Savannah Petroleum updates on Seven Energy transaction, Niger operations

Acquisition of controlling interest in Accugas, sale of 25% of SUGL for US$70m, agreement with Accugas Lenders and other creditors

Highlights

  • Acquisition of additional 55% interest in Accugas, resulting in the Enlarged Group owning a 75% interest and further consolidating control over the gas value chain in South East Nigeria;
  • Signature of MOU with a vehicle managed by African Infrastructure Investment Managers Limited for the sale of a 25% interest in each of Seven Uquo Gas Limited (‘SUGL’) and Accugas for consideration of US$70m, broadening the existing partnership with AIIM and providing significant additional liquidity to the Enlarged Group;
  • Enhancement of acquired assets’ NPV10 by 35%, and of the associated forecast cash flows by an average of 58% over the 2019 – 2022 period, as reviewed by Savannah’s Competent Person;
  • Term sheets agreed with lenders to Accugas and the holder of the 10.50% Notes in relation to the revised Transaction structure;
  • Proposed acquisition of the Creek Town to Calabar pipeline, expected to grant control of gas delivery from Uquo until transfer point at the Calabar power station;
  • Addition of significant new customer, the Alaoji power station, to Accugas; and
  • Implementation Agreement incorporating changes announced in this RNS expected to be signed by the end of January 2019, with the wider Transaction expected to complete during Q1 2019.

Following (i) this morning’s announcement; (ii) the Company’s RNS of 11 October 2018 in relation to the Nigerian Department of Petroleum Resources’ completion of due diligence (and satisfaction with) the Transaction; and (iii), the Company’s RNS of 20 September 2018 in relation to the Frontier MOU and the UERL Minorities Buy-Out, all commercial terms in relation to Transaction conditions precedent have now been agreed. Remaining workstreams are now mainly legal and procedural in nature.

A selection of slides summarising this morning’s announcement, along with a voiceover from Savannah Petroleum’s CEO, Andrew Knott, is available for review on the Company’s website at https://www.savannah-petroleum.com/en/videos.

Andrew Knott, CEO of Savannah Petroleum, said:

‘We are delighted to announce the amendments to our Seven Energy Transaction this morning. In aggregate, they grant control of Accugas to Savannah, are demonstrably NPV and cashflow accretive, release significant cash to the Company and significantly increase the upside exposure of our South East Nigerian gas business to rising gas volumes and prices.

The planned addition of the Alaoji power station as a new customer to the Accugas business (alongside other new customer discussions which are ongoing) diversifies our near-term customer mix while also serving as the start of the roadmap we are seeking to establish to enable a third train to be built at the Accugas Central Processing Facility.

I would like to take the time to thank the Seven Energy creditor group, AIIM, and our shareholders for their continued support which has enabled us to progress this transformational acquisition. I would also like to thank both the Savannah and Seven Energy teams for their tireless work this year. We look forward with excitement to 2019 as we seek to consolidate and grow the South East Nigerian gas business and further develop and explore our high-value acreage in Niger.’

Sola Lawson, Investment Director West Africa, African Infrastructure Investment Managers, said:

‘AIIM is pleased to partner with Savannah in this new Transaction structure which aligns our two companies’ interests in the acquisition. We see great potential in the growth of the domestic natural gas market in Nigeria, and believe this Transaction is a unique and exciting opportunity.’

Source: Savannah Petroleum

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