating loss (27,091) (8,412)
Finance income 283 207
Finance costs (561) (126)
Loss before tax (27,369) (8,331)
Income tax (13) (1,502)
Net loss and total comprehensive
loss (27,382) (9,833)
Total comprehensive loss
attributable to:
Owners of the group (27,350) (9,818)
Non-controlling interests (32) (15)
---------------------------------- ----- ------------- -------------
(27,382) (9,833)
Loss per share
Basic (US$) 3 (0.10) (0.04)
Diluted (US$) 3 (0.10) (0.04)
---------------------------------- ----- ------------- -------------
All results in the current financial period derive from
continuing operations
Consolidated Statement of Financial Position
As at 31 December 2017 2016
Note US$'000 US$'000
----------------------------------- ---- -------- --------
Assets
Non-current assets
Property, plant and equipment 2,933 954
Exploration and evaluation
assets 4 111,733 96,913
Total non-current assets 114,666 97,867
----------------------------------- ---- -------- --------
Current assets
Receivables and prepayments 3,999 6,074
Cash and cash equivalents 14,904 23,061
----------------------------------- ---- -------- --------
Total current assets 18,903 29,135
----------------------------------- ---- -------- --------
Total assets 133,569 127,002
----------------------------------- ---- -------- --------
Equity and liabilities
Capital and reserves
Share capital 5 520 483
Share premium 5 157,188 146,892
Capital contribution 6 458 458
Share based payment reserve 6 4,551 2,938
Accumulated deficit (59,317) (31,967)
----------------------------------- ---- -------- --------
Equity attributable to owners
of the Group 103,400 118,804
Non-controlling interests (397) (365)
Total equity 103,003 118,439
----------------------------------- ---- -------- --------
Current liabilities
Trade and other payables 17,888 7,777
Borrowings 12,678 -
Corporation tax liability - 786
Total current liabilities 30,566 8,563
----------------------------------- ---- -------- --------
Total equity and liabilities 133,569 127,002
----------------------------------- ---- -------- --------
Consolidated Statement of Cash Flows
Year ended Year ended
31 December 31 December
2017 2016
Note US$'000 US$'000
------------------------------- ---- ------------ ------------
Cash flows from operating
activities:
Net cash used in operating
activities 7 (15,677) (8,457)
Cash flows from investing
activities:
Payments for property, plant
and equipment (2,253) (441)
Proceeds from disposal of
property, plant and equipment - 97
Exploration and evaluation
costs paid (17,313) (9,315)
------------------------------- ---- ------------ ------------
Net cash used in investing
activities (19,566) (9,659)
------------------------------- ---- ------------ ------------
Cash flows from financing
activities:
Finance costs (221) (126)
Proceeds from issues of equity
shares, net of issue costs 14,966 33,454
Borrowings 12,341 -
------------------------------- ---- ------------ ------------
Net cash provided by financing
activities 27,086 33,328
------------------------------- ---- ------------ ------------
Net (decrease)/increase in
cash and cash equivalents (8,157) 15,212
Cash and cash equivalents
at beginning of year 23,061 7,849
Cash and cash equivalents
at end of year 14,904 23,061
------------------------------- ---- ------------ ------------
Consolidated Statement of Changes in Equity
Share
based
Share Share Capital payment Accumulated Non-controlling
capital premium contribution reserve deficit Total interest Total
US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
Balance at 01
January
2016 321 108,576 458 1,223 (22,149) 88,429 (350) 88,079
Loss for the year - - - - (9,818) (9,818) (15) (9,833)
Other comprehensive
income - - - - - - - -
------------------- --------- --------- ------------- -------- ------------- -------- --------------- --------
Total comprehensive
income for the
period - - - - (9,818) (9,818) (15) (9,833)
Transactions with
shareholders:
Equity settled
share based
payments - - - 1,715 - 1,715 - 1,715
Issue of ordinary
shares to
shareholders,
net of issue costs 162 38,316 - - - 38,478 - 38,478
Balance at 31
December
2016 483 146,892 458 2,938 (31,967) 118,804 (365) 118,439
Loss for the year - - - - (27,350) (27,350) (32) (27,382)
Other comprehensive
income - - - - - - - -
------------------- --------- --------- ------------- -------- ------------- -------- --------------- --------
Total comprehensive
income for the
period - - - - (27,350) (27,350) (32) (27,382)
Transactions with
shareholders:
Equity settled
share based
payments - - - 1,613 - 1,613 - 1,613
Issue of ordinary
shares to
shareholders,
net of issue costs 37 10,296 - - - 10,333 - 10,333
Balance at 31
December
2017 520 157,188 458 4,551 (59,317) 103,400 (397) 103,003
1. Corporate information
The consolidated financial statements of Savannah Petroleum Plc
("Savannah" or the "Company") and its subsidiaries (together the
"Group") for the year to 31 December 2017 were authorised for issue
in accordance with a resolution of the Board of Directors on 22
March 2018.
Savannah was incorporated in the United Kingdom on 3 July 2014.
Savannah's principal activity is the management of its investment
in Savannah Petroleum 1 Limited ("SP1"). SP1 was incorporated in
Scotland on 3 July 2013. SP1's principal activity is the management
of its investment in Savannah Petroleum 2 Limited ("SP2"), and the
provision of services to other companies within the Group. SP2 has
a 95% interest in Savannah Petroleum Niger R1/R2 S.A. ("Savannah
Niger") whose principal activity is the exploration of hydrocarbons
in the Republic of Niger.
The Company is domiciled in the UK for tax purposes and its
shares were listed on the Alternative Investments Market ("AIM") of
the London Stock Exchange on 1 August 2014.
The Company's registered address is 40 Bank Street, London, E14
5NR.
The Group's functional currency is US dollars ("US$").
No dividends have been declared or paid since incorporation.
2. Basis of preparation
The consolidated financial statements of the Group have been
prepared in accordance with International Financial Reporting
Standards as adopted by the European Union ("IFRSs as adopted by
the EU"), IFRIC interpretations and those parts of the Companies
Act 2006 applicable to companies reporting under IFRS. The
consolidated financial statements have been prepared under the
historical cost convention.
The consolidated financial statements of the Group incorporate
the results for the year to 31 December 2017.
Publication of non-statutory accounts
The financial information set out in this announcement does not
constitute statutory accounts as defined in Section 434 of the
Companies Act 2006.
The consolidated statement of financial position, the
consolidated statement of cash flows and the consolidated statement
of changes in equity as at 31 December 2017 and the consolidated
statement of comprehensive income for the period ended 31 December
2017, together with the associated notes, have been extracted from
the Group's 2017 financial statements upon which the auditor's
opinion is unqualified and does not include any statement under
Section 498 of the Companies Act 2006.
Going concern
The Directors have reviewed the budgets and forecasts as well as
the funding requirements of the business for the next 12 months.
Having conducted this review, the Directors have a reasonable and
strong expectation that the Group has adequate resources to
continue operating for the foreseeable future. The planned
acquisition of certain assets from Seven Energy is expected to see
the Company acquire interests in two free cash flow generative oil
and gas fields and receive incremental cash funds on close
associated with the US$20m proceeds from the SSN equity issuance.
This transaction is currently anticipated to complete in the second
quarter of 2018, following the satisfaction of relevant conditions
precedent which include, inter alia, the Implementation Agreement
being entered into, the Accugas Transaction and the Accugas Waiver
becoming effective, the Frontier Agreements being entered into and
becoming effective, Ministerial Consent and NSEC Consent. Upon
completion of the transaction the Group is therefore expected to
benefit from a significant positive liquidity/working capital
inflow. Were the transaction to be materially delayed from the
currently anticipated second quarter completion schedule, which the
Directors recognise as a potential risk, the Company would likely
be required to access incremental debt facilities. The Directors
have a reasonable and strong expectation that the Group would be
able to achieve this. On this basis the Directors continue to adopt
the going concern basis in preparing the consolidated financial
statements.
The Group is in a positive net asset position at 31 December
2017, and had at that date US$14,904,000 (2016: US$23,061,000) of
cash and cash equivalents to meet its operational requirements.
In December 2017, the Company announced a US$125,000,000 equity
raise, of which US$12,970,000 (gross) was received by the Company
prior to year-end. The remainder of the placing was successfully
completed post-period end. The use of proceeds of this placing is
to fund ongoing Niger operations, the Seven Energy transaction and
ongoing corporate purposes.
Basis of consolidation
Subsidiaries
The consolidated financial statements incorporate the financial
statements of the Company and its subsidiaries.
Control is achieved when the Group is exposed, or has rights, to
variable returns from its involvement with the investee and has the
ability to affect those returns through its power over the
investee. Specifically, the Group controls an investee if, and only
if, the Group has:
-- Power over the investee (i.e. existing rights that give it
the current ability to direct the relevant activities of the
investee);
-- Exposure, or rights, to variable returns from its involvement with the investee; and
-- The ability to use its power over the investee to affect its returns.
Generally, there is a presumption that a majority of voting
rights result in control. To support this presumption and when the
Group has less than a majority of the voting or similar rights of
an investee, the Group considers all relevant facts and
circumstances in assessing whether it has power over an investee,
including:
-- The contractual arrangement with the other vote holders of the investee;
-- Rights arising from other contractual arrangements; and
-- The Group's voting rights and potential voting rights.
The Group re-assesses whether or not it controls an investee if
facts and circumstances indicate that there are changes to one or
more of the three elements of control. Consolidation of a
subsidiary begins when the Group obtains control over the
subsidiary and ceases when the Group loses control of the
subsidiary. Assets, liabilities, income and expenses of a
subsidiary acquired or disposed of during the year are included in
the consolidated financial statements from the date the Group gains
control until the date the Group ceases to control the
subsidiary.
Profit or loss and each component of other comprehensive income
are attributed to the equity holders of the parent of the Group and
to the non-controlling interests, even if this results in the
non-controlling interests having a deficit balance.
Transactions eliminated upon consolidation
Where necessary, adjustments are made to the financial
statements of subsidiaries to bring their accounting policies into
line with those used by other members of the Group. All intra-group
transactions, balances, income and expenses are eliminated in full
on consolidation.
3. Earnings per share
Basic loss per share amounts are calculated by dividing the loss
for the period attributable to owners of the parent by the weighted
average number of ordinary shares outstanding during the
period.
Diluted loss per share amounts are calculated by dividing the
loss for the periods attributable to owners of the parent 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. The effect of share options and warrants are
therefore excluded from the calculation of diluted loss per
share.
Year ended 31 December 2017 2016
US$'000 US$'000
----------------------------------- ----------- -----------
Earnings
Net loss attributable to owners
of the parent (27,350) (9,818)
----------------------------------- ----------- -----------
Number Number
of shares of shares
Basic and diluted weighted average
number of shares 274,922,400 229,221,183
Loss per share US$ US$
Basic and diluted (0.10) (0.04)
In July 2016 the Company issued 81,280,000 new ordinary shares
as part of an equity fund raising to the value of US$40 million
(gross).
In December 2017 the Company issued 27,462,000 new ordinary
shares as part of an equity fund raising to the value of US$13
million (gross).
Refer to the note 8 (Subsequent Events) for more detail on the
placing of the second tranche of shares.
4. Exploration and evaluation assets
Exploration and evaluation assets consist of acquisition costs
relating to the acquisition of exploration licenses and other costs
associated directly with the discovery and development of specific
oil and gas reserves in the R1/R2 and R3/R4 licence area in the
Republic of Niger.
Total
US$'000
---------------------------- --------
Balance at 01 January 2016 80,529
Additions 16,384
------------------------------ --------
Balance at 31 December 2016 96,913
Additions 14,820
Balance at 31 December 2017 111,733
------------------------------ --------
The amount for intangible exploration and evaluation assets
represents active exploration projects. These will ultimately be
written off to the statement of comprehensive income as exploration
costs if commercial reserves are not established but are carried
forward in the statement of financial position whilst the
determination process is not yet completed and there are no
indications of impairment having regard to the indicators in IFRS
6.
On the R3/R4 License area, the Group has committed to a 3 well
drilling campaign in 2018. On the R1/R2 license area, the Group
continues to progress technical work, and to make relevant
preparations for potential operational programmes on the license
while discussions are ongoing with relevant authorities in relation
to the potential extension of the initial license term.
5. Share capital
As at 31 December 2017 2016
------------------------------------ ----------- -----------
Fully paid ordinary Shares in issue
(number) 301,793,177 264,489,510
Called up ordinary Shares in issue
(number) 290,270 10,131,937
Par value per share in GBP 0.001 0.001
------------------------------------ ----------- -----------
Number Share
of Shares Capital Share Premium Total
US$'000 US$'000 US$'000
-------------------- ----------- -------- ------------- --------
At 01 January 2016 193,341,447 321 108,576 108,897
Shares issued 81,280,000 162 38,316 38,478
At 31 December 2016 274,621,447 483 146,892 147,375
Shares issued 27,462,000 37 10,296 10,333
At 31 December 2017 302,083,447 520 157,188 157,708
-------------------- ----------- -------- ------------- --------
On 3 July 2014, 10 ordinary shares of GBP0.01 were issued.
On 22 July 2014, 49,999,991 ordinary shares of GBP0.001 were
issued as part of a share for share exchange.
On 1 August 2014, 25,497,236 ordinary shares of GBP0.001 were
issued as part of the loan note conversion.
On 1 August 2014, 55,839,935 ordinary shares of GBP0.001 were
issued as part of the AIM listing.
The total aggregate increase in the share premium reserve
regarding the share issues was US$35,158,000 (2014: US$73,668,000)
after deducting US$1,634,000 (2014: US$3,770,000) in expenses.
In July 2015, 61,690,000 ordinary shares of GBP0.001 were issued
as part of an equity fund raising.
In July 2015, 314,275 ordinary shares of GBP0.001 were issued as
part of an employee remuneration award.
In July 2016, 81,280,000 ordinary shares of GBP0.001 were issued
as part of an equity fund raising to the value of US$40 million
(gross).
In December 2017 the Company issued 27,462,000 new ordinary
shares as part of an equity fund raising to the value of US$13
million (gross). Due to the timing of the equity placing,
US$392,000 of new shares issued were unpaid as at the year-end and
are included as part of other debtors. The second tranche placing
of the equity fund raise was completed after year-end.
6. Other reserves
Share
based
Capital payment
contribution reserve Total
US$'000 US$'000 US$'000
------------------------- ------------- -------- -------
At 01 January 2016 458 1,223 1,681
Share based payments
expense during the year - 1,715 1,715
At 31 December 2016 458 2,938 3,396
Share based payments
expense during the year - 1,613 1,613
At 31 December 2017 458 4,551 5,009
------------------------- ------------- -------- -------
Nature and purpose of reserves
Share based payment reserve
The share-based payment reserve is used to recognise the value
of equity-settled share-based payments provided to employees,
including key management personnel, as part of their
remuneration.
Capital risk management
The Group manages its capital to ensure that entities in the
Group will be able to continue as a going concern while seeking to
maximise the return to shareholders through the optimisation of the
debt and equity balance.
Details of the Group's capital structure can be found in the
capital accounting policy.
The proceeds are used to finance the Group's ongoing
development, appraisal of its exploration and evaluation assets,
inorganic acquisitions and other business development in line with
the Group's strategy.
7. Notes to the consolidated statement of cash flows
Year ended Year ended
31 December 31 December
2017 2016
US$'000 US$'000
--------------------------------------- ------------- -------------
Loss for the period before tax (27,369) (8,331)
Adjustments for:
Depreciation and amortisation 274 122
Finance costs 561 126
Finance income (2) -
Share option charge 1,613 1,715
Operating cash flows before movements
in working capital (24,923) (6,368)
(Increase)/decrease in other
receivables and prepayments (2,560) (170)
Increase/(decrease) in trade
and other payables 12,604 (638)
Income tax paid (798) (1,281)
Net cash outflow from operations (15,677) (8,457)
8. Subsequent Events (Post Balance Sheet)
On 8 January 2018, as part of the Company's proposal to acquire
the Seven Assets (detailed on pages 2 to 17 in the 2017 Annual
Report), the Company held a general meeting to approve, inter alia,
the acquisition of the Seven Assets and the issue and allotment of
the shares described below.
On 7 February 2018, the Group completed the Exchange Offer on
Seven Energy's 10.25% Senior Secured Notes and Savannah had
received valid instructions in respect of US$305,623,123 in
principal amount of outstanding 10.25% Senior Secured Notes,
representing 96.04% of the outstanding notes. Consequently, on 8
February 2018, a total of 514,885,980 new ordinary shares were
issued, allotted and admitted to trading on AIM in connection with
the Second Tranche Placing, the Consideration Shares and the EBT
shares. This figure was comprised of 239,000,000 Second Tranche
Placing Shares, 42,624,837 EBT Shares, 224,021,689 new Ordinary
Shares to be issued to the holders of the 10.25% Senior Secured
Notes (which formed part of the Consideration Shares) and 9,239,454
new Ordinary Shares that were deposited in trust in accordance with
the terms of the Exchange Offer. Following the issue of these
shares, the Company had 816,969,427 ordinary shares in issue and
there were no shares held in treasury. In addition, 133,231,000
Warrants were issued to participants in the First Tranche Placing
completed in 2017 and the Second Tranche Placing referred to
above.
Gross proceeds raised from the Second Tranche Placing amounted
to approximately US$112.1 million. These proceeds are expected to
be used to fund the cash consideration for the proposed acquisition
of the Seven Assets, further advance the Company's Niger assets and
for general corporate purposes.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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March 23, 2018 03:00 ET (07:00 GMT)
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