TIDMSAVE
RNS Number : 7283M
Savannah Energy Plc
25 January 2021
25 January 2021
Savannah Energy PLC
("Savannah", "the Company" or "the Group")
FY 2020 Trading Update and Guidance Issued for FY 2021
Savannah Energy PLC the African-focused British independent
energy company sustainably developing high quality, high potential
energy projects in Nigeria and Niger, is pleased to announce a
trading update for the full year 2020 and to issue guidance for the
full year 2021.
Andrew Knott, CEO of Savannah Energy, said:
"As this FY 2020 trading update demonstrates, despite the
challenging headwinds, 2020 was a milestone year for Savannah
Energy. It was our first full year of operating the high margin
assets we acquired in Nigeria and I am delighted to report that we
have significantly exceeded all of the original financial guidance
we presented to the market this year, as laid out in our corporate
Key Performance Indicator statement published within our FY 2019
Annual Report. In 2020 we grew revenues, reduced our underlying
cost base and continued to provide gas contributing to over 10% of
Nigeria's daily national average power generation, highlighting the
resilience of the business.
Looking forward to 2021, we are providing guidance for the year
for continued strong revenue generation, investments in key
drilling and compression projects and an increased level of
maintenance project activity versus 2020. Overall we have reduced
our cost estimate for our indicative 2020-23 capital expenditure
programme by around 13%, versus our previous indications and are
guiding that we expect our underlying operating costs (which
include maintenance expenditures) to track levels consistent with
2020 (in real terms) over the medium term. It should also be noted
that our 2021 guidance excludes contributions from any new gas
sales agreements or any contribution from the R3 East development
project in Niger, which would be incremental to this.
I am excited around the potential for our business to grow
further over the coming years, especially given the
opportunity-rich West African environment in which we operate, and
look forward to keeping our stakeholders up to date on the progress
we make."
FY 2020 Key Highlights
FY 2020 Unaudited Financial Highlights
-- FY 2020 Total Revenues(1) of US$235.9m (up 23% on FY 2019
pro-forma Total Revenues of US$192.1m) which are ahead of the
Company's previously issued FY 2020 guidance of 'Total Revenues of
greater than US$200.0m';
-- Group cash balance of US$106.0m (2) (up 121% versus FY 2019
year-end Group cash balance of US$48.1m) and net debt of US$408.7m
(3) (down 16% versus FY 2019 year-end Group net debt of US$484.0)
as at 31 December 2020;
-- Total cash collections from the Company's Nigerian assets
rose 11% year-on-year to US$187.4m (FY2019 pro-forma cash
collections of US$168.8m); and
-- The Company reiterates guidance on the remaining items to report for FY 2020:
o Group Depreciation, Depletion and Amortisation guidance of
US$35.0m - US$37.0m;
o Group Administrative and Operating Costs(4) guidance of
US$43.0m - US$47.0m; and
-- FY 2020 Capital Expenditure guidance is modified to less than
US$13m from US$8.0-10.0m, primarily due to the acceleration of
previously assumed 2021 expenditure into 2020 for commercial
reasons.
FY 2020 Nigeria Operational Highlights
-- FY 2020 average gross daily production was 19.5 Kboepd, a
13.5% increase from the average gross daily production of 17.2
Kboepd in FY 2019, and at the mid-point of the Gross Production
guidance range for FY 2020 of 19.0 - 20.0 Kboepd ; and
-- Of the FY 2020 total average gross daily production of 19.5
Kboepd, 88% was gas, including a 16.6% increase in production from
the Uquo gas field compared to last year, from 88.1 MMscfpd (14.7
Kboepd) to 102.8 MMscfpd (17.1 Kboepd).
Nigeria Average Gross Daily Production
Uquo Gas Uquo Condensate Stubb Creek Total
(MMscfpd) (Kbopd) Oil (Kbopd) (Kboepd)
------------------ ---------------
1 January-31 December
2020 102.8 0.1 2.3 19.5
---------------- ------------------ ---------------
% of total production 87.7% 0.6% 11.7% 100.0%
---------------- --------------------- ------------------ ---------------
1 January-31 December
2019 88.1 0.1 2.4 17.2
---------------- --------------------- ------------------ ---------------
% of total production 85.4% 0.8% 13.8% 100.0%
---------------- --------------------- ------------------ ---------------
% Increase 16.6% -9.2% -4.2% 13.5%
---------------- --------------------- ------------------ ---------------
Note that Nigeria production levels are largely driven by
customer nomination levels, while cash collections are largely
driven by contractual maintenance adjusted take-or-pay
provisions.
Guidance Issued for FY 2021
Savannah is issuing guidance(5) for the full year 2021 as
follows:
o Total Revenues(1) of greater than US$205.0m from upstream and
midstream activities associated with the Company's three active
Nigerian gas sales agreements and liquids sales from the Company's
Stubb Creek and Uquo fields. Any revenues received from new
additional gas sales agreements would, therefore, be incremental to
this;
o Group Administrative and Operating Costs(4) of US$55.0m - US$65.0m;
o Group Depreciation, Depletion and Amortisation of US$19m fixed
for infrastructure assets plus US$2.6/boe; and
o Group capital expenditure of up to US$65.0m.
Modifications to 2020 - 23 Capital Expenditure Profile
Following the completion of the relevant technical and
commercial studies, Savannah has amended its planned four-year
capital expenditure programme in Nigeria, as originally set out in
the Nigeria Competent Person's Report (the "Nigeria CPR") published
December 2019(6) . The Company now expects to reduce its Nigerian
capital expenditures by 15% over the 2020-23 period from
approximately US$118m to US$100m. This has resulted in a reduction
in the overall indicative Group capital expenditure plans of around
13% from US$137m to US$119m over the same period. The principal
work programme changes will see only one gas well drilled in the
2020-23 period (as opposed to four assumed previously) on the Uquo
field and the acceleration of the Uquo field compression project
previously assumed to commence in 2026/27 to 2021/22. It should be
noted that the Uquo reservoir continues to perform in line with
expectations and that the proposed change in the capital
expenditure profile is not expected to impact Uquo field production
or expected ultimate reserve recovery. The amendments, therefore,
enhance the project economics of the ongoing Uquo field
development.
A table is provided below showing the revised programme for the
2021 to 2023 period compared to the original programme set out in
the Nigeria CPR:
Indicative Group Capital Expenditure Plan 2020 to 2023
Revised expenditure plan Previous expenditure plan
US$m US$m
2020 2021 2022 2023 2020 2021 2022 2023
------------------------ -------- ------- ------- -------- ------ ------ ------- -------
Uquo field gas wells
(incl. flowlines) 3.1 17.6 - - 18.9 18.0 18.0 18.0
Uquo field compression
project - 30.0 15.0 - - - - -
Other 8.8 17.3 22.4 4.5 20.9 23.8 11.8 7.5
Annual Total 11.9 64.9 37.4 4.5 39.8 41.8 29.8 25.5
Cumulative Total 11.9 76.8 114.2 118.7 39.8 81.6 111.4 136.9
Change in cumulative
total (%) (70.2%) (5.9%) (2.5%) (13.3%)
------------------------ -------- ------- ------- -------- ------ ------ ------- -------
Note: The indicative capital expenditure plan does not include
any expenditure relating to the R3 East Early Production Scheme or
any cost saving potential associated with the compression project
or Uquo field drilling activities versus the Nigeria CPR
assumptions.
Niger
Plans for delivering the R3 East development continue to
progress with the intention to commence installation of an Early
Production Scheme by the end of FY 2021, subject to market
conditions and financing.
ESG Reporting Update
Savannah continues to progress plans to harmonise and enhance
its approach to sustainability reporting across the enlarged
Group.
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 Income
Statement. A detailed explanation of the impact of IFRS 15 revenue
recognition rules on our Income Statement is provided in the
Financial Review section on page 67 of the Savannah Annual Report
and Accounts 2019. For reference FY 2020 Revenues were US$169.0m
(up 28% on FY 2019 pro-forma revenues of US$132.3).
(2) Within cash balance of US$106.0m, US$78.9m is set aside for
debt service, of which US$48.0m is for interest and US$30.9m is for
scheduled principal repayments, and US$1.6m relates to monies held
in escrow accounts for stamp duty relating to loan security
packages.
(3) Net debt (defined as 'Total long and short term debt
exclusive of lease liabilities less total cash and cash
equivalents') includes a Senior Secured Note with a call option,
which is subject to final review. Any change in this option value
will impact the reported net debt.
(4) Group Administrative Expenses and Operating Costs are
defined as total cost of sales, administrative and other operating
expenses excluding royalty and depletion, depreciation and
amortisation.
(5) We are not providing production guidance for FY 2021 as
production volumes are largely based on gas customer nomination
levels which are outside of the Group's control. Further, our
financial guidance assumes production levels remain lower than
maintenance-adjusted take-or-pay volumes in 2021 and, therefore, we
do not anticipate production levels associated with the Group's
three principal gas sales agreements to drive incremental revenue
generation above this level in 2021.
(6) The Competent Persons Report ("CPR"), prepared by CGG
Services (UK) Ltd ("CGG") and published on 11 December 2019, is
available to download on the Company's website
(https://www.savannah-energy.com/en/key-documents).
For further information, please refer to the Company's website
www.savannah-energy.com or contact:
+44 (0) 20 3817
Savannah Energy 9844
Andrew Knott, CEO
Isatou Semega-Janneh, CFO
Sally Marshak, Communications
Consultant
+44 (0) 20 7409
Strand Hanson (Nominated Adviser) 3494
James Spinney
Ritchie Balmer
Rory Murphy
finnCap Ltd (Joint Broker)
Christopher Raggett
Kate Washington +44 (0) 20 7220
Tim Redfern 0500
Panmure Gordon (UK) Ltd (Joint
Broker)
John Prior +44 (0) 20 7886
Hugh Rich 2500
+44 (0) 20 8434
Celicourt Communications 2754
Mark Antelme
Jimmy Lea
Ollie Mills
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.
About Savannah Energy:
Savannah Energy PLC is an AIM market listed African-focused
British independent energy company sustainably developing high
quality, high potential energy projects in Nigeria and Niger, with
a focus on delivering material long term returns for stakeholders.
In Nigeria, the Company has controlling interests in the cash flow
generative Uquo and Stubb Creek oil and gas fields, and the Accugas
midstream business in South East Nigeria, which provides gas to
over 10% of Nigeria's available power generation capacity. In
Niger, the Company has interests in two large PSC areas located in
the highly oil prolific Agadem Rift Basin of South East Niger,
where the Company has made five oil discoveries and seismically
identified a large exploration prospect inventory, consisting of
146 exploration targets to be considered for potential future
drilling activity.
Further information on Savannah Energy PLC can be found on the
Company's website: www.savannah-energy.com .
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END
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