TIDMSAVE
RNS Number : 5975A
Savannah Energy Plc
30 September 2020
30 September 2020
Savannah Energy PLC
("Savannah" or "the Company")
2020 Half Year Results, Trading Update and Outlook for the
Year
Savannah Energy PLC, the African-focused British independent
energy company sustainably developing high quality, high potential
energy projects in Nigeria and Niger, is pleased to announce its
unaudited interim results for the six months ended 30 June 2020
together with a trading update up to 31 August 2020 and outlook for
the FY 2020.
Andrew Knott, CEO of Savannah Energy, said:
"I believe that our first half results clearly demonstrate the
transformation Savannah has undergone to become a cash generative
business, benefitting from a long-dated, gas-biased revenue stream
with no meaningful oil price exposure. I am pleased that we are
able to reiterate our core FY 2020 Total Revenues (US$200m+) and
cost guidance (US$68.0 - US$72.0m) today, while also reporting cash
collections in the period to end of August of US$133.1m. Over 94%
of our forward revenue guidance is derived from three gas sales
agreements with a weighted average contracted life of 15 years.
As a company we are extremely cognisant of the challenging
macro-economic backdrop and the critical role our projects play in
our countries of operation. While we believe our business is
strongly positioned at this time, we fully understand the
importance of working in partnership with our project stakeholders
to ensure "win-win" outcomes as we continue to develop our
business. In this regard we continue to see strong growth potential
in both of our core business units, with gas sales to new customers
expected in Nigeria and new oil sales from the R3 East project in
Niger following the installation of an Early Production System
("EPS") which is expected to commence by the end of FY 2021."
Key Highlights
-- Total cash collections from the Nigerian Assets in the
year-to-date period ended 31 August 2020 were US$133.1m
(year-to-date period ended 31 August 2019: US$103.8m);
-- Group cash balance of US$84.7m[1] and net debt of US$426.8m as at 31 August 2020;
-- We reiterate our FY 2020 Total Revenues, Group Administrative
and Operating Costs and Capital Expenditure guidance:
o Total Revenues[2] of greater than US$200.0m;
o Group Administrative and Operating Costs[3] of US$68.0m to
US$72.0m;
o Capital expenditure of up to US$45.0m;
-- We reduce our FY 2020 Group Depreciation, Depletion and
Amortisation guidance to US$35.0m - US$37.0m (from US$43.0m -
US$45.0m), reflecting an increase in the estimated useful life of
our infrastructure assets.
H1 2020 Financial Highlights
-- H1 2020 Revenue of US$91.7m comprising US$83.6m of gas sales
and US$8.1m of liquids sales (H1 2019[4] Revenue: Nil, Pro-forma[5]
H1 2019 Revenue: US$70.3m);
-- Contract liabilities (or "Deferred Revenue") related to
invoiced sales and recognised in the Statement of Financial
Position as at 30 June 2020 increased by US$22.9m in H1 2020,
resulting in Total Revenues (2) of US$114.6m in H1 2020, in line
with FY 2020 guidance of Total Revenues greater than US$200.0m;
-- Average realised gas price of US$3.9/Mscf and an average
realised liquids price of US$48.3/bbl;
-- Group Administrative Expenses and Operating Costs 3 of
US$22.7m (H1 2019: US$4.3m). With our original FY 2020 guidance
having anticipated cost expenditures weighted into H2 2020 and an
associated FY contingency, FY guidance of US$68.0m-US$72.0m has
been maintained ;
-- EBITDA[6] of US$66.8m (H1 2019: negative US$10.5m, Pro-forma H1 2019 EBITDA: US$30.0m);
-- Group Depreciation, Depletion and Amortisation of US$18.9m (H1 2019: US$0.4m);
-- H1 2020 maiden profit after tax of US$1.8m (H1 2019: loss US$3m);
-- Capital expenditure of US$1.8m (H1 2019: US$2.5m). With our
original FY 2020 guidance envisioning a number of capital projects
which may be implemented in H2 2020, FY guidance of up to US$45m
has been maintained;
-- Total cash collections from the Nigerian Assets in H1 2020
were US$82.1m compared to US$55.3m in H1 2019;
-- Group cash balance of US$53.3m[7] as at 30 June 2020 (31 December 2019: US$48.1m); and
-- Group net debt of US$460.5m as at 30 June 2020, after a fair
value adjustment of US$3.7m (see Note 10 in the Condensed
Consolidated Interim Financial Statements) (31 December 2019:
US$484.0m).
H1 2020 Operational Highlights
Nigeria
-- Average gross daily production, of which 88.8% was gas,
increased 17.7% during H1 2020 to 21.3 Kboepd (H1 2019: 18.1
Kboepd). This includes a 22.4% increase in production from the Uquo
gas field compared to the same period last year, from 92.7 MMscfpd
(15.4 Kboepd) to 113.5 MMscfpd (18.9 Kboepd);
-- Achievement of an all-time Nigerian Assets gas production
record of 177 MMscfpd on 30 May 2020;
-- Accugas' customers achieved an all-time record peak
contribution of 11.5% of Nigeria's electricity generation or 486MW
on 23 May 2020, with the contributed electricity being exclusively
generated from Accugas sales gas;
-- On 31 January 2020, Accugas entered into the first new gas
sales agreement for the business in over five years with First
Independent Power Limited ("FIPL"), an affiliate company of the
Sahara Group, for the provision of gas to the FIPL Afam power
plant. Accugas is in the process of working with FIPL to validate
the third-party infrastructure required to enable the commencement
of gas sales under this contract; and
-- In June 2020, Accugas signed a term sheet with a significant
new industrial gas sales customer, a subsidiary of a well-respected
international company, for an initial quantity of up to 5 MMscfpd
of gas for an initial five-year period.
Niger
-- Updated Competent Person's Report for the Niger assets
compiled by CGG Services (UK) Ltd was published on 1 May 2020,
certifying 35MMstb of Gross 2C Resources for the R3 East
discoveries with an additional 90MMstb of Gross Unrisked
Prospective Resources (Best case) within tie-in distance of the
planned R3 East facilities, and a 2C case economic break-even oil
price estimated at US$26.0/bbl;
-- Agreement reached with the Niger Ministry of Petroleum to
combine the R4 area with the R1/R2 PSC Area into a new R1/R2/R4
PSC, extending the licences for a further 10 years and retaining
the full acreage position previously covered by the R1/R2 PSC and
the R3/R4 PSC, and that the R3 PSC area will continue as a
stand-alone PSC area. Ratification of these changes is subject to
Council of Minister approval and payment of the associated fee;
-- Plans for delivering the R3 East development continue to
progress with the intention to commence installation of an EPS by
the end of FY 2021, market conditions and financing permitting;
and
-- Significant further potential on the Savannah PSC areas
remains, with 146 further potential exploration targets having been
identified for future drilling consideration.
Post Period Summary/2020 YTD Trading Update
-- Average gross daily Nigeria production in the year-to-date
period ended 31 August 2020 of 20.4 Kboepd (2019: 17.6 Kboepd), of
which 88.2% was gas, including a 19.3% increase in production from
the Uquo gas field compared to the same period last year, from 90.5
MMscfpd (15.1 Kboepd) to 108.0 MMscfpd (18.0 Kboepd);
-- Group cash balance of US$84.7m1 and net debt of US$426.8m as at 31 August 2020;
-- In August 2020 the Company announced that a total of
10,998,844 Savannah ordinary shares (1.1% of total issued shares)
were purchased by directors of the Company, thereby demonstrating
their confidence in the significant future potential of the
business; and
-- Savannah published its first sustainability review as part of
the 2019 Annual Report and commented on plans to undertake a review
of its approach to Environmental, Social and Governance ("ESG")
reporting during 2020 with a view to developing and implementing a
new ESG performance reporting framework for the group.
Guidance for FY 2020
-- We reiterate our FY 2020 Total Revenues, Gross Production,
Group Administrative and Operating Costs and Capital Expenditure
guidance:
o Total Revenues of greater than US$200.0m;
o Gross Production of 21.0 Kboepd to 23.0 Kboepd;
o Group Administrative and Operating Costs(3) of US$68.0m to
US$72.0m;
o Capital expenditure of up to US$45.0m;
-- We reduce our FY 2020 Group Depreciation, Depletion and
Amortisation guidance to US$35.0m - US$37.0m (from US$43.0m -
US$45.0m), reflecting an increase in the estimated useful life of
our infrastructure assets .
For further information, please refer to the Company's website
www.savannah-energy.com or contact:
+44 (0) 20 3817
Savannah Energy 9844
Andrew Knott, CEO
Isatou Semega-Janneh, CFO
Sally Marshak, Communications
Consultant
+44 (0) 20 7409
Strand Hanson (Nominated Adviser) 3494
James Spinney
Ritchie Balmer
Rory Murphy
+44 (0) 20 7878
Mirabaud (Corporate Broker) 3362
Peter Krens
Ed Haig-Thomas
+44 (0) 20 8434
Celicourt Communications 2754
Mark Antelme
Jimmy Lea
Ollie Mills
The information contained within this announcement is considered
to be inside information prior to its release, as defined in
Article 7 of the Market Abuse Regulation No. 596/2014, and is
disclosed in accordance with the Company's obligations under
Article 17 of those Regulations.
About Savannah Energy:
Savannah Energy PLC is an AIM market listed African-focused
British independent energy company sustainably developing high
quality, high potential energy projects in Nigeria and Niger, with
a focus on delivering material long term returns for stakeholders.
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 to
over 10% of Nigeria's available power generation capacity. In
Niger, the Company has interests in two large PSC areas located in
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.
Further information on Savannah Energy PLC can be found on the
Company's website: www.savannah-energy.com.
H1 2020 Operational Review
Nigeria
We assumed operatorship of the Accugas gas processing facility
and the FUN Manifold crude gathering station in South East Nigeria
in January and April this year respectively with the successful
integration of staff and activities into the enlarged Savannah
group.
Average gross daily production from the Nigerian Assets
increased 17.7% in H1 2020 to an average of 21.3 Kboepd versus 18.1
Kboepd for H1 2019. This includes a 22.4% increase in production
from the Uquo gas field compared to the same period last year, from
92.7 MMscfpd (15.4 Kboepd) to 113.5 MMscfpd (18.9 Kboepd). H1 2020
Uquo gas field production of 18.9 Kboepd represented 88.8% of total
21.3 Kboepd production in H1 2020. Continuous uninterrupted
production was achieved throughout the period.
Nigeria Average Gross Daily Production
Uquo Gas Uquo Condensate Stubb Creek Total
(MMscfpd) (bopd) Oil (Kbopd) (Kboepd)
------------------ ---------------
1 January-30 June 2020 113.5 142.9 2.3 21.3
---------------- ------------------ ---------------
% of total production 88.8% 0.7% 10.8% 100.0%
---------------- --------------------- ------------------ ---------------
1 January-30 June 2019 92.7 140.3 2.5 18.1
---------------- --------------------- ------------------ ---------------
% of total production 85.4% 0.8% 13.8% 100.0%
---------------- --------------------- ------------------ ---------------
% Increase 22.4% 1.9% -8.0% 17.7%
---------------- --------------------- ------------------ ---------------
Gas production levels are driven by customer nomination levels.
In H1 2020, Accugas increased gas supply to the Nigeria power
sector by 35% versus Q4 2019. This compares to wider industry
performance which saw the gas shortage to supply the Nigerian power
grid increasing by 33% versus Q4 2019[8]. On 30 May 2020 Savannah
achieved an all-time Nigerian Assets gas production record of 177
MMscfpd. On 23 May 2020 Accugas customers achieved an all-time
record peak contribution of 11.5% of Nigeria's electricity
generation or 468MW, with the contributed electricity being
exclusively generated from Accugas sales gas.
As announced on 31 January 2020, Accugas entered into the first
new gas sales agreement for the business in over five years with
FIPL in relation to the provision of gas sales to its Afam power
plant in Rivers State, Nigeria. FIPL is an affiliate company of
Sahara Group, a leading international energy and infrastructure
conglomerate with operations in over 38 countries across Africa,
the Middle East, Europe and Asia.
In June 2020, Accugas signed a term sheet with a significant new
industrial gas sales customer, a subsidiary of a well-respected
international company, for an initial quantity of up to 5 MMscfpd
of gas for an initial five-year period.
Planning is underway for the drilling of a new production well
in the Uquo field and we have commenced preparations for ordering
compression equipment for the Accugas gas processing plant. Both of
these projects will ensure our continued ability to deliver gas at
current and anticipated future increased contracted volumes to
satisfy customer demand.
Niger
Following a successful exploration drilling programme in 2018 on
the R3 East portion of the R3/R4 PSC, an agreement was reached with
the Niger Ministry of Petroleum to combine the R4 area with the
R1/R2 PSC Area into a new R1/R2/R4 PSC, extending the licences for
a further 10 years and retaining the full acreage position
previously covered by the R1/R2 PSC and the R3/R4 PSC. The R3 PSC
area will continue as a stand-alone PSC area. Ratification of these
changes is subject to Council of Minister approval and payment of
the associated fee.
To deliver the R3 East development, Savannah intends to commence
installation of an Early Production System by the end of FY 2021,
market conditions and financing permitting, and intends to deliver
its initial production of 1.5 Kbopd to the Zinder refinery in
Niger. Significant further potential on the Savannah PSC areas
remains, with 146 further potential exploration targets having been
identified for future drilling consideration, as per the updated
Niger CPR announced on 1 May 2020.
In September 2019, the Transportation Convention was signed
between China National Petroleum Corporation ("CNPC") and the
Republic of Niger in relation to a crude oil export pipeline from
the ARB to the Atlantic coast in Benin. The Pipeline is expected to
run for approximately 2,000km from the ARB in Niger to Port Seme on
the Atlantic coast in Benin. Pipeline construction is now expected
to complete in 2022, which should further allow Savannah to
monetise the planned future ramp-up in oil production from its
discoveries.
ESG Reporting Update
Savannah published its first sustainability review as part of
the 2019 Annual Report in which the Company's Accugas subsidiary
reported its ESG performance in relation to the key requirements of
the International Finance Corporation's eight Performance Standards
and the World Bank's Environmental, Health & Safety
Guidelines.
The Company also commented on plans to undertake a holistic
review of its approach to sustainability reporting during 2020,
with a view to harmonising and enhancing our approach across the
enlarged Group. Following the review, Savannah plans to develop and
implement an ESG performance reporting framework for the Group
which will then be published as part of an annual sustainability
review.
H1 2020 Financial Review
The Group reports a maiden profit of US$1.8 million for the six
months ended 30 June 2020. This result was driven by the
acquisition of our Nigerian Assets which completed in November
2019.
The results are underpinned by the sale of gas to three gas
customers in Nigeria averaging 118 MMscfpd and sales of oil and
condensate at an average rate of 890 bopd.
In Niger, we continue to progress plans for our Early Production
Scheme to bring our exploration discoveries in the R3 area into
production.
Result for H1 2020
The table below provides an overview of our results and includes
a pro-forma summary for the corresponding period in 2019 to show
the comparative performance as if the Nigerian Assets had been
owned from the beginning of 2019.
Table of financial highlights
Pro-forma
Six months Six months Six months
ended 30 June ended 30 June ended 30 June
2020 2019(1) 2019
US$ million US$ million US$ million
Revenue 91.7 70.3 -
---------------- --------------- ----------------
Operating profit/(loss) 47.9 3.3 (10.9)
---------------- --------------- ----------------
Profit/(loss) before tax 1.2 (35.2) (3.0)
---------------- --------------- ----------------
Profit/(loss) after tax 1.8 3.4 (3.0)
---------------- --------------- ----------------
EBITDA(2) 66.8 30.0 (10.5)
---------------- --------------- ----------------
Difference between invoiced
sales and Revenue 22.9 25.2 -
---------------- --------------- ----------------
(1) As calculated from financial information in Savannah's
Supplemental Admission Document dated 30 April 2020.
(2) E BITDA is calculated as profit or loss before finance
costs, finance income, foreign exchange gains or losses, fair value
adjustments, gain on acquisition, taxes, depreciation, depletion,
and amortisation.
As disclosed in previous announcements, it is important to note
the impact of take-or-pay accounting rules under IFRS 15 on our
Income Statement as regards to revenue recognition for our gas
sales agreements. The table above shows revenue of US$91.7 million
recognised in our Income Statement and additional invoiced sales of
US$22.9 million for the gas that customers are committed to pay
for, but we have not yet delivered, under the terms of our
take-or-pay gas sales agreements, which combine to show the total
value that we have invoiced during the period.
The Group's operating profit for the six months ended 30 June
2020 was US$47.9 million, a significant increase compared to the
pro-forma result of US$3.3 million in H1 2019. This increase was
driven by a US$21.4 million increase in revenues due to increased
gas offtake by customers, reduced depletion and depreciation of
US$8 million and Expected Credit Loss charge falling from US$13.5
million to nil as a result of improved customer cash
collections.
The Group's net profit after tax for the six months ended 30
June 2020 was US$1.8 million representing a maiden Group profit
(2018: loss US$3.0 million).
EBITDA for the six months ended 30 June 2020 was US$66.8 million
(June 2019: EBITDA loss of US$10.5 million), highlights the robust
cash generation from the Nigerian Assets. For indicative purposes,
if the Nigeria Assets had been owned from the beginning of 2019,
the pro-forma EBITDA for the corresponding six months ended 30 June
2019 would have been US$30.0 million.
Statement of Comprehensive Income
Sales Volumes
Sales volumes during H1 2020, which were all derived from the
Nigerian Assets, amounted to a total of 21.5 Bscf of gas and
163,000 bbl of oil and condensate, net to Savannah, at an average
rate of 20.6 Kboepd during the period.
Gas produced from the Uquo field was sold to three customers,
Calabar NIPP, Unicem and Ibom Power. The oil sales from the Stubb
Creek field and condensate sales from the Uquo gas field were sold
to a subsidiary of ExxonMobil.
Revenue
Revenue during the period amounted to US$91.7 million (H1 2019:
nil) of which US$83.6 million was for gas sales and US$7.9 million
for oil and condensate sales. At our Accugas processing facilities
we are now processing a small volume of crude oil for a third
party, which generated revenue of US$0.2 million.
The table below summarises the sales volumes, average prices
achieved and revenue for H1 2020
Sales volumes Average price Revenue
US$ million
Gas 21,476 Mscf US$3.9/Mscf 83.6
Oil and condensate 163,000 bbl US$48.3/bbl 7.9
Crude oil processing - - 0.2
US$24.5/boe
Total 3.7 MMboe or US$4.1/Mscfe 91.7
--------------- ------------------ -------------
The table below summarises the sales volumes, average prices
achieved and revenue for pro-forma H1 2019
Sales volumes Average price Revenue
US$ million
Gas 18,100 Mscf US$3.6/Mscf 64.3
Oil and condensate 112,000bbl US$54.0/bbl 6.0
Crude oil processing - - -
US$22.5/boe
Total 3.1 MMboe or US$3.7/Mscfe 70.3
--------------- ------------------ -------------
The gas revenue stream is insulated from fluctuations in oil
prices as the gas contracts are all priced independently of oil
prices with escalation clauses related to US consumer price
inflation. Additionally, 94% of the gas sales are backed by
investment grade credit guarantees, including a World Bank
supported Partial Risk Guarantee in the case of the Calabar NIPP
gas sales agreement.
Total Revenues (a non-GAAP financial metric)
The table below shows the calculation of Total Revenues, a
non-GAAP financial metric. Total Revenues is defined as the total
amount of invoiced sales during the period (described in detail in
the Financial Review of the Savannah Annual Report and Accounts
2019). The Total Revenue is US$114.6 million, a figure which
management believes provides the most meaningful presentation of
the cash generative capability of our assets. There is a difference
between invoiced sales and revenue. This amount is invoiced and
recorded as deferred revenue in the Statement of Financial
Position, under contract liabilities.
Pro-forma
Six months ended Six months ended
30 June 2020 30 June 2019
US$ million US$ million
Revenue for gas
Revenue for liquids
Revenue (as per Income Statement) 83.6 64.3
8.1 6.0
------------------- ------------------
91.7 70.3
Difference between invoiced sales and
Revenue (Deferred Revenue) 22.9 25.2
------------------- ------------------
Total Revenues 114.6 95.5
------------------- ------------------
Cost of Sales
Cost of sales amounted to US$32.3 million (H1 2019: nil) which
includes US$11.8 million of facility operating and maintenance
costs, US$2.2 million of royalty expenses and US$18.3 million of
depletion and depreciation (of which US$9.3 million was for
upstream assets depleted on a unit of production basis and US$9.0
million for midstream infrastructure assets which are depreciated
on a straight line basis over their estimated useful life).
Following a review of the condition and durability of the gas
transportation pipelines in Nigeria, it has been concluded that
their useful operating life is 40 years, which is in line with
industry estimates on pipeline useful life, whereas the operating
life was previously estimated at 25 years. As a result, this has
reduced the depreciation charge during H1 2020 by US$4.2 million
had the life of the pipeline not being extended. This change is
what has driven the change in our FY 2020 guidance from US$43.0
million - US$45.0 million to US$35.0 million - US$37.0 million.
Administrative and other operating expenses
Administrative and other operating expenses for the period were
US$11.5 million (H1 2019: US$4.3 million). This amounted to
US$0.5/Mscfe (US$3.1/boe).
Together with operating costs noted above this gives a total
operating plus administration and other operating expenses unit
cost of US$1.1/Mscfe (US$6.3/boe), which compares favourably with
our average sales price of US$4.1/Mscfe (US$24.5/boe).
Financing Costs
Finance costs of US$36.3 million (H1 2019: US$0.7 million) were
partially offset by finance income of US$0.4 million (H1 2019:
US$0.7 million). The significant increase in finance costs is a
result of the full period impact of the debt that was assumed on
acquisition of the Nigerian Assets.
Of the total finance costs, interest on bank borrowings and loan
notes amounted to US$32.0 million, and the weighted average
interest rate on these borrowings was 11.9%.
Foreign Translation Loss
The net foreign exchange loss of US$7.1 million (H1 2019: nil)
comprises a realised loss of US$8.8 million and an unrealised gain
of US$1.7 million. The realised loss arises mainly from the fact
that US dollar denominated gas sales are collected in local
currency converted at the Central Bank of Nigeria ("CBN") official
rate. In order to purchase US dollars to service US dollar
obligations, Savannah is obliged to use the Nigerian Autonomous
Foreign Exchange rate ("NAFEX"), which is the benchmark rate for
foreign exchange spot operations in the Investors' and Exporters'
foreign exchange window. At the start of 2020 the CBN exchange rate
was approximately 306 Naira/US$ and the NAFEX rate was
approximately 360 Naira/US$, a 15% differential, however in March
2020 the CBN increased its exchange rate to N360/US$ which reduced
the differential between the CBN and NAFEX rates to 7%. Since
period end the rate has been further adjusted to N380/US$ reducing
the differential to around 2%, which is in line with the objective
stated by the Nigerian Government to unify these two rates. These
realised losses are in part recoverable over time through a foreign
exchange "true-up" clause in the Calabar NIPP Gas Sales Agreement
whereby realised foreign exchange losses on this contract may
subsequently be invoiced back to Calabar and recovered and
recognised as a reduction in foreign exchange losses.
Transaction costs
There were no transaction costs incurred in H1 2020. In H1 2019
the Group incurred transaction costs of US$6.6 million in relation
to the acquisition of the Nigerian Assets.
Fair value adjustment
As part of the financing associated with the acquisition of the
Nigerian Assets in November 2019, the Group issued a Senior Secured
Notes of US$20.0 million. The note includes a voluntary prepayment
option whereby early repayment will result in a discount to the
contractual loan value. As an embedded derivative, the option was
separated from the host loan instrument and valued separately. As
at 30 June 2020 the option value was US$3.4 million (31 December
2019: US$7.1 million), resulting in a non-cash charge to the income
statement of US$3.7 million.
In the prior period, the Group recognised a fair value gain
amounting to US$7.9 million on its Long-term financial asset: the
10.25% Senior Secured Notes that were acquired from the Seven
Energy Group in 2018. These notes were subsequently contributed as
part of the consideration for the Nigerian Assets and entities.
Taxation
The tax credit of US$0.6 million (H1 2019: nil) is made up of a
current tax charge of US$1.7 million and a deferred tax credit of
US$2.3 million. The current tax charge principally arises on
Nigerian profits. The deferred tax credit principally arises on
deferred capital allowances on the Nigerian Assets which are
expected to be utilised against future profits.
Profit after Tax
The Profit after tax amounted to US$1.8 million (H1 2019 loss:
US$3.0 million). Readers are reminded that this number includes the
US$3.7 million fair value adjustment and excludes US$22.9 million
of Deferred Revenue recorded as Contract liability in the Statement
of Financial Position. Of the Profit after tax of US$1.8 million,
US$0.1 million is attributable to minority shareholder interests
and US$1.7 million to equity owners of the Company.
Statement of Financial Position
Total Assets
Property, plant and equipment amounted to US$600.7 million (31
December 2019: US$618.3 million), which reduced as a result of
depreciation and depletion of US$18.6 million offset by capital
expenditures of US$1.0 million, with most of the activities
scheduled for H2 2020. Property, plant and equipment comprised of
US$443.8 million relating to the midstream gas processing and
transportation infrastructure assets in Accugas and US$155.3
million to the upstream oil and gas assets plus other assets of
US$1.6 million. Total assets amounted to US$1,164.4 million (31
December 2019: US$1,145.0 million).
Debt
Group net debt of US$460.5m as at 30 June 2020, after a fair
value adjustment of US$3.7m (see Note 10 in the Condensed
Consolidated Interim Financial Statements) (31 December 2019:
US$484.0 million). De-leveraging is continuing with the principal
amount of debt reduced by approximately US$22 million during H1
2020.
Cash
Total cash balance of US$53.3 million as at 30 June 2020, of
which US$34.9 million is set aside for debt service and US$1.6
million relates to monies held in escrow accounts for stamp duty
relating to loan security packages (31 December 2019 cash balance:
US$46.3 million).
Receivables
The Group has trade and other receivables of US$131.0 million
(31 December 2019: US$99.8 million). The trade receivables and
contract assets of US$82.4 million (31 December 2019: US$50.4
million) represent a net increase of US$32.0 million due from
customers in Nigeria under the current gas sales agreements in
place, with cash collections during July and August of US$49.3
million. It should be noted that by end of August 2020, the
receivables balance had reduced to US$106.1 million following
receipt of cash from customers.
Payables
The Group has trade and other payables of US$151.8 million (31
December 2019: US$133.9 million).
Statement of Cashflows
The net cash inflow from operating activities was US$45.6
million (H1 2019 cash outflow: US$10.1 million) which was driven by
cash inflows from operations in Nigeria. During the period,
payments for property plant and equipment and exploration and
evaluation payments totalled US$1.0 million (H1 2019: US$3.6
million).
Financing outflows during the period amounted to US$39.2 million
(H1 2019 inflow: US$20.9 million). This comprised US$18.1 million
of interest payments (H1 2019: nil), US$3.0 million finance costs
and fees (H1 2019: US$0.3 million), offset by US$3.8 million
borrowing proceeds (H1 2019: US$6.4 million), and US$22.1 million
(H1 2019: US$7.3 million) of debt repayments. In H1 2019 the Group
received proceeds of US$22.1 million from an equity shares
issue.
Brexit
Savannah's operations are primarily based in West Africa, with
its Corporate Head Office in London. The Board of Directors are of
the view that our operations are therefore unlikely to be directly
impacted in any material way by the United Kingdom's exit from the
European Union.
COVID-19
We are taking measures to mitigate the business impact
associated with the ongoing COVID-19 pandemic, which has sadly
emerged this year. Whilst the pandemic continues to present
challenges across our workforce and suppliers, we have continued to
run our operations continuously. However, we have witnessed some
short-term impacts on our supply chain and planned work programmes
particularly where overseas vendors and contractors are required to
make visits to install and commission equipment.
Going concern
Having reviewed the forecasted cashflows and applied a
significant range of sensitivity analyses to these projections, the
Directors consider that the Group has sufficient resources at its
disposal to continue operating for the foreseeable future.
Isatou Semega-Janneh
Chief Financial Officer & Company Secretary
30 September 2020
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE
SIX MONTHSED 30 JUNE 2020
Six months ended Six months ended
30 June 30 June
2020 2019
US$ ' 000 US$ ' 000
Note Unaudited Unaudited
-------------------------------------------- -------- ------------------- ---------------------
Revenue 4 91,676 -
Cost of sales 5 (32,293) -
-------------------------------------------- -------- ------------------- ---------------------
Gross profit 59,383 -
Administrative and other operating
expenses 6 (11,456) (4,299)
Transaction costs 6 - (6,632)
Operating profit/(loss) 6 47,927 (10,931)
Finance income 7 354 716
Finance costs 8 (36,291) (681)
Fair value adjustment 10 (3,674) 7,896
Foreign translation loss 9 (7,092) -
-------------------------------------------- -------- ------------------- ---------------------
Profit/(loss)before tax 1,224 (3,000)
Tax credit/( expense) 11 584 (3)
-------------------------------------------- -------- ------------------- ---------------------
Net profit/( loss) and total comprehensive
profit/( loss) 1,808 (3,003)
-------------------------------------------- -------- ------------------- ---------------------
Total comprehensive profit/(loss)
attributable to:
Owners of the parent 1,712 (2,741)
Non-controlling interests 96 (262)
-------------------------------------------- -------- ------------------- ---------------------
1,808 (3,003)
-------------------------------------------- -------- ------------------- ---------------------
Earnings per share
Basic (US$) 12 0.00 (0.00)
Diluted (US$) 12 0.00 (0.00)
-------------------------------------------- -------- ------------------- ---------------------
All results derive from continuing operations.
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 30 JUNE 2020
30 June 31 December
2020 2019
US$'000 US$'000
Note Unaudited Audited
---------------------------------------------- -------- --------------------- -----------------------
Assets
Non-current assets
Property, plant and equipment 13 600,664 618,286
Exploration and evaluation assets 155,500 154,745
Deferred tax assets 211,697 209,363
Right-of-use assets 3,064 4,183
Restricted cash 1,635 1,828
Finance lease receivable 795 -
---------------------------------------------- -------- --------------------- -----------------------
Total non-current assets 973,355 988,405
---------------------------------------------- -------- --------------------- -----------------------
Current assets
Inventory 1,974 4,020
Trade and other receivables 14 131,038 99,771
Prepayments 6,365 6,561
Cash and cash equivalents 51,671 46,256
---------------------------------------------- -------- --------------------- -----------------------
Total current assets 191,048 156,608
---------------------------------------------- -------- --------------------- -----------------------
Total assets 1,164,403 1,145,013
---------------------------------------------- -------- --------------------- -----------------------
Equity and liabilities
Capital and reserves
Share capital 15 1,393 1,393
Share premium 15 61,204 61,204
Capital contribution 458 458
Share based payment reserve 6,766 6,448
Retained earnings 166,597 164,885
---------------------------------------------- -------- --------------------- -----------------------
Equity attributable to owners of
the Group 236,418 234,388
Non-controlling interests (2,887) (2,983)
---------------------------------------------- -------- --------------------- -----------------------
Total e quity 233,531 231,405
---------------------------------------------- -------- --------------------- -----------------------
Non-current liabilities
Other payables 16 - 7,500
Borrowings 17 442,980 460,665
Long term lease liabilities 4,731 4,956
Provisions 110,408 109,503
Contract liabilities 18 141,552 118,052
---------------------------------------------- -------- --------------------- -----------------------
Total non- current liabilities 699,671 700,676
---------------------------------------------- -------- --------------------- -----------------------
Current l iabilities
Trade and other payables 16 151,842 133,899
Borrowings 17 70,828 71,387
Tax liabilities 4,900 3,090
Short term lease liabilities 696 614
Contract liabilities 18 2,935 3,942
Total current liabilities 231,201 212,932
---------------------------------------------- -------- --------------------- -----------------------
Total e quity and l iabilities 1,164,403 1,145,013
---------------------------------------------- -------- --------------------- -----------------------
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE SIX MONTHSED 30 JUNE 2020
Six months Six months
ended ended
30 June 30 June
2020 2019
US$'000 US$'000
Unaudited Unaudited
---------------------------------------------------- -------------------- -----------------------
Cash flows from operating activities
Profit/(loss) before tax 1,224 (3,000)
Adjustments for:
Depreciation 602 440
Depletion 18,310 -
Finance costs 36,064 -
Fair value adjustment 3,674 (7,896)
Unrealised foreign exchange (gain)/loss (1,659) -
IFRS 16 sub-lease recognition 71 -
Share option charge 318 274
Operating cash flows before movements
in working capital 58,604 (10,182)
Increase in trade and other receivables (29,248) (422)
(Decrease)/increase in trade and other
payables (6,113) 580
Increase in contract liabilities 22,293 -
Income tax rebates/(payments) 60 (3)
----------------------------------------------------- -------------------- -----------------------
Net cash from/(used in) operating activities 45,596 (10,027)
Cash flows from investing activities
Payments for property, plant and equipment (901) (186)
Payments for exploration and evaluation
assets (68) (3,428)
Sub-lease rental income 11 -
Loan to Seven Energy International Limited - (6,368)
Net cash used in investing activities (958) (9,982)
Cash flows from financing activities
Interest payments (18,062) -
Finance fees (3,006) (273)
Proceeds from issues of equity shares,
net of issue costs - 22,136
Borrowing proceeds 3,835 6,413
Borrowing repayments (22,107) (7,299)
Finance lease payments (76) (114)
Cash transferred from restricted cash 193 -
accounts
---------------------------------------------------- -------------------- -----------------------
Net cash (used in)/from financing activities (39,223) 20,863
Net increase in cash and cash equivalents 5,415 854
Cash and cash equivalents at beginning
of period 46,256 1,750
Cash and cash equivalents at end of
period 51,671 2,604
----------------------------------------------------- -------------------- -----------------------
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE SIX MONTHSED 30 JUNE 2020
Share Share Capital Other Share Retained Total Non-controlling Total
capital premium contribution reserves based earnings interest
payment
reserve
US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
Balance at 1
January 2020
(audited) 1,393 61,204 458 - 6,448 164,885 234,388 (2,983) 231,405
Equity-settled
share-based
payments - - - - 318 - 318 - 318
Profit for the
period and
total
comprehensive
profit - - - - - 1,712 1,712 96 1,808
---------------- -------- -------- ------------- --------- -------- --------- -------- ---------------- --------
Balance at 30
June 2020
(unaudited) 1,393 61,204 458 - 6,766 166,597 236,418 (2,887) 233,531
---------------- -------- -------- ------------- --------- -------- --------- -------- ---------------- --------
Share Share Capital Other Share Retained Total Non-controlling Total
capital premium contribution reserves based earnings interest
payment
reserve
US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
Balance at 1
January
2019 (audited) 1,240 - 458 (4,989) 5,908 225,679 228,296 (491) 227,805
Adjustment due
to adoption
of IFRS 16 - - - - - (450) (450) - (450)
Issue of
ordinary
shares
to
shareholders,
net
of issue costs 79 22,058 - - - - 22,137 - 22,137
Equity-settled
share-based
payments - - - - 274 - 274 - 274
Warrants
expired - - - 4,989 - (4,989) - - -
Loss for the
period
and total
comprehensive
loss - - - - - (2,741) (2,741) (262) (3,003)
---------------- -------- -------- ------------- --------- -------- --------- -------- ---------------- --------
Balance at 30
June
2019
(unaudited) 1,319 22,058 458 - 6,182 217,499 247,516 (753) 246,763
---------------- -------- -------- ------------- --------- -------- --------- -------- ---------------- --------
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
1. General information
Savannah Energy PLC ("Savannah" or "the Company") and its
subsidiaries (together, the "Group") was incorporated in the United
Kingdom on 3 July 2014. On 16 April 2020, the Company changed its
name from Savannah Petroleum PLC to Savannah Energy PLC.
Savannah's sole activity, until 14 November 2019, was the
management of its investment in Savannah Petroleum 1 Limited
("SP1"). SP1's principal activity is the management of its
investment in Savannah Petroleum 2 Limited ("SP2"), and the
provision of services to other companies within the Group. SP2 has
a 95% interest in Savannah Petroleum Niger SA ("Savannah Niger")
whose principal activity is the exploration of hydrocarbons in the
Republic of Niger.
On 14 November 2019 Savannah acquired certain Nigerian
operational entities and assets from the Seven Energy Group (the
"Nigerian Assets and entities"). This has resulted in a significant
expansion of the business. The principal activity of these entities
is the exploration, development and production of crude oil and
natural gas in Nigeria.
The Company is domiciled in the UK for tax purposes and its
shares were listed on the Alternative Investments Market ("AIM") of
the London Stock Exchange on 1 August 2014. The Company's
registered address is 40 Bank Street, London, E14 5NR.
2. Accounting policies
Basis of Preparation
These condensed consolidated financial statements have been
prepared in accordance with International Financial Reporting
Standards as adopted by the European Union ("IFRSs as adopted by
the EU"), IFRIC interpretations and those parts of the Companies
Act 2006 applicable to companies reporting under IFRS. The
provisions of IAS 34: Interim Financial Reporting have not been
applied.
The condensed consolidated financial statements do not include
all disclosures that would otherwise be required in a complete set
of financial statements and should be read in conjunction with the
2019 Annual Report. The financial information for the six months
ended 30 June 2020 does not constitute statutory accounts within
the meaning of Section 434(3) of the Companies Act 2006 and is
unaudited.
The annual financial statements of Savannah Energy PLC are
prepared in accordance with IFRSs as adopted by the European Union.
The Independent Auditors' Report on that Annual Report and
financial statements for 2019 was unqualified, did not draw
attention to any matters by way of emphasis, and did not contain a
statement under 498(2) or 498(3) of the Companies Act 2006.
The Group's statutory financial statements for the year ended 31
December 2019 will shortly be filed with the Registrar of
Companies.
All the Group's subsidiaries' functional currency is US Dollars
("US$"), and the consolidated financial statements are presented in
US Dollars and all values are rounded to the nearest thousand
(US$'000), except when otherwise stated.
The financial information presented herein has been prepared in
accordance with the accounting policies used in preparing 2019
Annual Report. There are no other new or amended standards or
interpretations adopted from 1 January 2020 that have a significant
impact on the interim financial information.
During the period, management assessed the technical life of the
gas pipelines following the acquisition of the Nigerian Assets and
entities in November 2019. Following this assessment, the expected
useful life of these pipelines increased from 25 to 40 years from
the beginning of the reporting period. This has had the effect of
reducing the depreciation charge for the period. This change has
resulted in a reduction in the Infrastructure assets depreciation
charge amounting to US$4.2 million. Refer to note 13 for more
information.
Going concern
The Group continues to trade strongly throughout 2020 with total
balance sheet cash amounting to approximately
US$53.3 million at the reporting date and a high volume of
receivables that it expects to collect from its customers during
the remaining part of the year.
The Directors have reviewed the Group's forecasted cash flows
for the twelve months from the date of publication of this Interim
Report. When reviewing the forecasts the Directors have considered
the Group's current trading performance and considered the
potential impact on the forecasted cash flows of the ongoing low
oil price environment and potential impact on demand resulting from
the COVID-19 virus, as well as counterparty credit risk.
As a result, the Directors consider that the Company has
sufficient resources at its disposal to continue operating for the
foreseeable future. The foreseeable future is defined as being not
less than twelve months from the date of publication of these
consolidated financial statements. On this basis, the Directors
remain satisfied with the Group's funding and liquidity position
and continue to adopt the going concern basis in preparing these
Interim Financial Statements.
3. Segmental reporting
For the purposes of resource allocation and assessment of
segment performance, the operations of the Group are divided into
three segments: two geographical locations and an Unallocated
segment. The two geographical segments are Nigeria and Niger and
their principal activities are the exploration, development and
extraction of oil and gas. These make up the revenue generating
operations of the Group. The Unallocated segments principal
activities are the governance and financing of the Group as well as
facilitating the acquisition of the Nigerian Assets and entities
during 2019. As a result of the acquisition, the comparative
segmental reporting for the prior period has been restated to
provide better comparability of the Group's results and
position.
The following is an analysis of the Group's results by
reportable segment for the six months ended 30 June 2020:
Nigeria Niger Unallocated Total
US$'000 US$'000 US$'000 US$'000
Unaudited Unaudited Unaudited Unaudited
-------------------------- ---------- ---------- ------------ ----------
Revenue 91,676 - - 91,676
Cost of sales (32,293) - - (32,293)
-------------------------- ---------- ---------- ------------ ----------
Gross profit 59,383 - - 59,383
Administrative and other
operating expenses (9,515) (1,164) (777) (11,456)
Operating profit/(loss) 49,868 (1,164) (777) 47,927
-------------------------- ---------- ---------- ------------ ----------
Finance income - - 354 354
Finance costs - - (36,291) (36,291)
Fair value adjustment - - (3,674) (3,674)
Foreign translation loss - - (7,092) (7,092)
-------------------------- ---------- ---------- ------------ ----------
Profit/(loss) before tax 49,868 (1,164) (47,480) 1,224
-------------------------- ---------- ---------- ------------ ----------
Segment assets 1,001,215 157,430 5,758 1,164,403
-------------------------- ---------- ---------- ------------ ----------
Segment liabilities (879,026) (26,338) (25,508) (930,872)
-------------------------- ---------- ---------- ------------ ----------
The following is an analysis of the Group's results by
reportable segment for the six months ended 30 June 2019. This has
been re-presented to allow for improved consistency to the current
period.
Nigeria Niger Unallocated Total
US$'000 US$'000 US$'000 US$'000
Unaudited Unaudited Unaudited Unaudited
----------------------------------- ---------- ---------- ------------ ----------
Revenue - - - -
Cost of sales - - - -
----------------------------------- ---------- ---------- ------------ ----------
Gross Profit - - - -
----------------------------------- ---------- ---------- ------------ ----------
Administrative expenses and other
operating expenses - (260) (4,039) (4,299)
Transaction costs - - (6,632) (6,632)
Operating loss - (260) (10,671) (10,931)
----------------------------------- ---------- ---------- ------------ ----------
Finance income - - 716 716
Finance costs - - (681) (681)
Fair value adjustment - - 7,896 7,896
Loss before tax - (260) (2,740) (3,000)
----------------------------------- ---------- ---------- ------------ ----------
Transaction costs were related to expenditures incurred in relation
to the corporate advisory and restructuring costs associated with
the acquisition of the Nigerian Assets and entities.
The following is an analysis of the Group's results by reportable
segment at 31 December 2019:
Nigeria Niger Unallocated Total
US$'000 US$'000 US$'000 US$'000
Audited Audited Audited Audited
----------------------------------- ---------- ---------- ------------ ----------
Segment assets 927,737 157,785 59,491 1,145,013
----------------------------------- ---------- ---------- ------------ ----------
Segment liabilities (872,560) (24,968) (16,080) (913,608)
----------------------------------- ---------- ---------- ------------ ----------
4. Revenue
Set out below is the disaggregation of the Group's revenue from
contracts with customers:
2020 2019
US$'000 US$'000
Six months ended 30 June Unaudited Unaudited
-------------------------------------------- ---------- ----------
Gas sales 83,622 -
Oil sales 8,054 -
-------------------------------------------- ---------- ----------
Total revenue from contracts with customers 91,676 -
-------------------------------------------- ---------- ----------
Gas sales represents gas deliveries made to the Group's
customers under long term take or pay gas sale agreements. The
Group sells oil under a sales and purchase agreement with
ExxonMobil Sales & Supply LLC (EMS&SLLC) at prevailing
market prices.
5. Cost of sales
2020 2019
US$'000 US$'000
Six months ended 30 June Unaudited Unaudited
--------------------------------------------------- ---------- ----------
Depletion - oil and gas, and infrastructure assets 18,310 -
(note 13)
Facility operation and maintenance costs 11,830 -
Royalties 2,153 -
32,293 -
--------------------------------------------------- ---------- ----------
6. Operating profit/( loss)
Operating profit/( loss) has been arrived at after charging:
2020 2019
US$'000 US$'000
Six months ended 30 June Unaudited Unaudited
-------------------------------------------------------- ---------- ----------
Staff costs (within Cost of sales) 4,083 -
Staff costs (within Administrative and other operating
expenses) 4,732 2,036
Depreciation - Other assets (note 13) 338 235
Depreciation - Right-of-use assets 264 205
Transaction expenses - 6,632
-------------------------------------------------------- ---------- ----------
7. Finance income
2020 2019
US$'000 US$'000
Six months ended 30 June Unaudited Unaudited
-------------------------- ---------- ----------
Interest income 354 716
354 716
-------------------------- ---------- ----------
In 2019, interest was recognised on the loan to the Seven Energy
Group prior to the acquisition of the Nigerian Assets and entities.
The loan balance was subsequently contributed as part of the
purchase consideration on 14 November 2019. In 2020, interest was
charged to customers for the late payment of their gas
invoices.
8. Finance costs
2020 2019
US$'000 US$'000
Six months ended 30 June Unaudited Unaudited
-------------------------------------------- ---------- ----------
Interest on bank borrowings and loan notes 31,983 681
Amortisation of debt finance fees 1,024 -
Unwinding of decommissioning discount 904 -
Bank charges 219 -
Other finance costs 2,161 -
-------------------------------------------- ---------- ----------
36,291 681
-------------------------------------------- ---------- ----------
9. Foreign translation loss
2020 2019
US$'000 US$'000
Six months ended 30 June Unaudited Unaudited
------------------------- ---------- ----------
Realised loss 8,751 -
Unrealised gain (1,659) -
------------------------- ---------- ----------
7,092 -
------------------------- ---------- ----------
10. Fair value adjustment
During 2019 the Group issued a Senior Secured Note of US$20
million. The note includes a voluntary prepayment option whereby
early repayment will result in a discount to the contractual loan
value. As an embedded derivative, the option was separated from the
host loan instrument and valued separately and accounted for as
FVTPL. As at 30 June 2020 the option value was US$3.4 million (31
December 2019 audited: US$7.1 million), resulting in a charge to
the income statement of US$3.7 million. The reduction in the option
value was principally due to the deteriorating credit spread
assumption observed during the period.
In the prior period, the Group recognised a fair value gain
amounting to US$7.9 million on its Long-term financial asset: the
10.25% Senior Secured Notes that were acquired from the Seven
Energy Group in 2018 and accounted for as FVTPL. These notes were
subsequently contributed as part of the consideration for the
Nigerian Assets and entities.
11. Taxation
The tax (credit)/expense for the Group is:
2020 2019
US$'000 US$'000
Six months ended 30 June Unaudited Unaudited
----------------------------------------- ---------- ----------
Current tax
- Adjustments in respect of prior years (28) -
- Current year 1,778 3
----------------------------------------- ---------- ----------
Deferred tax
- Adjustments in respect of prior years 423 -
- Current year (2,757) -
(584) 3
----------------------------------------- ---------- ----------
Income tax credit or expense is recognised based on the actual
results for the period.
The tax credit for the period of US$0.6 million is made up of a
current tax charge of US$1.7 million and a deferred tax credit of
US$2.3 million. The current tax charge principally arises on
Nigerian profits, including minimum tax recently brought in by the
Nigerian 2019 Finance Act. The deferred tax credit principally
arises on deferred capital allowances on the Nigerian Assets which
are expected to be utilised against future profits.
12. Earnings per share
Basic earnings per share amounts are calculated by dividing the
profit or loss for the period attributable to ordinary equity
holders by the weighted average number of ordinary shares
outstanding during the period.
Diluted earnings per share amounts are calculated by dividing
the profit or loss for the periods attributable to ordinary holders
by the weighted average number of ordinary shares outstanding
during the period, plus the weighted average number of shares that
would be issued on the conversion of dilutive potential ordinary
shares into ordinary shares.
2020 2019
Six months ended 30 June Unaudited Unaudited
---------------------------------------------- ------------ ------------
US$'000 US$'000
Profit/(loss) attributable to owners of the
parent 1,712 (2,741)
Number of Number of
shares shares
Basic weighted average number of shares 996,408,412 862,903,377
Basic and diluted weighted average number of
shares 996,541,577 862,903,377
Basic earnings/(loss) per share (US cents) 0.17 (0.32)
Diluted earnings/(loss) per share (US cents) 0.17 (0.32)
13. Property, plant and equipment
Oil and Infrastructure Other assets
gas assets assets Total
US$'000 US$'000 US$'000 US$'000
------------------------------------------- ------------ --------------- ------------- ---------
Cost
Balance at 1 January 2019 (audited) 1,588 - 1,655 3,243
Additions 2,062 3,556 110 5,728
Recognised on acquisition of subsidiaries 164,240 453,858 1,114 619,212
------------------------------------------- ------------ --------------- ------------- ---------
Balance at 31 December 2019 (audited) 167,890 457,414 2,879 628,183
Additions - 1,019 7 1,026
Balance at 30 June 2020 (unaudited) 167,890 458,433 2,886 629,209
------------------------------------------- ------------ --------------- ------------- ---------
Accumulated depreciation
Balance at 1 January 2019 (audited) (90) - (722) (812)
Depletion and depreciation charge (3,179) (5,671) (235) (9,085)
------------------------------------------- ------------ --------------- ------------- ---------
Balance at 31 December 2019 (audited) (3,269) (5,671) (957) (9,897)
Depletion and depreciation charge (9,347) (8,963) (338) (18,648)
------------------------------------------- ------------ --------------- ------------- ---------
Balance at 30 June 2020 (unaudited) (12,616) (14,634) (1,295) (28,545)
------------------------------------------- ------------ --------------- ------------- ---------
Net book value
31 December 2019 (audited) 164,621 451,743 1,922 618,286
------------------------------------------- ------------ --------------- ------------- ---------
30 June 2020 (unaudited) 155,274 443,799 1,591 600,664
------------------------------------------- ------------ --------------- ------------- ---------
Upstream assets principally comprise the well and field
development costs relating to the Uquo and Stubb Creek oil and gas
fields in Nigeria. The Infrastructure assets principally comprise
the Nigerian midstream assets associated with the Group's network
of gas transportation pipelines, oil and gas processing facilities
and gas receiving facilities. Other assets typically include
vehicles, office equipment and building improvements.
Following management's assessment of the gas pipelines, the
expected useful life of these pipelines was increased from 25 to 40
years from the beginning of the reporting period. This has had the
effect of reducing the depreciation charge for the period. This
change has resulted in a reduction in the Infrastructure assets
depreciation charge amounting to US$4.2 million.
14. Trade and other receivables
30 June 31 December
2020 2019
US$'000 US$'000
Unaudited Audited
-------------------------------------- ---------- ------------
Trade receivables 59,659 30,864
Contract assets 22,691 19,497
Receivables from a joint arrangement 29,583 30,321
-------------------------------------- ---------- ------------
111,933 80,682
Expected credit loss (431) (431)
-------------------------------------- ---------- ------------
111,502 80,251
-------------------------------------- ---------- ------------
VAT receivables 90 75
Other receivables 19,446 19,445
-------------------------------------- ---------- ------------
131,038 99,771
-------------------------------------- ---------- ------------
During the period, there has been an overall improvement in
customer cash collections as management have employed stricter
credit control procedures. As a result, the basis upon which the
expected credit loss was calculated, was re-assessed such that the
underlying provision percentages were adjusted and as a result
there is no charge for six months ended 30 June 2020. A further
assessment will take place during the second half of the year.
15. Share capital
30 June 31 December
2020 2019
Number of Number of
shares shares
Unaudited Audited
------------------------------------- ------------ ------------
Fully paid ordinary shares in issue 996,408,412 996,408,412
------------------------------------- ------------ ------------
Nominal value per share in GBP 0.001 0.001
------------------------------------- ------------ ------------
Share
capital Share premium Total
Number of US$'000 US$'000 US$'000
shares
------------------------------------- ------------ --------- -------------- --------
At 1 January 2019 (audited) 816,969,427 1,240 - 1,240
Shares issued 179,438,985 153 61,204 61,357
At 31 December 2019 (audited) 996,408,412 1,393 61,204 62,597
Shares issued - - - -
------------------------------------- ------------ --------- -------------- --------
Balance at 30 June 2020 (unaudited) 996,408,412 1,393 61,204 62,597
------------------------------------- ------------ --------- -------------- --------
There were no shares issued in the six months ended 30 June
2020. In January 2019 the Company issued 62,800,000 new ordinary
shares as part of an equity fund raising to the value of US$22.1
million (net). In November 2019 the Company issued 116,638,985 new
ordinary shares as part of the Seven Energy Group acquisition to
the value of US$40.4 million (gross).
16. Trade and other payables
30 June 31 December
2020 2019
US$'000 US$'000
Unaudited Audited
---------------------------------- ---------- ------------
Trade payables 44,953 48,800
Accruals 50,954 58,531
Interest payable 30,272 13,715
VAT payable 7,021 5,222
Royalty and levies 6,446 6,317
Other payables 12,196 1,314
---------------------------------- ---------- ------------
Current trade and other payables 151,842 133,899
Non-current other payables - 7,500
151,842 141,399
---------------------------------- ---------- ------------
The Directors consider that the carrying amount of trade and
other payables approximates to their fair value.
The Non-current other payables at 31 December 2019 amounting to
US$7.5 million relates to deferred consideration resulting from a
loan note that was initially acquired on the acquisition of the
Nigerian Assets and entities, which was then transferred to the
Company for future settlement. The total amount of US$7.5 million
remains outstanding and is due to be repaid by May 2021 and is now
disclosed within Other payables in Current trade and other
payables.
17. Borrowings
30 June 31 December
2020 2019
US$'000 US$'000
Unaudited Audited
--------------------------- ---------- ------------
Revolving credit facility 12,532 9,914
Bank loans 374,452 388,209
Senior secured notes 111,726 115,833
Other loan notes 15,098 18,096
513,808 532,052
--------------------------- ---------- ------------
30 June 31 December
2020 2019
US$'000 US$'000
Unaudited Audited
------------------------ ---------- ------------
Current borrowings 70,828 71,387
Non-current borrowings 442,980 460,665
513,808 532,052
------------------------ ---------- ------------
18. Contract liabilities
Contract liabilities represents the value of gas supply
commitment to the Group's customers for gas not taken but invoiced
under the terms of the contracts. The amount has been analysed
between current and non-current liability, based on the customers'
expected future usage gas delivery profile. This expected usage is
updated periodically by the customer.
30 June 31 December
2020 2019
US$'000 US$'000
Unaudited Audited
------------------------------------------ ---------- ------------
Amount due for delivery within 12 months 2,935 3,942
Amount due for delivery after 12 months 141,552 118,052
144,487 121,994
------------------------------------------ ---------- ------------
30 June 31 December
2020 2019
US$'000 US$'000
Unaudited Audited
----------------------------------------------- ---------- ------------
As at start of period 121,994 -
Additional contract liabilities 22,850 13,278
Acquired on acquisition of subsidiaries - 108,716
Contact liabilities utilised (557) -
Unwinding of discount on contract liabilities 200 -
As at end of period 144,487 121,994
----------------------------------------------- ---------- ------------
The unwinding of the discount on contract liabilities relates to
the fair value adjustments made under IFRS 3: Business Combinations
following the acquisition of the Nigerian Assets and entities in
2019. The fair value adjustment was calculated as the discounted,
expected cost of the future deliveries of gas volumes under the
terms of customer take-or-pay contracts. This discounted amount
unwinds relative to an apportioned amount of the contract
liabilities volumes at the date of acquisition that have
subsequently been utilised.
19. Capital commitments
At 30 June 2020, capital commitments related to drilling
amounted to US$ 1.9 million (30 June 2019: US$ nil).
20. Events after the reporting date
There are no events after the reporting date other than those
described within this announcement.
[1] Within cash balance of US$84.7m, US$34.9m is set aside for
debt service and US$1.6m relates to monies held in escrow accounts
for stamp duty relating to loan security packages.
[2] Total Revenues is 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 Income
Statement. A detailed explanation of the impact of IFRS 15 revenue
recognition rules on our Income Statement is provided in the
Financial Review section of the Savannah Annual Report and Accounts
2019.
[3] Group Administrative Expenses and Operating Costs are
defined as total cost of sales, administrative and other operating
expenses less royalty and depletion, depreciation and
amortisation.
[4] H1 2019 numbers do not include operations in Nigeria as
Company only completed the acquisition of the Nigerian Assets in
November 2019.
[5] Proforma numbers are calculated to show impact as if the
Nigerian Assets had been owned from 1 January 2019.
[6] EBITDA is defined as profit or loss before finance costs,
investment revenue, foreign exchange gains or losses, fair value
adjustments, gain on acquisition, taxes, depreciation, depletion,
and amortisation.
[7] Within cash balance of US$53.3m, US$34.9m is set aside for
debt service and US$1.6m relates to monies held in escrow accounts
for stamp duty relating to loan security packages .
[8] Source: Daily National Control Centre report from the
Transmission Company of Nigeria.
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END
IR URVKRRUUKORR
(END) Dow Jones Newswires
September 30, 2020 06:03 ET (10:03 GMT)
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