Savannah Energy reports FY20 as ‘a milestone year’
(SAVE ) said FY20 has highlighted “the resilience of the business” after reporting that it has significantly exceeded all of its original financial guidance for the full year and recued FY21-23 capex profile.
FY20 Trading Update
The African-focused British independent energy group said FY20 was a “milestone year” as Savannah reported success operating its recently acquired high margin assets in Nigeria.
“In 2020 we grew revenues, reduced our underlying cost base and continued to provide gas contributing to over 10% of Nigeria's daily national average power generation, highlighting the resilience of the business,” stated Andrew Knott, CEO of Savannah Energy of the results.
The company reported a 23% rise in revenues for FY20 of $235.9m (FY19: $192.1m) which is ahead of its previously issued FY20 guidance of 'Total Revenues of greater than $200m'.
Average gross daily production was 19.5 Kboepd, a 13.5% rise from FY19 (17.2 Kboepd), and at the mid-point of the gross production guidance range for FY20 of 19-20 Kboepd.
Total cash collections from the Nigerian assets, which Savannah acquired back in November 2019, rose 11% year-on-year to $187.4m (FY19 pro-forma cash collections of US$168.8m).
Capital expenditure guidance is modified to less than $13m from $8.0-10.0m, primarily due to the acceleration of previously assumed 2021 expenditure into 2020 ‘for commercial reasons.’
Meanwhile, the Company has reiterated guidance on remaining items to report for FY 2020, including a Depreciation, Depletion and Amortisation guidance of US$35.0m - US$37.0m.
Cash balance soared by 121% to $106.0m compared to FY19’s year-end group cash balance of $48.1m, while net debt came to $408.7m, slashing 16% from FY19’s net debt of $484m.
FY21-23 Outlook
“Looking forward to 2021, we are providing guidance for the year for continued strong revenue generation, investments in key drilling and compression projects and an increased level of maintenance project activity versus 2020,” Knott informed investors this morning.
Savannah expects to reduce its Nigerian capital expenditures by 15% over the 2020-23 period from around $118m to $100m, resulting in a reduction in the overall indicative Group capital expenditure plans of around 13% from $137m to $119m over the same period.
The principal work programme changes will see only one gas well drilled in the 2020-23 period (as opposed to four assumed previously) on the Uquo field and the acceleration of the Uquo field compression project previously assumed to start in 2026/27 to 2021/22.
The group said the Uquo reservoir continues to perform ‘in line with expectations’ and that the proposed change in the capital expenditure profile is not expected to impact Uquo field production or expected ultimate reserve recovery. ‘The amendments, therefore, enhance the project economics of the ongoing Uquo field development,’ the company told investors.
Savannah’s plans for delivering the R3 East development in Niger continue to progress as it intends to commence the installation of an Early Production Scheme by the end of FY21.
Knott added, “I am excited around the potential for our business to grow further over the coming years, especially given the opportunity-rich West African environment in which we operate and look forward to keeping our stakeholders up to date on the progress we make."
Today’s trading update reflects on the first full year of operation of its high margin assets acquired in Nigeria, with increased revenue and reduced costs while supplying over 10% of Nigeria’s daily national average power generation. The reduced capex plans for FY21-23 are an intelligent strategic move leaving significant upside potential for the shares should the Company sign new gas sale agreements or recognise any contribution from the R3 East development project in Niger. Shares in Savannah Energy have more than doubled in value since the beginning of November 2020 to open higher this morning at 15.30p following the announcement.
Reasons to Follow SAVE
Savannah Energy is a British independent oil and gas company focused on oil and gas activities in Niger and Nigeria with a focus on delivering material long-term returns.
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, it has interests in two large PSC areas located in the highly oil prolific Agadem Rift Basin of South East Niger, where the group 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.
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