FY2021 Results, Notice of AGM, Posting of Report

7 June 2022

Savannah Energy PLC

("Savannah", "the Company" or "the Group")

FY 2021 Preliminary Unaudited Annual Results

Notice of AGM and Posting of the 2021 Annual Report

Savannah Energy PLC, the British independent energy company focused around the delivery of Projects that Matter in Africa, is pleased to announce its preliminary unaudited results for the year ended 31 December 2021. The Notice of the Annual General Meeting ("AGM" or "Meeting") is available to download from the Company's website (www.savannah-energy.com). A copy of the 2021 Annual Report and Accounts ("Annual Report") and investor presentation will be available to download from the Company's website later today. The Notice of the AGM has been posted to shareholders today with the Annual Report to follow shortly.

Andrew Knott, CEO of Savannah Energy, said:

"2021 was a fantastic year for Savannah. Our Total Revenues¹² and Adjusted EBITDA² grew by 7% year-on-year to US$231m and US$175m respectively. We organically increased our Net 2P reserves by 20% to 77.7 MMboe. We announced our potentially transformational acquisition of a large portfolio of upstream and midstream assets in Chad and Cameroon, which upon completion we now expect will more than double our corporate free cashflow. We established a Renewable Energy Division which, post period, has signed agreements for up to 750 MW of large scale greenfield solar and wind projects. We successfully renewed and amalgamated our Niger PSC areas, paving the way for the progression of our intended 35 MMstb R3 East development and a return to exploration activity in the licence areas. Our performance against key industry sustainability metrics relating to HSE performance, carbon intensity, senior management gender diversity and local employee ratios remain industry leading.

Looking forward to the rest of 2022, I am confident in where we are as a business. We expect to deliver on our financial guidance. We expect to complete our entry to Chad and Cameroon during Q3 2022 and to likely announce further hydrocarbon acquisitions. We expect to further grow our Renewable Energy Division, with several new large-scale greenfield opportunities under review and negotiation. We expect to finalise the refinancing of our Nigerian debt and to announce the development and exploration plans for our assets in Niger.

I would urge shareholders to spend time reading through my CEO Letter to Shareholders which will be in the Annual Report, and which discusses our 2021 performance and 2022 plans in more detail, while also discussing our views of the "how" and the "why" we see the African energy transition evolving and how this relates to Savannah's hydrocarbon AND renewables business model.

Most of all we will maintain our focus around the delivery of Projects that Matter in Africa. I would like to express my gratitude to all of those who contributed to our success in 2021 - my incredibly dedicated and passionate colleagues, our host governments, communities, local authorities and regulators, our shareholders and lenders, and our customers, suppliers and partners. Thank you all."

Key FY 2021 Financial Highlights

·      FY 2021 Total Revenues[1] of US$230.5m (+7% on FY 2020 Total Revenues of US$215.9m²).  This is ahead of the Company's previously issued FY 2021 guidance of 'Total Revenues of greater than US$205m';

·      Average realised gas price of US$4.19/Mscf (+6% on the 2020 average realised gas price of US$3.96/Mscf) and an average realised liquids price of US$69.9/bbl (+51% compared to the 2020 average realised liquids price of US$46.2/bbl);

·      Total cash collections from the Company's Nigerian assets of US$208.2m (+24% on FY 2020 cash collections of US$167.4m[2]);

·      Adjusted EBITDA of US$175.0m (+7% on FY 2020 Adjusted EBITDA of US$163.2m²);

·      Adjusted EBITDA margin remained broadly unchanged at 76%;

·      Group operating expenses plus administrative expenses[3] of US$49.9m (FY 2021 initial guidance of US$55-65m);

·      Group Depreciation, Depletion and Amortisation of US$36.2m (FY 2021 initial guidance of US$38.3m based on the actual produced volumes);

·      Capital Expenditure for the year of US$32.5m (FY 2021 initial guidance of up to US$65m);

·      Group cash balances of US$154.3m[4] as at 31 December 2021 (+46% versus FY 2020 year-end Group cash balances of US$106.0m);

·      Group net debt of US$370.0m as at 31 December 2021 (-9% versus FY 2020 year-end Group net debt of US$408.7m);

·      Leverage[5] was 2.1x, (20% improvement on 2020 leverage of 2.5x), and an interest cover ratio[6] of 2.8x (FY 2020 ratio of 2.4x);

·      Total Group assets amounted to US$1,349m at year-end (2020: US$1,207m); and

·      Successfully announced a proposed placing to raise US$65.8m of equity financing and secured up to US$432m of debt financing for the proposed Chad and Cameroon Asset Acquisitions. The equity financing completed in January 2022.

Key FY 2021 Operational Highlights

·      FY 2021 average gross daily production from the Nigerian operations was 22.3 Kboepd, a 14% increase from the average gross daily production of 19.5 Kboepd in FY 2020;

·      Of the FY 2021 total average gross daily production of 22.3 Kboepd, 88% was gas, including a 15% increase in gas production from the Uquo gas field, from 103 MMscfpd (17.1 Kboepd) in FY 2020 to 118 MMscfpd (19.7 Kboepd) in FY 2021;

·      Successful drilling and completion of the Uquo-11 gas production well;

·      Publication of an updated Competent Person's Report ("CPR")[7] for Nigeria, with an organic 2P reserve upgrade on the Uquo field, resulting in a 20% increase in Nigeria 2P reserves to 77.7 MMboe (net);

·      Uquo compression project progressed with compressor packages acquired, completion of Front End Engineering & Design studies and long-lead items specified ready for ordering;

·      New gas sales agreement ("GSA") signed with Mulak Energy Limited in Nigeria in February 2021, representing Savannah's first Gas-to-CNG sales agreement;

·      Commencement of gas sales to First Independent Power Limited's ("FIPL") power plant, FIPL Afam, in Nigeria, in November 2021, marking Savannah's first entry into the high growth Port Harcourt Industrial area. Followed by the extension of the FIPL GSA in April 2022 post-year end, almost doubling the maximum contracted volume to up to 65 MMscfpd and extending coverage to a total of three of FIPL's power stations in Rivers State, Nigeria;

·      Post-year end, in February 2022, a new GSA was signed with the Central Horizon Gas Company, a major gas distribution company situated in the South-South region of Nigeria;

·      Post-year end, in June 2022, a further new GSA was signed with TransAfam Power Limited ("TAPL"), a subsidiary of Transnational Corporation of Nigeria plc, for the provision of gas to its power plants in Rivers State, Nigeria;

·      Niger Production Sharing Contract contractual and commercial framework completed and finalised with commercial terms agreed and announced in September 2021;

·      Savannah's Renewable Energy Division was established in 2021, with the announcement in March 2022 of the Company's inaugural renewable energy project, the up to 250 megawatts ("MW") Parc Eolien de la Tarka wind farm project in Niger. This is targeted to increase the country's on-grid electricity supply by up to 40%. Project sanction is targeted for 2023 with first wind power in 2025; and

·      This was followed in May 2022 with the signing of an agreement with the Ministry of Petroleum and Energy of the Republic of Chad for the development of up to 500 MW of renewable energy projects. The up to 300 MW 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 up to 200 MW Centrales d'Energie Renouvelable de N'Djamena in Chad 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%.

Financial Guidance Reiterated for FY 2022

Savannah reiterates its financial guidance for the full year 2022 as follows:

Update on Savannah's Sustainability Strategy

Savannah's focus in 2021 was on articulating the level of ambition across the four pillars of our sustainability strategy: (1) Promoting socio-economic prosperity; (2) Ensuring safe and secure operations; (3) Supporting and developing our people; and (4) Respecting the environment. We conducted an exercise to benchmark the Company's performance against industry peers and leaders, which helped us to develop our strategy and link key performance metrics to our ambitions and to the 13 relevant United Nations Sustainable Development Goals which anchor our strategy. In particular, the following key performance metrics were identified to measure performance and progress, many of which are industry-leading:

·      Continued our strong health & safety record with a zero Lost Time Injury Rate ("LTIR") (2020: zero) and a 0.34 Total Recordable Incident Rate ("TRIR") in 2021 (2020: 0.28);

·      Increased our Total Contributions^[8] to host nations Nigeria and Niger by 12% to US$55.1m (2020: US$49.3m);

·      Increased our investment in social impact projects in Nigeria and Niger by more than 50% to US$246,000 in 2021 (2020: US$161,000);

·      Number of transport related incidents remains exceptionally low with two in 2021 covering over 1.6 million transport kilometres travelled (2020: five incidents);

·      Maintained senior management female gender diversity at 35% (2020: 35%);

·      Established a multimillion-dollar, world class training scheme across our whole business for 2021-23, resulting in a 22% increase in training hours per employee and a 32% increase in total working hours of training;

·      Maintained a low carbon intensity of 13.3 kg CO2e/boe (2020: 12.8 kg CO2e/boe) compared to our industry peer group;

·      Maintained our zero hydrocarbon spills record defined as not greater than one barrel reaching the environment (2020: zero);

·      Measured our freshwater use for the first time, recording usage of approximately 5,359 m3 of freshwater from boreholes and mains supply; and

·      Minimised our negative impacts on biodiversity, putting in place Biodiversity Action Plans at our four operational sites to minimise any impact from our operations.

During 2021 and 2022, we have implemented the Company's new sustainability performance and reporting framework across the Group. We implemented a digital tool to track our performance on our key sustainability indicators on a month-by-month and country-by-country basis and have integrated seven leading sustainability reporting standards into our reporting framework. We plan to publish the respective detailed disclosure reports setting out our alignment to each standard during H2 2022.

Savannah is pleased to have been recognised for the progress in our sustainability reporting to date, having been shortlisted for 'ESG Initiative of the Year' at the Chartered Governance Institute UK & Ireland ("CGI") Awards in November last year and, more recently, shortlisted for 'Best ESG Materiality Reporting (Small Cap)' at the IR Magazine Awards - Europe 2022.

AGM

The AGM will be held at 10.30 a.m. on Thursday, 30 June 2022 at 40 Bank Street, London, E14 5NR. Details on how to submit your proxy vote are set out in the section of the Notice of AGM headed "Voting Arrangements - Action to be taken". The results of the AGM will be announced shortly after its conclusion and published on the Company's website at www.savannah-energy.com.

Presentation

The presentation from today’s Retail Investor Webinar will be added to the Savannah Energy website this evening and can be found at  www.savannah-energy.com/investors/reports-presentations/

For further information, please contact:

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 (EU) No. 596/2014, which forms part of United Kingdom 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 and is 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.

Unaudited Consolidated Statement of Comprehensive Income

for the year ended 31 December 2021

All results in the current financial year derive from continuing operations.

Unaudited Consolidated Statement of Financial Position

as at 31 December 2021

Unaudited Consolidated Statement of Cash Flows

for the year ended 31 December 2021

Unaudited Consolidated Statement of Changes in Equity

for the year ended 31 December 2021

Notes to the Unaudited Financial Information

for the year ended 31 December 2021

1.     Corporate information

The Company was incorporated in the United Kingdom on 3 July 2014. Savannah's principal activity is the exploration, development and production of natural gas and crude oil and development of other energy related projects in Africa. The Company is domiciled in England for tax purposes and is a public company, and its shares were listed on the Alternative Investment Market ("AIM") of the London Stock Exchange on 1 August 2014. The Company's registered address is 40 Bank Street, London E14 5NR.

2.     Basis of preparation

The unaudited consolidated financial statements of the Company and the Group have been prepared in accordance with International accounting standards as adopted by the United Kingdom, with future changes being subject to endorsement by the UK Endorsement Board. The unaudited consolidated financial statements have been prepared under the historical cost convention and incorporate the results for the year ended 31 December 2021. The financial information contained in this report for the year ended 31 December 2021 (the "Financial Information") does not constitute full statutory accounts as defined in sections 435 (1) and (2) of the Companies Act 2006.  The statutory accounts for the year ended 31 December 2021 will be finalised on the basis of the financial information presented by the Directors in this announcement and will be delivered to the Registrar of Companies in due course. The statutory accounts are subject to completion of the audit and may change before the approval of the Annual Report. 

Statutory accounts for the year ended 31 December 2020 have been delivered to the Registrar of Companies. The auditor's report on those accounts was unqualified, drew attention by way of emphasis of matter to the material uncertainty related to going concern without qualifying the accounts and did not contain a statement under section 498 (2) or (3) of the Companies Act 2006. Statutory accounts for the year ended 31 December 2021 will be delivered in due course.

The accounting policies applied are consistent with those adopted and disclosed in the Group's audited consolidated financial statements for the year ended 31 December 2021. There have been a number of amendments to accounting standards and new interpretations issued by the International Accounting Standards Board which were applicable from 1 January 2021, however these have not any impact on the accounting policies, methods of computation or presentation applied by the Group. Further details on new International Financial Reporting Standards adopted will be disclosed in the Annual Report.

Going concern

The Group places significant importance in managing its liquidity position and ensuring that all parts of the business have appropriate funding as needed to meet their obligations.  The Directors have considered the Group's forecasted cash flows and funding requirements for the period to 31 December 2023 (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 receipts of our gas invoices by our customers, (2) the forecast commodity price environment and (3) continued access to FX markets for debt refinancing. 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 its 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. These facts indicate that a material uncertainty exists that may cast significant doubt on the Group's, ability to continue to adopt 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 Group's unaudited 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 current and future revenue-generating operations of the Group. The Unallocated segment's principal activities are the governance and financing of the Group, as well as undertaking business development opportunities. Items not included within Operating profit/(loss) are reviewed at a Group level and therefore there is no segmental analysis for this information.

The following is an analysis of the Group's revenue and results by reportable segment in 2021:

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.

The following is an analysis of the Group's revenue and results by reportable segment in 2020:

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:

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

5.     Cost of sales

6.     Finance costs

1.    Includes amounts due to unwinding of a discount on a long-term payable, contract liabilities (note 14) and amortisation of debt fees.

7.     Taxation

Income tax

The tax (credit)/expense recognised in the profit or loss statement for the Group is:

Corporation tax is calculated at the applicable tax rate for each jurisdiction based on the estimated taxable profit for the year. The Group's outstanding current tax liabilities of US$2.1 million (2020: US$2.5 million) principally relate to the corporation tax liabilities in Nigeria.

8.     Earnings per share

Basic earnings per share is calculated by dividing the profit for the year attributable to owners of the Company by the weighted average number of ordinary shares outstanding during the year.

Diluted earnings per share is calculated by dividing the profit for year attributable to owners of the Company by the weighted average number of ordinary shares outstanding during the year, plus the weighted average number of shares that would be issued on the conversion of dilutive potential ordinary shares into ordinary shares. In the prior year, there was a loss attributable to the owners of the Company, which meant the diluted weighted average number of shares would reduce the loss per share. Therefore, the basic weighted average number of shares were used to calculate the diluted loss per share.

The weighted average number of shares outstanding excludes treasury shares of 41,966,942 (2020: 42,624,837).

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 year ended 31 December 2021 (2020: 49,973,168). These options could potentially dilute basic earnings per share in the future.

9.     Property, plant and equipment

1.     Certain assets have been reclassified between the various asset classes to ensure they are reported in the most appropriate class.

10.  Trade and other receivables

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

For reporting purposes previously acquired assets were shown net of any related ECL. After acquisition, some of these assets have been fully recovered. Consequently, the associated ECL has been released, with a credit of US$12.6 million (2020: US$27.8 million) being recognised in the Statement of Comprehensive Income. The recoveries on the acquired credit impaired assets are reflective of management's improved credit control processes since acquisition. The remaining ECL of US$1.8 million (2020: US$14.4 million) that was netted within the fair value of the trade receivables at acquisition remains netted within the trade receivables balance and will only be released when the associated receivables have been fully realised.

The provision for expected credit loss that has been recognised in the year relates to an expected credit loss recognised on new invoices raised during the year as well as changes in expected credit loss rates because of non-payment of certain invoices. Set out below is the movement in the allowance for expected credit loss on trade and other receivables:

Included within Prepayments and other receivables as at 31 December 2021 are amounts for shares to be issued following the

signing of placing agreements with shareholders of the Company in 2021 amounting to US$65.8 million (2020: US$nil), deposits

amounting to US$21.5 million (2020: US$nil) for the Group's proposed acquisition of the Chad and Cameroon assets as well as

debt fees associated with unutilised debt amounting to US$7.5 million (2020: US$nil).

11.  Cash at bank

The Directors consider that the carrying amount of cash at bank approximates their fair value.

Cash and cash equivalents includes US$1.1 million (2020: US$1.2 million) of cash collateral on the Orabank revolving facility. The cash collateral was at a value of XOF626.4 million (2020: XOF621.7 million).

Amounts held for debt service represents Naira denominated cash balances which are held by the Group for 2020 and 2021 debt service which has been separately disclosed from Cash and cash equivalents. In total, approximately US$132.8 million (2020: US$78.9 million) will be paid for the 2020 and 2021 debt service from bank accounts designated as Amounts held for debt service, and from Cash and cash equivalents.

12.  Trade and other payables

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

Deferred consideration of US$7.5 million related to a loan note that was initially acquired via the acquisition of the Nigerian assets in November 2019, and was then acquired by the Company for future settlement. The amount was repaid in 2021.

13.  Borrowings

14.  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 with the customer.

Following the purchase of the Nigerian assets on 14 November 2019, the contract liabilities balance was adjusted to reflect the fair value at the acquisition date. Discount amounting to US$6.6 million (2020: US$5.0 million) has been accreted during the year as make-up gas has been delivered.

15. Cash flow reconciliations

A reconciliation of profit before tax to net cash generated from operating activities is as follows:

Interest paid during the year amounted to US$22.6 million (2020: US$19.8 million).

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

16. Events after the reporting period

The Directors are not aware of any events after the reporting date that require reporting.