TIDMSAVE
RNS Number : 0893C
Savannah Energy Plc
08 June 2023
8 June 2023
Savannah Energy PLC
("Savannah" or "the Company"")
FY 2022 Audited Annual Results
Notice of AGM and Posting of the 2022 Annual Report
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 2022.
The Notice of the Annual General Meeting ("AGM" or "Meeting") is
available to download from the Company's website (
www.savannah-energy.com ). A copy of the 2022 Annual Report and
Accounts ("Annual Report") will be available to download from the
Company's website later today. 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:
"2022 was another year of significant progress and growth for
our company. Our Total Revenues(1) grew by 26% to US$290m, our
Adjusted EBITDA(2) rose by 27% to US$222m. To put these numbers
into context, since the announcement of our decision to acquire our
Nigerian business in 2017, it has delivered six consecutive years
of Total Revenues(1) growth at a compound annual growth rate of
21%. This growth has seen us more than double the number of
customers the business serves and increase the share of Nigeria's
thermal power generation capacity that it supplies from 10% to 24%.
Our performance against key industry sustainability metrics
relating to HSE performance, carbon intensity, senior management
gender diversity and local employee ratios remain industry
leading.
Looking forward to the rest of 2023, I am confident in where we
are as a business. Key projects we are focused on completing
include: (1) the closing of our proposed acquisition of PETRONAS'
assets in South Sudan in Q3; (2) at least one further hydrocarbon
asset deal; (3) reaching our target of having up to 1GW+ of
renewable energy projects in motion by end of year; (4) the flow
testing of our R3 East development in Q4; and (5) the refinancing
our Nigerian debt.
I would urge shareholders to spend time reading through my CEO
Letter to Shareholders and the "Why we do what we do" section of
the Annual Report which discuss our corporate purpose and
associated core beliefs which serve to underpin our hydrocarbons
AND renewables strategy and business model. They are essential
reading for anyone trying to understand what Savannah is, where we
are going and why.
I would like to express my gratitude to all of those who
contributed to our success in 2022 - 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."
Key FY 2022 Financial Highlights
-- FY 2022 Total Revenues(1) of US$290.4m (+26% on FY 2021 Total
Revenues(1) of US$230.5m). This is ahead of the Company's
previously issued FY 2022 guidance of 'Total Revenues(1) of greater
than US$215.0m';
-- Adjusted EBITDA(2) of US$222.4m (+27% on FY 2021 Adjusted EBITDA(2) of US$175.0m);
-- Adjusted EBITDA(2) margin remained broadly unchanged at 77%;
-- Average realised sales price for 2022 of US$4.14/Mscfe (-6%
on the 2021 average realised price of US$4.42/Mscfe and driven by
the broader mix of gas customers);
-- Operating expenses plus administrative expenses(3) of
US$66.2m (FY 2022 guidance of up to US$75.0m);
-- Depreciation, Depletion and Amortisation(4) of US$39.0m (FY
2022 guidance of US$41.9m based on the actual produced
volumes);
-- Capital Expenditure for the year of US$23.6m (FY 2022 guidance of up to US$35.0m);
-- Group cash balance(5) of US$240.9m as at 31 December 2022
(+56% versus FY 2021 year-end Group cash balance(5) of
US$154.3m);
-- Group net debt(6) of US$404.9m as at 31 December 2022 (+9%
versus FY 2021 year-end Group net debt(6) of US$370.0m);
-- Leverage(7) was 1.8x (2021 leverage(7) of 2.1x) and an
interest cover ratio(8) of 3.4x (FY 2021 ratio of 2.8x); and
-- Total Group assets amounted to US$1,760m at year-end (2021: US$1,349m).
Key FY 2022 Operational Highlights
-- FY 2022 average gross daily production from the Nigerian
operations was 26.8 Kboepd, a 20% increase from the average gross
daily production of 22.3 Kboepd in FY 2021;
-- Of the FY 2022 total average Nigerian gross daily production
of 26.8 Kboepd, 90% was gas, including a 23% increase in gas
production from the Uquo gas field, from 118 MMscfpd (19.7 Kboepd)
in FY 2021 to 145 MMscfpd (24.2 Kboepd) in FY 2022;
-- Four new gas sales agreements ("GSAs") announced during the year:
o GSA announced with Central Horizon Gas Company Limited on 21
February 2022 to supply up to 5 MMscfpd of gas;
o GSA announced with Trans Afam Power Limited on 6 June 2022 to
supply up to 35 MMscfpd of gas ;
o GSA announced with Notore Chemical Industries PLC on 16 August
2022 to supply up to 10 MMscfpd of gas; and
o Interim GSA signed with Shell Petroleum Development Company on
26 October 2022 to supply up to 3 MMscfpd.
-- Contract extension announced on 22 April 2022 for the GSA
with First Independent Power Limited, increasing the quantity of
gas supplied from up to 35 MMscfpd to up to 65 MMscfpd and
extending supply to cover three of its power plants, FIPL Afam,
Eleme and Trans Amadi;
-- In March 2022, Savannah announced its inaugural renewable
energy project, the up to 250 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% with project sanction
expected in 2024.
Post-year End Operational Update
-- Following the signing of two new renewable energy agreements
post-year end, Savannah currently has up to 525 MW of
hydroelectric, solar photovoltaic and wind projects in motion in
Cameroon and Niger:
o On 20 April 2023, Savannah announced the signing of an
agreement for the development of the 75 MW Bini a Warak
Hydroelectric Project located in the northern Adamawa Region of
Cameroon. Project sanction is expected in 2024 and first power
targeted in the 2027 to 2028 window.
o On 11 May 2023, Savannah announced the signing of an agreement
with the Government of Niger for the development of two proposed
solar photovoltaic power plants, with the combined installed power
generation capacity of up to 200 MW. The project is expected to
receive project sanction in 2024, with first power targeted in the
2025 to 2026 window.
-- Following Savannah's acquisition of a 41.06% indirect equity
interest in the Cameroon Oil Transportation Company ("COTCo") from
ExxonMobil on 9 December 2022, post-year end on 20 April 2023
Savannah's wholly owned subsidiary, Savannah Midstream Investment
Limited ("SMIL"), signed a share purchase agreement with the
national oil company of Cameroon, Société Nationale Des
Hydrocarbures ("SNH"), relating to the sale by SMIL and purchase by
SNH of 10% of the issued share capital in COTCo.
-- For the five months to end May 2023, COTCo transported an
average of 136.9 Kbopd of crude oil with a total of 21 liftings
conducted on behalf of its customers. Each lifting saw the safe and
successful transfer of approximately 1 MMbbls of crude oil from the
FSO to ocean going vessels by COTCo on behalf of its customers.
Sustainability Highlights
-- 0.34 Lost Time Injury Rate (2021: zero) and a 0.68 Total
Recordable Incident Rate in 2022 (2020: 0.34);
-- Low carbon intensity metric maintained of 9.7 kg CO(2) e/boe
(2021: 11.2 kg CO(2) e/boe), 48% lower than the industry average of
18.7 kg CO(2) e/boe;
-- Senior management female gender diversity of 32% (2021: 35%);
-- Total Contributions(9) to host nations Nigeria and Niger
increased by 3% to US$56.9m (2021: US$55.1m);
-- Investment in social impact projects in Nigeria and Niger
increased by 23% to US$304,000 in 2022 (2021: US$246,000);
-- The number of transport related incidents remained
exceptionally low with one in 2022 covering over 1.3 million
transport kilometres travelled (2021: two incidents);
-- Road Traffic Accident Rate metric reported for the first time which was 0.14;
-- Establishment of a multimillion-dollar, world class training
scheme across the business for 2022-2023, resulting in a 74%
increase in training hours per employee and a 109% increase in
total working hours of training in 2022, respectively;
-- Zero hydrocarbon spills recorded (defined as not greater than
one barrel reaching the environment) (2021: zero);
-- Freshwater usage reduced to approximately 11,314m(3) of
freshwater from boreholes and mains supply (2021: 11,645m(3) ,
restated figures); and
-- Minimised our negative impacts on biodiversity by
establishing Biodiversity Action Plans at our four operational
sites.
Chair Statement from the Annual Report
Ready for the next phase of growth
Dear fellow shareholders,
2022 was another year of substantial achievements for our
company as we continued to develop and invest in Projects that
Matter in Africa. Our Nigerian business recorded yet another year
of double-digit revenue growth, our Niger R3 East project benefited
from the strong progress made towards the construction of the
Niger-Benin pipeline and our Renewable Energy division established
a pipeline of utility projects which we hope to develop through to
first power over the course of the coming years. We also announced
our intended acquisition of PETRONAS' assets in South Sudan, which
produced an average gross 153.2 Kbopd in 2021. You will be able to
read about all of this and much more in this year's Annual
Report.
As we have grown, our commitment to the highest governance
standards has remained a priority. In this regard, 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 on page 108 of the 2022 Annual
Report explains how we applied the principles of the QCA Code in
2022.
In June 2022, I announced my decision to step down from my role
as Chair of the Board at the 2023 AGM, while remaining a
Non-Executive Director of the Company. It has been an honour to
Chair the Board from Savannah's initial listing to today. I would
like to welcome our new Chair Designate, Joseph Pagop Noupoué, who
was announced as my successor in April 2023. I believe Joseph's
leadership skills, deep knowledge of the African business
environment and extensive business, financial and legal expertise
will serve Savannah well over the course of his Chairmanship. Aside
from Joseph, we have announced the appointment of three new
Non-Executive Directors over the course of the past 18 months -
Sarah Clark, Dr. Djamila Ferdjani and Sylvie Rucar - who
collectively bring a wealth of talent and experience to the Board.
Nick Beattie was also appointed Savannah's permanent Chief
Financial Officer in June 2022, having served in an interim
capacity for the previous 10-month period. I would also like to
take this opportunity to thank David Jamison, who retired from the
Board in June 2022, for his dedicated service to the Company over
the previous eight years. We are delighted that David agreed to
assume the role of Honorary President of Savannah, ensuring we
continue to benefit from his considerable wisdom and
experience.
The Board continues to place great emphasis on engagement with
all our stakeholder groups and more information on this is provided
in Section 172 Statement on page 40 of the 2022 Annual Report.
Outlook
Savannah has the ambition and focus to be the leading African
Energy company. As I pass on the role of Chair to Joseph, I believe
that we are exceptionally well-positioned to achieve this and that
we should all look forward to the future with great confidence.
Steve Jenkins
Chair of the Board, Savannah
7 June 2022
CEO Letter to Shareholders from the Annual Report
Championing the African energy transition
Dear fellow shareholders
I would like to welcome you to our ninth Annual Report as a
listed company. This year's letter follows a similar format to
those of recent years. 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 discusses the "how" and the
"why" we see the African energy transition evolving and discusses
the relevance of our hydrocarbon AND renewables business model.
Before turning to the first section, I would like to draw your
attention to three key articles in this year's Annual Report. The
first article describes "Why we do what we do", where we discuss
our corporate purpose and the associated core beliefs which serve
to underpin our strategy and business model. I really believe that
this section is essential reading for anyone seeking to understand
our Company. The second, authored by Dr. Richard Norris, a global
energy policy specialist and a Fellow of the Canadian Global
Affairs Institute, discusses the equity of the global energy
transition and the importance of poverty alleviation. The third
article, from NJ Ayuk, Executive Chairman of the African Energy
Chamber, focuses on the critical role the private sector will be
required to play in the African energy transition. We are extremely
grateful to our guest authors for their contributions.
2022 in review
For the first time in almost 40 years10 the rich world faced the
challenges of operating in a high inflation, rising interest rate
environment with, for example, the IMF's advanced economy average
consumer price index rising 9% year-on-year, a level 2.5x the
10-year average11, and benchmark US$ interest rates rising to 5.5%
at year end, a level 4.4x the 10-year average12. The supply chain
impacts of the Russia-Ukraine war, particularly in the energy and
food sectors, were the principal drivers, with, for example, oil,
Liquified Natural Gas and European electricity prices rising 42%13,
64%14 and 53%15 respectively and food an estimated 14%16,
year-on-year. However, rich world interest and inflation rates
remained much lower than those of Sub-Saharan Africa which ended
the year at 12.0%17 and 17.7%18 respectively.
Boosted by the strength of the macro energy complex, the seven
energy supermajors reported a record US$200 billion of profit in
2022 (+100% year-on-year), despite a 1.3% aggregate reduction in
production volumes. Savannah too performed strongly, but for very
different reasons. Our Total Revenues(1) rose by 26% year-on-year
to US$290 million with our Adjusted EBITDA(2) rising by 27% to
US$222 million. At the Nigerian business unit level, we recorded
Adjusted EBITDA(2) of US$244 million. Our 20% production volume
growth in Nigeria (versus the supermajors' -1.3% noted above) was
primarily driven by the operationalisation of four new gas sales
agreements ("GSAs"). 89% of our 2022 revenue stream was derived
from fixed price GSAs with no cyclical exposure to oil or
international gas prices.
Our Nigerian business has now delivered six consecutive years of
Total Revenues(1) growth at a compound annual growth rate ("CAGR")
of 21%. This Total Revenues(1) growth compares favourably to the
long-term trend CAGR of the wider UK stock market constituents of
3.1%19,20. Further, since the announcement of our decision to
acquire our Nigerian business in 2017, we have more than doubled
the number of customers. We are now contracted to supply gas to 24%
of Nigeria's thermal power generation capacity (up from 10% at the
time of acquisition) as well as key petrochemical and cement
factories21. We are clearly performing a critical service to the
Nigerian economy. Over the same period our operational performance
has been equally robust, with an estimated 99% uptime across our
asset base.
The US$22 million difference between our Group and Nigerian
business Adjusted EBITDA (2) numbers largely reflects the central
costs of running our business and the investments we have made to
build the corporate infrastructure that will enable our future
organic and inorganic growth plans. On a pro forma basis we
increased our headcount by 21% year-on-year and training hours per
employee by 74%. In the coming years we intend to continue to
invest in our people and infrastructure as we continue to pursue
our goal of potentially quadrupling the scale of our business over
the course of the coming years.
In Niger, we are looking forward to conducting a comprehensive
flow testing programme in late 2023 of the main oil fields included
in our c. 35 MMstb R3 East field development plan (the "FDP"). This
flow testing programme is expected to enable us to fine tune and
optimise the FDP, ahead of expected first commercial oil production
in 2024. The key decision we made around R3 East in 2022 was to
move towards an export sales-driven development solution via the
new Niger-Benin pipeline, as opposed to our previously intended
initial development solution of selling crude to the domestic
Zinder refinery. This decision followed the strong progress that
China National Petroleum Corporation has made in constructing the
Niger-Benin pipeline, which is now over 75% complete and expected
to commence commercial oil transportation in the fourth quarter of
2023. The operationalisation of the Niger-Benin pipeline is
expected to be transformational for Niger, with exported oil sales
forecast to increase GDP by approximately 24% and exports by 68% in
202522.
In March 2022 we signed an agreement for our up to 250 MW Parc
Eolien de la Tarka wind farm project, located in the Tahoua region
of Southern Niger. At the time of writing all key studies required
to achieve project sanction have either been completed or are in
progress. The project's initial on-site wind speed data
measurements have proven to be highly encouraging, and we expect to
sanction the project in 2024 with first power delivery in 2026.
Post-year end, this project has been supplemented with the signing
of an agreement for the development of two solar photovoltaic power
plants in the areas around the cities of Zinder and Maradi, also in
southern Niger, with a combined installed power generation capacity
of up to 200 MW. These projects are expected to be developed on a
similar timeline to Parc Eolien de la Tarka: project sanction is
targeted for 2024 and first power delivery in 2026. In aggregate,
therefore, we are expecting to generate up to 450 MW of new clean
and affordable power for Niger, which would equate to an up to 60%
increase in overall on-grid electricity availability.
From a business development perspective, three major events
occurred in 2022:
-- Announcement of our proposed acquisition of the South Sudan
Assets 35 . In December, we announced our proposed acquisition of
PETRONAS' assets in South Sudan for a total consideration of up to
US$1.25 billion. The transaction is expected to complete in the
third quarter of 2023, alongside the publication of a new Admission
Document23.
-- Completion of our US$407 million acquisition of ExxonMobil's
assets in Cameroon and Chad. In Cameroon we acquired a 41.06%
interest COTCo, which owns and operates the 903 km Cameroon section
of the Chad-Cameroon pipeline and related infrastructure. During
2022, COTCo transported an average of 124 Kbopd of crude oil,
valued at an estimated US$4.6 billion at the Brent crude oil prices
prevailing during the year. Post-year end we agreed to sell a 10%
interest in COTCo to the national oil company of Cameroon, Société
Nationale Des Hydrocarbures, for consideration of US$44.9 million
plus accrued dividends. In Chad we acquired a 40% interest in the
Doba Oil PSC which produced 28 Kbopd in 2022. Post-year end these
assets were impacted by external events(24) . We see our interest
in COTCo acting as a potential catalyst for further growth in
Cameroon over the course of the coming years. Post-year end we
entered into an agreement in relation to the up to 75 MW Bini a
Warak Hydroelectric Project in the north-east of the country.
-- Growth of our renewable energy business. 2022 saw the first
full year of activity for our Renewable Energy Division. During the
year, we made significant investments in the people side of the
business as well as generating a pipeline of high quality solar,
wind and hydro power projects. At the time of writing this amounted
to up to 525 MW of publicly announced projects in motion.
Internally, we believe we have strong visibility on a range of
other projects, which we expect to enable us to meet our target of
delivering up to 1 GW+ of renewable energy projects in motion by
year-end 2023. I am, therefore, confident that Savannah will become
one of the largest renewable energy development companies in Africa
over the course of the next two years.
As always, we maintained our strong focus around safe
operational delivery. In 2022 we recorded a Lost Time Injury Rate
("LTIR") of 0.34 and a Total Recordable Incident Rate ("TRIR") of
0.68 per 200,000 working hours. Our performance against key
sustainability metrics remained equally industry leading. Our
carbon emission intensity fell 13% year-on-year to 9.7 kg CO2e/boe
(48% lower than the industry average of 18.7 kg CO2e/boe). Our
senior management female gender diversity was 32%, while our local
employee ratios in our countries of operation was over 95%.
Key focus areas for 2023 and 2024
Over the course of the next two years, I expect there to be
several key focus areas for the business. These include:
-- The refinancing of our US$359 million Accugas debt
facilities. Our intention remains to redenominate the current US
dollar-denominated facility to a multi-tranche Naira-denominated
facility, extending the average maturity to beyond 2030 and
reducing the facility cost in dollar equivalent terms;
-- Progressing the R3 East Development project. As noted
previously, we intend to commence a flow testing programme on the
key R3 East area fields in the fourth quarter of 2023 with first
commercial oil production anticipated by end 2024;
-- Further hydrocarbon acquisitions. The major energy companies
are estimated to have in excess of US$100 billion25 of upstream oil
and gas assets in Africa and most have significant upstream asset
divestment programmes. 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) compared to the previous asset owners;
-- Delivery of our renewable energy projects. We have an
aspiration to have our first project(s) fully sanctioned by end
2024 and first power from our project portfolio in 2026; and
-- Expansion of our renewable energy business. Savannah believes
the African renewable energy market represents a potentially vast
target market of over 242 GW by 203026, requiring an investment of
over US$40 billion in the 2026-2030 window, and that the Group's
hydrocarbon asset operational management skills are directly
transferable to this space. In the near term we are hoping to have
up to 1 GW+ of renewable energy projects in motion by end of 2023
and up to 2 GW+ of projects in motion by end 2024.
As can be seen from the above list, we remain 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
As in previous years' shareholder letters, I have chosen to
discuss how we see the African Energy transition. Before turning to
discuss this, I feel it is important to emphasise that this is only
one of several important contributing beliefs driving what Savannah
does as a company. On pages 8 to 17 of the 2022 Annual Report we
have outlined in detail "Why we do what we do". In that section we
discuss our corporate purpose and associated core beliefs which
serve to underpin our hydrocarbons AND renewables strategy and
business model. In simple terms, the section explains why energy
poverty in Africa is the principal problem our company is seeking
to help solve and why we believe this problem is one of the most
urgent and important problems facing the world today. I would urge
any reader interested in really understanding our company to read
this section, especially if they are from a rich world background
and perhaps less intuitively understand the realities of the
everyday challenges facing the 600 million people in Sub-Saharan
Africa who are defined by the World Bank as living in extreme
poverty (i.e. have incomes of less than US$2.15/day)27.
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 189
out of 191 on the UN Human Development Index28 ("UN HDI") with a
GDP per capita of US$58429 and power consumption per capita of 449
kWh30. The United States of America on the other hand is ranked 21
out of 191 on the UN HDI with GDP per capita of US$76,348 and power
consumption per capita of 79,480 kWh, 12,983% and 17,614% higher
respectively. 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 lifetime health
outcomes.
Over 80% of today's global energy mix is provided by
hydrocarbons with 54% of this provided by oil and gas31. The scale
of investment required to sustain the "status quo" global quality
of life is immense. Global non-financial capital expenditures for
the energy sector amount to 42% of all global capex32. 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,
the quote by John Kerry (The US Climate Change Envoy), which I have
cited in my last two shareholder letters, 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 still provides approximately 26% of
the 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 50%33 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
forecasts which generally see the total share of fossil fuel supply
falling to just over 20% of the global energy mix by 205034.
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
on-grid electricity (falling to 49% if South Africa, Egypt and
Algeria are excluded), with the electricity access rate in our
countries of active operations estimated at 65% for Cameroon, 19%
for Niger and 55% for Nigeria. 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 that 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 Big oil 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, 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 2022 - 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, Savannah
7 June 2023
South Sudan Acquisition Update
Further to the Company's 13 April 2023 Q1 2023 financial and
operational update, the Company continues to advance the various
workstreams required to complete the reverse takeover of PETRONAS
International Corporation Limited's ("PETRONAS") entire oil and gas
business in South Sudan and intends to publish an AIM Admission
Document by 28 July 2023, following which point the Company would
seek restoration to trading on AIM of its ordinary shares. Further
updates will be provided as and when appropriate.
Chad Assets Nationalisation
As previously announced, on 31 March 2023, the Government of
Chad passed a law confirming the nationalisation of Savannah Chad
Inc's ("SCI") upstream production assets and also providing for the
nationalisation of SMIL's c.40% interest in Tchad Oil
Transportation Company ("TOTCo"), the owner and operator of the
Chad section of the ETS.
The actions of the Republic of Chad are in direct breach of the
upstream conventions to which SCI and the Republic of Chad are,
amongst others, party, together with a direct breach of the
convention between TOTCo and the Government of Chad. Disputes under
the upstream conventions are subject to the jurisdiction of an ICC
arbitral tribunal, seated in Paris. The Company has commenced ICC
arbitral proceedings against the Government of Chad to seek full
recompense for the loss that it has and will suffer as a result of
the nationalisation of SCI's assets.
As a direct result of the nationalisation, the Company has not
been able to fully access all the underlying information, nor have
access to the relevant Chad-based employees of the impacted
entities in order to prepare the financial information for audit
purposes; it has not therefore been possible to complete an audit
of SCI or SMIL. Despite the acquisition of the Chad assets only
having completed approximately three weeks prior to the year end,
the Chad and Cameroon Assets(36) were material to the Group in 2022
and the limitations on having access to information and people has
led to the Group's external auditors issuing a disclaimer of
opinion. With respect to the opinion of the Group's external
auditors, the Company does not anticipate that there will be any
disclaimer opinion required for 2023 - this has only arisen for
2022 due to the specific and exceptional set of circumstances
discussed above. For further information and background, please
refer to the Company's 2022 Annual Report.
Board and Board Committee Changes
On 7 June 2022, it was announced that Nick Beattie, Group Chief
Financial Officer and Company Secretary, had been appointed to the
Board of Directors. At the same time, it was announced that David
Jamison would retire as a Non-Executive Director of the Board at
the 2022 AGM, which became effective 30 June 2022. Also on 7 June
2022, Steve Jenkins, announced his decision to step down from his
role as Chair of the Board at the 2023 AGM, having completed eight
years in the role, but that he would continue to serve as a
Non-Executive Director of the Company. Post-year end, on 21 April
2023, Joseph Pagop Noupoué was appointed a Non-Executive Director
of the Board and Chair Designate.
The Board was expanded in 2022 with the appointment of Sarah
Clark and Dr. Djamila Ferdjani as Non-Executive Directors of the
Company on 9 December 2022. Additionally, post-year end on 1
February 2023, Sylvie Rucar was appointed as a Non-Executive
Director of the Company. The Board, therefore, now comprises 10
Directors, which includes the Non-Executive Chair, the
Non-Executive Vice Chair, six Non-Executive Directors and two
Executive Directors (the CEO and the CFO).
AGM
The AGM will be held at 11.00 a.m. on Friday, 30 June 2023 at 40
Bank Street, London, E14 5NR. Details on how to submit your proxy
vote are set out in the section of the Notice of AGM headed "Voting
Arrangements - Action to be taken". The Notice of the AGM is
available to download from the Company's website (
www.savannah-energy.com ). For those shareholders who have elected
to receive postal copies, the Notice of the AGM has been posted to
them today.
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
This announcement contains inside information for the purposes
of Article 7 of the Market Abuse Regulation (EU) 596/2014 as it
forms part of UK domestic law by virtue of the European Union
(Withdrawal) Act 2018 ("MAR").
About Savannah Energy:
Savannah Energy PLC is an AIM quoted British independent energy
company focused around the delivery of Projects that Matter ,
active in Cameroon, Niger and Nigeria. Further information on
Savannah Energy PLC can be found on the Company's website:
www.savannah-energy.com.
Financial review
Laying foundations for growth
Nick Beattie
Chief Financial Officer
Performance against market guidance 2022
Full Year 2022 Full Year 2022
-----------------
Actuals Guidance
-------------------------------------- ----------------- -----------------------
Total Revenues(1) US$ million 290.4 >215
-------------------------------------- ----------------- -----------------------
Operating expenses plus administrative 66.2 <75
expenses(3) , US$ million
-------------------------------------- ----------------- -----------------------
Group depreciation, depletion and US$21 million US$21 million
amortisation(4) for fixed assets for fixed
plus US$2.0/boe assets plus US$2.3/boe
-------------------------------------- ----------------- -----------------------
Capital expenditure, US$ million 23.6 Up to 35
-------------------------------------- ----------------- -----------------------
Year in Summary
Savannah delivered strong operational and financial performance
in 2022, with results outperforming the guidance we set for the
year, whilst also laying the foundations to support our ambitious
growth plans.
Total Revenues(1) grew by over 25% to US$290.4 million (2021:
US$230.5 million) with a resulting rise in Adjusted EBITDA(2) of
over 27% to US$222.4 million (2021: US$175.0 million). The
improvement seen in financial performance for 2022 is principally a
reflection of the strength of the Nigerian business where we now
deliver gas to eight (2021: seven) customers - this diversification
of the customer base sees Savannah contracted to supply gas to
enable approximately 24% of Nigeria's thermal power generation
capacity (up from 10% at the time of our decision to acquire the
Nigerian business in 2017) as well as key petrochemical and cement
factories. We are clearly performing a critical service to the
Nigerian economy.
Our Nigerian business continues to be underpinned by long-dated,
take-or-pay contracts which have no linkage to commodity pricing
and provide stable, predictable cashflows. At end 2022 we had over
US$3.8bn of future contracted revenues with contracts having
average weighted remaining life of 15 years.
We continued in our substantial investment in scaling up the
business to support the growth ambitions in both the renewable
energy and hydrocarbons businesses. We have made significant
investments into new procedures and systems, and notably this
included the successful implementation during the year of a new
Enterprise Resource Planning ("ERP") solution. We also invested in
our people with a growth in headcount of 20% to 277 and we expect
this growth in headcount to continue in 2023. We continued to
invest in the operating businesses with the progression of the
compression project in Nigeria (which is due to complete in 2024)
and we progressed plans for delivering the R3 East development in
Niger (with orders for long-lead items having been placed in H1
2023).
2022 was also a significant year in terms of inorganic growth
with key events including: (i) completion of the acquisition of the
Chad and Cameroon Assets(36) (discussed in more detail below), (ii)
signing of agreements to acquire PETRONAS' South Sudan Assets(35)
and (iii) the notable scaling up of our Renewable Energy Division,
which currently has up to 525 MW of projects in motion in Niger and
Cameroon, with a target of reaching up to 1 GW by the end of 2023.
Good progress was also made on the refinancing of the Accugas US$
Facility and this remains a priority for 2023.
Chad and Cameroon Assets(36)
We completed the acquisition of the Chad and Cameroon Assets(36)
on 9 December 2022. However, the President of the Republic of Chad
issued a Decree on 23 March 2023 nationalising Savannah Chad Inc's
("SCI") upstream production assets in Chad. Subsequently on 31
March 2023, the Government of Chad passed a law confirming the
Nationalisation of SCI's upstream production assets and also
providing for the Nationalisation of Savannah's c. 40% interest in
TOTCo, the owner and operator of the Chad section of the ETS. The
actions of the Republic of Chad are in direct breach of the
upstream conventions to which SCI and the Republic of Chad are,
amongst others, party, together with a direct breach of the
convention between TOTCo and the Government of Chad.
Disputes under the upstream conventions are subject to the
jurisdiction of an ICC arbitral tribunal, seated in Paris. The
Company has commenced ICC arbitral proceedings against the
Government of Chad to seek full recompense for the loss that it has
and will suffer as a result of the Nationalisation of SCI's and
TOTCo's assets.
As a direct result of the Nationalisation however, the Company
has not been able to fully access all the underlying information,
nor have access to the relevant Chad-based employees of the
impacted entities in order to prepare the financial information for
audit purposes; it has not therefore been possible to complete an
audit of SCI or SMIL. Despite the acquisition only having completed
approximately three weeks prior to the year-end, the Chad and
Cameroon Assets(35) were material to the Group in 2022 and the
limitations on having access to information and people has led to
the Group's external auditors issuing a disclaimer of opinion. As
detailed in the Audit & Risk Committee report in our Annual
Report, these matters have been considered by the Directors and,
due to the exceptional circumstances, the Directors agree that a
disclaimer of opinion is unavoidable. We believe it is important to
highlight that it is the impact of the Nationalisation on SCI and
SMIL that has led to this situation. The Group excluding Chad
("GEC"), continues to operate in the ordinary course and as
discussed in this review, 2022 was a very strong year with the
sixth successive year of growth in Total Revenues(1) and Adjusted
EBITDA(2) .
Despite the Nationalisation, the Group is still required under
UK adopted International Accounting Standards to present the
Financial Statements for the financial year 2022 without separately
identifying the amounts which relate to the nationalised assets in
Chad. To help in providing a clearer description of the continuing
operations of the Group and to assist with understanding of the
performance of the business in 2022, we have shown in the tables on
the following page what we consider to be 'continuing operations' -
this excludes the assets subject to the Nationalisation. This
approach is further described in note 3 of the Financial
Statements.
In 2022, the Chad assets were insignificant from a revenue or
profitability perspective with a negligible profit of just US$1.0
million reflected in the Statement of Comprehensive Income for the
Group and nil Revenue.
For the financial year ending 31 December 2023, we expect that
these activities will be considered as a discontinued operation in
accordance with IFRS 5 - Non-Current Assets for Sale and
Discontinued Operations. This is without prejudice to Savannah's
claims following the expropriation. With respect to the opinion of
the Group's external auditors we do not anticipate that there will
be any disclaimer opinion required for 2023 - this has only arisen
for 2022 due to the specific and exceptional set of circumstances
discussed above.
Key performance metrics summary - Group excluding Chad
Full Year Full Year
2022 2021
------------------------------------------ --------- ---------
Gross production, Kboepd 26.8 22.3
------------------------------------------ --------- ---------
Total Revenues(1) , US$ million 290.4 230.5
------------------------------------------ --------- ---------
Revenue, US$ million 212.5 185.8
------------------------------------------ --------- ---------
Average oil and gas sales price, US$/Mscf 4.14 4.42
------------------------------------------ --------- ---------
Operating expenses plus administrative
expenses(3) , US$ million 66.2 49.9
------------------------------------------ --------- ---------
Operating expenses plus administrative
expenses(3) , US$/Mscfe 1.2 1.1
------------------------------------------ --------- ---------
Closing cash balances(5) , US$ million 240.9 154.3
------------------------------------------ --------- ---------
Trade and other receivables, US$ million 227.0 231.6
------------------------------------------ --------- ---------
Adjusted EBITDA(2) 222.4 175.0
------------------------------------------ --------- ---------
Net debt(6) , US$ million 404.9 370.0
------------------------------------------ --------- ---------
Leverage(7) 1.8x 2.1x
------------------------------------------ --------- ---------
Segmental analysis of results
The following tables are extracted from note 3 in the Financial
Statements. These show the results of the Group excluding Chad
("GEC"). These are highlighted to allow a useful comparison of
performance to prior years and to provide greater clarity on the
financial position and performance of the Group without the
inclusion of the nationalised assets. We do also include the
reported 2022 Group position so that this can be cross referenced
with the Financial Statements.
Summary of Segmental Consolidated Statement of Comprehensive
Income
2022
Group
excluding 2021 2022 2022
Chad(1) Group(2) Chad Group
Year ended 31 December US$ million US$ million US$ million US$ million
--------------------------------------- ------------ ------------ ------------ ------------
Revenue 212.5 185.8 - 212.5
------------ ------------ ------------ ------------
Cost of sales (73.2) (65.0) 1.1 (72.1)
--------------------------------------- ------------ ------------ ------------ ------------
Gross Profit 139.3 120.8 1.1 140.4
------------ ------------ ------------ ------------
Administrative & other operating
expenses (39.5) (25.7) (0.1) (39.6)
------------ ------------ ------------ ------------
Gain on disposal 7.4 - - 7.4
------------ ------------ ------------ ------------
Transaction costs (14.5) (7.4) - (14.5)
------------ ------------ ------------ ------------
Expected credit loss and other related
adjustments (39.5) - - (39.5)
--------------------------------------- ------------ ------------ ------------ ------------
Operating profit/(loss) 53.2 87.7 1.0 54.2
------------ ------------ ------------ ------------
Finance income 1.1 0.5 - 1.1
------------ ------------ ------------ ------------
Finance costs (78.9) (76.6) (0.1) (79.0)
------------ ------------ ------------ ------------
Share of net income from associates 0.2 - (0.1) 0.1
------------ ------------ ------------ ------------
Fair value adjustment (8.1) (0.6) - (8.1)
------------ ------------ ------------ ------------
Foreign translation loss (21.2) (18.7) - (21.2)
--------------------------------------- ------------ ------------ ------------ ------------
Profit/(Loss) before tax (53.7) (7.7) 0.8 (52.9)
--------------------------------------- ------------ ------------ ------------ ------------
(1) This Financial review refers to the "Group Excluding Chad"
column which excludes the Chad upstream and midstream operations
which were subject to the Nationalisation.
(2) 2021 Group figures are as published in the 2021 Annual
Report and Accounts and are the appropriate comparison for the 2022
Group excluding Chad.
Summary of Segmental Consolidated Statement of Financial
Position
2022
Group
excluding 2021 2022 2022
Chad(1) Group (2) Chad Group
As at 31 December US$ million US$ million US$ million US$ million
------------------------------ ------------ ------------ ------------ ------------
Property, plant and equipment 503 568 120 623
------------ ------------ ------------ ------------
Exploration and evaluation 174 161 9 183
------------ ------------ ------------ ------------
Investment in associates 183 - 5 188
------------ ------------ ------------ ------------
Other assets 245 235 42 287
------------ ------------ ------------ ------------
Trade and other receivables 227 231 12 239
------------ ------------ ------------ ------------
Cash at bank 241 153 - 241
------------------------------ ------------ ------------ ------------ ------------
Total assets 1,573 1,348 188 1,761
------------------------------ ------------ ------------ ------------ ------------
Trade and other payables 125 117 162 287
------------ ------------ ------------ ------------
Borrowings 646 524 - 646
------------ ------------ ------------ ------------
Interest payable 106 80 - 106
------------ ------------ ------------ ------------
Provisions 46 69 49 95
------------ ------------ ------------ ------------
Contract liabilities 332 240 - 332
------------ ------------ ------------ ------------
Other liabilities 13 12 38 51
------------------------------ ------------ ------------ ------------ ------------
Total liabilities 1,268 1,042 249 1,517
------------------------------ ------------ ------------ ------------ ------------
An abbreviated tabulation of The Consolidated Statement of
Financial Position is shown above consistent with the Consolidated
Statement of Consolidated Income which enables the position for the
continuing Group at 31 December 2022 to be compared to 31 December
2021. With effect from 31 March 2023, we expect that the Chad
Assets will be accounted for it in accordance with IFRS 5 -
Non--current Assets for Sale and Discontinued Operations during the
year ending 31 December 2023. This is without prejudice to
Savannah's claims following the expropriation.
Statement of Comprehensive Income - Group excluding Chad
Revenue
Revenue in 2022 was US$212.5 million (2021: US$185.8 million),
of which US$181.1 million (2021: US$169.1 million) was for gas,
US$29.8 million (2021: US$ 15.0 million) was for oil, condensate
sales and US$1.6 million (2021: US$1.7 million) was for processing
of third-party crude oil.
85% of 2022 revenue was from the sale of gas, sold under a
mixture of short and long-term gas sales agreements, all of which
have individually agreed prices defined in US Dollars, with certain
long-term contracts adjusted annually for consumer price
indexation. 85% of gas sales contracts are supported by investment
grade(36) guarantees, including a World Bank Partial Risk Guarantee
for the Calabar power station gas sales contract.
The weighted average sales price for the year was US$24.9/boe
(2021: US$26.5/boe), or US$4.14/Mscfe (2021: US$4.42/Mscfe), down
6%, mainly driven by the broader mix of gas customers.
Impact of take-or-pay accounting rules under IFRS 15 - Total
Revenues (1)
Revenue recognition for our gas sales agreements is impacted by
the take-or-pay accounting rules under IFRS 15. Under take-or-pay
contracts, customers agree to buy a minimum amount of gas from us
each year. This gas is either delivered to them, or the volume not
taken (which is described as make-up gas) is effectively prepaid
for by the customer for potential delivery in future periods.
During 2022, our customers took on average 43 MMscfpd less gas than
they had contracted to buy, so there was a difference between
invoiced oil and gas sales of US$290.4 million (Total Revenues(1) )
and Revenue as reported in our Consolidated Statement of
Comprehensive Income of US$212.5 million.
Revenue in our Consolidated Statement of Comprehensive Income of
US$212.5 million only reflects the value of oil and gas actually
delivered, with the difference of US$77.9 million reported as an
increase in Contract liabilities ("deferred revenue") in the
Consolidated Statement of Financial Position, net of any make-up
gas that is consumed, plus other invoiced amounts.
A key point to highlight is the cash neutrality of the
take-or-pay accounting treatment; had our customers requested the
make-up gas to be delivered to them in the accounting year, then
all the invoiced sales would have been recognised as Revenue in the
Consolidated Statement of Comprehensive Income and our cash
generation would have been the same in either case (as this
reflects receipts from customers regardless of whether they related
to delivered gas or make-up gas).
We therefore report Total Revenues(1) as management believes
that this is a more accurate method of describing the cash
generation capacity of the business.
To provide further clarity on the take-or-pay accounting rules,
please refer to a theoretical simplified worked example which is
shown on page 57 of the 2020 Annual Report and Accounts which can
be accessed on our website.
Operating expenses plus administrative expenses (3)
Operating expenses plus administrative expenses(3) for the year
were US$66.2 million (2021: US$49.9 million) which compared to 2022
guidance of up to US$75 million. Significant time and resources
were invested during the year in both completing the acquisition of
the Chad and Cameroon Assets(36) and in completing due diligence to
get to the point of signing a binding agreement to acquire the
PETRONAS South Sudan Assets(35) in December 2022. These costs are
reported separately as Transaction Costs totalling US$14.5 million
(2021: US$7.4 million) and have been shown separately in the
Consolidated Statement of Comprehensive Income.
Unit cost basis Operating expenses plus administrative
expenses(3) increased by 8% to US$1.2/Mscfe (2021: US$1.1/Mscfe),
which compares very favourably with our average sales price of
US$4.14/Mscf for oil and gas during the year.
Depreciation, depletion and amortisation(4) ("DD&A")
amounted to US$39.0 million (2021: US$36.2 million) made up of
US$18.5 million (2021: US$17.7 million) for infrastructure assets,
which are depreciated on a straight-line basis over their estimated
useful life and US$18.3 million (2021: US$16.7 million) for
upstream assets, which are depreciated on a unit of production
basis, plus US$2.2 million (2021: US$1.8 million) for other assets
and right-of-use assets.
Total DD&A costs in 2022 on a unit of production basis are
down from the prior year at US$0.7/Mscfe (2021: US$0.8/Mscfe).
Adjusted EBITDA(2)
Adjusted EBITDA(2) was US$222.4 million (2021: US$175.0 million)
continuing the six-year upward trend of performance.
A reconciliation of the calculation of Group excluding Chad
Adjusted EBITDA(2) to Group Adjusted EBITDA(2) is shown below.
Reconciliation of Adjusted EBITDA(2) for Group excluding Chad to
Group
2022
US$ million
------------------------------ ------------
Group excluding Chad Adjusted
EBITDA(2) 222.4
------------------------------ ------------
Adjust for: Chad operating
profit 1.0
------------------------------ ------------
Adjust for: Chad DD&A 1.6
------------------------------ ------------
Group Adjusted EBITDA(2) 225.0
------------
Adjusted EBITDA(2) % 77%
------------------------------ ------------
Refer to Note 5 and Note 35(g) in our 2022 Annual Report.
Finance costs
Finance costs for the year amounted to US$78.9 million (2021:
US$76.6 million), of which US$62.3 million (2021: US$53.4 million)
related to bank and loan note interest expense. The average
interest rate on debt for the Group was 12.0% (2021: 10.2%), due to
higher US LIBOR rates in 2022.
The interest cover ratio(8) was 3.4 times, up from 2.8 times in
2021.
Foreign exchange losses
Foreign exchange losses amounted to US$21.2 million (2021:
US$18.7 million).
US$12.4 million (2021: US$9.8 million) are unrealised losses on
Naira cash balances held in Nigeria primarily arising from
devaluation of the Naira/ US Dollar exchange rate.
Realised losses of US$8.8 million (2021: US$8.9 million)
resulted from US Dollar gas sales invoices which are settled in
local currency and from translation of Naira to US Dollars to
service US Dollar denominated obligations.
Statement of Financial Position - Group excluding Chad
Receivables and payables
Trade and other receivables amounted to US$227.0 million (2021:
US$231.6 million). This primarily consists of amounts due from gas
customers in Nigeria under the gas sales agreements in place.
Trade and other payables amounted to US$122.1 million (2021:
US$116.8 million), the majority of which will be settled in the
normal course of business.
Debt
The net debt(6) at year-end was US$404.9 million (2021: US$370.0
million), an increase of 9% compared to year-end 2021. The increase
in net debt(6) is principally a result of the new debt facility
established to support the acquisition of the Chad and Cameroon
Assets(36) .
During the course of 2022, US$44 million of debt was repaid
across the Group and combined with increased cash balances(5) ,
resulted in the net debt(6) increase being limited to just US$34.9
million.
Work continued during the year on the proposed refinancing of
the Accugas US$ Facility. The intention remains for this to be
refinanced into a multi-tranche, Naira denominated borrowing
structure with an average anticipated tenor in excess of 10 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 (the "Transitional Facility") and this Transitional
Facility will then be progressively paid down from the issuance of
longer-dated debt instruments. The existing Accugas lenders have
agreed terms for the Transitional Facility and we continue to work
with financial advisers to then enable implementation of the
intended final structure. it is expected that the Transitional
Facility will be utilised during 2023 and the existing US$ Facility
repaid. Once fully completed, this refinancing would align the
currencies of Accugas' 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 Transitional Facility, the Group
continues to hold significant Naira denominated cash balances(5) in
order to cover US Dollar denominated debt.
As shown in the following table, the Leverage(7) position of the
Group has improved compared to the prior year and this is
considered to be a conservative level given the long-dated (>15
year) gas sales contracts in place and the high quality, long-life
asset base which supports the supply contracts:
Leverage (7)
2022 2021
US$ million US$ million
---------------------- ------------ ------------
Adjusted EBITDA(2) 222.4 175.0
---------------------- ------------ ------------
Net debt(6) 404.9 370.0
---------------------- ------------ ------------
Naira held in cash
to pay interest 98.3 75.5
---------------------- ------------ ------------
Adjusted net debt(38) 503.2 445.5
------------ ------------
Leverage(7) (times) 1.8 2.1
------------ ------------
Adjusted Leverage(7)
(times) 2.2 2.5
---------------------- ------------ ------------
Details of the debt facilities available to the Group are in
Note 30 of our 2022 Annual Report .
Consolidated Statement of Cash flows - Group Cash flows
The cash flow results are for the Consolidated Group.
During 2022 total cash balances(5) increased by US$88.2 million
(2021 increase: US$48.3 million). This increase arises from a
combination of continued strong operating performance in Nigeria
and cash balances(5) within Savannah Chad Inc ("SCI") upon
acquisition of the Chad and Cameroon Assets(36) . This is offset by
capital expenditures for the year of US$23.6 million (2021: US$32.5
million), deposits advanced for acquisitions of US$19.7 million and
taxes paid of US$35.1 million (US$2.4 million). The majority of
taxes paid were in Chad and aside from this payment there was only
minimal other expenditure in Chad during the period following
completion of the acquisition until the year-end. No revenues were
received from Chad as no oil liftings took place in the period.
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 2024. Cash flow
forecasts are prepared on a "bottom-up" basis, at each major asset
and at corporate level, and it reflects the Group's best estimate
of its operating and capital expenditure and revenues for the
period. Cash forecasts are regularly produced, and sensitivities
run for different scenarios including, but not limited to, changes
in commodity prices, different production rates and timing of our
customer cash collections. The Directors recognise that the Group
faces a range of risks (including those laid out in the Risk
Management section in our Annual Report) and there are a number of
inter-dependencies across the Group which can create inherent risks
and uncertainties - the Group actively monitors the risks facing
the business and implements mitigating actions when required.
The Group's forecasts show that the Group has sufficient
financial headroom for the going concern assessment period and
based on the analysis above, the Directors have a reasonable
expectation that the Group has adequate resources to continue in
operational existence for the foreseeable future. Thus, they have
adopted the going concern basis of accounting in preparing the year
end result.
Please refer to Note 2 of the consolidated Financial Statements
for further details on the going concern review.
2023 Financial Guidance and outlook
In 2023, we are providing the following guidance in relation to
the Group. This guidance does not include any contribution from the
proposed acquisition of the South Sudan Assets(35) :
-- Total Revenues(1) greater than US$235 million;
-- Operating expenses and administrative expenses(3) of up to US$75 million; and
-- Capital expenditures of up to US$60 million.
Nick Beattie
Chief Financial Officer, Savannah
7 June 2023
Consolidated Statement of Comprehensive Income
for the year ended 31 December 2022
2022 2021
Note US$'000 US$'000
----------------------------------------------------- ---- --------- --------
Revenue 4 212,498 185,799
Cost of sales 5 (72,059) (65,011)
----------------------------------------------------- ---- --------- --------
Gross profit 140,439 120,788
Administrative and other operating expenses (39,646) (25,675)
Gain on disposal 7,372 -
Transaction expenses (14,487) (7,374)
Expected credit loss and other related adjustments (39,495) (26)
----------------------------------------------------- ---- --------- --------
Operating profit 54,183 87,713
Share of profit from associates 65 -
Finance income 1,068 490
Finance costs 6 (78,970) (76,604)
Fair value adjustment 7 (8,134) (610)
Foreign exchange loss (21,158) (18,734)
----------------------------------------------------- ---- --------- --------
Loss before tax (52,946) (7,745)
Current tax expense 8 (7,106) (2,589)
Deferred tax (expense)/credit 8 (4,025) 27,437
----------------------------------------------------- ---- --------- --------
Tax (expense)/credit 8 (11,131) 24,848
----------------------------------------------------- ---- --------- --------
(Loss)/profit after tax (64,077) 17,103
----------------------------------------------------- ---- --------- --------
Other comprehensive income
Items not reclassified to profit or loss:
Actuarial gains relating to post-employment benefits 100 1,827
Tax relating to items not reclassified to profit
or loss (33) (609)
----------------------------------------------------- ---- --------- --------
Other comprehensive income 67 1,218
----------------------------------------------------- ---- --------- --------
Total comprehensive (loss)/profit (64,010) 18,321
----------------------------------------------------- ---- --------- --------
(Loss)/profit after tax attributable to:
Owners of the Company (60,867) 768
Non-controlling interests (3,210) 16,335
----------------------------------------------------- ---- --------- --------
(64,077) 17,103
----------------------------------------------------- ---- --------- --------
Total comprehensive (loss)/profit attributable
to:
Owners of the Company (60,814) 1,742
Non-controlling interests (3,196) 16,579
----------------------------------------------------- ---- --------- --------
(64,010) 18,321
----------------------------------------------------- ---- --------- --------
(Loss)/earnings per share
Basic (US$) 9 (0.05) 0.00
Diluted (US$) 9 (0.05) 0.00
----------------------------------------------------- ---- --------- --------
All results in the current financial year derive from continuing
operations.
Consolidated Statement of Financial Position
as at 31 December 2022
2022 2021
Note US$'000 US$'000
--------------------------------------------- ---- ---------- ---------
Assets
Non-current assets
Property, plant and equipment 10 623,118 568,201
Intangible assets 183,013 161,343
Investment in associates 188,350 -
Deferred tax assets 234,666 223,814
Right-of-use assets 3,658 4,724
Restricted cash 28 1,635
Other non-current receivables 7,032 722
--------------------------------------------- ---- ---------- ---------
Total non-current assets 1,239,865 960,439
--------------------------------------------- ---- ---------- ---------
Current assets
Inventory 11 40,374 3,873
Trade and other receivables 12 239,346 231,631
Cash at bank 13 240,888 152,644
--------------------------------------------- ---- ---------- ---------
Total current assets 520,608 388,148
--------------------------------------------- ---- ---------- ---------
Total assets 1,760,473 1,348,587
--------------------------------------------- ---- ---------- ---------
Equity and liabilities
Capital and reserves
Share capital 1,828 1,409
Share premium 124,819 61,204
Shares to be issued - 63,956
Treasury shares (136) (58)
Other reserves 531 458
Share-based payment reserve 9,974 8,706
Retained earnings 96,407 157,221
--------------------------------------------- ---- ---------- ---------
Equity attributable to owners of the Company 233,423 292,896
Non-controlling interests 10,646 13,842
--------------------------------------------- ---- ---------- ---------
Total equity 244,069 306,738
--------------------------------------------- ---- ---------- ---------
Non-current liabilities
Other payables 14 7,712 3,415
Borrowings 15 102,392 108,652
Lease liabilities 3,453 5,308
Deferred tax liabilities 27,607 -
Provisions 94,845 68,966
Contract liabilities 314,018 213,043
--------------------------------------------- ---- ---------- ---------
Total non-current liabilities 550,027 399,384
--------------------------------------------- ---- ---------- ---------
Current liabilities
Trade and other payables 14 279,448 116,771
Borrowings 15 543,397 415,593
Interest payable 105,600 80,101
Tax liabilities 18,514 2,058
Lease liabilities 1,626 1,475
Contract liabilities 17,792 26,467
--------------------------------------------- ---- ---------- ---------
Total current liabilities 966,377 642,465
--------------------------------------------- ---- ---------- ---------
Total liabilities 1,516,404 1,041,849
--------------------------------------------- ---- ---------- ---------
Total equity and liabilities 1,760,473 1,348,587
--------------------------------------------- ---- ---------- ---------
Consolidated Statement of Cash Flows
for the year ended 31 December 2022
2022 2021
Note US$'000 US$'000
----------------------------------------------------- ---- --------- ---------
Cash flows from operating activities:
Net cash generated from operating activities 16 75,693 128,115
----------------------------------------------------- ---- --------- ---------
Cash flows from investing activities:
Interest received 881 193
Payments for property, plant and equipment and
other intangible assets (18,191) (31,191)
Exploration and evaluation payments (5,375) (1,327)
Payment for financial asset - (7,500)
Acquisition deposits (19,648) (7,000)
Loan provided to third party (1,067) -
Lessor receipts 286 388
Cash to debt service accounts (29,836) (76,800)
Cash acquired on acquisition of a subsidiary 95,596 -
----------------------------------------------------- ---- --------- ---------
Net cash from/(used) in investing activities 22,646 (123,237)
----------------------------------------------------- ---- --------- ---------
Cash flows from financing activities:
Finance costs (38,528) (25,967)
Proceeds from issues of equity shares, net of
issue costs 61,141 -
Sale of treasury shares 73 -
Borrowing proceeds 12,810 18,476
Borrowing repayments (57,008) (15,818)
Lease payments (1,474) (1,850)
----------------------------------------------------- ---- --------- ---------
Net cash used in financing activities (22,986) (25,159)
----------------------------------------------------- ---- --------- ---------
Net increase/(decrease) in cash and cash equivalents 75,353 (20,281)
Effect of exchange rate changes on cash and cash
equivalents (16,945) (8,238)
Cash and cash equivalents at beginning of year 45,739 74,258
----------------------------------------------------- ---- --------- ---------
Cash and cash equivalents at end of year 13 104,147 45,739
----------------------------------------------------- ---- --------- ---------
Amounts held for debt service at end of year 13 136,741 106,905
----------------------------------------------------- ---- --------- ---------
Cash at bank at end of year as per Statement
of Financial Position 13 240,888 152,644
----------------------------------------------------- ---- --------- ---------
Consolidated Statement of Changes in Equity
for the year ended 31 December 2022
Equity
attributable
to the
owners
Shares Share-based of Non-
Share Share to be Treasury Other payment Retained the controlling Total
capital premium issued shares reserves 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
2021 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
income - - - - - - 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 1,409 61,204 63,956 (58) 458 8,706 157,221 292,896 13,842 306,738
--------------- ------- -------- -------- --------- -------- ----------- -------- ------------ ----------- --------
Profit for
the year - - - - - - (60,867) (60,867) (3,210) (64,077)
Other
comprehensive
income - - - - - - 53 53 14 67
--------------- ------- -------- -------- --------- -------- ----------- -------- ------------ ----------- --------
Total
comprehensive
loss for the
year - - - - - - (60,814) (60,814) (3,196) (64,010)
Transactions
with
shareholders:
Shares issued 419 63,615 (63,956) (78) - - - - - -
Sale of
treasury
of shares - - - - 73 - - 73 - 73
Equity-settled
share-based
payments - - - - - 1,268 - 1,268 - 1,268
--------------- ------- -------- -------- --------- -------- ----------- -------- ------------ ----------- --------
Balance at
31 December
2022 1,828 124,819 - (136) 531 9,974 96,407 233,423 10,646 244,069
--------------- ------- -------- -------- --------- -------- ----------- -------- ------------ ----------- --------
Notes to the Financial Information
for the year ended 31 December 2022
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 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 consolidated financial statements have been prepared under the
historical cost convention and incorporate the results for the year
ended 31 December 2022.
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 2022, 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.
As a result of the Nationalisation, the Company has not been
able to fully access all the underlying financial information, nor
have access to the relevant Chad-based employees of the affected
entities in order to prepare the financial information for audit
purposes to be consolidated into the Group's financial statements
for the year ended 31 December 2022. The Group's auditor has
therefore been unable to conduct a complete audit on these entities
for the period from the date of acquisition on 9 December 2022 to
31 December 2022.
Despite this limitation, the Directors are still required to
present the Statement of Consolidated Income, Statement of
Consolidated Position and Statement of Consolidated Cash Flows
without separately identifying the amounts that the Directors
believe relate to the Chad Assets within these primary statements.
The financial information that has been disclosed for the Chad
Assets was primarily sourced from the financial records and
supporting documents that were available before the Nationalisation
date, and the Group's assessment of the fair values as required by
IFRS 3 - Business Combinations, for the purposes of acquisition
accounting are considered provisional because the Group has not
been able to finalise the purchase price allocation exercise by the
date of this report. This is due to the level of information
available to the Group following the Nationalisation. More
information is set out in note 3 which shows the different segments
that make up the Group.
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 2024. Cash flow
forecasts are prepared on a "bottom-up" basis, at each major asset
and at corporate level, and it reflects the Group's best estimate
of its operating and capital expenditure and revenues for the
period. Cash forecasts are regularly produced, and sensitivities
run for different scenarios including, but not limited to, changes
in commodity prices, different production rates and timing of our
customer cash collections.
The Directors recognise that the Group faces a range of risks
(including those laid out in the Risk section in the Annual Report)
and there are a number of inter-dependencies across the Group which
can create inherent risks and uncertainties - the Group actively
monitors the risks facing the business and implements mitigating
actions when required. The Group's forecasts show that the Group
has sufficient financial headroom for the going concern assessment
period and based on the analysis above, the Directors have a
reasonable expectation that the Group has adequate resources to
continue in operational existence for the foreseeable future. Thus,
they have adopted the going concern basis of accounting in
preparing the year end result.
3. Segmental reporting
For the purposes of resource allocation and assessment of
segment performance, the operations of the Group are divided into
five segments: four geographical locations and an Unallocated
segment. The current geographical segments are Nigeria, Cameroon
and Niger. The Chad segment has been identified separately to
reflect the events of the Nationalisation as described in note 2.
All these geographical segments' principal activities are
exploration, development and extraction of oil and gas. 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 2022:
Nigeria Cameroon Niger Unallocated Sub-total Chad Group
US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
------------------------------- --------- -------- ------- ----------- --------- ------- ---------
Revenue 212,498 - - - 212,498 - 212,498
Cost of sales (72,772) - (128) (256) (73,156) 1,097 (72,059)
------------------------------- --------- -------- ------- ----------- --------- ------- ---------
Gross profit/(loss) 139,726 - (128) (256) 139,342 1,097 140,439
------------------------------- --------- -------- ------- ----------- --------- ------- ---------
Administrative and
other operating expenses (9,476) - (622) (29,430) (39,528) (118) (39,646)
Gain on disposal - - - 7,372 7,372 - 7,372
Transaction expenses - - - (14,487) (14,487) - (14,487)
Expected credit loss
and other related adjustments (39,495) - - - (39,495) - (39,495)
------------------------------- --------- -------- ------- ----------- --------- ------- ---------
Operating profit/(loss) 90,755 - (750) (36,801) 53,204 979 54,183
------------------------------- --------- -------- ------- ----------- --------- ------- ---------
Finance income 1,068 - 1,068
Finance costs (78,872) (98) (78,970)
Share of profit from
associates 160 (95) 65
Fair value adjustment (8,134) - (8,134)
Foreign translation
loss (21,158) - (21,158)
------------------------------- --------- -------- ------- ----------- --------- ------- ---------
Loss before tax (53,732) 786 (52,946)
------------------------------- --------- -------- ------- ----------- --------- ------- ---------
Nigeria Cameroon Niger Unallocated Sub-total Chad Total
US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
------------------------------ ---------- -------- -------- ----------- ---------- -------- ----------
Segment DD&A 38,144 - 168 723 39,035 1,610 40,645
Segment non-current
assets additions 6,533 - 6,324 1,380 14,237 8,907 23,144
------------------------------ ---------- -------- -------- ----------- ---------- -------- ----------
Assets
Non-current assets
Property, plant and
equipment 501,387 - 1,180 488 503,055 120,063 623,118
Intangible assets 4,072 - 169,242 792 174,106 8,907 183,013
Investments in associates - 183,425 - - 183,425 4,925 188,350
Deferred tax assets 228,582 - - - 228,582 6,084 234,666
Right-of-use assets 1,621 - - 2,037 3,658 - 3,658
Restricted cash 28 - - - 28 - 28
Other non-current receivables - - - 7,032 7,032 - 7,032
------------------------------ ---------- -------- -------- ----------- ---------- -------- ----------
Total non-current
assets 735,690 183,425 170,422 10,349 1,099,886 139,979 1,239,865
Current assets
Inventory 5,194 - - - 5,194 35,180 40,374
Trade and other receivables 188,881 379 24 37,669 226,953 12,393 239,346
Cash at bank 205,456 - 1,441 33,991 240,888 - 240,888
------------------------------ ---------- -------- -------- ----------- ---------- -------- ----------
Total current assets 399,531 379 1,465 71,660 473,035 47,573 520,608
------------------------------ ---------- -------- -------- ----------- ---------- -------- ----------
Total assets 1,135,221 183,804 171,887 82,009 1,572,921 187,552 1,760,473
------------------------------ ---------- -------- -------- ----------- ---------- -------- ----------
Non-current liabilities
Other payables 3,225 - - - 3,225 4,487 7,712
Borrowings 102,392 - - - 102,392 - 102,392
Lease liabilities 835 - - 2,618 3,453 - 3,453
Deferred tax liabilities - - - - - 27,607 27,607
Provisions 44,444 - 1,622 - 46,066 48,779 94,845
Contract liabilities 314,018 - - - 314,018 - 314,018
------------------------------ ---------- -------- -------- ----------- ---------- -------- ----------
Total non-current
liabilities 464,914 - 1,622 2,618 469,154 80,873 550,027
Current liabilities
Trade and other payables 43,935 18 17,372 60,804 122,129 157,319 279,448
Borrowings 369,110 162,023 12,264 - 543,397 - 543,397
Interest payable 98,582 1,243 5,775 - 105,600 - 105,600
Tax liabilities 7,824 - - - 7,824 10,690 18,514
Lease liabilities 755 - - 871 1,626 - 1,626
Contract liabilities 17,792 - - - 17,792 - 17,792
------------------------------ ---------- -------- -------- ----------- ---------- -------- ----------
Total current liabilities 537,998 163,284 35,411 61,675 798,368 168,009 966,377
------------------------------ ---------- -------- -------- ----------- ---------- -------- ----------
Total liabilities 1,002,912 163,284 37,033 64,293 1,267,552 248,882 1,516,404
------------------------------ ---------- -------- -------- ----------- ---------- -------- ----------
The following is an analysis of the Group's revenue and results
by reportable segment in 2021:
Nigeria Niger Unallocated Total
US$'000 US$'000 US$'000 US$'000
---------------------------------------------------- --------- -------- ----------- -----------
Revenue 185,799 - - 185,799
Cost of sales (65,011) - - (65,011)
---------------------------------------------------- --------- -------- ----------- -----------
Gross profit 120,788 - - 120,788
---------------------------------------------------- --------- -------- ----------- -----------
Administrative and other operating expenses (6,814) (6,837) (12,024) (25,675)
Transaction expenses - - (7,374) (7,374)
Expected credit loss and other related adjustments (26) - - (26)
---------------------------------------------------- --------- -------- ----------- -----------
Operating profit/(loss) 113,948 (6,837) (19,398) 87,713
---------------------------------------------------- --------- -------- ----------- -----------
Finance income 490
Finance costs (76,604)
Fair value adjustment (610)
Foreign translation loss (18,734)
---------------------------------------------------- --------- -------- ----------- -----------
Loss before tax (7,745)
---------------------------------------------------- --------- -------- ----------- -----------
Segment depreciation, depletion and amortisation(4) 35,402 282 543 36,227
Segment non-current assets 568,709 162,644 2,915 734,268
Segment non-current asset additions 32,535 1,779 184 34,498
Segment total assets 1,085,486 160,962 102,139 1,348,587
Segment total liabilities (938,513) (31,620) (71,716) (1,041,849)
---------------------------------------------------- --------- -------- ----------- -----------
4. Revenue
Set out below is the disaggregation of the Group's revenue from
contracts with customers:
2022 2021
Year ended 31 December US$'000 US$'000
-------------------------------------------- -------- -------
Gas sales 181,125 169,052
Oil, condensate and processing sales 31,373 16,747
-------------------------------------------- -------- -------
Total revenue from contracts with customers 212,498 185,799
-------------------------------------------- -------- -------
Gas sales represents gas deliveries made to the Group's
customers under long-term, take-or-pay gas sale agreements. The
Group sells oil and condensates at prevailing market prices.
5. Cost of sales
2022 2021
Year ended 31 December US$'000 US$'000
------------------------------------------------------------- ------- -------
Depletion and depreciation - oil and gas, and infrastructure
assets 38,403 34,463
Facility operation and maintenance costs 26,232 26,023
Royalties 7,424 4,525
------------------------------------------------------------- ------- -------
72,059 65,011
------------------------------------------------------------- ------- -------
6. Finance costs
2022 2021
Year ended 31 December US$'000 US$'000
----------------------------------------------- ------- -------
Interest on bank borrowings and loan notes 62,324 53,384
Amortisation of balances measured at amortised
cost 7,314 14,557
Unwinding of decommissioning discount 5,585 4,977
Interest expense on lease liabilities 367 511
Bank charges 233 327
Other finance costs 3,147 2,848
----------------------------------------------- ------- -------
78,970 76,604
----------------------------------------------- ------- -------
7. Fair value adjustment
2022 2021
Year ended 31 December US$'000 US$'000
----------------------- ------- -------
Fair value adjustment 8,134 610
----------------------- ------- -------
8,134 610
----------------------- ------- -------
The fair value adjustment relates to the revaluation of the
embedded derivative within the US$20 million Senior Secured Notes
("SSNs") held by Accugas Holdings UK Plc, a subsidiary of the Group
as well as changes in the warrant instrument recognised as a
financial liability (note 14). The embedded derivative of the SSN
provides a redemption option whereby early repayment of the
principal amount will result in a discount to the contractual loan
value.
8. Taxation
(a) Income tax
The tax expense/(credit) recognised in the profit or loss
statement for the Group is:
2022 2021
Year ended 31 December US$'000 US$'000
----------------------------------------------------- ------- --------
Current tax
- Current year 7,198 2,586
- Adjustments in respect of prior years (92) 3
----------------------------------------------------- ------- --------
7,106 2,589
----------------------------------------------------- ------- --------
Deferred tax
- Origination and reversal of temporary differences 7,610 9,094
- Change in tax rates - 25,871
- Write down and reversal of previous write downs of
deferred tax assets (3,959) (61,657)
- Adjustments in respect of prior years 374 (745)
----------------------------------------------------- ------- --------
4,025 (27,437)
----------------------------------------------------- ------- --------
Total tax expense/(credit) for the year 11,131 (24,848)
----------------------------------------------------- ------- --------
9. Earnings per share
Basic earnings per share is calculated by dividing the profit
for the year attributable to owners of the Company by the weighted
average number of ordinary shares outstanding during the year.
Diluted earnings per share is calculated by dividing the profit
for year attributable to owners of the Company by the weighted
average number of ordinary shares outstanding during the year, plus
the weighted average number of shares that would be issued on the
conversion of dilutive potential ordinary shares into ordinary
shares. In the prior year, there was a loss attributable to the
owners of the Company, which meant the diluted weighted average
number of shares would reduce the loss per share. Therefore, the
basic weighted average number of shares were used to calculate the
diluted loss per share.
The weighted average number of shares outstanding excludes
treasury shares of 99,858,893 (2021: 41,966,942).
2022 2021
Year ended 31 December US$'000 US$'000
---------------------------------------------------- -------- -------
(Loss)/profit
(Loss)/profit attributable to owners of the Company (60,867) 768
---------------------------------------------------- -------- -------
Number of
Number of shares shares
------------------------------------------ ---------------- -----------
Basic weighted average number of shares 1,202,714,329 954,280,611
Add: employee share options and warrants 60,012,622 4,766,269
------------------------------------------ ---------------- -----------
Diluted weighted average number of shares 1,262,726,951 959,046,880
------------------------------------------ ---------------- -----------
US$ US$
-------------------------- ------ ----
(Loss)/earnings per share
Basic (0.05) 0.00
Diluted (0.05) 0.00
-------------------------- ------ ----
23,853,457 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 2022 (2021:
50,233,574). These options could potentially dilute basic earnings
per share in the future.
10. 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 2021 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 197,768 446,128 4,924 648,820
Additions 896 1,068 478 2,442
Transfer to Intangible assets - - (390) (390)
Recognised on acquisition of subsidiary 121,672 - - 121,672
Decommissioning remeasurement adjustment (5,162) (24,856) - (30,018)
----------------------------------------- -------- -------------- ------- ---------
Balance at 31 December 2022 315,174 422,340 5,012 742,526
----------------------------------------- -------- -------------- ------- ---------
Accumulated depreciation
Balance at 1 January 2021 (20,327) (23,170) (1,924) (45,421)
Depletion and depreciation charge (16,742) (17,721) (735) (35,198)
----------------------------------------- -------- -------------- ------- ---------
Balance at 31 December 2021 (37,069) (40,891) (2,659) (80,619)
Depletion and depreciation charge (22,176) (16,227) (617) (39,020)
----------------------------------------- -------- -------------- ------- ---------
Balance at 31 December 2022 (59,245) (57,118) (3,045) (119,408)
----------------------------------------- -------- -------------- ------- ---------
Net book value
Balance at 1 January 2021 163,525 446,747 2,435 612,707
----------------------------------------- -------- -------------- ------- ---------
Balance at 31 December 2021 160,699 405,237 2,265 568,201
----------------------------------------- -------- -------------- ------- ---------
Balance at 31 December 2022 255,929 365,222 1,967 623,118
----------------------------------------- -------- -------------- ------- ---------
11. Inventory
2022 2021
Year ended 31 December US$'000 US$'000
-------------------------- ------- -------
Spare parts 21,189 2,776
Crude oil and condensates 19,185 1,097
-------------------------- ------- -------
40,374 3,873
-------------------------- ------- -------
12. Trade and other receivables
Group Group
2022 2021
As at 31 December US$'000 US$'000
------------------------------------- --------- --------
Trade receivables 244,288 156,440
Receivables from a joint arrangement 8,673 67
Other financial assets 11,518 5,237
------------------------------------- --------- --------
264,479 161,744
Expected credit loss (68,840) (29,345)
------------------------------------- --------- --------
195,639 132,399
VAT receivables 1,385 694
Loan receivable 2,194 -
Prepayments and other receivables 40,128 98,538
------------------------------------- --------- --------
239,346 231,631
------------------------------------- --------- --------
13. Cash at bank
Group Group
2022 2021
As at 31 December US$'000 US$'000
------------------------------ -------- -------
Cash and cash equivalents 104,147 45,739
Amounts held for debt service 136,741 106,905
------------------------------ -------- -------
240,888 152,644
------------------------------ -------- -------
Cash and cash equivalents includes US$1.2 million (2021: US$1.1
million) of cash collateral on the Orabank revolving facility. The
cash collateral was at a value of XOF750.9 million (2021: XOF626.4
million).
Amounts held for debt service represents Naira denominated cash
balances(5) which are held by the Group for 2020-2022 debt service
which has been separately disclosed from Cash and cash equivalents.
In total, approximately US$174.8 million (2021: US$132.8 million)
will be paid for the 2020-2022 debt service from bank accounts
designated as Amounts held for debt service, and from Cash and cash
equivalents.
14. Trade and other payables
Group Group
2022 2021
As at 31 December US$'000 US$'000
----------------------------- -------- -------
Trade and other payables
Trade payables 159,068 30,957
Accruals 50,045 62,927
VAT and WHT payable 16,229 13,783
Royalty and levies 5,542 5,196
Employee benefits 71 91
Contingent consideration 14,680 -
Financial liability 19,739 -
Other payables 14,074 3,817
----------------------------- -------- -------
Trade and other payables 279,448 116,771
Other payables - non-current
Employee benefits 7,712 3,415
----------------------------- -------- -------
Other payables - non-current 7,712 3,415
----------------------------- -------- -------
287,160 120,186
----------------------------- -------- -------
15. Borrowings
Group Group
2022 2021
As at 31 December US$'000 US$'000
-------------------------- ------- -------
Revolving credit facility 11,223 9,916
Bank loans 367,249 379,002
Senior Secured Notes 91,383 100,717
Other loans 175,934 34,610
-------------------------- ------- -------
645,789 524,245
-------------------------- ------- -------
Group Group
2022 2021
As at 31 December US$'000 US$'000
----------------------- ------- -------
Current borrowings 543,397 415,593
Non-current borrowings 102,392 108,652
----------------------- ------- -------
645,789 524,245
----------------------- ------- -------
16. Cash flow reconciliations
A reconciliation of profit before tax to net cash generated from
operating activities is as follows:
Year
ended Year ended
31 December 31 December
2022 2021
US$'000 US$'000
--------------------------------------------------------- ----------- -----------
Loss for the year before tax (52,946) (7,745)
Adjustments for:
Depreciation 2,242 1,764
Depletion 38,403 34,463
Finance income (948) (49)
Finance costs 78,970 76,604
Fair value movement 8,134 610
Share of profit from associates (65) -
Gain on disposal (7,372) -
Unrealised foreign translation loss 12,374 9,791
Share option charge 1,268 1,602
Expected credit loss and other related adjustments 39,495 26
--------------------------------------------------------- ----------- -----------
Operating cash flows before movements in working capital 119,555 117,066
Increase in inventory (6,143) (956)
Increase in trade and other receivables (110,845) (57,744)
Increase in trade and other payables 20,534 29,455
Increase in contract liabilities 87,656 42,689
Income tax paid (35,064) (2,395)
--------------------------------------------------------- ----------- -----------
Net cash generated from operating activities 75,693 128,115
--------------------------------------------------------- ----------- -----------
17. Business combinations
On 9 December 2022, a subsidiary of the Company acquired the
Chad and Cameroon Assets36 that constituted a business combination.
Following the completion of this acquisition, the Group owned a 40%
operated interest in the Doba Oil Project (the "Doba oil field") in
Chad and an effective c.40% indirect interest in the Chad-Cameroon
midstream pipelines, being COTCo and TOTCo. This acquisition was in
line with the Group's strategy to deliver value accretive inorganic
growth.
As these assets and entities are interdependent due to supply
agreements between the upstream and midstream business, the
separable assets and liabilities of these acquired entities have
been shown as one single CGU.
Set out below are the provisional fair values of the separable
assets and liabilities of the combined acquired entities together
with the fair value of the purchase consideration. Refer to note 2
for the considerations on why these amounts are provisional.
9 December
2022
US$'000
--------------------------------------------------- ----------
Property, plant and equipment 121,672
Investments in associates 188,285
Deferred tax assets 6,084
Inventory 30,358
Trade and other receivables 12,772
Cash at bank 95,596
--------------------------------------------------- ----------
Total assets 454,767
--------------------------------------------------- ----------
Deferred tax liabilities 18,782
Other payables 4,487
Provisions 48,683
Trade and other payables 149,986
Tax liabilities 47,315
--------------------------------------------------- ----------
Total liabilities 269,253
--------------------------------------------------- ----------
Total identifiable net assets at fair value 185,514
Goodwill/(bargain purchase) arising on acquisition -
--------------------------------------------------- ----------
Total fair value of consideration transferred 185,514
--------------------------------------------------- ----------
Consideration satisfied by:
US$'000
---------------------------------------------- -------
Cash 7,593
Contingent consideration 14,680
Debt 162,023
Deferred consideration 1,218
---------------------------------------------- -------
Total fair value of consideration transferred 185,514
---------------------------------------------- -------
18. Events after the reporting period
As set out in note 2, 31 March 2023, the Nationalisation of the
assets and rights of any kind of SCI located in Chad or arising
from the conventions between SCI and the Republic of Chad in
respect of the exploration, exploitation and transportation of
hydrocarbons in Chad (the "Conventions") and the assets and rights
of any kind of SMIL, including the shares and rights held by SMIL
in any branch office in Chad and any company having its principal
place of business in Chad occurred. In particular the steps taken
by the Republic of Chad have resulted in the Nationalisation of
SCI's upstream production assets in Chad and SMIL's c.40% interest
in Tchad Oil Transportation Company ("TOTCo"), the owner and
operator of the Chad portion of the Chad-Cameroon midstream
pipelines, being the sole oil export infrastructure for all oil
production from Chad. The actions of the Republic of Chad are in
direct breach of the Republic of Chad's undertaking under the
Conventions it has entered into. As disputes under the Conventions
are subject to the jurisdiction of an ICC arbitral tribunal, seated
in Paris. SCI and SMIL will seek full compensation for the losses
they have suffered as a result of Chad's actions. SCI has commenced
ICC arbitral proceedings against the Republic of Chad to seek full
recompense for the loss that it has and may suffer as a result
of the Nationalisation of SCI's assets.
On 20 April 2023, the Group announced the sale of a 10% interest
in its equity held investment in COTCo for a consideration of
US$44.9 million. Upon completion of the sale, the Group will retain
a 31.06% shareholding in COTCo.
Footnotes:
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.
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.
In order to provide a meaningful comparison with 2021, the 2022
figures exclude the impact of Chad operations.
3. Operating expenses plus administrative expenses are defined
as total cost of sales, administrative and other operating
expenses, excluding royalty and depletion, depreciation and
amortisation. In order to provide a meaningful comparison with
2021, the 2022 figures exclude the impact of Chad operations.
4. The 2022 figure for Depreciation, Depletion and Amortisation
excludes the impact of Chad operations.
5. Within cash balance of US$240.9m, US$136.7m is set aside for
debt service, of which US$98.4m is for interest and US$38.3m is for
scheduled principal repayments.
6. Net debt is defined as Borrowings less Cash at bank and Restricted cash.
7. Leverage is defined as Net debt divided by Adjusted EBITDA.
8. Interest cover ratio is Adjusted EBITDA 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.
9. Total Contributions to Nigeria and Niger defined as payments
to governments, salaries and payments to local suppliers and
contractors.
10. Source: The Economist, 2022 has been a year of brutal inflation.
11. Source: IMF.
12. Fed Prime Rate LIBOR.
13. Source: EIA
14. Source: EIA
15. Source: Eurostat
16. Source: Food and Agriculture Organisation (FAO).
17. Source: Trading Economics.
18. Source: IMF.
19. FTSE 100, 10 years. Source: Factset.
20. Source: Growth Index.
21. Savannah estimate based on Accugas peak contributions to
thermal generation for the time period.
22. Source: Fitch Solutions
23. The document to be published by a company seeking admission
of its securities to trading on AIM in accordance with Rule 3 of
the AIM Rules.
24. External Events For further information see the Financial
Review section of this announcement.
25. Source: Word Bank.
26. Source: IEA.
27. Source: World Bank.
28. Source: United Nations Human Development Report 2021.
29. Source: IMF.
30. Source: Our World in Data
31. Source: IEA, World Energy Outlook (2022).
32. Source: S&P Global Market Intelligence, S&P Global Ratings. Universe is Global Capex 2000.
33. Source: IEA, Net Zero by 2050.
34. Source: EIA, International Energy Outlook. 25. Source: IEA, Net Zero by 2050.
35. South Sudan Assets means the assets that Savannah proposes
to acquire from PETRONAS International Corporation Ltd,
as announced on 12 December 2022. These assets comprise
interests in three Joint Operating Companies which operate
Block 3/7 (40% working interest ("WI")), Block 1/2/4 (30% WI)
and Block 5A (67.9% WI), in South Sudan.
36. Chad and Cameroon Assets means the assets acquired from
ExxonMobil being a 40% participating interest in the Doba Oil Field
Development Area 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)
37. Investment Grade indicates credit support from an entity
which holds an investment grade rating from either Standard &
Poor's, Moody's or Fitch Ratings.
38. Adjusted net debt is defined as Net debt adjusted for
US$98.4 million (2021: US$75.5 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. The figure presented for 2022 is for the Group excluding Chad
(which removes the impact of the Chad operations period of
ownership from 9 December to 31 December 2022) as described in the
Financial Review to provide a meaningful comparison with 2021. Note
that the Adjusted EBITDA presented in Note 35(g) of the Financial
Statements is for the Group, not Group excluding Chad.
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END
MSCDZGGVVRKGFZG
(END) Dow Jones Newswires
June 08, 2023 02:52 ET (06:52 GMT)
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