WTI (July) $75.55 +$1.48, Brent (Aug) $79.87 +$1.46, Diff -$4.32 -2c
USNG (July) $2.82 +6c, UKNG (July) 78.25p -1.39p, TTF (July) €33.0 -€0.4

Oil price

Another bounce-ish today after yesterday’s rally that followed the run round by the three wise men of Opec+ indeed one of the new boys decided to give a lesson to the market. Stating that“sometimes the market doesn’t understand decisions, it takes time to analyse” Suhail Al Mazrouei from the UAE was possibly exhibiting first night nerves, I mean doesn’t understand……?

Savannah Energy

Savannah Energy PLC, the British independent energy company focused around the delivery of Projects that Matter, is pleased to announce its audited results for the year ended 31 December 2023. The Notice of the Annual General Meeting (“AGM”) and a copy of the 2023 Annual Report and Accounts are available to download from the Company’s website (www.savannah-energy.com). The Notice of the AGM has been posted to those shareholders who have elected to receive postal copies.

Andrew Knott, CEO of Savannah Energy, said:
“2023 clearly demonstrated the robustness of our business model, corporate capacity and corporate infrastructure. Our core business continued to perform strongly, while we have progressed our projects in Niger during a period of political change, progressed two separate hydrocarbon acquisitions which are material to our business, continued to grow our renewable energy business, managed the impact of the nationalisation of our Chad Assets to ensure that we receive the value we are due and positioned ourselves strongly to announce further new and exciting projects in 2024.”

Andrew Knott has reported a good set of financials today and his comments are upbeat, reporting Total Revenues of US$260.9m (11%+ ahead of guidance) and average gross daily production of 23.8 Kboepd, broadly in line with FY 2022 production when adjusted for a planned maintenance programme. These results coincide with the Savannah Annual Report which is always worth a read with articles about the company ethos and some thought-provoking pieces from other distinguished authors 

These numbers beat guidance and show that Savannah’s business model is robust, which together with sufficient corporate capacity and infrastructure mean that the core business performed strongly. In Niger, for example, despite last year’s political changes, Savannah has announced that flow testing will commence in Q4 2024 and should lead to first oil in H2 2025 or early 2026, to be transported through the newly-operational Niger-Benin pipeline. 

The company is progressing two ‘material’ hydrocarbon acquisitions in South Sudan and Nigeria. Although the market awaits further details on the proposed acquisition of all of PETRONAS’ assets in South Sudan, it’s worth noting that in 2023 these assets produced 149 Kbopd (gross) of crude oil, materially lifting Savannah’s gross (and net) production on completion. Savannah has already undertaken significant preparation work associated with the completion of the acquisition, which is now targeted for Q3 2024.

At the same time, Savannah is also uber committed to grow its renewables business which is shown by the growth of up to 1 GW+ of projects in motion by end 2024 and now a new target set of up to 2 GW+ in motion by end 2026 – exciting projects such as the up to 250 MW Tarka wind farm in Niger and the up to 95 MW Bini a Warak hybrid hydroelectric and solar project in Cameroon. These are large-scale projects expected to supply up to 34% of Niger’s electricity demand and boost Cameroon’s on-grid electricity generation capacity in Northern Cameroon by over 50%. Funding via two leading Development Finance Institutions is already secured for two-thirds of the development of the Tarka wind farm project, with project sanction expected in 2024 and first power in 2027. The Cameroon project is not far behind, with project sanction expected in 2026 and first power in the 2027 to 2028 window. Savannah are clearly excited in this area and I understand that they are positioned very strongly to announce further new projects this year.

Nigeria remains the backbone of the company currently and the $45m being spent on the compression project at the Uquo CPF is expected to operational in H2 2024 and will enable significant further growth in gas production ‘over the coming years’. Also, completion of the SIPEC acquisition this year will materially boost reserves and resources and thus is expected to more than double oil production at Stubb Creek to 4.7 Kbopd on completion and debottlenecking plus, with the addition of 227 Bscf of 2C Contingent gas resources, secures significant additional feedstock gas supplies for existing and future customers well into the future.

So I would say that Savannah is looking very strong in its key focus areas, as I have said above it has a number of strictly defined targets according to that ‘robust’ model. Shareholders can expect a significant increase in renewables, further hydrocarbon acquisitions and of course the refinancing of the Accugas debt facility, closing of SIPEC and with the Chad disputes ongoing with claims of over $1bn at the arbitration processes set to conclude by end 2025. I’m very much looking forward to the shares returning from suspension. 

FY 2023 Highlights

• Average gross daily production was 23.6 Kboepd, broadly in line with FY 2022 production on a like-for-like basis when adjusted for a planned maintenance programme;
• Up to 696 MW of renewable energy projects in motion at year-end, and targeting a portfolio of up to 1 GW+ of renewable energy projects in motion by end 2024 and up to 2 GW+ by end 2026;

Financial guidance achieved or exceeded;

• Total Revenues1 of US$260.9 million (11% ahead of guidance of ‘greater than US$235 million’);
• Operating expenses plus administrative expenses2 of US$68.8 million (8% below guidance of ‘up to US$75.0 million’); and
• Capital expenditure of US$13 million (guidance of ‘up to US$30 million’);
• Strong safety record maintained with a zero Lost Time Injury rate;
• Continued increase in customer diversification in Nigeria with gas sold to nine customers, and a number of new and extended sales agreements signed, totalling up to 101 MMscfpd;
• Average realised sales price of US$4.51/Mscfe (+9% increase on the prior year average realised price of US$4.14/Mscfe);
• Agreement signed with Amalgamated Oil Company Nigeria Limited to purchase up to 20 MMscfpd of gas over the course of the next 10 years for onward sale to our gas customers, providing a commercial route to market for third-party stranded gas resources via our c. 260km pipeline network; and
• US$45m compression project in Nigeria advanced and remains on track with front-end engineering design and the associated order of long lead items completed in Q4 2023. 

Post-year End Update

• Strong Nigerian gas sales momentum continued with a 12-month contract extension signed in January 2024 with FIPL to supply up to 65 MMscfpd to their FIPL Afam, Eleme and Trans Amadi power stations;
• Accugas refinancing process underway with new Naira facility signed in early 2024, which is being progressively drawn down during the year and utilised towards repayment of the existing Accugas US$ facility;
• Agreements signed in March 2024 to acquire 100% of Sinopec International Petroleum Exploration and Production Company Nigeria Limited (“SIPEC”), whose principal asset is a 49% non-operated interest in the Stubb Creek oil and gas field, Nigeria, consolidating our interest in the asset. Plans in place to double production to approximately 4.7 Kbopd within 12 months following completion of the acquisition through the implementation of a de-bottlenecking programme; and
• US$45m compression project in Nigeria on-budget and on-track for completion in H2 2024, which will enable us to maintain and grow our gas production levels.

Sustainability Highlights

• Publication of first disclosure reports in accordance with the Task Force on Climate-Related Financial Disclosures (“TCFD”) and the Sustainability Accounting Standards Board (“SASB”) standards during 2023, and publication of first disclosure reports in accordance with the Global Reporting Initiative (“GRI”) and our chosen United Nations Sustainable Development Goals (“UN SDGs”) post-year end in 2024;
• Low carbon intensity metric maintained in 2023 of 10.7 kg CO2e/boe (2022: 9.7 kg CO2e/boe), 45% lower than the Supermajor average of 19.4 kg CO2e/boe3;
• Total Contributions4 in 2023 to host nations were US$52.0 million; and
• 24% increase in training hours per employee and a 24% increase in total training hours in 2023 to 15,858 (2022: 12,754).

Financial guidance for 2024

We are providing the following guidance in relation to the Group for the year ended 31 December 2024. This guidance does not include any contribution from proposed acquisitions:

• Total Revenues1 greater than US$245 million;
• Operating expenses and administrative expenses2 of up to US$75 million; and
• Capital expenditure of up to US$50 million.

Diversified Energy Company

Diversified has announces the closing of its acquisition of the proportionate working interest in certain assets within the Company’s Central Region from Oaktree Capital Management, as announced on March 19, 2024. Concurrently, the Company also completed an acquisition-related redetermination of the borrowing base of its revolving credit facility (Sustainability Linked Loan, or the “SLL”) resulting in a 26% or $80 million increase in the borrowing base to $385 million and estimated post-transaction liquidity of ~$130 million.

Acquisition Highlights

• Purchase price of $410 million before customary purchase price adjustments
• Acquisition net purchase price of $377 million after customary purchase price adjustments
• PDP reserves of 510 Bcfe (~85 MMBoe) and a PDP PV10 of ~$462 million(a)
• Current net production of 122 MMcfepd (~20 Mboepd)
• Estimated 2024 Adjusted EBITDA of ~$126 million(b)
• Purchase price multiple of ~3.0x(b)  and ~PV17 valuation on PDP-only assets
• Includes hedges on ~60% of the Assets 2024 production at an average price of ~$3.89/MMBtu

Consideration for the Acquisition consists of $83 million in deferred cash payments to Oaktree, the assumption of Oaktree’s proportionate debt of ~$120 million associated with the ABS VI amortizing note and other expanded liquidity sources.

CEO Rusty Hutson, Jr. commented:
“This transaction represents another deliberate step in our disciplined approach to focus on accretive acquisitions that enhance our scale, deliver margin expansion, and expand free cash flow. The net purchase price of these high quality assets approximates a PV17 valuation and represents a low multiple of the Assets annual cash flows. As the natural acquirer of Oaktree’s working interest in the Central Region, the transaction was a unique opportunity to consolidate these assets and represents the culmination of a successful, multi-year partnership with Oaktree.  I would also like to thank our financial partners for their continued support, demonstrated by the increase in the borrowing base of our Sustainability Linked Loan, and the highly successful ABS VIII financing.”

The deal announced earlier is a good one for DEC, as Rusty Hutson says its accretive, delivers that famous margin expansion and the FCF expands. As I wrote before the ABS VIII tidies up the balance sheet and shows industry comfort in their debt. There is nothing not to like about this so I remain very positive on DEC, even natural gas prices look good…

Footnotes:

For Company-specific items, refer also to the Glossary of Terms and/or Alternative Performance Measures found in the Company’s  Annual Report and Form 20-F for the year ended December 31, 2023 filed with the United States Securities and Exchange Commission. 

Corcel

Corcel the pan Angola-Brazil focused exploration and production company, provides the following updates:

Angola Operational Update:

Following the announcement on May 31st, 2024, that the near-term focus in Angola will be on geological and geophysical (G&G) activities, the company announces that the KON 11, KON 12, and KON 16 blocks have received all relevant approvals to acquire new G&G data through an Enhanced Full Tensor Gradiometry Survey (eFTG). This survey along with other G&G activities, to be conducted by the Metatek Group during Q3 2024, will deliver new geological insights into the prospectivity of the Tobias and Galinda fields, other potential leads and prospects, and provide insights to enable the reactivation of the brownfields.

Management and Finance Update:

The Company provided Fundraising Updates on May 13th, 2024, where it confirmed that it received £399,750, and issued 79,950,000 shares and 79,950,000 warrants of Tranche I, including 39,975,000 shares to Corcel Director, Geraldine Geraldo, who holds 3.89% of the issued share capital of the Company.

The Company will provide a further update by June 14th, 2024 on the remaining funds, which includes Tranche II representing £500,000 from cornerstone investor Extraction Srl, as well as one additional institutional investor. Through this period, the Company is managing its working capital position with its creditors.

Following the appointment of Scott Gilbert as Interim CEO, as announced on April 25th, 2024, Mr. Gilbert, together with the management team, is progressing with the Company’s operational activities in Angola to continue to pursue the potential which its current asset portfolio has to offer, while developing M&A opportunities in Brazil, capitalising on Mr. Gilbert’s extensive experience in the region. The Company is also looking at further sources of capital which it will require to continue these developments.

Mr. Antoine Karam was appointed as Interim Executive Chairman on July 19th, 2023 and will now revert to the role of Non-Executive Chairman, continuing to provide support to the Company as Chairman of the Board of Directors.

Antoine Karam, Non-Executive Chairman commented: 
“The eFTG Survey over our blocks will enhance our geological understanding and bolster our efforts in the Kwanza basin, where we remain confident there is significant potential. Despite our recent challenges, we remain focused in achieving our goals, and I remain fully committed to the Company as Non-Executive Chairman following the last few months where I have been Interim Executive Chair.”

Corcel are convinced that there is plenty to look for in the Kwanza Basin and with the significant amount of industry expertise being accumulated at board level will be looking at M&A opportunities in Brazil.