TIDMSAVE
RNS Number : 1235O
Savannah Energy Plc
08 June 2022
8 June 2022
Savannah Energy PLC
("Savannah", "the Company" or "the Group")
2021 Annual Report and Audited Accounts
Savannah Energy PLC, the British independent energy company
focused around the delivery of Projects that Matter in Africa , is
pleased to announce that the 2021 Annual Report and audited
Accounts ("Annual Report") and investor presentation are now
available to download from the Company's website and can be found
here
https://wp-savannah-2020.s3.eu-west-2.amazonaws.com/media/2022/06/Savannah_AR21_Proof-7-_08_06_22.pdf
and here www.savannah-energy.com/investors/reports-presentations/
respectively.
A summary of the financial and operational performance is shown
below (as previously reported on 7 June 2022), together with the
Chairman's Statement, CEO Shareholder Letter and Financial Review
from the Annual Report.
Key FY 2021 Financial Highlights
-- FY 2021 Total Revenues [1] of US$230.5m (+7% on FY 2020 Total
Revenues of US$215.9m(2) ). This is ahead of the Company's
previously issued FY 2021 guidance of 'Total Revenues of greater
than US$205m';
-- Average realised gas price of US$4.19/Mscf (+6% on the 2020
average realised gas price of US$3.96/Mscf) and an average realised
liquids price of US$69.9/bbl (+51% compared to the 2020 average
realised liquids price of US$46.2/bbl);
-- Total cash collections from the Company's Nigerian assets of
US$208.2m (+24% on FY 2020 cash collections of US$167.4m [2] );
-- Adjusted EBITDA of US$175.0m (+7% on FY 2020 Adjusted EBITDA of US$163.2m(2) );
-- Adjusted EBITDA margin remained broadly unchanged at 76%;
-- Group operating expenses plus administrative expenses [3] of
US$49.9m (FY 2021 initial guidance of US$55-65m);
-- Group Depreciation, Depletion and Amortisation of US$36.2m
(FY 2021 initial guidance of US$38.3m based on the actual produced
volumes);
-- Capital Expenditure for the year of US$32.5m (FY 2021 initial guidance of up to US$65m);
-- Group cash balances of US$154.3m [4] as at 31 December 2021
(+46% versus FY 2020 year-end Group cash balances of
US$106.0m);
-- Group net debt of US$370.0m as at 31 December 2021 (-9%
versus FY 2020 year-end Group net debt of US$408.7m);
-- Leverage [5] was 2.1x, (20% improvement on 2020 leverage of
2.5x), and an interest cover ratio [6] of 2.8x (FY 2020 ratio of
2.4x);
-- Total Group assets amounted to US$1,349m at year-end (2020: US$1,207m); and
-- Successfully announced a proposed placing to raise US$65.8m
of equity financing and secured up to US$432m of debt financing for
the proposed Chad and Cameroon Asset Acquisitions. The equity
financing completed in January 2022.
Key FY 2021 Operational Highlights
-- FY 2021 average gross daily production from the Nigerian
operations was 22.3 Kboepd, a 14% increase from the average gross
daily production of 19.5 Kboepd in FY 2020;
-- Of the FY 2021 total average gross daily production of 22.3
Kboepd, 88% was gas, including a 15% increase in gas production
from the Uquo gas field, from 103 MMscfpd (17.1 Kboepd) in FY 2020
to 118 MMscfpd (19.7 Kboepd) in FY 2021;
-- Successful drilling and completion of the Uquo-11 gas production well;
-- Publication of an updated Competent Person's Report ("CPR")
[7] for Nigeria, with an o rganic 2P reserve upgrade on the Uquo
field, resulting in a 20% increase in Nigeria 2P reserves to 77.7
MMboe (net);
-- Uquo compression project progressed with compressor packages
acquired, completion of Front End Engineering & Design studies
and long-lead items specified ready for ordering;
-- New gas sales agreement ("GSA") signed with Mulak Energy
Limited in Nigeria in February 2021, re presenting Savannah's first
Gas-to-CNG sales agreement;
-- Commencement of gas sales to First Independent Power
Limited's ("FIPL") power plant, FIPL Afam, in Nigeria, in November
2021, marking Savannah's first entry into the high growth Port
Harcourt Industrial area. Followed by the extension of the FIPL GSA
in April 2022 p ost-year end, almost doubling the maximum
contracted volume to up to 65 MMscfpd and extending coverage to a
total of three of FIPL's power stations in Rivers State,
Nigeria;
-- Post-year end, in February 2022, a new GSA was signed with
the Central Horizon Gas Company, a major gas distribution company
situated in the South-South region of Nigeria;
-- Post-year end, in June 2022, a further new GSA was signed
with TransAfam Power Limited ("TAPL"), a subsidiary of
Transnational Corporation of Nigeria plc, for the provision of gas
to its power plants in Rivers State, Nigeria;
-- Niger Production Sharing Contract contractual and commercial
framework completed and finalised with commercial terms agreed and
announced in September 2021;
-- Savannah's Renewable Energy Division was established in 2021,
with the announcement in March 2022 of the Company's inaugural
renewable energy project, the up to 250 megawatts ("MW") Parc
Eolien de la Tarka wind farm project in 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; and
-- This was followed in May 2022 with the signing of an
agreement with the Ministry of Petroleum and Energy of the Republic
of Chad for the development of up to 500 MW of renewable energy
projects. The up to 300 MW 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 up to 200 MW Centrales d'Energie Renouvelable
de N'Djamena in Chad 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%.
Financial Guidance Reiterated for FY 2022
Savannah reiterates its financial guidance for the full year
2022 as follows:
Total Revenues(1) >=US$215 million
Group Operating expenses plus <=US$75 million
administrative expenses(3)
---------------------------
Depreciation, Depletion and Amortisation US$21 million + US$2.3/boe
---------------------------
Capital Expenditure <=US$85 million
---------------------------
Update on Savannah's Sustainability Strategy
Savannah's focus in 2021 was on articulating the level of
ambition across the four pillars of our sustainability strategy:
(1) Promoting socio-economic prosperity; (2) Ensuring safe and
secure operations; (3) Supporting and developing our people; and
(4) Respecting the environment. We conducted an exercise to
benchmark the Company's performance against industry peers and
leaders, which helped us to develop our strategy and link key
performance metrics to our ambitions and to the 13 relevant United
Nations Sustainable Development Goals which anchor our strategy. In
particular, the following key performance metrics were identified
to measure performance and progress, many of which are
industry-leading:
-- Continued our strong health & safety record with a zero
Lost Time Injury Rate ("LTIR") (2020: zero) and a 0.34 Total
Recordable Incident Rate ("TRIR") in 2021 (2020: 0.28);
-- Increased our Total Contributions ([8]) to host nations
Nigeria and Niger by 12% to US$55.1m (2020: US$49.3m);
-- Increased our investment in social impact projects in Nigeria
and Niger by more than 50% to US$246,000 in 2021 (2020:
US$161,000);
-- Number of transport related incidents remains exceptionally
low with two in 2021 covering over 1.6 million transport kilometres
travelled (2020: five incidents);
-- Maintained senior management female gender diversity at 35% (2020: 35%);
-- Established a multimillion-dollar, world class training
scheme across our whole business for 2021-23, resulting in a 22%
increase in training hours per employee and a 32% increase in total
working hours of training;
-- Maintained a low carbon intensity of 13.3 kg CO2e/boe (2020:
12.8 kg CO2e/boe) compared to our industry peer group;
-- Maintained our zero hydrocarbon spills record defined as not
greater than one barrel reaching the environment (2020: zero);
-- Measured our freshwater use for the first time, recording
usage of approximately 5,359 m3 of freshwater from boreholes and
mains supply; and
-- Minimised our negative impacts on biodiversity, putting in
place Biodiversity Action Plans at our four operational sites to
minimise any impact from our operations.
During 2021 and 2022, we have implemented the Company's new
sustainability performance and reporting framework across the
Group. We implemented a digital tool to track our performance on
our key sustainability indicators on a month-by-month and
country-by-country basis and have integrated seven leading
sustainability reporting standards into our reporting framework. We
plan to publish the respective detailed disclosure reports setting
out our alignment to each standard during H2 2022.
Savannah is pleased to have been recognised for the progress in
our sustainability reporting to date, having been shortlisted for
'ESG Initiative of the Year' at the Chartered Governance Institute
UK & Ireland ("CGI") Awards in November last year and, more
recently, shortlisted for 'Best ESG Materiality Reporting (Small
Cap)' at the IR Magazine Awards - Europe 2022.
For further information, please contact:
Savannah Energy +44 (0) 20 3817 9844
Andrew Knott, CEO
N ick 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 Broker)
Christopher Raggett
Tim Redfern +44 (0) 20 7220 0500
Panmure Gordon (UK) Ltd (Joint
Broker)
John Prior +44 (0) 20 7886 2500
Hugh Rich
James Sinclair-Ford
Camarco +44 (0) 203 757 4980
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 (EU) No. 596/2014, which
forms part of United Kingdom 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 and is 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 .
Chairman's statement
Delivering Projects that Matter in Africa
Steve Jenkins
Chairman of the Board
Dear fellow shareholders,
2021 was a year of substantial delivery for Savannah, driven by
our corporate mission of developing and investing in Projects that
Matter in Africa, namely delivering energy projects that change
peoples' lives for the better. Many countries in Africa suffer from
energy poverty, and Savannah is very proud to be part of the effort
to alleviate this and create a more sustainable future for all.
In June 2021, we announced our proposed acquisitions of the Chad
and Cameron Assets(m). The transactions were approved by
shareholders on 24 January 2022 and are expected to complete later
this year. In order to finance these acquisitions, in December
2021, we raised US$65 million via an oversubscribed equity placing
and subscription, alongside new debt facilities. I would like to
thank and welcome all existing and new investors who participated,
especially those who were so patient and supportive during the
seven-month share suspension.
Corporate governance and stakeholder engagement
The Board is committed to ensuring Savannah's sustainable
success for the benefit of our shareholders whilst also having
regard to all our other stakeholders' interests. We continue to use
the 2018 Quoted Companies Alliance Corporate Governance Code (the
"QCA Code") as the basis of the Group's governance framework and
the Corporate Governance Report in our 2021 Annual Report and
Accounts explains how we applied the principles of the QCA Code in
2021.
I am delighted with the progress the company has made since its
listing in 2014. After eight years as Chairman, I have decided to
step down at or prior to the 2023 Annual General Meeting. It has
been a privilege to lead the Board during this phase of the Group's
development and I look forward to continuing as a Non-Executive
Director. The search for a Chair-Designate has commenced and there
will be a period of handover in order to ensure a smooth
transition. In the meantime, I am pleased to welcome Nick Beattie
to the Board, following confirmation of his appointment as Group
Chief Financial Officer.
Similarly, I look forward to welcoming three new, highly
experienced Directors to the Board following completion of the
proposed ExxonMobil transaction. The incoming Directors all have
successful backgrounds in a diverse range of industries and will
significantly strengthen the Board's experience. I would also like
to recognise the significant contribution which David Jamison has
made to the Group as a Director. David will be retiring from the
Board at the end of June 2022, and I am delighted that he has
agreed to assume the role of Honorary President of Savannah.
The Board continues to place great emphasis on engagement with
all our stakeholder groups and more information on this is provided
in our Section 172 Statement on page 31 of our 2021 Annual Report
and Accounts.
Outlook
Savannah has the ambition and focus to be the leading African
energy company, in particular the operating partner of choice for
both companies and governments. The proposed acquisitions of the
Chad and Cameroon Assets(m) together with the new renewable energy
projects in Niger and Chad, demonstrate the magnitude of the deals
we are capable of achieving. Savannah is exceptionally
well-positioned and I look forward to the future with great
confidence.
Steve Jenkins
Chairman of the Board
7 June 2022
CEO Shareholder Letter
Championing the African energy transition
Andrew Knott
Chief Executive Officer
Dear fellow shareholders
I would like to welcome you to our eighth Annual Report as a
listed company. I have divided this year's letter into three
sections. The first section discusses our Company's continued
industry leading financial, operational and sustainability
performance. The second discusses our key focus areas for 2022 and
2023. The third section discusses the "how" and the "why" we see
the African energy transition evolving, explaining the relevance
and power of our hydrocarbon AND renewables business model.
Before turning to the first section, I would like to draw your
attention to two guest authored articles in this year's Annual
Report. The first article is authored by His Excellency Professor
Yemi Osinbajo SAN, Vice President of the Federal Republic of
Nigeria and Chairman of Niger Delta Power Holding Company, and
highlights his views (shared by many in Africa, including myself)
as to the inadequacies and hypocrisy of rich countries' climate
policies. The second article authored by NJ Ayuk, Chairman of the
African Energy Council, argues for meaningful solutions to combat
energy poverty in Africa, including the urgent need for the
provision of greater finance to the sector. We are extremely
grateful to both of our guest authors for their contributions.
Section three of this letter builds on many of their ideas.
Savannah's 2021 performance
2021 saw the global economy begin to recover from the impacts of
the Covid-19 pandemic. Global GDP rose by 5.5%1, while benchmark
oil and gas prices increased by over 50%2. The financial
performance of the global energy industry reflected this rebound
with the seven Supermajors recording a combined US$96 billion
profit in 2021 as compared to their record US$88 billion3 financial
loss in 2020.
In line with this trend, Savannah performed strongly. Our Total
Revenues(a) and Adjusted EBITDA(c) increased by 7% year-on-year to
US$230.5 million and US$175 million respectively. At the Nigerian
business unit level, we recorded Adjusted EBITDA(c) of US$193
million. Our Nigerian business has now delivered five consecutive
years of Total Revenues(a) growth at a compound annual growth rate
("CAGR") of 20%. 93% of this revenue stream was derived from fixed
price gas sales contracts with no cyclical exposure to oil prices
or international gas prices. This revenue growth compares
favourably to the long-term trend CAGR of the wider UK stock market
constituents (6%)4.
The US$18 million difference between our Group and Nigerian
business Adjusted EBITDA(c) numbers reflects the central costs of
running our business and the investments we have made to build the
corporate infrastructure to enable our future organic and
in-organic growth plans. We will continue to invest in our growth
going forward as we target a potential quadrupling of the scale of
our business over the course of the coming years.
Operationally, the key workstream of note was the drilling of
the Uquo-11 gas well in Nigeria. This well was a major financial
and technical success for our business. It was drilled at a total
cost of approximately US$18 million, US$8 million less than the
last well to be drilled on the Uquo field prior to Savannah
assuming ownership. This performance continued our track record of
delivering operational projects safely, on target and in line with,
or ahead of, budget. The well result, combined with various
technical workstreams, enabled us to upgrade our group 2P reserves
by 20% and report a three-year organic reserve replacement ratio of
107% (versus the industry average of 57%5). Put simply, despite
approximately three years of production, our Nigerian business now
has more oil and gas reserves than when we bought it.
From a business development perspective, the year was dominated
by our proposed acquisition of the Chad and Cameroon Assets(m). for
a consideration of up to US$700 million. These transactions are
expected to be transformational for our Company. For example, upon
completion it is estimated that our post-deal reserves and
resources would increase by 108% to 359 MMboe, while our nine-year
average forward asset level revenues and free cash flows are
projected to increase by 96% to US$279 million.
We see strong upside potential across the asset portfolio we are
acquiring. I am, therefore, hopeful that in future shareholder
letters, I will be able to write about the achievement of these
organic upside cases in the Chad and Cameroon Assets(m). in the
same way we have been writing about the transformation of our
Nigerian business since announcing our intention to acquire it in
2017.
In 2021, we announced the formation of our Renewable Energy
Division and, post period, signed agreements for the development of
large-scale greenfield solar and wind projects up to a total of 750
MW with the Governments of Niger (Parc Eolien de la Tarka) and Chad
(Centrale Solaire de Komé and Centrales d'Energie Renouvelable de
N'Djamena). The scale of our future ambition in this area is clear.
The up to 250 MW Parc Eolien de la Tarka would increase Niger's
on-grid power generation capacity by up to 40%. The up to 300 MW
Centrale Solaire de Komé would represent the largest solar plant in
sub-Saharan Africa (excluding South Africa) and potentially the
largest battery storage project on the continent.
The up to 200 MW, the Centrales d'Energie Renouvelable de
N'Djamena alone would more than double the existing installed
generation capacity supplying the capital city and increase total
installed on-grid power generation capacity in Chad by an estimated
63%.
For both Chad and Niger the projects represent potentially
substantial foreign direct investments that would make significant
contributions to the economic development of the regions where they
will be situated. I am excited to be writing about the progress we
have made on these initial renewable energy projects and hope to be
writing much more about them and many others in future shareholder
letters.
In Niger, we successfully renewed and amalgamated our R1/R2 and
R3/R4 PSCs, extending the exploration term for up to another 10
years. This has paved the way for us to hopefully proceed to the
next phase in the 35 MMstb R3 East development and recommencement
of exploration activities in Niger.
As always, we maintained our strong focus around safe
operational delivery. We recorded a zero incident Lost Time Injury
Rate ("LTIR") and a Total Recordable Incident Rate ("TRIR") of 0.34
per 200,000 person hours. Our performance against key
sustainability metrics, such as carbon intensity (13.3kg CO2e/boe),
senior management gender diversity (35% female) and local employee
ratios (99%) all remained equally industry-leading in 2021.
We also continued to strengthen our sustainability performance
and reporting framework, implementing a Group-wide digital tool to
track our performance on key sustainability indicators on a
month-by-month and country-by-country basis, and fully integrating
this with our chosen seven leading sustainability reporting
standards. Not only is this progress reflected in the
Sustainability Review section of this year's Annual Report but we
plan to publish separate ESG disclosure reports later this year
setting out our alignment to our chosen ESG standards.
Key focus areas for 2022 and 2023
Over the course of the next two years, I expect there to be
several key focus areas for the business. These include:
-- The planned refinancing of our US$371m Accugas debt
facilities during H2 2022. Our intention is to redenominate the
facility from US dollars to a multi-tranche Naira denominated
facility, extending the average maturity to be beyond 2030 and
significantly reducing the facility cost in dollar equivalent
terms. The effect of this would be to significantly increase the
quantum of cash flows available for re-investment in other
opportunities; AND
-- Adding new gas sales agreements in Nigeria. Our midstream
assets in Nigeria continue to have significant excess
transportation capacity and we will continue to seek to add new, or
modify, existing contracts to increase asset throughput over time.
In this regard, it should be noted that prior to Savannah acquiring
our Nigerian Business unit, it had not signed a new customer in
over five years. Since acquisition three years ago, we have
increased the number of facilities we are contracted to sell gas to
from three to seven; AND
-- Recommencing field operations in Niger. Delivery of the 35
MMstb R3 East development project and further exploration activity
on the new R1234 PSC area is a focus for the company; AND
-- Completion and integration of the proposed acquisition of the
Chad and Cameroon Assets(m). As discussed above, these acquisitions
are expected to be transformational for Savannah; AND
-- Further hydrocarbon acquisitions. We believe there are asset
divestment programmes valued in excess of US$100 billion likely to
take place, a significant portion of which are in Africa. Savannah
is strongly positioned to successfully participate in these
divestment programmes, given our operating capabilities, regional
reputation and access to capital. Post-deal we would expect to act
as strong asset stewards, delivering better underlying operational
performance and improvements in unit carbon intensity (within the
limitations of the underlying assets) than the previous asset
owners; AND
-- Expansion of our renewable energy business. Savannah believes
the African renewables energy market represents a potentially vast
target market of over 310 GW by 2030 and that our hydrocarbon asset
operational management skills are directly transferrable to this
space.
As can be seen from the above list, we are unequivocally an
"AND" company. We are seeking to deliver strong performance both
for the short AND long-term across multiple fronts. We are pursuing
growth opportunities in both the hydrocarbon and renewable energy
areas. This approach permeates our entire business and how we have
built, and will continue to build, our corporate
infrastructure.
How we see the African energy transition
Energy is critical to enabling and sustaining people's quality
of lives. People without access to energy are dramatically poorer
than those with access to energy. For example, Niger is ranked 178
out of 178 on the UN Human Development Index ("UNHDI") with a
GDP/head of US$622 and power consumption per capita of 451/Kwh. The
US on the other hand is ranked 17 out of 178 on the UNHDI with
GDP/head of US$62,631 and power consumption per capita of
80,106/Kwh, 5,015% and 17,653% higher7. A similar pattern emerges
when we look at the relationship between power consumption and
other key quality of life barometers such as life expectancy and
life-time health outcomes.
83.2%8 of today's global energy mix is provided by hydrocarbons.
56% of this is provided by oil and gas. The scale of investment
required to sustain the "status quo" global quality of life is
immense, with approximately 30% of all global capital expenditures
(estimated at US$341 billion in 20219) being attributed to the oil
and gas industry.
The world clearly, therefore, requires oil and gas today, and is
prepared to pay vast amounts of money to enable this. The extent to
which the world requires oil and gas in the future will depend on
the absolute and relative rate of renewable energy and carbon
mitigation technological improvements and the absolute and relative
rate of adoption of these improvements. In this regard, John
Kerry's (the US Climate Change Envoy) quote, which I cited in my
last shareholder letter, remains pertinent - "I am told by
scientists that 50% of the reductions we have to make by 2050 or
2045 are going to come from technologies we don't have yet."
While the pace of technological evolution and adoption may be
argued to be generally faster today than in earlier periods, I
believe that it is important to recognise that the global energy
transition is likely to take a relatively long time. Previous
energy transitions have taken fifty plus years, and the modern
renewable transition only began around 2015. Further, full
displacement of the previous energy sources has not occurred in
previous transitions (i.e. coal is still 27.2%8 of the 2022 global
energy mix).
In this regard, when we look at the forecast future energy mix,
there is currently a big difference between the trend case (i.e.
what forecasters are suggesting will actually happen) versus the
Net Zero 2050 case. Essentially the world appears to be on track to
have around 45%8 of its energy mix in 2050 to be provided by oil
and gas, which, given likely energy demand growth over the course
of the next 28 years, suggests that actual oil and gas demand is
currently not on trend to fall significantly over the period.
The foregoing contrasts dramatically with the many Net Zero
demand forecasts which generally see oil and gas demand fall to
below 20% of the global energy mix by 2050. Further, it is likely
that lower income countries, where the ability to pay for renewable
energy infrastructure is lowest, and the need for low priced energy
to deliver life changing economic growth is highest, will see
hydrocarbons form a much greater part of their energy mix in 2050
than in the developed world. On average, only 56% of Africa's
entire population has access to electricity (falling to 41% if
South Africa, Egypt and Algeria are excluded), with the electricity
access rate in our countries of operation estimated at 11% for
Chad, 65% for Cameroon, 19% for Niger and 55% for Nigeria10. For
much of Africa, the primary issue is around people being given
access to reliable and affordable power, period.
From a Savannah perspective, our primary focus is on
participating in Projects that Matter in Africa. We expect to
continue to acquire hydrocarbon businesses and to re-invest the
cash flows we generate in both hydrocarbon AND renewable energy
projects. We firmly believe Africa needs both if it is to be given
the opportunity to grow and lift ever more of her citizens out of
energy poverty.
Closing thoughts
I would hope that, having read through this letter, my reasons
for being optimistic around the future of our business are clear.
We are a purposeful organisation, doing societally essential work.
The opportunities associated with the African energy transition
(hydrocarbon acquisitions from Supermajor sellers and the build-out
of our renewable energy business) represent a once in a generation
opportunity, which we at Savannah are strongly positioned to take
advantage of. We have made significant investments in our people,
infrastructure and capabilities, and have well-developed regional
and financial stakeholder relationships and credibility. We have a
strong track record of "getting things done". I believe that
Savannah will achieve great things over the course of the coming
years and look forward to continuing this journey with you, my
fellow shareholders.
Lastly, I would like to express my gratitude to all those who
contributed to our successes in 2021 - 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.
Andrew Knott
Chief Executive Officer
7 June 2022
Footnotes - CEO Shareholder Letter:
1. Source: World Bank: Global Economic Report.
2. Source: U.S. Energy Information Administration (EIA).
3. Source: 2021 annual reports and results announcements for BP,
Chevron, ConocoPhillips, Eni, ExxonMobil, Royal Dutch Shell and
Total.
4. Source: Bloomberg.
5. Source: UBS: Global Integrated Oil & Gas Analyser.
6. Forecasts based on Chad/Cameroon CPR, November 2021. Note:
Savannah benefits economically from Acquisition Asset cash flow
generation in FY 2021 and FY 2022, given the Transaction effective
date of 1 January 2021.
7. Source: United Nations Human Development Report 2020, World Bank.
8. Source: S&P Global IHS Markit, Energy & Natural Resources Research & Analysis.
9. Source: BP Statistical Review of World Energy 2021.
10. Source: World Bank
Financial review
Delivering strong results for 2021
Nick Beattie
Chief Financial Officer and Company Secretary
Performance against market guidance 2021
Full Year 2021 Full Year 2021
Actuals Guidance
---------------------------------------------- ----------------- -----------------
Total Revenues(a) US$ million 230.5 >205.0
---------------------------------------------- ----------------- -----------------
Operating expenses plus administrative
expenses(g) , US$ million 49.9 55.0-65.0
---------------------------------------------- ----------------- -----------------
US$19 million US$19 million
for fixed assets for fixed assets
Group depreciation, depletion and amortisation plus US$2.3/boe plus US$2.6/boe
---------------------------------------------- ----------------- -----------------
Capital expenditure (cash), US$ million 32.5 Up to 65.0
---------------------------------------------- ----------------- -----------------
The year in summary
Savannah produced a strong set of results for 2021, delivering
Adjusted EBITDA(c) of US$175.0 million (2020(#) : US$163.2
million), and surpassing financial guidance set out at the
beginning of the year. The Nigerian assets continued to perform
well, delivering gas to four customers, including first deliveries
to FIPL Afam (a new power station customer) in November 2021.
During the year there was significant capital investment in our
Nigerian gas business to ensure we continue to reliably supply gas
to our customers and this included the drilling of a new gas
production well, Uquo 11, and the installation of compression at
the gas processing facility is underway. 2021 was also significant
in terms of future growth following the signing of agreements for
the proposed acquisitions of the Chad and Cameroon Assets(m) -
these transformational acquisitions are expected to close in Q3
2022 and full details of the transactions are contained in the
admission document which was published in December 2021.
The table below summarises the key financial metrics for the
business and these once again show material year-on-year
improvement in performance with increased production, prices,
revenues and cash generation as well as improved Leverage(k) . Of
particular note is the improvement seen in Total Revenues(a) - this
represents the total amount of invoiced sales during the period and
this increased by 7% during 2021. The gas business accounts for 93%
of these Total Revenues(a) and it is important to note that this
business benefits from long-term, fixed price gas contracts which
have an average weighted remaining contract life of 16 years
resulting in a contracted revenue stream of US$4 billion.
These take-or-pay contracts have no linkage to oil price and
provide a stable, predictable cash flow which can be seen in the
record level of Cash collections(j) of US$208.2 million during the
year (2020(#) : US$ 167.4 million). This increase in Total
Revenues(a) combined with continued focus on cost control, resulted
in a 7% increase in Adjusted EBITDA(c) to US$175.0 million (2020(#)
:US$163.2 million).
We have invested heavily during H2 2021 (and continuing into
2022) to scale up the business ahead of completion of the proposed
acquisitions of the Chad and Cameroon Assets(m) . This has included
a substantial increase in headcount and also a large investment
into new systems and processes that will be required to support the
enlarged scale of the Group (including the deployment of a new SAP
platform). This investment is firmly positioning the business for
growth with the right processes, systems, controls and people in
place.
Key performance metrics summary
Full
Year Full Year
2021 2020
------------------------------ ----- ---------
Gross production, Kboepd 22.3 19.5
------------------------------ ----- ---------
Total Revenues(a) , 215.9
US$ million 230.5 (#)
------------------------------ ----- ---------
Revenue, US$ million 185.8 169.0
------------------------------ ----- ---------
Average gas sales price,
US$/Mscf 4.19 3.96
------------------------------ ----- ---------
Average oil sales price,
US$/bbl 69.9 46.2
------------------------------ ----- ---------
Normalised operating
expenses plus administrative
expenses(g) , US$ million 49.9 42.5
------------------------------ ----- ---------
Normalised operating
expenses plus administrative
expenses(g) , US$/Mscfe 1.1 1.1
------------------------------ ----- ---------
Cash collections(j)
, US$ million 208.2 167.4(#)
------------------------------ ----- ---------
Total cash, US$ million 154.3 106.0
------------------------------ ----- ---------
Trade and other receivables,
US$ million 231.6 122.4
------------------------------ ----- ---------
Adjusted EBITDA(c) 175.0 163.2(#)
------------------------------ ----- ---------
Adjusted EBITDA(c)
margin 76% 76%(#)
------------------------------ ----- ---------
Net debt (i) , US$
million 370.0 408.7
------------------------------ ----- ---------
Leverage(k) 2.1x 2.5x
------------------------------ ----- ---------
(Loss)/profit before
tax, US$ million (7.7) 10.4
------------------------------ ----- ---------
Profit/(loss) after
tax, US$ million 17.1 (6.4)
------------------------------ ----- ---------
# In order to compare performance on a like-for-like basis the
2020 figures have been represented to exclude the impact of an
advance payment of US$20 million received from Lafarge Africa on
entering an amended and extended gas sales agreement.
Consolidated Statement of Comprehensive Income
Revenue
Revenue in 2021 was US$185.8 million (2020: US$169.0 million),
of which US$169.1 million (2020: US$157.1 million) was for gas,
US$15.0 million (2020: US$11.1 million) was for oil and condensate
sales and US$1.7 million (2020: US$0.8 million) was for processing
of third-party crude oil.
91% of revenue is for gas which is sold under long term gas
sales agreements which have fixed US Dollar prices, adjusted for
consumer price escalation. The average price of gas sold during
2021 was US$4.19/Mscf (2020: US$3.96/Mscf). 95% of our gas sales
contracts are supported by investment grade guarantees, including a
World Bank Partial Risk Guarantee for the Calabar power station gas
sales contract.
The average price achieved for oil sales was US$69.9/bbl (2020:
US$46.2/bbl) reflecting the increase in oil prices seen during the
year. The weighted average sales price for the year was US$26.5/boe
(2020: US$24.5/boe), or US$4.42/Mscfe (2020: US$4.08/Mscfe).
Total Revenues (a)
We report Total Revenues(a) as management believes that this is
an appropriate method of reflecting the cash generation capacity of
the business. During 2021, our customers had on average contracted
to buy more gas (132 MMscfpd) than they ultimately requested to be
delivered (111 MMscfpd), which resulted in a difference between
invoiced oil and gas sales of US$230.5 million (Total Revenues(a) )
and Revenue of US$185.8 million reported in the Consolidated
Statement of Comprehensive Income. Revenue only reflects the value
of oil and gas actually delivered, with the difference of US$44.7
million mainly an increase in Contract liabilities ("deferred
revenue") in the Consolidated Statement of Financial Position, net
of make-up gas that is consumed.
Operating expenses plus administrative expenses (g)
Operating expenses plus administrative expenses(g) for 2021 were
US$49.9 million (2020: US$46.4 million) which compared to 2021
guidance of US$55.0-65.0 million. These costs were favourable to
guidance due to certain planned maintenance activities being
deferred, including a pipeline pigging programme which was
completed during the first quarter of 2022. In addition to these
costs, considerable time and costs were invested in the workstreams
associated with the proposed acquisitions of the Chad and Cameroon
Assets(m) . These Transaction costs, which include third party
costs incurred, amounted to US$7.4 million (2020: nil) and have
been shown separately in the Consolidated Statement of
Comprehensive Income.
On a unit cost basis Operating expenses plus administrative
expenses(g) remained flat at US$1.1/Mscfe, which compares
favourably with our increased average sales price of US$4.42/Mscfe
for oil and gas during the year.
Depreciation, depletion and amortisation ("DD&A") amounted
to US$36.2 million (2020: US$36.3 million) made up of US$17.7
million (2020: US$17.6 million) for infrastructure assets, which
are depreciated on a straight-line basis over their estimated
useful life and US$16.7 million (2020: US$17.2 million) for
upstream assets which are depreciated on a unit of production
basis, plus US$ 1.8 million (2020: US$1.5 million) for other assets
and right-of-use assets. The depletion for upstream assets has
reduced on a unit of production basis by 15% as a result of a
reserves increase at the Uquo field. This led to the total DD&A
costs in 2021 being US$0.8/Mscfe (2020: US$0.9/Mscfe), a 13%
year-on -- year reduction.
Adjusted EBITDA (c)
Adjusted EBITDA(c) was US$175.0 million (2020(#) : US$163.2
million).
Year ended 31 2021 2020 Percentage
December US$ million US$ million change
------------------------- ------------ ------------- ----------
Operating profit 87.7 92.8 -6%
------------------------- ------------ ------------- ----------
Add back:
Depletion, depreciation
and amortisation 36.2 36.3
Adjust for Transaction
costs 7.4 -
------------------------- ------------ ------------- ----------
EBITDA 131.3 129.1 2%
------------------------- ------------ ------------- ----------
Add: other invoiced
amounts 44.7 66.9 -
Deduct: Royalty
payable on additional
gas volume(11) (1.0) (1.8) -
Exclude impact
of expected
credit loss
and other related
adjustments - (11.0) -
------------------------- ------------ ------------- ----------
Deduct: Advance
payment received - (20)
------------------------- ------------ ------------- ----------
Adjusted EBITDA#(c) 175.0 163.2
Comprising:
Nigeria segment 193.0 167.7
UK and Niger
segments (18.0) (4.5) 7%
------------------------- ------------ ------------- ----------
# In order to compare performance on a like-for-like basis the
2020 Adjusted EBITDA has been represented to exclude the impact of
an advance payment of US$20 million received from Lafarge Africa on
entering an amended and extended gas sales agreement.
Finance income and costs
Finance costs for the year amounted to US$76.6 million (2020:
US$75.8 million), of which US$53.4 million (2020: US$58.9 million)
related to bank and loan note interest expense. The average
interest rate on debt for the Group was 10.2% (2020: 11.0%) which
reflects lower US Libor rates in 2021.
The interest cover ratio(h) was 2.8 times, improved from 2.4
times in 2020.
Foreign exchange losses
Foreign exchange losses amounted to US$18.7 million (2020:
US$5.4 million).
Unrealised losses are US$9.8 million (2020: US$0.4 million) of
which US$8.2 million is the impact on cash balances held in Naira
when the official exchange rate at the Central Bank of Nigeria was
devalued. The remaining unrealised losses are revaluations of other
monetary items in the Consolidated Statement of Financial
Position.
Realised losses of US$8.9 million (2020: US$5.0 million) arise
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.
The Calabar power station Gas Sales Agreement includes a foreign
exchange "true-up" clause whereby realised foreign exchange losses
on this contract are subsequently invoiced to Calabar NIPP and
recovered and recognised as a reduction in foreign exchange
losses.
The Group continues to have an active contracting strategy to
ensure that wherever possible providers of goods and services, both
locally and overseas, are paid in Naira.
Tax
The tax credit of US$24.8 million (2020: US$16.9 million charge)
is made up of a current tax charge of US$2.6 million (2020: US$4.2
million) and a deferred tax credit of US$27.4 million (2020:
US$12.7 million charge). The current tax charge principally relates
to tax on our operations in Nigeria.
The deferred tax credit is made up of a credit of US$61.7
million principally arising from a revision of judgments whereby
the utilisation of deferred tax assets is recognised over the
expected life of our projects in Nigeria reflecting observed asset
performance since acquisition of the Nigerian assets (refer to Note
4 in the Financial Statements). There is a charge of US$8.4 million
principally relating to our operations in Nigeria, plus a write
down of US$25.9 million in deferred tax assets relating to our
upstream oil business as a result of the introduction of lower tax
rates under the Petroleum Industries Act.
Consolidated Statement of Financial Position
Debt
The Net debt(i) at year-end for the Group was US$370.0 million
(2020: US$408.7 million), a reduction of 9% compared to year-end
2020. The largest component of the debt remains the Accugas Term
Debt Facility (outstanding balance at 31 December 2021 of US$371.0
million). The Accugas Facility was established when the acquisition
of the Nigeria assets concluded in November 2019 and Savannah is
continuing to progress with a refinancing of this facility. It
remains the intention that this will be refinanced into a
multi-tranche, Naira denominated borrowing structure with an
average anticipated tenor of 11 years. As an initial step in the
refinancing, it is expected that the current facility will be
refinanced into a medium-term Naira bank debt facility and this
facility will then be progressively paid down from the issuance of
longer-dated debt instruments. Savannah has been working with its
advisers on the new debt capital structure for Accugas and a number
of key milestones have been achieved in the process to date,
including the approval of the shelf programme registration for the
proposed bond issuance by the Securities and Exchange Commission of
Nigeria and obtaining a standalone investment grade credit rating
of Accugas.
Once completed, this refinancing would align the currencies of
the Group's principal revenue streams with its debt service
obligations and would significantly reduce the Group's foreign
exchange exposure. It would also bring further benefits through the
increase in tenor and enhancements to the structure of the debt
facilities. Pending completion of the refinancing, Accugas has
agreed with the current lenders to hold a sufficient Naira
equivalent cash balance to cover outstanding debt service
requirements - at 31 December 2021 this amounted to US$132.8
million (being interest of US$75.5 million and principal of US$57.3
million). The Group anticipates that the refinancing will be
concluded prior to the year-end.
As shown in the following table, the Leverage(k) position of the
Group has improved compared to the prior year and this is
considered to be a conservative level given the long-dated (>16
year) gas sales contracts in place and the high quality, long-life
asset base which supports the supply contracts:
Leverage (k)
2021 2020
US$ million US$ million
--------------------- ------------ ------------
Adjusted EBITDA#(c) 175.0 163.2
--------------------- ------------ ------------
Net debt(i) 370.0 408.7
--------------------- ------------ ------------
Naira held in cash
to pay interest 75.5 48.0
--------------------- ------------ ------------
Adjusted net debt
(f) 445.5 456.7
Leverage(k) (times) 2.1 2.5
Adjusted Leverage(l)
(times) 2.5 2.8
--------------------- ------------ ------------
In December 2021, two new debt facilities were signed in
connection with the funding of the proposed acquisitions of the
Chad and Cameroon Assets(m) , an up to US$400 million borrowing
base facility and a US$32 million junior loan facility. Details of
the debt facilities available to the Group are in Note 29 of the
Consolidated Financial Statements in our 2021 Annual Report and
Accounts.
Receivables and payables
The Group has Trade and other receivables of US$231.6 million
(2020: US$122.4 million). This largely comprises of US$156.4
million (2020: US$131.1 million) gross amounts due from gas
customers in Nigeria under the current gas sales agreements in
place. Trade and other receivables also include US$65.8 million
receivables from shareholders for the equity placing and US$29.0
million deposits and finance fees associated with the proposed
acquisitions of the Chad and Cameroon Assets(m) .
The Group has current Trade and other payables of US$116.8
million (2020: US$106.2 million). During 2021 over US$13.0 million
was settled with Nigerian counter-parties through offsets against
receivables; certain payables remain that we expect to settle in a
similar manner.
Cash flow
2021 2020
As at 31 December US$ million US$ million
--------------------------- ------------ ------------
Net cash generated
from operating activities 128.1 115.6
Net cash used in investing
activities(12) (46.4) (11.1)
Net cash used in financing
activities (25.2) (46.8)
Impact of exchange
rate changes on cash
balances (8.3) 0.4
--------------------------- ------------ ------------
Net increase in cash
at bank 48.2 58.1
--------------------------- ------------ ------------
Cash at bank at end
of year 152.7 104.4
Restricted cash 1.6 1.6
--------------------------- ------------ ------------
Total cash 154.3 106.0
--------------------------- ------------ ------------
Total cash balances as at 31 December 2021 amounted to US$154.3
million which included US$1.6 million of restricted cash (2020:
US$106.0 million, including US$1.6 million of restricted cash). Of
these cash balances US$132.8 million (2020: US$78.9 million) is set
aside for debt service purposes.
Cash flows from operating activities amounted to US$128.1
million (2020: US$115.6 million). This represents the continuing
robust cash flow generation of the Nigerian assets with our cash
flow generation providing cash for debt service and capital
projects and providing support for the growth of the business.
Total investing activity(2) spend was US$46.4 million (2020:
US$11.1 million), the two primary components of this being US$9.4
million (2020: US$2.9 million) for the Uquo-11 gas production well
and US$16.1 million (2020: US$1.3 million) for compression and
other facilities at the Accugas gas processing facility.
Financing net outflows for the year amounted to US$25.2 million
(2020: US$46.8 million), which was principally made up of US$26.0
million (2020: US$21.8 million) interest costs and fees and a net
US$0.8 million (2020: US$24.3 million net repayment) in borrowing
proceeds.
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 period to 30 June 2023 (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 as set out in the risk
section on page 70 of the Annual Report. 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. 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.
Please refer to Note 2 of the Consolidated Financial Statements
in our 2021 Annual Report and Accounts for further details on the
going concern review.
2022 financial guidance and outlook
In 2022, we are providing the following guidance in relation to
our business. This guidance relates only to our Nigerian and
Nigerien assets and does not include the assets that we are
proposing to acquire in Chad and Cameroon(m) :
-- Total Revenues(a) of greater than US$215.0 million from
upstream and midstream activities associated with the Company's
four active Nigerian gas sales agreements and liquids sales from
the Company's Stubb Creek and Uquo fields. Any revenues received
from additional gas sales agreements would, therefore, be
incremental to this;
-- Group Operating expenses and administrative expenses(g) of up to US$75.0 million;
-- Group Depreciation, Depletion and Amortisation of US$21
million fixed for infrastructure assets plus US$2.3/boe of
production; and
-- Group capital expenditure of up to US$85.0 million.
Nick Beattie
Chief Financial Officer and Company Secretary
7 June 2022
Definitions
(a) Total Revenues are defined as the total amount of invoiced
sales during the period. This number is seen by management as
appropriately reflecting the underlying cash generation capacity of
the business as opposed to Revenue recognised in the 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 our 2020 Annual
Report in the Financial Review section on page 56. Note that Total
Revenues is not an audited number. # In order to compare
performance on a like-for-like basis the 2020 Total Revenues have
been represented to exclude the impact of an advance payment of
US$20 million received from Lafarge Africa on entering an amended
and extended gas sales agreement.
(b) Remaining life of contact revenues estimated on a
maintenance adjusted Take or Pay basis including contributions from
three of our customers: Calabar Generation Company Limited (owner
of the Calabar power station), Ibom Power Company Limited (owner of
the Ibom power station) and the Lafarge Africa PLC (owner of the
Lafarge Mfamosing cement plant). Note this is not an audited
number.
(c) Adjusted EBITDA is calculated as profit or loss before
finance costs, investment revenue, foreign exchange gains or loss,
expected credit loss and other related adjustments, fair value
adjustments, gain on acquisition, taxes, transaction costs,
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. #
In order to compare performance on a like-for-like basis the 2020
Adjusted EBITDA has been represented to exclude the impact of an
advance payment of US$20 million received from Lafarge Africa on
entering an amended and extended gas sales agreement.
(d) Total contributions to Nigeria and Niger defined as payments
to governments, employee salaries and payments to local suppliers
and contractors. Where total contributions refer to the period
2014-2021 they include contributions to Nigeria during the period
pre-acquisition of the Nigerian assets by Savannah.
(e) Investment grade indicates credit support from an entity
which holds an investment grade rating from either Standard &
Poor's, Moody's or Fitch Ratings.
(f) Adjusted Net debt is defined as Net debt adjusted for
US$75.5 million (2020: US$48.0 million) equivalent held in Naira
that is set aside to cover interest payments. This measure
recognises the fact that when interest is paid the Net debt will
rise.
(g) 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.
(h) Interest cover ratio is Adjusted EBITDA(c) divided by
Finance costs excluding (i) unwinding of a discount on a long-term
payable, (ii) unwind of discount on contract liabilities and (iii)
unwinding of decommissioning discount, less Interest Finance
Income.
(i) Net debt is defined as Borrowings less Cash at bank and
Restricted cash.
(j) Cash collections are defined as the amount of cash received
from customers. # In order to compare performance on a
like-for-like basis the 2020 Cash collections have been represented
to exclude the impact of an advance payment of US$20 million
received from Lafarge Africa on entering an amended and extended
gas sales agreement. Definitions Savannah Energy PLC Annual Report
and Accounts 2021 172 Definitions
(k) Leverage is defined as Net debt divided by Adjusted
EBITDA.
(l) Adjusted Leverage is defined as Adjusted net debt divided
Adjusted EBITDA. This measure thus excludes sums held to pay
interest from the calculation in parallel with Adjusted net
debt.
(m) Chad and Cameroon Assets: means the assets to be acquired on
completion of the Exxon Acquisition (being a 40% participating
interest in the Doba OFDA in Chad, and a 40.19% and 41.06%
shareholding interest in Tchad Oil Transportation Company and
Cameroon Oil Transportation Company (respectively) which own and
operate the Chad-Cameroon pipeline and FSO), and the assets to be
acquired on completion of the PETRONAS Acquisition (being a 35%
participating interest in the Doba OFDA in Chad, and a 30.16% and
29.77% shareholding interest in Tchad Oil Transportation Company
and Cameroon Oil Transportation Company (respectively) which own
and operate the Chad-Cameroon pipeline and FSO). Exxon Acquisition
the acquisition of Esso Pipeline Investments Limited and Esso
Exploration and Production Chad Inc. PETRONAS Acquisition the
acquisition of PETRONAS Carigali Chad Exploration
Unaudited Consolidated Statement of Comprehensive Income
for the year ended 31 December 2021
Year ended Year ended
31 December 31 December
2021 2020
Unaudited Audited
Note US$'000 US$'000
-------------------------------------------------------------- ---- ----------- -----------
Revenue 4 185,799 169,005
Cost of sales 5 (65,011) (72,460)
-------------------------------------------------------------- ---- ----------- -----------
Gross profit 120,788 96,545
Administrative and other operating expenses (25,675) (14,691)
Transaction expenses (7,374) -
Expected credit loss and other related adjustments (26) 10,992
-------------------------------------------------------------- ---- ----------- -----------
Operating profit 87,713 92,846
Finance income 490 472
Finance costs 6 (76,604) (75,796)
Fair value adjustment (610) (1,682)
Foreign exchange loss (18,734) (5,396)
-------------------------------------------------------------- ---- ----------- -----------
(Loss)/profit before tax (7,745) 10,444
Current tax expense 7 (2,589) (4,197)
Deferred tax credit/(expense) 7 27,437 (12,685)
-------------------------------------------------------------- ---- ----------- -----------
Tax credit/(expense) 7 24,848 (16,882)
-------------------------------------------------------------- ---- ----------- -----------
Profit/(loss) after tax 17,103 (6,438)
-------------------------------------------------------------- ---- ----------- -----------
Other comprehensive income
Items not reclassified to profit or loss:
Actuarial gains/(losses) relating to post-employment benefits 1,827 (362)
Tax relating to items not reclassified to profit or loss (609) 308
-------------------------------------------------------------- ---- ----------- -----------
Other comprehensive profit/(loss) 1,218 (54)
-------------------------------------------------------------- ---- ----------- -----------
Total comprehensive profit/(loss) 18,321 (6,492)
-------------------------------------------------------------- ---- ----------- -----------
Profit/(loss) after tax attributable to:
Owners of the Company 768 (6,684)
Non-controlling interests 16,335 246
-------------------------------------------------------------- ---- ----------- -----------
17,103 (6,438)
-------------------------------------------------------------- ---- ----------- -----------
Total comprehensive profit/(loss) attributable to:
Owners of the Company 1,742 (6,738)
Non-controlling interests 16,579 246
-------------------------------------------------------------- ---- ----------- -----------
18,321 (6,492)
-------------------------------------------------------------- ---- ----------- -----------
Earnings/(loss) per share
Basic (US$) 8 0.00 (0.01)
Diluted (US$) 8 0.00 (0.01)
-------------------------------------------------------------- ---- ----------- -----------
All results in the current financial year derive from continuing
operations.
Unaudited Consolidated Statement of Financial Position
as at 31 December 2021
2021 2020
Unaudited Audited
Note US$'000 US$'000
------------------------------------------------- ----- --------- ---------
Assets
Non-current assets
Property, plant and equipment 9 568,201 612,707
Exploration and evaluation assets 161,343 159,572
Deferred tax assets 223,814 196,986
Right-of-use assets 4,724 5,581
Restricted cash 1,635 1,635
Finance lease receivable 722 1,049
------------------------------------------------- ----- --------- ---------
Total non-current assets 960,439 977,530
------------------------------------------------- ----- --------- ---------
Current assets
Inventory 3,873 2,916
Trade and other receivables 10 231,631 122,400
Cash at bank 11 152,644 104,363
------------------------------------------------- ----- --------- ---------
Total current assets 388,148 229,679
------------------------------------------------- ----- --------- ---------
Total assets 1,348,587 1,207,209
------------------------------------------------- ----- --------- ---------
Equity and liabilities
Capital and reserves
Share capital 1,409 1,409
Share premium 61,204 61,204
Shares to be issued 63,956 -
Treasury shares (58) (59)
Capital contribution 458 458
Share-based payment reserve 8,706 7,104
Retained earnings 157,221 155,308
------------------------------------------------- ----- --------- ---------
Equity attributable to owners of the Company 292,896 225,424
Non-controlling interests 13,842 (2,737)
------------------------------------------------- ----- --------- ---------
Total equity 306,738 222,687
------------------------------------------------- ----- --------- ---------
Non-current liabilities
Other payables 12 3,415 4,648
Borrowings 13 108,652 424,667
Lease liabilities 5,308 7,057
Provisions 68,966 106,606
Contract liabilities 14 213,043 185,172
------------------------------------------------- ----- --------- ---------
Total non-current liabilities 399,384 728,150
------------------------------------------------- ----- --------- ---------
Current liabilities
Trade and other payables 12 116,771 106,225
Borrowings 13 415,593 89,995
Interest payable 15 80,101 51,544
Tax liabilities 7 2,058 2,539
Lease liabilities 1,475 1,004
Contract liabilities 14 26,467 5,065
------------------------------------------------- ----- --------- ---------
Total current liabilities 642,465 256,372
------------------------------------------------- ----- --------- ---------
Total liabilities 1,041,849 984,522
------------------------------------------------- ----- --------- ---------
Total equity and liabilities 1,384,587 1,207,209
------------------------------------------------- ----- --------- ---------
Unaudited Consolidated Statement of Cash Flows
for the year ended 31 December 2021
Year ended Year ended
31 December 31 December
2021 2020
Unaudited Audited
Note US$'000 US$'000
------------------------------------------------------------------- ---- ----------- -----------
Cash flows from operating activities:
Net cash generated from operating activities 15 128,115 115,569
------------------------------------------------------------------- ---- ----------- -----------
Cash flows from investing activities:
Interest received 193 110
Payments for property, plant and equipment (31,191) (9,381)
Exploration and evaluation payments (1,327) (2,167)
Payment for financial asset (7,500) -
Acquisition deposits (7,000) -
Lessor receipts 388 113
Cash to debt service accounts (76,800) (30,105)
Cash from restricted cash accounts - 181
------------------------------------------------------------------- ---- ----------- -----------
Net cash used in investing activities (123,237) (41,249)
------------------------------------------------------------------- ---- ----------- -----------
Cash flows from financing activities:
Finance costs (25,967) (21,767)
Borrowing proceeds 18,476 7,213
Borrowing repayments (15,818) (31,474)
Lease payments (1,850) (767)
Net cash used in financing activities (25,159) (46,795)
------------------------------------------------------------------- ---- ----------- -----------
Net (decrease)/increase in cash and cash equivalents (20,281) 27,525
Effect of exchange rate changes on cash and cash equivalents (8,238) 477
Cash and cash equivalents at beginning of year 74,258 46,256
------------------------------------------------------------------- ---- ----------- -----------
Cash and cash equivalents at end of year 11 45,739 74,258
------------------------------------------------------------------- ---- ----------- -----------
Amounts held for debt service at end of year 11 106,905 30,105
------------------------------------------------------------------- ---- ----------- -----------
Cash at bank at end of year as per Statement of Financial Position 11 152,644 104,363
------------------------------------------------------------------- ---- ----------- -----------
Unaudited Consolidated Statement of Changes in Equity
for the year ended 31 December 2021
Equity
Shares Share-based attributable Non-
to the
Share Share to be Treasury Capital payment Retained owners controlling Total
of the
capital premium issued shares contribution reserve earnings Company interest 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 2020
(audited) 1,393 61,204 - - 458 6,448 161,099 230,602 (2,983) 227,619
(Loss)/profit
for the year - - - - - - (6,684) (6,684) 246 (6,438)
Other
comprehensive
loss - - - - - - (54) (54) - (54)
--------------- ------- ------- ------- -------- ------------ ----------- -------- ------------ ------------ -------
Total
comprehensive
(loss)/profit
for the year - - - - - - (6,738) (6,738) 246 (6,492)
Transactions
with
shareholders:
Equity-settled
share-based
payments - - - - - 656 - 656 - 656
Share
adjustments 16 - - - - - 888 904 - 904
Treasury shares
recognition - - - (59) - - 59 - - -
--------------- ------- ------- ------- -------- ------------ ----------- -------- ------------ ------------ -------
Balance at
31 December
2020 (audited) 1,409 61,204 - (59) 458 7,104 155,308 225,424 (2,737) 222,687
Profit for the
year - - - - - - 768 768 16,335 17,103
Other
comprehensive
profit - - - - - - 974 974 244 1,218
--------------- ------- ------- ------- -------- ------------ ----------- -------- ------------ ------------ -------
Total
comprehensive
profit for the
year - - - - - - 1,742 1,742 16,579 18,321
Transactions
with
shareholders:
Equity-settled
share-based
payments - - - - - 1,602 - 1,602 - 1,602
Share
adjustments - - - 1 - - 171 172 - 172
Shares to be
issued - - 63,956 - - - - 63,956 - 63,956
--------------- ------- ------- ------- -------- ------------ ----------- -------- ------------ ------------ -------
Balance at
31 December
2021
(unaudited) 1,409 61,204 63,956 (58) 458 8,706 157,221 292,896 13,842 306,738
--------------- ------- ------- ------- -------- ------------ ----------- -------- ------------ ------------ -------
Notes to the Unaudited Financial Information
for the year ended 31 December 2021
1. Corporate information
The Company was incorporated in the United Kingdom on 3 July
2014. Savannah's principal activity 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 England for tax purposes and is a public company, and its shares
were listed on the Alternative Investment Market ("AIM") of the
London Stock Exchange on 1 August 2014. The Company's registered
address is 40 Bank Street, London E14 5NR.
2. Basis of preparation
The unaudited consolidated financial statements of the Company
and the Group have been prepared in accordance with International
accounting standards as adopted by the United Kingdom, with future
changes being subject to endorsement by the UK Endorsement Board.
The unaudited consolidated financial statements have been prepared
under the historical cost convention and incorporate the results
for the year ended 31 December 2021. The financial information
contained in this report for the year ended 31 December 2021 (the
"Financial Information") does not constitute full statutory
accounts as defined in sections 435 (1) and (2) of the Companies
Act 2006. The statutory accounts for the year ended 31 December
2021 will be finalised on the basis of the financial information
presented by the Directors in this announcement and will be
delivered to the Registrar of Companies in due course. The
statutory accounts are subject to completion of the audit and may
change before the approval of the Annual Report.
Statutory accounts for the year ended 31 December 2020 have been
delivered to the Registrar of Companies. The auditor's report on
those accounts was unqualified, drew attention by way of emphasis
of matter to the material uncertainty related to going concern
without qualifying the accounts and did not contain a statement
under section 498 (2) or (3) of the Companies Act 2006. Statutory
accounts for the year ended 31 December 2021 will be delivered in
due course.
The accounting policies applied are consistent with those
adopted and disclosed in the Group's audited consolidated financial
statements for the year ended 31 December 2021. There have been a
number of amendments to accounting standards and new
interpretations issued by the International Accounting Standards
Board which were applicable from 1 January 2021, however these have
not any impact on the accounting policies, methods of computation
or presentation applied by the Group. Further details on new
International Financial Reporting Standards adopted will be
disclosed in the Annual Report.
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 period to 31 December 2023 (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 receipts of our gas invoices by our customers, (2) the
forecast commodity price environment and (3) continued access to FX
markets for debt refinancing. 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 its 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.
These facts indicate that a material uncertainty exists that may
cast significant doubt on the Group's, ability to continue to adopt
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 Group's
unaudited 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 current and
future revenue-generating operations of the Group. The Unallocated
segment's 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 revenue and results
by reportable segment in 2021:
Nigeria Niger Unallocated Total
Unaudited Unaudited Unaudited Unaudited
US$'000 US$'000 US$'000 US$'000
--------------------------------------------------- --------- --------- ----------- -----------
Revenue 185,799 - - 185,799
Cost of sales1 (65,011) - - (65,011)
--------------------------------------------------- --------- --------- ----------- -----------
Gross profit 120,788 - - 120,788
--------------------------------------------------- --------- --------- ----------- -----------
Administrative and other operating expenses (6,814) (6,837) (12,024) (25,675)
Transaction expenses - - (7,374) (7,374)
Expected credit loss and other related adjustments (26) - - (26)
--------------------------------------------------- --------- --------- ----------- -----------
Operating profit/(loss) 113,948 (6,837) (19,398) 87,713
--------------------------------------------------- --------- --------- ----------- -----------
Finance income 490
Finance costs (76,604)
Fair value adjustment (610)
Foreign translation loss (18,734)
--------------------------------------------------- --------- --------- ----------- -----------
Loss before tax (7,745)
--------------------------------------------------- --------- --------- ----------- -----------
Segment depreciation, depletion and amortisation 35,402 282 543 36,227
Segment non-current assets 2 568,709 162,644 2,915 734,268
Segment non-current asset additions 32,535 1,779 184 34,498
Segment total assets 1,085,486 160,962 102,139 1,348,587
Segment total liabilities (938,513) (31,620) (71,716) (1,041,849)
--------------------------------------------------- --------- --------- ----------- -----------
1. Refer to note 5 for items included within Cost of sales.
2. Includes Property, plant and equipment, Exploration and
evaluation assets and Right-of-use assets.
The following is an analysis of the Group's revenue and results
by reportable segment in 2020:
Nigeria Niger Unallocated Total
Audited Audited Audited Audited
US$'000 US$'000 US$'000 US$'000
--------------------------------------------------- --------- -------- ----------- ---------
Revenue 169,005 - - 169,005
Cost of sales1 (72,460) - - (72,460)
--------------------------------------------------- --------- -------- ----------- ---------
Gross profit 96,545 - - 96,545
--------------------------------------------------- --------- -------- ----------- ---------
Administrative and other operating expenses (9,235) (282) (5,174) (14,691)
Expected credit loss and other related adjustments 10,992 - - 10,992
--------------------------------------------------- --------- -------- ----------- ---------
Operating profit/(loss) 98,302 (282) ( 5,174) 92,846
--------------------------------------------------- --------- -------- ----------- ---------
Finance income 472
Finance costs (75,796)
Fair value adjustment (1,682)
Foreign translation loss (5,396)
--------------------------------------------------- --------- -------- ----------- ---------
Profit before tax 10,444
--------------------------------------------------- --------- -------- ----------- ---------
Segment depreciation, depletion and amortisation 35,310 328 643 36,281
Segment non-current assets 2 613,439 161,147 3,274 777,860
Segment total assets 1,039,653 161,778 5,778 1,207,209
Segment total liabilities (919,067) (34,524) (30,931) (984,522)
--------------------------------------------------- --------- -------- ----------- ---------
1. Refer to note 5 for items included within Cost of sales.
2. Includes Property, plant and equipment, Exploration and
evaluation assets and Right-of-use assets.
4. Revenue
Set out below is the disaggregation of the Group's revenue from
contracts with customers:
2021 2020
Unaudited Audited
Year ended 31 December US$'000 US$'000
-------------------------------------------- --------- -------
Gas sales 169,052 157,080
Oil, condensate and processing sales 16,747 11,925
-------------------------------------------- --------- -------
Total revenue from contracts with customers 185,799 169,005
-------------------------------------------- --------- -------
Gas sales represents gas deliveries made to the Group's
customers under long-term, take-or-pay gas sale agreements. The
Group sells oil and condensates at prevailing market prices.
5. Cost of sales
2021 2020
Unaudited Audited
Year ended 31 December US$'000 US$'000
-------------------------------------------------------------------- --------- -------
Depletion and depreciation - oil and gas, and infrastructure assets 34,463 34,789
Facility operation and maintenance costs 26,023 33,682
Royalties 4,525 3,989
-------------------------------------------------------------------- --------- -------
65,011 72,460
-------------------------------------------------------------------- --------- -------
6. Finance costs
2021 2020
Unaudited Audited
Year ended 31 December US$'000 US$'000
----------------------------------------------------- --------- -------
Interest on bank borrowings and loan notes 53,384 58,910
Amortisation of balances measured at amortised cost1 14,557 11,184
Unwinding of decommissioning discount 4,977 1,781
Interest expense on lease liabilities 511 372
Bank charges 327 352
Other finance costs 2,848 3,197
----------------------------------------------------- --------- -------
76,604 75,796
----------------------------------------------------- --------- -------
1. Includes amounts due to unwinding of a discount on a
long-term payable, contract liabilities (note 14) and amortisation
of debt fees.
7. Taxation
Income tax
The tax (credit)/expense recognised in the profit or loss
statement for the Group is:
2021 2020
Unaudited Audited
Year ended 31 December US$'000 US$'000
------------------------------------------------------------------------- --------- -------
Current tax
- Current year 2,586 2,903
- Adjustments in respect of prior years 3 1,294
------------------------------------------------------------------------- --------- -------
2,589 4,197
------------------------------------------------------------------------- --------- -------
Deferred tax
- Current year 9,094 3,808
- Change in tax rates 25,871 -
- Write down and reversal of previous write downs of deferred tax assets (61,657) -
- Adjustments in respect of prior years (745) 8,877
------------------------------------------------------------------------- --------- -------
(27,437) 12,685
------------------------------------------------------------------------- --------- -------
Total tax (credit)/expense for the year (24,848) 16,882
------------------------------------------------------------------------- --------- -------
Corporation tax is calculated at the applicable tax rate for
each jurisdiction based on the estimated taxable profit for the
year. The Group's outstanding current tax liabilities of US$2.1
million (2020: US$2.5 million) principally relate to the
corporation tax liabilities in Nigeria.
8. Earnings per share
Basic earnings per share is calculated by dividing the profit
for the year attributable to owners of the Company by the weighted
average number of ordinary shares outstanding during the year.
Diluted earnings per share is calculated by dividing the profit
for year attributable to owners of the Company by the weighted
average number of ordinary shares outstanding during the year, plus
the weighted average number of shares that would be issued on the
conversion of dilutive potential ordinary shares into ordinary
shares. In the prior year, there was a loss attributable to the
owners of the Company, which meant the diluted weighted average
number of shares would reduce the loss per share. Therefore, the
basic weighted average number of shares were used to calculate the
diluted loss per share.
The weighted average number of shares outstanding excludes
treasury shares of 41,966,942 (2020: 42,624,837).
2021 2020
Unaudited Audited
Year ended 31 December US$'000 US$'000
---------------------------------------------------- --------- -------
Profit/(loss)
Profit/(loss) attributable to owners of the Company 768 (6,684)
---------------------------------------------------- --------- -------
Unaudited Audited
Number of shares Number of shares
------------------------------------------ ---------------- ----------------
Basic weighted average number of shares 954,280,611 953,783,575
Add: employee share options 4,766,269 279,565
------------------------------------------ ---------------- ----------------
Diluted weighted average number of shares 959,046,880 954,063,140
------------------------------------------ ---------------- ----------------
Unaudited Audited
US$ US$
-------------------------- --------- -------
Earnings/(loss) per share
Basic 0.00 (0.01)
Diluted 0.00 (0.01)
-------------------------- --------- -------
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 year ended 31 December 2021 (2020:
49,973,168). These options could potentially dilute basic earnings
per share in the future.
9. Property, plant and equipment
Oil and gas Infrastructure Other
assets assets assets Total
US$'000 US$'000 US$'000 US$'000
--------------------------------------------------- ----------- -------------- ------- --------
Cost
Balance at 1 January 2020 (audited) 167,890 457,414 2,879 628,183
Additions 1,757 1,831 534 4,122
Disposals - - (59) (59)
Decommissioning remeasurement adjustment (14,914) 10,236 - (4,678)
Transfer from Receivables from a joint arrangement 30,844 - - 30,844
Transfers to Exploration and evaluation assets - (284) - (284)
Reclassification of assets1 (1,725) 720 1,005 -
--------------------------------------------------- ----------- -------------- ------- --------
Balance at 31 December 2020 (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 (unaudited) 197,768 446,128 4,924 648,820
--------------------------------------------------- ----------- -------------- ------- --------
Accumulated depreciation
Balance at 1 January 2020 (audited) (3,269) (5,671) (957) (9,897)
Depletion and depreciation charge (17,234) (17,555) (751) (35,540)
Adjustment to accumulated depreciation 176 56 (216) 16
--------------------------------------------------- ----------- -------------- ------- --------
Balance at 31 December 2020 (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 (unaudited) (37,069) (40,891) (2,659) (80,619)
--------------------------------------------------- ----------- -------------- ------- --------
Net book value
Balance at 1 January 2020 (audited) 164,621 451,743 1,922 618,286
Balance at 31 December 2020 (audited) 163,525 446,747 2,435 612,707
--------------------------------------------------- ----------- -------------- ------- --------
Balance at 31 December 2021 (unaudited) 160,699 405,237 2,265 568,201
--------------------------------------------------- ----------- -------------- ------- --------
1. Certain assets have been reclassified between the various
asset classes to ensure they are reported in the most appropriate
class.
10. Trade and other receivables
2021 2020
Unaudited Audited
As at 31 December US$'000 US$'000
------------------------------------- --------- --------
Trade receivables 156,440 131,078
Receivables from a joint arrangement 67 419
Other financial assets 5,237 5,548
------------------------------------- --------- --------
161,744 137,045
Expected credit loss (29,345) (17,213)
------------------------------------- --------- --------
132,399 119,832
VAT receivables 694 185
Prepayments and other receivables 98,538 2,383
------------------------------------- --------- --------
231,631 122,400
------------------------------------- --------- --------
The following has been recognised in the Statement of
Comprehensive Income relating to expected credit losses:
2021 2020
Unaudited Audited
Year ended 31 December US$'000 US$'000
--------------------------------------------------- --------- --------
Provision for expected credit loss (12,628) (16,782)
Gain on acquired credit impaired assets 12,602 27,774
--------------------------------------------------- --------- --------
Expected credit loss and other related adjustments (26) 10,992
--------------------------------------------------- --------- --------
For reporting purposes previously acquired assets were shown net
of any related ECL. After acquisition, some of these assets have
been fully recovered. Consequently, the associated ECL has been
released, with a credit of US$12.6 million (2020: US$27.8 million)
being recognised in the Statement of Comprehensive Income. The
recoveries on the acquired credit impaired assets are reflective of
management's improved credit control processes since acquisition.
The remaining ECL of US$1.8 million (2020: US$14.4 million) that
was netted within the fair value of the trade receivables at
acquisition remains netted within the trade receivables balance and
will only be released when the associated receivables have been
fully realised.
The provision for expected credit loss that has been recognised
in the year relates to an expected credit loss recognised on new
invoices raised during the year as well as changes in expected
credit loss rates because of non-payment of certain invoices. Set
out below is the movement in the allowance for expected credit loss
on trade and other receivables:
2021 2020
Unaudited Audited
US$'000 US$'000
----------------------------------- --------- -------
As at 1 January 17,213 431
Provision for expected credit loss 12,628 16,782
Other receivables written off (496) -
----------------------------------- --------- -------
As at 31 December 29,345 17,213
----------------------------------- --------- -------
Included within Prepayments and other receivables as at 31
December 2021 are amounts for shares to be issued following the
signing of placing agreements with shareholders of the Company
in 2021 amounting to US$65.8 million (2020: US$nil), deposits
amounting to US$21.5 million (2020: US$nil) for the Group's
proposed acquisition of the Chad and Cameroon assets as well as
debt fees associated with unutilised debt amounting to US$7.5
million (2020: US$nil).
11. Cash at bank
2021 2020
Unaudited Audited
As at 31 December US$'000 US$'000
------------------------------ --------- -------
Cash and cash equivalents 45,739 74,258
Amounts held for debt service 106,905 30,105
-------------------------------- --------- -------
152,644 104,363
------------------------------ --------- -------
The Directors consider that the carrying amount of cash at bank
approximates their fair value.
Cash and cash equivalents includes US$1.1 million (2020: US$1.2
million) of cash collateral on the Orabank revolving facility. The
cash collateral was at a value of XOF626.4 million (2020: XOF621.7
million).
Amounts held for debt service represents Naira denominated cash
balances which are held by the Group for 2020 and 2021 debt service
which has been separately disclosed from Cash and cash equivalents.
In total, approximately US$ 132.8 million (2020: US$78.9 million)
will be paid for the 2020 and 2021 debt service from bank accounts
designated as Amounts held for debt service, and from Cash and cash
equivalents.
12. Trade and other payables
2021 2020
Unaudited Audited
As at 31 December US$'000 US$'000
----------------------------- --------- -------
Trade and other payables
Trade payables 30,957 40,590
Accruals 62,927 35,565
VAT and WHT payable 13,783 12,075
Royalty and levies 5,196 6,261
Employee benefits 91 74
Deferred consideration - 7,500
Other payables 3,817 4,160
------------------------------- --------- -------
Trade and other payables 116,771 106,225
Other payables - non-current
Employee benefits 3,415 4,648
------------------------------- --------- -------
Other payables - non-current 3,415 4,648
------------------------------- --------- -------
120,186 110,873
----------------------------- --------- -------
The Directors consider that the carrying amount of trade and
other payables approximates to their fair value.
Deferred consideration of US$7.5 million related to a loan note
that was initially acquired via the acquisition of the Nigerian
assets in November 2019, and was then acquired by the Company for
future settlement. The amount was repaid in 2021.
13. Borrowings
2021 2020
Unaudited Audited
As at 31 December US$'000 US$'000
-------------------------- --------- -------
Revolving credit facility 9,916 12,998
Bank loans 379,002 376,509
Senior Secured Notes 100,717 106,513
Other loan notes 34,610 18,642
---------------------------- --------- -------
524,245 514,662
-------------------------- --------- -------
2021 2020
Unaudited Audited
As at 31 December US$'000 US$'000
----------------------- --------- -------
Current borrowings 415,593 89,995
Non-current borrowings 108,652 424,667
------------------------- --------- -------
524,245 514,662
----------------------- --------- -------
14. Contract liabilities
Contract liabilities represents the value of gas supply
commitment to the Group's customers for gas not taken but invoiced
under the terms of the contracts. The amount has been analysed
between current and non-current liability, based on the customers'
expected future usage gas delivery profile. This expected usage is
updated periodically with the customer.
2021 2020
Unaudited Audited
As at 31 December US$'000 US$'000
----------------------------------------- --------- -------
Amount due for delivery within 12 months 26,467 5,065
Amount due for delivery after 12 months 213,043 185,172
----------------------------------------- --------- -------
239,510 190,237
----------------------------------------- --------- -------
2021 2020
Unaudited Audited
US$'000 US$'000
------------------------------------------- --------- --------
As at 1 January 190,237 121,994
Additional contract liabilities 61,033 86,881
Contract liabilities utilised (18,345) (23,632)
Unwind of discount on contract liabilities 6,585 4,994
------------------------------------------- --------- --------
As at 31 December 239,510 190,237
------------------------------------------- --------- --------
Following the purchase of the Nigerian assets on 14 November
2019, the contract liabilities balance was adjusted to reflect the
fair value at the acquisition date. Discount amounting to US$6.6
million (2020: US$5.0 million) has been accreted during the year as
make-up gas has been delivered.
15. Cash flow reconciliations
A reconciliation of profit before tax to net cash generated from
operating activities is as follows:
Year ended Year ended
31 December 31 December
2021 2020
Unaudited Audited
US$'000 US$'000
--------------------------------------------------------- ----------- -----------
Loss/(profit) for the year before tax (7,745) 10,444
Adjustments for:
Depreciation 1,764 1,492
Depletion 34,463 34,789
Finance income (49) (388)
Finance costs 76,604 75,796
Fair value movement 610 1,682
Unrealised foreign translation loss 9,791 404
Share option charge 1,602 656
Expected credit loss and other related adjustments 26 (10,992)
--------------------------------------------------------- ----------- -----------
Operating cash flows before movements in working capital 117,066 113,883
(Increase)/decrease in inventory (956) 1,104
Increase in trade and other receivables (57,744) (49,281)
Increase/(decrease) in trade and other payables 29,455 (11,162)
Increase in contract liabilities 42,689 63,247
Income tax paid (2,395) (2,222)
--------------------------------------------------------- ----------- -----------
Net cash generated from operating activities 128,115 115,569
--------------------------------------------------------- ----------- -----------
Interest paid during the year amounted to US$22.6 million (2020:
US$19.8 million).
The changes in the Group's liabilities arising from financing
activities can be classified as follows:
Interest Lease
Borrowings payable liabilities Total
US$'000 US$'000 US$'000 US$'000
------------------------------------------------- ---------- -------- ----------- --------
At 1 January 2021 (audited) 514,662 51,544 8,061 574,267
------------------------------------------------- ---------- -------- ----------- --------
Cash flows
Repayment (15,818) (22,584) (1,850) (40,252)
Proceeds 18,476 - - 18,476
Realised foreign translation 175 - - 175
------------------------------------------------- ---------- -------- ----------- --------
2,833 (22,584) (1,850) (21,601)
Non-cash adjustments
Payment-in-kind adjustment/accretion of interest 10,544 51,327 511 62,382
Lease liability additions - - 138 138
Net debt fees (2,774) - - (2,774)
Borrowing fair value adjustments 610 - - 610
Working capital movements - - (29) (29)
Foreign translation (1,630) (186) (48) (1,864)
------------------------------------------------- ---------- -------- ----------- --------
At 31 December 2021 (unaudited) 524,245 80,101 6,783 611,129
------------------------------------------------- ---------- -------- ----------- --------
Interest Lease
Borrowings payable liabilities Total
US$'000 US$'000 US$'000 US$'000
------------------------------------------------- ---------- -------- ----------- --------
At 1 January 2020 (audited) 532,052 13,715 5,570 551,337
------------------------------------------------- ---------- -------- ----------- --------
Cash flows
Repayment (31,474) (19,785) (767) (52,026)
Proceeds 7,213 - - 7,213
------------------------------------------------- ---------- -------- ----------- --------
(24,261) (19,785) (767) (44,813)
Non-cash adjustments
Payment-in-kind adjustment/accretion of interest 3,991 57,612 372 61,975
Lease liability additions - - 3,050 3,050
Net debt fees 1,049 - - 1,049
Borrowing fair value adjustments 1,682 - - 1,682
Foreign translation 149 2 (164) (13)
------------------------------------------------- ---------- -------- ----------- --------
At 31 December 2020 (audited) 514,662 51,544 8,061 574,267
------------------------------------------------- ---------- -------- ----------- --------
16. Events after the reporting period
The Directors are not aware of any events after the reporting
date that require reporting.
[1] Total Revenues refers to the total amount invoiced in the
financial year. This number is seen by management as appropriately
reflecting the underlying cash generation capacity of the business
compared 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 of
our 2020 Annual Report. For reference FY 2021 Revenues were
US$185.8 million (up 10% on FY 2020 Revenues of US$169.0 million).
2020 Total Revenues are represented to exclude a one-off advance
payment of US$20 million which was received on entering into an
amended and extended Gas Sales Agreement with Lafarge Africa to
enable a like-for-like comparison with 2021.
[2] Adjusted EBITDA is calculated as profit or loss before
finance costs, investment revenue, foreign exchange gains or
loss,
expected credit loss and other related adjustments, fair value
adjustments, gain on acquisition, taxes, transaction costs,
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. 2020 cash collections and Adjusted
EBITDA are represented to exclude a one-off advance payment of
US$20 million which was received on entering into an amended and
extended Gas Sales Agreement with Lafarge Africa to enable a
like-for-like comparison with 2021.
[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.
[4] Within cash balance of US$154.3m, US$132.8m is set aside for
debt service, of which US$75.5m is for interest and US$57.3m is for
scheduled principal repayments, and US$1.6m relates to monies held
in escrow accounts.
[5] Leverage is calculated as Net debt/Adjusted EBITDA
[6] Interest cover ratio is Adjusted EBITDA(2) divided by
Finance costs excluding (i) unwind of a discount on a long-term
payable, (ii) unwind of discount on contract liabilities and (iii)
unwinding of decommissioning discount, less Interest Finance
Income
[7] CPR compiled by CGG Services (UK) Ltd ("CGG"), a well-known
independent third-party reserves auditor. For an explanation of the
defined terms in this announcement readers should refer to the
updated Nigeria CPR, which is available to download from the
Company's website at www.savannah-energy.com
[8] Total Contributions to Nigeria and Niger defined as payments
to governments, employee salaries and payments to local suppliers
and contractors.
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