2020 Half Year Results

 

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 Revenues² 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 Costs3 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 Costs³ 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:

 

Savannah Energy	+44 (0) 20 3817 9844
Andrew Knott, CEO
Isatou Semega-Janneh, CFO
Sally Marshak, Communications Consultant
Strand Hanson (Nominated Adviser)	+44 (0) 20 7409 3494
James Spinney
Ritchie Balmer
Rory Murphy
Mirabaud (Corporate Broker)	+44 (0) 20 7878 3362
Peter Krens
Ed Haig-Thomas
Celicourt Communications	+44 (0) 20 8434 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 (MMscfpd)	Uquo Condensate (bopd)	Stubb Creek Oil (Kbopd)	Total (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

	Six months ended 30 June 2020 US$ million	Pro-forma Six months ended 30 June 20191 US$ million	Six months ended 30 June 2019 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)
EBITDA2	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 EBITDA 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 Oil and condensate Crude oil processing	21,476 Mscf 163,000 bbl -	US$3.9/Mscf US$48.3/bbl -	83.6  7.9 0.2
Total	3.7 MMboe	US$24.5/boe 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 Oil and condensate Crude oil processing	18,100 Mscf 112,000bbl -	US$3.6/Mscf US$54.0/bbl -	64.3 6.0 -
Total	3.1 MMboe	US$22.5/boe 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.

	Six months ended 30 June 2020 US$ million	Pro-forma Six months ended 30 June 2019 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 MONTHS ENDED 30 JUNE 2020

 

 

		Six months ended 30 June 2020 US$'000	Six months ended 30 June 2019 US$'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 equity		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 liabilities
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 equity and liabilities		1,164,403	1,145,013

 

 

 

 

 

 

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE SIX MONTHS ENDED 30 JUNE 2020
		Six months ended 30 June	Six months ended 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 accounts		193	-
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