TIDMSAVE
RNS Number : 0970X
Savannah Energy Plc
30 December 2021
NOT FOR RELEASE OR DISTRIBUTION OR PUBLICATION IN WHOLE OR IN
PART IN OR INTO THE UNITED STATES, AUSTRALIA, CANADA, HONG KONG,
JAPAN, NEW ZEALAND OR SINGAPORE
This announcement is not for publication or distribution,
directly or indirectly, in or into the United States of America.
This announcement is not an offer of securities for sale into the
United States. The securities referred to herein have not been and
will not be registered under the U.S. Securities Act of 1933, as
amended, and may not be offered or sold in the United States,
except pursuant to an applicable exemption from registration. No
public offering of securities is being made in the United
States.
30 December 2021
Savannah Energy PLC
("Savannah", the "Company" or the "Group")
Proposed Placing and Subscription to Raise US$65 million
Savannah Energy PLC, the British independent energy company
focused around the delivery of Projects that Matter in Africa,
today announces its intention to conduct an accelerated bookbuild
(the "Bookbuild") by way of a placing (the "Placing") with
institutional and other investors (the "Placees") and subscription
by certain of the directors ("Subscription") to raise gross
proceeds of approximately US$65 million through the issue of new
ordinary shares of GBP0.001 each in the Company ("Ordinary
Shares").
It is intended that as part of the Subscription five of the
Board's six directors will subscribe for an aggregate amount of
GBP2.8 million, including a subscription of GBP2.2 million by the
Company's CEO, Andrew Knott (via a wholly-owned entity).
-- Up to approximately 258,397,932 new Ordinary Shares (the
"Placing Shares") will be placed at the pre-suspension share price
of 19.35 pence per Ordinary Share (the "Placing Price") and, at
this price, are expected to represent approximately 20.6 per cent.
of the Company's issued share capital, as enlarged by the Placing
and Subscription;
-- The Bookbuild will open with immediate effect following the
release of this announcement and is expected to close by no later
than 4.00 p.m. GMT today. A further announcement confirming the
closing of the Bookbuild, the number of new Ordinary Shares to be
issued as part of the Placing and Subscription and the amount
raised will then be issued by the Company;
-- The Company intends to publish its AIM admission document
(the "Admission Document") in respect of, inter alia, the Exxon
Acquisition and the PETRONAS Acquisition as defined in its
announcements of 13 December 2021, and the Placing and
Subscription, on or around 31 December 2021, following which the
Company will seek restoration to trading on AIM;
-- finnCap Ltd and Panmure Gordon (UK) Limited are acting as
joint bookrunners (together, the "Joint Bookrunners") in relation
to the Placing. Strand Hanson Limited is acting as Nominated and
Financial Adviser to the Company.
Andrew Knott, CEO of Savannah, said:
"The US$65 million we are raising is intended, inter alia, to
allow Savannah to progress our planned acquisitions of ExxonMobil's
and PETRONAS's assets in Chad and Cameroon. I am delighted by the
support we have received from our shareholder base for these
transactions and look forward to providing further updates in due
course."
Summary of the Proposed Acquisitions
On 13 December 2021, the Company announced that it had entered
into agreements to acquire ExxonMobil's and PETRONAS's interests in
the Doba Oil Project and the Chad-Cameroon ETS for considerations
of US$360 million (with a further oil price contingent payment of
up to US$50 million), subject to other adjustments, and US$266
million, subject to working capital and customary adjustments,
respectively.
Completion of the Exxon Acquisition and the PETRONAS Acquisition
are each conditional upon, inter alia, shareholder approval at a
general meeting (notice of which will be sent to shareholders upon
publication of the Company's Admission Document), the waiver of
pre-emption rights by other participants in the Doba Consortium and
approval by the Ministry of Petroleum and Energy of the Republic of
Chad. Completion of the PETRONAS Acquisition also requires receipt
of merger approval from the CEMAC Council for Competition. The
Exxon Acquisition and the PETRONAS Acquisition are not
inter-conditional.
Under the terms of the sale and purchase agreement in respect of
the Exxon Acquisition, the Company will acquire a 40 per cent.
operated interest in the Doba Oil Project, a 40.19 per cent.
interest in the Chad Pipeline Company and a 41.06 per cent.
interest in the Cameroon Pipeline Company. Under the terms of the
sale and purchase agreement in respect of the PETRONAS Acquisition,
the Company will acquire a 35 per cent. interest in the Doba Oil
Project, a 30.16 per cent. interest in the Chad Pipeline Company
and a 29.77 per cent. interest in the Cameroon Pipeline
Company.
In aggregate, Savannah will acquire, assuming Completion of both
the Exxon Acquisition and the PETRONAS Acquisition:
-- a 75.00 per cent. participating interest in the Doba Oil
Project which comprises seven producing oil fields with 186.5 MMstb
of 2P Reserves and 2C Resources and which produced an average gross
daily production of 33.7 Kbopd (net 25.3 Kbopd) in 2020;
-- a 70.34 per cent. equity interest in the company which owns
the 178 km section of the Chad-Cameroon ETS that runs from the Doba
Oil Project to the Cameroon border (the "Chad Pipeline Company");
and
-- a 70.83 per cent. equity interest in the company which owns
the 903 km section of the Chad-Cameroon ETS that runs from the
border, through Cameroon and the associated export facilities,
including the Kome Kribi 1 FSO (the "Cameroon Pipeline
Company").
Due to their size and nature, both the Exxon Acquisition and the
PETRONAS Acquisition individually constitute reverse takeover
transactions pursuant to AIM Rule 14.
Funding the Exxon Acquisition and the PETRONAS Acquisition
The considerations payable for the Exxon Acquisition and the
PETRONAS Acquisition will be funded by a combination of the Debt
Financing, Placing, Subscription and the Junior Loan Facility,
further details of which are set out in the appendices of this
announcement and in the Company's Admission Document to be
published.
The Placing is not conditional on the Exxon Acquisition or the
PETRONAS Acquisition completing.
Completion of the Acquisitions
Completion of the Exxon Acquisition is conditional upon, inter
alia, shareholder approval at a general meeting (notice of which
will be sent to shareholders upon publication of the Company's
Admission Document) and Ministerial Consent, which is expected to
be received by March 2022. The Exxon Acquisition is also
conditional upon an IT systems transition process, which is
expected to take approximately six months from the signature of the
Exxon SPA. Therefore, completion of the Exxon Acquisition is
expected to take place during or around June 2022.
Assuming completion of the Exxon Acquisition (such that all
conditions precedent are satisfied), the Company's existing
quotation on AIM will be cancelled and re-admission of the then
group (including the entities acquired pursuant to the PETRONAS
Acquisition to the extent the PETRONAS Acquisition has completed),
as enlarged by the Exxon Acquisition, will become effective.
Completion of the PETRONAS Acquisition is conditional upon,
inter alia, Shareholder approval at a general meeting (notice of
which will be sent to shareholders upon publication of the
Company's Admission Document) and Ministerial Consent, which is
expected to be received by March 2022. Completion of the PETRONAS
Acquisition also requires receipt of merger approval from the CEMAC
Council for Competition, and such approval can take up to six
months to be determined, following submission of the notification
by Savannah Energy Chad Limited, which is expected to be made
shortly after publication of the Company's Admission Document.
Therefore, should the CEMAC Council for Competition take the full
six months to provide its approval, completion of the PETRONAS
Acquisition would be expected to take place during or around June
2022.
Assuming Completion of the PETRONAS Acquisition (such that all
conditions precedent are satisfied), the Company's existing
quotation on AIM will be cancelled and re-admission of the then
group (including the entities acquired pursuant to the Exxon
Acquisition, to the extent the Exxon Acquisition has completed), as
enlarged by the PETRONAS Acquisition, will become effective.
On completion of each of the Exxon Acquisition and the PETRONAS
Acquisition, the Company shall be required to publish a
supplementary admission document pursuant to the AIM Rules.
Further details on the Exxon Acquisition and the PETRONAS
Acquisition are set out in Appendix II of this announcement.
Current Trading
The Nigerian Assets year-to-date cash collections for the period
ended 13 December 2021 amount to US$201.3 million. This is 7 per
cent. higher than FY 2020 cash collections of US$187.4 million and
20 per cent. higher than FY 2020 cash collections when an
adjustment is made for the non-recurring US$20 million contract
re-negotiation payment received from Lafarge Africa in FY 2020.
Financial Guidance Issued for FY 2022
The Company is issuing financial guidance for the full year 2022
as follows:
Existing Business Exxon & PETRONAS Total [1]
Acquisitions
--------------------
Total Revenues >=US$215 million US$381 million >=US$596 million
[2]
------------------ ----------------- ------------------------
Opex and G&A [3] <=US$75 million US$151 million <=US$226 million
------------------ ----------------- ------------------------
Depreciation, US$21 million US$26 million US$47 million
Depletion and + US$2.3/boe + US$2.3/boe (Nigeria)
Amortisation
------------------ ----------------- ------------------------
Capital Expenditure <=US$85 million US$30 million <=US$115 million
------------------ ----------------- ------------------------
Shareholder Returns Policy
The Directors view Savannah as a high cashflow growth company
and expect to re-invest the majority of internally generated
post-debt service cashflows in organic and in-organic growth
projects consistent with the Company's corporate strategy. However,
the Directors also recognise the importance of paying a regular and
growing dividend to Shareholders. Over the course of the next 12
months, the Company expects to formalise and announce a dividend
policy centred around its underlying free cashflow generation, with
the anticipation being that a minimum dividend of US$10 million
would be paid in H1 2023 in respect of full year 2022.
Additional Information on the Placing and the Bookbuild
The Bookbuild will open with immediate effect following this
announcement. The Placing Shares will be placed at the Placing
Price. The final number of Placing Shares will be determined
following the close of the Bookbuild. The Placing Shares, when
issued, will be fully paid and will rank pari passu in all respects
with the existing Ordinary Shares. It is expected that the Placing
Shares will be admitted to trading on AIM on or around 7 January
2022.
The timing of the closing of the Bookbuild and allocations of
Placing Shares is at the discretion of the Joint Bookrunners and
the Company. The details of the results of the Placing will be
announced as soon as practicable after the close of the Bookbuild.
Your attention is drawn to the detailed terms and conditions of the
Placing described in Appendix I and the risk factors detailed in
Appendix III (the "Risk Factors") (which both form part of this
announcement).
By choosing to participate in the Placing and by making an oral
and legally binding offer to acquire Placing Shares, investors will
be deemed to have read and understood this announcement in its
entirety (including the Appendices) and to be making such offer on
the terms and subject to the conditions in it, and to providing the
representations, warranties and acknowledgements contained in the
Appendices.
Please note that Appendices II, III and IV of this announcement,
together with the Definitions and Glossary sections which follow,
are extracts from the Pathfinder Admission Document, which has been
shared with certain investors, and, therefore, remains in draft
form and will be subject to finalisation upon close of the
Bookbuild.
Further announcements will be made in due course.
+44 (0) 20 3817
Savannah Energy 9844
Andrew Knott, CEO
Nick Beattie, Deputy CFO
Sally Marshak, Head of IR &
Communications
+44 (0) 20 7409
Strand Hanson (Nominated Adviser) 3494
James Spinney
Ritchie Balmer
Rob Patrick
finnCap Ltd (Joint Broker)
Christopher Raggett +44 (0) 20 7220
Tim Redfern 0500
Panmure Gordon (UK) Ltd (Joint
Broker)
John Prior
Hugh Rich +44 (0) 20 7886
James Sinclair-Ford 2500
+44 (0) 20 3757
Camarco 4983
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 listed British independent energy
company focused around the delivery of Projects that Matter in
Africa. In Nigeria, the Company has controlling interests in the
cash flow generative Uquo and Stubb Creek oil and gas fields, and
the Accugas midstream business in South East Nigeria, which
provides gas enabling over 10% of Nigeria's thermal power
generation. In Niger, the Company has licence interests covering
approximately 50% of the highly oil prolific Agadem Rift Basin of
South East Niger, where the Company has made five oil discoveries
and seismically identified a large exploration prospect inventory
consisting of 146 exploration targets to be considered for
potential future drilling activity. The Company has announced that
it is in the process of acquiring a portfolio of upstream and
midstream assets in Chad and Cameroon.
Further information on Savannah Energy PLC can be found on the
Company's website: www.savannah-energy.com .
This press release is for informational purposes only and shall
not constitute or form part of any prospectus, offer or invitation
to sell or issue or any solicitation of any offer to purchase or
subscribe for any securities in the United States or in any other
jurisdiction, nor shall it (or any part of it), or the fact of its
distribution, form the basis of, or be relied upon in connection
with, or act as any inducement to enter into, any contract or
commitment whatsoever relating to any securities. Neither this
announcement nor any copy of it may be made or transmitted into the
United States of America, or distributed, directly or indirectly,
in the United States of America.
Neither this announcement nor any copy of it may be taken or
transmitted directly or indirectly into Australia, Canada or Japan
or to any persons in any of those jurisdictions, except in
compliance with Applicable securities laws. Any failure to comply
with this restriction may constitute a violation of United States,
Australian, Canadian or Japanese securities laws. The distribution
of this announcement in other jurisdictions may be restricted by
law and persons into whose possession this announcement comes
should inform themselves about, and observe, any such restrictions.
This announcement does not constitute, or form part of, an offer to
sell, or a solicitation of an offer to purchase, any securities in
the United States of America, Australia, Canada or Japan or in any
jurisdiction in which such offer or solicitation is unlawful
("Excluded Territory").
The securities have not been and will not be registered under
the U.S. Securities Act of 1933, as amended (the "Securities Act"),
or with any securities' regulatory authority of any state or other
jurisdiction of the United States. The securities may not be
offered or sold in the United States except pursuant to an
exemption from, or in a transaction not subject to, the
registration requirements of the Securities Act and applicable
state securities laws. There will be no public offer of the
securities in the United States. The securities referred to herein
have not been registered under the applicable securities laws of,
Canada, Australia or Japan or and, subject to certain exceptions,
may not be offered or sold within Canada, Australia or Japan or to
any national, resident or citizen of Canada, Australia or
Japan.
Neither the Company, Strand Hanson Limited, finnCap Ltd, Panmure
Gordon (UK) Limited or any of their respective parent or subsidiary
undertakings, or the subsidiary undertakings of any such parent
undertakings, or any of such person's respective directors,
officers, employees, agents, affiliates or advisers or any other
person ("their respective affiliates") accepts any responsibility
or liability whatsoever for/or makes any representation or
warranty, express or implied, as to this announcement, including
the truth, accuracy or completeness of the information in this
announcement (or whether any information has been omitted from the
announcement) or any other information relating to the Company, its
subsidiaries or associated companies, whether written, oral or in a
visual or electronic form, and howsoever transmitted or made
available or for any loss howsoever arising from any use of the
announcement or its contents or otherwise arising in connection
therewith. The Company, Strand Hanson Limited, finnCap Ltd, Panmure
Gordon (UK) Limited and their respective affiliates accordingly
disclaim all and any liability whether arising in tort, contract or
otherwise which they might otherwise have in respect of this
announcement or its contents or otherwise arising in connection
therewith.
Forward-looking statements
This announcement contains statements that may constitute
forward-looking statements, including statements about current
beliefs and expectations of the Directors. In particular, the words
"envisage", "projects", "expect", "anticipate", "estimate", "may",
"should", "plan", "intend", "will", "would", "could", "target",
"believe" and similar expressions (or in each case their negative
and other variations or comparable terminology) can be used to
identify forward looking statements. Such forward looking
statements relate to matters that are not historical facts. These
statements appear in a number of places throughout this
announcement and the Admission Document and include statements
regarding the Board's expectations of external conditions and
events, current business strategy, plans and the other objectives
of management for future operations and estimates and projections
of the Enlarged Group's financial performance. Though the Board
believes these expectations to be reasonable at the date of this
document, they may prove to be erroneous. Forward looking
statements involve known and unknown risks, uncertainties and other
factors which may cause the actual results, achievements or
performance of the Enlarged Group, or the industry in which the
Enlarged Group operates, to be materially different from any future
results, achievements or performance expressed or implied by such
forward looking statements. Prospective investors are strongly
recommended to read the risk factors set out in Appendix III to
this announcement.
Any forward-looking statement in this announcement speaks only
as of the date it is made. Save as required by law or regulation or
the AIM Rules for Companies, the Company undertakes no obligation
to publicly release the results of any revisions to any
forward-looking statements in the Admission Document that may occur
due to any change in the Board's expectations or in order to
reflect events or circumstances after the date of publication of
the Admission Document. Any forward-looking statement in this
announcement based on past or current trends and/or activities of
the Enlarged Group should not be taken as a representation or
assurance that such trends or activities will continue in the
future. No statement in this document is intended to be a profit
forecast or to imply that the earnings of the Company or Enlarged
Group for the current year or future years will match or exceed the
historical or published earnings of the Enlarged Group.
Information to Distributors UK Product Governance
Requirements
Solely for the purposes of Paragraph 3.2.7R regarding the
responsibilities of UK Manufacturers under the Product Governance
requirements contained in Chapter 3 of the FCA Handbook Product
Intervention and Product Governance Sourcebook (the "UK Product
Governance Requirements") and disclaiming all and any liability,
whether arising in tort, contract or otherwise, which any
"manufacturer" (for the purposes of the UK Product Governance
Requirements) may otherwise have with respect thereto, the Ordinary
Shares have been subject to a product approval process, which has
determined that the Ordinary Shares are: (i) compatible with an end
target market of (a) retail investors, (b) investors who meet the
criteria of professional clients and (c) eligible counterparties,
each as defined in UK Product Governance Requirements; and (ii)
eligible for distribution through all distribution channels as are
permitted by UK Product Governance Requirements (the "UK Target
Market Assessment"). Notwithstanding the UK Target Market
Assessment, distributors should note that: the price of the
Ordinary Shares may decline and investors could lose all or part of
their investment; the Ordinary Shares offer no guaranteed income
and no capital protection; and an investment in the Ordinary Shares
is compatible only with investors who do not need a guaranteed
income or capital protection, who (either alone or in conjunction
with an appropriate financial or other adviser) are capable of
evaluating the merits and risks of such an investment and who have
sufficient resources to be able to bear any losses that may result
therefrom.
The UK Target Market Assessment is without prejudice to the
requirements of any contractual, legal or regulatory selling
restrictions in relation to the Placing.
For the avoidance of doubt, the UK Target Market Assessment does
not constitute: (a) an assessment of suitability or appropriateness
for the purposes of MiFID II; or (b) a recommendation to any
investor or group of investors to invest in, or purchase, or take
any other action whatsoever with respect to, the Ordinary
Shares.
Each distributor is responsible for undertaking its own target
market assessment in respect of the Ordinary Shares and determining
appropriate distribution channels.
EU Product Governance Requirements
Solely for the purposes of the product governance requirements
contained in MiFID II and Articles 9 and 10 of Commission Delegated
Directive (EU) 2017/593 supplementing MiFID II (the "EU Product
Governance Requirements") and disclaiming all and any liability,
whether arising in tort, contract or otherwise, which any
"manufacturer" (for the purposes of the EU Product Governance
Requirements) may otherwise have with respect thereto, the Ordinary
Shares have been subject to product approval process, which has
determined that the Ordinary Shares are: (i) compatible with an end
target market of (a) retail investors, (b) investors who meet the
criteria of professional clients and (c) eligible counterparties,
each as defined in EU Product Governance Requirements; and (ii)
eligible for distribution through all distribution channels as are
permitted by EU Product Governance Requirements (the "EU Target
Market Assessment"). Notwithstanding the EU Target Market
Assessment, distributors should note that: the price of the
Ordinary Shares may decline and investors could lose all or part of
their investment; the Ordinary Shares offer no guaranteed income
and no capital protection; and an investment in the Ordinary Shares
is compatible only with investors who do not need a guaranteed
income or capital protection, who (either alone or in conjunction
with an appropriate financial or other adviser) are capable of
evaluating the merits and risks of such an investment and who have
sufficient resources to be able to bear any losses that may result
therefrom.
The EU Target Market Assessment is without prejudice to the
requirements of any contractual, legal or regulatory selling
restrictions in relation to the Placing.
Furthermore, it is noted that, notwithstanding the UK Target
Market Assessment and the EU Target Market Assessment, the Brokers
will only procure investors who meet the criteria of professional
clients and eligible counterparties. For the avoidance of doubt,
the EU Target Market Assessment does not constitute: (a) an
assessment of suitability or appropriateness for the purposes of
MiFID II; or (b) a recommendation to any investor or group of
investors to invest in, or purchase, or take any other action
whatsoever with respect to the Ordinary Shares. Each distributor is
responsible for undertaking its own target market assessment in
respect of the Ordinary Shares and determining appropriate
distribution channels.
APPIX I
TERMS AND CONDITIONS OF THE PLACING
Introduction
IMPORTANT INFORMATION FOR INVITED PLACEES ONLY REGARDING THE
PLACING.
THIS ANNOUNCEMENT, INCLUDING THIS APPIX, AND THE INFORMATION IN
IT, IS RESTRICTED, AND IS NOT FOR PUBLICATION, RELEASE OR
DISTRIBUTION, DIRECTLY OR INDIRECTLY, IN WHOLE OR IN PART, IN OR
INTO THE UNITED STATES, ANY RESTRICTED JURISDICTION OR ANY OTHER
JURISDICTION IN WHICH SUCH PUBLICATION OR DISTRIBUTION WOULD BE
UNLAWFUL.
THE PLACING SHARES THAT ARE THE SUBJECT OF THE PLACING ARE NOT
BEING OFFERED OR SOLD TO ANY PERSON IN THE EUROPEAN ECONOMIC AREA
("EEA") OR THE UK, OTHER THAN TO QUALIFIED INVESTORS WITHIN THE
MEANING OF ARTICLE 2(E) OF THE PROSPECTUS REGULATION (EU) 2017/1129
("EU PROSPECTUS REGULATION") OR WITHIN THE MEANING OF ARTICLE 2(E)
OF THE PROSPECTUS REGULATION (EU) 2017/1129 AS IT FORMS PART OF THE
LAW OF ENGLAND AND WALES BY VIRTUE OF THE EUROPEAN UNION
(WITHDRAWAL) ACT 2018 ("UK PROSPECTUS REGULATION"), WHICH INCLUDES
LEGAL ENTITIES WHICH ARE REGULATED BY THE FCA OR ENTITIES WHICH ARE
NOT SO REGULATED WHOSE CORPORATE PURPOSE IS SOLELY TO INVEST IN
SECURITIES.
MEMBERS OF THE PUBLIC IN THE UK OR ELSEWHERE ARE NOT ELIGIBLE TO
TAKE PART IN THE PLACING. THIS ANNOUNCEMENT (INCLUDING THIS APPIX)
AND THE TERMS AND CONDITIONS SET OUT HEREIN ARE FOR INFORMATION
PURPOSES ONLY AND ARE DIRECTED ONLY AT: (A) PERSONS WHO ARE
QUALIFIED INVESOTRS WITHIN THE MEANING OF ARTICLE 2(E) OF THE EU
PROSPECTUS REGULATION ("EU QUALIFIED INVESTORS"); OR (B) PERSONS IN
THE UNIKTED KINGDOM WHO ARE QUALIFIED INVESTORS WITHIN THE MEANING
OF ARTICLE 2(E) OF THE UK PROSPECTUS REGULATION ("UK QUALIFIED
INVESTORS") WHO ALSO
(I) FALL WITHIN ARTICLE 19(5) OF THE FINANCIAL PROMOTION ORDER,
OR (II) FALL WITHIN ARTICLE 49(2)(A) TO (D) OF THE FINANCIAL
PROMOTION ORDER; OR ARE PERSONS TO WHOM IT MAY OTHERWISE BE
LAWFULLY COMMUNICATED AND (III) ARE A "PROFESSIONAL CLIENT" OR AN
"ELIGIBLE COUNTERPARTY" WITHIN THE MEANING OF CHAPTER 3 OF THE
FCA'S CONDUCT OF BUSINESS SOURCEBOOK; OR (C) OTHER PERSONS TO WHOM
IT MAY LAWFULLY BE COMMUNICATED (ALL SUCH PERSONS TOGETHER BEING
REFERRED TO AS "RELEVANT PERSONS"). THIS ANNOUNCEMENT (INCLUDING
THIS APPIX) AND THE TERMS AND CONDITIONS SET OUT HEREIN MUST NOT BE
ACTED ON OR RELIED ON BY PERSONS WHO ARE NOT RELEVANT PERSONS. ANY
INVESTMENT OR INVESTMENT ACTIVITY TO WHICH THIS ANNOUNCEMENT
(INCLUDING THIS APPIX) AND THE TERMS AND CONDITIONS SET OUT HEREIN
RELATES IS AVAILABLE ONLY TO RELEVANT PERSONS AND WILL BE ENGAGED
IN ONLY WITH RELEVANT PERSONS.
THIS ANNOUNCEMENT, INCLUDING THIS APPIX, IS NOT AN OFFER FOR
SALE OR SUBSCRIPTION IN ANY JURISDICTION IN WHICH SUCH OFFER,
SOLICITATION OR SALE WOULD BE UNLAWFUL UNDER THE SECURITIES LAWS OF
ANY SUCH JURISDICTION. THIS ANNOUNCEMENT, INCLUDING THIS APPIX, IS
NOT AN OFFER OF OR SOLICITATION TO PURCHASE OR SUBSCRIBE FOR
SECURITIES IN THE UNITED STATES.
EACH PLACEE SHOULD CONSULT WITH ITS OWN ADVISERS AS TO LEGAL,
TAX, BUSINESS AND RELATED ASPECTS OF AN INVESTMENT IN PLACING
SHARES. THE PRICE OF THE PLACING SHARES IN THE COMPANY AND THE
INCOME FROM THEM (IF ANY) MAY GO DOWN AS WELL AS UP AND INVESTORS
MAY NOT GET BACK THE FULL AMOUNT INVESTED ON DISPOSAL OF THE
PLACING SHARES.
Placees will be deemed to have read and understood this
announcement and these terms and conditions in their entirety and
to be making such offer on the terms and conditions and to be
providing the representations, warranties, acknowledgements, and
undertakings contained in this Appendix. In particular, each such
Placee represents, warrants and acknowledges that:
1. it is a Relevant Person and undertakes that it will acquire,
hold, manage or dispose of any Placing Shares that are allocated to
it for the purposes of its business;
2. in the case of any Placing Shares acquired by it as a
financial intermediary, as that term is used in Article 5(1) of the
UK Prospectus Regulation, (i) the Placing Shares acquired by it
have not been acquired on behalf of, nor have they been acquired
with a view to their offer or resale to, persons in any Member
State of the EEA or the UK other than EU Qualified Investors under
Article 2(e) the EU Prospectus Regulation, or UK Qualified
Investors or in circumstances in which the prior consent of Panmure
Gordon and finnCap has been given to the offer or resale; or (ii)
where Placing Shares have been acquired by it on behalf of persons
in any Member State of the EEA or the UK other than EU Qualified
Investors or UK Qualified Investors, the offer of those Placing
Shares to it is not treated under the Prospectus Regulation as
having been made to such persons; and/or
3. if it is in the United States (i) it is a qualified
institutional buyer (or QIB), as defined in Rule 144A under the US
Securities Act of 1933, as amended; or (ii) it is a dealer or other
professional fiduciary in the United States acting for a
discretionary account (other than an estate or trust) held for the
benefit or account of a non-U.S. person in reliance on Regulation
S.
The Company, Panmure Gordon and finnCap will rely upon the truth
and accuracy of the foregoing representations, acknowledgements and
agreements. Neither Panmure Gordon nor finnCap makes any
representation to any Placee regarding an investment in the Placing
Shares referred to in this announcement (including this
Appendix).
This announcement (including this Appendix) does not constitute
an offer, and may not be used in connection with an offer, to sell
or issue or the solicitation of an offer to buy or subscribe for
Placing Shares in any jurisdiction in which such offer or
solicitation is or may be unlawful. This announcement (including
this Appendix) and the information contained herein is not for
publication or distribution, directly or indirectly, to persons in
the United States, the Restricted Jurisdiction or in any
jurisdiction in which such publication or distribution is unlawful.
Persons who come into possession of this announcement are required
by the Company to inform themselves about and to observe any
restrictions of transfer of this announcement. No public offer of
securities of the Company under the Placing is being made in the
United Kingdom, the United States or any Restricted
Jurisdiction.
In particular, the Placing Shares referred to in this
announcement have not been and will not be registered under the
Securities Act and may not be offered or sold, directly or
indirectly, in the United States, except pursuant to an exemption
from the registration requirements of the Securities Act. The
Placing Shares are only being offered and sold outside the United
States in offshore transactions in accordance with Regulation S
under the Securities Act and in the United States only to QIBs.
The relevant clearances have not been, nor will they be,
obtained from the securities commission of any province or
territory of Canada; no prospectus has been lodged with or
registered by the Australian Securities and Investments Commission
or the Japanese Ministry of Finance; and the Placing Shares have
not been, nor will they be, registered under or offered in
compliance with the securities laws of any state, province or
territory of any of the Restricted Jurisdiction. Accordingly, the
Placing Shares may not (unless an exemption under the relevant
securities laws is applicable) be offered, sold, resold or
delivered, directly or indirectly, in or into the Restricted
Jurisdiction or any other jurisdiction outside the United
Kingdom.
Persons (including, without limitation, nominees and trustees)
who have a contractual or other legal obligation to forward a copy
of this Appendix or the announcement of which it forms part should
seek appropriate advice before taking any action.
Details of the Placing
Panmure Gordon, finnCap and Strand Hanson Limited ("Strand
Hanson") have entered into the Placing Agreement with the Company
under which each of Panmure Gordon and finnCap have, on the terms
and subject to the conditions set out therein, undertaken to use
its reasonable endeavours to procure, as agent for the Company,
subscribers for the Placing Shares at the Placing Price.
The Placing Agreement contains customary warranties given by the
Company and its directors to Panmure Gordon, finnCap and Strand
Hanson as to matters relating to the Company and its business and a
customary indemnity given by the Company to Panmure Gordon, finnCap
and Strand Hanson in respect of liabilities arising out of, or in
connection with, the Placing.
Panmure Gordon and finnCap (after consultation with the Company)
reserves the right to scale back the number of Placing Shares to be
subscribed by any Placee in the event of applications in excess of
the target amount under the Placing. The Company, Panmure Gordon
and finnCap also reserve the right not to accept offers to
subscribe for Placing Shares or to accept such offer in part rather
than in whole. Panmure Gordon and finnCap shall be entitled to
effect the Placing by such method as they shall intheir sole
discretion determine. To the fullest extent permissible by law,
neither Panmure Gordon, finnCap nor any holding company of Panmure
Gordon, finnCap nor any subsidiary branch or affiliate of Panmure
Gordon, finnCap (each an affiliate) nor any person acting on behalf
of any of the foregoing shall have any liability to the Placees (or
to any other person whether acting on behalf of a Placee or
otherwise). In particular, neither Panmure Gordon, finnCap nor any
affiliate thereof nor any person acting on their behalf shall have
any liability to Placees in respect of their conduct of the
Placing.
Each Placee's obligations will be owed to the Company, Panmure
Gordon and to finnCap. Following the confirmation referred to below
in the paragraph entitled "Participation in, and principal terms
of, the Placing", each Placee will also have an immediate,
separate, irrevocable and binding obligation, owed to Panmure
Gordon or finnCap, to pay to Panmure Gordon or finnCap (or as
Panmure Gordon and finnCap may direct) in cleared funds an amount
equal to the product of the Placing Price and the number of Placing
Shares which such Placee has agreed to acquire.
Each Placee agrees to indemnify on demand and hold each of
Panmure Gordon and finnCap and the Company, and their respective
affiliates harmless from any all costs, claims, liabilities and
expenses (including legal fees and expenses) arising out of or in
connection with any breach of the acknowledgments, undertakings,
representations, warranties and agreements set forth in these terms
and conditions and any contract note.
The Placing is also conditional upon the Placing Agreement
becoming unconditional and the Placing Agreement not being
terminated in accordance with its terms. Further details of
conditions in relation to the Placing are set out below in the
paragraph entitled "Conditions of the Placing".
A Placee agrees to become a member of the Company and agrees to
subscribe for those Placing Shares allocated to it by Panmure
Gordon and finnCap at the Placing Price, conditional on: (i)
Admission occurring and becoming effective by 8.00 a.m. on 7
January 2022 (or, such later time and/or date, not being later than
8.00 a.m. on 13 January 2022, as the Company, Panmure Gordon and
finnCap may agree); (ii) the Placing Agreement becoming otherwise
unconditional in all relevant respects and not having been
terminated in accordance with its terms on or before the date of
Admission; and (iii) Panmure Gordon and finnCap confirming to the
Placees their allocation of Placing Shares.
To the fullest extent permitted by law, each Placee acknowledges
and agrees that it will not be entitled to exercise any remedy of
rescission at any time. This does not affect any other rights the
Placee may have.
Application for Admission to Trading
Application will be made to the London Stock Exchange for
Admission. It is expected that settlement of the Placing Shares and
Admission will become effective on or around 8.00 a.m. on 7 January
2022 and that dealings in the Placing Shares will commence at that
time.
Payment for Shares
Each Placee has a separate, irrevocable and binding obligation
to pay the Placing Price in cleared funds for the number of Placing
Shares duly allocated to the Placee under the Placing in the manner
and by the time directed by Panmure Gordon and finnCap. If any
Placee fails to pay as so directed and/or by the time directed, the
relevant Placee's application for Placing Shares shall at Panmure
Gordon's and/or finnCaps' discretion either be rejected or accepted
in which case the paragraph below entitled "Registration and
Settlement" shall apply to such application.
Participation in, and Principal Terms of, the Placing
Each of Panmure Gordon and finnCap (whether through itself or
any of its affiliates) is arranging the Placing as placing agent of
the Company for the purpose of using reasonable endeavours to
procure Placees at the Placing Price for the Placing Shares.
Participation in the Placing will only be available to persons
who may lawfully be, and are, invited to participate by Panmure
Gordon and finnCap. Each of Panmure Gordon and finnCap and its
affiliates may participate in the Placing as principal.
By participating in the Placing, Placees will be deemed to have
read and understood this announcement, including this Appendix, in
its entirety and to be participating and making an offer for
Placing Shares on the terms and conditions, and to be providing the
representations, warranties, acknowledgements, agreements and
undertakings contained in this Appendix.
This Appendix gives details of the terms and conditions of, and
the mechanics of participation in, the Placing. No commissions will
be paid to Placees or by Placees in respect of any Placing
Shares.
The number of Placing Shares to be issued, and the extent of
each Placee's participation in the Placing (which will not
necessarily be the same for each Placee), will be agreed by Panmure
Gordon, finnCap, and the Company following completion of the
bookbuilding process in respect of the Placing (the "Bookbuild").
No element of the Placing will be underwritten. The aggregate
number of Placing Shares will be announced on a Regulatory
Information Service following completion of the Bookbuild.
A Placee's commitment to acquire a fixed number of Placing
Shares under the Placing will be agreed orally with Panmure Gordon
and finnCap as agents of the Company. Each Placee's allocation will
be confirmed to Placees orally or by email by Panmure Gordon and
finnCap, and a form of confirmation will be dispatched as soon as
possible thereafter. The oral or email confirmation to such Placee
will constitute an irrevocable legally binding commitment upon such
person (who will at that point become a Placee) in favour of
Panmure Gordon and finnCap and the Company, under which it agrees
to acquire the number of Placing Shares allocated to it at the
Placing Price on the terms and conditions set out in this Appendix
and in accordance with the articles of association of the
Company.
Except as required by law or regulation, no press release or
other announcement will be made by Panmure Gordon, finnCap or the
Company using the name of any Placee (or its agent), in its
capacity as Placee (or agent), other than with such Placee's prior
written consent.
Irrespective of the time at which a Placee's allocation pursuant
to the Placing is confirmed, settlement for all Placing Shares to
be acquired pursuant to the Placing will be required to be made on
the basis explained below under the paragraph entitled
"Registration and Settlement".
All obligations under the Placing will be subject to fulfilment
or (where applicable) waiver of, amongst other things, the
conditions referred to below and to the Placing not being
terminated on the basis referred to below.
By participating in the Placing, each Placee will agree that its
rights and obligations in respect of the Placing will terminate
only in the circumstances described below and will not be capable
of rescission or termination by the Placee.
To the fullest extent permissible by law, none of the Company,
Panmure Gordon or finnCap or any of their respective affiliates
shall have any liability to Placees (or to any other person whether
acting on behalf of a Placee or otherwise under these terms and
conditions). In particular, none of the Company, Panmure Gordon or
finnCap or any of their respective affiliates shall have any
liability (including to the fullest extent permissible by law, any
fiduciary duties) in respect of Panmure Gordon's and finnCaps'
conduct of the Placing. Each Placee acknowledges and agrees that
the Company is responsible for the issue of the Placing Shares to
the Placees and Panmure Gordon and finnCap shall have no liability
to the Placees for the failure of the Company to fulfil those
obligations.
Conditions of the Placing
The Placing is conditional upon the Placing Agreement becoming
unconditional and not having been terminated in accordance with its
terms.
Panmure Gordon's and finnCap's obligations under the Placing
Agreement in respect of the Placing Shares are conditional on,
inter alia:
1. the Company allotting, subject only to Admission, the Placing
Shares in accordance with the Placing Agreement;
2. Admission taking place not later than 8.00 a.m. on 7 January
2022 (or such later date as may be agreed in writing between the
Company, Panmure Gordon and finnCap); and
3. the Company having complied with its obligations under the Placing Agreement.
If (a) any of the conditions contained in the Placing Agreement
in relation to the Placing Shares are not fulfilled or waived by
Panmure Gordon, finnCap and Strand Hanson by the respective time or
date where specified (or such later time or date as the Company,
Panmure Gordon, finnCap and Strand Hanson may agree not being later
than 5.00 p.m. on the "Final Date"); or (b) the Placing Agreement
is terminated as described below, the Placing in relation to the
Placing Shares will lapse and the Placee's rights and obligations
hereunder in relation to the Placing Shares shall cease and
terminate at such time and each Placee agrees that no claim can be
made by the Placee in respect thereof.
Subject to certain exceptions, each of Panmure Gordon, finnCap
and Strand Hanson may, at its absolute discretion and upon such
terms as it thinks fit, waive, or extend the period (up to the
Final Date) for, compliance by the Company with the whole or any
part of any of the Company's obligations in relation to the
conditions in the Placing Agreement. Any such extension or waiver
will not affect Placees' commitments as set out in this
announcement.
None of Panmure Gordon, finnCap, Strand Hanson nor the Company
shall have any liability to any Placee (or to any other person
whether acting on behalf of a Placee or otherwise) in respect of
any decision they may make as to whether or not to waive or to
extend the time and/or date for the satisfaction of any condition
to the Placing nor for any decision they may make as to the
satisfaction of any condition or in respect of the Placing
generally and by participating in the Placing each Placee agrees
that any such decision is within the absolute discretion of Panmure
Gordon, finnCap and Strand Hanson.
Right to Terminate under the Placing Agreement
Panmure Gordon, finnCap and Strand Hanson are entitled, at any
time before Admission, to terminate the Placing Agreement by giving
notice to the Company in certain circumstances, including, inter
alia:
1. the Company has failed to comply with any of its obligations
under the Placing Agreement which is material in the context of the
Placing and/or Admission; or
2. any of the warranties given by the Company to Panmure Gordon,
finnCap and/or Strand Hanson under the Placing Agreement not being
true or accurate in any material respect when given; or
3. if, amongst other things, there is a material adverse change
in the condition, earnings, business, operations or prospects of
the Group or if there is a material adverse change in the
financial, political, economic or stock market conditions, which in
Panmure Gordon's, finnCap's and/or Strand Hanson's reasonable
opinion (acting in good faith) makes it impractical or inadvisable
to proceed with the Placing.
Following Admission, the Placing Agreement is not capable of
termination to the extent that it relates to the Placing of the
Placing Shares.
The rights and obligations of the Placees shall terminate only
in the circumstances described in these terms and conditions and in
the Placing Agreement and will not be subject to termination by the
Placee or any prospective Placee at any time or in any
circumstances. By participating in the Placing, Placees agree that
the exercise by Panmure Gordon, finnCap and Strand Hanson of any
right of termination or other discretion under the Placing
Agreement shall be within the absolute discretion of Panmure
Gordon, finnCap and Strand Hanson and that they need not make any
reference to Placees and that they shall have no liability to
Placees whatsoever in connection with any such exercise or decision
not to exercise. Placees will have no rights against Panmure
Gordon, finnCap, Strand Hanson. the Company or any of their
respective directors or employees under the Placing Agreement
pursuant to the Contracts (Rights of Third Parties) Act 1999 (as
amended).
No Prospectus
The Placing Shares are being offered to Relevant Persons only
and will not be offered in such a way as to require a prospectus in
the United Kingdom or elsewhere. No offering document or prospectus
has been or will be submitted to be approved by the FCA in relation
to the Placing and Placees' commitments will be made solely on the
basis of the information contained in this announcement (including
this Appendix) and certain business and financial information the
Company is required to publish in accordance with the AIM Rules and
the rules and practices of the FCA (collectively "Exchange
Information").
Each Placee, by accepting a participation in the Placing, agrees
that the content of this announcement, including this Appendix, is
exclusively the responsibility of the Company and confirms that it
has not relied on any other information (other than the Exchange
Information), representation, warranty, or statement made by or on
behalf of the Company, Panmure Gordon and/or finnCap or any other
person and none of Panmure Gordon, finnCap nor the Company nor any
other person will be liable for any Placee's decision to
participate in the Placing based on any other information,
representation, warranty or statement which the Placees may have
obtained or received. Each Placee acknowledges and agrees that it
has relied on its own investigation of the business, financial or
other position of the Company in accepting a participation in the
Placing. Nothing in this paragraph shall exclude the liability of
any person for fraudulent misrepresentation.
Registration and Settlement
Settlement of transactions in the Placing Shares (ISIN:
GB00BP41S218) following Admission will take place within CREST
provided that, subject to certain exceptions, Panmure Gordon and
finnCap reserve the right to require settlement for, and delivery
of, the Placing Shares (or a portion thereof) to Placees by such
other means that they deem necessary if delivery or settlement is
not possible or practicable within CREST within the timetable set
out in this announcement or would not be consistent with the
regulatory requirements in any Placee's jurisdiction.
Each Placee allocated Placing Shares in the Placing will be sent
a form of confirmation stating the number of Placing Shares
allocated to it at the Placing Price, the aggregate amount owed by
such Placee to Panmure Gordon and/or finnCap (as agents for the
Company) and settlement instructions (including the trade date
which will be 31 December 2021). Each Placee agrees that it will do
all things necessary to ensure that delivery and payment is
completed in accordance with either the CREST or certificated
settlement instructions that it has in place with Panmure Gordon
and/or finnCap. Each Placee will also be sent a trade confirmation
on the trade date (referred to above) confirming the details of the
trade (being the acquisition of the relevant number of Placing
Shares).
Settlement of transactions in the Placing Shares (ISIN:
GB00BP41S218) following Admission will take place within the CREST
system, subject to certain exceptions. Settlement through CREST of
the Placing Shares is expected to take place on 7 January 2022
unless otherwise notified by Panmure Gordon and finnCap and
Admission is expected to occur no later than 8.00 a.m. on 7 January
2022 unless otherwise notified by Panmure Gordon and finnCap.
Admission and settlement may occur at an earlier date.
Settlement will be on a delivery versus payment basis. However, in
the event of any difficulties or delays in the admission of the
Placing Shares to CREST or the use of CREST in relation to the
Placing, the Company, Panmure Gordon and finnCap may agree that the
Placing Shares should be issued in certificated form. Panmure
Gordon and finnCap reserve the right to require settlement for the
Placing Shares, and to deliver the Placing Shares to Placees, by
such other means as they deem necessary if delivery or settlement
to Placees is not practicable within the CREST system or would not
be consistent with regulatory requirements in a Placee's
jurisdiction.
Interest is chargeable daily on payments not received from
Placees on the due date in accordance with the arrangements set out
above at the rate of two percentage points above Libor as
determined by Panmure Gordon and finnCap.
Each Placee is deemed to agree that, if it does not comply with
these obligations, Panmure Gordon and finnCap may sell any or all
of the Placing Shares allocated to that Placee on such Placee's
behalf and retain from the proceeds, for Panmure Gordon's and
finnCap's account and benefit (as agents for the Company), an
amount equal to the aggregate amount owed by the Placee plus any
interest due. Any excess proceeds will pass to the relevant Placee
at its risk. The relevant Placee will, however, remain liable and
shall indemnify Panmure Gordon and finnCap on demand for any
shortfall below the aggregate amount owed by it and may be required
to bear any stamp duty or stamp duty reserve tax or securities
transfer tax (together with any interest or penalties) which may
arise upon the sale of such Placing Shares on such Placee's behalf.
By communicating a bid for Placing Shares, each Placee confers on
each of Panmure Gordon and finnCap all such authorities and powers
necessary to carry out any such sale and agrees to ratify and
confirm all actions which Panmure Gordon and/or finnCap lawfully
takes in pursuance of such sale.
If Placing Shares are to be delivered to a custodian or
settlement agent, Placees should ensure that the form of
confirmation is copied and delivered immediately to the relevant
person within that organisation.
Insofar as Placing Shares are registered in a Placee's name or
that of its nominee or in the name of any person for whom a Placee
is contracting as agent or that of a nominee for such person, such
Placing Shares should, subject as provided below, be so registered
free from any liability to UK stamp duty or stamp duty reserve tax
or securities transfer tax. Placees will not be entitled to receive
any fee or commission in connection with the Placing.
Representations, Warranties and Further Terms
By participating in the Placing, each Placee (and any person
acting on such Placee's behalf) makes the following
representations, warranties, acknowledgements, agreements and
undertakings (as the case may be) to the Company, Panmure Gordon
and finnCap, namely that, each Placee (and any person acting on
such Placee's behalf):
1. represents and warrants that it has read and understood this
announcement, including this Appendix, in its entirety and that its
subscription of Placing Shares is subject to, and based upon, all
the terms, conditions, representations, warranties,
acknowledgements, agreements and undertakings and other information
contained herein and undertakes not to redistribute or duplicate
this announcement (including this Appendix);
2. acknowledges that no offering document or prospectus has been
prepared in connection with the placing of the Placing Shares and
represents and warrants that it has not received a prospectus or
other offering document in connection therewith;
3. acknowledges that the Placing Shares are admitted to trading
on AIM, and the Company is therefore required to publish Exchange
Information, which includes a description of the nature of the
Company's business and the Company's most recent balance sheet and
profit and loss account and that the Placee is able to obtain or
access such information without undue difficulty, and is able to
obtain access to such information or comparable information
concerning any other publicly traded company, without undue
difficulty;
4. acknowledges that the content of this announcement (including
this Appendix) is exclusively the responsibility of the Company,
and that none of Panmure Gordon and/or finnCap, their affiliates or
any person acting on their behalf has or shall have any liability
for any information, representation or statement contained in this
announcement (including this Appendix) or any information
previously or concurrently published by or on behalf of the Company
(including any Exchange Information), and will not be liable for
any Placee's decision to participate in the Placing based on any
information, representation or statement contained in this
announcement (including this Appendix) or otherwise. Each Placee
further represents, warrants and agrees that the only information
on which it is entitled to rely and on which such Placee has relied
in committing itself to acquire the Placing Shares is contained in
this announcement (including this Appendix) and any Exchange
Information, such information being all that it deems necessary to
make an investment decision in respect of the Placing Shares and
that it has neither received nor relied on any other information
given or representations, warranties or statements made by Panmure
Gordon and finnCap or the Company or any of their respective
directors, officers or employees or any person acting on behalf of
any of them (including with respect to the Company, the Placing,
the Placing Shares or the accuracy, completeness or adequacy of any
publicly available information), or, if received, it has not relied
upon any such information, representations, warranties or
statements, and none of Panmure Gordon, finnCap nor the Company
will be liable for any Placee's decision to accept an invitation to
participate in the Placing based on any other information,
representation, warranty or statement. Each Placee further
acknowledges and agrees that it may not place the same degree of
reliance on this announcement as it may otherwise place on a
prospectus or admission document. Each Placee further acknowledges
and agrees that it has relied solely on its own investigation of
the business, financial or other position of the Company and the
terms of the Placing in deciding to participate in the Placing and
it will not rely on any investigation that Panmure Gordon, finnCap
and their affiliates or any other person acting on their behalf has
or may have conducted;
5. represents and warrants that it has neither received nor
relied on any confidential price sensitive information concerning
the Company in accepting this invitation to participate in the
Placing;
6. acknowledges that Panmure Gordon and finnCap do not have any
duties or responsibilities to it, or their clients, similar or
comparable to the duties of "best execution" and "suitability"
imposed by the Conduct of Business Sourcebook in the FCA's Handbook
of Rules and Guidance and that Panmure Gordon and finnCap are not
acting for it or their clients and that Panmure Gordon and finnCap
will not be responsible for providing protections to it or their
clients;
7. acknowledges that none of Panmure Gordon, finnCap and any of
their affiliates or any person acting on behalf of them has or
shall have any liability for any publicly available or filed
information (including any Exchange Information) or any
representation relating to the Company, provided that nothing in
this paragraph excludes the liability of any person for fraudulent
misrepresentation made by that person;
8. that, save in the event of fraud on the part of Panmure
Gordon and finnCap (and to the extent permitted by the FCA),
neither Panmure Gordon nor finnCap, their respective ultimate
holding companies nor any direct or indirect subsidiary
undertakings of such holding companies, nor any of their respective
directors and employees shall be liable to Placees for any matter
arising out of Panmure Gordon's and finnCap's role as placing agent
or otherwise in connection with the Placing and that where any such
liability nevertheless arises as a matter of law, Placees will
immediately waive any claim against any of such persons which it
may have in respect thereof;
9. represents and warrants that a) it is not in the United
States; or b) it is a dealer or other professional fiduciary in the
United States acting for a discretionary account (other than an
estate or trust) held for the benefit or account of a non U.S.
Person in reliance on Regulation S;
10. unless otherwise specifically agreed in writing with Panmure
Gordon and finnCap, represents and warrants that neither it nor the
beneficial owner of such Placing Shares will be a resident of a
Restricted Jurisdiction;
11. acknowledges that the Placing Shares have not been and will
not be registered under the securities legislation of a Restricted
Jurisdiction and, subject to certain exceptions, may not be
offered, sold, taken up, renounced or delivered or transferred,
directly or indirectly, within those jurisdictions;
12. represents and warrants that the issue to it, or the person
specified by it for registration as holder, of Placing Shares will
not give rise to a liability under any of sections 67, 70, 93 or 96
of the Finance Act 1986 (depositary receipts and clearance
services) and that the Placing Shares are not being acquired in
connection with arrangements to issue depositary receipts or to
transfer Placing Shares into a clearance system;
13. represents and warrants that: (i) it has complied with and
will continue to comply with its obligations under the Market Abuse
Regulation (EU) No. 596/2014 as it forms part of the law of England
and Wales by virtue of the European Union (Withdrawal) Act 2018
("EUWA"), Criminal Justice Act 1993 and Part VIII of the Financial
Services and Markets Act 2000, as amended ("FSMA") and other
applicable law; (ii) in connection with money laundering and
terrorist financing, it has complied with its obligations under the
Proceeds of Crime Act 2002 (as amended), the Terrorism Act 2000 (as
amended), the Terrorism Act 2006, the Money Laundering, Terrorist
Financing and Transfer of Funds (Information on the Payer) 2017
Regulations, and any other applicable law (where all such
legislation listed under this (ii) shall together be referred to as
the "AML Legislation"); and (iii) it is not a person: (1) with whom
transactions are prohibited under the Foreign Corrupt Practices Act
of 1977 or any economic sanction programmes administered by, or
regulations promulgated by, the Office of Foreign Assets Control of
the U.S. Department of the Treasury; (2) named on the Consolidated
List of Financial Sanctions Targets maintained by HM Treasury of
the United Kingdom; or (3) subject to financial sanctions imposed
pursuant to a regulation of the EU or a regulation adopted by the
United Nations (together, the "Regulations"); and, if making
payment on behalf of a third party, that satisfactory evidence has
been obtained and recorded by it to verify the identity of the
third party as required by the Regulations and pursuant to AML
Legislation and has obtained all governmental and other consents
(if any) which may be required for the purpose of, or as a
consequence of, such purchase, and it will provide promptly to
Panmure Gordon, finnCap or the Company such evidence, if any, as to
the identity or location or legal status of any person (including
in relation to the beneficial ownership of any underlying investor)
which Panmure Gordon, finnCap or the Company may request from it in
connection with the Placing (for the purpose of complying with such
Regulations or ascertaining the nationality of any person or the
jurisdiction(s) to which any person is subject or otherwise or any
other information as may be required to comply with legal or
regulatory requirements (including in particular under the AML
Legislation)) in the form and manner requested by Panmure Gordon,
finnCap or the Company on the basis that any failure by it to do so
may result in the number of Placing Shares that are to be purchased
by it or at its direction pursuant to the Placing being reduced to
such number, or to nil, as Panmure Gordon and/or finnCap may decide
at its sole discretion;
14. if a financial intermediary, as that term is used in Article
5(1) of the UK Prospectus Regulation, represents and warrants that
the Placing Shares purchased by it in the Placing will not be
acquired on a non-discretionary basis on behalf of, nor will they
be acquired with a view to their offer or resale to, persons in a
Member State of the EEA or the UK other than EU Qualified Investors
or UK Qualified Investors respectively, or in circumstances in
which the prior consent of Panmure Gordon and finnCap has been
given to the offer or resale;
15. represents and warrants that it has not offered or sold and
will not offer or sell any Placing Shares to persons in the EEA or
the UK prior to Admission except to persons whose ordinary
activities involve them in acquiring, holding, managing or
disposing of investments (as principal or agent) for the purposes
of their business or otherwise in circumstances which have not
resulted in and which will not result in an offer to the public in
any Member State of the EEA or the UK within the meaning of the EU
Prospectus Regulation or UK Prospectus Regulation respectively;
16. represents and warrants that it has only communicated or
caused to be communicated and will only communicate or cause to be
communicated any invitation or inducement to engage in investment
activity (within the meaning of section 21 of the FSMA) relating to
the Placing Shares in circumstances in which section 21(1) of the
FSMA does not require approval of the communication by an
authorised person;
17. represents and warrants that it has complied and will comply
with all applicable provisions of the FSMA and the Financial
Services Act 2012 with respect to anything done by it in relation
to the Placing Shares in, from or otherwise involving, the United
Kingdom;
18. if in the United Kingdom, represents and warrants that it is
a UK Qualified Investor who: (i) falls with Articles 49(2)(A) to
(D) or 19(5) of the Order or (ii) it is a person to whom the
Placing Shares may otherwise be lawfully offered under such Order
or, if it is receiving the offer in circumstances under which the
laws or regulations of a jurisdiction other than the United Kingdom
would apply, it is a person to whom the Placing Shares may be
lawfully offered under that other jurisdiction's laws and
regulations; and (iii) is a "professional client" or an "eligible
counterparty" within the meaning of Chapter 3 of the FCA's Conduct
of Business Sourcebook;
19. represents and warrants that it and any person acting on its
behalf is entitled to acquire the Placing Shares under the laws of
all relevant jurisdictions and that it has all necessary capacity
and has obtained all necessary consents and authorities and taken
any other necessary actions to enable it to commit to this
participation in the Placing and to perform its obligations in
relation thereto (including, without limitation, in the case of any
person on whose behalf it is acting, all necessary consents and
authorities to agree to the terms set out or referred to in this
announcement (including this Appendix)) and will honour such
obligations;
20. where it is acquiring Placing Shares for one or more managed
accounts, represents and warrants that it is authorised in writing
by each managed account: (i) to acquire the Placing Shares for each
managed account; (ii) to make on its behalf the representations,
warranties, acknowledgements, undertakings and agreements in this
Appendix and the Announcement of which it forms part; and (iii) to
receive on its behalf any investment letter relating to the Placing
in the form provided to it by Panmure Gordon and/or finnCap;
21. undertakes that it (and any person acting on its behalf)
will make payment for the Placing Shares allocated to it in
accordance with this announcement (including this Appendix) on the
due time and date set out herein, failing which the relevant
Placing Shares may be placed with other subscribers or sold as
Panmure Gordon and/or finnCap may in their sole discretion
determine and without liability to such Placee and it will remain
liable and will indemnify Panmure Gordon and finnCap on demand for
any shortfall below the net proceeds of such sale and the placing
proceeds of such Placing Shares and may be required to bear the
liability for any stamp duty or stamp duty reserve tax or security
transfer tax (together with any interest or penalties due pursuant
to or referred to in these terms and conditions) which may arise
upon the placing or sale of such Placee's Placing Shares on its
behalf;
22. acknowledges that neither Panmure Gordon, finnCap nor any of
its affiliates, or any person acting on behalf of any of them, is
making any recommendations to it, advising it regarding the
suitability of any transactions it may enter into in connection
with the Placing and that participation in the Placing is on the
basis that it is not and will not be treated for these purposes as
a client of Panmure Gordon and/or finnCap and that Panmure Gordon
and/or finnCap do not have any duties or responsibilities to it for
providing the protections afforded to their respective clients or
customers or for providing advice in relation to the Placing nor in
respect of any representations, warranties, undertakings or
indemnities contained in the Placing Agreement nor for the exercise
or performance of any of their rights and obligations thereunder,
including any rights to waive or vary any conditions or exercise
any termination right;
23. undertakes that the person whom it specifies for
registration as holder of the Placing Shares will be (i) itself; or
(ii) its nominee, as the case may be. Neither Panmure Gordon,
finnCap nor the Company will be responsible for any liability to
stamp duty or stamp duty reserve tax resulting from a failure to
observe this requirement. Each Placee and any person acting on
behalf of such Placee agrees to participate in the Placing and it
agrees to indemnify the Company, Panmure Gordon and finnCap in
respect of the same on the basis that the Placing Shares will be
issued to the CREST stock account of Panmure Gordon and/or finnCap
who will hold them as nominee on behalf of such Placee until
settlement in accordance with its standing settlement
instructions;
24. acknowledges that these terms and conditions and any
agreements entered into by it pursuant to these terms and
conditions and any non-contractual obligations arising out of or in
connection with such agreement shall be governed by and construed
in accordance with the laws of England and it submits (on behalf of
itself and on behalf of any person on whose behalf it is acting) to
the exclusive jurisdiction of the English courts as regards any
claim, dispute or matter (including non-contractual matters)
arising out of any such contract, except that enforcement
proceedings in respect of the obligation to make payment for the
Placing Shares (together with any interest chargeable thereon) may
be taken by the Company, Panmure Gordon or finnCap in any
jurisdiction in which the relevant Placee is incorporated or in
which any of its securities have a quotation on a recognised stock
exchange;
25. acknowledges that time shall be of the essence as regards to
obligations pursuant to this Appendix;
26. agrees that the Company, Panmure Gordon and finnCap and
their respective affiliates and others will rely upon the truth and
accuracy of the foregoing representations, warranties,
acknowledgements and undertakings which are given to Panmure Gordon
and finnCap on their own behalf and on behalf of the Company and
are irrevocable and are irrevocably authorised to produce this
announcement or a copy thereof to any interested party in any
administrative or legal proceeding or official inquiry with respect
to the matters covered hereby;
27. agrees to indemnify on an after-tax basis and hold the
Company, Panmure Gordon and finnCap and their respective affiliates
harmless from any and all costs, claims, liabilities and expenses
(including legal fees and expenses) arising out of or in connection
with any breach of the representations, warranties,
acknowledgements, agreements and undertakings in this Appendix and
further agrees that the provisions of this Appendix shall survive
after completion of the Placing;
28. acknowledges that no action has been or will be taken by any
of the Company, Panmure Gordon, finnCap or any person acting on
behalf of the Company, Panmure Gordon or finnCap that would, or is
intended to, permit a public offer of the Placing Shares in any
country or jurisdiction where any such action for that purpose is
required;
29. acknowledges that it is an institution that has knowledge
and experience in financial, business and international investment
matters as is required to evaluate the merits and risks of
subscribing for the Placing Shares. It further acknowledges that it
is experienced in investing in securities of this nature and in
this sector and is aware that it may be required to bear, and it,
and any accounts for which it may be acting, are able to bear, the
economic risk of, and is able to sustain, a complete loss in
connection with the Placing. It has relied upon its own examination
and due diligence of the Company and its associates taken as a
whole, and the terms of the Placing, including the merits and risks
involved;
30. acknowledges that its commitment to subscribe for Placing
Shares on the terms set out herein will continue, notwithstanding
any amendment that may in the future be made to the terms of the
Placing and that Placees will have no right to be consulted or
require that their consent be obtained with respect to the
Company's conduct of the Placing;
31. acknowledges that Panmure Gordon, finnCap or any of their
affiliates acting as an investor for its own account may take up
shares in the Company and in that capacity may retain, purchase or
sell for its own account such shares and may offer or sell such
shares other than in connection with the Placing;
32. represents and warrants that, if it is a pension fund or
investment company, its purchase of Placing Shares is in full
compliance with all applicable laws and regulation; and
33. to the fullest extent permitted by law, it acknowledges and
agrees to the disclaimers contained in the announcement, including
this Appendix.
The representations, warranties, acknowledgments and
undertakings contained in this Appendix are given to Panmure
Gordon, finnCap and the Company and are irrevocable and shall not
be capable of termination in any circumstances.
The agreement to settle a Placee's subscription (and/or the
subscription of a person for whom such Placee is contracting as
agent) free of stamp duty and stamp duty reserve tax depends on the
settlement relating only to a subscription by it and/or such person
direct from the Company for the Placing Shares in question. Such
agreement assumes that the Placing Shares are not being subscribed
for in connection with arrangements to issue depositary receipts or
to transfer the Placing Shares into a clearance service. If there
are any such arrangements, or the settlement relates to any other
subsequent dealing in the Placing Shares, stamp duty or stamp duty
reserve tax may be payable, for which none of the Company, Panmure
Gordon nor finnCap will be responsible, and the Placee to whom (or
on behalf of whom, or in respect of the person for whom it is
participating in the Placing as an agent or nominee) the
allocation, issue or delivery of Placing Shares has given rise to
such UK stamp duty or stamp duty reserve tax undertakes to pay such
UK stamp duty or stamp duty reserve tax forthwith and to indemnify
on an after-tax basis and to hold harmless the Company, Panmure
Gordon and/or finnCap in the event that any of the Company, Panmure
Gordon and/or finnCap has incurred any such liability to UK stamp
duty or stamp duty reserve tax. If this is the case, each Placee
should seek its own advice and notify Panmure Gordon and/or finnCap
accordingly.
In addition, Placees should note that they will be liable for
any stamp duty and all other stamp, issue, securities, transfer,
registration, documentary or other duties or taxes (including any
interest, fines or penalties relating thereto) payable outside the
UK by them or any other person on the subscription by them of any
Placing Shares or the agreement by them to subscribe for any
Placing Shares.
Each Placee, and any person acting on behalf of the Placee,
acknowledges that neither Panmure Gordon nor finnCap owe any
fiduciary or other duties to any Placee in respect of any
representations, warranties, undertakings or indemnities in the
Placing Agreement.
When a Placee or person acting on behalf of the Placee is
dealing with Panmure Gordon and/or finnCap, any money held in an
account with Panmure Gordon and/or finnCap on behalf of the Placee
and/or any person acting on behalf of the Placee will not be
treated as client money within the meaning of the rules and
regulations of the FCA made under the FSMA. The Placee acknowledges
that the money will not be subject to the protections conferred by
the client money rules; as a consequence, this money will not be
segregated from Panmure Gordon's and/or finnCap's money in
accordance with the client money rules and will be used by Panmure
Gordon and/or finnCap in the course of its own business and the
Placee will rank only as a general creditor of Panmure Gordon
and/or finnCap.
All times and dates in this announcement (including this
Appendix) may be subject to amendment, and Placees' commitments,
representations and warranties are not conditional on any of the
expected times and dates in this announcement (including this
Appendix) being achieved. Panmure Gordon and/or finnCap shall
notify the Placees and any person acting on behalf of the Placees
of any changes.
Past performance is no guide to future performance and persons
needing advice should consult an appropriately qualified
independent financial adviser.
Panmure Gordon and finnCap are entitled, at their discretion and
out of its own resources, at any time to rebate to some or all of
its investors, or to other parties, part or all of its fees
relating to the Placing.
APPIX II
PATHFINDER ADMISSION DOCUMENT - PART 1 (SECTION 2 ONWARDS) AND
PART 2
2. Key investment proposition
Savannah is a British energy company focused around the delivery
of Projects that Matter in Africa. Our Business model is currently
focused around the delivery of material long-term returns for our
stakeholders through the sustainable development and ultimate
monetisation of high-quality, high-potential energy projects.
The Directors believe that an investment in the Company should
be attractive to prospective investors for the following
reasons:
2.1 The Exxon Assets and the PETRONAS Assets
The Doba Oil Project
-- The Doba Oil Project has gross Proved Reserves (1P) of 100.6
MMstb and gross Proved & Probable (2P) Reserves of 138.4 MMstb,
estimated by CGG:
o of which, Proved Reserves (1P) of 40.2 MMstb and Proved &
Probable (2P) Reserves of 55.4 MMstb are attributable to the Exxon
Target Companies, and Proved Reserves (1P) of 35.2 MMstb and Proved
& Probable (2P) Reserves of 48.4 MMstb are attributable to the
PETRONAS Target Companies; and
o the Doba Oil Project includes 120.4 MMstb of gross 2P Reserves
that are categorised as requiring "No Further Investment" to be
produced.
-- CGG estimates 2022 gross production of 30.1 Kbopd from the
Doba Oil Project, with 12.0 Kbopd attributable to the Exxon Target
Companies and 10.5 Kbopd attributable to the PETRONAS Target
Companies.
-- CGG estimates average annual upstream asset free cashflow
over the next nine years of US$39.1 million attributable to the
Exxon Target Companies and US$32.9 million attributable to the
PETRONAS Target Companies.
-- Additional enhanced oil recovery (EOR), drilling, production
and facilities optimisation exists to develop the full field
potential of the assets.
-- The Exxon Target Companies and the PETRONAS Target Companies
each have concession terms through to 2050.
-- Each of the Exxon Acquisition and the PETRONAS Acquisition
provides a platform for the Company to build a material business
with further in-country consolidation opportunities in Chad.
The Chad-Cameroon ETS
-- Midstream project facilities in a mature hydrocarbon basin
with established infrastructure including a 1,081 km pipeline with
250 Kbopd nameplate capacity and high operational reliability since
2003:
o being the only international export route for oil production
in Chad (pipeline used by ExxonMobil, CNPC, Glencore, OPIC and
PETRONAS); and
o potential for new adjacent operations to utilise the
Chad-Cameroon Pipeline, including a number of undeveloped
discoveries in Chad.
-- CGG estimates average annual midstream asset free cashflow
over the next nine years of US$37.4 million attributable to the
Exxon Target Companies and US$27.2 million attributable to the
PETRONAS Target Companies:
o 49 per cent. of the total Exxon Target Companies and 45 per
cent. of PETRONAS Target Companies' cash-flow is derived from
long-dated, non-oil-price dependent revenue streams.
-- In aggregate, across the Doba Oil Project and the
Chad-Cameroon ETS assets, CGG estimates average annual asset free
cashflow over the next nine years of US$76.6 million attributable
to the Exxon Target Companies and US$60.1 million attributable to
the PETRONAS Target Companies.
2.2 Savannah's existing predictable base revenue stream
-- Two high-quality, high-growth business units in Nigeria and Niger.
-- Achieved revenue of US$169.0 million, all from the Nigerian
assets, in the year ended 31 December 2020.
-- Nigerian Assets' future contracted revenues are derived from
fixed price, long-term gas sales agreements with a weighted average
remaining contract life of 16 years and over US$4.0 billion of
remaining life-of-contract revenues, of which 95 per cent. of
current contracted revenues are with customers providing investment
grade credit guarantees.
2.3 Savannah's proven track record of delivery
-- Strong and functionally arranged operating platform, with a
purposeful and performance-driven culture and highly experienced
Board and senior management team.
-- Proven track record of delivering improved performance from acquired assets:
o 2020 Adjusted EBITDA increased 19 per cent. compared to pro forma Adjusted EBITDA in 2019.
-- Track record of delivering capital projects on time and
budget and of exploration excellence, including:
o five discoveries from the five exploration wells drilled in Niger; and
o R3 East exploration drilling programme in 2018 delivered on time and on budget.
2.4 Making a sustainable impact
-- The Company is seeking to deliver energy projects in emerging
markets, which make meaningful positive socio-economic
contributions to its host countries.
-- The Company strives to manage all of its operations in a
safe, secure and environmentally sustainable manner.
-- The Company's carbon intensity and diversity metrics are industry-leading.
-- The Company's sustainability strategy is aligned with 13 of
the 17 United Nations Sustainable Development Goals, where the
Board believes it can have the biggest economic, environmental,
social and governance impact to achieve a better and more
sustainable future for its host nations in Africa.
2.5 Strong organic growth potential on Completion
-- In Nigeria, the Directors expect to continue to deliver
significant organic growth from a combination of increased sales to
existing customers and sales to new customers.
-- In Niger, the Directors expect to progress the R3 East
development and the Board believes that there is significant
additional longer-term growth potential associated with its bank of
146 identified exploration targets within its licence area, with
export via the Niger-Benin pipeline currently under
construction.
-- The Company's growth ambitions are underpinned by the Enlarged Group's asset base:
o the Nigerian Assets have a 29.2-year combined Reserve and Resource life; and
o following completion of the Exxon Acquisition and the PETRONAS
Acquisition, the Enlarged Group would have net Proved Reserves (1P)
of 130.8 MMboe, net Proved & Probable (2P) Reserves of 183.1
MMboe and net Contingent Resources (2C) of 176.0 MMboe as presented
in the table below.
1P 2P 2C
MMboe Net Net Net
Existing Group 55.4 79.3 93.3
Exxon Target Companies 40.2 55.4 44.1
PETRONAS Target Companies 35.2 48.4 38.6
-------- -------- --------
Enlarged Group(1) 130.8 183.1 176.0
-------- -------- --------
Percentage increase +136% +131% +89%
--------
-------- -------- -------- --------
--------
Notes:
(1) Assuming Completion of both the Exxon Acquisition and the
PETRONAS Acquisition.
-- In Chad, the Directors expect to enhance asset performance
through optimisation of operations and the application of
alternative production technologies to improve and extend its
economic life.
2.6 Strong inorganic growth potential
-- The Company continues to actively review new projects and
acquisition opportunities in its core African region focused
predominantly on:
o cash-generative, or near-term cash-generative, upstream and midstream assets;
o "bolt-on" assets for which there is significant synergistic
value to the Existing Group's operations; and/or
o greenfield renewable power projects.
-- The Board believes that the Company's strong operating
platform and industrial reputation, access to finance and regional
relationships place it well to acquire further assets in the
current environment, where the seven supermajors in the industry
alone have announced divestment programmes reported to amount to
over US$100 billion. The supermajors are rationalising their
portfolios and divesting assets that are no longer deemed to be
core and, due to the limited buyer universe, the Board believes
that there are opportunities to acquire high quality assets at
attractive valuations. The Board sees significant value creation
potential in such transactions, with the performance improvements
it has delivered in its Nigerian asset base post-acquisition being
a prime example of how this can be achieved.
3. Information on the Chad/Cameroon Assets
The Chad/Cameroon Assets, comprising the Doba Oil Project and
the Chad-Cameroon ETS, are led in Central and West Africa,
bordering the Existing Group's operations in Nigeria and Niger.
http://www.rns-pdf.londonstockexchange.com/rns/0970X_1-2021-12-30.pdf
Figure 1, Location of the Chad/Cameroon Assets relative to the
Existing Group's operations
Source: Company materials
3.1 The Doba Oil Project
Overview and background
The Doba Oil Project, located in Southern Chad's established
Doba Basin, is a material development, having produced 631 MMstb of
crude oil since 2003 from approximately 3.8 Bnbbls of oil initially
in place. The Doba Oil Project is owned by the Doba Consortium,
comprised of ExxonMobil (EEPCI) as operator (40 per cent.),
PETRONAS (PC Chad) (35 per cent.) and Chad National Oil Company
(SHT) (25 per cent.). CGG estimates expected 2022 production of
30.1 Kbopd and remaining gross 2P Reserves and 2C Resources of
138.4 MMstb and 110.2 MMstb, respectively. The oil produced is
exported to international markets via the Chad-Cameroon Pipeline
and then the Kome Kribi 1 FSO, offshore Cameroon.
The development comprises seven producing fields: Miandoum,
Kome, Bolobo, Moundouli, Nya, Maikeri and Timbre. The first
discoveries, Miandoum and Kome, were made by Conoco in 1975.
ExxonMobil took operatorship in 1982 and subsequent successful
exploration and appraisal increased discovered resources to over 3
Bnbbls of oil initially in place enabling a bespoke export solution
with construction of the 1,081 km Chad-Cameroon Pipeline.
http://www.rns-pdf.londonstockexchange.com/rns/0970X_1-2021-12-30.pdf
Figure 2, Location of the Doba Oil Project fields
Source: Chad/Cameroon CPR
Historical Production
Production started in 2003 from the Miandoum field and the full
start-up of project facilities and production from the Kome and
Bolobo fields was achieved in 2004. Crude oil from all fields is
collected at the Miandoum and Kome gathering stations. Processing
and power generation is centralised at the Kome facility from where
crude oil is exported through the Chad-Cameroon Pipeline. Peak
production of over 200 Kbopd was achieved in 2004, the success of
which led to further drilling campaigns and the development of the
Nya, Moundouli, Maikeri and Timbre fields, the last of which was
brought into commercial production in 2009. Drilling continued
until 2015, when ExxonMobil stopped drilling activities and
implemented a polymer flooding scheme in the Kome and Miandoum
fields to enhance oil recovery and extend the economic life of the
fields. In 2020, the average gross production was 33.7 Kbopd from
approximately 300 wells.
Figure 3, Doba Oil Project fields Area (km(2)
information Field ) Discovery Production start-up
Miandoum 101 1975 2003
Kome 186 1975 2004
Bolobo 53 1989 2004
Nya 13 2002 2005
Moundouli 74 2001 2006
Maikeri 15 2005 2007
Timbre 22 2005 2009
Source: modified from the Chad/Cameroon
CPR
To date, approximately 16 per cent. of the discovered Reserves
and Resources have been recovered from the Doba Oil Project.
Further Reserves and Resources could be developed through the
application of infill drilling, optimisation of water and polymer
injection, alternative well completion and intervention
technologies, work-over and recompletions of existing non-producing
wells, or further enhanced oil recovery applications.
Reserves and Resources
As further detailed in the Chad/Cameroon CPR, a summary of the
gross and net 2P Reserves and 2C Resources and the expected asset
free cashflows of the seven fields are set out below. Approximately
85 per cent. of the 2P Reserves are Proved Developed Reserves that
are categorised as requiring "No Further Investment" to be
produced.
Figure 4, Summary of Gross and Net(1) 2P Reserves and 2C
Resources of the Doba Oil Project
2P Reserves 2C Resources
Gross Net(1) Gross Net(1)
Moundouli, Nya 13.6 10.2 23.2 17.4
Maikeri, Timbre 4.9 3.7 4.6 3.5
Miandoum, Bolobo, Kome 119.9 89.9 82.4 61.8
-------- -------- -------- --------
Total (MMstb) 138.4 103.8 110.2 82.7
-------- -------- -------- --------
Exxon Acquisition 55.4 44.1
PETRONAS Acquisition 48.4 38.6
-------- -------- -------- --------
-------- -------- -------- --------
Source: Chad/Cameroon CPR
Notes:
(1) Net to Savannah, assuming Completion of the Exxon Acquisition and the PETRONAS Acquisition.
Expected Asset Level Free Cashflow(1)
Figure 5, Summary of Expected Net Free Cashflows from the Doba
Oil Project
Exxon Target Companies PETRONAS Target
US$m Companies Aggregate
US$m US$m
2022 78.6 46.4 125.0
2023 58.5 24.1 82.6
2024 9.7 32.3 42.0
2025 61.6 26.6 88.2
2026 20.4 32.3 52.7
2027 66.0 40.5 106.5
2028 28.5 39.2 67.7
2029 30.1 (3.6) 26.5
2030 (1.2) 58.4 57.2
Source: Chad/Cameroon CPR
Notes:
(1) Expected Asset Level Free Cashflow Is the pre-debt service
net cashflow derived directly from the assets (and excludes any
indirect revenues and costs). The marked variations in annual
cashflows are in part caused by projected timings of oil
liftings.
CGG has conducted a review of the value of the interests to be
acquired in the Doba Oil Project, which has been incorporated in
the Chad/Cameroon CPR. The base case NPV10 for Savannah's interest
in the Doba Oil Project, based on 2P Reserves, assuming completion
of the Exxon Acquisition and the PETRONAS Acquisition, has been
assessed at US$484.8 million with (US$245.4 million attributable to
the Exxon Acquisition and US$239.4 million attributable to the
PETRONAS Acquisition). The base Brent price assumption in the
evaluation assumes prices of US$75/bbl, US$70/bbl and US$65/bbl in
2022, 2023 and 2024 respectively. Beyond 2024, the price is
escalated at 2 per cent. per year.
3.2 Chad-Cameroon Export Transport System
ETS overview
The Chad-Cameroon ETS is a crude oil export pipeline, which
connects Chad to the Atlantic Ocean port of Kribi in Cameroon, and
an offshore moored floating storage and offloading facility ("FSO")
and terminal infrastructure. The total length of the pipeline is
1,081 km (178 km in Chad, 903 km in Cameroon including a 12 km
offshore section). The nameplate capacity of the ETS is 250 Kbopd
and it can transport relatively heavy crude oil. The ETS is the
only pipeline connecting landlocked oil-producing assets in Chad to
the international market.
http://www.rns-pdf.londonstockexchange.com/rns/0970X_1-2021-12-30.pdf
Figure 6, The Chad-Cameroon Export Transportation System
Source: Chad/Cameroon CPR
Construction of the Chad-Cameroon pipeline, which is buried
below the ground, started in 2000 and was completed in 2003, a year
ahead of schedule. The total cost of the pipeline project was
US$2.2 billion and several US and European Export/Import Credit
agencies and the World Bank supported the construction and
implementation of this major infrastructure project. There are
three pumping stations along the length of the pipeline and a
pressure reduction station at Kribi. The first pumping station is
located at the Kome field, the second and third pumping stations
are located in Cameroon.
Figure 7, Chad Pipeline Company and Cameroon Pipeline
Company ownership Shareholder TOTCo COTCo
ExxonMobil (EPIL) 40.19% 41.06%
PETRONAS (Doba Pipeline) 30.16% 29.77%
Chad National Oil Company (SHT) 21.54% 21.26%
Chad Government 8.12% 2.74%
Cameroon National Oil Company (SNH) 0% 5.17%
Source: Company materials
Historical ETS throughputs
The primary objective of the ETS was to export oil production
from the Doba Oil Project, but since 2013 other producers in Chad
(including CNPC, OPIC and Glencore) have started transporting crude
oil through the pipeline. Third-party throughput reached
approximately 100 Kbopd in 2020 with a number of further
development projects expected to be brought onstream in the short
to medium term.
The Kome Kribi 1 FSO is a converted crude tanker with a
nameplate storage capacity of 2.5 MMbbl. The Kome Kribi 1 FSO is
able to accommodate tandem-berthed 80,000-320,000 dwt export
tankers with typical loading times of 20 to 40 hours. Currently,
there are on average four liftings per month from the FSO, with
both EPIL and PCCEPI lifting on average four times per year.
The ETS is managed by two joint-venture companies, the Chad
Pipeline Company (TOTCo) which manages transportation across the
Chad route of the pipeline and the Cameroon Pipeline Company
(COTCo) which manages transportation across the Cameroon route of
the pipeline. Following Completion of the Exxon Acquisition,
Savannah Chad will be responsible for appointing the general
manager of COTCo and TOTCo under the terms of service agreements
that EPIL and EEPCI will be parties to.
COTCo and TOTCo both charge shippers a tariff to transport their
crude oil which covers the costs of operating and maintaining the
infrastructure. Third-party shippers pay an additional tariff
element in recognition of the Doba Consortium's historical
investment in the pipeline.
The governments of Chad and Cameroon have the right to acquire
their respective portions of the Chad-Cameroon Pipeline following
renunciation of the transportation authorisations by TOTCo and
COTCo. If such rights are exercised, TOTCo and COTCo are not
required to decommission the pipeline.
Expected Asset Level Free Cashflow
Figure 8, Summary of Expected Net Free Cashflows from the
Chad-Cameroon ETS
Exxon Target Companies PETRONAS Target
US$m Companies Aggregate
US$m US$m
2022 34.4 25.0 59.4
2023 35.2 25.6 60.8
2024 35.7 25.9 61.6
2025 37.6 27.3 64.9
2026 40.0 29.0 69.0
2027 41.3 30.0 71.3
2028 40.4 29.3 69.7
2029 38.4 27.9 66.3
2030 34.0 24.7 58.7
Source: Chad/Cameroon CPR
CGG has conducted a review of the value of the interests to be
acquired in the Chad-Cameroon ETS, which has been incorporated in
the Chad/Cameroon CPR. The base case NPV10 for Savannah's interest
in the Chad-Cameroon ETS, assuming completion of the Exxon
Acquisition and the PETRONAS Acquisition, has been assessed at
US$497.6 million with (US$288.3 million attributable to the Exxon
Acquisition and US$209.3 million attributable to the PETRONAS
Acquisition).
4. Chad and Cameroon Opportunity
4.1 Acquisition of strong cash generative oil producing
asset
The Doba Oil Project has gross Proved Reserves (1P) of 100.6
MMstb and gross Proved & Probable (2P) Reserves of 138.4 MMstb,
estimated by CGG. This includes 120.4 MMstb of gross 2P Reserves
that are categorised as requiring "No Further Investment" to be
produced. CGG estimates 2022 gross production of 30.1 Kbopd from
the Doba Oil Project, with 12.0 Kbopd attributable to the Exxon
Target Companies and 10.5 Kbopd attributable to the PETRONAS Target
Companies.
CGG estimates asset free cashflow of US$352.2 million
attributable to the Exxon Target Companies interests in the Doba
Oil Project and US$296.2 million attributable to the PETRONAS
Target Companies' interests in the Doba Oil Project over the next
nine years.
4.2 Acquisition of a material interest in and operational
control over the Chad-Cameroon ETS, with significant spare
capacity
The Chad-Cameroon ETS, which includes a 1,081 km pipeline with
250 Kbopd nameplate capacity, is the only international export
route for oil production in Chad, which is used by the Doba
Consortium and other third-party shippers, including CNPC, Glencore
and OPIC. Based on throughput in 2020, there is spare capacity of
in excess of 100 Kbopd in this export route and the Board believes
there is potential for new adjacent operations to utilise the
export pipeline, including a number of undeveloped discoveries in
Chad. Third-party consultant, Wood Mackenzie, has forecasted
Chad-Cameroon Pipeline volumes, denoted as the "Upside" case in the
Chad-Cameroon CPR, for the 2022 to 2030 period as approximately 30
per cent. higher than Savannah's base case assumed profile, with
most of the upside coming from existing third-party shippers.
CGG estimates asset free cashflow of US$337.0 million is
attributable to the Exxon Target Companies interests in the
Chad-Cameroon ETS and US$244.7 million is attributable to the
PETRONAS Target Companies interests in the ETS over the next nine
years under Savannah's base case.
4.3 An asset portfolio with significant upside potential
In addition to the available capacity in the Chad-Cameroon ETS,
there is additional undeveloped upside in the Doba Oil Project. No
wells have been drilled on the fields by the current operator since
2015 and Savannah intends to make further investments in the
fields, including drilling an average of 12 wells per year from
2023. Savannah is also considering various production techniques to
improve and enhance oil recovery. The Doba Oil Project has gross
Proved Undeveloped Reserves (1P) of 15.7 MMstb and gross Proved
& Probable Undeveloped (2P) Reserves of 23.9 MMstb, estimated
by CGG.
CGG estimates combined asset free cashflow from the Doba Oil
Project and the Chad-Cameroon ETS of US$113.0 million is
attributable in aggregate to the Exxon Target Companies in 2022 and
US$689.2 million over the next nine years. CGG further estimates
combined asset free cashflow from the Doba Oil Project and the
Chad-Cameroon ETS of US$71.4 million is attributable to the
PETRONAS Target Companies in 2022 and US$540.9 million over the
next nine years. CGG estimates that 49 per cent. of the Exxon
Target Companies and 45 per cent. of PETRONAS Target Companies'
cashflow is derived from long-dated, non-oil-price dependent
revenue streams.
4.4 Make a material contribution to the economic development of
Chad and Cameroon
The oil industry has a significant, wide-ranging impact on
Chad's economy and the Doba Oil Project has been at the forefront
of this. In addition to the billions of dollars of revenues,
royalties and taxes that have flowed directly to the Chadian
government, the Doba Oil Project has contributed to the growth of
the economy through local employment, the training and development
of thousands of workers, purchases of hundreds of millions of
dollars of goods and services from local providers and the transfer
of business and technical knowledge. The Board believes that
Savannah's plans for further investment into the Doba Oil Project
will make a material contribution to the economic development of
Chad. Likewise, continued transportation of oil through the
Chad-Cameroon Pipeline will provide long-term employment and
training opportunities for local providers.
4.5 Platform for further growth in Chad with synergies with the
Existing Group's businesses
The Board considers that the Exxon Acquisition and the PETRONAS
Acquisition will provide a platform to build a material business
with further regional consolidation opportunities in Chad with
synergies with the Existing Group's businesses and operations in
Nigeria and Niger.
5. Chad and its Oil and Gas Industry
5.1 Reserves and Resources
Chad has a proven petroleum system and ranks as the
tenth-largest oil reserve holder among African countries, with 1.5
billion barrels of Proved Reserves as of 2020 and average
production of over 140 Kbopd in 2020. Chad's undeveloped but
discovered Resources are estimated by Wood Mackenzie to be 366
MMbbls. These are mainly held by CNPC, OPIC and Glencore in
southern Chad. In addition, the EIA and Advanced Resources
International Inc. estimate that Chad holds around 40 Bnbbl of oil
and 40 Tscf of gas of potential yet-to-find, conventional resource,
which suggests that further discoveries should be possible. Of
this, the recoverable amounts could be of the order of 10 Bnbbls of
oil and over 20 Tscf of gas.
5.2 Production
Chad became an oil producing nation in 2003 when the Doba Oil
Project came onstream, exporting oil via the Chad-Cameroon ETS.
In 2011, CNPC developed the Block H fields in southern Chad.
Initially production supplied a 20 Kbopd new-build refinery outside
the capital, N'Djamena, jointly owned by CNPC (60 per cent.) and
SHT (40 per cent.), via a 311 km pipeline. With increasing
production, CNPC started exporting surplus oil in 2013 via the
Chad-Cameroon ETS and is currently the largest producer in Chad
with approximately 100 Kbopd produced in 2020.
In 2013, Glencore brought the Badila and Mangara fields onstream
and the Taiwanese Chinese Petroleum Corp (operating as OPIC)
started production and exports from the Benoy development in
2020.
5.3 Oil sector contribution to Chad's economy
The oil industry has a significant, wide-ranging impact on
Chad's economy. Since the introduction of oil production, the
previously agrarian economy's GDP per capita has grown from US$221
in 2002 to US$710 in 2019. While the oil sector accounts for 18 per
cent. of Chad's GDP, it constitutes a much higher share of Chad's
balance of payments (being equivalent to 83 per cent. of foreign
direct investment, 79 per cent. of exports and 65 per cent. of
services).
In addition to the billions of dollars of revenues, royalties
and taxes which have flowed directly to the Chadian government, the
oil industry has contributed to the growth of the economy through
local employment, training and development of thousands of workers,
purchases of hundreds of millions of dollars of goods and services
from local providers and the transfer of business and technical
knowledge.
6. Company History and Existing Assets
Savannah is a leading, Africa-focused, British independent
energy company quoted on AIM. The Company is the holding company of
the Existing Group and currently operates from offices in the UK
(London), Nigeria (Abuja, Lagos, Eket and Uyo) and Niger
(Niamey).
The Company currently has two high-quality and high-growth
business units located in Nigeria and Niger.
6.1 Nigeria
http://www.rns-pdf.londonstockexchange.com/rns/0970X_1-2021-12-30.pdf
Figure 9, Savannah's Operations in South East Nigeria
Source: Company materials
In Nigeria, the Company has a significant controlling interest
in a large-scale integrated gas production and distribution
business which is currently supplying gas to facilitate over 10 per
cent. of Nigeria's thermal power generation. The Company acquired
the Nigerian Assets in November 2019 (refer to the April 2020
Supplemental Admission Document for further information).
The Nigerian Assets comprise interests in two large-scale oil
and gas fields, the Uquo non-associated gas field and the Stubb
Creek oil and gas field, with net 2P Reserves and net 2C Resources,
as estimated by CGG in the 2021 Nigeria CPR, of 79.3 MMboe and 60.0
MMboe respectively and the Accugas Midstream Business, all of which
are located in South East Nigeria.
In relation to the Nigerian Assets, Savannah indirectly
holds:
-- Uquo Field - an 80 per cent. economic interest in the
exploration, development and production of gas within the Uquo
Field. The remaining 20 per cent. economic interest in the Uquo
Field is held by AIIM.
-- Stubb Creek Field - a 51 per cent. interest in the Stubb
Creek Field. The remaining 49 per cent. interest in the field is
held by Sinopec International Petroleum Exploration and Production
Company Nigeria Limited.
-- Accugas Midstream Business - an 80 per cent. interest in the
Accugas Midstream Business. The remaining 20 per cent. of the
Accugas Midstream Business is held indirectly by AIIM.
Gas produced from the Uquo Field is processed and transported
through Accugas Limited's infrastructure, which includes a 200
MMscfpd processing facility and an approximate 260 km gas pipeline
network to end user gas customers. The Company's five current gas
sales agreements are with the Calabar Electricity Generation
Company Ltd, which owns and operates the Calabar power station,
Lafarge Africa PLC, which owns the Mfamosing cement plant, Ibom
Power, the operator of the Ibom power station, FIPL, the owner of
the FIPL Afam power station, and Mulak Energy to supply gas to
their proposed Compressed Natural Gas ("CNG") project in
Nigeria.
The Stubb Creek Field comprises both a producing oil field and
an undeveloped gas field. Oil production is exported via
ExxonMobil's Qua Iboe Terminal. It is intended that the gas field
will be developed when required in the future to supplement gas
production from the Uquo Field.
Figure 10, Summary of Nigeria Gross and Net(1)
2P Reserves and 2C Resources
2P Reserves 2C Resources
Oil (MMstb) Gross Net Gross Net
Uquo 0.6 0.5 - -
Stubb Creek 13.4 3.1 - -
-------- -------- -------- --------
14.0 3.6 - -
Gas (Bscf)
Uquo 567.3 453.9 82.8 66.2
Stubb Creek 515.3 293.7
567.3 453.9 598.1 359.9
-------- -------- -------- --------
Total (MMboe) 108.6 79.3 99.7 60.0
-------- -------- -------- --------
Source: Nigeria CPR
Notes:
(1) Net to Savannah
6.2 Niger
The Company's interests in Niger are located in the highly
prospective Agadem Rift Basin ("ARB") in South East Niger and cover
an area of approximately 13,655 km(2) . The ARB, which is
comparable in scale to the North Sea rift system and forms part of
the Central African Rift System, has proven to be one of the
world's most successful exploration provinces since 2008 with an
estimated 1 Bnbbls 2P Reserve base established and an exploration
success rate of over 80 per cent. The Central African Rift System
runs through Niger, Chad, Sudan, South Sudan and also Nigeria, with
over 6 Bnbbls of oil discovered to date.
The Company's interests, which were acquired during 2014 and
2015, cover approximately 50 per cent. of the ARB, and of the
original Agadem PSC area which was compulsorily relinquished by
CNPC in July 2013. The Company has proven its ability to operate in
Niger, delivering a highly successful exploration drilling
programme in 2018 on R3 East with five discoveries from five wells
across five fields. The Company also conducted a 36,948 km full
tensor gravity survey over the ARB as well as 806 km(2) 3D seismic
over part of the R3 portion of the R3/R4 PSC Area. The Company has
a strong operational track record in Niger, with all projects
having been delivered with no lost-time incidents and ahead of
budgeted time. The initial term of the Exclusive Exploration
Authorisation on the R1/R2 PSC, as extended in 2018, expired on 5
August 2019. Furthermore, the term of the Exclusive Exploration
Authorisation on the R3/R4 PSC, expired on 31 August 2021. Since
the expiration of the Exclusive Exploration Authorisation of both
the R1/R2 PSC and R3/R4 PSC the Company held negotiations with the
Niger government to renew the PSCs and, on 29 September 2021, the
Company reached an agreement in principle with the Ministry of
Petroleum to formally renounce the R1/R2 PSC and the R3/R4 PSC and
to combine the R1/R2 PSC Area with the R3/R4 PSC Area into one
amalgamated R1234 PSC. This resets the Company's PSC licence
validity periods to up to
10 years for the exploration phase, comprising an initial term
of four years, with the option to extend this term by two further
terms of two years each. In addition, one of these three terms can
be extended by the Company for a further two years. The amalgamated
R1234 PSC was approved by the Council of Ministers in Niger on 16
December 2021 and is now subject to the payment of a signature
bonus by the Company. The Company anticipates that the R1234 PSC
will become effective in Q1 2022.
The Company's current focus in Niger is the delivery of first
production and cashflows from the planned R3 East early production
scheme to be located at the Amdigh field and initially commencing
in 2022, subject to market conditions and financing. The Board
believes that significant further potential exists on its licence
area in Niger with an exploration portfolio containing a total of
146 potential exploration targets with a total Unrisked Best
Estimate of approximately 6.7 Bnbbls Oil Initially In Place. The
Board believes that this has the potential to deliver meaningful
cashflows to the Group in the future.
7. Oil Price History and Forecast
The price of oil is affected by numerous factors including
global supply and demand, together with expectations regarding
future supply and demand for oil and the availability of
alternative sources of energy. The price of oil is also affected by
the desire of members of OPEC and, more recently, OPEC+ to set and
maintain specified levels of production to support the oil price.
Oil prices have fluctuated significantly over the last 20 years and
this has been accentuated over the last two years as a result of
the COVID-19 pandemic.
During the first quarter of 2020, global oil consumption
experienced a downturn as a result of the COVID-19 pandemic. By
April 2020, the demand for oil was 20 MMbopd less than pre-COVID-19
levels and the imbalance in demand and supply caused Brent prices
to reach a low of US$9.12/bbl. At the end of April 2020, the
members of OPEC+ agreed to cut production and non-OPEC nations such
as the United States also significantly cut production, resulting
in the balancing of supply and demand and the stabilisation of oil
inventory levels, with oil prices recovering to approximately
US$50/bbl by the end of 2020. Since then, oil prices continued to
rise following an increase in demand due to the rollout of
vaccination programmes and the recommencement of global economic
activities. The Brent price is currently trading at approximately
US$75/bbl, which is some 50 per cent. higher than its value of one
year ago.
There is no direct link between the cost of sales (excluding
depreciation and depletion which are non-cash items and the 2 per
cent. statistical tax) for the Doba Oil Project and the oil price,
with the costs being largely fixed plus an element of costs related
to produced volumes. In circumstances where oil prices fall
substantially, the Board expects that costs may be reduced, as
industry activity levels decrease leading to services being offered
at a lower price.
http://www.rns-pdf.londonstockexchange.com/rns/0970X_1-2021-12-30.pdf
Figure 11, Historical Brent Crude Price from 2000 to December
2021
Source: EIA
http://www.rns-pdf.londonstockexchange.com/rns/0970X_1-2021-12-30.pdf
Figure 12, Bloomberg's Consensus Forecast Brent Price
Source: Bloomberg, December 2021
The Exxon Acquisition and the PETRONAS Acquisition will increase
the Enlarged Group's exposure to the oil price on an ongoing basis.
The economic evaluation of the interests to be acquired in the Doba
Oil Project as summarised in this Part 1 is based on an oil price
of US$75/bbl, US$70/bbl and US$65/bbl in 2022, 2023 and 2024,
respectively. Beyond 2024, the price is escalated at 2 per cent.
per year. The Chad/Cameroon CPR illustrates the effect of changing
oil price assumptions on the future cashflows and underlying value
of the Exxon Target Companies' and the PETRONAS Target Companies'
assets.
8. Details of the Placing and Subscription
The Placing will raise approximately US$[ l ] million for the
Company (net of commissions and expenses). The Placing Shares are
being placed with certain existing and new institutional and other
sophisticated investors.
The Company has placed the Placing Shares at the Placing Price
conditional on their admission, which is expected to occur at 8.00
a.m. on [ -- ] December 2021. The Placing Shares will be issued
pursuant to the existing pre-emption disapplication authority
granted to the Directors by Shareholders at the annual general
meeting of the Company held on 30 June 2021. The Placing Shares
represent approximately [ -- ] per cent. of the Company's Enlarged
Share Capital.
The Placing Shares will rank pa n i passu in all respects with
the Existing Ordinary Shares, including the right to receive all
dividends and other distributions declared, paid or made after the
date of issue, and will be placed free of any expenses and stamp
duty.
In the case of investors receiving Placing Shares in
uncertificated form, it is expected that the appropriate CREST
accounts will be credited with the Placing Shares with effect from
[ -- ] December 2021. In the case of investors receiving Ordinary
Shares in certificated form, it is expected that certificates will
be dispatched by post, within 14 days of the date of admission.
Under the terms of the Placing Agreement, each purchaser of
Placing Shares in the United States will be deemed to have
represented and agreed as follows:
-- The purchaser (a) is a qualified institutional buyer, or QIB,
as defined in Rule 144A under the U.S. Securities Act of 1933, as
amended, or a broker-dealer acting for the account of a QIB, (b) is
acquiring such securities for its own account or for the account of
a QIB, and (c) is aware that the securities are restricted within
the meaning of the Securities Act and may not be deposited into any
unrestricted depositary facility, unless at the time of such
deposit the securities are no longer restricted.
-- The purchaser is aware that the securities have not been and
will not be registered under the U.S. Securities Act of 1933, as
amended, and are being offered in the United States only to QIBs in
a transaction not involving any public offering in the United
States within the meaning of the Securities Act.
-- The purchaser understands and agrees that the Placing Shares
may not be offered, sold, pledged or otherwise transferred, except
(a) to a person that the seller and any person acting on its behalf
reasonably believe is a QIB purchasing for its own account or for
the account of another QIB or (b) outside the United States in
accordance with Regulation S under the U.S. Securities Act of 1933,
as amended, or (c) pursuant to an exemption from registration under
the Securities Act, or (d) pursuant to an effective registration
statement under the Securities Act.
The Subscribers have agreed, pursuant to the Subscription
Letters, to subscribe for the Subscription Shares at the Placing
Price to raise approximately GBP[2.75] million for the Company (net
of commissions and expenses). The Subscription Shares shall rank pa
n i passu in all respects with the Existing Ordinary Shares,
including the right to receive all dividends and other
distributions declared, paid or made after the date of issue and
will be placed free of expenses or stamp duty.
The Placing and Subscription are not conditional on either or
both of the Exxon Acquisition or the PETRONAS Acquisition
completing.
9. Details of the Debt Financing
On [ -- ] December 2021, Savannah Chad and the Senior Lender
entered into an agreement pursuant to which the Senior Lender has
agreed to provide to Savannah Chad an up to US$400 million
borrowing base facility (US$300 million initial commitment with a
US$100 million accordion). Savannah Chad intends to utilise the
facility to partly fund the Exxon Acquisition and the PETRONAS
Acquisition. Further details of the terms of the Debt Financing are
set out in paragraph 3.1 in Appendix IV of this announcement.
10. Details of the Junior Loan Facility and Warrant
Instrument
On [ -- ] December 2021, the Company entered into the Junior
Loan Facility and the Warrant Instrument. Pursuant to the Junior
Loan Facility, the Company's Chief Executive Officer, Andrew Knott,
has committed to lend to the Company (via his wholly owned company,
Lothian Capital Partners 4 Limited ("LCP4L")): (i) US$17 million to
finance the Exxon Acquisition; and (ii) US$15 million to finance
the PETRONAS Acquisition.
Warrants will be granted to Andrew Knott (via LCP4L) as lender
under the Junior Loan Facility with a 90 month term and an exercise
price of 23.5 pence. The number of Warrants to be issued is [ -- ],
calculated as the total value of the Junior Loan Facility (at the
prevailing exchange rate on the date of signature) divided by the
Exercise Price.
In structuring Andrew Knott's investment in the Junior Loan
Facility, the Company consulted with Shareholders in the Company
collectively holding more than 50 per cent. of the Existing
Ordinary Shares who, having reviewed the terms of the Junior Loan
Facility and Warrant Instrument, have indicated their support. The
Company's entry into the Junior Loan Facility and the associated
issue of Warrants is classified as a related party transaction
pursuant to the AIM Rules - refer to paragraph 29 of this Part 1
for the Related Party Transaction opinion in this regard from the
Directors, other than Andrew Knott, following consultation with the
Company's Nominated Adviser, Strand Hanson.
Further details of the terms of the Junior Loan Facility and the
Warrants are set out in paragraphs 3.2 and 3.3 in Appendix IV of
this announcement.
11. Use of Proceeds
The Company is raising gross proceeds of approximately US$[ -- ]
million from the Placing and Subscription, which are currently
intended to be used as listed in the table below:
Use of Proceeds US$m
Debt repayment [ -- ]
Corporate infrastructure investment [ -- ]
Exxon Acquisition and the PETRONAS Acquisition considerations [ -- ]
and costs
General corporate purposes, including the Niger R3 East [ -- ]
development, costs associated with the Placing, Subscription
and Re-Admission to the date of this document
The remainder of the Exxon Acquisition and the PETRONAS
Acquisition considerations payable will be funded by the Junior
Loan Facility and the Debt Financing.
It is noted that the Placing and Subscription is not conditional
on either or both the Exxon Acquisition or the PETRONAS Acquisition
completing. In the event that neither acquisition completes, the
Company anticipates deploying the remaining net proceeds towards
its existing asset base.
12. Summary Financial Information of the Exxon Target Companies and the PETRONAS Target Companies
The summary financial information presented below has been
extracted without material adjustment from the historical financial
information of the Exxon Target Companies and the PETRONAS Target
Companies.
A review of the recent trading performance of the Exxon Target
Companies and the PETRONAS Target Companies is set out in paragraph
15 of this Part 1.
12.1 Exxon Target Companies
The summary financial information presented below is an extract
of the historical financial information of Exxon Target Companies.
The summary financial information for the year ended 31 December
2020 has been derived from Exxon Target Companies' Financial
Information. The summary financial information for the six months
ended 30 June 2021 has been derived from the Exxon Target
Companies' Interim Financial Information.
Figure 13, Summary Financial Information of the Exxon Target
Companies
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME SELECTED LINE
ITEMS
Year ended Six months
31 December ended 30 June
2020 US$'000 2021 US$'000
Revenue 133,468 122,110
Operating (loss)/profit (585,006) 209,501
(Loss)/profit before tax (601,396) 201,513
(Loss)/profit after tax (241,304) 77,977
CONSOLIDATED STATEMENT OF FINANCIAL POSITION SELECTED
LINE ITEMS
Total assets 1,081,745 1,119,231
Total liabilities 733,277 692,786
Net assets 348,468 426,445
CONSOLIDATED CASH FLOW STATEMENT SELECTED LINE
ITEMS
Cash used in operating activities (45,400) (42,024)
Cash provided by investing activities 9,305 29,128
Cash provided by financing activities 36,080 12,889
Net cash outflow (15) (7)
12.2 PETRONAS Target Companies
The summary financial information presented below is an extract
of the historical financial information of PETRONAS Target
Companies. The summary financial information for the year ended 31
December 2020 has been derived from the PETRONAS Target Companies'
Financial Information. The summary financial information for the
six months ended 30 June 2021 has been derived from the PETRONAS
Target Companies' Interim Financial Information.
Figure 14, Summary Financial Information of the PETRONAS Target
Companies CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME SELECTED
LINE ITEMS
Year ended Six months
31 December ended 30 June
2020 US$'000 2021 US$'000
Revenue 170,656 132,002
Operating (loss)/profit (531,280) 54,197
(Loss)/profit before tax (529,470) 56,873
(Loss)/profit after tax (277,858) 54,295
CONSOLIDATED STATEMENT OF FINANCIAL POSITION SELECTED
LINE ITEMS
Total assets 429,178 457,154
Total liabilities 204,236 217,917
Net assets 224,942 239,237
CONSOLIDATED CASH FLOW STATEMENT SELECTED LINE
ITEMS
Cash generated from operating activities 1,106 36,995
Cash provided by investing activities 2,521 22,328
Cash used in financing activities (25,000) (40,000)
Net cash (outflow)/inflow (21,373) 19,323
13. Summary Financial Information of the Existing Group
The summary financial information presented below is an extract
without material adjustment from the audited consolidated financial
statements for the Existing Group for the year ended 31 December
2020 and the unaudited interim financial information for the six
months ended 30 June 2021.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME SELECTED LINE
ITEMS
Year ended Six months
31 December ended 30 June
2020 US$'000 2021 US$'000
Revenue 169,005 99,386
Operating profit 93,310 53,993
Profit before tax 10,908 7,688
Loss after tax (5,974) (1,377)
CONSOLIDATED STATEMENT OF FINANCIAL POSITION SELECTED
LINE ITEMS
Total assets 1,207,209 1,238,230
Total liabilities 980,272 1,011,123
Net assets 226,937 227,107
CONSOLIDATED CASH FLOW STATEMENT SELECTED LINE
ITEMS
Cash generated from operating activities 115,569 65,183
Cash used in investing activities (11,325) (4,849)
Cash used in financing activities (76,719) (53,682)
Net cash inflow 27,525 6,652
14. Anticipated Corporate Structure
Following Completion of both the Exxon Acquisition and the
PETRONAS Acquisition, the anticipated structure of the Enlarged
Group is shown in Figure 15.
http://www.rns-pdf.londonstockexchange.com/rns/0970X_1-2021-12-30.pdf
Figure 15, Anticipated Enlarged Group Structure Chart
Source: Company materials
15. Current trading of the Enlarged Group
15.1 Existing Group
Average gross daily Nigeria production in the year-to-date
period ended 31 October 2021 was 21.9 Kboepd, a 16 per cent.
increase from the average gross daily production of 19.0 Kboepd in
the same period in 2020. Of the total average gross daily
production of 21.9 Kboepd in the year-to-date period, 88 per cent.
was gas, including a 16 per cent. increase in production from the
Uquo gas field compared to the same period last year, from 99.5
MMscfpd (16.6 Kboepd) to 115.6 MMscfpd (19.3 Kboepd).
The Nigerian Assets year-to-date cash collections for the period
ended 13 December 2021 amount to US$201.3 million. This is 7 per
cent. higher than FY20 cash collections of US$187.4 million and 20
per cent. higher than FY20 cash collections when an adjustment is
made for the non-recurring US$20 million contract re-negotiation
payment received from Lafarge Africa in FY20.
The Uquo-11 gas producer well has been drilled and was completed
in the D1.0 and D1.3/D1.4 reservoirs on 16 November 2021. The well
total net pay thickness was 71ft above prognosis, with a total
thickness of 355ft for the main reservoirs' targets (C9.0, D1.0 and
D1.3/D1.4 reservoirs).
The Existing Group also started ordering compression equipment
for the Accugas gas processing plant during the first half of 2021.
Factory Acceptance Tests for the two compressor packages have been
successfully carried out, the Front-End Engineering Design is in
progress and Long Lead Items are expected to be ordered before the
year end. Both the drilling and compression projects will ensure
Savannah's continued ability to deliver gas at current and
anticipated future increased contracted volumes to satisfy customer
demand.
The Existing Group is progressing towards refinancing its US$371
million Accugas Term Debt Facility, which currently has a maturity
date of 31 December 2025, into a multi-tranche, Naira denominated
borrowing structure. It is currently anticipated that the
refinancing will complete during the first half of 2022, although
there can be no guarantee this will occur. The intended structure
is summarised as follows:
-- Tranche 1: (approximately 25 per cent. of total) Bilateral
loan up to a15-year tenor and indicatively priced around 10-year
Nigeria government bond rate plus 3.5 per cent.
-- Tranche 2: (approximately 50 per cent. of total) Nigerian listed bond, up to 12-year tenor.
-- Tranche 3: (approximately 25 per cent. of total) Bank loan, up to 5-year tenor.
Once completed, this refinancing would align the currencies of
the Existing Group's principal revenue streams with its debt
service obligations and would significantly reduce the Existing
Group's foreign exchange exposure. It would also bring further
benefits through the significant increase in tenor and intended
removal of the cash sweep structure. The Existing Group currently
holds certain Naira denominated cash balances and approximately
US$109.0 million will be paid for debt service from these
accounts.
15.2 Recent performance of the Exxon Target Companies and the
PETRONAS Target Companies
The tables below have been extracted from the Exxon Target
Companies' Financial Information, the Exxon Target Companies'
Interim Financial Information, the PETRONAS Target Companies'
Financial Information and the PETRONAS Target Companies' Interim
Financial Information and expands on the summary financial
information referred to in paragraph 12 above.
The tables below show the underlying EBITDA performance (and
EBITDA adjusted for impairment where relevant), for both the Exxon
Target Companies and PETRONAS Target Companies for the year ended
31 December 2020 and for the six months ended 30 June 2021. The
relative increase is principally due to the improvement in the oil
price which is discussed in paragraph 7 of this Part 1 (Oil Price
History and Forecast Overview).
Exxon Target Companies
http://www.rns-pdf.londonstockexchange.com/rns/0970X_1-2021-12-30.pdf
PETRONAS Target Companies
http://www.rns-pdf.londonstockexchange.com/rns/0970X_1-2021-12-30.pdf
In the six months ended 30 June 2021, the Exxon Target Companies
lifted 1.911 MMbbls of crude oil at an average price of
US$63.84/bbl, compared to 3.771 MMbbls in the year ended 31
December 2020 at an average price of US$35.27/bbl. The PETRONAS
Target Companies lifted 1.959 MMbbls of crude oil in the six months
ended 30 June 2021 at an average price of US$67.38/bbl, compared to
3.826 MMbbls in the year ended 31 December 2020 at an average price
of US$44.69/bbl.
With respect to current production, average daily gross
production for the year-to-date period ended 30 September 2021 from
the Doba Oil Project amounted to 28.8 Kbopd compared to 34.1 Kbopd
during the same period in 2020. The reduction in production in 2021
has primarily been due to a workforce strike and unscheduled
downtime at the Miandoum Gathering Station requiring additional
maintenance work. However, the increase in oil price in 2021
compared to 2020 has offset the financial impact of the lower
production volumes.
16. Future prospects of the Company
Savannah is focused on the delivery of projects that matter in
Africa. The Enlarged Group will have a valuable and stable asset
base that provides a strong platform for future and sustainable
growth and the Directors believe that energy companies can create
substantial value by acquiring or discovering oil and gas reserves
and resources at a significant discount to the net present value
per share of the cashflows that they are capable of subsequently
realising from those reserves and resources.
The Company continues to actively review new acquisition
opportunities in its core African region focused predominantly
on:
-- cash-generative, or near-term cash-generative, upstream and midstream assets; and/or
-- "Bolt-on" assets for which there is significant synergistic value to its existing operations.
In the case of the former, typically larger opportunities, the
Company's focus is on those that:
-- are being offered by vendors who are divesting assets for strategic reasons; and
-- significantly enhance the Company's ability to commence and
accelerate shareholder distributions, by way of dividend and share
buy-backs.
The Company also keeps under review the best avenue for
developing its Nigerien Assets and Nigerian Assets, which may, in
due course, result in the Company seeking independent finance for
each business.
Savannah's business model is underpinned by the Company's
entrepreneurial and proactive culture. Savannah focuses on
generating long-term value over short-term results and aims to move
quickly to take advantage of opportunities that arise and to react
promptly to changes in the business environment.
17. Directors and Senior Managers
17.1 Directors
Stephen ("Steve") Ian Jenkins, aged 63 - Independent
Non-Executive Chair
Steve joined Savannah as Non-Executive Chairman in July 2014. In
the Board's view, he is widely recognised as one of the most
capable oil and gas executives in the UK, having delivered for his
investors as CEO of Nautical Petroleum plc a GBP414 million sale to
Cairn Energy plc in Q3 2012. Prior to Nautical Petroleum, Steve
held a variety of senior roles at Nimir Petroleum Co. Ltd, an
emerging-markets focused private Saudi Arabian company with
extensive global exploration and production interests. Steve is a
geologist by profession and is currently Chair of the Oil and Gas
Independents' Association, one of the principal oil and gas trade
bodies in the UK.
Rt. Hon. Sir Stephen Rothwell O'Brien, aged 64 - Independent
Non-Executive Vice Chair
Sir Stephen is a former UN Under-Secretary-General for
Humanitarian Affairs and Emergency Relief Coordinator. Prior to
this role he was a British MP, during which time he served as
Parliamentary Under-Secretary of State for International
Development and as the Prime Minister's Envoy & UK Special
Representative for the Sahel as well as a series of shadow
ministerial roles. Before entering politics, Sir Stephen was
International Director and Group Secretary of the FTSE 100 listed
global building materials company, Redland plc. Sir Stephen began
his career as a corporate lawyer with Freshfields Bruckhaus
Deringer LLP. He currently is Chair of Motability Operations Group
plc and the Innovative Vector Control Consortium, a Non-Executive
Board Member of the UK's Department for International Trade and
advises a number of international companies, non-profits and
academic institutions. Sir Stephen is a serving member of the Privy
Council and was knighted in 2017 for his achievements and
commitments to international development, global health advocacy
and malaria control.
Andrew Allister Knott, aged 41 - Chief Executive Officer
Andrew is the principal founder of Savannah, becoming a Director
of the Company in July 2014. Andrew has led all of the Company's
key growth initiatives, including the country entries to Niger,
Nigeria, Chad and Cameroon. Prior to establishing Savannah, Andrew
was Head of Global Energy Investments for GLG Partners/MAN Group
which, in December 2012, was the largest listed hedge fund in the
world by assets. Andrew previously held various roles at Merrill
Lynch and Dresdner Kleinwort Wasserstein.
David Clarkson, aged 69 - Independent Non-Executive Director
David was formerly a member of BP's Group Leadership Team and
Senior Vice President for Projects and Engineering (Upstream). He
built his career creating value by delivering complex major
infrastructure projects in frontier areas and gained a deep
knowledge of the oil and gas industry and the need for engaging
with local communities, government authorities and NGOs to build
mutual trust and respect. Over the course of his BP career, David
held a variety of other senior project management and delivery
roles in countries including Iraq, Indonesia, Colombia, the USA,
and the UK. He joined the Savannah Board in December 2017 as
Non-Executive Director. Between June 2018 and December 2019, David
acted as the Company's Chief Operating Officer and during that time
led Savannah's operations as the Company carried out its five well
Niger drilling campaign as well as the integration of the Nigerian
Assets. In December 2019 he resumed his Non-Executive Director
role. In September 2020 he joined Storegga Geotechnologies Limited,
an independent focused on the development and deployment of carbon
reduction and carbon removal technologies, as Chief Operating
Officer. He was appointed to the Storegga board in July 2021. David
is a Chartered Engineer and Fellow of the Institute of Mechanical
Engineers.
Marco ("Mark") Iannotti, aged 53 - Independent Non-Executive
Director
Mark was appointed to the Board of Savannah in July 2014. He is
an experienced capital markets professional with over 20 years'
experience in EMEA equities, which has been largely focused on the
oil and gas sector. Mark has held senior management positions at
Canaccord Genuity Group Inc where he was Managing Director and Head
of Securities, UK & Europe and Bank of America Merrill Lynch
where he was a member of its EMEA Executive Committee and Head of
its EMEA Equity Research Division. Mark began his career at Wood
Mackenzie Consultants, focusing on the Asian and Indian
sub-Continent energy markets. He subsequently held senior equity
research positions at Cazenove & Co, Credit Suisse and
Citigroup. Mark is currently Non-Executive Chair of Djado Gold
plc.
David Lawrence Jamison, aged 77 - Independent Non-Executive
Director
David was appointed to the Board of Savannah in July 2014. He
was one of the founders of the modern-day Vitol, having executed a
management buyout of the company alongside three partners in 1976.
He left Vitol in 1986 to operate as an independent venture
capitalist in the upstream oil and gas industry. David's principal
investment vehicle today is DLJ Partners Ltd which seeks to act as
agent and advisor on upstream oil and gas transactions. Previous
companies at which David has held integral roles include Russian
focused oil and gas company Sibir Energy plc (founder director) and
independent gasoline company Blue Ocean Associates Limited (founder
director).
17.2 Senior Managers
In addition to the Directors, the following Senior Managers will
ensure that the Enlarged Group has appropriate expertise and
experience for the management of its business.
Nicholas ("Nick") Beattie, aged 48 - Interim Chief Financial
Officer
Nick is the Company Secretary and Interim CFO. Nick joined
Savannah in 2019 from another AIM quoted E&P company and has an
extensive background in financing oil and gas companies including
seven years with BNP Paribas where he was a Managing Director in
the Upstream Oil and Gas team in London and responsible for leading
the bank relationships with UK focused independent E&P
companies. Nick is a Fellow of the Chartered Banker Institute and a
Member of the Chartered Institute for Securities and
Investment.
Antoine Richard, aged 54 - Chief Operating Officer
Antoine joined Savannah in 2016. Antoine has over 25 years'
experience working for both major and independent oil and gas
companies worldwide, having worked for Total Energies SE and
Perenco SAs, with over 10 years' experience in West Africa. He has
a strong operational background, with a focus on production
optimisation, onshore and offshore facilities design and operation
and management of drilling campaigns and seismic acquisition
programs. His previous positions within Perenco included Global HSE
Manager and General Manager roles for Congo, Egypt and Venezuela.
Antoine acted as Savannah's VP Operations from 2016 until 2018,
over which time he delivered the Company's 806 km(2) R3 East 3D
seismic acquisition campaign with no lost-time incidents and within
budgeted time and also left Savannah well-placed to deliver its
successful five well R3 East exploration campaign which achieved a
100 per cent. success rate. As Chief Operating Officer, Antoine has
responsibility for group-wide operations.
17.3 Appointment of permanent CFO
The Board intends, within H1 2022 and, in any event, ahead of
the anticipated Completion of the Exxon Acquisition and the
PETRONAS Acquisition, to appoint a permanent CFO, which will also
be a board level position. Further updates will be made as and when
appropriate.
17.4 Appointment of new Directors
Pursuant to a process initiated in H1 2021, the Company intends
to appoint up to four new Non-Executive Directors to its Board in
H1 2022.
18. Environmental, Social and Governance
Savannah is committed to managing its operations in a safe,
secure, reliable and environmentally sustainable manner, and to act
in a responsible manner towards its stakeholders. Savannah
considers that a high standard of health and safety performance and
environmental protection is critical to the ongoing success of the
Company and the Enlarged Group. The Company has Environmental,
Social and Governance ("ESG") policies in place and reports its
performance to the Board through the Health, Safety, Security and
Environmental ("HSSE") Committee and to its stakeholders through
its Annual Report and other corporate updates. The Company expects
its employees, contractors and partners to comply with these
policies and to enforce similarly high standards.
The Company also has a robust HSSE management system in place
which aligns with international management system standards and
local legislation, takes a proactive approach to the identification
and management of HSSE risks and is underpinned by on-site
leadership and through a leading indicator monitoring approach to
building safe working practices.
In 2020, Savannah undertook a thorough review of its
sustainability strategy, taking into account the feedback of an
extensive consultation exercise conducted with the Company's key
external and internal stakeholder groups. Following this exercise,
the Company refocused its sustainability strategy around four
strategic pillars which are aligned with the United Nations
Sustainable Development Goals ("UN SDGs") that the Company believes
it can have the biggest economic, environmental, social and
governance impact to achieve a better and more sustainable future
for all. While anchoring the sustainability strategy around the 13
most relevant UN SDGs to Savannah, the Company has integrated six
additional sustainability reporting standards into its new
performance and reporting framework. These were selected on the
basis of those most relevant for the sector and of most importance
to stakeholders and include the Global Reporting Index,
International Petroleum Industry Environmental Conservation
Association, the International Association of Oil & Gas
Producers, Sustainability Accounting Standards Board, Task Force on
Climate Related Disclosures and the International Finance
Corporation key performance standards.
During 2021, the Company has been rolling out the new
sustainability performance and reporting framework across the Group
and plans to provide measurable, verifiable and trackable
performance metrics for this going forward. This will allow the
Company to set meaningful sustainability performance targets for
the Group and track its progress against these, which will form the
basis of the Company's sustainability reporting from 2022 onwards.
As an initial step on this path, the Company reported performance
against key sustainability metrics in the 2020 Annual Report for
carbon intensity (12.8kg CO2e/boe versus industry average 17.0kg
CO2/boe), senior management gender diversity (35 per cent. female)
and local employee ratios (99 per cent.), all of which were
industry leading.
19. Summary of competition
Savannah's operations are currently focused on West Africa,
specifically, Niger and Nigeria, and should the Exxon Acquisition
or the PETRONAS Acquisition complete, also Chad and Cameroon.
On Completion of both the Exxon Acquisition and the PETRONAS
Acquisition, the Enlarged Group will have a 75 per cent. operated
interest in the Doba Oil Project and 70.34 per cent. and 70.83 per
cent. interests respectively in TOTCo and COTCo, which collectively
own the Chad-Cameroon ETS. The Chad-Cameroon ETS, which is
currently operated by the Exxon Target Companies under the TOTCo
and COTCo Conventions, is the sole oil export infrastructure,
spanning nearly 1,100 km, for all oil production from Chad. The
Chad-Cameroon ETS has a nameplate capacity of 250 Kopd and
production from the Doba Oil Project has priority over third party
shippers using this export system. Based on 2020 throughput, there
is in excess of 100 Kbopd spare capacity in the Chad-Cameroon
ETS.
Historically, the oil and gas industry has been highly
competitive, particularly for acquiring assets and for securing
trained and experienced personnel and services. However, the Board
believes that the level of competition in the industry and in West
Africa generally has reduced significantly and that this creates an
opportunity for Savannah to acquire additional oil and gas assets
over time, at attractive valuations. The seven super-major oil
companies have all announced significant divestment programmes,
including a number of assets and portfolios on the African
continent, as they refocus their strategies through the energy
transition to accelerate investments in renewable fuels and reduce
their focus on fossil fuels. The Board believes that there is a
relatively small group of independent energy companies with the
necessary expertise and access to the capital required to acquire
and operate these assets and to exploit these opportunities.
Furthermore, the Board believes that the barriers to entry into the
sector in Africa are high and, therefore, that Savannah has a
competitive advantage over new entrants into the market.
20. Corporate governance
The Board recognises its responsibility for the proper
management of the Company and the importance of sound corporate
governance, proportionate to the size and nature of the Company and
the interests of its shareholders. As an AIM-quoted Company, the
Board is committed to maintaining high standards of corporate
governance and has adopted the QCA Code as the basis of the Group's
governance framework.
21. The Takeover Code
The Company is a public limited company incorporated in England
and Wales and is admitted to trading on AIM. Accordingly, the
Takeover Code applies to the Company.
Under the Takeover Code a concert party arises when persons
acting together pursuant to an agreement or understanding (whether
formal or informal) cooperate to obtain or consolidate control of,
or frustrate the successful outcome of an offer for, a company
subject to the Takeover Code. Control means an interest or
interests in shares carrying an aggregate of 30 per cent. or more
of the voting rights of the company, irrespective of whether the
holding or holdings give de facto control.
Under Rule 9 of the Takeover Code, where any person acquires,
whether by a series of transactions over a period of time or not,
an interest in shares which (taken together with shares in which
persons acting in concert with that person are interested) carry 30
per cent. or more of the voting rights of a company which is
subject to the Takeover Code, that person is normally required to
make a general offer to all the shareholders of that company to
acquire their shares. Similarly, when any person, together with
persons acting in concert with him, is interested in shares which,
in aggregate, carry not less than 30 per cent. of the voting rights
of a company and does not hold shares carrying more than 50 per
cent. of such voting rights and such person, or any person acting
in concert with him, acquires an interest in any other shares which
increases the percentage of shares carrying voting rights in which
he is interested, a general offer will normally be required in
accordance with Rule 9.
An offer under Rule 9 must be made in cash (or be accompanied by
a cash alternative) and at not less than the highest price paid by
the person required to make the offer, or any person acting in
concert with that person, for any interest in shares of the company
during the 12 months prior to the announcement of the offer.
The Panel has previously deemed that a concert party is in
existence between Andrew Knott and his family members, Aralia
Capital SA (which also includes the holding of Peleng Holding
Corporation, wholly owned by the same investor as Aralia Capital
SA) and Luzon Investments S.A. (the "Existing Concert Party"). The
Existing Concert Party is currently interested, so far as the
Company is aware, in aggregate, in 48,836,749 Ordinary Shares,
representing 4.90 per cent. of the Existing Share Capital.
Further details on the members of the Existing Concert Party are
disclosed in the Company's circular to shareholders dated 11 March
2015.
22. Shareholder returns policy
The Directors view Savannah as a high cashflow growth company
and expect to re-invest the majority of internally generated
post-debt service cashflows in organic and in-organic growth
projects consistent with our corporate strategy. However, the
Directors also recognise the importance of paying a regular and
growing dividend to Shareholders. Over the course of the next 12
months, the Company expects to formalise and announce a dividend
policy centred around its underlying free cashflow generation, with
the anticipation being that a minimum dividend of US$10 million
would be paid in H1 2023 in respect of the financial year ending 31
December 2022.
23. UK Taxation
Prospective investors are strongly advised to consult their own
independent professional tax advisers regarding the tax
consequences of purchasing and owning Ordinary Shares.
24. Share Options
The Company considers it essential that its Directors, Senior
Managers and employees are appropriately incentivised to create
future value for the Shareholders. This is also relevant in the
context of the Enlarged Group, whereby it will be important that
key employees of the Exxon Target Companies and the PETRONAS Target
Companies who become part of the Enlarged Group are appropriately
incentivised.
24.1 Proposed amendments to existing awards
The Company disclosed in the December 2017 Admission Document,
and reiterated in the April 2020 Supplemental Admission Document,
an intention to amend the vesting and hurdle conditions of the 2014
Long-Term Incentive Plan and the 2015 Supplemental Plan (together
the "Original Plans", such that the exercise price for the options
awarded under such Plans would be harmonised across both schemes at
38 pence per share, conditional upon the Company's Ordinary Shares
meeting a hurdle vesting price condition of 42 pence per share (the
"Proposed Amendments").
The Company did not subsequently implement the Proposed
Amendments, and the Board has resolved that it would be
preferential to replace the Original Plans for current employees
and Directors with one new incentive plan (being the Employee
2014/15 Replacement Plan). The Employee 2014/15 Replacement Plan is
designed to provide its participants with broadly similar economic
exposure to that to which they would have been entitled to had the
Proposed Amendments to their awards under the Original Plan been
implemented. The new options proposed to be granted under the
Employee 2014/15 Replacement Plan will have a hurdle vesting price
condition of 42 pence per share and an exercise price of 38 pence
per share.
The approval of Shareholders to the issue of the new Ordinary
Shares, which will be issued in the event of the exercise of the
options proposed to be granted under the Employee 2014/15
Replacement Plan, will be sought pursuant to Resolutions 6 and 11
to be proposed at the General Meeting. It is intended that all such
options will be granted following the passing of Resolutions 6 and
11 at the General Meeting.
24.2 Proposed grant of new awards
Given the expected growth in activity and headcount in the
Company, on [ -- ] December 2021, the Company adopted the Employee
Plan 2021. This plan is being put in place principally to enable
the Company to continue to attract and retain high quality
personnel. Awards of options under the Employee Plan 2021 will be
granted over Ordinary Shares held by the EBT.It is proposed that
the EBT subscribes for a further 58,066,951 new Ordinary Shares at
nominal value following the passing of Resolutions 4 and 8 at the
General Meeting.
24.3 Proposed adoption of an Employee Share Incentive Plan
The Company intends in due course to adopt an Employee Share
Incentive Plan (the "SIP") for the benefit of employees of the
Enlarged Group. Further details of the SIP will be made available
to Shareholders in due course.
25. General Meeting
The General Meeting will be held at the offices of the Company,
being 40 Bank Street, London E14 5NR, at 10.30 a.m. on [ -- ]
January 2022 at which the following Resolutions will be
proposed:
-- Resolution 1: an ordinary resolution to approve the Exxon
Acquisition for the purposes of Rule 14 of the AIM Rules for
Companies;
-- Resolution 2: an ordinary resolution to approve the PETRONAS
Acquisition for the purposes of Rule 14 of the AIM Rules for
Companies;
-- Resolution 3: an ordinary resolution to authorise the
Directors to allot further Ordinary Shares representing up to 33
per cent. of the Enlarged Share Capital;
-- Resolution 4: an ordinary resolution to authorise the Directors to allot the EBT Shares;
-- Resolution 5: an ordinary resolution to authorise the Directors to allot the Warrant Shares;
-- Resolution 6: an ordinary resolution to authorise the
Directors to allot up to 23,853,457 new Ordinary Shares to satisfy
awards to be granted under the Employee 2014/15 Replacement
Plan;
-- Resolution 7: a special resolution to disapply statutory
pre-emption rights in relation to the allotment of further Ordinary
Shares representing up to 33 per cent. of the Enlarged Share
Capital;
-- Resolution 8: a special resolution to disapply statutory
pre-emption rights in relation to the allotment of the EBT
Shares;
-- Resolution 9: a special resolution to disapply statutory
pre-emption rights in relation to the allotment of the Warrant
Shares; and
-- Resolution 10: a special resolution to disapply statutory
pre-emption rights in relation to the allotment of up to 23,853,457
new Ordinary Shares to satisfy awards to be granted under the
Employee 2014/15 Replacement Plan.
If Resolution 1 is not passed, the Exxon Acquisition will not
proceed. If Resolution 2 is not passed, the PETRONAS Acquisition
will not proceed. If Resolutions 5 and 9 are not passed, one or
both of the Exxon Acquisition and the PETRONAS Acquisition may not
proceed.
To be passed:
-- Resolution 1 requires a simple majority of Shareholders
voting in person or proxy to vote in favour;
-- Resolution 2 requires a simple majority of Shareholders
voting in person or proxy to vote in favour;
-- Resolution 3 requires a simple majority of Shareholders
voting in person or proxy to vote in favour;
-- Resolution 4 requires a simple majority of Shareholders
voting in person or proxy to vote in favour;
-- Resolution 5 requires a simple majority of Shareholders
voting in person or proxy to vote in favour;
-- Resolution 6 requires a simple majority of Shareholders
voting in person or proxy to vote in favour;
-- Resolution 7 requires a majority of not less than 75 per
cent. of Shareholders voting in person or by proxy to vote in
favour;
-- Resolution 8 requires a majority of not less than 75 per
cent. of Shareholders voting in person or by proxy to vote in
favour;
-- Resolution 9 requires a majority of not less than 75 per
cent. of Shareholders voting in person or by proxy to vote in
favour; and
-- Resolution 10 requires a majority of not less than 75 per
cent. of Shareholders voting in person or by proxy to vote in
favour.
The Company is planning to hold the General Meeting in person
but, given the continued impacts of COVID-19, recommends that
Shareholders do not attend the General Meeting in person and
instead appoint the Chair of the General Meeting to act as their
proxy.
The Company has been and will continue to closely monitor the
continued impacts of COVID-19 and the related restrictions on
public gatherings and the public health guidance issued by the UK
Government. The Company is optimistic Shareholders will be able to
attend in person, but given the continued uncertainty, there is a
possibility that the Government may make changes to their current
guidance which could impact this.
A decision that Shareholders are unable to attend the General
Meeting in person, and any other necessary changes, will only be
made if the Directors believe this is the most reasonable course of
action when considering the current UK Government Guidance at the
time of the General Meeting.
Any changes to the General Meeting arrangements will be
communicated to Shareholders before the meeting through our website
www.savannah-energy.com and, where appropriate, by RIS
announcement.
Shareholders who plan to attend the meeting in person are asked
not to attend the General Meeting if they are displaying any
symptoms of COVID-19 or have recently been in contact with anyone
who has tested positive. In order to further reduce the risk of the
spread of the virus, the Company is encouraging shareholders who
plan to attend the meeting in person to take a lateral flow test
beforehand, on the day of the meeting. The General Meeting will
also be more streamlined than previous meetings and we will not be
serving refreshments. Shareholders are advised to arrive at the
venue in plenty of time in order to complete registration
formalities and comply with the venue's health and safety
procedures.
26. Restoration, Admission of the Placing Shares and
Subscription Shares, settlement and CREST
It is expected that Restoration will become effective and
dealings in the Existing Share Capital will commence at 8.00 a.m.
on [ -- ] December 2021.
Application has been made for the admission of the Placing
Shares and Subscription Shares to trading on AIM, which is expected
to become effective and dealings in the Enlarged Share Capital will
commence at 8.00 a.m. on [ -- ] December 2021.
CREST is a paperless settlement system enabling securities to be
evidenced otherwise than by a certificate and transferred otherwise
than by written instrument in accordance with the CREST
Regulations.
The Ordinary Shares are eligible for CREST settlement.
Accordingly, following Restoration, settlement of transactions in
the Ordinary Shares may continue to take place within the CREST
system if a Shareholder so wishes.
CREST is a voluntary system and Shareholders who wish to receive
and retain share certificates are able to do so.
For more information concerning CREST, Shareholders should
contact their stockbroker.
27. Risk factors and Additional Information
You are recommended to read all the information contained in
this document and not just rely on the key or summarised
information. In particular Shareholders should read in full the
Risk Factors set out in Part 3 of this document.
The technical information contained in this document has been
reviewed and approved by CGG. CGG has consented to the inclusion of
the technical information extracted from the Competent Person's
Reports in this document in the form and context in which it
appears.
28. Action to be taken
In order to be valid, a proxy appointment must be made and
returned by one of the following methods:
(a) by completion of the Form of Proxy, in hard copy form by
post, or by courier to the registrar, Computershare Investor
Services PLC, The Pavilions, Bridgwater Road, Bristol BS99 6ZY
("the Registrar");
(b) in the case of CREST members, by utilising the CREST
electronic proxy appointment service in accordance with the
procedures set out below; or
(c) by appointing your proxy electronically via the Registrar's
website at www.investorcentre.co.uk/eproxy.
You will need your Control Number, SRN & PIN which can be
found on your Form of Proxy, and in each case, the appointment must
be received not less than 48 hours before the time for holding of
the General Meeting. In calculating such 48-hour period, no account
shall be taken of any part of a day that is not a working day. A
Shareholder that appoints a person to act on its behalf under any
power of attorney or other authority and wishes to use method (a),
(b) or (c) must return such power of attorney or other authority to
Computershare Investor Services PLC, The Pavilions, Bridgwater
Road, Bristol BS99 6ZY prior to using such method and in any event
not less than 48 hours before the time of the General Meeting. If
you hold your Ordinary Shares in uncertificated form (that is, in
CREST) you may appoint a proxy by completing and transmitting a
CREST message (a "CREST Proxy Instruction") in accordance with the
procedures set out in the CREST manual so that it is received by
the Registrar by no later than 10.30 a.m. on [ -- ] January 2022,
being 48 hours (excluding weekends and public holidays) before the
time appointed for the holding of the General Meeting.
The completion and return of the Form of Proxy will not preclude
Shareholders from attending the General Meeting and voting in
person should they wish to do so. Accordingly, whether or not
Shareholders intend to attend the General Meeting they are urged to
complete and return the Form of Proxy as soon as possible.
29. Related party transactions under the AIM Rules
The participation in the Subscription by certain of the
Directors, the Company's entry into the Junior Loan Facility and
the associated issue of Warrants to Andrew Knott (through a vehicle
controlled by him) are considered related party transactions
pursuant to the AIM Rules.
The Directors independent of each of the above related party
transactions, being David Jamison in relation to the participation
of certain Directors in the Subscription, and all of the
Non-Executive Directors in relation to the Company's entry into the
Junior Loan Facility and the associated issue of Warrants,
consider, having consulted with Strand Hanson Limited, the
Company's Nominated Adviser, that the respective terms of each of
the related party transactions are fair and reasonable insofar as
Shareholders are concerned.
30. Directors' recommendation and voting intention
The Directors consider that the Exxon Acquisition and the
PETRONAS Acquisition is in the best interests of the Shareholders
and the Company as a whole, and, accordingly, the Directors
recommend that Shareholders vote in favour of the Resolutions to be
proposed at the General Meeting, as they have irrevocably
undertaken to do so in respect of their own beneficial holdings of
43,114,105 Ordinary Shares, representing approximately [ -- ] per
cent. of the Enlarged Share Capital.
Shareholders should note that in the event Resolutions 1, 2, 5
and/or 9 are not approved, amongst other things, one or both of the
Exxon Acquisition and the PETRONAS Acquisition (as applicable) may
not proceed. For this reason, the Company strongly encourages
Shareholders to vote in favour of Resolutions 1, 2, 5 and/or 9 and
the other Resolutions to be proposed at the General Meeting.
Yours faithfully,
Steve Jenkins
Independent Non-Executive Chair
PART 2
EXXON ACQUISITION AND THE PETRONAS ACQUISITION OVERVIEW 1. Exxon Acquisition
1.1. On 12 December 2021, Savannah Chad and the Exxon Sellers
entered into the Exxon SPA relating to the acquisition by Savannah
Chad:
1.1.1. from Exxon Mobil Corporation, of a 100 per cent.
shareholding interest in EEPCI, which holds a 40 per cent.
participating interest in, and is operator of, the Doba OFDA;
and
1.1.2. from ExxonMobil International Holdings Inc. and Esso
Exploration Holdings Inc., of a 100 per cent. shareholding interest
in EPIL, which in turn holds a:
1.1.2.1. 40.19 per cent. shareholding interest in TOTCo; and
1.1.2.2. 41.06 per cent. shareholding interest in COTCo.
1.2. Subject to Completion occurring, the Exxon SPA has an
economic effective date of 1 January 2021.
Acquisition Consideration
1.3. The total approximate consideration payable by the Company
for the Exxon Acquisition shall consist of: 1.3.1. US$255,600,000
in cash for the entire issued share capital of EEPCI (plus
interest); plus
1.3.2. US$104,400,000 in cash for the entire issued share
capital of EPIL (plus interest); plus or less (as applicable)
1.3.3. the sum of certain completion date adjustments (plus
interest on certain of these adjustments), including: (i) a
positive adjustment for (EEPCI's underlift position) of US$11.9
million as at the Economic Effective Date; (ii) a negative
adjustment for any leakage from the Exxon Target Companies during
the interim period; (iii) a positive adjustment for any
contributions made to the Exxon Target Companies by the Exxon
Sellers during the interim period; (iv) a negative adjustment for
certain agreed cash amounts extracted from the Exxon Target
Companies by the Exxon Sellers immediately prior to Completion; and
(v) a negative adjustment to compensate for EEPCI failing to
achieve its target production between 1 November 2021 and
Completion; plus
1.3.4. to the extent that EEPCI fails to achieve its target
production (should the effect on production capacity, following an
incident affecting the water handling system at the Miandoum
gathering station, not have been rectified) a negative adjustment
at Completion proportionate to the extent to which the then current
production falls short on the target production, followed by a
contingent positive post-Completion non-interest bearing payments
payable from the proceeds of EEPC's crude oil over a four year
period post-Completion should the target production be re-achieved;
plus
1.3.5. up to an aggregate of US$50,000,000 of non-interest
bearing contingent consideration, by means of payment to ExxonMobil
of 25 per cent. of the proceeds of sale of EEPCI's entitlement to
crude oil (net of any royalty barrels or royalty payments due to
the Government of Chad) received by EEPCI above US$55 per bbl and
up to US$80 per bbl, between 1 January 2021 and 31 December 2023.
The first of such payments shall be made at Completion.
Conditions to Completion
1.4. Completion of the Exxon Acquisition remains subject to a
number of conditions, the most substantive of these outstanding
conditions being:
1.4.1. Ministerial Consent;
1.4.2. waiver from the other members of the Doba Consortium of
their preferential rights under the Doba JOA in relation to the
transfer of shares in EEPCI, or confirmation of the expiry of the
relevant period within which such preferential rights may be
exercised, without such rights having been exercised;
1.4.3. shareholder approval at the General Meeting;
1.4.4. EEPCI obtaining a settlement between EEPCI and the
Government of Chad with respect to certain items, including all
taxes or similar levies in relation to the activities of EEPCI
prior to the Economic Effective Date, or an alternative arrangement
having been agreed between the Exxon Sellers and Savannah Chad;
and
1.4.5. material completion of the transfer of Exxon's IT systems
used in the operation of the Exxon Target Companies and the
Pipeline Companies to Savannah Chad that have been agreed to be
transferred.
1.5 A description of the key terms of the Exxon SPA are set out
in paragraph 2.1 of Part 14 of this
document.
1.6 The Company has provided to the Exxon Sellers a parent
company guarantee to guarantee the obligations of Savannah Chad
under the Exxon SPA.
2. PETRONAS Acquisition
2.1. On 2 December 2021, Savannah Chad and PETRONAS entered into
the PETRONAS SPA relating to the acquisition by Savannah Chad from
PETRONAS of a 100 per cent. shareholding interest in PCCEPI, which
holds:
2.1.1. a 100 per cent. shareholding interest in PC Chad, which
holds a non-operating 35 per cent. participating interest in the
Doba OFDA;
2.1.2. a 100 per cent. shareholding interest in Doba Pipeline, which in turn holds a:
2.1.2.1. 30.16 per cent. shareholding interest in TOTCo; and
2.1.2.2. 29.77 per cent. shareholding interest in COTCo; and
2.1.3. a 100 per cent. shareholding interest in PC Marketing,
which purchases all of PC Chad's entitlement to crude oil under an
offtake agreement. PC Marketing has appointed PETCO Trading (UK)
Limited (PETRONAS' marketing entity) to market such offtake, such
marketing agency agreement will be terminated at Completion.
Acquisition Consideration
2.2. The total approximate consideration payable by the Company
for the PETRONAS Acquisition shall consist of:
2.2.1. US$266,000,000 in cash for the entire issued share
capital of PCCEPI (plus interest); plus or less (as applicable)
2.2.2. the sum of certain completion date adjustments,
including: (i) a positive working capital adjustment for cash in
the PETRONAS Target Companies as at the Economic Effective Date;
(ii) a positive adjustment for the working capital balance of the
PETRONAS Target Companies as at the Economic Effective Date; (iii)
a negative adjustment of US$4.5 million for the overlift as at the
Economic Effective Date; (iv) a negative adjustment for any leakage
from the PETRONAS Target Companies during the interim period; (v) a
positive adjustment for any contributions to the PETRONAS Target
Companies made by PETRONAS during the interim period; and (vi) a
negative adjustment for certain agreed cash amounts extracted from
the PETRONAS Target Companies by PETRONAS immediately prior to
Completion. The sum of (i), (ii) and (iii), net off the cash
extraction in respect of these amounts is a positive adjustment of
US$16.8 million.
2.3. Subject to Completion occurring, the PETRONAS SPA has an
economic effective date of 1 January 2021.
2.4. The Company has provided to PETRONAS a parent company
guarantee to guarantee the obligations of Savannah Chad under the
PETRONAS SPA.
Conditions to Completion
2.5. Completion of the PETRONAS Acquisition remains subject to a
number of conditions, the most substantive of these outstanding
conditions being:
2.5.1. Ministerial Consent;
2.5.2. waiver from the other members of the Doba Consortium of
their preferential rights under the Doba JOA in relation to the
transfer of shares in PC Chad, or confirmation of the expiry of the
relevant period within which such preferential rights may be
exercised, without such rights having been exercised; and
2.5.3. shareholder approval at the General Meeting.
2.6 In addition to the above, Completion of the PETRONAS Acquisition may also be delayed pending
receipt of merger approval from the CEMAC Council for
Competition.
3. Adjustment upon Completion
Given the difference between the Economic Effective Date of the
transaction of 1 January 2021 and the anticipated Completion date
of the Exxon Acquisition and the PETRONAS Acquisition of 1 July
2022, there is expected to be a significant completion adjustment
to the sums ultimately to be paid to ExxonMobil and PETRONAS at
Completion relating to, inter alia, the cash generation of the
acquired assets during this period and the sweeping by ExxonMobil
and PETRONAS of certain of the upstream target companies' cash
balances just prior to Completion. As at the date of re-admission
and consistent with the economic and commercial assumptions
outlined in the Chad/Cameroon CPR, the Completion date adjustment
is expected to be approximately [US$ -- million].
4. The Enlarged Group Post-Completion
4.1. The Exxon Acquisition and the PETRONAS Acquisition are
entirely separate and independent. Failure to satisfy the
conditions under one of the acquisitions will not impact the
ability of the Company to achieve Completion under the other
acquisition.
4.2. Following completion of the Exxon Acquisition and PETRONAS
Acquisition, the Enlarged Group will hold:
4.2.1. a 75 per cent. participating interest in, and be the operator of, the Doba OFDA;
4.2.2. a 70.34 per cent. shareholding interest in TOTCo; and
4.2.3. a 70.83 per cent. shareholding interest in COTCo.
4.3. A simplified structure chart of the Enlarged Group
following Completion is shown in paragraph 14 of Part 1 contained
in Appendix II of this announcement.
5. Acquisition Financing
The Company intends to fund the considerations payable for the
Exxon Acquisition and the PETRONAS Acquisition through a
combination of the Debt Financing, the Junior Loan Facility, the
Placing and the Subscription.
Debt Financing
5.1 On [ -- ] December 2021, Savannah Chad and the Senior Lender
entered into an agreement pursuant
to which the Senior Lender agreed to provide Savannah Chad with
an up to US$400 million borrowing base facility (US$300 million
initial commitment with a US$100 million accordion). Descriptions
of the key terms of the Debt Financing are set out in paragraph 3.1
of Appendix IV.
Junior Loan Facility
5.2 On [ -- ] December 2021, the Company entered into the Junior
Loan Facility. The Company's Chief
Executive Officer, Andrew Knott, has committed to lend to the
Company (via LCP4L): (i) US$17 million immediately prior to
Completion of the Exxon Acquisition; and (ii) US$15 million
immediately prior to Completion of the PETRONAS Acquisition.
Further details of the terms of the Junior Loan Facility are set
out in paragraph 3.2 of Appendix IV of this announcement.
Placing and Subscription
5.3 The Company is raising approximately US$[ -- ] (net of
commissions and expenses) from the Placing and Subscription, which
is intended to be used to, inter alia, partly fund the Exxon
Acquisition and the PETRONAS Acquisition.
6. Shareholder Approval
6.1. Due to their size and nature, each of the Exxon Acquisition
and the PETRONAS Acquisition independently constitutes a reverse
takeover transaction pursuant to AIM Rule 14.
6.2. Each of the Exxon Acquisition and the PETRONAS Acquisition
are, therefore, subject to Shareholder approval at the General
Meeting. The General Meeting will be held at 10.30 a.m. on [ -- ]
January 2022 at the offices of the Company, being 40 Bank Street,
London E14 5NR. At the General Meeting, the following Resolutions
will be proposed in respect of the Exxon Acquisition and the
PETRONAS Acquisition:
6.2.1. Resolution 1: an ordinary resolution to approve the Exxon
Acquisition for the purposes of Rule 14 of the AIM Rules for
Companies; and
6.2.2. Resolution 2: an ordinary resolution to approve the
PETRONAS Acquisition for the purposes of Rule 14 of the AIM Rules
for Companies.
6.3. If Resolution 1 is not passed, the Exxon Acquisition will
not proceed. If Resolution 2 is not passed, the PETRONAS
Acquisition will not proceed. If Resolutions 5 and 9 are not passed
one or both of the Exxon Acquisition and the PETRONAS Acquisition
may not proceed.
7. Ministerial Consent
Ministerial Consent for each of the Exxon Acquisition and the
PETRONAS Acquisition is required prior to Completion. The Minister
has 60 days following notification to grant or deny consent,
following which, consent is deemed to have been given. EEPCI, in
respect of the Exxon Acquisition, and PC Chad, in respect of the
PETRONAS Acquisition, have each provided notification to the
Minister seeking Ministerial Consent.
APPIX III
PATHFINDER ADMISSION DOCUMENT - PART 3
RISK FACTORS
The investment detailed in this document may not be suitable for
all of its recipients and involves a high degree of risk. Before
making an investment decision, prospective investors are advised to
consult an authorised professional adviser who specialises in
advising on investments of the kind described in this document.
Prospective investors should consider carefully whether an
investment in the Company is suitable for them in the light of
their personal circumstances and the financial resources available
to them.
The Enlarged Group's business, financial condition or results of
operations could be materially and adversely affected by any of the
risks described below. In such cases, the market price of the
Ordinary Shares may decline and investors may lose all or part of
their investment.
In addition to the other relevant information set out in this
document, the Directors consider that the following risk factors,
which are not set out in any particular order of priority,
magnitude or probability, are of particular relevance to the
Enlarged Group's activities and to any investment in the Company.
The risks and uncertainties described below are not the only ones
the Enlarged Group faces. Additional risks and uncertainties of
which the Enlarged Group is not aware or that the Enlarged Group
currently believes are immaterial may also adversely affect the
Enlarged Group's business, financial condition and results of
operations. If any of the possible events described below were to
occur, the Enlarged Group's business, results of operations,
cashflows, financial condition and prospects could be materially
and adversely affected. If that happens, the value of the Enlarged
Group may diminish and investors could lose all or part of the
investment. Any one or more of these risk factors could have a
materially adverse impact on the value of the Enlarged Group.
There can be no certainty that the Enlarged Group will be able
to implement successfully the strategy set out in this document. No
representation is or can be made as to the future performance of
the Enlarged Group and there can be no assurance that the Enlarged
Group will achieve its objectives.
This document also contains forward looking statements that
involve risks and uncertainties. The Enlarged Group's actual
results may differ materially from those anticipated in these
forward looking statements as a result of various factors,
including the risks described below and elsewhere in this document.
In general, investing in securities of companies in emerging market
countries such as Chad, Cameroon, Nigeria and Niger involves
certain risks not typically associated with investing in the
securities of companies operating in more developed economies.
To the extent the description in this section relates to
government data or third-party sources, such information has been
extracted from official government publications or other
third-party sources and has not been independently verified by the
Enlarged Group.
The risk factors have been grouped as follows:
1. Risks related to the Exxon Acquisition and/or the PETRONAS Acquisition
2. General risks associated with the operations and business of the Enlarged Group and COVID-19
3. Risks associated with the Chad/Cameroon Assets and doing business in Chad and Cameroon
4. Risks associated with the Nigerian Assets and doing business in Nigeria
5. Risks associated with the Niger Assets and doing business in Niger
6. Risks relating to the Ordinary Shares
1. Risks related to the Exxon Acquisition and/or the PETRONAS Acquisition
1.1 There is a risk that the Exxon Acquisition and/or the PETRONAS Acquisition will not be
implemented on a timely basis or at all.
Completion of the Exxon Acquisition is conditional upon, inter
alia: (i) Ministerial Consent; (ii) waiver from the other members
of the Doba Consortium of their preferential rights under the Doba
JOA in relation to the transfer of shares in EEPCI, or confirmation
of the expiry of the relevant period within which such preferential
rights may be exercised, without such rights having been exercised;
(iii) shareholder approval approving the Exxon Acquisition at the
General Meeting; (iv) the Exxon Sellers obtaining a settlement
between EEPCI and the Government of Chad with respect to all taxes
or similar levies in relation to the activities of EEPCI prior to
the Economic Effective Date; and (v) material completion of the
transfer of Exxon's IT systems used in the operation of the Exxon
Target Companies and the Pipeline Companies to Savannah Chad that
have been agreed to be transferred.
Completion of the PETRONAS Acquisition is conditional upon,
inter alia: (i) Ministerial Consent; (ii) waiver from the other
members of the Doba Consortium of their preferential rights under
the Doba JOA in relation to the transfer of shares in PC Chad, or
confirmation of the expiry of the relevant period within which such
preferential rights may be exercised, without such rights having
been exercised; and (iii) shareholder approval approving the
PETRONAS Acquisition at the General Meeting. In addition,
Completion of the PETRONAS Acquisition may also be delayed pending
receipt of merger approval from the CEMAC Council for
Competition.
There is a risk that the conditions for each of Exxon
Acquisition and the PETRONAS Acquisition will not be satisfied on a
timely basis or at all. If such conditions are not satisfied, or,
where applicable, not waived, the Exxon Acquisition and/or the
PETRONAS Acquisition (as applicable) will not be implemented, the
benefits expected to result from the Exxon Acquisition and/or the
PETRONAS Acquisition will not be achieved and the market price of
the Ordinary Shares may be affected. In addition, with respect to
the PETRONAS Acquisition, there is a risk that the Company does not
receive merger approval from the CEMAC Council for Competition, and
therefore the PETRONAS Acquisition will not be implemented.
In particular, although the Company expects to receive
Ministerial Consent for the Exxon Acquisition and the PETRONAS
Acquisition, there is a risk that governmental policy on oil and
gas fields may change and Ministerial Consent will not be obtained
on time or at all.
1.2 If the Exxon Acquisition and/or the PETRONAS Acquisition are/is completed, the Enlarged
Group may experience difficulties in integrating the existing
businesses carried on by the Company, ExxonMobil and PETRONAS.
The Existing Group, ExxonMobil and PETRONAS operate and, until
completion of the Exxon Acquisition and/or the PETRONAS
Acquisition, will continue to operate, as separate and independent
businesses. Completion of the Exxon Acquisition and/or the PETRONAS
Acquisition will lead to the integration of the businesses with the
Existing Group, and the success of the Enlarged Group will depend,
in part, on the effectiveness of the integration process and the
ability of the Enlarged Group and the Directors to realise the
anticipated advantages from combining the respective
businesses.
The integration of the assets, organisations, systems and
facilities of the Company, the Exxon Target Companies and the
PETRONAS Target Companies, as well as the development of new
systems and procedures for the Enlarged Group, requires the
dedication of substantial management effort, time and resources
which may divert management's focus and resources from other
strategic opportunities and from operational matters during this
process. There can be no assurance that the Company will realise
the potential benefits of the Exxon Acquisition and/or the PETRONAS
Acquisition.
The integration of the Exxon Target Companies will include the
transition, handover and/or replacement of certain IT systems,
infrastructure and services used by the Exxon Target Companies,
including IT systems and services that are currently provided
centrally by the ExxonMobil group and will need to be transitioned
onto new systems to be installed and implemented by the Enlarged
Group. These IT systems include systems critical to the day-to-day
operations and production management, maintenance, inventory
management, HSE, HR, accounting, financial reporting, treasury and
supply chain management. These new systems will need to be in place
by the time the Exxon Acquisition completes. If they are not, there
is a risk that there will be disruption to the acquired businesses
which could impact on the Enlarged Group's operations, results,
cashflows and prospects.
The integration process may result in the loss of key employees
and the disruption of ongoing business and employee relationships
that may adversely affect the Enlarged Group's ability to achieve
the anticipated advantages of the Exxon Acquisition and/or the
PETRONAS Acquisition.
Moreover, some of the potential challenges in combining the
businesses may not become known until after Completion of the Exxon
Acquisition and/or the PETRONAS Acquisition, in particular due to
the substantial increase in the scale of the combined operations
and the number of projects which the Enlarged Group would operate.
The geographical spread of the Enlarged Group's operations may make
it more difficult to implement and impress upon local workforces
the Enlarged Group's policies on matters such as health and safety
and can present challenges in the effective supervision of
sub-contracted employees. Uncertainty about the effects of the
Exxon Acquisition and/or the PETRONAS Acquisition, including
effects on employees, partners, contractors, regulators and
customers may adversely affect the business and operations of the
Enlarged Group. These uncertainties could cause customers, business
partners, regulators and other parties that have business
relationships with the Enlarged Group to defer the consummation of
other transactions or other decisions concerning those businesses,
or to seek to change existing business relationships.
1.3 Costs related to the Exxon Acquisition and the PETRONAS Acquisition may exceed the
Company's expectations.
Costs related to the Exxon Acquisition and/or the PETRONAS
Acquisition may exceed the Company's expectations. These costs will
include execution, integration and post-Completion costs in order
to acquire the Exxon Target Companies and the PETRONAS Target
Companies and combine with the operations of the Existing Group.
The actual costs of the acquisition execution and integration
process may exceed those estimated and there may be further
additional and unforeseen expenses incurred in connection with the
Exxon Acquisition and/or the PETRONAS Acquisition. In addition, the
Company will incur legal, accounting, transaction fees and other
costs relating to the Exxon Acquisition and the PETRONAS
Acquisition, some of which are payable whether or not the Exxon
Acquisition and/or the PETRONAS Acquisition completes.
1.4 The Enlarged Group will have increased indebtedness.
Following Completion, the Enlarged Group will have increased
indebtedness and interest and debt repayment obligations. This is
addressed further in paragraph 2.6 below.
1.5 Certain figures included in the Chad/Cameroon CPR are modelled on assumptions that
may turn out to be incorrect.
The hydrocarbon Reserve and Resource estimates, and economic
valuations associated with these estimates included in the
Chad/Cameroon CPR are based upon certain assumptions, including,
inter alia, future oil prices, geological and geophysical
assumptions of the performance of the subsurface, demand,
maintenance requirements and timing and amount of future capital
expenditure requirements. There can be no guarantee that these
assumptions are correct. There are uncertainties inherent in
estimating the quantity of Reserves and Resources, and in
projecting future rates of production. Estimating the amount of
hydrocarbon Reserves and Resources, and the expected cost to
exploit these Reserves and Resources, is an interpretive process
and, in addition, results of drilling, testing and production
subsequent to the date of an estimate may result in material
revisions to an estimate.
No assurance can be given that hydrocarbon Resources and
Reserves included in the Chad/Cameroon CPR are, or will be, present
as estimated, will be recovered at the rates estimated nor that
they can be brought into profitable production. Hydrocarbon
Resource and Reserve estimates may require revisions (either up or
down) based on actual production experience and in light of the
prevailing market price of oil and gas. Hydrocarbon Resource and
Reserve estimates are highly subjective, and there is a risk that
there are discrepancies between those estimates and the Resources
and Reserves which are ultimately identified, both in terms of
volume of Resources and Reserves identified, and in terms of the
potential for recovery of such resources to be economically
recoverable. A decline in the market price for oil and gas could
render Reserves uneconomic to recover and may ultimately result in
a reclassification of Reserves as Resources.
1.6 Advice from Professional advisers.
The Directors and the Enlarged Group have relied upon advice
from various professional advisers engaged by the Enlarged Group in
relation to the acquisition of the Exxon Target Companies and the
PETRONAS Target Companies and the preparation of this Admission
Document. Such professional advisers' liability is subject to
limitations. Accordingly, in the event any such advice proves to
have been incorrect, any amounts recoverable from the relevant
adviser(s) may not be sufficient to cover
all of the Enlarged Group's resulting losses. This could have a
material adverse effect on the Enlarged Group's business and
operations, financial condition and prospects.
1.7 The Enlarged Group may become liable for unforeseen
liabilities including potential unknown historical violations of
applicable law by the Exxon Target Companies and the PETRONAS
Target Companies, TOTCo and/or COTCo.
During the course of the Exxon Acquisition and the PETRONAS
Acquisition, the Enlarged Group has undertaken, and engaged
professional advisors to undertake on its behalf, extensive due
diligence (including tax, financial, human resources, compliance,
legal, technical and environmental) on the Exxon Target Companies
and the PETRONAS Target Companies, the Pipeline Companies and the
Chad-Cameroon Assets. Such due diligence has involved reviewing
publicly available information and information disclosed by the
Exxon Sellers and PETRONAS, as well as site visits. Under the terms
of the Exxon SPA and the PETRONAS SPA, the Enlarged Group also has
the benefit of warranty protection with respect to certain
substantive issues relating to the Exxon Target Companies, the
PETRONAS Target Companies and the Chad/Cameroon Assets, including
warranties relating to title, litigation, environmental,
operational, employees and tax.
However, notwithstanding the due diligence undertaken by the
Company with respect to the Exxon Acquisition and the PETRONAS
Acquisition, there is no assurance that the Exxon Target Companies
and the PETRONAS Target Companies, the Pipeline Companies and the
Chad-Cameroon Assets are not subject to obligations or liabilities
or third-party rights or claims of which the Enlarged Group is
currently unaware. The warranty protection afforded to the Enlarged
Group under each sale purchase agreement is a negotiated package
and is subject to limitations of liability claims, including
financial caps, time limitations and various exclusions of
liability. Such limitations could result in restricting the
Enlarged Group from: (i) bringing a warranty claim under a sale
purchase agreement; and/or (ii) recovering the full amount of
losses suffered from a breach of the relevant warranty.
In order to offer Exxon and PETRONAS a clean-break from the
Exxon Target Companies and the PETRONAS Target Companies and their
operations in Chad and Cameroon, Savannah Chad has provided the
Exxon Sellers (and its affiliates) and PETRONAS (and its
affiliates) with an indemnity in respect of all liabilities (save
for certain exceptions) whether they relate to pre or post
Completion, suffered by the Exxon Sellers (or their affiliates) and
the PETRONAS Sellers (or its affiliates) in relation to the
Chad-Cameroon Assets.
Any obligations or liabilities or third-party rights or claims
which the Enlarged Group becomes subject to post-Completion of
either Exxon Acquisition and the PETRONAS Acquisition, either
directly or as a result of the indemnity provided to Exxon (and its
affiliates) or PETRONAS (and its affiliates), could have a material
adverse effect on the Enlarged Group's business, financial
condition and/or prospects.
1.8 Future litigation.
Through the acquisition of the PETRONAS Target Companies, the
Company will inherit the PETRONAS Target Companies' obligation to
keep EEPCI (in its capacity as an Operator of the Doba Consortium)
whole for PC Chad's participating interest share of liabilities
arising from existing litigation that has been brought against
EEPCI. The conduct of such litigation is within the sole control of
EEPCI and therefore the PETRONAS Target Companies have no control
over the ultimate outcome and consequent exposure of the PETRONAS
Target Companies for their proportionate share of a negative
outcome. However, should the Exxon Acquisition complete, the
Company would acquire EEPCI and therefore have sole control of
EEPCI and the conduct of litigation.
2. General risks associated with the operations and business of the Enlarged Group
2.1 Risks relating to the Enlarged Group's activities in the oil and gas industry.
There are numerous factors which may affect the success of the
Enlarged Group's business which are beyond its control including
local, national and international economic, legal and political
conditions. The Enlarged Group's business involves a high degree of
risk which a combination of experience, knowledge and careful
evaluation may not overcome. The operations of the Enlarged Group
in Central and West Africa may expose it to potential civil unrest
and political or currency risks.
2.2 Drilling for and producing oil and gas are high-risk
activities with many uncertainties which
may result in the Enlarged Group's expenses increasing and
projected cashflows decreasing.
The Enlarged Group's future success partially depends on its
ability to develop and produce from its oil and gas fields in a
timely and cost-effective manner. As part of its strategy, the
Enlarged Group intends to pursue the further development of its
existing assets, which include undeveloped Reserves and Resources
and prospective Resources, and/or future opportunities to obtain or
acquire further assets. This is expected to be achieved by further
drilling and exploiting its existing fields, which the Directors
believe will enable the Enlarged Group to grow its Reserves and
production levels. However, drilling for and producing oil and gas
are high-risk activities with many uncertainties, which may result
in the Enlarged Group's expenses increasing and projected cashflows
decreasing.
2.3 Oil prices.
The marketability and price of oil and natural gas that may
directly or indirectly be acquired or discovered by the Enlarged
Group will be affected by numerous factors beyond the control of
the Enlarged Group, but which include: global and regional supply
and demand, together with expectations regarding future supply and
demand, for oil and gas; global and regional economic conditions;
political, economic and military developments in oil and gas
producing regions; prices and availability of alternative sources
of energy; geopolitical uncertainty; speculative activities and
trends in the financial community; and the ability and desire of
members of OPEC, and other oil producing nations, to set and
maintain specified levels of production and prices. Low oil prices
will reduce the projected economic value of the Enlarged Group's
assets, make it harder for the Company to attract partners and/or
capital and reduce the cashflows of the Enlarged Group's assets
once developed.
2.4 Governmental relations may change and retention of key business relationships.
In order to protect the Enlarged Group's licences and permits to
operate and its ability to secure new resources, it is important
that the Enlarged Group should maintain strong positive
relationships with the governments of, and communities in, the
countries where its business is conducted. Failure - real or
perceived - to maintain these relationships could harm the Enlarged
Group's reputation, which could, in turn, impact the Enlarged
Group's licences, financing and access to new opportunities.
Although the Company believes that it has good relations with
its host governments, there can be no assurance that the actions of
present or future governments in these countries, together with
governments of other countries in which the Enlarged Group may
operate, directly or indirectly, in the future and supra-national
authorities (such as CEMAC), will not materially adversely affect
the business or financial condition of the Enlarged Group.
The Enlarged Group will rely significantly on strategic
relationships with other entities, on good relationships with
regulatory and governmental departments and upon third parties to
provide essential contracting services. There can be no assurance
that its existing relationships will continue to be maintained or
that new ones will be successfully formed, and the Enlarged Group
could be adversely affected by changes to such relationships or
difficulties in forming new ones. Any circumstance that causes the
early termination or non-renewal of one or more of these key
business alliances or contracts could adversely impact the Enlarged
Group, its business, operating results and prospects.
2.5 The Enlarged Group operates in a capital-intensive industry and its growth may require
additional funding to meet both expected and unanticipated
costs, which the Enlarged Group may not be able to raise.
The Enlarged Group's business requires significant capital for
appraisal, development, maintenance, production, processing
infrastructure and transportation expenditures and, in the future,
the Enlarged Group may seek additional financing to fund its future
exploration, development, acquisition and/or construction plans
beyond its current committed and planned expenditures.
There can be no assurance that the Enlarged Group will be able
to generate or raise sufficient funds to meet required capital
expenditures in the longer term or to do so at a reasonable cost.
Moreover, in circumstances where such funding is not available, the
Enlarged Group may be required to amend its appraisal, development
and other capital expenditure plans. The Enlarged Group's ability
to arrange future financing, and the cost of financing generally,
will depend on many factors, including: political, economic and
capital markets conditions and the global political pressures
towards energy transition; the availability of finance for fossil
fuel projects; oil and gas prices; investor confidence in the oil
and gas industry generally and in Chad, Cameroon, Nigeria, Niger,
specifically, and in the Enlarged Group; business performance;
regulatory developments, including tax and securities laws that are
conducive to raising capital; and credit available from banks and
other lenders.
Furthermore, the ability of many companies to arrange financing
and the cost of financing is subject to events affecting the global
financial markets. Also, the cost of and terms and conditions on
which future funding or financing may be made available may not be
acceptable to the Enlarged Group or funding or financing may not be
available at all, and any additional debt financing may involve
financing costs including prepayment fees or restrictive covenants
and ratios that could limit or affect our operational
flexibility.
Any inability in the longer term to procure sufficient financing
could adversely affect the Enlarged Group's ability to expand its
business and meet its production targets, may result in unexpected
costs and delays in relation to project development and/or
construction plans, or may result in an inability to implement the
plans as currently contemplated. If the reductions in financing
levels are severe enough, they could adversely affect the Enlarged
Group's ability to maintain production at current levels and limit
its cash available to service its indebtedness.
If the Enlarged Group's revenue or Reserves declines, it may be
unable to raise additional funds (or any external debt or equity
financing may not be available on acceptable terms) or have the
capital necessary (either from internal sources or through external
debt or equity financing) to undertake or complete future drilling
and development programs or acquisitions.
The occurrence of any of these events could have a material
adverse effect on the Enlarged Group's business, results of
operations, cashflows, financial condition and prospects.
2.6 The Enlarged Group's leverage and debt service obligations
could adversely affect its business and prevent it from fulfilling
its obligations under the debt facilities.
As of 30 November 2021, the Existing Group had gross debt of
US$529.8 million and, to finance the Exxon Acquisition and the
PETRONAS Acquisition, it is proposed that the Enlarged Group will
take on a further US$432 million of gross debt.
This amount of debt could have significant consequences for the
Enlarged Group's business including, but not limited to:
- making it more difficult for it to satisfy its obligations
with respect to the various financing arrangements;
- increasing the Enlarged Group's vulnerability to, and reducing
its flexibility to respond to, general adverse economic and
industry conditions;
- requiring the dedication of a substantial portion of the
Enlarged Group's cashflow from operations to the payment of
principal of, and interest on, indebtedness, thereby reducing the
availability of such cashflow for other uses;
- limiting the Enlarged Group's ability to obtain additional
financing to fund working capital, capital investments,
acquisitions, other debt service requirements, business ventures or
other general corporate purposes;
- limiting its flexibility in planning for, or reacting to,
changes in its business and the competitive environment and the
industry in which the Enlarged Group does business;
- placing the Enlarged Group at a competitive disadvantage
compared to its competitors that have lower leverage or greater
financial resources;
- negatively impacting credit terms with its creditors; and
- limiting the Enlarged Group's ability to borrow additional
funds and subjecting it to financial and other restrictive
covenants or pay dividends to Shareholders.
These consequences could have a material adverse effect on the
Enlarged Group's business, prospects, financial condition and
results of operations and on its ability to satisfy its obligations
under the various financing agreements.
Furthermore, the Enlarged Group requires a significant amount of
cash to service its debt and to sustain its operations, and its
ability to generate sufficient cash depends on many factors beyond
its control. The Enlarged Group's ability to make payments on, or
repay or refinance, its debt, and to fund working capital and
capital investments, will depend on its future operating
performance and ability to generate sufficient cashflow. This
depends on the success of the Enlarged Group's business strategy
and on general economic, financial, operational, competitive,
market, legislative, regulatory, technical and other factors
discussed in these "Risk factors", many of which are beyond the
control of the Company.
A breach of any covenant or restriction or a failure to make
scheduled payments of principal or interest on any of the Enlarged
Group's indebtedness could result in a default that would permit
the lender or noteholder to declare all amounts borrowed to be due
and payable, together with accrued and unpaid interest. In
addition, since certain of the financing arrangements are (or, upon
Completion of the Exxon Acquisition and/or the PETRONAS Acquisition
will be) secured by various security agreements, such as pledges
over shares of certain subsidiaries (and, in particular, Savannah
Chad, Accugas, SEUGL and Universal), any enforcement action taken
by a lender could include the sale by such lenders of the property
securing such debt if the Enlarged Group is unable to pay the
outstanding debt on demand. Accordingly, payment default or
covenant breaches and the subsequent exercise by the relevant
lenders of their rights under the various financing agreements
could have a material adverse effect on the Enlarged Group's
business, results of operations, cashflows, financial condition and
prospects.
2.7 Exploration, appraisal, development and production risks.
With respect to the Enlarged Group's operations in Niger, in
particular, there can be no guarantee that hydrocarbons will be
discovered in commercial quantities, or that those discovered will
be developed into profitable production. Hydrocarbon deposits may
not ultimately contain economically recoverable volumes of
resources and even if they do, delays in the construction and
commissioning of production projects or other technical
difficulties may result in any projected target dates for
production being delayed or further capital expenditure being
required. There is also the risk that the Enlarged Group may not be
awarded exclusive exploitation rights in respect of resources which
are ultimately identified.
The operations and planned drilling activities of the Enlarged
Group and its partners may be disrupted, curtailed, delayed or
cancelled by a variety of risks and hazards which are beyond the
control of the Enlarged Group, including unusual or unexpected
geological formations, formation pressures, geotechnical and
seismic factors, environmental hazards such as accidental spills or
leakage of petroleum liquids, gas leaks, ruptures or discharge of
toxic gases, industrial accidents, occupational and health hazards,
technical failures, mechanical difficulties, equipment shortages,
labour disputes, fires, power outages, compliance with governmental
requirements and extended interruptions due to inclement or
hazardous weather and ocean conditions, explosions, blow-outs, pipe
failure and other acts of God.
Any one of these risks and hazards could result in work
stoppages, damage to, or destruction of, the Enlarged Group's or
its partners' facilities, personal injury or loss of life, severe
damage to or destruction of property, environmental damage or
pollution, clean-up responsibilities, regulatory investigation and
penalties, business interruption, monetary losses and possible
legal liability which could have a material adverse impact on the
business, operations and financial performance of the Enlarged
Group. Although precautions to minimise risk are taken, even a
combination of careful evaluation, experience and knowledge may not
eliminate all of the hazards and risks. In addition, not all of
these risks are insurable.
2.8 Hydrocarbon resource and reserve estimates.
No assurance can be given that hydrocarbon Resources and
Reserves reported by the Company previously, now or in the future,
are, or will be, present as estimated, will be recovered at the
rates estimated or that they can be brought into profitable
production. Hydrocarbon Resource and Reserve estimates may require
revisions (either up or down) based on actual production experience
and in light of the prevailing market price of oil and gas.
Hydrocarbon Resource and Reserve estimates are highly subjective,
and there is a risk that there are discrepancies between those
estimates and the Resources and Reserves which are ultimately
identified, both in terms of volume of Resources and Reserves
identified, and in terms of the potential for recovery of such
resources to be economically recoverable. A decline in the market
price for oil and gas could render Reserves uneconomic to recover
and may ultimately result in a reclassification of Reserves as
Resources.
2.9 Capital and operating expenditure estimates may not be accurate.
Estimated capital and operating expenditure requirements are
estimates based on anticipated costs and made on certain
assumptions. Given the inherent uncertainties as to Savannah's
future work programmes and associated capital expenditures (in
particular, following the integration of the Exxon Target Companies
and PETRONAS Target Companies' businesses following Completion),
the uncertain time frame during which the capital expenditures will
be made and sources of finance will be made available to the
Enlarged Group, and the general correlation between oil and gas
capital expenditures and global commodity markets, there is a risk
that currently assessed capital and operating expenditures as
referenced in the CPRs included as Parts 9, 10 and 11 in this
document may prove to be inaccurate. In addition, given the
pragmatic approach of Savannah's Board and executive management
team, nearer term capital and operating expenditure may be subject
to change if Savannah's Board and management believe such a change
is in the best interests of the Enlarged Group.
Should the Enlarged Group's capital and operating expenditure
requirements turn out to be higher than currently anticipated, the
Enlarged Group or its partners may need to seek additional funds
which it may not be able to secure on reasonable commercial terms
to satisfy the increased capital expenditure requirements. If this
happens, the Enlarged Group's business, cashflow, financial
condition and operations may be materially adversely affected.
2.10 Exploration activities are capital intensive and there is
no guarantee of success.
Exploration activities are capital intensive and their
successful outcome cannot be assured. The Enlarged Group may
undertake exploration activities and incur significant costs with
no guarantee that such expenditures will result in the discovery of
commercially deliverable oil or gas. The Enlarged Group may explore
in geographic areas, where environmental conditions are challenging
and costs can be high. The costs of drilling, completing and
operating wells are often uncertain. As a result, there may be cost
overruns or requirements to curtail, delay or cancel drilling
operations because of many factors, including unexpected drilling
conditions, pressure or irregularities in geological formations,
equipment failures or accidents, adverse weather conditions,
compliance with environmental regulations, governmental
requirements and shortages or delays in the availability of
drilling rigs and the delivery of equipment. Capital expenditure
commitments may vary (or be increased) as a result of actual
exploration
performance. The risk of incurring such costs and the failure of
such exploration may adversely affect the Enlarged Group's
profitability.
2.11 Appraisal and development results may be unpredictable.
Appraisal results for discoveries are also uncertain. Appraisal
and development activities involving the drilling and testing of
wells across a field may be unpredictable and may not result in the
outcome planned, targeted or predicted, as only by extensive
testing can the properties of the entire field be fully
understood.
2.12 Increase in drilling costs and the availability of drilling
equipment.
The oil and gas industry historically has experienced periods of
rapid cost increases. Increases in the cost of exploration and
development would affect the Enlarged Group's ability to invest
directly or indirectly in prospects and to purchase or hire
equipment, supplies and oil and gas specific services.
In addition, the availability and cost of drilling rigs and
other equipment and services, including access to seismic survey
equipment and related professionals, is affected by the level and
location of drilling activity around the world.
An increase in drilling operations outside or in the Enlarged
Group's intended area of operations may reduce the availability,
and increase the cost, of such equipment and services to the
Enlarged Group and to the companies with which it operates. The
reduced availability of such equipment and services may delay the
Enlarged Group's ability, directly or indirectly, to exploit
Reserves and adversely affect the Enlarged Group's operations and
profitability.
2.13 Delays in production, marketing and transportation.
Various production, marketing and transportation conditions may
cause delays in oil and gas production and adversely affect the
Enlarged Group's business. Drilling wells in areas remote from
distribution and production facilities may delay production from
those wells until sufficient Reserves are established to justify
expenditure on construction of the necessary transportation and
production facilities. The Enlarged Group's inability directly or
indirectly to complete wells in a timely manner would result in
production delays.
The Enlarged Group is also subject to market fluctuations in the
prices of oil and natural gas, deliverability uncertainties related
to the proximity of reserves to adequate pipeline and processing
facilities, and extensive government regulations relating to price,
taxes, royalties, licences, land tenure, allowable production, the
export of oil and natural gas, and many other aspects of the oil
and natural gas business. Moreover, weather conditions may impede
the transportation and delivery of oil by sea. Any or all of these
factors may result in an adverse impact on the financial returns
anticipated by the Enlarged Group.
2.14 Decommissioning costs may be greater than initially
estimated.
The Enlarged Group, through its licence interests, has certain
obligations in respect of the decommissioning of its wells, fields
and related infrastructure. These liabilities are derived from
legislative and regulatory requirements concerning the
decommissioning of wells and production facilities and require the
Enlarged Group to make provisions for, set aside funds and/or
underwrite the liabilities relating to such decommissioning. It is
difficult to forecast accurately the costs that the Enlarged Group
will incur in satisfying its decommissioning obligations. When its
decommissioning liabilities crystallise, the Enlarged Group will
not hold ring fenced funds nor will it have contributed to any
reserves for meeting its decommissioning obligations for the
Accugas Midstream Business, the Doba Oil Project or the
Chad/Cameroon Pipeline Companies and it will be liable either on
its own or jointly and severally with its then partners in the
field. In the event that it is jointly and severally liable with
other partners and such partners default on their obligations, the
Enlarged Group will remain liable and its decommissioning
liabilities could increase significantly through such default. Any
significant increase in the actual or estimated decommissioning
costs that the Enlarged Group incurs may adversely affect its
financial condition.
The Company does not have a decommissioning or abandonment fund
in respect of any of its assets in Nigeria or Niger and does not
intend to establish such a fund for the Chad/Cameroon Assets on
Completion of the Exxon Acquisition and/or the PETRONAS
Acquisition. However, there can be no guarantee that, in certain of
the jurisdictions in which the Company operates, the Company will
not be required to put in place a fund of this nature in the
future.
2.15 Natural disasters.
Any interest held by the Enlarged Group is subject to the
impacts of any natural disaster such as earthquakes, epidemics,
fires and floods etc. No assurance can be given that the Enlarged
Group will not be affected by future natural disasters.
2.16 Environmental factors.
The Enlarged Group's operations are, and will be, subject to
environmental regulation in Chad, Cameroon, Nigeria and Niger and
any other regions in which the Enlarged Group may operate.
Environmental regulations may evolve in a manner that will require
stricter standards and enforcement measures being implemented,
increases in fines and penalties for non-compliance, more stringent
environmental assessments of proposed projects and a heightened
degree of responsibility for companies and their directors and
employees. Compliance with environmental regulations could increase
the Enlarged Group's costs. Should the Enlarged Group's operations
not be able to comply with this mandate, financial penalties may be
levied. Environmental legislation can provide for restrictions and
prohibitions on spills, releases of emissions of various substances
produced in association with oil, condensate and natural gas
operations. In addition, certain types of operations may require
the submission and approval of environmental impact assessments.
The Enlarged Group's operations will be subject to such
environmental policies and legislation.
Environmental legislation and policy may be periodically
amended. Such amendments may result in stricter standards of
enforcement and in more stringent fines and penalties for
non-compliance. Environmental assessments of existing and proposed
projects may carry a heightened degree of responsibility for
companies and their directors, officers and employees. The costs of
compliance associated with changes in environmental regulations
could require significant expenditure, and breaches of such
regulations may result in the imposition of material fines and
penalties. In an extreme case, such regulations may result in
temporary or permanent suspension of production operations. There
can be no assurance that these environmental costs or effects will
not have a materially adverse effect on the Enlarged Group's future
financial condition or results of operations.
2.17 Any expansion via acquisition may not be successful and
anticipated benefits of acquisitions may not be realised.
The Enlarged Group may enter into future acquisitions,
particularly to increase its oil and gas reserves and resources
through acquisitions of interests in further oil and gas assets
that have significant resource potential and are near high demand
areas. Any such future acquisitions may be achieved through licence
awards following bidding rounds, transfers of participating or
other economic interests by an existing licence holder, or direct
or corporate acquisitions. No assurance can be given that the
Enlarged Group will be able to identify attractive acquisition
opportunities or, even if the Enlarged Group does identify
attractive opportunities, that it will be able to complete
acquisitions, or do so on commercially acceptable terms.
Furthermore, the Enlarged Group could encounter difficulties
integrating acquired assets, including operations, systems,
management and other personnel and technology associated with such
acquired assets with its own. Such difficulties could disrupt the
Enlarged Group's ongoing business, distract its management and
employees and/or increase its expenses.
2.18 Dependence on key executives and personnel.
The future performance of the Enlarged Group will to a
significant extent be dependent upon its ability to retain the
services and personal connections or contacts of key executives, to
attract, recruit, motivate and retain other suitably skilled,
qualified and industry experienced personnel to form a high-calibre
management team and to develop a succession plan for key
executives. Such key executives are expected to play an important
role in the development and growth of the Enlarged Group, in
particular, by maintaining good business relationships with
regulatory and governmental departments and essential partners,
contractors and suppliers.
Attracting and retaining highly skilled talent is expected to be
fundamental to the successful implementation of the Company's
strategy and continued growth. The Company anticipates
substantially growing its headcount in the coming years across both
its operational and support functions. There is intense competition
for high calibre individuals and there can be no guarantee that the
Company will be successful in identifying and recruiting
individuals necessary to continue to grow its business and
implement its strategy.
Many of the Enlarged Group's competitors are larger, have
greater financial and technical resources, as well as staff and
facilities, and have been operating in a market-based competitive
economic environment for much longer than the Enlarged Group.
There can be no assurance that the Enlarged Group will retain
the services of any key executives, advisers or personnel who have
entered into service agreements or letters of appointment with the
Enlarged Group. The loss of the services of any of the key
executives, advisers or personnel may have a material adverse
effect on the business, operations, relationships and/or prospects
of the Enlarged Group. In particular, given the importance of the
direction and leadership of its existing Chief Executive Officer as
founder of the Company, his local knowledge, his relationships in
the oil and gas industry in West Africa, his relationships with
financing partners and his industry expertise, the future success
of the Enlarged Group is, to an extent, dependent upon the
continued service of the Chief Executive Officer. The Enlarged
Group currently has no succession plan in place and, therefore,
there is a risk that the unexpected departure or loss of this
individual could have a material adverse effect on the business,
financial condition and results of operations of the Enlarged
Group, and there can be no assurance that the Enlarged Group will
be able to attract or retain a suitable replacement.
2.19 Health & safety.
Developing oil and gas resources and reserves into commercial
production involves a high degree of risk. The Enlarged Group's
operations are subject to all the risks common in its industry.
These hazards and risks include encountering unusual or unexpected
rock formations or geological pressures, geological uncertainties,
seismic shifts, blowouts, oil spills, uncontrollable flows of oil,
natural gas or well fluids, explosions, fires, improper
installation or operation of equipment and equipment damage or
failure, including failure to comply with regulatory requirements
expected of a Western country (such as comprehensive health and
safety processes). Personal injuries suffered as a result of the
foregoing are likely to be exacerbated as a result of a lack of
access to medical care facilities and healthcare professionals.
If any of these types of events were to occur, they could result
in loss of production, environmental damage, injury to persons and
loss of life.
They could also result in significant delays to drilling
programmes, a partial or total shutdown of operations, significant
damage to equipment owned or used by the Enlarged Group and
personal injury, wrongful death or other claims related to loss
being brought against the Enlarged Group. These events could result
in the Enlarged Group being required to take corrective measures,
incurring significant civil liability claims, significant fines or
penalties as well as criminal sanctions potentially being enforced
against the Enlarged Group and/or its officers. The Enlarged Group
may also be required to curtail or cease operations on the
occurrence of such events. Any of the above could have a material
adverse effect on the Enlarged Group's business, prospects,
financial condition or results of operations.
While the Enlarged Group has implemented certain policies and
procedures to identify and mitigate such hazards, and developed
appropriate work plans and approvals for high-risk activities to
prevent accidents from occurring, these procedures may not be
sufficiently robust or appropriately followed by the Enlarged
Group's staff or third-party contractors to prevent accidents.
2.20 Labour relations.
Any labour disputes, unrest or strike activity at any of the
Enlarged Group's oil and gas production processing and/or
transportation operations or situated at, or affecting, the
operations of any third-party which the Enlarged Group utilises for
its business, could adversely affect its ongoing operations and the
Enlarged Group's ability to explore for, produce, transport and
market oil and gas production or cause cost increases. All of these
factors could adversely affect the Enlarged Group's business,
results of operations, cashflows, financial condition and
prospects.
2.21 Managing growth and executing strategy.
There can be no assurance that the Enlarged Group will be able
to manage effectively the expansion of its operations or that the
Enlarged Group's current personnel, systems, procedures and
controls will be adequate to support the Enlarged Group's
operations. Any failure of the Board to manage effectively the
Enlarged Group's growth and development could have a material
adverse effect on the Enlarged Group's business, financial
condition and results of operations. There is no certainty that all
or, indeed, any of the elements of the Enlarged Group's current
strategy will develop as anticipated and that the Enlarged Group
will be profitable.
2.22 The Group may be negatively impacted by the failure of its
information technology and communications systems and related
operational processes, including through cyber-attacks.
There can be no assurance that the Existing Group's or the
Enlarged Group's IT systems are or will continue to be able to
support the Group's business whether due to general or specific
systems failure or through failure to develop in an adequate
manner. While the Existing Group has in place business continuity
procedures and security measures in the event of IT failures or
disruption, including backup IT systems to reduce and contain the
risk through the use of technical and assurance-based controls,
there can be no guarantee that its systems in the future will
continue to support all of the Enlarged Group's activities.
Disruption to or failure of the Enlarged Group's IT systems could
result in loss of business or damage to the Group's reputation,
resulting in a material adverse effect on the Enlarged Group's
reputation, business, financial condition and results of
operations.
The Group's operations rely on the effective management and the
secure processing, storage and transmission of financial, personal
and other information in its information systems and networks. In
addition, the use of computers and connected sensors is essential
to the safe running of upstream production facilities.
The Enlarged Group may be the target of attempted cyber-attacks.
While the Existing Group maintains systems and controls designed to
detect and prevent such events from occurring, the Group may not be
able to anticipate, detect or implement effective preventive
measures against all cyber threats. Cyber-attacks can take many
forms across a wide range of channels and their initiators can be
varied, including opportunists, state-sponsored or, as a
hydrocarbons producer, the Enlarged Group may be the target of
"eco-hacktivists". Cyber-attacks are typically designed to deny
service, obtain unauthorised access to confidential information,
manipulate or destroy data, disrupt or destroy IT or production
control systems or steal money. There have been in the past highly
publicised cases where hackers have requested "ransom" payments in
exchange for not disclosing customer information or for restoring
access to information or systems, including systems critical to the
day-to-day operations of the business. Cyber-attacks are
increasingly sophisticated, rapidly evolving and may be far
reaching and difficult to prevent and they may not be recognised
until launched. Further, third parties may seek to gain access to
the Group's systems either directly or using equipment or security
passwords belonging to the Group's personnel or third-party service
providers. If a cyber-attack or other information security breach
were to occur, this could have a material adverse effect on the
Group, including, the misappropriation of confidential information
belonging to the Group, damage to the Group's computer systems
infrastructure and production control systems, environmental
damage, fines, penalties and other financial loss to the Group. The
Group's reputation may also be adversely affected resulting in a
loss of business opportunities. The Group may also become exposed
to litigation and regulatory sanctions.
2.23 Emerging markets, such as Chad, Cameroon, Nigeria and
Niger, are subject to greater risks than more developed
markets.
Investing in securities of issuers whose operations and assets
are located in emerging markets, such as Chad, Cameroon, Nigeria
and Niger, can typically involve a higher degree of risk than
investments in securities of corporate or sovereign issuers from
more developed countries and carries risks that are not typically
associated with investing in more mature markets. Investors should
exercise particular care in evaluating the risks involved and must
decide for themselves whether, in light of those risks, their
investment is appropriate. Emerging markets can be subject to rapid
change and the information set out in this document may become
outdated relatively quickly.
Financial turmoil in an emerging market country can adversely
affect companies operating within those markets, as investors move
their money to more stable, developed markets. As has happened in
the past, financial problems or an increase in the perceived risks
associated with investing in emerging economies could dampen
foreign investment in any of Chad, Cameroon, Nigeria or Niger and
adversely affect their economies. In addition, during such times of
loss of market confidence, companies that operate in emerging
markets can face severe liquidity constraints as foreign funding
sources are withdrawn. In Nigeria, for example, there has been
periodic issues with FX market liquidity as a result of
macro-economic challenges.
As a result of the Enlarged Group's operations in Central and
West Africa, it may be particularly susceptible to disruptions in
the capital markets and the reduced availability of credit or
increased cost of debt, which could result in it experiencing
financial difficulty. In addition, the availability of credit to
entities operating within emerging markets is significantly
influenced by levels of investor confidence in such markets as a
whole and thus any factors that impact market confidence (for
example, a decrease in credit ratings, state or central bank
intervention or foreign funding sources being withdrawn) could
negatively affect the price or availability of funding to it.
Financial turmoil in any of the Company's host jurisdictions or
the capital markets generally could adversely affect the Enlarged
Group's business.
2.24 The judicial systems in which the Enlarged Group operates
may create an uncertain environment for investment and business
activity.
As with a number of developing countries, the legal systems of
the countries in which the Enlarged Group operates continue to
develop and mature. As a result, the Enlarged Group may become
subject to certain difficulties in obtaining effective or
consistent legal redress due to a number of factors out of its
control. Such difficulties may include delay, the level of
discretion that may be exercised by the courts or governmental
authorities, insufficient judicial or administrative guidance on
interpreting applicable rules and regulations, inconsistencies or
conflicts between and within various existing laws, regulations,
decrees, orders and resolutions and/or the relative inexperience of
the judiciary and courts in commercial matters. In addition, the
enforcement of laws or the Enlarged Group's statutory or
contractual rights may depend on, and be subject to, the
interpretation of, the relevant local authority, and such
interpretation may differ from the advice given to the Enlarged
Group by local lawyers and potentially result in unexpected
outcomes. For example, there is no assurance that all contracts
governed by international law and/or with the benefit of
international arbitration dispute resolution procedures will be
recognised or enforced by local courts in the host countries in
which the Enlarged Group operates, or that the Enlarged Group would
be successful in subjecting counterparties to the jurisdiction of
another country.
It is possible that any adverse finding against the Enlarged
Group, or any restriction placed on the Enlarged Group in
exercising its contractual or statutory rights, could have a
material adverse effect on the Enlarged Group's business, financial
condition and/or prospects.
2.25 Actual and perceived risks of corruption may adversely
affect the Enlarged Group's operations and ability to attract
capital.
The Enlarged Group is subject to Compliance Laws, including the
UK Bribery Act 2010 (the "Bribery Act"), the Foreign Corrupt
Practices Act of 1977 ("FCPA") and other laws and regulations that
prohibit companies and their intermediaries from making improper
payments or offers of payments to foreign governments and their
officials and political parties, or others for the purpose of
obtaining or retaining business and other benefits. Nigeria, Niger,
Chad and Cameroon are ranked 149, 123, 160 and 149 (respectively)
out of 180 countries in Transparency International's 2020
Corruption Perceptions Index and placed 131, 132, 182 and 167
(respectively) out of 190 countries in the World Bank's Doing
Business 2020 report.
By doing business in these countries, there is a risk that the
Enlarged Group may face, directly or indirectly, corrupt demands by
officials, militant groups or private entities. Consequently, the
Enlarged Group faces the risk that one or more of the Enlarged
Group's employees, agents, intermediaries or consultants may make
or receive unauthorised payments given that such persons may not
always be subject to the Enlarged Group's control. In addition, it
is possible that post-Completion the Enlarged Group could be held
liable for successor liability for the violation of any Bribery
Act, FCPA and/or other Compliance Laws committed (if any were to
exist) by the Exxon Target Companies, PETRONAS Target Companies or
the Pipeline Companies. Although the Enlarged Group has policies
and procedures designed to ensure that the Enlarged Group, its
employees, agents, intermediaries and consultants adhere to
Compliance Laws and will implement policies and procedures with
respect to all applicable Chad and Cameroon anti-corruption
legislation, there is no assurance that such policies or procedures
will work effectively all of the time or protect the Enlarged Group
against liability under any such legislation for actions taken by
our agents, employees, intermediaries and consultants with respect
to the Enlarged Group's business. If the Enlarged Group is not in
compliance with the Bribery Act, the FCPA or other Compliance Laws
governing the conduct of business with Nigeria, Niger, Chad and
Cameroon government entities (including local laws), the Enlarged
Group may be subject to criminal and civil penalties and other
remedial measures.
Furthermore, any remediation measures taken in response to
potential or alleged violations of Compliance Laws, including any
necessary changes or enhancements to the Enlarged Group's
procedures, policies and controls and potential personnel changes
and/or disciplinary actions, may result in increased compliance
costs. Any such findings, or any alleged or actual involvement in
corrupt practices or other illegal activities by the Enlarged Group
or its commercial partners or anyone with whom the Enlarged Group
conducts business could damage its reputation and its ability to do
business, including by affecting the Enlarged Group's rights and
title to assets or by the loss of key personnel, and together with
any increased compliance costs, could adversely affect the Enlarged
Group's business, results of operations, cashflows, financial
condition and prospects.
There is concern in the oil and gas industry that, following the
letter of the law, the Bribery Act prohibits certain practices
which are not covered by (a) the FCPA, or (b) the anti-corruption
legislation and regulations of the relevant host jurisdiction (to
which the Enlarged Group is bound), but which are regarded as
standard industry practice (for example, facilitation payments). It
may not be possible for the Enlarged Group to detect or prevent
every instance of fraud, bribery or corruption. Failure to detect
or prevent any such instances may expose the Enlarged Group to
potential civil or criminal penalties under relevant applicable law
and to reputational damage, which may have a material adverse
effect on the Enlarged Group's business, prospects, financial
condition or results of operations.
2.26 Risk of crime and disruption to the Enlarged Group's
operations.
Countries in Central and West Africa can experience high levels
of criminal activity and oil and gas companies operating in Central
and West Africa may be particular targets of criminal or terrorist
actions. Criminal, corrupt or terrorist action against the Enlarged
Group and its directly or indirectly held properties or facilities
could have a material adverse effect on the Enlarged Group's
business, results of operations or financial condition. In
addition, the fear of criminal or terrorist actions against the
Enlarged Group could have an adverse effect on the ability of the
Enlarged Group adequately to staff and/or manage its operations or
could substantially increase the costs of doing so. The Enlarged
Group faces a threat of terrorism as a result of its proximity and
accessibility to various regional Islamist insurgencies. Whilst
these insurgencies have not impacted Savannah's operations
historically, there can be no guarantee this continues to be the
case in the future.
2.27 Licensing and other regulatory requirements.
The Enlarged Group's direct and/or indirect intended future
operations will be subject to, licences, production sharing
contracts, operating permits, regulations and approvals of
governmental authorities for exploration, development,
construction, operation, production, marketing, pricing,
transportation and storage of oil, taxation, and environmental and
health and safety matters. The Enlarged Group cannot guarantee that
such documents applied for will be granted or, if granted, will not
be subsequently withdrawn or made subject to possibly onerous
conditions, or their availability to the Enlarged Group or its
associated companies may adversely affect the Enlarged Group's
assets, plans, targets and projections.
The Enlarged Group will be subject to extensive government laws
and regulations (which may be subject to change) governing prices,
taxes, royalties, allowable production, waste disposal, pollution
control and similar environmental laws, the export of oil and many
other aspects of the oil business. There can be no assurance that
the actions of present or future governments in which the Group
operates, or of governments of other countries in which the
Enlarged Group may operate in the future, will not materially
adversely affect the Enlarged Group's ability to comply with such
laws and regulations or that there will not be a challenge to the
Enlarged Group's title to any interest it may have.
2.28 Expiry of contracts.
The Enlarged Group is party to various contracts and
arrangements that will expire at points in time in the future in
accordance with their terms. There can no assurance that such
contracts will, if required, be renewed either on the same terms or
otherwise.
2.29 The taxation and customs systems in the countries in which
the Enlarged Group operates may be subject to change and the rules
of those systems may be subject to different interpretation.
The Enlarged Group operates in emerging market economies and the
regulations on, and laws relating to, taxation, customs and excise
duties in these countries may change from time to time as
considered necessary for its further development. The Enlarged
Group's existing effective tax rate and revenues may be affected by
changes in such policies, laws or regulation. The Enlarged Group
has subsidiaries located in multiple jurisdictions and has relied
upon external professional advice in relation to the applicable
taxation regime in each jurisdiction. The Enlarged Group cannot be
certain that this advice will ultimately prove to be correct.
Furthermore, local tax authorities' interpretation of, and/or
decisions with respect to applicable tax laws or regulations may
differ from the Enlarged Group's interpretation of such laws or
regulations. Such interpretations or decisions could result in
additional tax becoming due or payable in the future by the
Enlarged Group.
Changes in applicable policies on taxation, customs and excise
duties, as well as differences in interpretation of and decisions
relating to tax laws, may have an adverse effect on the Enlarged
Group's business, results of operations, financial position and
prospects.
2.30 Exchange rate fluctuations.
Currency fluctuations may affect the Enlarged Group's operating
cashflow since certain of its costs and revenues are denominated in
currencies other than Pounds Sterling, such as US Dollars, Euros,
Naira, Central African CFA Franc and West African CFA Franc.
Fluctuations in exchange rates between currencies in which the
Enlarged Group operates may cause fluctuations in its cashflows and
financial results (which are reported in US Dollars). In
particular, under the terms of the Enlarged Group's gas sales
agreements, which are US Dollar denominated, the customer has the
option to settle in Naira at the relevant prevailing exchange rate
immediately prior to settlement; therefore the Enlarged Group is
exposed to any adverse exchange rate differential or movement in
exchange rate in converting Naira back into US Dollars, for
example, for servicing US Dollar denominated debt. Such exposure
increases if local currencies like the Naira are not freely
convertible into US Dollars or other hard currencies and there is a
devaluation of the local currency. The Enlarged Group does not
currently have a foreign currency hedging policy in place. Refer to
paragraph 2.36 of this Part 3 for further information.
The Company's share price is quoted on AIM, a sub-market of the
London Stock Exchange, in Pounds Sterling. As a consequence,
shareholders may experience fluctuation in the market price of the
Ordinary Shares as a result of, amongst other factors, movements in
the exchange rate between Pounds Sterling, US Dollars, Euros,
Naira, Central African CFA Franc and West African CFA Franc.
2.31 Insurance coverage and uninsured risks.
While the Board will determine appropriate insurance coverage
from time to time, it may elect not to have insurance for certain
risks due to the high premium costs associated with insuring those
risks or for other reasons, including an assessment in some cases
that the risks are remote.
No assurance can be given that the Enlarged Group will be able
to obtain insurance coverage at reasonable rates or with reasonable
deductibles (or at all), or that any coverage it or the relevant
operator obtains or the proceeds of insurance claims will be
adequate and available to cover any losses arising. The Enlarged
Group may become subject to liability for pollution, blow-outs or
other hazards against which it has not insured or cannot insure
itself against, including those in respect of past activities for
which it was not responsible. The Enlarged Group will exercise due
care in the conduct of its business and obtain insurance prior to
commencing operations in accordance with industry standards to
cover certain of these risks and hazards. However, insurance is
subject to deductibles and limitations on liability and, as a
result, may not be sufficient to cover all of the Enlarged Group's
losses. The occurrence of a significant event against which the
Enlarged Group is not fully insured, or the insolvency of the
insurer of such event, could have a material adverse effect on the
Enlarged Group's business, financial condition, results of
operations and prospects. Any indemnities the Enlarged Group may
receive from such parties may be difficult to enforce if such
sub-contractors, operators or joint venture partners lack adequate
resources. In the event that insurance coverage is not available or
the Enlarged Group's insurance is insufficient to fully cover any
losses, claims and/or liabilities incurred, or indemnities are
difficult to enforce, the Enlarged Group's business and operations,
financial results or financial position may be disrupted and
adversely affected. Further, even where the Enlarged Group is
insured, its contractors may themselves be insufficiently insured,
or uninsured, in respect of damage they may cause to the Enlarged
Group's property or operations. In such cases, the Enlarged Group
may be required to incur additional costs to extend its cover to
its contractors, from whom it may be unsuccessful in recovering
such costs in full or at all.
The payment by the Enlarged Group's insurers of any insurance
claims may result in increases in the premiums payable by the
Enlarged Group for its insurance cover and adversely affect the
Enlarged Group's financial performance. In the future, some or all
of the Enlarged Group's insurance coverage may become unavailable
or prohibitively expensive.
Operational insurance policies are usually placed in one-year
contracts and the insurance market can withdraw cover for certain
risks which can greatly increase the costs of risk transfer. Such
increases are often driven by factors unrelated to the Enlarged
Group such as well control elsewhere in the world and windstorm
damage.
2.32 Litigation.
From time to time, the Existing Group has been or is, and the
Enlarged Group may be, subject directly or indirectly to litigation
arising out of its business and proposed operations. Damages
claimed under such litigation may be material or may be
indeterminate, and the outcome of such litigation may materially
impact the Enlarged Group's business, results of operations or
financial condition. While the Enlarged Group assesses the merits
of each lawsuit and defends itself accordingly, it may be required
to incur significant expenses or devote significant resources to
defending itself against such litigation. In addition, the adverse
publicity surrounding such claims may have a material adverse
effect on the Enlarged Group's business.
2.33 The ongoing COVID-19 pandemic could have a material adverse
effect on the Enlarged Group's results of operations and financial
condition.
The COVID-19 pandemic has had a negative impact on economic
conditions globally and there remains concerns for prolonged
economic uncertainty and tightening of global financial conditions
as countries continue to experience extended waves of increased
infection rates.
Although the Company is continuing to take measures to mitigate
the broader public health risks associated with COVID-19 to its
business and employees, including through self-isolation of
employees where possible in line with the recommendations of
relevant health authorities, the continued and long term adverse
impact this may have on the Enlarged Group's workforce and key
suppliers and its impact on the global economy (including the
Chadian, Cameroonian, Nigerian and Nigerien economies) and the oil
and gas industries is unknown. As a result of the ongoing COVID-19
pandemic, there may be short-term impacts on the Enlarged Group's
supply chain and planned work programmes. Similarly,
government-imposed travel restrictions may impair the ability of
certain of the Enlarged Group's employees and advisors to conduct
physical inspections of existing operations and visit in-country
offices.
As the impact of the COVID-19 pandemic continues, there can be
no assurances that contract counterparties will not seek to
renegotiate contractual terms or seek to claim force majeure to
excuse performance of their contractual obligations to the extent
that they are affected by the COVID-19 outbreak.
Given the continually evolving nature of the COVID-19 pandemic
and resultant government restrictions around the world, there can
be no assurances that there will not be a material adverse effect
on the Enlarged Group's results of operations and financial
condition.
2.34 Reliance on Third Party Service Providers and
Contractors.
The Enlarged Group will rely on a relatively concentrated group
of oil field services providers and contractors to provide
materials and services across its existing operations and also in
Chad and Cameroon. Any competitive pressures on the oilfield
service providers (or increases in the cost of raw materials) could
result in a substantial increase in the costs to conduct the
Company's business. Similarly, shortages of raw materials could
lead to delays in implementing projects and/or increases in costs
which could adversely impact upon the operations of the Enlarged
Group.
2.35 Debt Counterparty and Commercial Risk.
The Company is reliant upon debt providers to finance its
operations and has entered into certain loan documentation to
finance both the Exxon Acquisition and the PETRONAS Acquisition,
and as the Company continues to grow, it expects to enter into
further debt facilities in the future. The Company seeks to
minimise counterparty and commercial risk when entering into such
debt facilities, such as, for example, by retaining debt facility
specialist employees and employing experienced professional
advisors. However, there can be no guarantee that monies will be
advanced under a facility due to circumstances outside of the
Enlarged Group's control. This may result in the Enlarged Group
being unable to finance its business as anticipated and require it
to seek alternative funding sources which may or may not be
available at the point in time such alternative finance is
sought.
2.36 Hedging policy may prove ineffective at managing price
risk.
The Company is expecting to establish a commodity hedging
programme which could see up to 60 per cent. of forward production
volumes associated with the assets being acquired pursuant to the
Exxon Acquisition and the PETRONAS Acquisition being hedged for the
forward 12 months. The Senior Lender under the Debt Financing may
additionally request or require further hedging be undertaken at
various times. The intention of the hedging policy is to minimise
exposure to fluctuations in commodity prices through the use of
various derivative based hedging instruments (most likely put
options). No speculative hedging is anticipated to be
undertaken.
While the Company will seek to only hedge its forward exposure
through transactions with credit worthy parties, there can be no
guarantee that such parties will prove credit worthy over time and
therefore that the intended hedging program could be effective.
Further, while the Enlarged Group has a clear intention to enter
into hedging contracts, there can be no guarantee that it will be
able to enter into appropriately priced hedging contracts and
therefore that the hedging program would be entered into in full or
at all.
2.37 Climate Change legislative changes.
The growing political attention surrounding climate change and
legislative changes being seen could have adverse impacts on the
success of the Enlarged Group. International agreements, national
and regional legislation and regulatory measures to limit
greenhouse emissions are currently in various stages of discussion
or implementation. The Enlarged Group may be exposed to additional
costs from compliance with legislation and best practice. The
growing awareness amongst end consumers of climate change may also
lead ultimately to diminished demand for oil and gas.
The Enlarged Group may be subject to climate related activism
from groups who are campaigning against fossil fuel extraction
which could negatively impact upon the Enlarged Group's
business.
2.38 The Importance of maintaining a "social licence to operate"
in host communities.
The Company operates an engagement policy with the communities
in which it operates and provides benefits to these communities
through employment, training and other local projects. Given the
proximity of operations to communities, ongoing interaction is
important to maintain the social licence to operate and the trust
of the communities. Failure to maintain this relationship though
could lead to disruption to our operations and the ability of the
Company to execute its projects in a timely manner.
3 Risks associated with the Chad/Cameroon Assets and doing business in Chad and Cameroon
3.1 Production from the Doba Oil Project may be affected by
unforeseen events including facilities and infrastructure failure
and labour disputes.
The Doba Oil Project is in a remote location and has been on
production since 2003 and, therefore, some of the production and
storage facilities require increasingly regular maintenance and may
be more susceptible to failure. The Doba Oil Project is also
dependent on its workforce, comprising employees and contractors
and the uninterrupted availability of certain critical
infrastructure, including the oil field gathering stations, on-site
power generation and the Chad-Cameroon ETS, to sustain production
rates and to export the crude oil production to the international
markets. Any labour disputes, unrest or strike activity involving
the employees and contractors on the Doba Oil Project could
adversely affect its ongoing operations. For example, in June, July
and October 2021 the Doba Consortium experienced labour disputes
which resulted in reduced production (which, to the extent of the
EEPCI participating interest share in the Doba Oil Project, the
Company has been compensated for through the consideration payment
structure under the Exxon SPA).
The failure of any key infrastructure could result in some or
all of the production from the Doba Oil Project being shut in,
either temporarily or for a longer period of time whilst repairs
are made, or replacement equipment is sourced and brought to
location. All these factors could have a material adverse impact on
the Enlarged Group's business results of operations, cashflows,
financial condition and prospects.
For example, an incident occurred in early November 2021 at the
Miandoum gathering Station (MGS), which affected the water handling
system. Production from the Miandoum, Moundouli, Maikeri and Nya
fields which are gathered at the MGS was temporarily shut-in and
resumed in early December 2021. The operator of the project is
currently implementing a solution to replace the water handling
system at Miandoum, with the aim that production will ramp-up to
pre-incident levels in the coming weeks.
The Company has been compensated for this temporary reduction in
production through the consideration payment structure under the
Exxon SPA.
3.2 The co-mingling of third-party crude oil may negatively
affect the commercial value of the crude oil produced from the Doba
Oil Project and impact the revenue of the Enlarged Group.
Crude oil produced from the Doba Oil Project and transported by
the Chad-Cameroon Pipeline is commingled with the crude oil of
other shippers, such that no shipper is entitled to receive the
identical crude oil that was delivered on behalf of such shipper
into the Chad-Cameroon Pipeline. From the Company's due diligence,
it is understood that there is no quality bank agreement in place
between the Pipeline Companies and the Shippers to provide for
adjustments to be made to the respective lifting entitlements, to
equitably account for quality differences in crude. Consequently,
there is a risk that the quality and ensuing sales price of the
Company's crude oil might be diminished by other shippers' crude
oil.
3.3 The Enlarged Group will be reliant on the Chad-Cameroon Pipeline and Kome Kribi 1 FSO
to export its production from the Doba Oil Project.
The Enlarged Group's route to market for its production from the
Doba Oil Project will be dependent on transportation through the
Chad-Cameroon Pipeline and offloading at the Kome Kribi 1 FSO for
sale to international markets. There is no other viable alternative
route to market for crude oil produced from the Doba Oil Project.
If, for any reason, the Enlarged Group was not able to access the
Chad-Cameroon Pipeline and Kome Kribi 1 FSO this could have a
material adverse impact on the Enlarged Group's business, results
of operations, cashflows, financial condition and prospects.
3.4 The success of the Doba Oil Project and profitability of TOTCo and COTCo relies on the
Enlarged Group's relationship and alignment with its joint
venture partners and other shareholders.
After Completion of both the Exxon Acquisition and the PETRONAS
Acquisition, the Enlarged Group would have a 75 per cent. operated
interest in the Doba Oil Project and 70.34 per cent. and 70.83 per
cent. interests respectively in TOTCo and COTCo, which collectively
own the Chad-Cameroon ETS. The Doba Oil Project and Chad-Cameroon
ETS are run and operated through a number of contracts governing
the relationship between the: (i) joint venture partners to the
Doba Consortium; and (ii) shareholders of TOTCo and COTCo. The Doba
Oil Project is operated by EEPCI (and the day-to-day management and
operations of TOTCo and COTCo is the responsibility of the General
Managers, who (after completion of the Exxon Acquisition) will be
appointed by EPIL and EEPCI). If either of the Exxon Acquisition or
the PETRONAS Acquisition does not complete, the Enlarged Group will
not have control of either TOTCo or COTCo and will not be in a
position to single handedly pass or block board or shareholder
resolutions, or, likewise, single handedly pass or block decisions
under the Doba JOA. Furthermore, if the Exxon Acquisition does not
complete, the Enlarged Group will not obtain operatorship of the
Doba Oil Project or the right to appoint the General Managers of
TOTCo or COTCo.
As is typical of these arrangements, there are certain material
decisions which will require super majority approval of the other
joint venture partners and shareholders (as applicable).
Accordingly, any delay, absence of engagement, withholding of
consent, breach, objections or disagreement by or with any of the
joint venture partners or shareholders (as applicable) could
adversely impact the success of the Doba Oil Project, profitability
of TOTCo and COTCo and/or have a material adverse effect on the
Enlarged Group's business, future cashflows, results of operations,
financial condition and prospects.
3.5 The Enlarged Group has not maintained decommissioning arrangements and/or security
funds.
The Board understands that:
-- no security abandonment fund is currently in place, nor has
EEPCI or PC Chad been separately reserving for future
decommissioning obligations, in relation to the Doba Oil Project;
and
-- the Pipeline Companies have not been separately reserving the
decommissioning contributions received from Shippers, which are
made through an abandonment fee included in the tariff charged by
the Pipeline Companies under the respective transportation
agreements.
The Enlarged Group's valuation of the Exxon Acquisition and/or
the PETRONAS Acquisition has been made on the basis that no such
abandonment security funds are in existence. However, if such
abandonment and decommissioning costs and expenses are higher than
expected, or the Enlarged Group incurs penalties for failure to
abandon and/or decommission its properties as required, this may
adversely impact the Enlarged Group's business, prospects and/or
financial condition.
Under the terms of the Midstream Conventions, the governments of
Chad and Cameroon (respectively) have the right to acquire their
respective portions of the Chad-Cameroon Pipeline following
renunciation of the transportation authorisations by TOTCo and
COTCo. If such rights are exercised, TOTCo and COTCo are not
required to decommission the Chad-Cameroon Pipeline. The Enlarged
Group would likely seek to exercise its shareholder rights (to the
extent possible) in TOTCo and COTCo in order to facilitate future
discussions with the governments of Chad and Cameroon
(respectively) on this issue when appropriate.
3.6 The profitability of TOTCo and COTCo is dependent on its third-party customers continuing
to produce oil from their upstream operations.
The profitability of TOTCo and COTCo is wholly dependent on the
revenues received from shippers utilising the Chad-Cameroon ETS.
The tariff payments due to TOTCo and COTCo for transportation of
crude oil under the Shipper Transportation Agreements are
determined by usage and throughput rates, rather than on a capacity
reservation basis. Consequently, TOTCo and COTCo's future revenues
are dependent on the level of production from, and field life of,
those fields operated by the existing Shippers and any new fields
operated by new or existing Shippers who require access to the
Chad-Cameroon ETS. Under the Shipper Transportation Agreements, the
shippers are not obliged to make any minimum nominations, and
consequently any shipper could nominate zero once it no longer
requires transportation services through the Chad-Cameroon Pipeline
(which could significantly impact the cashflow position of TOTCo
and COTCo).
Given that the Chad-Cameroon ETS is presently the only
economically viable transportation option to market each shipper's
crude oil to the international market, the Enlarged Group's view is
that the risk that the existing Shippers (and future shippers) will
no longer require the transportation services of TOTCo and COTCo in
the immediate to mid-term is low.
3.7 Any political instability and/or unrest may adversely impact
the operation of the Chad/Cameroon Assets.
Any political instability and/or unrest in Chad and/or Cameroon
has the potential to adversely impact the operation of the
Chad/Cameroon Assets.
In Chad, there has been a period of political instability
following the death of President Idriss Déby Itno on 20 April 2021,
which led to the dissolution of the existing government. Although a
transition government is now in place in Chad, there can be no
guarantee that this political instability will not return and
adversely impact the operation of the Chad/Cameroon Assets.
Since 2016, Cameroon has been subject to political instability
in the North West and South West regions due to the Anglophone
crisis. Although, to the best of the Board's knowledge, the
Chad-Cameroon Pipeline infrastructure has not been subject to any
terrorist activities to date, there can be no guarantee that this
will continue to be the case in future.
3.8 Militant activity could destabilise oil production in Chad and/or Cameroon and adversely
affect the Enlarged Group's operations and Chad's and/or
Cameroon's economy.
3.8.1 Chad
Militant activity, violence and civil disturbances have, in the
past, caused intermittent problems in Chad. In the recent past, the
most prominent local rebel activity was essentially localised in
the north of the Chad Territory and the related battles between the
rebels and the army led notably to the death of Chad's then
president, President Idriss Déby Itno, and the instability
in-country due to presidential vacancy.
The Doba Oil Project and Chad-Cameroon Pipeline are located in
Southern Chad and they have not been subjected to any militant
activity. However, in spite of this fact and the Chadian
government's efforts, unlawful acts may be directed at oil and gas
industry participants and there is no assurance that militant acts
will not occur in the future. In addition, any militant action
against the Enlarged Group's assets or operations could result in
significant damage to the environment, negatively impact its
relationships with local communities and result in a temporary or
permanent closure of all or part of those facilities.
The occurrence of any of the above could have a material adverse
effect on the Enlarged Group's business, results of operations,
cashflows, financial condition and prospects.
3.8.2 Cameroon
Although there has been unlawful and militant activities in the
North West, South West and far North regions of Cameroon, the Board
does not expect that it will affect the activities of the Enlarged
Group in Cameroon.
3.9 The governments of Chad and Cameroon have significant influence over their domestic oil
and gas sectors, and their decisions and/or actions may directly
or indirectly adversely impact the operations of the Enlarged Group
in these countries.
The governments of Chad and Cameroon play a significant role in
regulating their respective oil and gas industries. Accordingly,
any action or decisions taken by such governments concerning the
oil and gas industry, or economy more generally, could have an
unexpected and materially adverse effect on the Enlarged Group's
business, results of operations, cashflows, financial condition and
prospects. Such risks include expropriation or re-nationalisation,
breach, abrogation or renegotiation of concession/project
agreements, denials of required permits and approvals, changes in
law or policy, increases in royalty rates and taxes and the
application of exchange or capital controls.
There can be no assurance that, post-Completion of the Exxon
Acquisition and/or the PETRONAS Acquisition, the Enlarged Group
will be able to establish and maintain a supportive and cooperative
relationship with either of the Chad and/or Cameroon
governments.
3.10 The Enlarged Group may have to contend with logistical and
operational difficulties as a result of carrying out its operations
in Chad and Cameroon.
As with many emerging economies, access to, and the condition
of, public infrastructure (including roads, bridges and utilities)
across Chad and Cameroon is limited. There can be no assurance that
the operations of the Exxon Target Companies, PETRONAS Target
Companies and/or the Pipeline Companies will not be materially
impacted due to the state of relative infancy and/or repair of such
public infrastructure. To date, the majority of the infrastructure
required for exploration, operations and transportation of
production across the two countries has been privately constructed
by the Doba Consortium and/or Pipeline Companies, and the
operations of the Enlarged Group in Chad and Cameroon is dependent
on it. Such private infrastructure requires substantial expenditure
to build and maintain, and construction and repair work is often
subject to delays.
3.11 The Chad and Cameroon judicial system may create an
uncertain environment for investment and business activity.
The legal systems in Chad and Cameroon, as with many developing
countries, continue to develop and mature.
As a result, the Enlarged Group may become subject to certain
difficulties in obtaining effective or consistent legal redress due
to a number of factors out of its control. Such difficulties may
include delay, the level of discretion that may be exercised by the
courts or governmental authorities, insufficient judicial or
administrative guidance on interpreting applicable rules and
regulations, inconsistencies or conflicts between and within
various existing laws, regulations, decrees, orders and resolutions
and/or the relative inexperience of the judiciary and courts in
commercial matters. In addition, the enforcement of laws or the
Enlarged Group's statutory or contractual rights may depend on, and
be subject to the interpretation of, the relevant local authority,
and such interpretation may differ from the advice given to the
Enlarged Group by local lawyers and potentially result in
unexpected outcomes. Any disputes arising under the Upstream
Conventions or the Conventions of Establishment are subject to the
exclusive jurisdiction of an ICC arbitral panel seated in Paris.
Whilst Cameroon is a party to the New York Convention, Chad is not
and therefore there can be no guarantee that an ICC award made
against Chad for the benefit of the Company would be recognised or
enforced by the Chadian courts. However, such an award could be
enforced in any other New York Convention state. Similarly, whilst
there is a bilateral investment treaty in force between Cameroon
and the UK, there is no such bilateral investment treaty in force
between Chad and the UK.
It is possible that any adverse finding against the Enlarged
Group, or any restriction placed on the Enlarged Group in
exercising its contractual or statutory rights, could have a
material adverse effect on the Enlarged Group's business, financial
condition and/or prospects.
3.12 EEPCI (as Operator of the Doba Consortium) is currently
subject to a number of labour related claims
EEPCI is currently subject to a number of labour related
litigation matters in the Chadian courts. The practice of claimants
in Chad is often to bring vastly inflated and meritless claims
against defendants and it appears to be the case that, even when
claimants are successful in their claims, the amount of any award
is significantly less than the amount claimed. To date, EEPCI's
approach has been to rigorously contest all such claims brought
against the Doba Consortium. The Company understands that the
amount paid out by EEPCI (gross to all members of the Doba
Consortium) during the six year period 2016 to 2021 was for an
amount less than 1 per cent. of the total amount of claims
currently being brought or threatened against EEPCI.
Following Completion of the Exxon Acquisition and PETRONAS
Acquisition, there can be no certainty that EEPCI will be
successful in its defence of all ongoing claims or any new claims
brought against it. It is possible that claimants may seek seizure
or freezing orders over its or Doba Consortium property or other
injunctive remedies in support of their claims for damages. A
successful claim by one or more claimants may have a materially
adverse impact on the Enlarged Group's business, ability to operate
or financial condition. However, the Company intends to continue
EEPCI's ongoing approach to actively contest all existing (and any
new) claims that it considers lack merit.
3.13 Potential effect of the CEMAC Forex Regulation.
Foreign exchange matters within the Economic and Monetary
Community of Central Africa Countries (CEMAC) area are dealt with
in Act Ndeg2/18/CEMAC/UMAC/CM dated 21 December 2018 and applicable
as from 1 March 2019 (the "CEMAC Forex Regulation"). The
application of the CEMAC Forex Regulation to entities falling
within the hydrocarbons and mining sectors (the "extractive
companies") has however been postponed since 2019 but it is
intended to come into full force and effect as of 1 January 2022.
In the past two years, representatives of the hydrocarbons and
mining industries have engaged in discussions with the Bank of
Central African States (the "BEAC") and the CEMAC authorities to
review the principles and related requirements enacted by the CEMAC
Forex Regulations in the context of their operations. The outcome
of these discussions resulted so far in the adoption of three
separate instructions by the Governor of the BEAC on 13 December
2021 that apply to the extractive companies in connection with (a)
the conditions and modality of opening and maintaining foreign
currency accounts and (b) the domiciliation of the importation and
exportation of goods and services. The CEMAC Forex Regulation as
amended by the new instructions provides, inter alia, several new
obligations for the extractive companies:
- the prior authorisation from the BEAC for opening and
maintaining foreign currency accounts outside and within the CEMAC
zone and in relation to any existing foreign currency accounts
existing as of 13 December 2021, the extractive companies have a
grace period of 10 months from 31 December 2021 to comply with the
newly adopted relevant instruction;
- the prior declaration and the repatriation of any borrowings
(principal, interests repayments) made to a resident entity by a
non-resident;
- the prior authorisation from the BEAC for any loan from a
resident to a non-resident in the CEMAC zone and the declaration
and repatriation of any revenues (including any repayments) from
such loan within the CEMAC zone;
- the domiciliation of all importations and exportation of goods
or services with a local credit institution when the amount is at
least XAF 10 million;
- the repatriation of any export revenues within the CEMAC zone
within 150 days of receipt; and
- the declaration to the Central Bank and the ministry in charge
of money and credit of all transfer exceeding XAF 100 million out
of the CEMAC zone 30 days prior to their realization.
The CEMAC Forex Regulation is a regional cross-border regulation
which, from a hierarchy of norms' perspective, supersedes and
prevails on the national provisions of each country. The Company
will, following Completion of the Exxon Acquisition and PETRONAS
Acquisition, review the structure of its operations in Chad and
Cameroon to ensure compliance with the CEMAC Forex Regulation as
amended and in particular once all regulations that are expected to
be adopted by the CEMAC countries by the year end have been so
adopted.
3.14 The taxation and customs systems in Chad and/or Cameroon
may be subject to change and the rules of those systems may be
subject to different interpretation.
Chad and Cameroon are both emerging market economies, and their
policies and regulations on, and laws relating to, taxation,
customs and excise duties may change from time to time as
considered necessary for its further development.
More specifically, tax and customs rules usually evolve on an
annual basis through annual finance laws, as considered necessary
for further development and the realisation of their budgetary
objectives.
Changes in applicable policies on taxation, customs and excise
duties, as well as differences in interpretation of and decisions
relating to tax laws, may have an adverse effect on the Enlarged
Group's business, results of operations, financial position and
prospects.
4. Risks associated with the Nigerian Assets and doing business in Nigeria
4.1 The Enlarged Group's future Nigerian cashflows depend on certain key end users and such
key end users may fail to fulfil their contractual obligations
to the Enlarged Group or the Enlarged Group could fail to obtain
replacement customers.
The Enlarged Group has entered into four long-term take-or-pay
gas sales agreements and one short-term interruptible gas sales
agreement, and the Enlarged Group expects these five agreements
will contribute a very significant portion of its future revenue.
The inability of any of the key contractual counterparties to meet
their obligations to the Enlarged Group or failure to make timely
payments may affect the Enlarged Group's financial results,
cashflows and ability to service its debt.
In the event that the Enlarged Group's existing customers do not
fulfil their obligations under the respective gas sales agreements,
or in the event that any of these entities become insolvent or
subject to liquidation, the Enlarged Group may seek to enforce the
terms of the agreements, including the NDPHC letter of credit and
the World Bank Partial Risk Guarantee provided in respect of the
Calabar NIPP gas sales agreement. There can be no assurance as to
how long an enforcement action may take, or whether at the time of
such enforcement, the relevant guarantor will be able to meet its
obligations. In addition, in the event that any of the Enlarged
Group's customers change ownership, the contractual obligations of
that counterparty may transfer to the new owner and may expose the
Enlarged Group to different payment and credit risks.
To the extent any of Accugas's material downstream customers
breach or disavow their respective contracts with Accugas, there is
a scarcity of potential new customers to contract with Accugas for
the supply of gas on a similar scale to these existing customers.
This may impact Accugas's ability to pay its creditors. Also, sales
and transportation of the Enlarged Group's gas is dependent on
pipelines and other infrastructure facilities enabling it to supply
to customers, and new infrastructure might be required to be
installed to re-route production to alternative or additional end
users. Any requirement to install new infrastructure would require
further capital expenditure by Accugas that may not be
available.
In addition, the Upstream GSA, under which SEUGL sells gas from
the Uquo Field to Accugas, is structured on a 'pay-when-paid'
basis. Therefore, if Accugas's customers fail to pay or are late in
paying Accugas, this may impact SEUGL's ability to pay its
creditors.
The occurrence of any of these events could have a material
adverse effect on the Enlarged Group's business, future cashflows,
results of operations, financial condition and prospects.
4.2 A significant proportion of the Enlarged Group's cashflow is supported by the World Bank
Partial Risk Guarantee.
A significant proportion of the Existing Group's cashflow, those
arising under the Calabar GSA, is supported by the World Bank
Partial Risk Guarantee, provided by the International Development
Agency to Accugas, backed by a letter of credit.
Under the terms of the Partial Risk Guarantee and associated
documents, the Federal Government of Nigeria has provided an
indemnity to the International Development Agency in the event that
Accugas have to call on the letter of credit. Accugas has
historically experienced payment delays in respect of the supply of
gas to Calabar NIPP and as at the date of this announcement US$98.2
million is currently due under the Calabar GSA. The Company is
working with NDPHC to settle this amount in a timely fashion
without recourse to the Partial Risk Guarantee.
Under the terms of the Partial Risk Guarantee agreements, there
is a risk that the International Development Agency could, after
giving notice, suspend this guarantee and, ultimately, terminate
the guarantee if Accugas does not comply with its terms. The
Directors believe that the Enlarged Group has the policies and
procedures in place to ensure compliance with the relevant
representations, covenants and obligations, which largely relate to
environmental and social practices and anti-bribery and corruption
standards.
4.3 A significant proportion of the Enlarged Group's revenue is derived from the sale of gas to
the Nigerian power sector.
The Nigerian power sector suffers from numerous problems, such
as limited access to infrastructure, low connection rates,
inadequate power generation capacity, lack of capital for
investment, insufficient transmission and distribution facilities,
high technical, commercial and collection losses and vandalism.
These problems contributed to Nigeria ranking by the World Bank in
2020 as the 171st most difficult country in which to obtain access
to electricity. These problems have created liquidity issues
throughout the power value chain, from the distribution companies
to the thermal power generating companies, which have resulted in
delays in payments to the gas suppliers and dependence on financial
assistance being provided to the sector from the Federal Government
and the World Bank. Further reforms of the power sector are being
proposed, but there is no guarantee that these reforms will be
effective and so continued liquidity challenges for the sector
could impact on the Enlarged Group's cashflows, financial condition
and prospects.
4.4 There can be no certainty in relation to future levels of
growth in Nigerian domestic demand
for gas.
Whilst the Board believes that utilisation of domestic gas in
Nigeria will be important in solving Nigeria's shortage of domestic
power, the expected growth in demand for domestic gas may be less
or slower than anticipated. In particular, if the Nigeria
government's Gas Master Plan and Power Sector Recovery Program are
not successful in promoting the development and utilisation of gas
in Nigeria and improving electric power generation and supply, or
if the Nigerian government decides to amend its stated policy so as
to move away from domestic gas as a key component of tackling
Nigeria's shortage of domestic energy, expected growth in demand
for domestic gas could be materially impacted.
4.5 The Enlarged Group's upstream interests in Nigeria are
concentrated on two oil and gas fields.
The Enlarged Group's upstream interests in Nigeria are
concentrated on two oil and gas fields, namely the Uquo Field and
the Stubb Creek Field. As a result, the Enlarged Group's success in
Nigeria will be heavily reliant on it being able to continue to
successfully exploit existing oil and/or natural gas reserves
and/or maintaining valid legal title in these two fields. There can
be no guarantee that the Enlarged Group can or will be able to, or
that it will be commercially advantageous for the Enlarged Group to
continue to exploit the Uquo Field and the Stubb Creek Field.
Furthermore, with both the Uquo Field and the Stubb Creek Field
being located in South East Nigeria, the Enlarged Group's revenues
may be impacted by issues generally affecting oil and gas
operations in the region.
4.6 Operational impediments or damage to, or the shut-down of, processing and transport
infrastructure may hinder the Enlarged Group's access to oil and
gas markets or delay or cease production.
The Enlarged Group is reliant on the Uquo CPF and the Stubb
Creek EPF to process natural gas and crude oil respectively and its
pipeline infrastructure to transport gas and oil to its gas
customers and to the oil the export terminal. Any sudden loss of,
or significant interruption to, processing at the Uquo CPF or the
Stubb Creek EPF, or the transportation of crude oil and/or natural
gas through the pipelines that the Enlarged Group uses could result
in an inability to meet gas contract obligations and to sell its
oil production. In particular, a significant interruption to crude
oil and/or natural gas processing at the Stubb Creek EPF or the
Uquo CPF could occur if any essential piece of equipment for which
the Enlarged Group lacks a replacement should break down for a
substantial period of time or if multiple breakdowns were to occur
at the same time. Furthermore, there can be no assurance that the
Enlarged Group will be able to find a replacement or arrange
necessary repairs on a timely or cost-effective basis.
The Enlarged Group may also be required to shut-in wells for
regulatory reasons or due to a lack of demand or inadequacy or
unavailability of a gas pipeline, gathering system or processing
capacity. If a shut in were to occur, the Enlarged Group would be
unable to realise revenue from those wells until suitable
arrangements were made to transport and market that production.
Any significant delay, interruption or stoppage to the Enlarged
Group's oil and gas operations could damage the Enlarged Group's
relationships with one or more of its key customers, harm its
reputation and cause the Enlarged Group to be liable for breach of
contract for a failure to meet its contractual obligations.
The occurrence of any of these events could have a material
adverse effect on the Enlarged Group's business, results of
operations, cashflows, financial condition and prospects.
4.7 The Enlarged Group is, or could potentially in the future
be, reliant on third-party owned or
operated infrastructure for the transport of its oil and natural
gas liquids from the Uquo Field and the Stubb Creek Field to export
terminals.
The Enlarged Group is reliant on certain joint-venture owned or
third party operated infrastructure for its oil and gas operations,
in particular the transportation of Uquo and Stubb Creek oil and
natural gas liquids (or condensate) sold through QIT for export.
The Enlarged Group's oil and condensate volumes are stabilised
through the FUN Manifold, which is jointly owned by the Uquo JV,
the Stubb Creek JV and a third-party joint venture.
The inadequacy or unavailability of such oil and condensate
pipeline capacity and infrastructure, and/or the necessary licences
to operate and export, could require the Enlarged Group to shut-in
wells, leading to the Enlarged Group being unable to realise
revenues from sales of oil and gas from those wells until suitable
alternative transportation arrangements can be made.
Accugas also uses third-party owned and operated gas
transportation pipelines to access other customers and gas markets
in the region and will do so in the future in order for Accugas to
access new customers and markets.
4.8 The Enlarged Group's operations in marginal fields are subject to indigenous ownership
restrictions.
The Uquo Field and the Stubb Creek Field are subject to the
rules and requirements of the Marginal Field Guidelines, which
govern Nigeria's marginal field programme. The Marginal Field
Guidelines provide, among other things, that marginal fields may
only be awarded to, and operated by, indigenous companies that are
"substantially Nigerian". Furthermore, in 2014 the DPR issued
guidelines for obtaining ministerial consent to the assignment of
interests in Oil and Gas assets in Nigeria. The guidelines provide
that the total interest assignable to a foreign entity in a
marginal oil field in Nigeria shall not exceed 49 per cent. of the
total overall interest in the asset.
Following the recent enactment of the PIA in 2021, the
interpretation of the Marginal Field Guidelines will now be carried
out by the Commission (the newly-formed Nigerian upstream
regulatory authority that has replaced the DPR). Although the
Directors believe that the current ownership structures of both the
Stubb Creek Field and the Uquo Field satisfy the "substantially
Nigerian" requirement, to the extent the Commission changes its
policy in this regard or the ownership structure changes due to
changes in the Enlarged Group or its joint venture partners in the
relevant field, there is a risk that the Company and its respective
joint venture partners could be forced to relinquish their interest
in these assets.
4.9 The Enlarged Group has not maintained decommissioning
arrangements and/or security
in respect of the Uquo Field and the Stubb Creek Field.
By the provisions of the PIA, it is now a statutory obligation
for the Enlarged Group to make adequate provisions for and
establish a Decommissioning and Abandonment Fund with the funds to
be set aside in escrow and funded on a straight-line basis over the
remaining economic life of the Uquo Field and Stubb Creek Field.
The Enlarged Group is required to submit the Decommissioning plans
to the regulator within 12 months of the PIA becoming
effective.
Under the terms of the Enlarged Group's existing contractual
arrangements with respect to the Uquo Field and the Stubb Creek
Field, the Enlarged Group and its joint venture partners in such
fields are obliged to maintain certain decommissioning
arrangements/security in respect of potential future
decommissioning liabilities. To date, and in line with a number of
other operators of marginal fields, these provisions have not been
strictly enforced and such decommissioning arrangements/security
arrangements have not been put in place. If a notice of breach were
received in respect of these decommissioning arrangements/security
arrangements then each of the contracts allow a 90-day period in
order to remedy the breach, which may be achieved by making the
relevant payments into escrow.
4.10 The Enlarged Group is subject to risks involving third
party operators, contract counterparties, partners and other
project participants. Furthermore, disagreements with, or the
exercise of termination rights by, any of the Enlarged Group's
partners or contract counterparties may result in delays, losses or
additional costs to the Enlarged Group.
Both the Enlarged Group and its partners are obliged to comply
with the requirements of the applicable contracts, joint operating
agreements, farm-out agreements and other arrangements governing
their respective relationships.
Co-operation and agreement among project participants on
existing or future projects is important for the smooth operation
and financial success of such projects and if one or more project
participants were to fail to cooperate, it may delay or disrupt
existing or future projects. Further, operators, partners and other
project participants that own interests in assets in which the
Enlarged Group has interests may have economic or business
interests or objectives that are inconsistent or conflict with
those of the Enlarged Group and may elect not to participate in
certain activities relating to those assets or withhold their
consent in circumstances when their consent is required, which may
limit the ability of the Enlarged Group and other interest holders
to explore, appraise or develop such assets as planned.
Although the Stubb Creek Field is operated by Universal, the
joint operating agreement in respect of the Stubb Creek Field
requires decisions of the project management committee to be made
jointly, thereby requiring both the Enlarged Group and Sinopec to
vote in favour of key decisions of the project management committee
(save for non-associated gas developments in respect of which
Universal has the casting vote). Sinopec is currently required to
provide 80 per cent. of funding in relation to crude oil and
associated natural gas developments pursuant to the terms of the
joint operating agreement in respect of the Stubb Creek Field.
There is a risk that Sinopec may not vote in favour of oil
development plans for the Stubb Creek Field. The Enlarged Group may
suffer unexpected costs or other losses if Sinopec or any future
partner does not meet its obligations. For example, other
participants may experience financial or other difficulties or
otherwise default on their obligations to meet capital or other
funding obligations in relation to assets in which the Enlarged
Group has interests. Furthermore, any failure by a third-party
operator or the Enlarged Group to carry out its obligations with
respect to a field could put the licence for that asset at
risk.
In addition, certain of the Enlarged Group's contractual
arrangements may permit the counterparty to terminate the
relationship under certain circumstances. Any loss of a third-party
operator (and any resulting loss of the licence to the field
operated by such operator) or partner could also impact the
Enlarged Group's ability to develop the field in accordance with
the development plans, or at all, which could impact oil and gas
production at a given field and could lead to the Enlarged Group
being unable to deliver gas to customers in accordance with its
contractual obligations. This, in turn, could impact the revenues
earned by the Enlarged Group with respect to the field.
Furthermore, contract counterparties may seek to renegotiate
contractual terms in the event of changes in their business or
operating environment, economic hardship or financial distress. In
such circumstances, the Enlarged Group may have to resort to legal
process to enforce its contractual rights and such processes can be
time consuming and costly and could result in an adverse outcome
for the Enlarged Group.
The occurrence of any of the above could have a material adverse
effect on the Enlarged Group's business, results of operation,
financial condition and prospects.
4.11 Deferred payments to Frontier.
As part of the FOL Transaction and pursuant to the terms of the
agreement with Frontier, SEUGL is required to pay Frontier a
deferred cash call equal to the Naira equivalent of US$4.13
million. Failure by SEUGL to pay Frontier the deferred cash call
will give rise to the right for Frontier to require SEUGL to
transfer a portion of its economic interest in the Uquo Gas Project
as a default remedy.
4.12 Revenue recognition under take-or-pay gas sales
agreements.
The Enlarged Group may be in position to deliver contracted gas
volumes when its customers are not ready or able to receive those
volumes. The take-or-pay provisions in the gas sales agreements
bind the purchaser to pay for certain quantities of gas even when
undelivered, from the date on which the gas is available for
delivery. However, title to gas sold only passes on the date of
delivery and, as the risk of ownership only transfers upon
delivery, revenue from the sale of the gas is recognised only on a
delivered basis. In circumstances which the Enlarged Group receives
payments pursuant to take-or-pay provisions and gas is not
delivered to the contractual counterparties, the Enlarged Group is
unable to recognise this income as revenue for accounting purposes
and instead accrues it as deferred revenue.
4.13 The Enlarged Group may attract spurious claims and media
coverage and is therefore subject to reputation risk.
Prominent businesses operating in Nigeria can attract
significant attention from the Nigerian media, which can be of an
adverse nature. Such media coverage can often be spurious and/or
politically motivated, putting forward allegations which are
unfounded due to the limited nature of the country's libel
laws.
The Enlarged Group has been subject to spurious litigation in
the past and there can be no assurance that other negative
publicity relating to the Enlarged Group will not arise and harm
Savannah's reputation with its operating partners, other project
participants, existing customers (some of whom are state-owned),
prospective customers, regulators, suppliers, host communities, the
wider Nigerian oil and gas industry, lenders and shareholders,
regardless of the inaccuracy of, or lack of grounds for, any such
negative publicity. Any such damage to the Enlarged Group's
reputation could have a material adverse effect on its business,
results of operations, financial condition and prospects and could
have a material adverse effect on the prevailing market price of
the Ordinary Shares.
Other proceedings have been brought against members of the Seven
Group which Savannah did not acquire. Although these proceedings
have not been brought in relation to companies within the Enlarged
Group, there is a residual risk that claimants may attempt to
extend their claims to the Enlarged Group.
4.14 There is a risk that the Enlarged Group could be held
liable for successor liability for violations of Compliance
Laws.
It is possible that the Enlarged Group could be held liable for
successor liability for violations of Compliance Laws, if such
violations have been committed in the past by companies within the
Seven Group, or by their employees, directors, representatives or
agents, in relation to the Nigerian Assets. There have, in the
past, been allegations and investigations into companies in the
Seven Group which are not included in the Nigerian Assets and did
not relate to the Nigerian Assets. It is the Company's belief that
none of these investigations are ongoing in Nigeria and there are
no other investigations ongoing in relation to companies in the
Nigerian Assets in any other jurisdiction. In addition, the
Company's due diligence did not find any evidence of violations of
Compliance Laws by the Seven Group or such persons or in relation
to the Nigerian Assets. However, there remains a risk that the
Company's due diligence may not have identified all issues which
may have occurred over the life and in all aspects of the business
of the Seven Group. The Company may also be negatively impacted if,
in the future, allegations or investigations were to suggest
violations of Compliance Laws had occurred in the past in relation
to the Seven Group and/or the Nigerian Assets, whether or not such
allegations or investigations were founded in fact.
4.15 The Enlarged Group must manage logistical and operational
difficulties as a result of carrying out its operations in
Nigeria.
The Enlarged Group must manage logistical and operational
difficulties as a result of carrying out operations in Nigeria.
Persistent problems with power generation, transmission and
distribution, a deteriorating and congested road network, congested
ports and obsolete rail infrastructure have severely constrained
socio-economic development in Nigeria.
Moreover, infrastructure in South Eastern Nigeria is limited and
unreliable. Rail and road infrastructure is relatively limited and
restricts the movement of people and goods within those regions
thereby increasing the time it takes to mobilise workforces and
deliver supplies or equipment. The lack of reliable infrastructure
also limits the Enlarged Group's ability (and that of its partners,
contractors, customers and suppliers) to respond quickly to
unforeseen situations, which can lead to delays and production
stoppages.
4.16 South East Nigeria periodically experiences adverse weather
conditions and natural disasters.
South East Nigeria, in which the Uquo Field and Stubb Creek
Field are both based, periodically experiences adverse weather
conditions and natural disasters, mainly in the form of floods,
which further limits the use of available infrastructure,
particularly during the rainy season (March to November), and
increases the likelihood of disruption during that part of year. In
addition, flooding in the Niger Delta has also led to outbreaks of
disease which, coupled with the ongoing security concerns in
relation to the region (see paragraphs 4.21 and 4.22 of this Part
3), may affect the Enlarged Group's ability to staff its operations
with qualified Nigerian and overseas individuals if such
individuals were deterred from relocating to the Niger Delta, or to
Nigeria more generally, as a result of health or security
concerns.
4.17 The Nigerian economy is dependent on oil production in
Nigeria and global prices of oil.
The Nigerian economy is highly dependent on oil production in
Nigeria and global prices of oil. Reductions in oil revenues could
have a material adverse effect on the Nigerian economy, and in turn
on the Enlarged Group's business and results of operations. The
Nigerian government relies heavily on oil revenue to fund its
budget and the decline in prices has resulted in a high rate of
unemployment, reduction in foreign exchange and government revenue,
as well as significant budgetary constraints, leading to less
investment in key projects such as infrastructure.
4.18 The Nigerian government has significant influence over, and
dependency upon, Nigeria's oil and gas industry, exposing the
Enlarged Group to adverse sovereign action by the Nigerian
government.
According to the IMF, oil and natural gas export revenue, which
was estimated at US$65 billion in 2019, has accounted for 48 per
cent. of Nigeria's total government revenue on average between 2010
to 2019. Oil and natural gas revenue has been the country's main
source of foreign exchange, making up more than 93 per cent. of
Nigeria's total exports to the world within this period.
The Nigerian government's ownership of Nigeria's mineral wealth
is reinforced by an array of laws and regulations, including the
Petroleum Act and the Petroleum Investment Act. As a consequence,
the Nigerian government plays a key role in determining the extent
to which anyone participates in the Nigerian oil and gas industry.
There can be no assurance that the Enlarged Group will continue to
benefit from the support of the Nigerian government, which could
have a material adverse effect on the Enlarged Group's business,
results of operations, cashflows, financial condition and
prospects.
Accordingly, petroleum companies in Nigeria face the risks of
expropriation or re-nationalisation, breach or abrogation of
project agreements, application to such companies of laws and
regulations from which they were intended to be exempt, denials of
required permits and approvals, increases in royalty rates and
taxes that were intended to be stable, application of exchange or
capital controls, and other risks. Possible future changes in the
Nigerian government, major policy shifts or increased security
arrangements in Nigeria could have, to varying degrees, a material
adverse effect on the Enlarged Group's business, results of
operations, cashflows, financial condition and prospects.
4.19 Production of oil in Nigeria may be impacted by OPEC and
other production quotas.
Nigeria is a member of OPEC, which, from time to time constrains
its members' ability to produce oil through the imposition of
production quotas. NNPC allocates production quotas among oil
producers based on the aggregate technical production limits of all
producing wells, which are negotiated between the producer and the
Nigerian government. In the event that technical production exceeds
Nigeria's OPEC quota, the quota is allocated to the producers on a
pro rata basis based on their respective technical production
levels. If production allocations are exceeded, it is possible to
apply for additional quotas from the Nigerian government, but there
can be no assurance that the additional quotas will be granted.
Nigeria also has the power to implement export quotas. As a result,
the Enlarged Group may be constrained in exporting oil through such
quotas in the future, which could have a material adverse effect on
the Enlarged Group's business, prospects, results of operations,
cashflows, financial condition and prospects.
4.20 Local content legislation in Nigeria may impact upon the
Enlarged Group's ability to recruit suitably qualified
individuals.
The Nigerian Local Content Act, which was enacted in April 2010,
provides a framework for increasing Nigerian participation in all
sectors of the Nigerian oil and gas industry. The Local Content Act
prescribes minimum thresholds for Nigerian participation in oil and
gas activities and also impacts the day-to-day management of
companies operating in the oil and gas industry by imposing
requirements concerning, among others, the use and involvement of
Nigerian labour in their operations. This may adversely impact on
the Enlarged Group's ability to hire suitably qualified persons
and, consequently, the costs of the Enlarged Group's operations in
Nigeria.
4.21 Political instability, religious differences, ethnicity,
regionalism and internal security in Nigeria pose risks that impact
Nigerian oil and gas production.
Following the adoption of a new presidential constitution in May
1999, Nigeria is experiencing its longest period of civilian rule
since obtaining independence from the United Kingdom in 1960.
Political tensions and incidents, including civil unrest, have been
seen around the time of, or leading up to, previous elections held
in Nigeria, and there can be no assurance that similar incidents
will not take place in relation to future elections. In the past,
results of elections in Nigeria have been subject to criticism by
both opposition candidates and international election observers.
Further, if there are allegations of fraud or other irregularities
in connection with the presidential elections and such allegations
are not properly handled in an orderly manner, such allegations may
undermine the legitimacy of the new administration.
The outcome of future elections, the next one of which is
currently due in 2023, may have a significant impact on Nigeria's
political stability and may adversely affect its economy, and no
assurance can be given that the reforms and policies that are
proposed or taking place will continue. Any post-election
administration may pursue different policies and priorities, alter
or reverse certain reforms or take actions (including a highly
unlikely expropriation or nationalisation (which in any case is
required to be with adequate compensation), breach or abrogation of
project agreements) that make domestic and foreign investment in
Nigeria less attractive or lead to protests, violence or other
unrest. Any significant changes in the political climate in
Nigeria, including changes affecting the stability of the Nigerian
Government or involving a rejection, reversal or significant
modification of policies, favouring the privatisation of
state-owned enterprises, reforms in the power, banking or oil and
gas sectors, may have negative effects on the economy, government
revenues or foreign reserves and, as a result, a material adverse
effect on the Enlarged Group's business, results of operations,
financial condition and prospects.
Religious differences, particularly between the mainly Muslim
North and broadly Christian South, pose additional risks to the
stability of Nigeria and the political landscape. Certain Northern
states have adopted Sharia law since the return to civilian rule in
1999, which has resulted in further alienation of the Christian
minorities in these states. Hundreds of lives have been lost in a
series of terrorist attacks, primarily by way of bombings carried
out by religious militia groups against both civilians and state
institutions. In addition, religious militia groups have carried
out armed attacks and kidnappings against foreigners working in
Nigeria.
Furthermore, Boko Haram, a militant Islamist group operating in
northern Nigeria, has become increasingly active engaging in mass
kidnappings, raids on villages with high fatalities and cross
border attacks in Cameroon. Suspected members of the Boko Haram
have reportedly conducted kidnappings and attacks in the North
Eastern part of the country and the Federal Capital Territory.
While terrorist attacks linked to religious and/or ethnic
differences have in the past primarily been carried out in the
north of the country, no assurances can be given that such violence
will not spread to southern Nigeria where the Enlarged Group's
operations are based. These conflicts may adversely affect
Nigeria's political stability which may, in turn, affect the
Enlarged Group's business, results of operations, cashflows,
financial condition and prospects.
4.22 Militant and unlawful activity could destabilise oil
production in Nigeria and adversely affect the Enlarged Group's
operations and Nigeria's economy.
Militant and unlawful activity, violence and civil disturbances
have, in the past, caused intermittent problems in the Niger Delta.
Various militant groups have conducted guerrilla attacks on crude
oil pipelines and other related infrastructure, kidnapping oil and
gas workers for ransom and generally disrupting the activities of
oil and gas companies with operations in the Niger Delta, and more
broadly throughout Nigeria. Militant and unlawful activity has, in
the past, resulted in companies being forced to decrease production
or to even consider ceasing their operations in Nigeria as a result
of attacks on, or threats to, their operations and staff.
There is a risk that, in the future, and in spite of the
Nigerian government's efforts (which have included offering an
amnesty to militants who surrender their weapons), militant acts in
the Niger Delta may continue to be directed at oil and gas industry
participants and there is no assurance that militant acts will not
occur in the future.
If the Enlarged Group, its employees or employees of its
operating partners is the subject of any attacks, kidnappings or
other security threats, the Enlarged Group's operations and
production of oil and gas in the Niger Delta could be materially
adversely affected. Unrest in the Niger Delta region may lead to
lower Nigerian oil and gas production, deter foreign direct
investment, lead IOCs to curtail their operations in Nigeria or
lead to increased political instability and unrest, and such unrest
could have a material adverse effect on Nigeria's economy. The fear
of militant attacks could have an adverse effect on the Enlarged
Group's ability to adequately staff and/or manage its operations
and could substantively increase the costs of doing so. In
addition, any militant action against the Enlarged Group's assets
or operations could result in significant damage to the
environment, negatively impact its relationships with local
communities and result in a temporary or permanent closure of all
or part of those facilities.
The occurrence of any of the above could have a material adverse
effect on the Enlarged Group's business, results of operations,
cashflows, financial condition and prospects.
4.23 The Enlarged Group may be subject to currency controls
which may limit its ability to service US Dollar denominated debt,
to transfer funds out of country, to attract appropriately skilled
staff or to purchase required services.
The Nigerian Government has imposed foreign exchange
restrictions to control the flow of US Dollars in and out of the
country. The controls prohibit the use of currencies other than the
Naira as a means of payment for certain items. The imposition of
foreign exchange controls may have an adverse effect on the
Enlarged Group's ability to convert Naira into US Dollars to
service US Dollar denominated debt, to transfer funds out of
country and to attract and retain appropriately skilled staff and
pay for required services in Nigeria. The occurrence of any of the
above could have a material adverse effect on the Enlarged Group's
business, results of operations, cashflows, financial condition and
prospects.
4.24 Importance of maintaining good title to licence
interests.
The Enlarged Group's right to explore and exploit its licence
interests and Accugas's ability to operate the Accugas Midstream
Business is reliant on the establishment and maintenance of good
title to the licence interests both entities purport to hold
including, in particular, any licence fees that become due. Whilst
the Enlarged Group seeks to ensure that it has good title to the
participating interests that it owns, it cannot completely
eliminate the risk of future title disputes or challenges. A
successful challenge to the Enlarged Group's title to assets may
result in the Enlarged Group being required to halt development or
production or operations or, ultimately, in the loss of such
assets.
4.25 Foreign subsidiaries.
The ability of the Company's subsidiaries to make payments to
the Company may be constrained by, among other things, the level of
taxation, particularly in relation to corporate profits and
withholding taxes, in the jurisdiction in which any other Group
company operates, and the introduction of exchange controls or
repatriation restrictions or the availability of hard currency to
be repatriated.
4.26 The Nigerian judicial system may create an uncertain
environment for investment and business activity.
Nigerian law is predicated on the common law system, with its
roots being derived from the English legal system.
The Nigerian legal system continues to develop but faces a
number of challenges including delays in the judicial process, as
most cases, even spurious claims, take a considerable period of
time to be concluded. As a result, obtaining effective legal
redress may be delayed and there is a high degree of uncertainty
due to some level of discretion that may be exercised by the
courts. There is also a lack of judicial or administrative guidance
on interpreting applicable rules and regulations, inconsistencies
or conflicts between and within various laws, regulations, decrees,
orders and resolutions and relative inexperience of the judiciary
and courts in commercial matters. However, recent years have
witnessed considerable reform of the judiciary, especially in Lagos
State with the setting up of commercial courts and the introduction
of new rules to cut down on delays in the judicial process.
The slow judicial process may sometimes affect the
enforceability of judgments obtained. In addition, the enforcement
of laws may depend on, and be subject to the interpretation of, the
relevant local authority, and such interpretation may differ from
the advice given to the Enlarged Group by local lawyers.
There can be no assurance that contracts, joint ventures,
licenses, license applications or other legal arrangements will not
be adversely affected by the actions of Nigerian government
authorities and the effectiveness and enforcement of such
arrangements in Nigeria. A number of the asset and joint venture
documents to which we are a party are not standard form documents,
which makes interpretation of disputed provisions less certain.
These and other issues arising out of Nigeria's legal system
subject the Enlarged Group's business to greater risks and
uncertainties than if the Enlarged Group's operations were
conducted in jurisdictions with a more mature legal system.
4.27 Nigeria is a federal state, and the Enlarged Group's
operations are located across two states, exposing the Enlarged
Group to varying, potentially adverse, state and local government
policies.
The Enlarged Group's operations are located across two states of
Nigeria, both of which have their own governments. Within those
states, there are multiple local government authorities within the
Enlarged Group's areas of operation. In addition, the Enlarged
Group presently contracts with certain state-owned entities, such
as Ibom Power, which is owned by Akwa Ibom State. Each of these
states has a varying political dynamic. Political changes at the
state and local level can affect the Enlarged Group's contracts
with these local governments or entities they own or control,
including the potential risk of expropriation. While the powers of
the various tiers of government to levy and collect taxes are set
forth in the Nigerian constitution, it is not unusual for state and
local government agencies to seek to levy and collect taxes that
they are not constitutionally authorised to levy and collect. These
factors, combined with potential conflicts between federal, state
and local governments, could have a material adverse effect on the
Enlarged Group's business, results of operations, financial
position, cashflows and prospects.
5. Risks associated with the Niger Assets and doing business in Niger
5.1 Licensing and other regulatory requirements in Niger.
The Nigerien Government owns the country's mineral Resources and
grants hydrocarbon exploration and production rights under fixed
term production sharing contracts, which can be renewed in
accordance with their terms. It therefore retains control over the
exploration and exploitation of hydrocarbon Reserves. Any adverse
changes in the Nigerien Government's policy with respect to the oil
and gas industry, including any which may occur following the
proposed review of the current Petroleum Code, may adversely impact
the interests of the Enlarged Group.
The new PSC covering the R1, R2, R3 and R4 areas, named the
R1234 PSC, has been approved by the Minister of Petroleum, Energy
and Renewables Energies and the Niger Council of Ministers through
a decree. Savannah Niger is now liable to pay a signature bonus,
which constitutes a condition precedent for the entry into force of
the R1234 PSC. Unless and until all conditions precedent are met,
including the signature bonus paid by Savannah, Savannah is limited
in its ability to carry out activities in the R1234 PSC area and
there is a risk that the new R1234 PSC will not be awarded.
Exploration and development activities in developing countries
may require protracted negotiations with host governments, national
oil companies and third parties and may be subject to economic and
political risks and expropriation, nationalisation or renegotiation
of existing contracts. The two main protections granted to Savannah
under the R1234 PSC are (1) the stability of the legislation and
the terms agreed under the R1234 PSC and the commitment that the
Nigerien Government shall never (a) directly or consequently
increase the obligations and responsibilities imposed on Savannah
Niger nor (b) infringe the latter's economic rights and advantages
resulting from Law of 2017 and the R1234 PSC, without Savannah's
prior consent, and (2) (a) a conciliation procedure which shall
ultimately be resolved by means of arbitration conducted in
accordance with the Arbitration Rules of the International Centre
for Settlement of Investment Disputes (ICSID Rules) in accordance
with the Convention on the settlement of investment disputes
between States and nationals of other States, the "Washington
Convention", and (b) an arbitration procedure for any dispute which
cannot be settled amicably. The R1234 PSC provides that the dispute
shall be resolved in accordance with its provisions, the provisions
of the petroleum legislation in force at the date of entry into
force of the R1234 PSC, the provisions of laws in force at the
signature date of the R1234 PSC other than the petroleum laws and
social and environmental laws, as well as the provisions of
international law applicable in the area. The R1234 PSC
specifically provides for any such arbitration to be heard in
Paris, France.
5.2 Title matters and payment obligations.
Although the Savannah PSC, and various international treaties to
which Savannah Niger is a signatory, offers strong protection to
the Enlarged Group, an unforeseen defect in title, changes in law
(or interpretations thereof), regulatory consents or political
events may arise or occur to defeat or impair the claim of the
Enlarged Group to some or all of the rights in properties which it
currently owns or is interested or may acquire which could result
in a material adverse effect on the Enlarged Group, including a
reduction in any revenues generated.
5.3 Early stage of operations.
The Enlarged Group's operations in Niger are at an early stage
of development and future success will depend, inter alia, on the
Directors' ability to successfully manage and exploit the current
asset portfolio and to take advantage of further opportunities
which may arise. There can be no guarantee that the Enlarged Group
can or will be able to, or that it will be commercially
advantageous for the Enlarged Group to, develop its Nigerien
assets.
Further, the Enlarged Group's future success in developing the
existing discoveries and making additional discoveries of oil
and/or natural gas, is dependent on accessing the appropriate
sources of future funding, including, but not limited to, equity
markets and bank debt. Whilst the Directors are optimistic about
the Enlarged Group's prospects in Niger, there is no certainty that
sustainable revenue streams and sustainable profitability will be
achieved.
The Enlarged Group's business plan to exploit and commercialise
its Nigerien assets will require significant capital expenditure
for the identification, acquisition, appraisal, exploration,
development and production of oil and gas resources and/or reserves
in the future. The Enlarged Group's inability to access sufficient
capital for its operations may have a material adverse effect on
its business, financial condition, results of operations and
prospects.
5.4 Foreign subsidiaries.
The Enlarged Group conducts most of its operations in Niger
through its subsidiary, Savannah Niger, which is located outside of
the United Kingdom. At the point of production commencement, the
ability of Savannah Niger to make payments to the Company may be
constrained by, among other things, the level of taxation,
particularly in relation to corporate profits and withholding
taxes, in the jurisdiction in which it or any other Group company
operates, and the introduction of exchange controls or repatriation
restrictions or the availability of hard currency to be
repatriated.
5.5 Exchange controls in Niger.
Savannah Niger is subject to the common foreign exchange regime
provided for by Regulation Ndeg09/2010/CM/UEMOA relating to
external financial relations of the WAEMU member States dated
October 01, 2010 (the "WAEMU Foreign Exchange Regulation"), which,
inter alia, may restrict the flow of funds out of country.
5.6 Oil exploration and production in Niger and the sale of such
production depends on adequate infrastructure.
Reliable roads, bridges, power sources and water supplies are
important determinants which affect capital and operating costs.
Generally speaking, Niger suffers from underdeveloped
infrastructure, communication problems (particularly internet
access), energy shortages and high energy costs. Inadequate
infrastructure could impact the Enlarged Group's plans in Niger and
could have an adverse impact on the Enlarged Group's business and
prospects.
5.7 Interruptions in availability of exploration, production or supply infrastructure in Niger.
The Enlarged Group may suffer, indirectly, from delays or
interruptions due to lack of availability of drilling rigs or
construction of infrastructure, including pipelines, storage tanks
and other facilities, which may adversely impact the operations and
could lead to fines, penalties, criminal sanctions against the
Enlarged Group and/or its officers or its current or future
licences or interests being terminated. Despite assurances given by
the Nigerien Government in the Savannah PSC, there is the risk of
delays in obtaining licences, permissions and approvals required by
the Enlarged Group or its partners in the pursuance of its business
objectives which could likewise have a material adverse impact on
the Enlarged Group's business and the results of its
operations.
5.8 Failure to meet contractual work commitments may lead to penalties.
The Enlarged Group is subject to contractual work commitments,
including those specified within the Savannah PSC, which includes a
minimum work programme to be fulfilled within certain time
restraints. Specifically, these commitments may cover certain
depths of wells to be drilled, seismic surveys to be performed and
other data acquisition. Failure to comply with such obligations,
whether inadvertent or otherwise, may lead to fines, penalties,
restrictions and withdrawal of licences with consequent material
adverse effects.
5.9 Political, economic, fiscal, legal, regulatory and social environment risk.
The Enlarged Group's interests in Niger are likely to be exposed
to political, economic, fiscal, legal, regulatory and social
environment risk. The Enlarged Group's business will involve a high
degree of risk which a combination of experience, knowledge and
careful evaluation may not overcome. These risks include, but are
not limited to, corruption, civil strife or labour unrest, armed
conflict, terrorism, limitations or price controls on oil exports,
and limitations or the imposition of tariffs or duties on imports
of certain goods. If the existing body of laws and regulations in
Niger is interpreted or applied, or relevant discretions exercised,
in an inconsistent manner by the courts or applicable regulatory
bodies, this could result in ambiguities, inconsistencies and
anomalies in the enforcement of such laws and regulations, which,
in turn, could hinder the long-term planning efforts of the
Enlarged Group and may create uncertainties in its operating
environment.
The strategy and business of the Enlarged Group in Niger depends
on it maintaining good relationships and cooperating with the
relevant Nigerien authorities. While the Company believes that it
has an effective working relationship with the Niger authorities,
there is no guarantee that this positive relationship will continue
or that actions by current or future governments will not seriously
affect the business or financial position of the Enlarged Group.
This relationship could be adversely impacted by future changes in
the personnel or management of the Enlarged Group or the Nigerien
authorities.
5.10 Uncertainties in the interpretation and application of laws
and regulations.
The Savannah PSC is governed by Niger law. The courts in Niger
may offer less certainty as to the judicial outcome or a more
protracted judicial process than is the case in more established
economies. However, the Savannah PSC offers the option of recourse
to an international arbitration procedure. Nevertheless, the
Enlarged Group could face risks, such as: (i) difficulty of
obtaining effective legal redress in the courts, whether in respect
of a breach of law or regulation, or in an ownership dispute, (ii)
a higher degree of discretion on the part of governmental
authorities and, therefore, less certainty, and (iii) the lack of
judicial or administrative guidance on interpreting applicable
rules and regulations. Enforcement of laws in Niger may also depend
on and be subject to the interpretation placed upon such laws by
the relevant local authority, and such authority may adopt an
interpretation of an aspect of local law which differs from the
advice that has been given to the Enlarged Group by local lawyers
or even previously by the relevant local authority itself.
6. Risks relating to the Ordinary Shares
6.1 Suitability.
Investment in the Ordinary Shares may not be suitable for all
readers of this announcement. Readers are accordingly advised to
consult a person authorised under FSMA who specialises in
investments of this nature before making any investment
decisions.
6.2 Investment in AIM-traded shares.
Investment in shares traded on AIM involves a higher degree of
risk, and such shareholdings may be illiquid. The AIM Rules are
different and may be less demanding than those rules that govern
companies admitted to the Premium Segment of the Official List. It
is emphasised that no application is being made for the admission
of the Company's securities to the Official List. An investment in
the Ordinary Shares may be difficult to realise. Prospective
investors should be aware that the value of an investment in the
Company may go down as well as up and that the market price of the
Ordinary Shares may not reflect the underlying value of the
Company. Investors may therefore realise less than, or lose all of,
their investment. The Board cannot assure investors that the
Ordinary Shares will always continue to be traded on AIM or on any
other exchange. If such trading were to cease, certain investors
may decide to sell their Ordinary Shares, which could have an
adverse impact on the price of the Ordinary Shares. Additionally,
if in the future the Company decides to obtain a listing on another
exchange in addition or as an alternative to AIM, the level of
liquidity of the Ordinary Shares traded on AIM could decline.
6.3 Share price volatility and liquidity.
The Company's entire issued share capital is admitted to trading
on AIM but there can be no assurance that an active or liquid
trading market for the Ordinary Shares will develop or, if
developed, that it will be maintained. AIM is a market designed
primarily for emerging or smaller growing companies which carry a
higher-than-normal financial risk and tend to experience lower
levels of liquidity than larger companies. Accordingly, AIM may not
provide the liquidity normally associated with the Official List or
some other stock exchanges. The Ordinary Shares may therefore be
difficult to sell compared to the shares of companies listed on the
Official List and the share price may be subject to greater
fluctuations than might otherwise be the case. An investment in
shares traded on AIM carries a higher risk than those listed on the
Official List.
The Company is principally aiming to achieve capital growth and,
therefore, Ordinary Shares may not be suitable as a short-term
investment. Consequently, the share price may be subject to greater
fluctuation on small volumes of shares traded, and thus the
Ordinary Shares may be difficult to sell at a particular price.
Prospective investors should be aware that the value of an
investment in the Company may go down as well as up and that the
market price of the Ordinary Shares may not reflect the underlying
value of the Company. There can be no guarantee that the value of
an investment in the Company will increase. Investors may therefore
realise less than, or lose all of, their original investment.
The share prices of publicly quoted companies can be highly
volatile and shareholdings illiquid. The price at which the
Ordinary Shares are quoted and the price which investors may
realise for their Ordinary Shares may be influenced by a large
number of factors, some of which are general or market specific,
others which are sector specific and others which are specific to
the Enlarged Group and its operations. These factors include,
without limitation, (i) the performance of the Company and the
overall stock market, (ii) large purchases or sales of Ordinary
Shares by other investors, (iii) results of exploration,
development and appraisal programmes and production operations,
(iv) changes in analysts' recommendations and any failure by the
Enlarged Group to meet the expectations of the research analysts,
(v) changes in legislation or regulations and changes in general
economic, political or regulatory conditions (particularly in Chad,
Cameroon, Nigeria and/or Niger), and (vi) other factors which are
outside of the control of the Company.
6.4 Dilution.
Shareholders not participating in future offerings may be
diluted and pre-emptive rights may not be available to
Shareholders, including, but not limited to Shareholders resident
in jurisdictions with restrictions which means that they will not
be granted subscription rights in connection with, or be able to
subscribe for new shares in, such offerings. Statutory pre-emptive
rights have been waived up to certain stated amounts as detailed in
the Company's 2021 AGM circular. The Company may in the future
issue warrants and/or options (in addition to the existing awards
made by the Company under its share incentive scheme, as well as
the further intended awards) to subscribe for new Ordinary Shares,
including (without limitation) to certain advisers, employees,
directors, senior management and consultants. The exercise of such
warrants and/or options would result in dilution of the
shareholdings of other investors.
6.5 Dividends.
The Enlarged Group has announced its intention to commence
payment of an annual dividend. The Enlarged Group intends to
provide further information on its intended forward dividend policy
in due course, however there can be no assurance as to the level of
future dividends.
6.6 Overseas shareholders may be subject to exchange rate risks.
The Ordinary Shares are, and any dividends to be paid on them
will be, denominated in Pounds Sterling. An investment in Ordinary
Shares by an investor whose principal currency is not Pounds
Sterling exposes the investor to foreign currency exchange rate
risk. Any depreciation in the value of Pounds Sterling in relation
to such foreign currency will reduce the value of the investment in
the Ordinary Shares or any dividends in relation to such foreign
currency.
6.7 Impact of research on share price.
If securities or industry analysts do not publish research or
publish unfavourable or inaccurate research about the business, the
Company's share price and trading volume of the Ordinary Shares
could decline.
The trading market for the Ordinary Shares will depend, in part,
on the research and reports that securities or industry analysts
publish about the Company or its business. The Directors may be
unable to sustain coverage by well-regarded securities and industry
analysts. If either none or only a limited number of securities or
industry analysts maintain coverage of the Company, or if these
securities or industry analysts are not widely respected within the
general investment community, the trading price for the Ordinary
Shares could be negatively impacted. In the event that the Company
obtains securities or industry analyst coverage, if one or more of
the analysts who cover the Company downgrade the Ordinary Shares or
publish inaccurate or unfavourable research about the Group's
business, the share price would be likely to decline.
If one or more of these analysts cease coverage of the Company
or fail to publish reports regularly, demand for the Ordinary
Shares could decrease, which might cause the share price and
trading volume to decline.
6.8 The ability of non-UK resident Shareholders to bring actions or enforce judgments against
the Company may be limited.
The Company is a public limited company incorporated in England
and Wales. he rights of Shareholders are governed by the Articles
and English law and these rights may differ from those which would
be typical in some non-UK corporations. Notably, English law
significantly limits the circumstances under which shareholders of
English companies may bring derivative actions. Nor does English
law afford approval rights to dissenting shareholders in the form
typically available to shareholders in a US corporation.
It should be noted that the risk factors listed above are not
intended to be exhaustive and do not necessarily comprise all of
the risks to which the Enlarged Group is or may be exposed or all
those associated with an investment in the Company. In particular,
the Company's performance is likely to be affected by changes in
market and/or economic conditions, political, judicial, and
administrative factors and in legal, accounting, regulatory and tax
requirements in the areas in which it operates and holds its major
assets. There may be additional risks and uncertainties that the
Directors do not currently consider to be material or of which they
are currently unaware which may also have an adverse effect upon
the Enlarged Group.
If any of the risks referred to in this Part 3 crystallise, the
Enlarged Group's business, financial condition, results or future
operations could be materially adversely affected. In such case,
the price of its Ordinary Shares could decline and investors may
lose all or part of their investment.
Although the Directors will seek to minimise the impact of the
risk factors listed above, investment in the Enlarged Group should
only be made by investors able to sustain a total loss of their
investment.
APPIX IV
PATHFINDER ADMISSION DOCUMENT - EXTRACTS FROM PART 14
3.2 Junior Loan Facility
3.2.1 On [ -- ] December 2021, the Company as borrower, LCP4L as
lender and Lothian Capital Partners Holdings Limited as its holding
company ("LCPHL HoldCo") entered into the US$32 million Junior Loan
Facility. Loans drawn under the Junior Loan Facility (the "Loans")
have a 90 month tenor (ie. 7.5 years) and shall accrue interest
daily at a rate of: (i) compounded reference rate plus 8 per cent.
per annum if paid in cash; or (ii) compounded reference rate plus
10 per cent. per annum if paid-in-kind. An arrangement fee equal to
2 per cent. of the principal amount of each Loan was payable to
Lothian Capital Partners 2 Limited (for the account of the LCP4L)
upon signing the loan note facility agreement. The Loans and
commitment of LCP4L are transferable subject to (i) the consent of
the Company (not to be unreasonably withheld or delayed) prior to
the occurrence of an event of default under the Junior Loan
Facility, and (ii) the accession by the transferee to the
intercreditor agreement to be executed in connection with the Exxon
Acquisition and the PETRONAS Acquisition.
3.2.2 The Junior Loan Facility shall be subordinated to the Debt
Financing and will share on a second-ranking basis the security
granted under the Debt Financing. Under the terms of the Junior
Loan Facility, the Company has agreed not to grant any security
over the assets of the Company other than (i) the security granted
to secure the Junior Loan Facility and (ii) the security granted to
secure the US$20 million bridge facility agreement under which the
Company is a borrower. The Company may voluntarily prepay a Loan,
subject to the payment of an early repayment fee of the interest
which would have accrued on such Loan for the lesser of: (i) a
period of one year from the date of prepayment; and (ii) a period
from the date of prepayment to the final maturity date of the
Junior Loan Facility. Mandatory prepayment of the Junior Loan
Facility will occur in various circumstances, which includes: (i)
acceleration under the terms of the Debt Financing: (ii) any
refinancing or repayment of the Debt Financing in full, and (iii)
the Company incurring more than US$50 million of new debt (in
addition to the Junior Loan Facility and the Company's bridge
facility).
3.2.3 On [ -- ] December 2021, the Company's Chief Executive
Officer, Andrew Knott committed (via LCP4L) to lend: (i) US$17
million to finance the Exxon Acquisition; and (iii) US$15 million
to
finance the PETRONAS Acquisition. Lothian Capital Partners 3
Limited ("LCP3L") has also committed to subscribe for 11,613,390
new Ordinary Shares as part of the Subscription. At the discretion
of Andrew Knott, the Senior Lender may also act as a lender to
LCP4L and LCP3L, and in that case the obligations of LCP3L and
LCP4L will be cross-guaranteed and secured by Ordinary Shares held
by LCP3L in the Company, the Junior Loan Facility advanced by LCP4L
and Warrants held by Andrew Knott. LCPHL HoldCo would also grant
security over their shares to secure their obligations. Andrew
Knott would also provide the Senior Lender with a conditional
personal guarantee in relation to certain obligations of LCP3L and
LCP4L.
3.3 Warrant Instrument
3.3.1 Warrants will be granted to LCP4L as lender under the
Junior Loan Facility immediately following the General Meeting,
subject to the passing of Resolutions 5 and 9. The number of
Warrants to be issued shall be calculated as the total value of the
Junior Loan Facility (at the prevailing exchange rate on the date
of signature) divided by the Exercise Price. Set out below are the
particulars of the principal terms and conditions applying to the
Warrants constituted by an instrument entered into by the Company
by way of deed poll dated [ -- ] December 2021 (the "Warrant
Instrument").
3.3.2 Constitution
The Company has determined by a resolution of the Board to issue
up to [ -- ] Warrants, each Warrant entitling the holder thereof
(the "Warrantholder") to subscribe for new Ordinary Shares at the
Exercise Price payable in cash in full on subscription.
3.3.3 Subscription Rights
The Warrantholder of each Warrant will have the right
("Subscription Rights"), which may be exercised on any business day
from the date of the grant of the Warrants up to (and including)
the date falling 90 calendar months after their date of grant (the
"Expiry Date") (such period being the "Subscription Period"), to
subscribe in cash for one new Ordinary Share (subject to adjustment
in accordance with the terms of the Warrant Instrument) in
consideration of the payment of the Exercise Price (being 23.5
pence) in full per Warrant, subject to a minimum subscription price
of not less than GBP100,000. The Subscription period shall be
extended by a period of three months if the Warrantholder is in
possession of relevant price sensitive information or inside
information relating to the Company and is thereby precluded from
exercising its Subscription Rights on the last day of the Exercise
Period. The Warrantholder may elect to pay the subscription price
by surrendering to the Company, for cancellation, such number of
additional Warrants that have an aggregate value equal to the
aggregate subscription price payable (for these purposes, each
Warrant shall have a value equal to the prevailing middle market
price of one Ordinary Share).
Every Warrant in respect of which Subscription Rights:
(i) have been exercised in full; or
(ii) at the end of the Subscription Period have not been exercised,
shall lapse and be cancelled.
New Ordinary Shares allotted pursuant to the exercise of
Warrants in accordance with the terms of the Warrant Instrument
shall be issued fully-paid and free from any liens, charges or
encumbrances and rights of pre-emption, but shall not rank for any
dividends or other distributions declared, made or paid on the
Ordinary Shares for which the record date is prior to the date on
which the Warrants are exercised (the "Exercise Date") but, subject
thereto, shall rank in full for all dividends and other
distributions declared, made or paid on the Ordinary Shares on or
after the Exercise Date and otherwise pani passu in all respects
with the Ordinary Shares in issue at that date.
At any time when the Ordinary Shares are admitted to trading on
AIM, application will be made by the Company to the London Stock
Exchange for the Ordinary Shares allotted pursuant to any exercise
of Warrants to be admitted to trading on AIM and the Company will
promptly apply for such admission so as to be effective
simultaneously with the allotment of the relevant Ordinary Shares
pursuant to the exercise of the Warrants in accordance with the
terms of the Warrant Instrument becoming effective.
3.3.3 Transfer
The Warrants shall be freely transferable.
3.3.4 Undertakings of the Company
Warrantholders will have made available to them, at the same
time and in the same manner as the same are made available to
holders of Ordinary Shares, copies of the audited accounts of the
Company (with the relevant directors' and auditor's reports) and
copies of all other circulars or notices which are made available
to holders of Ordinary Shares.
3.3.5 Adjustment of Subscription Rights
The Exercise Price and/or the number of Ordinary Shares for
which a Warrantholder is entitled to subscribe shall from time to
time be adjusted in accordance with the provisions of the Warrant
Instrument to account for, inter alia, any sub-division or
consolidation of the Ordinary Shares or any issue of Ordinary
Shares fully paid by way of capitalisation of profits or reserves,
so far as practical to compensate the Warrantholder for the
economic effect of such adjustment event.
3.3.6 Anti Dilution
Customary anti-dilution provisions apply for the benefit of
Warrantholders including, inter alia, where the Company carries out
an equity fundraising at a greater than 5 per cent. discount to the
prevailing middle market price of the Company's Ordinary
Shares.
3.3.7 Clawback
The Warrants cannot be exercised until such time as completion
occurs of the Exxon Acquisition or the PETRONAS Acquisition. In the
event that the Exxon Acquisition does not complete prior to the
Exxon Longstop Date, the Board (save for Andrew Knott) can, at its
discretion, cancel the Warrants issued in relation to the Exxon
Acquisition (being 53 per cent. of the total Warrants issued), and
similarly if the PETRONAS Acquisition does not complete prior to
the PETRONAS Longstop Date, the Warrants issued in relation to the
PETRONAS Acquisition (being 47 per cent. of the total Warrants
issued) can be cancelled at the discretion of the Board (save for
Andrew Knott).
DEFINITIONS
The following definitions apply throughout this document, unless
otherwise stated or the context requires otherwise:
1962 Petroleum Code Ordinance ndeg7/PC/TP/MH dated 3 February
1962 relating to the exploration, exploitation and transportation
by pipeline of hydrocarbons, and the fiscal regime of these
activities within the territory of the Republic of Chad;
1967 Implementing Decree Decree dated 10 May 1967 specifying the
implementation modalities of Ordinance ndeg7/PC/TP/MH dated 3
February 1962;
1988 Convention the convention covering a portion of Permit H
described as "Lake Chad, Chari North, Chari South" between the
Republic of Chad, EEPCI, PC Chad and SHT Petroleum Chad Company
Limited dated 19 December 1988 (as amended on 19 May 1993, 12 March
1997, 21 June 2000 and 9 June 2017);
2004 Convention the convention covering a portion of Permit H
described as "Chari West, Chari East and Lake Chad" between the
Republic of Chad, EEPCI, PC Chad and SHT Petroleum Chad Company
Limited dated 10 May 2004 (as amended on 9 June 2017);
2014 Long-Term Incentive Plan the Company's initial long-term incentive plan, which was
or 2014 LTIP established on 28 November 2014;
2015 Supplemental Plan the Company's supplemental long-term incentive plan;
Accugas Holdco Accugas Holdings UK PLC, a company incorporated
under the laws of England and Wales with registered number
11950135, whose registered office is at 40 Bank Street, London E14
5NR;
Accugas Limited Accugas Limited, a company incorporated under
the laws of Nigeria with registered number 881197, whose registered
office is at 35 Kofo Abayomi Street, Victoria Island, Lagos;
Accugas Midco Accugas UK Limited, a company incorporated under
the laws of England and Wales with registered company number
12257421, whose registered office is at 40 Bank Street, London E14
5NR;
Accugas Midstream Business the business currently operated by
Accugas Limited, an indirect subsidiary of Accugas HoldCo,
comprising a 200 MMscfpd gas processing facility and approximately
260 km gas pipeline network and associated gas processing
infrastructure;
Accugas Term Facility the US$370.8 million term facility
provided to Accugas Limited (as amended and restated) and as more
fully described in paragraph 6.1 of this announcement;
Agadem Rift Basin or ARB the Agadem basin in South East Niger
located within the Central African Rift System;
AIIM African Infrastructure Investment Fund 3 GP Proprietary
Limited, a vehicle managed by African Infrastructure Investment
Managers Limited;
AIM the AIM market operated by the London Stock Exchange;
AIM Rules for Companies or AIM the London Stock Exchange's rules
and guidance notes contained
Rules in its "AIM Rules for Companies" publication relating to
companies whose securities are traded on AIM, as amended from time
to time;
AIM Rules for Nominated Advisers the London Stock Exchange's
rules contained in its "AIM Rules for Nominated Advisers"
publication relating to the nominated advisers of companies whose
securities are traded on AIM, as amended from time to time;
April 2020 Supplemental the supplemental AIM admission document published by the
Admission Document Company on 30 April 2020;
Articles the articles of association of the Company, as amended
and restated from time to time;
Authority or NMDPRA Nigerian Midstream and Downstream Petroleum
Regulatory Authority;
BEAC Bank of Central African States;
Board the board of directors of the Company from time to
time;
Brokers finnCap Ltd and Panmure Gordon (UK) Limited
Cameroon Transportation System the portion of the ETS located in
the Republic of Cameroon operated by COTCo;
Cameroonian Petroleum Code the code governing petroleum
activities in Cameroon under Law Ndeg2019/008 dated 25 April
2019;
CEFC China CEFC Hainan International (HK) Limited;
CEMAC Economic and Monetary Community of Central Africa;
certificated or in certificated form an Ordinary Share which is
not in uncertificated form (that is, not in CREST);
CFA Franc Central African franc;
CGCL Calabar Generation Company Limited, the operating company
of the Calabar power station;
CGG CGG Services (UK) Limited, the author of the Nigeria CPR,
the Niger CPR and the Chad/Cameroon CPR;
Chad Republic of Chad;
Chad/Cameroon Assets the following assets to be acquired on completion of:
(i) the Exxon Acquisition, being:
(a) a 40 per cent. participating interest in the Doba OFDA in Chad; and
(b) 40.19 per cent. and 41.06 per cent. shareholding interest in
TOTCo and COTCo (respectively), which own and operate the
Chad-Cameroon Pipeline and the Kome Kribi 1 FSO; and
(ii) the PETRONAS Acquisition, being:
(a) a 35 per cent. participating interest in the Doba OFDA in Chad; and
(b) 30.16 per cent. and 29.77 per cent.
shareholding interest
in TOTCo and COTCo (respectively), which
own and operate the Chad-Cameroon Pipeline
Chad/Cameroon Competent and the Kome Kribi 1 FSO;
Person's Report or Chad/Cameroon the competent person's report on the Chad/Cameroon
CPR Assets;
Chad-Cameroon ETS or ETS the Chad-Cameroon export transportation
system comprising the Chad-Cameroon Pipeline and the Kome Kribi 1
FSO;
Chad-Cameroon Pipeline the 1,081 km, 30 inch oil pipeline
connecting the Doba Oil Project to the Kome Kribi 1 FSO, offshore
Cameroon, with a nameplate capacity of 250 Kbopd;
Chad Transportation System the portion of the ETS located in the
Republic of Cameroon operated by TOTCo;
Chadian Petroleum Code the code governing upstream, midstream
and downstream activities under Law Ndeg07-006 dated 2 May 2007
relating to hydrocarbons in Chad;
Cliveden Cliveden Petroleum Co. Limited, a party to the Shipper
Transportation Agreements;
CNPC China National Petroleum Corporation, an oil and gas
company with interests in Chad and that uses the Chad-Cameroon
Pipeline;
CNPC PSC the production sharing contract into which CNPC entered
with the Government of Niger in 2008 in respect of the R1/R2 PSC
Area and R3/R4 PSC Area;
CNPCI CNPCI International (Chad) Co., Limited, a subsidiary of
CNPC that is a Shipper;
CNPCI Convention the Convention for Exploration, Exploitation
and Transportation of Hydrocarbons between the Republic of Chad,
CNPCI and Cliveden Petroleum Co. Ltd dated 23 February 1999, as
amended from time to time;
Commission or NUPRC Nigerian Upstream Petroleum Regulatory Commission;
Companies Act the UK Companies Act 2006, as amended from time to
time;
Company or Savannah Savannah Energy PLC, a company incorporated
in England and Wales with registered number 09115262, whose
registered office is at 40 Bank Street, London E14 5NR;
Completion the completion of the:
(i) Exxon Acquisition in accordance with the terms of the Exxon SPA; and
(ii) PETRONAS Acquisition in accordance with the terms of the PETRONAS SPA,
(as applicable);
Compliance Laws the UK Bribery Act 2010, the Foreign Corrupt
Practices Act of 1977
and all other relevant and applicable anti-corruption,
anti-bribery, anti-money laundering, compliance laws and
regulations, and other laws governing the conduct of business
(including with Chadian, Cameroon, Nigerian and Nigerien government
entities), including local laws, that apply to the Enlarged
Group;
Conventions of Establishment the COTCo Convention and TOTCo Convention;
COTCo or Cameroon Pipeline Cameroon Oil Transportation Company, incorporated
Company under the laws of the Republic of Cameroon,
with registered company number M089700006137L,
whose registered office is at 164 Rue Toyota,
Bonapriso, Douala, Cameroon;
COTCo Convention the Convention of Establishment between the
Republic of Cameroon and COTCo dated 20 March 1998, as amended from
time to time and which granted COTCo the right to construct, own,
operate and maintain the Cameroon Transportation System;
COTCo Transportation Agreement the transportation agreement
between COTCo, the Republic of Chad, EEPCI, PC Chad and SHT dated
19 June 2000, which regulates the transportation services provided
by COTCo to the Consortium members of the Cameroon Transportation
System;
COVID-19 the infectious disease caused by SARS-CoV-2 virus,
which first emerged in December 2019;
CREST the computerised settlement system (as defined in the
CREST Regulations) operated by Euroclear which facilitates the
transfer of title to shares in uncertificated form;
CREST Regulations the Uncertificated Securities Regulations 2001
(SI 2001/3755) including any enactment or subordinate legislation
which amends or supersedes those regulations and any applicable
rules made under those regulations or any such enactment or
subordinate legislation for the time being in force;
Debt Financing the up to US$400 million borrowing base facility
agreement (initial commitment of US$300 million and US$100 million
accordion) between, inter alia, Savannah Chad and the Senior
Lender, which shall be utilised by Savannah Chad to partly fund the
Exxon Acquisition and the PETRONAS Acquisition;
December 2017 Admission the AIM admission document published by the Company on
Document 22 December 2017;
Directive the Directive on Takeover Bids (2004/25/EC);
Directors those persons who have been appointed as executive or
non-executive directors of the Company, as applicable, whose names
are set out in Appendix II of this announcement;
Doba Consortium the unincorporated joint venture of EEPCI,
PETRONAS Carigali (Chad EP) Inc. and SHT Petroleum Chad Company
Limited, which explores, develops and produces hydrocarbons
pursuant to the Upstream Conventions;
Doba JOA the operating agreement dated 7 April 2000 between
EEPCI, PETRONAS Carigali (Chad EP) Inc. and SHT Petroleum Chad
Company Limited, concerning the operation of the Doba Petroleum
Consortium, (as amended on 1 September 2009 and 11 June 2014);
Doba OFDA or Doba Oil Project the area known as the Doba oil
field development area, consisting of the contractual areas covered
by the Upstream Conventions;
Doba Pipeline Doba Pipeline Investments Inc., incorporated under
the laws of the Cayman Islands, whose registered office is at the
Offices of Maples and Calder, Attorneys-at-Law, P.O. Box 309,
George Town, Grand Cayman, Cayman Islands BW1, which holds 30.16
per cent. and 29.77 per cent. shareholding interests in TOTCo and
COTCo respectively;
DPR the Department of Petroleum Resources, a department of the
MPR, in Nigeria and where applicable its successor bodies under the
Petroleum Investment Act 2021, the Nigerian Upstream Petroleum
Regulatory Commission or Nigerian Midstream and Downstream
Petroleum Regulatory Authority;
EBT the Savannah Energy Employee Benefit Trust, constituted by a
trust deed dated 9 February 2015 or such other trust to be
established by the Company from time to time;
EBT Shares 58,066,951 new Ordinary Shares, which are proposed to
be subscribed for by the EBT at nominal value and funded via a
loan
provided by the Company;
EBT Subscription the proposed subscription for the EBT Shares by
the EBT;
ECL expected credit loss;
Economic Effective Date 1 January 2021;
EEPCI Esso Exploration and Production Chad Inc., incorporated in
the Bahamas, which holds a 40 per cent participating interest in
(and is the operator in respect of) the Doba Oil Project;
EIA Energy Information Administration, being the statistical
agency of the U.S. Department of Energy;
Employee Plan 2018 means the Savannah Energy PLC Employee Share
Option Plan 2018
;
Employee Plan 2021 means the Savannah Energy PLC Employee Share
Option Plan 2021
;
Employee 2014/15 Replacement means the Savannah Energy PLC
Replacement Share Option Plan
Plan 2021t;
English High Court the High Court of England and Wales;
Enlarged Group the Company and its subsidiaries immediately
following Completion;
Enlarged Share Capital the [ -- ] Ordinary Shares in issue
following admission to trading on AIM of the Placing Shares and the
Subscription Shares, expected to take effect at 8.00 a.m. on [ -- ]
December 2021;
EPIL Esso Pipeline Investments Limited, incorporated in the
Bahamas and which holds a 40.19 per cent. and 41.06 per cent.
shareholding interest in TOTCo and COTCo respectively;
ESG environmental, social and governance;
ESMA Recommendations European Securities and Markets Authority's
update of the Committee of European Securities Regulators'
recommendations for the consistent implementation of the EU
Regulations on Prospectuses;
Euro or EUR the official currency of the European Union;
Euroclear Euroclear UK & Ireland Limited, a company
incorporated in England and Wales with registered number 2878738,
being the operator of CREST;
Exercise Price 23.5 pence per Ordinary Share;
Existing Group the Company and its subsidiaries prior to
Completion;
Existing Share Capital or the 996,408,412 Ordinary Shares as at
the date of this document; Existing Ordinary Shares
Exoro Exoro Holding B.V., a company incorporated in the
Netherlands with registered number 2730262 which owns the entire
issued share
capital of Accugas Limited;
ExxonMobil Exxon Mobil Corporation, being the parent company of
the Exxon Target Companies;
Exxon Acquisition the acquisition by Savannah Chad, a wholly
owned subsidiary of the Company, of EEPCI and EPIL;
Exxon Sellers Exxon Mobil Corporation, ExxonMobil International
Holdings Inc. and Esso Exploration Holdings Inc.;
Exxon SPA the share sale and purchase agreement dated 12
December 2021 between Exxon Mobil Corporation, ExxonMobil
International Holdings Inc., Esso Exploration Holdings Inc. and
Savannah Energy Chad Limited;
Exxon Target Companies the companies being acquired by Savannah
pursuant to the Exxon SPA, being EEPCI, EPIL, as applicable;
Exxon Target Companies' the audited combined historical IFRS financial
Financial Information information prepared by the Company for
Exxon Target Companies the financials of the Exxon Target Companies
' Interim Financial for the three years ended 31 December 2018,
Information 31 December 2019 and 31 December 2020;
the unaudited interim historical financial
information of the Exxon Target Companies
for the six-month period ended 30 June 2021;
FCA the Financial Conduct Authority (formerly the Financial
Services
Authority) of the United Kingdom;
FIPL First Independent Power Limited;
FIPL Afam FIPL Afam power plant;
FOL Transaction the transaction between SEUGL and Frontier,
under which SEUGL acquired 100 per cent. of the Uquo Field Gas
Project (including associated condensate production), Frontier
relinquished operatorship of the Uquo CPF to Accugas Limited and
Frontier acquired 100 per cent. of the oil project at the Uquo
Field;
Frontier Frontier Oil Limited, a company incorporated under the
laws of the Federal Republic of Nigeria with registered number
41178, whose registered office is at 9C Joseph Adu Street, Oniru
Estate, Victoria Island, Lagos, Nigeria;
FSMA the Financial Services and Markets Act 2000 of the UK (as
amended), including any regulations made pursuant thereto;
FUN Group Frontier, Universal and Network Exploration &
Production Company Nigeria Limited;
FUN Manifold the facilities for storing, handling and exporting
crude oil on behalf of the FUN Group from the Uquo, Stubb Creek and
Qua Iboe fields to QIT;
Further Enlarged Share Capital the share capital of the Company
as enlarged by issue of the Placing Shares, the Subscription Shares
and the EBT Shares;
General Meeting the general meeting of the Company to be held at
the Company's offices at 40 Bank Street, London E14 5NR on [ -- ]
January 2022 at 10.30 a.m., formal notice of which is set out in
this document;
Glencore Glencore Exploration (DOB/DOI) Limited, an oil &
gas company with interests in Chad;
Glencore PSC the Production Sharing Contract dated 18 March 2011
between the Republic of Chad, Glencore, PCM and SHT, as amended
from time to time;
Group the Company and its subsidiaries from time to time;
HSSE health, safety, security and environmental;
IFRS International Financial Reporting Standards as adopted by
the United Kingdom;
Junior Loan Facility the US$32 million term loan facility
entered into between the Company, as borrower, LCP4L as lender, and
Lothian Capital Partners Holdings Limited dated [ -- ] December
2021;
Kome Kribi 1 FSO the Kome Kribi 1 floating storage and
offloading facility which forms part of the ETS;
Lafarge Lafarge Africa plc (previously known as United Cement
Company of Nigeria Limited), a customer of Accugas Limited;
Latest Practicable Date [ -- ] December 2021, being the last
practicable day prior to the publication of the Admission Document
for the inclusion of certain information in this document;
London Stock Exchange London Stock Exchange plc;
Marginal Field Guidelines the Guidelines for Farm-out And
Operation of Marginal Fields 2001 published by the DPR in
Nigeria;
Market Abuse Regulations Market Abuse Regulation (Regulation
596/2014) (as it forms part of domestic UK law pursuant to the
European Union (Withdrawal) Act 2018);
Minister Minister of Petroleum and Mining of the Republic of
Chad;
Ministerial Consent the approval of the Minister for each of the
Exxon Acquisition and the PETRONAS Acquisition in accordance with
the 1962 Petroleum Code, the 1967 Implementing Decree, the Upstream
Conventions and the TOTCo Convention, further details of which are
set out in paragraph 6 of Part 2 in Appendix II of this
announcement;
MPN Mobil Producing Nigeria Unlimited, a subsidiary of
ExxonMobil;
MPR the Federal Ministry of Petroleum Resources in Nigeria;
Mulak Mulak Energy Limited, a member of the Mansour Group, which
is a Egyptian multinational conglomerate, which operates a
compressed natural gas project in Nigeria;
NDPHC the Niger Delta Power Holding Company, the owner of, inter
alia, the Calabar power station;
NERC the Nigerian Electricity Regulatory Commission;
NFCCPC Nigerian Federal Competition and Consumer Protection
Commission;
NFCCPC Consent NFCCPC's consent to the Company's acquisition of
62.5 per cent. of Universal;
NGN or Naira Nigerian Naira, the functional currency of Nigeria;
Niger CPR or Niger Competent the competent person's report on the Group's Nigerien assets
Person's Report ;
Nigerian Assets the interest in the Uquo Gas Project owned by
SEUGL, the interest in the Stubb Creek Field owned by Universal and
the interest in the Accugas Midstream Business owned by Accugas
Limited;
Nigerian CPR or Nigerian the competent person's report on the
Group's Nigerian assets
Competent Person's Report ;
NNDC New Nigeria Development Company Ltd., a conglomerate owned
by the 19 Northern States of Nigeria, whose registered office is at
Ahmed Talib House, 18/19 Ahmadu Bellow Way, Kaduna, Kaduna State,
Nigeria;
NNPC Nigerian National Petroleum Corporation, whose registered
office is at NNPC Towers, Central Business District, Herbert
Macaulay Way, P.M.B. 190, Garki, Abuja, Nigeria;
NPDC Nigerian Petroleum Development Company, with its head
office at 62/64 Sapele Road, Benin City, Edo State, Nigeria;
Notice of General Meeting formal notice convening the General Meeting ;
Officers Plan 2020 means the Savannah Energy PLC Share Option
Plan 2020 ;
Official List the Official List maintained by the UK Listing
Authority pursuant to Part VII of the FSMA;
Ordinary Shares the ordinary shares of par value GBP0.001 each
in the capital of the Company;
OPEC the Organisation of the Petroleum Exporting Countries,
comprising: Algeria, Angola, Congo, Ecuador, Equatorial Guinea,
Gabon, IR Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia,
United Arab Emirates and Venezuela;
OPEC+ the Organisation of the Petroleum Exporting Countries
Plus, comprising OPEC and Azerbaijan, Bahrain, Brunei, Kazakhstan,
Malaysia, Mexico, Oman, Russia, South Sudan and Sudan;
OPIC OPIC Overseas Petroleum and Investment Corporation, a
wholly owned subsidiary of CPC Corporation, Taiwan, and a Shipper
using the Chad-Cameroon Pipeline;
Panel the UK Panel on Takeovers and Mergers;
PC Chad PETRONAS Carigali (Chad EP) Inc., incorporated under the
laws of the Cayman Islands, whose registered office is at the
Offices of Maples and Calder, Attorneys-at-Law, P.O. Box 309,
George Town, Grand Cayman, Cayman Islands BW1;
PC Marketing PETRONAS Chad Marketing Inc., incorporated under
the laws of the Cayman Islands, whose registered office is at the
Offices of Maples and Calder, Attorneys-at-Law, P.O. Box 309,
George Town, Grand Cayman, Cayman Islands BW1;
PCCEPI PETRONAS Carigali Chad Exploration & Production Inc.,
incorporated under the laws of the Cayman Islands, whose registered
office is at the Offices of Maples and Calder, Attorneys-at-Law,
P.O. Box 309, George Town, Grand Cayman, Cayman Islands BW1;
PCM PetroChad (Mangara) Limited;
PETRONAS PETRONAS (E&P) Overseas Ventures SDN. BHD.,
incorporated under the laws of Malaysia, whose registered office is
at Tower 1, PETRONAS Twin Towers, Kuala Lumpur City Centre, 5008,
Kuala Lumpur, Malaysia;
PETRONAS Acquisition the acquisition by Savannah Energy Chad
Limited, a wholly owned subsidiary of the Company, of PCCEPI, PC
Chad, Doba Pipeline and PC Marketing;
PETRONAS SPA the share sale and purchase agreement dated 2
December 2021 between PETRONAS (E&P) Overseas Ventures SDN.
BHD. and Savannah Energy Chad Limited;
PETRONAS Target Companies the companies being acquired by Savannah pursuant to the
PETRONAS SPA, being PCCEPI, PC Chad, Doba Pipeline and PC
Marketing, as applicable;
PETRONAS Target Companies' the audited combined historical financial
Financial Information information of the PETRONAS Target Companies
PETRONAS Target Companies' for the three years ended 31 December 2018,
Interim Financial Information 31 December 2019 and 31 December 2020;
the unaudited interim historical financial
information of the PETRONAS Target Companies
for the six-month period ended 30 June
2021;
PIA Petroleum Industry Act 2021 of Nigeria;
Pipeline Companies TOTCo and COTCo;
Placing the conditional placing of the Placing Shares by the
Brokers at the Placing Price with institutional and other investors
pursuant to the Placing Agreement;
Placing Agreement the conditional placing agreement between the
Company, the Directors, Strand Hanson and the Brokers relating to
the Placing ;
Placing Price [ -- ] pence per Placing Share;
Placing Shares [ -- ] new Ordinary Shares subscribed for
pursuant to the Placing;
Pounds Sterling or GBP pounds sterling, the lawful currency of
the UK from time to time;
Pro Forma Financial Information the unaudited pro forma
statement of net assets of the Company as at 30 June 2021;
Promissory Note the US$11.5 million note issued by Accugas Holdco;
Prospectus Directive Directive 2003/71/EC including any relevant
implementing measures in each member state of the European Economic
Area that has implemented Directive 2003/71/EC;
Prospectus Regulation Rules the rules published by the FCA under
FSMA governing the publication of a prospectus, as derived from the
Prospectus Directive;
QCA Code the Quoted Companies Alliance Corporate Governance Code
for Small and Mid-Size Quoted Companies, as amended from time to
time;
QIT the Qua Iboe oil export terminal owned and operated by MPN,
a subsidiary of ExxonMobil, located close to the Uquo Field, on the
south coast of Nigeria;
R1/R2 PSC the production sharing contract between Savannah Niger
and the Government of Niger dated 3 July 2014, its amendment no. 1
dated 2 November 2015 and amendment no. 2 dated 26 October 2016 in
respect of the R1/R2 PSC Area;
R1/R2 PSC Area the R1/R2 areas in South Eastern Niger that are
the subject of the R1/R2 PSC;
R1/R2 Signature Bonus the payments of US$34 million and US$2.7
million made by the Group to the Government of Niger represented by
the Ministry of Energy and Petroleum and their advisers on or
around 4 August 2014 pursuant to the R1/R2 PSC;
R1234 PSC the amalgamation of the R1/R2 PSC with the R3/R4
PSC;
R3/R4 PSC the production sharing contract between Savannah Niger
and the Government of Niger dated 30 July 2015 and its amendment
no.1 dated 2 November 2015 and amendment no. 2 dated 26 October
2016 in respect of the R3/R4 PSC Area;
R3/R4 PSC Area the R3/R4 areas in South East Niger that are the
subject of the R3/R4 PSC;
R3/R4 Signature Bonus the payments of US$28 million and US$2.24
million made by the Group to the Government of Niger represented by
the Ministry of Energy and Petroleum and their advisers on or
around 31 July 2015 pursuant to the R3/R4 PSC;
R3 East the R3 East portion of the R3/R4 PSC;
Re-Admission the re-admission of the Further Enlarged Share
Capital to trading on AIM, following Completion, and such admission
becoming effective in accordance with the AIM Rules for
Companies;
Registrar Computershare Investor Services plc;
Regulation S Regulation S promulgated under the Securities Act;
Resolutions the resolutions to be proposed at the General
Meeting;
Restoration the restoration of the Existing Share Capital to
trading on AIM following publication of this Admission Document,
expected to occur at 8.00 a.m. on or around [l] December 2021, with
neither the Exxon Acquisition nor the PETRONAS Acquisition having
completed;
Savannah Chad Savannah Energy Chad Limited, incorporated under
the laws of England and Wales with registered number 13490881,
whose registered office is at 40 Bank Street, London E14 5NR;
Savannah Niger Savannah Energy Niger S.A. a société anonyme
unipersonelle incorporated under the laws of Niger with registered
number RCCM: NI-NIA-2014-B 1940, whose registered office is at 124
Rue des Ambassades, BP11272, Niamey, Niger;
Savannah PSCs or Savannah PSC the R1/R2 PSC, the R3/R4 PSC and
the R1234 PSC as applicable;
SE1L Savannah Energy 1 Limited, a company incorporated in
Scotland with registered number SC453751, whose registered office
is at 50 Lothian Road, Festival Square, Edinburgh, EH3 9WJ;
SEC US Securities and Exchange Commission;
Securities Act US Securities Act of 1933, as amended from time
to time, and the rules and regulations promulgated thereunder;
Senior Lender Maddox DMCC, a global commodity trader
headquartered in Dubai;
Senior Managers Nick Beattie and Antoine Richard, further
details of whom are set out in paragraph 17 of Part 1 in Appendix
II of this announcement;
Seven or Seven Energy or SEIL Seven Energy International
Limited, a company incorporated in Mauritius with registered number
65304 C2/GBL, whose registered office is at c/o International
Management (Mauritius) Ltd, Les Cascades Building, Edith Cavel
Street, Port-Louis, Mauritius;
Seven Group Seven and its subsidiary entities;
SEUGL Savannah Energy Uquo Gas Limited (previously known as
Seven Uquo Gas Limited and GOGE (Nig) Limited), a company
incorporated under the laws of the Federal Republic of Nigeria,
with registered number 659675, whose registered office is at 35
Kofo Abayomi Street, Victoria Island, Lagos, Nigeria;
Shareholders the holders of Ordinary Shares from time to time;
Share Options options to subscribe for new Ordinary Shares and
Ordinary Shares held by the EBT;
Share Schemes means the 2014 LTIP, the 2015 Supplemental Plan,
the Employee Plan 2018, the Officers Plan 2020, the Employee Plan
2021, the Employee 2014/15 Replacement Plan, further details of
which are set out in paragraph 4 of Part 12 of this Admission
Document;
Shell Royal Dutch Shell PLC;
Shippers the Doba Consortium, Glencore, CNPCI and PIC; SHT or
Chad National Oil Company Société des Hydrocarbures du Tchad;
Significant Shareholder a Shareholder holding three per cent. or
more of the Ordinary Shares in issue from time to time;
Sinopec Sinopec International Petroleum Exploration and
Production Company Nigeria Limited;
Shipper Transportation being:
Agreements (i) the transportation contract dated 19
June 2000 between COTCo, the Republic of
Chad and the Doba Consortium;
(ii) the transportation contract between
TOTCo, Republic of Chad and the Doba Consortium
dated 21 June 2000, as amended on 11 October
2011;
(iii) the transportation contract dated 21
October 2013 between COTCo, Republic of Chad,
Glencore, PCM and SHT;
(iv) the transportation contract dated 11
October 2013 between TOTCo, Republic of Chad,
Glencore, PCM and SHT;
(v) the transportation contract dated 22
November 2013 between
COTCo, Republic of Chad, CNPCI and Cliveden;
(vi) the transportation contract dated 22
November 2013 between TOTCo, Republic of
Chad, CNPCI and Cliveden;
(vii) the transportation contract dated 28
January 2020 between TOTCo, Republic of Chad,
OPIC Africa Corporation, CEFC Hainan International
(HK) Limited and SHT; and
(viii) the transportation contract dated 28 January 2020 between
COTCo, Republic of Chad, OPIC Africa Corporation, CEFC Hainan
International (HK) Limited and SHT;
SPDC Shell Petroleum Development Company of Nigeria Limited;
Strand Hanson Strand Hanson Limited, the Company's financial and
nominated adviser, whose registered office is at 26 Mount Row,
London W1K 3SQ;
Stubb Creek EPF the early production facilities located at the
Stubb Creek Field;
Stubb Creek Field the Stubb Creek marginal field located in the
OML 14 block onshore Nigeria;
Stubb Creek JV the joint venture between Universal and Sinopec
in connection with the Stubb Creek Field;
Subscribers Andrew Knott (via a wholly-owned entity), Steve
Jenkins, Sir Stephen O'Brien, David Clarkson and Mark Iannotti;
Subscription the subscription for the Subscription Shares at the
Placing Price to the Subscribers pursuant to the Subscription
Letters;
Subscription Letters the subscription letters entered into
between the Company and each of the Subscribers;
Subscription Shares [14,346,982] new Ordinary Shares subscribed
for pursuant to the Subscription;
Takeover Code the UK City Code on Takeovers and Mergers (as
amended from time to time);
TOTCo or Chad Pipeline Company Tchad Oil Transportation Company,
incorporated under the laws of the Republic of Chad with registered
company number 600 010 746, whose registered office is at 3223 Rue
d'Abeche, B. P. 6321 N'Djamena, Tchad;
TOTCo Convention the Convention of Establishment between the
Republic of Chad and TOTCo dated 20 July 1998, as amended from time
to time, which granted TOTCo the right to construct, own, operate
and maintain the Chad Transportation System;
TOTCo Transportation Agreement the transportation agreement
between TOTCo, the Republic of Chad, EEPCI, PC Chad and SHT dated
11 June 2000 (as amended on 11 October 2011);
Transportation Agreements the TOTCo Transportation Agreement and
the COTCo Transportation Agreement;
UK or United Kingdom the United Kingdom of Great Britain and Northern Ireland;
UKLA or UK Listing Authority the FCA, acting in its capacity as
the competent authority for the purposes of Part VI of the
FSMA;
uncertificated or in recorded on the relevant register of the
share or security concerned as
uncertificated form being held in uncertificated form in CREST
and title to which, by virtue of the CREST Regulations, may be
transferred by means of CREST;
United States or US the United States of America, its
territories and possessions, any state of the United States of
America and the district of Columbia and all other areas subject to
its jurisdiction;
Universal or UERL Universal Energy Resources Limited, a company
incorporated under the laws of the Federal Republic of Nigeria with
registered number 429120, whose registered office is 25 Idoro Ro.
d, Uyo, Akwa Ibom State, Nigeria;
Upstream Conventions the 1988 Convention and the 2004 Convention;
Upstream GSA the gas sales agreement dated 6 November 2019
between SEUGL as seller and Accugas Limited as buyer relating to
gas produced at the Uquo Field;
Uquo CPF the 200 MMscfpd gas processing facilities, owned by
Accugas Limited and located at the Uquo Field;
Uquo Field the Uquo marginal field located in the OML 13 block
onshore Nigeria;
Uquo Gas Project the gas project at the Uquo Field;
Uquo HoldCo Savannah Energy (Uquo) Limited, a company
incorporated under the laws of England and Wales with registered
company number 12292632, whose registered office is at 40 Bank
Street, London E14 5NR;
Uquo JOA the joint operating agreement between Frontier and
SEUGL dated 9 January 2007 as amended from time to time;
Uquo JV the joint venture between SEUGL and Frontier in
connection with the Uquo Field which governs the terms of the FOL
Transaction on an ongoing basis;
US Dollar, US$ or $ the legal currency of the United States from
time to time;
VAT valued added tax;
Warrantholders the holders of Warrants from time to time;
Warrants the Warrants to be granted to Andrew Knott (via LCP4L)
under the terms of the Warrant Instrument;
Warrant Instrument the warrant instrument entered into by the
Company by way of deed poll on [l] December 2021;
Warrant Shares the new Ordinary Shares to be issued to
Warrantholders on exercise of the Warrants;
Wood Mackenzie Wood Mackenzie Limited;
World Bank Partial Risk the guarantee of the payment obligations
under the downstream
Guarantee or Partial Risk GSA between Accugas Limited and
Calabar Generation Company
Guarantee Limited, provided by the World Bank's International
Development Association; and
XOF West African CFA Franc, the functional currency of
Niger.
GLOSSARY
The following table provides an explanation of certain technical
terms and abbreviations used in this document. The terms and their
assigned meanings may not correspond to standard industry meanings
or sage of these terms.
2D seismic geophysical data that depicts the subsurface strata
in two dimensions;
2P Reserves proven and probable reserves;
3D seismic geophysical data that depicts the subsurface strata
in three dimensions. 3D seismic typically provides a more detailed
and accurate interpretation of the subsurface strata than 2D
seismic;
Adjusted EBITDA profit or loss before finance costs, investment
revenue, foreign exchange gains or losses, 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;
API a standard measure of oil density, as defined by the
American Petroleum Institute;
appraisal well a well drilled as part of an appraisal drilling
programme which is carried out to determine the physical extent,
reserves and likely production rate of a field;
barrels or bbl a unit of volume measurement used for petroleum
and its products (for a typical crude oil 7.3 barrels = 1 tonne:
6.29 barrels = 1 cubic meter);
Bscf billion standard cubic feet. 1 bscf is approximately equal
to 166,667 boe or 23,618 tonnes of oil equivalent;
Best Estimate the middle value in a range of estimates
considered to be the most likely. If based on a statistical
distribution, can be the mean, median or mode depending on
usage;
Block an area defined for exploration licensing;
blow-out an uncontrolled flow of gas, oil, or other well fluids
into the atmosphere or into an underground formation;
Bnbbls billions of barrels of oil;
Boe barrels of oil equivalent. One barrel of oil is
approximately the energy equivalent of 6,000 scf of natural
gas;
bopd barrels of oil per day;
Brent major trading classification of sweet light crude oil;
carbonates a sedimentary rock composed primarily of calcium
carbonate (limestone) or calcium magnesium carbonate
(dolomite);
Central African Rift System the rift system composed of two
coeval Cretaceous rift sub-systems in Central Africa;
Chance of Success or CoS the estimated chance, or probability,
of making an oil and gas discovery in an exploration well;
Clastics sediments formed by the breakdown of large rock masses
by climatological processes, physical or chemical;
Condensate light hydrocarbon compounds that condense into liquid
at surface temperatures and pressures. They are generally produced
with natural gas and are a mixture of pentane and higher
hydrocarbons;
Contingent Resources those quantities of petroleum estimated, as
of a given date, to be potentially recoverable from known
accumulations by application of development projects, but which are
not currently considered to be commercially recoverable due to one
or more contingencies;
Cretaceous geological strata formed during the period 140
million to 65 million years before the present;
crude oil hydrocarbons that at atmospheric temperature and
pressure are in a liquid state, including crude mineral oil,
asphalt and ozokerites, and liquid hydrocarbons that are obtained
by the separation treatment, processing or extraction;
DCQ daily contract quantity;
debottlenecked process of identifying specific areas and/or
equipment in oil and gas facilities that limit the flow of product
and optimising them so that overall capacity in the plant can be
increased;
Deltaic sediments deposited in an ancient (or present day) river
delta;
Dip the inclination of a horizontal structure from the
horizontal;
discovery well an exploration well which has encountered
hydrocarbons for the first time in a structure;
Doba Basin the oil basin in southern Chad, which forms part of
the West and Central African Rift System;
drilling rig the derrick or most drawworks, and attendant
surface equipment of a drilling or workover unit;
dwt dead weight tonnage, a measure of the weight a ship is able
to carry;
EBITDA earnings before interest and tax, depreciation and
amortisation;
EBITDAX earnings before interest and tax, depreciation,
amortisation and exploration expense;
EOR Enhanced Oil Recovery;
E&P exploration and production;
Eocene horizon stratigraphic section of Eocene age (approx. 55 -
34 mybp);
EPS Early Production Scheme;
Exploration Risk Factor the estimated probability of discovering
hydrocarbons within an exploration prospect. Also known as Chance
of Success, or CoS;
exploration well a well drilled to find hydrocarbons in an
unproved area or to extend significantly a known oil or natural gas
reservoir;
fault or faulting a displacement (vertical, inclined or lateral)
below the earth's surface that acts to offset rock layers relative
to one another. Faulting can create traps for hydrocarbons;
Field an area consisting of either a single reservoir or
multiple reservoirs, all grouped on or related to the same
individual geological structural feature and/or stratigraphic
condition;
Formation a layer or unit of rock. A productive formation in the
context of reservoir rock;
FSO floating storage and offloading vessel;
full tensor gravity a form of gravimetric survey;
GDP gross domestic product;
geophysical measurement of the earth's physical properties to
explore and delineate hydrocarbons by means of electrical, seismic,
gravity and magnetic methods;
gross resources the total estimated petroleum that is
potentially recoverable from a field or prospect;
GSA gas sales agreement;
heavy crude oil of high specific gravity, an API gravity of less
than 22 degrees and viscosity of less than 100 centipoise;
HSE health, safety and environment;
hydrocarbon a compound containing only the elements hydrogen and
carbon. May exist as a solid, a liquid or a gas. The term is mainly
used in a catch-all sense for oil, gas and condensate;
IMF International Monetary Fund;
investment grade a rating that indicates that a municipal or
corporate bond has a relatively low risk of default;
IT information technology
Kboepd thousands of barrels of oil equivalent per day;
Kbopd thousands of barrels of oil per day;
km kilometre;
km(2) square kilometers;
Lacustrine sediments deposited in an ancient (or present day)
freshwater lake;
Lead a conceptual exploration idea usually based on minimal data
but with sufficient support from geological analogues and the like
to encourage further data acquisition and/or study on the basis
that hydrocarbon accumulations of unknown size may be found in the
future;
licence an exclusive right to search for or to develop and
produce hydrocarbons within a specific area and/or a pipeline
licence, as the context requires. Usually granted by the State
authorities and may be time limited;
Lower Cretaceous stratigraphic section of Early Cretaceous age
(approximately 145 - 100 mybp);
LTI lost time injury;
M&A mergers and acquisitions;
M thousand;
Mscf thousand standard cubic feet of natural gas;
MMbbls millions of barrels of oil;
MMboe millions of barrels of oil equivalent;
MMBtu millions of British Thermal Units;
MMscfpd millions of standard cubic feet per day;
MMstb millions of standard stock tank barrels of oil;
MOU memorandum of understanding;
Mscf thousand standard cubic feet (equivalent to 1.037
MMBtu);
mybp millions of years before present;
natural gas hydrocarbon that at a standard temperature of sixty
degrees Fahrenheit (60 F) and a standard pressure of one atmosphere
are in a gaseous state, including wet mineral gas and dry mineral
gas, casing head gas, residual gas remaining after separation
treatment, processing, or extraction of liquid hydrocarbons;
NPV Net Present Value;
oil equivalent international standard for comparing the thermal
energy of different fuels. 1 boe = 6,000scf;
Operator the entity that has legal authority to drill wells and
undertake production of hydrocarbons found. The operator is often
part of a consortium and acts on behalf of this consortium;
Paleocene period of geological time, approximately 65 to 55
mybp;
Petroleum a generic name for hydrocarbons, including crude oil,
natural gas liquids, natural gas and their products;
permeability a measure of the ability of a material (such as
rocks) to transmit fluids;
pinch-out to taper to a zero edge;
Play a project associated with a prospective trend of potential
prospects, but which requires more data acquisition and/or
evaluation in order to define specific leads or prospects;
Porosity the percentage of void in a porous rock compared to the
solid formation;
Possible Reserves those additional Reserves that analysis of
geoscience and engineering data suggest are less likely to be
recoverable than Probable Reserves. The total quantities ultimately
recovered from the project have a low probability to exceed the sum
of Proved plus Probable plus Possible (3P) Reserves, which is
equivalent to the high-estimate scenario;
Probable Reserves those additional Reserves which analysis of
geoscience and engineering data indicate are less likely to be
recovered than Proved Reserves but more certain to be recovered
than Possible Reserves. It is equally likely that actual remaining
quantities recovered will be greater than or less than the sum of
the estimated Proved plus Probable Reserves (2P);
Prospect a project associated with a potential accumulation of
oil or natural gas that is sufficiently well defined to represent a
viable drilling target;
Prospective Resources those quantities of petroleum estimated,
as of a given date, to be potentially recoverable from undiscovered
accumulations by application of future development projects;
Proved Reserves those quantities of Petroleum that, by analysis
of geoscience and engineering data, can be estimated with
reasonable certainty to be commercially recoverable from known
reservoirs and under defined technical and commercial
conditions;
PSC Production Sharing Contract;
Reserves those quantities of petroleum anticipated to be
commercially recoverable by application of development projects to
known accumulations from a given date forward under defined
conditions;
Reservoir a subsurface body of rock having sufficient porosity
and permeability to store and transmit fluids. A reservoir is a
critical component of a complete petroleum system;
Resources deposits of naturally occurring hydrocarbons which, if
recoverable, include those volumes of hydrocarbons either yet to be
found (prospective) or if found the development of which depends
upon a number of factors (technical, legal and/or commercial) being
resolved (contingent);
RFT Repeat Formation Tester;
Scf standard cubic feet;
Seal a relatively impermeable rock, commonly shale, anhydrite or
salt, that forms a barrier or cap above and around reservoir rock
such that fluids cannot migrate beyond the reservoir. A seal is a
critical component of a complete petroleum system;
seismic survey a method by which an image of the earth's
subsurface is created through the generation of shockwaves and
analysis of their reflection from rock strata. Such surveys can be
done in two or three-dimensional form;
stratigraphic a mode of trapping hydrocarbons which is not
dependent on structural entrapment;
sweet crude the New York Mercantile Exchange designates
petroleum with less than 0.5 per cent. sulfur as sweet;
Tscf trillion standard cubic feet;
Tertiary geological strata formed during the period from 65 to
1.8 mybp;
TVDSS true vertical depth sub-sea;
UN United Nations;
UN SDG United Nations Sustainable Development Goals;
Upper Cretaceous period of geological time, approximately 100 to 65 mybp;
up-dip up the plane of the dip;
USGS US Geological Survey;
Volcanics rocks derived from an ancient (or present day)
volcano;
WTI West Texas Intermediate, a light, sweet crude oil; and
Yet-to-find or YTF estimated volumes of hydrocarbons which are
as yet undiscovered.
[1] Assumes a six-month contribution from the acquisition assets
based on 1 July 2022 expected completion date.
[2] Total Revenues are defined as the total amount of invoiced
sales during the period. This number is seen by management as more
accurately reflecting the underlying cash generation capacity of
the business as opposed to Revenue recognised in the Condensed
Consolidated Statement of Comprehensive Income. A detailed
explanation of the impact of IFRS 15 revenue recognition rules on
our Consolidated Statement of Comprehensive Income is provided in
the Financial Review section of the Savannah Energy Annual Report
and Accounts 2020.
[3] Group Administrative Expenses and Operating Costs are
defined as total cost of sales, administrative and other operating
expenses excluding royalty and depletion, depreciation and
amortisation.
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END
IOEGZMFZKGLGMZM
(END) Dow Jones Newswires
December 30, 2021 10:47 ET (15:47 GMT)
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