Savannah Petroleum PLC – 2018 Audited Annual Results

Savannah Petroleum PLC is pleased to announce its full year audited results for the period ending 31 December 2018.

Highlights

Niger 

• Safe and successful completion of the Company’s maiden exploration drilling campaign in Niger, delivering five discoveries from five wells on the R3 East portion of the R3/R4 PSC;
• Confirmation of Savannah’s intent to develop a domestic-focused early production system (“EPS”) utilising resources discovered on R3 East, with oil expected to be sold into the Société de Raffinage de Zinder (“SORAZ”) refinery, which is connected to the ARB via the third party owned 463km Agadem-Zinder crude oil transportation pipeline;
• Net capital expenditure to first oil expected to be less than US$5m, with external financing requirement 60% lower vs. the Company’s conceptual development solution announced in November 2016; and
• Signature of a Memorandum of Understanding (“MOU”) between Savannah’s Niger subsidiary and the Ministry of Energy and Petroleum (“MEP”) in Niger in relation to the planned EPS, setting out the MEP’s commitment to support Savannah’s EPS by facilitating infrastructure access agreements between Savannah Niger and third-party oil processing and transportation infrastructure. 

Seven Energy Transaction 

• Successful completion of US$125m placing in February 2018 to fund, inter alia, the acquisition by Savannah of certain assets from Seven Energy International Limited (“Seven”) (“the Transaction” or “the Seven Energy Transaction”) and including the acquisition of Seven’s 10.25% Senior Secured Notes (“SSNs”) by way of an Exchange Offer;
• Memorandum of Understanding signed between Frontier Oil Limited (“Frontier”), Seven Uquo Gas Limited (“SUGL”) and Accugas Limited (“Accugas”) to conduct a gas for oil swap at the Uquo Field, increasing SUGL’s right to gas production from the Uquo Field to 100% from a current 87.7%;
• Agreement reached to acquire the 37.5% minority shareholders’ interests in Universal Energy Resources Limited (“UERL”), increasing the Enlarged Group’s interest in the Stubb Creek Field to 51% (operated) from a current c.32%;
• Acquisition of additional 55-60% interest in Accugas Limited (“Accugas”), resulting in the Enlarged Group owning a 75-80% interest and further consolidating control over the gas value chain in South East Nigeria;
• Signature of MOU with a vehicle managed by African Infrastructure Investment Managers Limited (“AIIM”) for the sale of a 20-25% interest in each of Seven Uquo Gas Limited (“SUGL”) and Accugas for consideration of US$54-70m, broadening the existing partnership with AIIM and providing significant additional liquidity to the Enlarged Group; and
• Enhancement of acquired assets’ NPV10 by 35%, and of the associated forecast cash flows by an average of 58% over the 2019 – 2022 period, as reviewed by Savannah’s Competent Person[1]. 

Financial

• Five well drilling campaign in Niger delivered within budgeted time;
• Completion of the second tranche of a US$125m equity placing, resulting in a cash inflow of US$99m; and
• Completion of Exchange Offer in relation to Seven Energy’s 10.25% Senior Secured Notes (“SSNs”).

Post-Period Highlights 

• Successful completion of US$23m equity raise to fund working capital needs of the Company ahead of Seven Energy Transaction completion;
• Submission of feasibility study to the Ministry of Energy and Petroleum in Niger in relation to the planned R3 East EPS; and
• Signature of Implementation Agreement in relation to the Seven Energy Transaction, a legally binding agreement between Savannah, Seven and certain of Seven’s creditors which details the legal terms and steps according to which the Transaction will be implemented. 

Andrew Knott, CEO of Savannah Petroleum, said: 

“I am very pleased with the progress we made as a Company in 2018.  During the year we executed a highly successful drilling campaign in Niger, that saw us deliver five discoveries from five wells, a 100% exploration success record.  With this achievement, we have proven that the geology is low-risk, and therefore that similar success is expected to be repeatable elsewhere on our acreage. We have also consistently demonstrated our ability to operate safely and within budgeted time in the ARB.  Our focus for the remainder of the year in Niger will be to deliver first oil from our R3 East EPS and to recommence exploration drilling in H2, potentially with a partner on the licence.

In Nigeria, we shortly expect to complete the Seven Energy Transaction and our guidance remains that this will complete in Q2 2019.  We continue to see Nigeria as a high-potential jurisdiction for Savannah and believe we will be able to significantly grow our business and generate returns for our stakeholders through maximising the cash flow generation potential of the Seven Assets as well as through accessing new growth opportunities.  I look forward to updating all Savannah stakeholders on the progress made across our portfolio during the remainder of 2019.”