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Can Small Savannah Petroleum Stomach The Swallow of Seven Energy?

By Jackson Otiti

Watching the presentation of the entire portfolio of Savannah Petroleum at the Africa Oil Week in Cape Town last October, it was hard to believe that this small, frail company was the one trying to acquire Seven Energy’s assets in Nigeria.
“We saw an opportunity to acquire producing oil and gas assets in Nigeria”, Steve Jenkins, the company’s non-executive chairman, told the audience, “and we are having a conversation”.

Savannah’s entire assets consist of two undeveloped permits in Niger Republic, where there is no evacuation infrastructure for exporting crude. Niger Republic’s entire production (20,000BOPD) is refined in the country’s only Refinery. Savannah’s largest shareholders are Fidelity International Limited, Andrew Knott, Standard Life Investments Limited and Capital Group Companies, Inc, not the most bespoke of investors, combining around 34% equity.

Savannah has talked up its MoU with the New Nigeria Development Company NNDC, a company owned by 19 Northern states of Nigeria, to collaborate on the Nigerian section of the Central African rift system (CARS). Keen observers of the Nigerian oil industry know that the NNDC’s so called partnership with the Nigerian state hydrocarbon company NNPC does not carry significant value.

On the contrary, Seven Energy owns over 200 kilometres of natural gas pipeline; the company constructed and owns the dominant equity in a 200MMscf/d gas processing plant, from which gas is supplied to two power plants and a cement company. It also has equity in two marginal fields: 40% in the Uquo gas field (90MMscf/d, 50BCPD), operated by Frontier Oil and 31.875% in Stubb Creek oil and gas field, both onshore South eastern Niger Delta basin. Seven Energy is a Strategic Alliance partner, entitled to equity crude, in three Seplat operated acreages in mid-western Niger Delta which produce, at peak, in excess of 70,000BOPD.

The company’s debt burden, exacerbated by the difficult Nigerian domestic gas market, has however been so overwhelming that Seven Energy has struggled to breathe.

So that, in spite of the gap between it and this very junior, AIM listed suitor, there is already an agreement.
Seven Energy reports that Savannah will acquire substantially all of its valuable assets, including, at its option, the Strategic Alliance Agreement, which are to be transferred to Savannah, its subsidiaries, or an entity to be nominated by Savannah, subject to completion of a financial restructuring of the Group in accordance with the Term Sheets (see Seven Energy website) which says, among others, that new capital will be provided by Savannah with funding available for, amongst other things: (1)operational working capital and the liquidity needs of the target Group; (2)cash consideration to be paid to selected creditors, including the SSN Noteholders and (3)costs associated with the Agreed Transaction.

The SSN Noteholders will receive their pro rata share of (i)$52.5Million in newly-issued equity in Savannah and (ii) an US$87.5Million cash payment, in consideration for the discharge of all $318.2MillionSSNs and release of claims against the entities being acquired by Savannah (together the “SSN Consideration”) (with further principles set out in the relevant Term Sheet); In addition to the SSN Consideration, the SSN Noteholders shall also be offered the right to subscribe, on a pro rata basis to their holdings of SSNs, for $25Million worth of newly-issued equity in Savannah for a total cash consideration of $20Million (the“Equity Issuance”).

The Equity Issuance shall be fully underwritten by VR Capital and each SSN Noteholder may specify an amount of shares up to its pro rata share it is willing to subscribe for as part of the Equity Issuance. SSN Note holders who participate in the Equity Issuance shall also be entitled to a share, on a pro rata basis to their participation in the Equity Issuance, in a $20Million New Accugas Holdco Facility (as defined in the relevant Term Sheet), for which (other than in certain circumstances) no cash consideration shall be payable by the SSN Noteholders (as described more particularly in the relevant Term Sheet and the Steps Plan).

Savannah may choose, in certain circumstances, to exchange entitlements in respect of the Savannah equity and the Equity Issuance into additional cash consideration (i.e. gross subscription price minus transaction costs resulting in a net cash value of 96c in the dollar) (as described more particularly in the relevant Term Sheet); The 10.50% Notes will be exchanged such that the 10.50% Noteholder will receive $15Million of new notes issued by Accugas Holdco (as defined in the Lock-Up Agreement) and $85Million of newly issued notes issued by Seven Uquo Gas Limited, in each case to be serviced and repaid in Nigerian Naira (converted from USD at the prevailing NAFEX rate) with extended maturities and lower debt service obligations than the 10.50% Notes (as described more particularly in the relevant Term Sheet and the Steps Plan); The Term Loan 1 Facility will be exchanged into a new $20Million facility issued by Accugas HoldCo (as defined in the Lock-Up Agreement); The Term Loan 2 Facility holder will receive (i) $4.4Million in newly-issued equity in Savannah and (ii) an $7.3Million cash payment, in consideration for the discharge of the Term Loan 2 Facility and release of claims against the entities acquired by Savannah (assuming the SAA is not reinstated (fuller details on Seven Energy website, with further principles set out in the relevant Term Sheet).

Nigerian Bid Round Unlikely Until 2018

By McJohn Opotobo, in Warri
The much anticipated 2nd licencing round for oil fields deemed marginal in Nigeria is unlikely to be inaugurated until 1st Quarter 2018.
There is a heightened sense of anxiety for the round, the first in 10 years, and dozens of companies are waiting for the announcement, but impeccable sources at the Ministry of Petroleum in the country’s capital Abuja dismiss the possibility of the anticipated inaugural statement being made any time in the next three months.
The Department of Petroleum Resources, the country’s regulatory agency, responded angrily to a newspaper report which cited some guidelines to the round last week including allusions that the authorities plan to set aside some of the oil acreages for discretionary awards to “individuals from the Niger Delta region”. The report, published Monday September 18, had indicated that such discretionary awards are “to ensure that people from the region own the oil assets, even if it means holding a separate bid round for Niger Delta-owned companies”.
Petroleum ministry sources who spoke with Africa Oil+Gas Report were not discomfited by the parts of the said newspaper report which indicated that interested investors will be required to pay $50,000 each for a Competent Persons Report (CPR), which, the newspaper wrote “will require bidders to provide details of their shareholding structure, names of their directors, track record in the oil and gas sector, audited financial statements, partnership and/or collaboration with indigenous firms, and financial resources to bid and pay for the oil acreages”. The ministry sources also did not contest the part that said that “after the CPR stage, investors will also pay $15,000 each as data mining fees to enable them gain access to the relevant data on the acreages that will be placed on offer”. They are, however vigorously upset about the claims that the guidelines include a plan to set aside some of the oil acreages for discretionary awards to “individuals from the Niger Delta region.” Fuller story here

Uganda’s Poor Outcome Highlights Africa’s Growing Bid Round Losses

By Toyin Akinosho

Whenever the Ugandan government awards a petroleum exploration licence and signs an oil production sharing agreement with Oranto Petroleum on the Ngassa area, as it expects to do in the coming week,it would be concluding its debut,31 month long, open acreage sale.

In the event, only two of the four companies that were granted the opportunity to take positions accepted to do so.

While Oranto of Nigeria and Armour Energy of Australia agreed to sign, Waltersmith and Niger Delta Exploration, both Nigerian companies, chose to walk out.

Incidentally, these two unsatisfied companies have far more hands-on experience in oilfield activity than the two who signed up (ref-Africa Oil+Gas Report, Vol 17, No 4, 2016).

And yet, Uganda’s is only the latest on the list of cases of poor outcomes of lease sales on the continent.
Angola, Nigeria, even Equatorial Guinea have suffered losses, both in relative and absolute terms, after drawn out bid round proceedings. Read the full article in the Vol 18, No 7 (September) 2017 issue of the Africa Oil+Gas Report.

African Petroleum Clutches At a Straw in the Gambia

The West African state believes that the minnow was trying to sell hydrocarbon property that did not belong to it

Oslo listed junior, African Petroleum, says it is preparing toformally commence arbitration against Gambian authorities, as it has not received any feedback, formal or otherwise, from the Government, “despite its best efforts to engage in dialogue with the relevant authorities”.

African Petroleum has for the past three and half years been at odds with the Gambian Government, who revoked the two licences in January 2014 and then reinstated the licences after the company went to arbitration.

The Government’s concern has always been that it doesn’t see African Petroleum doing much with the acreages, located in what has now become one of the world’s hottest Exploration spots; the Northwest African transform margin.

Since late 2016, African Petroleum has been in negotiation with an unnamed third party regarding the possible acquisition of interests by said third party in those two Licences: A1 and A4
But the acquisition was conditional upon extension of the exploration periods of both licences by at least 12 months. This fact, as far as the Gambian government was concerned, meant that African Petroleum was trying to sell hydrocarbon property that did not belong to it.

ByJuly 2017, the proposed deal had unravelled.The putative buyer was no longer keen. African Petroleum had failed in the bid to sell a 70% stake in A1 and A4 offshore blocks in Gambia, along with another licence in neighbouring Senegal.

African Petroleum is vexed that the Government’s non response to its call for renewal fostered the climate of uncertainty that soured the deal. The government simply didn’t respond to the company’s proposal to enter into the next phase of the licences and transfer the outstanding well commitment into the new phase.

“We now believe that in order to protect our historical investment, we have no choice but to take this case to arbitration.We remain open to progressive dialogue and sensible resolutions with the Gambian authorities but must proactively seek to protect our rights through this process”, the company said.

Chariot Walks Out Of Namibian Southern Blocks

London listed Chariot Oil & Gas Limited has elected not to enter into the First Renewal Exploration Period of the exploration licences covering each of the Namibian Blocks 2714A and 2714B.

But in the event that any company completes exploration drillingin any of these blocks, Chariot has secured an assurance from the Namibian government that it could return to them and acquire f10% equity for no financial consideration.

Chariot has been one of those companies extremely keen on Namibian prospectivity. It currently holds85% equity with the state hydrocarbon firm NAMCO Rholding 10% and Quiver, a little known minnow holding 5%. The company says it has notified these two partners about its exit and the process of withdrawal is now underway.

Chariot was in the Joint Venture that drilled Kabeljou-1 in Block 2714A in 2012, and plugged and abandoned the well as a duster at a total depth of 3,150metres True Vertical Depth subsea (TVDss) in September 2012. At the time of that drilling, Chariot held 25%, with Petrobras (Operator) 30% and BP 45%. The other companies have since left.

Chariot acquired approximately 2,128 kilometres of 2D seismic data, prefunded the ION Namibia SPAN long offset 2D seismic data and reprocessed the historic 3D seismic data over the 2714A and 2714B. Analysis of the integration of this seismic data with regional well data identified gas prospects AO1 and AO2 in the Aptianclasticonlap play.

“The work undertaken by Chariot to define this prospectivity resulted in industry interest; however the technical risk associated with these prospects deterred potential partners from committing to a programme of exploration drilling in the current environment”, the company explains. “The decision not to enter into the next period was made in line with the Company’s risk management strategy, its focus on portfolio management and capital discipline”.

Australian Junior Gets Approval For Increased Stake in Guinea Bissau

Swedish operator and its partner receive licence extension in this promising corner of the North West African margin

Australian minnow, FAR Limited,has been granted approval by Guinea Bissau authorities to increase its stake from 15 to 21.42% in Sinapa and Esperança oil blocks.

The approval reflects the fact that state-owned Petróleos de Guiné (Petroguin) has given up its shareholding until a discovery with commercial value occurs.

Petroguin will assume a shareholding of 10%if a discovery is made. FAR Limited and Svenska Petroleum Exploration AB, the operator, will then have stakes of 19.28% and 70.71% respectively.

The partnership obtained from the government a more favourable agreement regarding the investment needed for oil prospecting in deepwater, including the reduction of royalties to be paid to the Guinea-Bissau state if production begins, FAR notes in its statement. The partnership’s licences to the blocks have been extended by three years and will now expire on 25 November 2020, with obligation to drill at least one prospecting well and spend a minimum of $3Million on each licence, FAR says.

The Guinea Bissau government places a lot of hope on Svenska, the Swedish explorer, to make a significant discovery in in Sinapa and Esperança. The country, afterall, is located in the North West African margin, which has recently proven vast commercial hydrocarbons in Senegal and Mauritania.

TOTAL Takes Hold of East African E&P

Confirms our prognosis that the Majors are reclaiming the African E&P Frontier

With its $7.45Billion purchase of Maersk Oil, TOTAL has taken over the majority of the 2 Billion barrels sized undeveloped discoveries in East Africa.
Maersk holds 50% of the undeveloped discoveries in Kenya, which have been estimated at 750Million barrels. This sale comes less than eight months after TOTAL purchased 22% of the assets about to be developed in Uganda, fetching it 55% in the upstream part of the entire Uganda basin development project.

This means that TOTAL will be funding the majority share in expenses on the two pipelines that will export crude from Uganda (Hoima –Tanga) and Kenya (Lockhichar to Lamu).

The deal with Maersk is expected to close in 1Q 2018, subject to the consent of the Kenyan authorties. Maersk Oil’s parent, AP Moller-Maersk will receive $4.95bn in the form of Total shares, representing a 3.75% stake in the French major, and Total will also assume $2.5Billion of Maersk Oil’s debt.

TOTAL’s purchase of Maersk Oil, follows Shell’s 28 month old takeover of BG and confirms Africa Oil+Gas Report’s analysis of the retreat of independents from Africa’s E&P frontier, where the majors are extending their footprints.

Egbolom Is the Biggest Field On Offer In the Impending Marginal Field Round

Shell operated Egbolom field, in Oil Mining Lease (OML) 23, is the asset to have in Nigeria’s impending Marginal Field round.

Ibe Kachikwu, the Minister of state for Petroleum Resources, has proposed an asset sale this year and the country’s regulatory agency, the Department of Petroleum Resources, is working frantically to deliver on the call.

Of all the 40+ fields likely to be on offer, Egbolom, an onshore (Swamp) asset, located in the Central Niger Delta, has the highest estimated Ultimate Recoverable (2P) Reserves of 85Million barrels, a volume that is over 30% higher than the second largest field, which is located in the prolific south east shallow water Niger Delta.

The smallest field in the play is Chevron operated Obira field, located in OML 89.

Egbolom was discovered in 1982, and has lain fallow ever since. The Central Niger Delta swamp is the site of one of the most militant, oil theft and crude oil flow disruption activity in the entire Niger Delta basin.
Full marginal field reserves map can be accessed here.

DPR Unaware of Planned Handover of OML 11

The Department of Petroleum Resources, Nigeria’s regulatory agency, is unaware of any plan by Shell to hand over the Oil Mining Lease (OML) 11, the acreage which contains the Ogoni community, to a new divestee on Tuesday July 25, 2017.

There are whispers everywhere that the AngloDutch major has picked one of several companies vying to acquire the 45% stake belonging to Shell, TOTAL and ENI on this onshore eastern Niger Delta asset, which contains the troubled Ogoni area.

→   Read the rest of this entry

I Will Give More To Companies Like Platform Petroleum

By Emmanuel Ibe Kachikwu

“If you did this much, I have enough confidence in you to give you more responsibility”

It is very unique when a single individual along with his team puts up something as edifying as this. I’ve known Austin as the Managing Director of Seplat Petroleum then I saw him with Platform Petroleum, I was a bit confused. Now he goes by the tag name Advisor, a usual synonym for disguising heavy shareholders in oil parlance. I’m glad he’s giving back in a very big way and I urge everybody who’s an alumnus in every university in the country to follow suit.

It is significant in terms of what message he’s sending which is that Nigerian graduands study with the best tools in the best environment and produce the best results. “I congratulate Platform Petroleum and if you did this much, I have enough confidence in you to give you more responsibility and I’m going to work towards that”. I’m impressed with you and what you did and I’m impressed by the fact that you were one of the first to take advantage of the Marginal Field Allocation. I’m going to do what I can to ensure there’re more marginal field allocations to people like you.

In Houston I announced the Project 100, the whole idea is to identify 100 Nigerians who have the impetus, resources and skill set to be able take oil industry forward and do the very quick things. We’re beginning to search for those Nigerians and clearly you’re one of the people we’re looking for. Nigerians have shown they can do it. I’m looking forward to be able to announce soon what terminal date we’ll have for the production of FPSOs in Nigeria, such big type projects.

This morning at the Federal Executive Council, under the guidance of the Acting President, we approved the new Gas Policy for 2017 which is now official and we’re in the thresholds of approving a new Petroleum Policy and working very hard with National Assembly to finalize the PIB. The terrain today is now different, oil is no longer the commodity that we can take for granted in terms of pricing. Pricing has tumbled down to about a quarter of what it used to be, production has pummelled and no matter how much we try to fight as OPEC, we continue to suffer the pangs of price uncertainties and continual decline. Every country worth its salt is looking inward, in terms of investors.

It’s amazing how much Nigerian investors exist when you see the amount of fields bought up from the majors by Nigerians, you’ll realize we actually neglect our capacity. One of the things I’m committed to do under the Project 100 Theory is to create the right incentives for Nigerians to invest in their own country. Different from those investments, there’re certain very bold steps we must take.

Refining for example we’ve been having all these debates, but the reality is if we can’t refine our petroleum products in this country, it’s a major shame. And whatever it takes, I seek all your support in all of these, we must achieve those 2019 goal post. In terms of financing, we have changed the dynamics of the funding mechanism that allows the majors to move forward. We need to transmit some of those advantages to domestic producers and I’m hoping that in the next one month, the process will be completed and we’ll give you some advantages that we give the majors.

There’re lots of things to be done, we’re moving from oil to gas. Gas is a new equation but more importantly, we’re moving to aphilosophical base of not just producing oil and shipping out crude rather having to process as much of that into this country. Hopefully soon, we’ll be able to provide to our Nigerian populace, our work is cut out for us, there’s a huge amount of work out there. When we see this sort of effort that Austin has done together with the state, it is time to knock doors, it is time to say you must take coverage of this and begin to move forward it encourages all of us to move forward.

Speech delivered by Mr. Kachikwu, Nigeria’s Minister of State for Petroleum Resources on the occasion of his opening of a $0.6MillionGeoscience Teaching and Research Complex at the University of Nigeria, Nsukka.

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