WTI $76.56 +24c, Brent $79.23 +21c, Diff -$2.67 -3c, NG $3.99 -3c, UKNG 207.23p -22.77p
By Malcolm Graham-Wood
Another very quiet day as with rollover imminent and the week, month and year-end coming over a Bank Holiday there are few who want to or even need to take any risks.
There has been a good deal of activity in Savannah in the last 24 hours, having forecast documentation and funding details regarding the considerations payable for the Exxon Acquisition and the PETRONAS Acquisition and today’s restoration of listing.
Savannah Energy PLC, the British independent energy company focused around the delivery of Projects that Matter in Africa, is pleased to announce the results of its placing with institutional and other investors, and subscription by certain of the directors, as announced at 3.48 p.m. on 30 December 2021, raising gross proceeds, in aggregate, of US$65 million.
A total of 251,623,456 new Ordinary Shares have been placed pursuant to the Placing and Subscription at a price of 19.35 pence per share (the “Placing Price”). The Placing received strong demand and was oversubscribed. As part of the Subscription, five of the Company’s six directors subscribed for an aggregate amount of £2.8 million at the Placing Price, including a subscription for £2.2 million by Savannah’s CEO, Andrew Knott.
The net proceeds of the Placing, together with the Debt Financing, the Subscription and the Junior Loan Facility, further details of which are set out in Appendices II and IV of today’s earlier announcement, will be used to, inter alia, fund the considerations payable for the Exxon Acquisition and the PETRONAS Acquisition (as defined in the Company’s announcements of 13 December 2021).
Following on from earlier announcements, the Company intends to publish an AIM Admission Document in respect of, inter alia, the Exxon Acquisition and the PETRONAS Acquisition by 7.00 a.m. on 31 December 2021, following which point the Ordinary Shares will be restored to trading on AIM, with dealings expected to recommence at 8.00 a.m. tomorrow.
Andrew Knott, CEO of Savannah, said:
“The successful Placing and intended restoration of our shares to trading on AIM tomorrow marks the end of a fantastic year for our company. Not only have we progressed our transformational acquisitions of the Exxon and PETRONAS assets, but our existing business has delivered strongly as well. In Nigeria we have delivered a record financial performance, commenced gas sales to a major new customer, organically upgraded our group 2P reserves by 27% and made significant progress re-financing our existing debt facilities. In Niger we have consolidated and extended our PSCs while also progressing our R3 East Development project plans.
The strong level of support we have received for the Placing has been very encouraging and a clear endorsement of our management team and strategy of delivering Projects that Matter in Africa. I would like to thank our existing shareholders for their continued support and take this opportunity to welcome new investors to Savannah as we look towards the future with confidence. I would also like to take this opportunity to again welcome the incoming employees to Savannah and acknowledge with gratitude the support we have received from our stakeholders in government. Lastly, I would like to thank the ExxonMobil, PETRONAS and Savannah deal and advisory teams for the hard work that has been undertaken to deliver these transactions.”
Much has been spoken and the length of the conference call this morning and the number of questions asked, and answered by Andrew Knott is a testament to his desire to answer any question put by shareholders in sometimes great detail. Today’s publication of the Admission Document and the restoration to trading sets the scene for the return of Savannah and its focus on the delivery of Projects that Matter in Africa.
Overall the acquisition of the Exxon Mobil and Petronas’ assets in Chad and Cameroon for $700m will give Savannah significant combined net upstream production of some 38.6 kboepd with midstream assets forecast to deliver 112.3 kboepd on a combined basis in 2022f, and gives an average of $279m pa of free cashflow 2022f-30f of which $129m (c.46%) is upstream and $149m (c.53%) is midstream.
It is also worth noting that there has been a significant continued growth in the existing business in the last six months which these acquisitions will add to with accretive growth. The enlarged business is strongly positioned to deliver even more growth from reserves, production increasing and thus a substantial growth in EPS helped by this funding. The company clearly sees the ability to combine paying down debt with a realistic and disciplined long term policy of returning money to shareholders whilst continuing to focus on growth and expansion in Africa.
Across the portfolio this gives a big jump in the combined asset base and giving upside potential from production in Chad, pipeline growth in Chad-Cameroon and of course the continuing growth in the Nigerian gas market which has decent potential. Not withstanding all that SAVE is also looking at opportunities in renewables across Africa which the company estimate at being some 310 GW by the end of 2030.
Savannah has an incredibly strong management with long term and still existing shareholder support as demonstrated in this raise, in addition it has market leading ESG credentials from the top down. It has become a major force across west and central Africa and knowing Andrew Knott as I do I would not be at all surprised to see more of the same.
The shares are 23.5p as I speak which would place them 6th in the 2021 Bucket list up a creditable 83.5% since suspension but I am sure that there is considerably more upside from here and that Andrew Knott is building something really special at Savannah and it will be more than worth hanging on for the ride.
IOG has announced the spudding of the first Southwark development well. The Noble Hans Deul jack-up rig mobilised from repairs in Dundee on 3 Dec 2021 and initially jacked up at the Southwark Platform on 9 Dec. After preparations for drilling, the first Southwark well spudded at 2100hrs on 30 December.
First Gas is expected at Southwark in mid-2022 after the planned installation in Q1 2022 of the 6km Saturn Banks pipeline extension to the Southwark platform. The rig is then scheduled to move on to drill the Goddard and Kelham North/Central appraisal wells while analysis of reservoir and production data from Southwark development wells 1 and 2 will inform an optimal Southwark 3 well plan.
Andrew Hockey, CEO of IOG, commented:
“We are pleased to have overcome the technical issues with ROV equipment and to have completed the spud can surveys needed to allow us to spud the first development well at Southwark, another important step for IOG in delivering our Phase 1 project. The Southwark wells have been meticulously planned by the IOG drilling, subsurface, subsea and HSE teams in collaboration with our main drilling contractors Noble Corporation, Petrofac and Schlumberger, our Platform Duty Holder ODE Asset Management and our partner CalEnergy Resources (UK) Limited and fully integrate the learnings from the Elgood and Blythe wells. We have a very clear collective focus on ensuring safe and efficient performance leading successfully to First Gas in mid-2022 from the Southwark Field.”
After a short technical hitch IOG is back in business with this first Southwark well now spudded. It should enable first gas by ‘mid-2022’ according to Andrew Hockey, CEO.
Meantime, excitement must be reaching fever pitch as the company prepares for first gas from Phase 1 which must be within weeks now, all credit should go to the entire team for getting this far, this quickly without any losing of the highest standards demanded by working in the UKCS.
Advance Energy, the energy company seeking growth through acquisition or farm-in to non-operated interests in discovered upstream projects, is pleased to announce that the Valaris JU-107 jack-up drilling rig has commenced operations at the Buffalo-10 well location, offshore Timor-Leste.
The Operator, Carnarvon Petroleum Timor, Lda., has advised that the drilling rig has successfully concluded the ready to operate process and has drilled the surface hole and installed the surface casing. The well is currently drilling ahead in the 17 ½” hole section at a depth of approximately 120 metres.
The rig will drill the 17 ½” hole to the planned section depth of approximately 800 metres followed by setting of the 13 3/8” casing. The 12 ¼” hole section will then be drilled to approximately 2,800 metres before setting the 9 5/8” casing.
No hydrocarbons are anticipated to be intersected in these first two sections of the well.
The Buffalo-10 well is being drilled offshore Timor-Leste within the TL- SO T19-14 Production Sharing Contract in a water depth of approximately 30 metres with a target depth of approximately 3,500 metres. The well is being drilled to test for the presence of commercial quantities of high-quality light oil that is expected to lead to the early re-development of the Buffalo field.
Leslie Peterkin, CEO of Advance Energy, commented:
“We are delighted to hear this progress from the Operator as we hit another operational milestone. The joint venture is working hard to conclude the drilling program in the coming weeks and remains confident that the Buffalo-10 well will be a geological and economic success. We look forward to providing further updates in due course.“
It is a bit early for me to add much to what I have said before about Advance and its model especially as the well is currently drilling at Timor-Leste. It is making a very large shout for a space in the updated Bucket List, due out next week and the only drawback may be the timing situation.
Hunting has today announced the completion of a restructuring of its European Oil Country Tubular Goods businesses. The restructuring will simplify Hunting’s operating presence in the EMEA region, as the North Sea market positions itself for growth following the downturn seen over the past two years.
Hunting, through its subsidiary Hunting Energy Services Limited, is currently a 60% shareholder in the Hunting Energy Services Limited joint venture. Marubeni-Itochu Steel Inc and Marubeni-Itochu Tubulars Europe PLC (collectively referred to as “MI”) hold the balance of the shareholding of 40%.
As a result of the transaction, Hunting has purchased MI’s 40% interest in the joint venture and becomes the
sole shareholder in HESUK, which includes the operating facilities in Aberdeen, UK and in Velsen-Noord, the
Netherlands. Hunting and MI have also entered into a Business Purchase agreement, whereby MI has agreed
to purchase OCTG inventory held by the joint venture.
Hunting will receive a net cash inflow of $27.7m on completion of the restructuring, reflecting the purchase of
MI’s shareholding and the agreed consideration under the Business Purchase agreement.
For the 12 months to 31 December 2020, HESUK reported revenue of $35.3 million and a loss before tax of
$8.5 million. The gross assets held as at 31 December 2020 were $60.7 million. The transaction provides Hunting and MI the opportunity to focus on their respective core competencies of providing world-leading threading, manufacturing and in-field support and OCTG supply and trading.
Jim Johnson, Chief Executive of Hunting, commented:
“The restructuring of our European OCTG businesses has generated a $27.7m net cash inflow and has released
significant capital for the Group to deploy into new business opportunities. Our operations in Aberdeen and VelsenNoord will continue to support clients operating in the North Sea and Europe and we look forward to continuing our close relationship with MI.”
I wish deals like this could be done every week as it is a cracking piece of M&A that leaves Hunting in a very strong position and as readers know I am very optimistic about the markets this company addresses. Following the recent trading statement Hunting looks very powerful in its sub-sector and I wouldnt be surprised to see the shares double from these levels.
It has been real pleasure documenting the energy sector this year and all that it remains for me to wish all the readers of the blog a happy, peaceful and prosperous new year.
The opinions expressed here are those of the author
Disclaimer: Malcy’s Blog is provided for general information about the international oil and gas industry and the companies that operate within it. It does not constitute investment advice and Malcy does not buy or sell shares, warrants or bonds in any company written about within the blog. Information is taken from publicly available sources and any comment is that of the author who does not take any third party comment in the blog
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