Half-year Report

RNS Number : 3103B
Savannah Energy Plc
30 September 2022
 

 

30 September 2022

--Savannah Energy PLC

("Savannah" or "the Company")

 

2022 Half Year Results

Savannah Energy PLC, the British independent energy company focused around the delivery of Projects that Matter in Africa, is pleased to announce its unaudited interim results for the six months ended 30 June 2022.

 

Andrew Knott, CEO of Savannah Energy, said:

"Our half year results again demonstrate the continued strong underlying progress we have made in our existing producing business with a 10% year-on-year increase reported for both Total Revenues 1 (to US$128.7m) and Adjusted EBITDA2 (to US$100.3m). Further, I am pleased to report that our growth trajectory has continued into H2, with average daily production to 26 September 2022 having increased by 55% to 34.8 Kboepd versus the H1 average of 22.5 Kboepd and 118% versus the 16.0 Kboepd level at the time of acquisition in November 2019. This H2-to-date growth reflects the impact of the three new gas sales contracts and the contract extension we have announced in 2022, with Accugas now supplying gas to approximately 24% of Nigeria's thermal power generation capacity as compared to approximately 10% at the time of the original acquisition.  In the first half, we also announced agreements for the development of up to 750 MW of large-scale greenfield solar and wind projects in Niger and Chad, which have the potential to transform the electricity access rates in both countries.

Looking forward to the rest of 2022 and 2023, I remain confident in where we are as a business. We look forward to closing our Proposed Acquisitions of the Chad and Cameroon Assets in Q4 of this year. We expect to deliver on or exceed our financial guidance. We expect to announce further hydrocarbon acquisitions and to expand our Renewable Energy Division with several new large-scale greenfield opportunities currently under review and negotiation. We continue to work towards completing the refinancing of our Nigerian debt and to announce the development and exploration plans for our assets in Niger.

Lastly, I would like to express my gratitude to all of those who contributed to the progress in our business in H1 - my incredibly dedicated and passionate colleagues, our host governments, communities, local authorities and regulators, our shareholders and lenders, and our customers, suppliers and partners. Thank you all."

H1 2022 Financial Highlights

· Total Revenues1 of US$128.7m (up 10% on H1 2021: US$116.5m);

· Adjusted EBITDA2 of US$100.3m (up 10% on H1 2021: US$91.5m);

· Operating expenses plus administrative expenses3 of US$24.5m (H1 2021: US$22.4m);

· Loss before tax of US$11.3m (H1 2021 profit before tax: US$7.7m);

· Capital expenditure of US$14.0m (H1 2021: US$5.2m);

· Net debt position as at 30 June 2022 of US$327.1m (Year-end 2021: US$370.0m) with Adjusted Leverage4 of 2.0x (Year-end 2021: 2.5x); and

· Total cash5 of US$182.8m as at 30 June 2022 (Year end 2021: US$154.3m)

 

H1 2022 Operational Highlights

· New gas sales agreements ("GSAs") were signed with Central Horizon Gas Company Limited ("CHGC"), a major gas distribution company situated in the South-South region of Nigeria, and TransAfam Power Ltd, a licensed power generation company in Nigeria and, post-period-end in August 2022, with Notore Chemical Industries PLC for its fertiliser plant.  These customers are accessed via Accugas' pipeline network to Ikot Abasi and on to the Port Harcourt area via third party infrastructure, thus no capital expenditure is required;

· A contract extension was signed with First Independent Power Limited ("FIPL") to supply gas to its Eleme and Trans Amadi power plants, bringing the total number of power plants supplied under the contract to three, including the FIPL Afam power plant;

· During the period, Savannah commenced gas deliveries to three new customers in Nigeria, FIPL's Trans Amadi power plant, TransAfam's power plants in Rivers State, and CHGC.  Savannah now has operational GSAs with power plants comprising 24% of Nigeria's thermal generation capacity;

· Average gross daily production, of which 89% was gas, remained almost constant during H1 2022 at 22.5 Kboepd (H1 2021: 22.6 Kboepd). The broadening of our customer base during H1 2022 has enabled us to increase gas deliveries to support Nigeria's power generation needs;

· A new gas production well, Uquo 11, commenced production in April 2022 and produced at an average rate of 68 MMscfpd up to 30 June 2022; and

· Our Renewable Energy Division signed agreements for the development of up to 750 MW large-scale greenfield solar and wind projects with the Governments of Niger (Parc Eolien de la Tarka) and Chad (Centrale Solaire de Komé and Centrales d'Energie Renouvelable de N'Djamena).

Chad and Cameroon Assets

· Work continues to complete our proposed acquisitions of ExxonMobil's and PETRONAS' assets in Chad and Cameroon (the "Chad and Cameroon Assets") by the end of the year.

· Savannah has undertaken significant preparation work ahead of completion including recruitment of the operational team and enhancements to organisational systems to ensure that the transition of operatorship can be completed.

 

FY 2022 Guidance Reiterated

Savannah reiterates full year 2022 guidance as follows:

· Total Revenues1 greater than US$215.0m;

· Group Operating expenses plus administrative expenses3 of up to US$75.0m;

· Group Depreciation, Depletion and Amortisation of US$21m fixed for infrastructure assets plus US$2.3/boe for oil and gas assets; and

· Capital expenditure of up to US$85.0m.

 

H1 2022 Corporate Events

· In June 2022, Savannah announced several changes to the Board:

Nick Beattie was appointed as Chief Financial Officer and was appointed to the Board of Directors;

David Jamison retired from the Board at the Annual General Meeting on 30 June 2022, and assumed the (non-board) role as Honorary President of Savannah;

Steve Jenkins will step down from his role as Non-Executive Chairman at or prior to the 2023 Annual General Meeting. A search for a Chair-Designate is underway and it is anticipated that an appointment will be made during H2 2022, and

It is intended that three new non-executive directors (Sylvie Rucar, Sarah Clark and Dr Djamila Ferdjani) will be appointed to the Board following completion of the proposed acquisition of the ExxonMobil upstream and midstream assets in Chad and Cameroon.

 

For further information, please refer to the Company's website  www.savannah-energy.com  or contact:

Savannah Energy  

+44 (0) 20 3817 9844

Andrew Knott, CEO

 

Nick Beattie, CFO

 

Sally Marshak, Head of IR & Communications

 

 

 

Strand Hanson (Nominated Adviser)

+44 (0) 20 7409 3494

James Spinney

 

Ritchie Balmer

 

Rob Patrick


 


finnCap Ltd (Joint Broker) 

Christopher Raggett

Tim Redfern

+44 (0) 20 7220 0500


 

Panmure Gordon (UK) Ltd (Joint Broker) 

John Prior

Hugo Rich

James Sinclair-Ford

+44 (0) 20 7886 2500

 

Camarco

 

  +44 (0) 20 3757 4983

Billy Clegg
Owen Roberts
Violet Wilson

 





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, as it forms part of UK domestic law by virtue of the European Union (Withdrawal) Act 2018, as amended, 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 quoted British independent energy company focused around the delivery of Projects that Matter in Africa, active in Cameroon, Chad, Niger and Nigeria.

 

Further information on Savannah Energy PLC can be found on the Company's website: www.savannah-energy.com .



H1 2022 Operational Review

Nigeria

Average gross daily production was flat in H1 2022 with an average of 22.5 Kboepd (H1 2021: 22.6 Kboepd). During H1 2022, the Company's subsidiary, Accugas, supplied gas to the Calabar, Ibom, TransAfam, FIPL Afam and FIPL Trans Amadi power stations.  Gas was delivered throughout the period to Lafarge's Mfamosing cement factory in Cross Rivers State and deliveries to CHGC, a distributor of gas to industrial and commercial customers in the Port Harcourt area, commenced in June 2022.

Niger

During H1 2022, t he four licence areas in Niger were amalgamated into a single PSC (R1234) valid for up to a further 10 years. This has laid the foundation to progress plans for the R3 East Early Production Scheme and we expect to announce further details of this project later in the year.

Renewable Energy Division

Savannah's Renewable Energy division was established in 2021 and during H1 2022 signed three agreements for the development of a total of up to 750MW large-scale greenfield solar and wind projects with the governments of Chad and Niger.

The agreement signed in Chad covers two projects.  The first comprises an up to 300 MW photovoltaic solar farm and battery energy storage system located in Komé, Southern Chad (the "Centrale Solaire de Komé").  This project is being developed to provide clean, reliable power generation for the Doba Oil Project and the surrounding towns of Moundou and Doba. The second involves the development of solar and wind projects of up to 100 MW each to supply power to the country's capital city, N'Djamena (the "Centrales d'Energie Renouvelable de N'Djamena").  The Centrale Solaire de Komé project would represent the largest solar plant in sub-Saharan Africa (excluding  South Africa ) and potentially the largest battery storage project on the continent. The Centrales d'Energie Renouvelable de N'Djamena would more than double the existing installed generation capacity supplying the capital city and increase the total installed on-grid power generation capacity in  Chad  by up to an estimated 63%.

In Niger, an agreement was signed with the Ministry of Petroleum, Energy and Renewable Energies of the Republic of Niger for the construction and operation of the country's first wind farm, with a proposed installed power generation capacity of up to 250 MW on an independent power producer basis in the Tahoua Region of Southern Niger. This is targeted to increase the country's on-grid electricity supply by up to 40%. Project sanction is targeted for 2023 with first wind power in 2025.

These projects represent potentially substantial foreign direct investments that would make significant contributions to the economic development of the regions where they will be situated. 

 

H1 2022 Financial Review

The Group reports Total Revenues1 of US$128.7 million for the six months ended 30 June 2022, up 10% on H1 2021 and an Adjusted EBITDA2 of US$100.3 million also up 10% on H1 2021, reflecting the quality of our gas producing assets in Nigeria as we broaden and diversify our customer base.

We have invested heavily during the period to scale up the business ahead of completion of the proposed acquisition of the Chad and Cameroon Assets and to enable the delivery of our wider business development plans. This has included a 21% increase in headcount in H1 2022, alongside a large investment into new systems and processes that will be required to support the enlarged scale of the Group.

Summary of results for H1 2022

The table below provides an overview of our results for H1 2022 with a comparison for H1 2021.

Financial highlights


Six months ended

 30 June 2022

US$ million

Six months ended

 30 June 2021

US$ million

Total Revenues1

128.7

116.5

Adjusted EBITDA2

100.3

91.5

Revenue

85.8

99.4

Operating expenses plus administrative expenses3

24.5

22.4

Operating profit

27.9

54.0

(Loss)/profit before tax

(11.3)

7.7

(Loss) after tax

(20.5)

(1.4)

 

The Group's operating profit for the six months ended 30 June 2022 was US$27.9 million (H1 2021: US$54.0 million). The decrease resulted from a combination of lower revenues resulting from unscheduled downtime suffered by certain of our customers (which does not reduce Total Revenues1 under the terms of the take-or-pay gas contracts) and a 10% increase in operating expenses plus administrative expenses3. The increase in these costs is a result of the investment being made in growing the business infrastructure in preparation for completion of the acquisition of the Chad and Cameroon Assets and continued investment into the efficiency of the Nigerian assets.

The Group's loss before tax was US$11.3 million (H1 2021 profit: US$7.7 million) and the loss after tax was US$20.5  million (H1 2021 loss: US$1.4 million). 

Adjusted EBITDA2 for H1 2022 was US$100.3 million, compared to US$91.5 million for H1 2021. 

Revenue

Revenue during the period was 14% lower than the comparable prior year period at US$85.8 million (H1 2021: US$99.4 million). As previously highlighted, 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 Revenue shown in the Condensed Consolidated Statement of Comprehensive Income includes only the gas, oil and condensate that has been delivered. The Total Revenues1 of US$128.7 million (H1 2021: US$116.5m) includes the volume of gas that customers are committed to pay for under the take-or-pay terms of the gas sales agreements, which includes gas that has been delivered plus gas invoiced but yet to be delivered, plus oil and condensate revenues. Total Revenues 1 showed a 10% increase compared to H1 2021. Management believes that Total Revenues1 is the most appropriate method of reflecting the underlying cash generation capacity of the business.

Savannah continues to benefit from over US$4 billion of contracted future gas revenues in Accugas with annual price escalation clauses related to US consumer price inflation.

Cost of Sales, administrative and other operating expenses

Cost of sales amounted to US$33.1 million (H1 2021: US$34.3 million) which includes US$13.8 million (H1 2021: US$13.8 million) for facility operating and maintenance costs, US$2.9 million (H1 2021: US$2.2 million) royalty expenses and US$16.4 million (H1 2021: US$18.3 million) depletion and depreciation. 

Administrative and other operating expenses for the period were US$11.7 million (H1 2021: US$9.5 million), which includes US$0.9 million (H1 2021: US$0.9 million) of depreciation. 

Group Operating expenses plus administrative expenses3 were US$24.5 million (H1 2021: US$22.4 million). 

EBITDA and Adjusted EBITDA2

Presented below is the calculation of EBITDA and Adjusted EBITDA2. Management believes that the alternative performance measure of Adjusted EBITDA2 more accurately reflects the cash generating capacity of the business.  Adjusted EBITDA2 includes gas that has been invoiced under take-or-pay contracts but not yet delivered and is adjusted for transaction and other related expenses to provide a meaningful comparison between periods.

Calculation of EBITDA and Adjusted EBITDA2 for the Group

GROUP

Six months ended

30 June 2022

US$ million

Six months ended 30 June 2021

US$ million

Operating profit

Add: depletion, depreciation and amortisation

Add: transaction and other related expenses

27.9

17.3

7.3

54.0

19.2

2.3

EBITDA

Add: other invoiced amounts

Deduct: royalty payable on additional gas volume

Deduct: expected credit loss & other related adjustments

52.5

42.9

(1.0)

5.9

75.5

17.1

(0.4)

(0.7)

Adjusted EBITDA 2

100.3

91.5

Finance Costs

Finance costs were US$36.8 million (H1 2021: US$38.7 million) - of these costs US$27.9 million (H1 2021: US$26.8 million) related to bank and loan note interest.  The average interest rate was 10.7% (H1 2021: 10.3%) reflecting the higher US Libor rates during the period compared to prior year.  The remainder of the finance costs are primarily a number of non-cash items which are itemised in Note 8 of the financial statements. 

The interest cover ratio, on an Adjusted EBITDA2 basis is 3.1 times (H1 2021: 2.9 times).

Foreign Exchange loss

Foreign exchange losses amounted to US$0.8 million (H1 2021: US$10.9 million).  These losses were realised losses arising from US Dollar gas sales invoices which are settled in local currency, and from the translation of Naira into US Dollars to service US Dollar denominated obligations. Realised foreign exchange losses can be recovered through the "true up" mechanism in the Calabar GSA

In order to purchase US dollars to service US dollar obligations, Savannah accesses foreign exchange at market rates and there is typically a differential between this rate and the Central Bank of Nigeria exchange rate. The majority of these losses are recoverable through a foreign exchange "true-up" clause in the Calabar GSA.

Taxation

The tax charge of US$9.2 million (H1 2021: US$9.1 million) was made up of a current tax charge of US$2.8 million (H1 2021: US$2.2 million) and a deferred tax charge of US$6.4 million (H1 2021: US$6.9 million).  The current tax charge principally arises on Nigerian profits and the deferred tax charge is a result of utilisation of unused losses in Nigeria.

Debt

The Group net debt as at 30 June 2022 was US$327.1 million (31 December 2021: US$370.0 million).  During the period, the leverage ratio, and Adjusted Leverage ratio, improved as shown in the table below.

Work continues on the proposed refinancing of the Accugas debt facility as was detailed in the 2021 Annual Report and Accounts.

Leverage

 

30 June

2022

US$ million

31 December 2021

US$ million

Adjusted EBITDA2 #

100.3

175.0

Net debt

327.1

370.0

Naira held in cash for interest

80.9

75.5

Adjusted net debt

408.0

445.5

Leverage (Net debt/Adjusted EBITDA 2 )

1.6

2.1

Adjusted Leverage4 (Adjusted net debt/Adjusted EBITDA 2 )

2.0

2.5

# Adjusted EBITDA2 for 6 months to 30 June 2022 and for 12 months to 31 December 2021

 

Cash flow

A summary of the cash flows for the period is as follows:


Six months ended

30 June 2022

US$ million

Six months ended

30 June 2021

US$ million

Net cash generated from operating activities

41.9

65.2

Net cash used in investing activities

(29.3) (a)

(4.8) (a)

Net cash generated from/(used in) financing activities

18.1

(22.8)

Impact of exchange rate changes on cash balances

(2.2)

(7.9)

Net increase in cash

28.5

29.7

Cash balances at start of period 5

154.3

106.0

Cash balances at end of period 5

182.8

135.7

(a)  excludes US$32.2 million (H1 2021: US$31.0 million) transferred to debt service accounts

 

The net cash inflow from operating activities was US$41.9 million (H1 2021: US$65.2 million).

Net cash used in investing activities includes US$14.6 million deposits paid towards the acquisition of the Chad and Cameroon Assets (H1 2021: nil), payments for property, plant and equipment of US$9.1 million (H1 2021: US$4.1 million) and US$4.9 million (H1 2021: US$1.1 million) incurred on exploration and evaluation assets.

The net cash generated from and used in financing activities includes equity proceeds of US$61.1 million (H1 2021: nil), principal debt repayments of US$17.1 million (H1 2021: US$8.8 million) and finance costs of US$24.8 million (H1 2021: US$13.6 million).

Total Cash balances of the Group at the end of the period increased to US$182.8 million (H1 2021: US$135.7 million). 

 

Nick Beattie

Chief Financial Officer

30 September 2022



Footnotes

1 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 Annual Report and Accounts 2020.

 

2 Adjusted EBITDA is calculated as 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 and other related expenses, 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.

 

3 Group operating expenses plus administrative expenses are defined as total cost of sales, administrative and other operating expenses excluding royalty and depletion, depreciation and amortisation and transaction costs.

 

4 Adjusted Leverage is defined as Adjusted net debt/Adjusted EBITDA. Adjusted net debt is calculated as the net debt balance adjusted for the Naira held in cash for interest (as shown in the financial review). For the 6 month period ended 30 June 2022, the Adjusted Leverage calculation is prepared on an annualised EBITDA basis

 

5 Within Cash balances, US$1.6m is restricted cash which includes deposits and stamp duty escrow balances.

 



 

 

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVEINCOME FOR THE SIX MONTHS ENDED30JUNE2022

 

 



Six months ended

30 June

2022

US$ ' 000

Six months ended

30 June

2021

US$ ' 000


Note

Unaudited

Unaudited

Revenue

4

85,847

99,386

Cost of sales

5

(33,127)

(34,286)

Gross profit

 

52,720

65,100

Administrative and other operating expenses


(11,686)

(9,505)

Transaction and other related expenses

6

(7,262)

(2,341)

Expected credit loss and other related adjustments

14

(5,918)

739

Operating profit

6

27,854

53,993

Finance income

7

273

328

Finance costs

8

(36,827)

(38,732)

Fair valueadjustment

9

(1,768)

3,042

Foreign translation loss

10

(846)

(10,943)

(Loss)/profit before tax


(11,314)

7,688

Current tax expense

11

(2,793)

(2,172)

Deferred tax expense

11

(6,438)

(6,893)

Tax expense

11

(9,231)

(9,065)

Net loss andtotalcomprehensiveloss


(20,545)

(1,377)

 

Total comprehensive (loss)/profit attributable to:




Owners of theCompany


(20,264)

(3,109)

Non-controlling interests


(281)

1,732



(20,545)

(1,377)

 

Loss per share

 

US cents

US cents

Basic

12

(1.77)

(0.33)

Diluted

12

(1.77)

(0.33)

 

All results derive from continuing operations.

 

 




 

CONDENSED CONSOLIDATED STATEMENT OF FINANCIALPOSITION

AS AT 30 JUNE 2022

 



30 June

31 December



2022

2021



US$'000

US$'000


Note

Unaudited

Audited

Assets

Non-current assets

Third-party investment


1,182

-

Property, plantandequipment

13

557,368

568,201

Exploration and evaluation assets


166,373

161,343

Deferred tax assets


217,376

223,814

Right-of-use assets


4,180

4,724

Restricted cash


1,635

1,635

Finance lease receivable


581

722

Total non-current assets


948,695

960,439

Current assets

Inventory


5,230

3,873

Trade and other receivables

14

206,667

231,631

Cash at bank

15

181,168

152,644

Total current assets


393,065

388,148

Total assets


1,341,760

1,348,587

Equity and liabilities

Capital andreserves

Share capital


1,749

1,409

Share premium


124,897

61,204

Shares to be issued


-

63,956

Treasury shares


(135)

(58)

Other reserves


8,381

458

Share-based payment reserve


9,042

8,706

Retained earnings


136,957

157,221

Equity attributable to ownersof the Company


280,891

292,896

Non-controlling interests


13,561

13,842

Total e quity


294,452

306,738

Non-current liabilities

Other payables

16

3,617

3,415

Borrowings

17

107,429

108,652

Lease liabilities


4,553

5,308

Provisions


71,714

68,966

Contract liabilities

18

269,435

213,043

Total non-current liabilities


456,748

399,384

Current l iabilities

Trade and other payables

16

86,603

116,771

Borrowings

17

402,497

415,593

Interest payable


85,556

80,101

Tax liabilities


1,633

2,058

Lease liabilities


1,558

1,475

Contract liabilities

18

12,713

26,467

Total currentliabilities


590,560

642,465

Total liabilities

 

1,047,308

1,041,849

Total e quity and liabilities


1,341,760

1,348,587



CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE SIX MONTHS ENDED30JUNE2022

 


 

Six months ended

30 June

Six months ended

30 June


 

2022

2021


 

US$'000

US$'000


Note

Unaudited

Unaudited

Cash flows from operating activities:

(Loss)/profit before tax

 

(11,314)

7,688

Adjustments for:


 


Depreciation 

 

914

888

Depletion

 

16,432

18,335

Finance income

 

(190)

(124)

Finance costs

8

36,827

38,732

Fair value adjustment


1,768

(3,042)

Unrealised foreign exchange (gain)/loss

10

(99)

6,981

Share option charge

 

336

1,375

Expected credit loss and other related adjustments

14

5,918

(739)

Operating cash flows before movements in working capital

 

50,592

70,094

Increase in inventory

 

(1,357)

(689)

Increase in trade and other receivables

 

(40,703)

(15,921)

Decrease in trade and other payables

 

(6,389)

(4,467)

Increase in contract liabilities

 

40,765

16,798

Income tax paid

 

(1,024)

(632)

Net cash generated from operating activities

 

41,884

65,183

Cash flows from investing activities:

Interest received

 

171

98

Payments for property, plant and equipment

 

(9,104)

(4,109)

Payments for exploration and evaluation assets

 

(4,888)

(1,118)

Acquisition deposits

 

(14,648)

-

Loans provided to third parties

 

(1,067)

-

Cash transferred to debt service accounts

 

(32,186)

(30,973)

Lessor receipts

 

196

280

Net cash used in investing activities

 

(61,526)

(35,822)

Cash flows from financing activities:

Finance costs

 

(24,758)

(13,580)

Proceeds from issues of equity shares, net of issue costs


61,141

-

Sale of Treasury shares


73

-

Borrowing proceeds

19

12,810

-

Borrowing repayments

19

(30,545)

(8,794)

Lease payments

19

(527)

(335)

Net cash generated from/(used in) financing activities

 

18,194

(22,709)

Net (decrease)/increase in cash and cash equivalents

 

(1,448)

6,652

Effect of exchange rate changes on cash and cash equivalents

 

(2,214)

(7,938)

Cash and cash equivalents at beginning of period

 

45,739

74,258

Cash and cash equivalents at end of period

15

42,077

72,972

 

 

 


Amounts held for debt service at end of period

139,091

61,078

Cash at bank at end of period

181,168

134,050

 

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE SIX MONTHS ENDED30JUNE2022

 


Share capital

Share premium

Shares to be issued

Treasury shares

Other reserves

Share-based payment reserve

Retained earnings

Equity attributable to the owners of the Company

Non-controlling interest

Total equity


US$'000

US$'000

US$'000

US$'000

US$'000

US$'000

US$'000

US$'000

US$'000

US$'000

Balance at 1 January 2022 (audited)

1,409

61,204

63,956

(58)

458

8,706

157,221

292,896

13,842

306,738

Loss for the period

-

-

-

-

-

-

(20,264)

(20,264)

(281)

(20,545)

Total comprehensive loss for the period

-

-

-

-

-

-

(20,264)

(20,264)

(281)

(20,545)

Transactions with shareholders:











Equity-settled share-based payments

-

-

-

-

-

336

-

336

-

336

Issue of shares, net of costs

340

63,693

(63,956)

(77)

-

-

-

-

-

-

Sale of treasury shares

-

-

-

-

73

-

-

73

-

73

Issue of warrants

-

-

-

-

7,850

-

-

7,850

-

7,850

Balance at 30 June 2022 (unaudited)

1,749

124,897

-

(135)

8,381

9,042

136,957

280,891

13,561

294,452

 


Share capital

Share premium

Treasury shares

Other reserves

Share-based payment reserve

Retained earnings

Equity attributable to the owners of the Company

Non-controlling interest

Total equity


US$'000

US$'000

US$'000

US$'000

US$'000

US$'000

US$'000

US$'000

US$'000

Balance at 1 January 2021 (audited)

1,409

62,092

(59)

458

7,104

158,670

229,674

(2,737)

226,937

Profit/(loss) for the period

-

-

-

-

-

(3,109)

(3,109)

1,732

(1,377)

Total comprehensive profit/(loss) for the period

-

-

-

-

-

(3,109)

(3,109)

1,732

(1,377)

Transactions with shareholders:










Equity-settled bonus payments

-

171

1

-

-

-

172

-

172

Equity-settled share-based payments

-

-

-

-

1,375

-

1,375

-

1,375

Balance at 30 June 2021 (unaudited)

1,409

62,263

(58)

458

8,479

155,561

228,112

(1,005)

227,107

 

 

 


NOTES TO THE CONDENSEDCONSOLIDATEDINTERIMFINANCIALSTATEMENTS

1.  General information

 

Savannah Energy PLC ("Savannah" or "the Company") was incorporated in the United Kingdom on 3 July 2014. The principal activity of Savannah and its subsidiaries (together, the "Group") is the exploration, development and production of natural gas and crude oil and development of other energy related projects in Africa.

 

The Company is domiciled in the UK for tax purposes and its shares were admitted to trading on the AIM market ("AIM") of the London Stock Exchange plc on 1 August 2014.  The Company's registered address is 40 Bank Street, London, E14 5NR.

 

2.  Accounting policies

 

Basis of Preparation

 

On 31 December 2020, International Financial Reporting Standards ("IFRS") as adopted by the European Union at that date was brought into UK law and became international accounting standards as adopted by the United Kingdom ("UK-adopted IAS"), with future changes being subject to endorsement by the UK Endorsement Board. The Group transitioned to UK-adopted IAS in its consolidated financial statements from 1 January 2021. There was no impact on the Group from this transition, nor any changes in accounting policy. These condensed consolidated financial statements have been prepared in accordance with UK-adopted IAS. 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 Group's 2021 Annual Report and audited financial statements for the year ended 31 December 2021 ("the Group's 2021 Annual Report"). The financial information for the six months ended 30 June 2022 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 for the year ended 31 December 2021 were prepared in accordance with international accounting standards in conformity with the requirements of the Companies Act 2006. The Independent Auditors' Report on the Group's 2021 Annual Report was unqualified and did not contain a statement under 498(2) or 498(3) of the Companies Act 2006. The Independent Auditors' Report contained a material uncertainty related to going concern.

 

The Group'sstatutoryfinancialstatementsfor the year ended 31December2021 have beenfiledwith 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 the Group's 2021 Annual Report. There are no other new or amended standards or interpretations adopted from 1 January 2022 that have a significant impact on the interim financial information.

 

Going concern

 

The Group places significant importance in managing its liquidity position and ensuring that all parts of the business have appropriate funding as needed to meet their obligations. The Directors have considered the Group's forecasted cash flows and funding requirements for the twelve months from the date of publication of this Interim Report (including sensitivity analysis of key assumptions which has been undertaken) and in addition the Directors have considered the range of risks facing the business on an ongoing basis. The principal assumptions made in relation to the going concern assessment relate to: (1) the timely payments of our gas invoices by our customers, (2) the forecast commodity price environment and (3) continued access to FX markets. Considering this last point, the Directors are highly confident that the Group will continue to be able to access US dollars as required to maintain going concern status. However, a minimal risk exists that the Group may not be able to continue to do so and/or the Group may not be able to amend its debt facilities and/or complete its planned debt refinancing as described in the Group's 2021 Annual Report. These facts indicate that a material uncertainty exists that may cast significant doubt on the Group's, ability to continue to apply the going concern basis of accounting. Notwithstanding this, the Directors have full confidence in the Group's forecasts and have continued to adopt the going concern basis in preparing the consolidated 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 total revenue generating operations of the Group. The Unallocated segments principal activities are the governance and financing of the Group as well as undertaking business development opportunities. Items not included within Operating profit/(loss) are reviewed at a Group level and therefore there is no segmental analysis for this information.

 

The following is an analysis of the Group's results by reportable segment for the six months ended 30 June 2022:

 


Nigeria

Niger

Unallocated

Total


US$'000

US$'000

US$'000

US$'000


Unaudited

Unaudited

Unaudited

Unaudited

Revenue

85,847

-

-

85,847

Cost of sales1

(33,127)

-

-

(33,127)

Gross profit

52,720

-

-

52,720

Administrative and other operating expenses

(3,446)

(972)

(7,268)

(11,686)

Transaction and other related expenses

-

-

(7,262)

(7,262)

Expected credit loss and other related adjustments

(5,918)

-

-

(5,918)

Operating profit/(loss)

43,356

(972)

(14,530)

27,854

Finance income




273

Finance costs




(36,827)

Fair value adjustment




(1,768)

Foreign translation loss




(846)

Profit before tax

 

 

 

(11,314)

 





Segment depreciation, depletion and amortisation

16,890

132

323

17,345

Segment non-current assets2

553,681

167,667

7,755

729,103

Segment non-current asset additions

1,862

5,035

4,101

10,998

Segment total assets

1,118,014

168,970

54,776

1,341,760

Segment total liabilities

(974,629)

(33,525)

(37,154)

(1,047,308)

1.  Refer to note 5 for items included within Cost of Sales.

2.  Includes Third party investments, Property, plant and equipment, Exploration and evaluation assets and Right-of-use assets.

 

The following is an analysis of the Group's results by reportable segment for the six months ended 30 June 2021:

 


Nigeria

Niger

Unallocated

Total


US$'000

US$'000

US$'000

US$'000


Unaudited

Unaudited

Unaudited

Unaudited

Revenue

99,386

-

-

99,386

Cost of sales1

(34,286)

-

-

(34,286)

Gross profit

65,100

-

-

65,100

Administrative and other operating expenses

(2,748)

(2,410)

(4,347)

(9,505)

Transaction and other related expenses

-

-

(2,341)

(2,341)

Expected credit loss and other related adjustments

739

-

-

739

Operating profit/(loss)

63,091

(2,410)

(6,688)

53,993

Finance income




328

Finance costs




(38,732)

Fair value adjustment




3,042

Foreign translation loss




(10,943)

Profit before tax

 

 

 

7,688

 



 

The following is an analysis of the Group's results by reportable segment at 31 December 2021:

 

 

Nigeria

Niger

Unallocated

Total

 

US$'000

US$'000

US$'000

US$'000

 

Unaudited

Unaudited

Unaudited

Unaudited

Segment depreciation, depletion and amortisation

18,807

153

263

19,223

Segment non-current assets2

568,709

162,644

2,915

734,268

Segment non-current asset additions

32,535

1,779

184

34,498

Segment total assets

1,085,486

160,962

102,139

1,348,587

Segment total liabilities

(938,513)

(31,620)

(71,716)

(1,041,849)

1.  Refer to note 5 for items included within Cost of Sales.

2.  Includes Property, plant and equipment, Exploration and evaluation assets and Right-of-use assets.

 

4.  Revenue

 

Set out below is the disaggregation of the Group's revenue from contracts with customers:

 

 

2022

2021

 

US$'000

US$'000

Six months ended 30 June

Unaudited

Unaudited

Gas sales

72,629

91,675

Oil and condensates sales

13,218

7,711

Revenue from contracts with customers

85,847

99,386

 

Gas sales represents gas deliveries made to the Group's customers under long term take or pay gas sale agreements. The Group sells oil and condensates at prevailing market prices.

 

Included within revenue from contracts with customers is revenue of US$83.8 million (30 June 2021: US$89.6 million) relating to four (30 June 2021: two) of the Group's customers who each contribute more than 10% of revenue US$36.6 million, US$21.7 million, US$13.2 million, and US$12.3 million respectively (30 June 2021: US$61.3 million and US$28.3 million, respectively).

 

 

5.  Cost of sales

 

2022

2021

 

US$'000

US$'000

Six months ended 30 June

Unaudited

Unaudited

Depletion - oil and gas, and infrastructure assets (note 13)

16,432

18,335

Facility operation and maintenance costs

13,770

13,794

Royalties

2,925

2,157

 

33,127

34,286

 

6.  Operating profit

Operating profit has beenarrived at aftercharging:

 

2022

2021

 

US$'000

US$'000

Six months ended 30 June

Unaudited

Unaudited

Staff costs

11,896

12,112

Depreciation - other assets (note 13)

370

380

Depreciation - right-of-use assets

544

508

Transaction and other related expenses1

7,262

2,341

1.  Included within Transaction and other related expenses are costs incurred with respect of the Group's proposed acquisitions of the Chad and Cameroon Assets, integration and IT activities and other business development opportunities.



 

7.  Finance income

 

 

2022

2021

 

US$'000

US$'000

Six months ended 30 June

Unaudited

Unaudited

Lease income

19

26

Bank interest income

161

98

Other interest income

93

204

 

273

328

 

8.  Finance costs

 

 

2022

2021

 

US$'000

US$'000

Six months ended 30 June

Unaudited

Unaudited

Interest on bank borrowings and loan notes

27,949

26,826

Amortisation of balances measured at amortised cost1

3,898

7,004

Unwinding of decommissioning discount

2,749

2,488

Interest expense on lease liabilities

201

262

Bank charges

191

131

Other finance costs

1,839

2,021

 

36,827

38,732

1.  Includes amounts due to unwinding of a discount on a long-term payable, contract liabilities (note 18) and amortisation of debt fees.

 

9.  Fair value adjustment 

 

During 2019 the Group issued a Senior Secured Note of US$20 million that includes a voluntary prepayment option whereby early repayment will result in a discount to the contractual loan value.  As an embedded derivative, the option has been separated from the host loan instrument and valued separately and accounted for as fair value through profit or loss. As at 30 June 2022 the option value was approximately US$3.0 million (31 December 2021 audited: US$4.8 million), resulting in a charge of US$1.8 million (30 June 2021: gain of US$3.0 million). The decrease in the option value was due to a worsening in credit bond spreads observed during the period as well as an increase in market expectations around interest rates. The increase in the option value during the prior period was principally due to an improvement in credit bond spreads observed during the period.

 

10.  Foreign translation loss

 

 

2022

2021

 

US$'000

US$'000

Six months ended 30 June

Unaudited

Unaudited

Realised loss

945

3,962

Unrealised (gain)/loss

(99)

6,981

 

846

10,943

 

Realised foreign translation loss for the six months ended 30 June 2022 mainly relates to Nigerian trade receivables which are invoiced in US Dollars and where customers are able to pay in Naira. Foreign translation loss for the six months ended 30 June 2021 mainly relate to the translation of Naira into US Dollars to service US Dollar denominated obligations.

 

Unrealised foreign translation loss relates to the revaluation of monetary items held in currencies other than US Dollars. During the six months ended 30 June 2021 the Nigerian Naira devalued against the US Dollar in May 2021 which created a significant unrealised loss on monetary items held in Naira.



 

11.  Taxation

The tax expense for the Group is:

 

2022

2021

US$'000

US$'000

Six months ended 30 June

Unaudited

Unaudited

Current tax

 

 

- Adjustments in respect of prior years

(1,126)

3

- Current year

3,919

2,169

 

2,793

2,172

Deferred tax

 

 

- Adjustments in respect of prior years

193

15

- Write down and reversal of previous write downs of deferred tax assets

4,353

-

- Origination and reversal of temporary differences

1,892

6,878

 

6,438

6,893

 

9,231

9,065

 

Income tax expense is recognised based on the actual results for the period. 

 

The tax charge for the period of US$9.2 million (30 June 2021: charge of US$9.1 million) is made up of a current tax charge of US$2.8 million (30 June 2021: US$2.2 million) and a deferred tax charge of US$6.4 million (30 June 2021: charge of US$6.9 million). The current tax charge principally arises on Nigerian profits. The deferred tax charge principally relates to the utilisation of losses in Nigeria, as well as a write down of deferred tax assets.

 

12.  Loss per share

 

Basic earnings per share amounts are calculated by dividing the profit or loss for the period attributable to owners of the Company 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 owners of the Company 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. As there is a loss attributable to the owners of the Company for the six months ended 30 June 2022, the diluted weighted average number of shares would reduce the loss per share. Therefore, the basic weighted average number of shares has been used to calculate the diluted loss per share.

 

The weighted average number of shares outstanding excludes treasury shares of 99,858,893 (30 June 2021: 41,966,942).

 

 

2022

2021

 

US$'000

US$'000

Six months ended 30 June

Unaudited

Unaudited

Loss

 


Loss attributable to owners of the Company

(20,264)

(3,109)

 

 

Number of shares

Number of shares

Basic weighted average number of shares

1,142,656,405

954,116,177

Add: employee share options

5,243,720

3,840,024

Diluted weighted average number of shares

1,147,900,125

957,956,201

 

 

US cents

US cents

Loss per share

 


Basic loss per share

1.77

0.33

Diluted loss per share

1.77

0.33

 

50,233,574 options granted under share option schemes are not included in the calculation of diluted earnings per share because they are anti-dilutive for the six months ended 30 June 2022 (30 June 2021: 50,233,574). These options could potentially dilute basic earnings per share in the future.

 

 

 

13.  Property, plant and equipment

 


Oil and gas assets

Infrastructure assets

Other assets

 

Total


US$'000

US$'000

US$'000

US$'000

Cost





Balance at 1 January 2021 (audited)

183,852

469,917

4,359

658,128

Additions

16,212

15,780

565

32,557

Decommissioning remeasurement adjustment

(2,296)

(39,569)

-

(41,865)

Balance at 31 December 2021 (audited)

197,768

446,128

4,924

648,820

Additions

983

854

4,132

5,969

Balance at 30 June 2022 (unaudited)

198,751

446,982

9,056

654,789






Accumulated depreciation





Balance at 1 January 2021 (audited)

(20,327)

(23,170)

(1,924)

(45,421)

Depletion and depreciation charge

(16,742)

(17,721)

(735)

(35,198)

Balance at 31 December 2021 (audited)

(37,069)

(40,891)

(2,659)

(80,619)

Depletion and depreciation charge

(8,312)

(8,120)

(370)

(16,802)

Balance at 30 June 2022 (unaudited)

(45,381)

(49,011)

(3,029)

(97,421)






Net book value





1 January 2021 (audited)

163,525

446,747

2,435

612,707

31 December 2021 (audited)

160,699

405,237

2,265

568,201

30 June 2022 (unaudited)

153,370

397,971

6,027

557,368

 

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 (including IT software) and building improvements.

 

14.  Trade and other receivables

 

 

30 June

2022

31 December 2021

 

US$'000

US$'000

 

Unaudited

Audited

Trade receivables

188,969

156,440

Receivables from a joint arrangement

3,645

67

Other financial assets

5,261

5,237

 

197,875

161,744

Expected credit loss

(35,263)

(29,345)

 

162,612

132,399

VAT receivables

677

694

Prepayments and other receivables

43,378

98,538

 

206,667

231,631

 

The following has been recognised in the Condensed Statement of Comprehensive Income relating to expected credit losses for the period:

 

2022

2021

 

US$'000

US$'000

Six months ended 30 June

Unaudited

Unaudited

Provision/(release) of expected credit losses

5,918

(739)

Expected credit loss and other related adjustments

5,918

(739)

 

 

15.  Cash at bank

 

 

30 June

2022

31 December 2021

 

US$'000

US$'000

 

Unaudited

Audited

Cash and cash equivalents

42,077

45,739

Amounts held for debt service

139,091

106,905

 

181,168

152,644

 

Cash and cash equivalents include US$1.2 million (31 December 2021: US$1.1 million) of cash collateral on the Orabank revolving facility. The cash collateral was at a value of XOF758.3 million (31 December 2020: XOF626.4 million).

 

Amounts held for debt service represents Naira denominated cash which is held by the Group for debt service, and this has been separately disclosed from Cash and cash equivalents. In total, approximately US$149.0 million (31 December 2021: US$132.8 million) will be paid for the debt service from bank accounts designated as Amounts held for debt service, and from Cash and cash equivalents.

 

16.  Trade and other payables

 

 

30 June

2022

31 December 2021

 

US$'000

US$'000

 

Unaudited

Audited

Trade and other payables

 

 

Trade payables

31,489

30,957

Accruals

30,950

62,927

VAT and WHT payable

16,717

13,783

Royalty and levies

4,471

5,196

Employee benefits

88

91

Other payables

2,888

3,817

 

86,603

116,771

Other payables - non-current

 

 

Employee benefits

3,617

3,415

 

3,617

3,415

 

90,220

120,186

 

The Directors consider that the carrying amount of trade and other payables approximates to their fair value.

 

17. Borrowings

 

 

30 June

2022

31 December 2021

 

US$'000

US$'000

 

Unaudited

Audited

Revolving credit facility

11,939

9,916

Bank loans

374,009

379,002

Senior Secured Notes

95,135

100,717

Other loan notes

28,843

34,610

 

509,926

524,245

 

 

30 June

2022

31 December 2021

 

US$'000

US$'000

 

Unaudited

Audited

Current borrowings

402,497

415,593

Non-current borrowings

107,429

108,652

 

509,926

524,245

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, based on the customers' expected future usage gas delivery profile. This expected usage is updated periodically with the customer.

 

 

30 June

2022

31 December 2021

 

US$'000

US$'000

 

Unaudited

Audited

Amount due for delivery within 12 months

12,713

26,467

Amount due for delivery after 12 months

269,435

213,043

 

282,148

239,510

 

 

30 June

2022

31 December 2021

 

US$'000

US$'000

 

Unaudited

Audited

As at 1 January

239,510

190,237

Additional contract liabilities

46,175

61,033

Contract liabilities utilised

(5,409)

(18,345)

Unwinding of discount on contract liabilities

1,872

6,585

As at end of period

282,148

239,510

 

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. Cash flow reconciliations

 

The changes in the Group's liabilities arising from financing activities can be classified as follows:


Borrowings

Interest payable

Lease liabilities

Total


US$'000

US$'000

US$'000

US$'000

At 1 January 2022 (audited)

524,245

80,101

6,783

611,129

Cash flows

 

 

 

 

Repayment

(30,545)

(21,050)

(527)

(52,122)

Proceeds

12,810

-

-

12,810

Realised loss on loan repayment

33

-

-

33


(17,702)

(21,050)

(527)

(39,279)

Non-cash adjustments

 

 

 

 

Payment in kind adjustment/accretion of interest

3,764

26,502

201

30,467

Net debt fees

(1,236)

-

-

(1,236)

Borrowing fair value adjustments

1,768

-

-

1,768

Working capital movements

-

-

107

107

Foreign translation

(913)

3

(453)

(1,363)

Balance at 30 June 2022 (unaudited)

509,926

85,556

6,111

601,593

 

 


 

 

 


Borrowings

Interest payable

Lease liabilities

Total


US$'000

US$'000

US$'000

US$'000

At 1 January 2021 (audited)

514,662

51,544

8,061

574,267

Cash flows

 

 

 

 

Repayment

(8,794)

(10,981)

(335)

(20,110)

Realised loss on loan repayment

175

-

-

175


(8,619)

(10,981)

(335)

(19,935)

Non-cash adjustments

 

 

 

 

Payment in kind adjustment/accretion of interest

1,380

26,025

262

27,667

Net debt fees

1,752

-

-

1,752

Borrowing fair value adjustments

(3,042)

-

-

(3,042)

Working capital movements

-

-

(291)

(291)

Foreign translation

(1,011)

(90)

79

(1,022)

Balance at 30 June 2021 (unaudited)

505,122

66,498

7,776

579,396

 

20. Capital commitments

 

At 30 June 2022,capitalcommitmentsamounted to US$ 4.8 million (30 June 2021: US$13.0 million).

 

21. Events after the reporting date

 

There are no events after the reporting date other than those described within this announcement.

 

 

 

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