Half-year Report

30 September 2024

Savannah Energy PLC

("Savannah" or "the Company")

2024 Half-Year Results

Savannah Energy PLC, the British independent energy company focused around the delivery of Projects that Matter, is pleased to announce its unaudited half-year results for the six months ended 30 June 2024.

Andrew Knott, CEO of Savannah Energy, said:

"I am pleased to report our results for the first six months of 2024, as well as the wider progress we are making developing our business. Key highlights in H1 included the delivery of US$233m of Total Income¹ and the announcement of our planned acquisition of SINOPEC's upstream assets in Nigeria. Alongside this, we are pleased to report strong progress in the development of our renewable energy business, particularly relating to our planned projects in Niger and Cameroon. Looking forward we expect to make a series of announcements around our entry into further renewable energy projects prior to year-end. We remain unequivocally an "AND" company, seeking to deliver strong performance both for the short AND long term across multiple fronts, and pursuing growth opportunities in both the hydrocarbon AND renewable energy sectors."

Highlights

·    Average gross daily production of 24.4 Kboepd, a 3% increase compared to FY2023 (23.6 Kboepd);

·      Up to 696 MW of renewable energy projects in motion at period-end, and targeting a portfolio of up to 1 GW+ of renewable energy projects in motion by end 2024 and up to 2 GW+ by end 2026;

·      Three contracts with customers agreed and extended in the year-to-date for a total of up to 105 MMscfpd;

·      Strong financial performance reported in the period:

o  Total Income¹ increased by 40% to US$233.4 million (H1 2023: US$167.6 million), comprising Total Revenues² of US$123.5 million and Other operating income of US$109.9 million;

o  Operating profit of US$152.3 million, 130% higher than H1 2023 (US$66.2 million); and

o  Adjusted EBITDA³ of US$91.6 million (H1 2023: US$108.2 million). This excludes Other operating income which when included shows a 47% increase year-on-year to US$201.5 million (H1 2023: US$137.1 million).

·      Agreements signed to consolidate our interest in Stubb Creek through the acquisition of 100% of Sinopec International Petroleum Exploration and Production Company Nigeria Limited ("SIPEC") for a total consideration of US$61.5 million (the "SIPEC Acquisition"). Completion of the SIPEC Acquisition is anticipated in Q4 2024, with plans in place to more than double oil production to approximately 4.7 Kbopd within 12 months of completion;

·      US$45 million compression project in Nigeria remains on-budget and on-track for completion during 2024, enabling us to maintain and grow our gas production levels over the long-term; and

·      Naira denominated debt facility signed with a consortium of five Nigerian banks. This is being progressively drawn down, with the resulting funds being converted to US$ to repay the existing Accugas US$ Facility.

2024 Guidance

·      Guidance is reiterated at:

o  Total Revenues² 'greater than US$245 million';

o  Operating expenses plus administrative expenses⁴ 'up to US$75 million'; and

o  Capital expenditure 'up to US$50 million'.

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 Limited (Nominated Adviser)                        +44 (0) 20 7409 3494

James Spinney

Ritchie Balmer

Rob Patrick

Cavendish Capital Markets Ltd (Joint Broker)                      +44 (0) 20 7220 0500

Derrick Lee

Tim Redfern

Panmure Liberum Limited (Joint Broker)                              +44 (0) 20 3100 2000

Scott Mathieson

Kieron Hodgson

James Sinclair-Ford

Camarco                                                                                  +44 (0) 20 3757 4983

Billy Clegg

Owen Roberts

Violet Wilson

This announcement contains inside information for the purposes of Article 7 of the Market Abuse Regulation (EU) 596/2014 as it forms part of UK domestic law by virtue of the European Union (Withdrawal) Act 2018, as amended.

About Savannah:  

Savannah Energy PLC is a British independent energy company focused around the delivery of Projects that Matter in Africa.

Operational Review

Nigeria

Average gross daily production was 24.4 Kboepd an increase of 3% compared to FY 2023 (23.6 Kboepd).

During 2024 YTD, three gas contracts have been agreed and extended for a total of up to 105 MMscfpd, including:

·      An extension of the agreement with First Independent Power Limited ("FIPL") was signed in January 2024 for an additional 12-month period, whereby Accugas is supplying FIPL's FIPL Afam, Eleme and Trans Amadi power stations with up to 65 MMscfpd of gas;

·      A new 24-month agreement was signed in July 2024 with Ibom Power Company Limited, owner of the Ibom power station, to supply up to 30 MMscfpd of gas. This follows the expiration of the previous 10-year agreement; and

·      An extension of the agreement with Central Horizon Gas Company Limited ("CHGC") was signed in August 2024 for an additional 12-month period, whereby Accugas is supplying CHGC with up to 10 MMscfpd of gas.

Progress continues on the US$45 million compression project at the Uquo Central Processing Facility ("CPF"). In H1 2024, we completed the detailed engineering work, the procurement of all long lead items and the site preparation, piling and civil works. All remaining site installation works, including structural works, electrical and instrumentation, piping and mechanical works, and the compressor package installation itself, are nearing completion and pre-commissioning activities are underway.

The compression project remains on budget and on track to be completed during 2024. The remaining steps to it becoming operational include the finalisation of site installation activities, mechanical works, and pre-commissioning and commissioning activities, together with the receipt of regulatory approval.

Post-period end in August 2024, we successfully completed an annual maintenance programme at the CPF, which involved a 10-day shutdown of the plant. This was also used as an opportunity to tie in the new compression system.

We are currently working on a proposed further development programme for the Uquo field which is expected to see additional wells drilled in 2025 and 2026. 

SIPEC Acquisition

In March 2024, we announced the proposed acquisition (via two separate transactions) of 100% of SIPEC for a total consideration of US$61.5 million.  SIPEC's principal asset is the 49% non-operated interest in Stubb Creek. A subsidiary of Savannah, Universal Energy Resources Limited, is the 51% owner and operator.  We currently expect completion to occur in Q4 2024. The transaction consideration is expected to be funded through a new senior debt facility arranged by Standard Bank of South Africa Limited and the existing cash resources of the Company.

As at year end 2023, SIPEC had an estimated 8.1 MMstb of 2P oil reserves and 227 Bscf of 2C Contingent gas resources. Savannah's Reserve and Resource base is expected to increase by approximately 46 MMboe following completion of the SIPEC Acquisition. SIPEC oil production is estimated at an average of 1.4 Kbopd for 2024. Following completion of the SIPEC Acquisition, we plan to implement a de-bottlenecking programme at the Stubb Creek processing facilities. It is anticipated that within 12 months of completion of the acquisition, this will lead to Stubb Creek gross production increasing by 135% to approximately 4.7 Kbopd. Importantly, the SIPEC Acquisition also secures significant additional feedstock gas available for sale to our Accugas subsidiary, underpinning Savannah's long-term ambition to be the gas supplier of choice in Nigeria.

Niger

Savannah remains committed to the 35 MMstb (Gross 2C Resources) R3 East oil development in South-East Niger. The Niger-Benin oil export pipeline, now fully operational, provides a clear route to international markets for crude oil produced from our R1234 contract area. We continue to progress our planned four well testing programme and are in the process of mobilising the required long lead item equipment into country.

Located in the Tahoua Region of southern Niger, Savannah's Parc Eolien de la Tarka wind farm project is anticipated to be the country's first wind farm and the largest in West Africa, with a total power generation capacity of up to 250 MW. We have signed agreements with two leading international Development Finance Institutions (the International Finance Corporation, the private sector arm of the World Bank, and the US International Development Finance Corporation, the U.S. government's development finance institution) to fund approximately two-thirds of the pre-construction development costs of the project.

The project made significant progress in H1 2024 with all key studies now either complete or at an advanced stage. We submitted our Environmental and Social Impact Assessment ("ESIA") scoping report to the Government of Niger and have been continuing to progress the ongoing ESIA field work additional studies required for the submission of the full ESIA report, expected in 2025. As part of the ESIA studies, Savannah is currently performing a land survey of the wind farm area. We have partnered with the Department of Geography of the Abdou Moumouni University of Niamey, where Savannah has enabled a cartography and software training programme for a cohort of its students, before deploying them under supervision on the Tarka site. This has provided local students with a material and exciting learning experience, while involving them in a transformational energy project for their country.

We hosted a site visit in August 2024 for Niger's Minister of Energy where we provided the Minister, Governor of Tahoua, local officials and community representatives with a presentation on the project and a tour of the wind farm site. During the Minister's visit we detailed our plans for the project and outlined its transformative potential for Niger and its people. The Minister confirmed that the Parc Eolien de la Tarka wind farm project is on the Ministry of Energy's list of priority projects.

Parc Eolien de la Tarka is expected to produce up to 800 GWh of electricity per year, representing approximately 22% of Niger's annual electricity demand, based on the country's projected energy demand in 2026. The construction phase is expected to create over 500 jobs, while the project has the potential to reduce the cost of electricity for Nigeriens and avoid an estimated 450,000 tonnes of CO₂ emissions annually.

We also continue to progress the two photovoltaic solar power plants expected to be located within 20 km of the cities of Maradi and Zinder. In H1 2024, we presented the preliminary commercial and technical proposals to the Government of Niger. A sanctioning decision on these projects is expected in 2025, with first power in 2027.

Cameroon

Substantial progress has been made on the Bini a Warak Hybrid Hydroelectric and Solar Project in Cameroon, following the approval of the optimisation and proposed redesign of the project given by the Minister of Water and Energy. The redesigned project, involving the construction of a hydroelectric dam on the Bini River in the northern Adamawa region of Cameroon, now incorporates photovoltaic solar, raising its installed power generation capacity from up to 75 MW to up to 95 MW. We continue to progress the project towards an anticipated project sanction in 2026, with first power targeted in the 2028 to 2029 window.

South Sudan

As separately announced today, Savannah remains in active discussions regarding a potential transaction in South Sudan. A further update is expected to be made in early November.

Chad Arbitration Update

As previously disclosed in Savannah's 2023 Annual Report, Savannah Chad Inc ("SCI"), has commenced arbitral proceedings against the Government of the Republic of Chad and its instrumentalities in response to the March 2023 nationalisation of SCI's rights in the Doba fields in Chad, and other breaches of SCI's rights. Our other wholly owned subsidiary, Savannah Midstream Investment Limited ("SMIL"), has commenced arbitral proceedings in relation to the nationalisation of its investment in Tchad Oil Transportation Company, the Chadian company which owns and operates the section of the Chad-Cameroon pipeline located in Chad. SMIL has also commenced arbitral and other legal proceedings for breaches of SMIL's rights in relation to Cameroon Oil Transportation Company ("COTCo"), the Cameroon company which owns and operates the section of the Chad-Cameroon pipeline located in Cameroon.

We expect the arbitral proceedings to be concluded in the second half of 2025. SCI and SMIL are claiming in excess of US$840 million for the nationalisation of their rights and assets in Chad, and SMIL has a claim valued at approximately US$380 million for breaches of its rights in relation to COTCo. Whilst the Government of the Republic of Chad has acknowledged SCI's and SMIL's right to compensation, no compensation has been paid or announced by the Government of the Republic of Chad to date.

Savannah remains ready and willing to discuss with the Government of the Republic of Chad an amicable solution to the disputes. However, in the absence of such discussions, the Group intends to vigorously pursue its rights in the arbitrations.

Sustainability

We published our Task Force on Climate-Related Financial Disclosures 2023 disclosure report and our maiden disclosure report in accordance with our chosen 13 United Nations Sustainable Development Goals in June 2024. We continue to progress our 2024 sustainability performance measurement and reporting in line with our sustainability strategy.

Financial Review

The table below provides an overview of our results for H1 2024 with a comparison for H1 2023: 

Financial highlights

 * The prior year comparative has been restated to conform with the presentation of "other operating income" in the 2023 annual report

Total Income¹ is 40% higher compared to previous period at US$233.4 million (H1 2023: US$167.6 million) - this measures the total amount of invoiced income for the period and captures both Total Revenues² plus Other operating income. We believe this is the most representative measure of the underlying income of the Group during the period. The substantial increase is due principally to Other operating income of US$109.9 million (H1 2023: US$28.9 million), which relates to the re-billing of foreign exchange losses incurred by Accugas as it converted historic Naira cash received into US dollars. Total Revenues² were slightly lower in the period due to phasing of delivery of gas under certain contracted GSAs and a different mix of customers supplied in the period.

Operating profit was significantly higher than H1 2023 at US$152.3 million (H1 2023: US$66.2 million), driven again by the higher level of re-billing of realised foreign exchange losses.

Adjusted EBITDA³ was US$91.6 million (H1 2023: US$108.2 million), which excludes Other operating income. When including this Other operating income, Adjusted EBITDA³ would be US$201.5 million (H1 2023: US$137.1 million).  Adjusted EBITDA³ margin, excluding Other operating income, is slightly lower at 74% (H1 2023: 78%), with this reduction largely due to an increase in Operating expenses plus administrative expenses⁴ of 10% compared to 2023. However, in H1 2023 certain costs, amounting to US$6.9 million were recharged to operations in Cameroon which did not re-occur in H1 2024. Excluding this recharge, underlying costs decreased on a comparable basis.

Revenue

Revenue during the period of US$114.8 million (H1 2023: US$123.7 million) was 7% lower than 2023 driven primarily by delivery of gas to a different mix of customers compared to prior year.

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 Revenues² of US$123.5 million (H1 2023: US$138.7 million) includes the volume of gas that customers are committed to pay for under the take-or-pay terms of certain gas sales agreements, which includes gas that has been delivered plus gas invoiced but yet to be delivered, plus oil and condensate revenues. The foreign exchange true-up invoices are also not reflected within Revenue or Total Revenues².

Savannah continues to benefit from over US$3.4 billion of contracted future gas revenues in Accugas with annual price escalation clauses tied to US consumer price inflation.

Cost of Sales, administrative and other operating expenses

Cost of sales amounted to US$34.7 million (H1 2023: US$35.5 million) which includes US$16.0 million (H1 2023: US$14.9 million) for facility operating and maintenance costs, US$2.6 million (H1 2023: US$2.7 million) royalty expenses and US$16.1 million (H1 2023: US$17.8 million) depletion and depreciation. Administrative and other operating expenses for the period were US$15.9 million (H1 2023: US$14.3 million).

On a unit of production basis, costs are stable at US$1.1/Mscfe (H1 2023: US$1.1/Mscfe). Costs have been well managed during the period and on an underlying basis are lower than in the prior period - during H1 2023 there was approximately US$6.9 million of central costs recharged to Cameroon operations which did not reoccur in H1 2024.  The Company has taken steps to reduce central costs which has kept costs stable on a unit of production basis.

Transaction and other related expenses of US$8.9 million (H1 2023: US$2.8 million) primarily relate to legal expenses with respect to the ongoing arbitration processes and the activity associated with the proposed acquisitions in Nigeria and South Sudan.

Finance Costs

The 24% decrease in Finance costs to US$39.3 million (H1 2023: US$51.8 million) is largely a result of release of legacy non-cash related finance costs of US$9.6 million and a US$4.0 million reduction in other finance costs from a lower unwind of the decommissioning provision discount. Interest costs were broadly unchanged at US$42.1 million (H1 2023: US$41.4 million). 

Foreign Exchange loss

Foreign exchange losses amounted to US$67.6 million (H1 2023: US$82.9 million). Of this, US$49.9 million (H1 2023: US$54.7 million) are unrealised losses, mainly due to movements in Naira monetary assets and liabilities, specifically Naira cash balances, which occurred as a result of further Naira devaluation from approximately NGN900:US$ at year-end 2023 to NGN1,470:US$ at 30 June 2024. 

Realised losses were lower than previous period at US$17.7 million (H1 2023: US$28.2 million). Certain foreign exchange losses are recoverable through the true up mechanism included in the GSA with our principal gas customer. These amounts, when invoiced, are reported under Other operating income - as noted above, in H1 2024 these amounted to US$109.9 million (H1 2023: US$28.9 million).

Cash flow

Operating cashflows before working capital adjustments remained stable at US$166.3 million (H1 2023: US$163.0 million).

Cash balances at 30 June 2024 were US$42.9 million (31 December 2023: US$106.9 million) with the reduction due principally to a US$60.2 million effect of devaluation on Naira denominated cash and cash equivalent balances. In addition, cash generated during the period was utilised towards debt repayments and finance costs amounting to a combined US$106.8 million (H1 2023: US$102.9 million) partially offset by drawings under the Accugas Naira transitional facility of US$39.0 million (H1 2023: Nil).

Capital and exploration expenditure for the period amounted to US$13.9 million (H1 2023: US$4.2 million), the majority of which related to the Uquo compression project.

Debt

Net debt at 30 June 2024 was US$533.1 million an increase of 13% from year-end position (31 December 2023: US$473.7 million). Gross debt was reduced at US$576.0 million (31 December 2023: US$580.7 million) and the increase seen in net debt was primarily a result of the devaluation of Naira denominated cash balances as discussed above. This has resulted in leverage⁵ increasing from 2.6x to 3.2x.

It is worth noting the treatment of the debt facility entered into to finance the acquisition of the Chad and Cameroon Assets. Despite the Nationalisation there remains an outstanding balance of US$126.7 million (31 December 2023: US$119.3 million) - of this amount only up to a maximum of US$37.0 million is recourse to the Company with the remainder being fully non-recourse. The only other debt within the Group which is resource to the Company totals approximately US$11.9 million, with all other borrowings on a non-recourse basis.

In H1 2024, a new NGN340 billion 4 year-term facility was signed by Accugas with a consortium of five Nigerian banks. This facility is being progressively drawn down with the resulting funds being converted to US$, which along with cash held is used to repay the existing Accugas US$ Facility. This process, when complete, will align Accugas' debt facility with the currency in which gas revenues are received. Year to date NGN 196 billion has been drawn and we continue to also advance plans for a potential long-dated domestic bond issuance to ultimately replace the transitional facility.

Going Concern

The results have been presented on a going concern basis. Details of the Group's assessment of going concern for the period can be found in note 2.

Footnotes

¹ Total Income is calculated as Total Revenues² plus Other operating income.

² 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.

³ 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, share based payments, 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.

⁴ Group operating expenses plus administrative expenses are defined as total cost of sales, administrative and other operating expenses, excluding gas purchases, royalties, depletion, depreciation and amortisation and transaction costs.

⁵ Leverage is defined as net debt/Adjusted EBITDA³. For the 6-month period ended 30 June 2024, the Leverage calculation is prepared on a rolling 12-month basis.

Condensed consolidated statement of comprehensive income

for the six months ended 30 June 2024

Condensed consolidated statement of financial position

as at 30 June 2024

Condensed consolidated statement of cash flows

for the six months ended 30 June 2024