2021 Half Year Results and Outlook for the Year

Source Press Release
Company Savannah Energy PlcExxonMobil 
Tags Decommissioning, Production/Development, Exploration, Upstream Activities, Strategy - Upstream, Capital Spending, Guidance, Strategy - Corporate, Financial & Operating Data
Date September 30, 2021

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 2021 and outlook for the FY 2021.

Andrew Knott, CEO of Savannah Energy, said: 

"These results show just how far we have come this year, with US$116.5m of Total Revenues1, US$91.5m of Adjusted EBITDA2 and strong free cash flow. Our operational performance has been excellent which is important to all our stakeholders as we continue to play a vital role in driving economic growth and living standards in our countries of operation. This growth is set to continue as we progress discussions with ExxonMobil with respect to the proposed acquisition of its entire upstream and midstream assets in Chad and Cameroon and begin an anticipated new investment programme on our Niger assets, over which we are pleased to have agreed terms for an extension of up to 10 years.

I'd like to thank all of our shareholders and other stakeholders for their continued support as we look to capitalise on the opportunities available to us."

H1 2021 Financial Highlights

·      Total Revenues1 of US$116.5m (up 2% on H1 2020 Total Revenues of US$114.6m), in line with 2021 guidance of over US$205m for the full year;

·      Average realised gas price of US$4.2/Mscf (H1 2020: US$3.9/Mscf) and an average realised liquids price of US$63.5/bbl (H1 2020: US$48.3/bbl);

·      Cash collections from the Nigerian Assets in H1 2021 were US$101.6m compared to US$82.1m in H1 2020;

·      Adjusted EBITDA2 of US$91.5m (H1 2020: US$89.2m);

·      Adjusted EBITDA margin broadly unchanged at 79% (H1 2020: 78%);

·      Operating expenses plus administrative expenses3 of US$22.5m (H1 2020: US$22.7m) being US$1.0/Mscfe (H1 2020: US$1.1/Mscfe);

·      Profit before tax of US$7.7m (H1 2020: US$1.2m);

·      Drilling of a gas well on the Uquo field commenced in September 2021 and the non-associated gas compression project at the Accugas gas processing plant is progressing, full year capital expenditure guidance of up to US$65m maintained;

·      Net debt position as at 30 June 2021 of US$369.4m (Year-end 2020: US$408.7m) with Adjusted Leverage4 of 2.3x (Year-end 2020: 2.5x); and

·      Cash at bank5 of US$135.7m as at 30 June 2021 (Year-end 2020: US$106.0m)

H1 2021 Operational Highlights

·      Average gross daily production, of which 88.6% was gas, increased 6% during H1 2021 to 22.6 Kboepd (H1 2020: 21.3 Kboepd). This includes a 6% increase in production from the Uquo gas field compared to the same period last year, from 113.5 MMscfpd (18.9 Kboepd) to 120.2 MMscfpd (20.0 Kboepd);

·      On 5 February 2021 Accugas signed a new gas sales agreement ("GSA") with Mulak Energy Limited ("Mulak") representing Savannah's entry into Nigeria's high-growth compressed natural gas ("CNG") market;

·      On 2 June 2021, Savannah announced that the Company is in exclusive discussions with ExxonMobil Corporation with respect to the proposed acquisition of its entire upstream and midstream asset portfolio in Chad and Cameroon; and

·      On 7 June 2021, Savannah published its re-focused sustainability strategy as part of the 2020 Annual Report focusing on four key strategic pillars with the strategy anchored around the 13 most relevant UN Sustainable Development Goals where we believe Savannah can have the biggest economic, environmental, social and governance impact

Post Period Update

·      Drilling of a new gas production well in the Uquo field, Uquo 11, commenced on 21 September 2021;

·      On 29 September 2021, the Niger Ministry of Petroleum amalgamated Savannah's four licence areas (covered by the previous R1/R2 PSC and the R3/R4 PSC) into a single PSC (R1/R2/R3/R4), valid for up to a further 10 years. This lays the foundation for an anticipated new investment programme in our R3 East development in 2022;

·      On 12 August 2021 it was announced that, as a result of the Company's growth in recent years and the planned significant further expansion, the decision was taken to restructure the finance function of the Company.  As a result, Ms Isatou Semega-Janneh left, and ceased to be a Director of, the Company; and

·      On 16 August 2021 His Excellency President Muhammadu Buhari signed the Petroleum Industry Act 2021 (the "PIA") into law indicating the government of Nigeria's commitment to enhancing the governance, administrative and fiscal regimes of the domestic industry.  It is anticipated that the PIA will have a positive fiscal impact on Savannah

FY 2021 Guidance Reiterated

We reiterate our FY 2021 guidance as follows:

·      Total Revenues1 greater than US$205.0m from upstream and midstream activities associated with the Company's three active Nigerian gas sales agreements and liquids sales from the Company's Stubb Creek and Uquo fields. Any revenues received from new additional gas sales agreements would, therefore, be incremental to this;

·      Operating expenses plus administrative expenses3 of US$55.0m to US$65.0m;

·      Depreciation, Depletion and Amortisation of US$19m fixed for infrastructure assets plus US$2.6/boe for oil and gas assets; and

·    Capital expenditure of up to US$65.0m

H1 2021 Operational Review

Nigeria

Average gross daily production from the Nigerian Assets increased 6% in H1 2021 to an average of 22.6 Kboepd versus 21.3 Kboepd for H1 2020. This includes a 6% increase in production from the Uquo gas field compared to the same period last year, from 113.5 MMscfpd (18.9 Kboepd) to 120.2 MMscfpd (20.0 Kboepd). Uquo gas field production of 20.0 Kboepd represented 88% of total 22.6 Kboepd production in H1 2021.

Average Gross Daily Production

  Uquo Gas (MMscfpd)  Uquo Condensate (bopd)  Stubb Creek Oil (Kbopd)  Total (Kboepd) 
1 January-30 June 2021  120.2  110.4  2.5  22.6 
% of total production  88%  1%  11%  100% 
1 January-30 June 2020  113.5  142.9  2.3  21.3 
% of total production  88%  1%  11%  100% 
% Increase/(Decrease)  6%  (23)%  9%  6% 

Gas production levels are driven by customer nominations.  During H1 2021 the Company's subsidiary, Accugas, supplied gas to the Calabar power station and the Ibom power station to generate an average of 340MW of electricity per day (H1 2020: 355 MW per day), representing 11% of the total grid-based thermal power generated in Nigeria during the period.  The peak generation from Accugas supplied gas was 497MW (H1 2020: 476MW), highlighting Accugas' continuing position as a principal gas-to-power supplier in Nigeria.

In February 2021, Savannah announced that Accugas had entered into a new GSA with Mulak. The GSA is initially for a seven-year term to supply gas produced by Savannah's majority-owned Uquo field for an initial two-year period on an interruptible basis (the "Interruptible Gas Delivery Period") starting in 2022 and the subsequent five years on a firm contract basis (the "Firm Delivery Period"). During the Interruptible Gas Delivery Period, Mulak is able to nominate a maximum daily quantity of up to 2.5 MMscfpd. Volumes in the Firm Delivery Period will be agreed by the parties before the end of the Interruptible Gas Delivery Period. Sales under the GSA benefit from a bank guarantee arrangement from an investment grade credit rated international bank.

The Company commenced drilling of a new gas production well, Uquo 11, in the Uquo field on 21 September 2021. The Company also started ordering compression equipment for the Accugas gas processing plant during the first half of 2021. Factory Acceptance Tests for the two compressor packages have been successfully carried out, the Front End Engineering Design is in progress and we expect the Long Lead Items order to be delivered before the year end. Both the drilling and compression projects will ensure our continued ability to deliver gas at current and anticipated future increased contracted volumes to satisfy customer demand.

Niger

During H1 2021, the Company agreed in principle with the Ministry of Petroleum to amalgamate the four licence areas (covered by the R1/R2 PSC and the R3/R4 PSC) into a single PSC rather than the previous proposal of two PSCs. Post-period reporting end on 29 September 2021, the Ministry of Petroleum amalgamated the four licence areas into a single PSC (R1/R2/R3/R4) valid for up to a further 10 years. It will enter into force following ratification in early October 2021 by the Council of Ministers and the payment of the associated fee within 30 business days. This lays the foundation for an anticipated new investment programme in our R3 East development in 2022.

Proposed Acquisition in Chad and Cameroon 

Savannah announced in June 2021 that the Company is in advanced exclusive discussions with ExxonMobil Corporation with respect to the proposed acquisition of its entire upstream and midstream asset portfolio in Chad and Cameroon (the "Proposed Acquisition"). The Proposed Acquisition would include a 40% operated interest in the Doba Oil Project, and an effective c.40% interest in the Chad-Cameroon oil transportation pipeline. For reference, in 2020 the Doba Oil Project produced an average gross 33.7 Kbopd and the Chad-Cameroon pipeline transported a gross 129.2 Kbopd.

If completed on the currently proposed terms, the Proposed Acquisition would be classified as a reverse takeover transaction in accordance with the AIM Rule 14, and accordingly, the Company's ordinary shares were suspended from trading on AIM and will remain so pending publication of an AIM admission document setting out, inter alia, details of the Proposed Acquisition, or confirmation is provided that discussions around the Proposed Acquisition have been terminated. There can be no assurance that agreement between the parties will be reached on mutually acceptable terms and that the Proposed Acquisition will complete. The Company will update shareholders as to progress made in relation to the Proposed Acquisition as appropriate.

Update on Savannah's Sustainability Strategy

In June 2021 Savannah published our re-focused sustainability strategy based on four key strategic pillars: (1) promoting socio-economic prosperity; (2) ensuring safe and secure operations; (3) supporting and developing our people; and (4) respecting the environment. Our four strategic pillars are aligned with 13 key United Nations Sustainable Development Goals ("UN SDGs"), where we believe Savannah can have the biggest economic, environmental, social and governance impact to achieve a better and more sustainable future for all. While anchoring our strategy around these 13 UN SDGs, we have chosen to integrate six additional sustainability reporting standards into our new performance and reporting framework. These have been selected on the basis of those most relevant for our sector and of most importance to our stakeholders and include those for: the Global Reporting Index ("GRI"); the eight International Finance Corporation Performance Standards ("IFC PS"); the International Association of Oil and Gas Producers ("IOGP"); the International Petroleum Industry Environmental Conservation Association ("IPIECA"); the Sustainability Accounting Standards Board ("SASB"); and the Task Force on Climate-related Financial Disclosures ("TCFD"). Progress continues to be made in rolling out our new sustainability performance and reporting framework across the Group with a view to reporting on this from 2022 onwards.

Petroleum Industry Act ("PIA")

We are pleased to note that on 16 August 2021 His Excellency President Muhammadu Buhari signed the Petroleum Industry Act 2021 into law. The PIA is an overhaul of the administrative, regulatory and fiscal regime of the Nigerian oil and gas industry in order to create a framework to attract additional investment into the country, which is Africa's largest producer and with the continents largest oil and gas reserves.

Overall, we anticipate that the PIA will have a positive fiscal impact on Savannah, with lower gas royalties offsetting higher oil and condensate royalties and additional levies.  Furthermore, a reduction in tax rates for upstream oil operations as a result of the replacement of Petroleum Profits Tax with a combination of Corporate Income Tax and a new Hydrocarbon Tax is expected to reduce cash tax costs over the life of the assets, although the lower tax rates will reduce the carrying value of deferred tax assets on upstream oil operations. 

H1 2021 Financial Review

The Group reports Total Revenues1 of US$116.5 million for the six months ended 30 June 2021, up 2% on H1 2020 and an Adjusted EBITDA2 of US$91.5 million up 3% on H1 2020.  This performance continues to reflect the strong cash generative quality of our gas producing assets in Nigeria.

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 of US$99.4 million shown in the Condensed Consolidated Statement of Comprehensive Income includes only the gas, oil and condensate that has been delivered.  The Total Revenues1 of US$116.5 million includes the volume of gas that customers are committed to pay for under the take-or-pay terms of the gas sales agreements, which includes gas that has been delivered plus gas invoiced but yet to be delivered, plus oil and condensate revenues.

Summary of result for H1 2021

The table below provides an overview of our results for H1 2021 with a comparison for H1 2020.

Financial highlights

  Six months ended 30 June 2021US$ million  Six months ended 30 June 2020US$ million 
Total Revenues1  116.5  114.6 
Revenue  99.4  91.7 
Operating expenses plus administrative expenses3  22.5  22.7 
Operating profit  54.0  47.9 
Profit before tax  7.7  1.2 
(Loss)/profit after tax  (1.4)  1.8 
Adjusted EBITDA2  91.5  89.2 
Cash collections  101.6  82.1 

The Group's operating profit for the six months ended 30 June 2021 was US$54.0 million (H1 2020: US$47.9 million), a 13% improvement between periods reflecting the increased revenues in the period combined with the ongoing control of operating expenses and administrative expenses, which remained flat.

The Group's profit before tax was US$7.7 million (H1 2020: US$1.2 million) and the loss after tax was US$1.4 million (H1 2020 profit: US$1.8 million).  The increased tax charge year-on-year was primarily a result of profits generated in Nigeria.

Adjusted EBITDA2, described in further detail below, for H1 2021 was US$91.5 million, up 3% on US$89.2 million for H1 2020.

Revenue

Revenue during the period was 8% higher than the prior year comparable at US$99.4 million (H1 2020: US$91.7 million) on stable overall sales volumes. The increase is a result of higher realised prices and the following tables summarise the sales volumes and prices achieved during H1 2021 and H1 2020:

Sales volumes, average prices and revenue for H1 2021

  Sales volume  Average price  RevenueUS$ million 
Gas  21,774 MMscf  US$4.2/Mcf  91.7 
Oil and condensate  107 kbbl  US$63.5/bbl  6.8 
Crude oil processing  0.9 
Total  3.74 MMboe*  US$26.4/boe or US$4.4/Mscfe  99.4 

*1 boe equivalent to 6 Mscf of gas

Sales volumes, average prices and revenue for H1 2020

  Sales volume  Average price  RevenueUS$ million 
Gas  21,476 MMscf  US$3.9/Mcf  83.6 
Oil and condensate  163 kbbl  US$48.3/bbl  7.9 
Crude oil processing  0.2 
Total  3.74 MMboe  US$24.5/boe or US$4.1/Mscfe  91.7 

The gas revenue stream, which represents 92% of H1 2021 revenue (H1 2020: 91%), is insulated from fluctuations in oil price as the gas contracts are all priced independently of oil prices with escalation clauses related to US consumer price inflation.  Additionally, 95% 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 power station gas sales agreement.

Cost of Sales, administrative and other operating expenses

Cost of sales amounted to US$34.3 million (H1 2020: US$32.3 million) which includes US$13.8 million (H1 2020: US$11.8 million) for facility operating and maintenance costs, US$2.2 million (H1 2020: US$2.2 million) royalty expenses and US$18.3 million (H1 2020: US$18.3 million) depletion and depreciation. 

Administrative and other operating expenses for the period were US$11.8 million (H1 2020: US$11.5 million), which includes US$0.9 million (H1 2020: US$0.6 million) of depreciation.  Of the total, US$2.3 million (H1 2020: nil) were transaction costs incurred in relation to the Proposed Acquisition.

Group operating expenses plus administrative expenses3 were US$22.5 million (H1 2020: US$22.7 million), reflecting strong cost control across the Group. This amounts to a unit cost of US$1.0/Mscfe (H1 2020: US$1.1/Mscfe) which compares favourably with our average sales price of US$4.4/Mscfe (H1 2020: US$4.1/Mscfe).

EBITDA and Adjusted EBITDA2

Presented below is the calculation of EBITDA and Adjusted EBITDA2. Management believes that the alternative performance measure of Adjusted EBITDA2 more accurately reflects the cash generating capacity of the business.  Adjusted EBITDA2 includes gas that has been invoiced under take-or-pay contracts but not yet delivered and is adjusted for transaction costs, and expected credit losses to provide a meaningful comparison between periods.

Calculation of EBITDA and Adjusted EBITDA2

  Six months ended30 June 2021US$ million  Six months ended 30 June 2020US$ million 
Operating profitAdd: depletion, depreciation and amortisation  54.019.2  47.918.9 
EBITDAAdd: other invoiced amountsDeduct: royalty payable on additional gas volumeAdd: transaction costs associated with the Proposed AcquisitionDeduct: expected credit loss & other related adjustments  73.217.1(0.4)2.3(0.7)  66.822.9(0.5)-- 
Adjusted EBITDA2  91.5  89.2 

Finance Costs

Finance costs of US$38.7 million (H1 2020: US$36.3 million) were partially offset by finance income of US$0.3 million (H1 2020: US$0.4 million). Of these costs US$26.8 million (H1 2020: US$32.0 million) related to bank and loan note interest.  The average interest rate was 10.3% (H1 2020: 11.9%) reflecting lower US Libor rates during 2021.  The remainder of the finance costs are primarily a number of non-cash items which are itemised in Note 8 of the financial statements. 

The interest cover ratio, on an Adjusted EBITDA2 basis is 2.9 times versus 2.5 times in H1 2020.

Foreign Exchange loss

Foreign exchange losses amounted to US$10.9 million (H1 2020: US$7.1 million).

An unrealised loss of US$7.0 million (H1 2020 gain: US$1.7 million) was mainly a result of revaluation of monetary items held in Nigerian Naira following the devaluation of the Naira from approximately 380 Naira/US$ to 410 Naira/US$ in May 2021.  The realised losses of US$4.0 million (H1 2020: US$8.8 million) arise mainly from US dollar gas sales invoices which are collected in local currency and then converted at the Central Bank of Nigeria ("CBN") official rate to settle US dollar invoices. In order to purchase US dollars to service US dollar obligations, Savannah accesses foreign exchange at market rate and there is typically a differential between this rate and the CBN rate. The majority of these losses are recoverable through a foreign exchange "true-up" clause in the Calabar GSA.

Taxation

The tax charge of US$9.1 million (H1 2020: credit US$0.6 million) was made up of a current tax charge of US$2.2 million (H1 2020: US$1.8 million) and a deferred tax charge of US$6.9 million (H1 2020: credit US$2.3 million).  The current tax charge principally arises on Nigerian profits and the deferred tax charge is a result of utilisation of unused losses in Nigeria.

Condensed Consolidated Statement of Financial Position 

Group Assets

  30 June 2021US$ million  31 December 2020US$ million 
Property, Plant and Equipment  604.1  612.7 
Exploration and evaluation assets  160.1  159.6 
Deferred tax asset  190.1  197.0 
Other non-current assets  7.6  8.2 
Total non-current assets  961.9  977.5 
Inventory  3.6  2.9 
Trade and other receivables  138.6  122.4 
Cash and cash equivalents  134.1  104.4 
Total current assets  276.3  229.7 
Total assets  1,238.2  1,207.2 

Total assets increased to US$1,238.2 million (31 December 2020: US$1,207.2 million) principally due to a US$29.7 million increase in cash balances held in Nigeria.

As was noted in our 2020 Annual Report & Accounts, there has been a reduction seen in foreign exchange liquidity in Nigeria since the first half of 2020. The Company anticipates that liquidity will return to the FX market in the near-term and in the meantime, Savannah has agreed with the Accugas lenders to retain a sufficient balance in Naira to cover the US$ denominated debt service amounts.  This is reflected in the Adjusted net debt figure shown in the table below.

The Group has Trade and other receivables of US$138.6 million (31 December 2020: US$122.4 million).  The trade receivables and contract assets (from sales) of US$146.3 million (31 December 2020: US$131.1 million) represent a net increase of US$15.2 million mainly due from customers in Nigeria under the GSAs in place. 

The Group has trade and other payables of US$108.9 million (31 December 2020: US$106.6 million). These amounts will be settled in the normal course of business. The increase is primarily a result of capital investment activities including the drilling of a gas well at Uquo and the compression project at the Accugas processing facility.

Debt

The Group net debt as at 30 June 2021 was US$369.4 million (31 December 2020: US$408.7 million).  During the period our leverage ratio, and our adjusted leverage ratio, both based on Adjusted EBITDA2 improved as shown in the table below.

Leverage

  30 June2021US$ million  31 December 2020US$ million 
Adjusted EBITDA2 #  91.5  183.6 
Net debt  369.4  408.7 
Naira held in cash for interest  58.7  48.0 
Adjusted net debt  428.1  456.7 
Leverage (Net debt/Adjusted EBITDA2)  2.0  2.2 
Adjusted Leverage4 (Adjusted net debt/Adjusted EBITDA2)  2.3  2.5 

# Adjusted EBITDA2 for 6 months to 30 June 2021 and for 12 months to 31 December 2020

Cashflow

A summary of the cashflows for the period is as follows:

  Six months ended30 June 2021US$ million  Six months ended30 June 2020US$ million 
Net cash generated from operating activities  65.2  45.6 
Net cash used in investing activities  (4.8)  (1.0) 
Finance costs paid  (22.8)(a)  (39.4)(b) 
Impact of exchange rate changes on cash balances  (7.9) 
Net increase in cash  29.7  5.2 
Cash balances at start of period5  106.0  48.1 
Cash balances at end of period5  135.7  53.3 

(a)   excludes US$31.0 million moved to debt service accounts

(b)   excludes US$0.2 million moved from restricted balances

The net cash inflow from operating activities was US$65.2 million (H1 2020: US$45.6 million) with the increase being driven by improved cash collections from customers which totalled US$101.6 million compared to US$82.1 million in H1 2020.

Net cash used in investing activities includes payments for property, plant and equipment of US$4.1 million (H1 2020: US$0.9 million) and US$1.1 million (H1 2020: US$0.1 million) incurred on exploration and evaluation assets.

Total cash balances of the Group at the end of the period increased to US$135.7m (H1 2020: US$53.3m). 

 CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE SIX MONTH PERIOD ENDED 30 JUNE 2021   

  Six months ended30 June2021US$'000 Six months ended30 June2020US$'000 
 Note Unaudited Unaudited 
Revenue 99,386 91,676 
Cost of sales (34,286) (32,293) 
Gross profit  65,100 59,383 
Administrative and other operating expenses  (11,846) (11,456) 
Expected credit loss and other related adjustments 14 739 
Operating profit 53,993 47,927 
Finance income 328 354 
Finance costs (38,732) (36,291) 
Fair value adjustment 3,042 (3,674) 
Foreign translation loss 10 (10,943) (7,092) 
Profit before tax  7,688 1,224 
Current tax expense 11 (2,172) (1,750) 
Deferred tax (expense)/credit 11 (6,893) 2,334 
Tax (expense)/credit 11 (9,065) 584 
Net (loss)/profit and total comprehensive (loss)/profit  (1,377) 1,808 
 Total comprehensive (loss)/profit attributable to:    
Owners of the Company  (3,109) 1,712 
Non-controlling interests  1,732 96 
  (1,377) 1,808 
 (Loss)/earnings per share  US cents US cents 
Basic 12 (0.33) 0.17 
Diluted 12 (0.33) 0.17 
 All results derive from continuing operations.                   CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITIONAS AT 30 JUNE 2021  
  30 June 31 December 
  2021 2020 
  US$'000 US$'000 
 Note Unaudited Audited 
Assets 
Non-current assets 
Property, plant and equipment 13 604,104 612,707 
Exploration and evaluation assets  160,135 159,572 
Deferred tax assets  190,093 196,986 
Right-of-use assets  5,074 5,581 
Restricted cash  1,635 1,635 
Finance lease receivable  864 1,049 
Total non-current assets  961,905 977,530 
Current assets 
Inventory  3,605 2,916 
Trade and other receivables 14 138,670 122,400 
Cash at bank 15 134,050 104,363 
Total current assets  276,325 229,679 
Total assets  1,238,230 1,207,209 
Equity and liabilities 
Capital and reserves 
Share capital  1,409 1,409 
Share premium  62,263 62,092 
Treasury shares  (58) (59) 
Capital contribution  458 458 
Share-based payment reserve  8,479 7,104 
Retained earnings  155,561 158,670 
Equity attributable to owners of the Company  228,112 229,674 
Non-controlling interests  (1,005) (2,737) 
Total equity  227,107 226,937 
Non-current liabilities 
Other payables 16 4,884 4,648 
Borrowings 17 405,433 424,667 
Lease liabilities  6,352 7,057 
Provisions  108,342 106,606 
Contract liabilities 18 201,970 185,172 
Total non-current liabilities  726,981 728,150 
Current liabilities 
Trade and other payables 16 104,063 101,975 
Borrowings 17 99,689 89,995 
Interest payable  66,498 51,544 
Tax liabilities  3,640 2,539 
Lease liabilities  1,424 1,004 
Contract liabilities 18 8,828 5,065 
Total current liabilities  284,142 252,122 
Total liabilities  1,011,123 980,272 
Total equity and liabilities  1,238,230 1,207,209  
  CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWSFOR THE SIX MONTH PERIOD ENDED 30 JUNE 2021  
  Six months ended30 June Six months ended30 June 
  2021 2020 
  US$'000 US$'000 
 Note Unaudited Unaudited 
Cash flows from operating activities: 
Profit before tax  7,688 1,224 
Adjustments for:    
Depreciation   888 602 
Depletion  18,335 18,310 
Finance income  (124) 
Finance costs 38,732 36,064 
Fair value adjustment  (3,042) 3,674 
Unrealised foreign exchange loss/(gain) 10 6,981 (1,659) 
IFRS 16 sub-lease recognition  71 
Share option charge  1,375 318 
Expected credit loss and other related adjustments 14 (739) 
Operating cash flows before movements in working capital  70,094 58,604 
Increase in trade and other receivables  (16,610) (29,248) 
Decrease in trade and other payables  (4,467) (6,113) 
Increase in contract liabilities  16,798 22,293 
Income tax (payments)/rebates  (632) 60 
Net cash generated from operating activities  65,183 45,596 
Cash flows from investing activities: 
Interest received  98 
Payments for property, plant and equipment  (4,109) (901) 
Payments for exploration and evaluation assets  (1,118) (68) 
Lessor receipts  280 11 
Net cash used in investing activities  (4,849) (958) 
Cash flows from financing activities: 
Finance costs  (13,580) (21,068) 
Borrowing proceeds 19 3,835 
Borrowing repayments 19 (8,794) (22,107) 
Lease payments 19 (335) (76) 
Cash to debt service accounts  (30,973) 
Cash from restricted cash accounts  193 
Net cash used in financing activities  (53,682) (39,223) 
Net increase in cash and cash equivalents  6,652 5,415 
Effect of exchange rate changes on cash and cash equivalents  (7,938) 
Cash and cash equivalents at beginning of period  74,258 46,256 
Cash and cash equivalents at end of period 15 72,972 51,671 
    
Amounts held for debt service at end of period 15 61,078 
Cash at bank at end of period 15 134,050 51,671 

 CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITYFOR THE SIX MONTH PERIOD ENDED 30 JUNE 2021  

  Share capital  Share premium  Treasury shares  Capital contribution  Share-based payment reserve  Retained earnings  Equity attributable to the owners of the Company  Non-controlling interest  Total equity 
  US$'000  US$'000  US$'000  US$'000  US$'000  US$'000  US$'000  US$'000  US$'000 
Balance at 1 January 2021 (audited)  1,409  62,092  (59)  458  7,104  158,670  229,674  (2,737)  226,937 
Profit/(loss) for the period  (3,109)  (3,109)  1,732  (1,377) 
Total comprehensive profit/(loss) for the period  (3,109)  (3,109)  1,732  (1,377) 
Transactions with shareholders:                   
Equity-settled bonus payments  171  172  172 
Equity-settled share-based payments  1,375  1,375  1,375 
Balance at 30 June 2021 (unaudited)  1,409  62,263  (58)  458  8,479  155,561  228,112  (1,005)  227,107 
  Share capital  Share premium  Treasury shares  Capital contribution  Share-based payment reserve  Retained earnings  Equity attributable to the owners of the Company  Non-controlling interest  Total equity 
  US$'000  US$'000  US$'000  US$'000  US$'000  US$'000  US$'000  US$'000  US$'000 
Balance at 1 January 2020 (audited)  1,393  61,204  458  6,448  164,885  234,388  (2,983)  231,405 
Profit for the period  1,712  1,712  96  1,808 
Total comprehensive profit for the period  1,712  1,712  96  1,808 
Transactions with shareholders:                   
Equity-settled share-based payments  318  318  318 
Balance at 30 June 2020 (unaudited)  1,393  61,204  458  6,766  166,597  236,418  (2,887)  233,531 

3.   Segmental reporting

For the purposes of resource allocation and assessment of segment performance, the operations of the Group are divided into three segments: two geographical locations and an Unallocated segment. The two geographical segments are Nigeria and Niger, and their principal activities are the exploration, development and extraction of oil and gas. These make up the total revenue generating operations of the Group. The Unallocated segments principal activities are the governance and financing of the Group as well as undertaking business development opportunities. Items not included within Operating profit/(loss) are reviewed at a Group level and therefore there is no segmental analysis for this information. As such, the comparative segmental reporting has been restated to remove these amounts from the segments and show only the totals to provide better comparability of the Group's 2021 results. The following is an analysis of the Group's results by reportable segment for the six months ended 30 June 2021: 

  Nigeria  Niger  Unallocated  Total 
  US$'000  US$'000  US$'000  US$'000 
  Unaudited  Unaudited  Unaudited  Unaudited 
Revenue  99,386  99,386 
Cost of sales1  (34,286)  (34,286) 
Gross profit  65,100  65,100 
Administrative and other operating expenses  (2,748)  (2,410)  (6,688)  (11,846) 
Expected credit loss and other related adjustments  739  739 
Operating profit/(loss)  63,091  (2,410)  (6,688)  53,993 
Finance income        328 
Finance costs        (38,732) 
Fair value adjustment        3,042 
Foreign translation loss        (10,943) 
Profit before tax        7,688 
         
Segment non-current assets2  604,741  161,554  3,018  769,313 
Segment total assets  1,069,494  162,229  6,507  1,238,230 
Segment total liabilities  (948,557)  (30,754)  (31,812)  (1,011,123) 

1.     Refer to note 5 for material items included within Cost of Sales.2.     Includes Property, plant and equipment, Exploration and evaluation assets and Right-of-use assets. For non-current asset additions in Nigeria, refer to Oil & gas assets and Infrastructure asset additions in note 13. Non-current asset additions in Niger relate to additions in Exploration & evaluation amounting to US$0.6 million. Non-current additions in Unallocated relate to Other asset additions in note 13 and Right-of-use additions amounting to US$nil. The following is an analysis of the Group's results by reportable segment for the six months ended 30 June 2020.  This has been re-presented to allow for improved consistency to the current period. 

  Nigeria  Niger  Unallocated  Total 
  US$'000  US$'000  US$'000  US$'000 
  Unaudited  Unaudited  Unaudited  Unaudited 
Revenue  91,676  91,676 
Cost of sales1  (32,293)  (32,293) 
Gross profit  59,383  59,383 
Administrative and other operating expenses  (9,515)  (1,164)  (777)  (11,456) 
Operating profit/(loss)  49,868  (1,164)  (777)  47,927 
Finance income        354 
Finance costs        (36,291) 
Fair value adjustment        (3,674) 
Foreign translation loss        (7,092) 
Profit before tax        1,224 

 The following is an analysis of the Group's results by reportable segment at 31 December 2020:  

  Nigeria  Niger  Unallocated  Total 
  US$'000  US$'000  US$'000  US$'000 
  Audited  Audited  Audited  Audited 
Segment non-current additions2  613,439  161,147  3,274  777,860 
Segment total assets  1,039,653  161,778  5,778  1,207,209 
Segment total liabilities  (919,067)  (30,274)  (30,931)  (980,272) 

1.     Refer to note 5 for material items included within Cost of Sales.2.     Includes Property, plant and equipment, Exploration and evaluation assets and Right-of-use assets. For non-current asset additions in Nigeria, refer to Oil & gas assets and Infrastructure asset additions in note 13. Non-current asset additions in Niger relate to additions in Exploration & evaluation totalling US$4.5 million. Non-current additions in Unallocated relate to Other asset additions in note 13, and Right-of-use additions totalling US$3.0 million. 

4.   Revenue

Set out below is the disaggregation of the Group's revenue from contracts with customers: 

  2021  2020 
  US$'000  US$'000 
Six months ended 30 June  Unaudited  Unaudited 
Gas sales  91,675  83,622 
Oil and condensates sales  7,711  8,054 
Revenue from contracts with customers  99,386  91,676 

Gas sales represents gas deliveries made to the Group's customers under long term take or pay gas sale agreements; these comprise two power stations and a cement production facility. The Group sells oil and condensates under a sales and purchase agreement with ExxonMobil Sales & Supply LLC at prevailing market prices. Included within revenue from contracts with customers is revenue of US$89.6 million (30 June 2020: US$79.6 million) relating to the Group's customers who each contribute more than 10% of revenue

5.   Cost of sales

  2021  2020 
  US$'000  US$'000 
Six months ended 30 June  Unaudited  Unaudited 
Depletion - oil and gas, and infrastructure assets (note 13)  18,335  18,310 
Facility operation and maintenance costs  13,794  11,830 
Royalties  2,157  2,153 
  34,286  32,293 

6.   Operating profit

Operating profit has been arrived at after charging:

  2021  2020 
  US$'000  US$'000 
Six months ended 30 June  Unaudited  Unaudited 
Staff costs  12,112  8,815 
Depreciation - other assets (note 13)  380  338 
Depreciation - right-of-use assets  508  264 
Transaction expenses1  2,277 

1.     Transaction expenses primarily relate to expenses incurred relating to the proposed acquisition of ExxonMobil's upstream and midstream asset portfolio in Chad and Cameroon (as announced on 2 June 2021).    

7.   Finance income

  2021  2020 
  US$'000  US$'000 
Six months ended 30 June  Unaudited  Unaudited 
Lease income  26  16 
Bank interest income  98  74 
Other interest income  204  264 
  328  354 

8.   Finance costs

  2021  2020 
  US$'000  US$'000 
Six months ended 30 June  Unaudited  Unaudited 
Interest on bank borrowings and loan notes  26,826  31,983 
Amortisation of balances measured at amortised cost1  7,004  2,038 
Unwinding of decommissioning discount  2,488  904 
Interest expense on lease liabilities  262  144 
Bank charges  131  219 
Other finance costs  2,021  1,003 
  38,732  36,291 

1.     Includes amounts due to unwinding of a discount on a long-term payable, contract liabilities (note 18) and amortisation of debt fees.

9.   Fair value adjustment 

During 2019 the Group issued a Senior Secured Note of US$20 million that includes a voluntary prepayment option whereby early repayment will result in a discount to the contractual loan value.  As an embedded derivative, the option has been separated from the host loan instrument and valued separately and accounted for as fair value through profit or loss ("FVTPL"). As at 30 June 2021 the option value was approximately US$8.4 million (31 December 2020 audited: US$5.4 million), resulting in a gain of US$3.0 million (30 June 2020: charge of US$3.7 million). The increase in the option value was principally due to an improvement in credit bond spreads observed during the period. The reduction in the option value in the prior period was principally due to the deteriorating credit bond spread observed.

10.  Foreign translation loss

  2021  2020 
  US$'000  US$'000 
Six months ended 30 June  Unaudited  Unaudited 
Realised loss  3,962  8,751 
Unrealised loss/(gain)  6,981   (1,659) 
  10,943  7,092 

Unrealised foreign translation loss for the six months ended 30 June 2021 mainly relates to the revaluation of monetary items held in Nigerian Naira following the devaluation of the Naira against the US Dollar in May 2021. Realised foreign translation loss mainly relates to Nigerian trade receivables which are invoiced in US Dollars and where customers are able to pay in Naira.

11.  Taxation

The tax expense/(credit) for the Group is:

  2021  2020 
  US$'000  US$'000 
Six months ended 30 June  Unaudited  Unaudited 
Current tax     
- Adjustments in respect of prior years  (28) 
- Current year  2,169  1,778 
  2,172  1,750 
Deferred tax     
- Adjustments in respect of prior years  15  423 
- Current year  6,878  (2,757) 
  6,893  (2,334) 
  9,065  (584) 

Income tax credit or expense is recognised based on the actual results for the period. 

The tax expense for the period of US$9.1 million (30 June 2020: credit of US$0.6 million) is made up of a current tax charge of US$2.2 million (30 June 2020: US$1.8 million) and a deferred tax charge of US$6.9 million (30 June 2020: credit of US$2.3 million). The current tax charge principally arises on Nigerian profits. The deferred tax charge principally relates to the utilisation of losses in Nigeria.

  Oil and gas assets  Infrastructure assets  Other assets   Total 
  US$'000  US$'000  US$'000  US$'000 
Cost         
Balance at 1 January 2020 (audited)  167,890  457,414  2,879  628,183 
Additions  1,757  1,831  534  4,122 
Disposals  (59)  (59) 
Decommissioning remeasurement adjustment  (14,914)  10,236  (4,678) 
Transfer from Receivables from a joint arrangement  30,844  30,844 
Transfers to Exploration and evaluation assets  (284)  (284) 
Reclassification of assets1  (1,725)  720  1,005 
Balance at 31 December 2020 (audited)  183,852  469,917  4,359  658,128 
Additions  761  8,991  360  10,112 
Balance at 30 June 2021 (unaudited)  184,613  478,908  4,719  668,240 
         
Accumulated depreciation         
Balance at 1 January 2020 (audited)  (3,269)  (5,671)  (957)  (9,897) 
Depletion and depreciation charge  (17,234)  (17,555)  (751)  (35,540) 
Adjustment to accumulated depreciation  176  56  (216)  16 
Balance at 31 December 2020 (audited)  (20,327)  (23,170)  (1,924)  (45,421) 
Depletion and depreciation charge  (9,467)  (8,868)  (380)  (18,715) 
Balance at 30 June 2021 (unaudited)  (29,794)  (32,038)  (2,304)  (64,136) 
         
Net book value         
31 December 2020 (audited)  163,525  446,747  2,435  612,707 
30 June 2021 (unaudited)  154,819  446,870  2,415  604,104 

1.     Certain assets have been reclassified between the various asset classes to ensure they are reported in the most appropriate class.

 Upstream assets principally comprise the well and field development costs relating to the Uquo and Stubb Creek oil and gas fields in Nigeria. The Infrastructure assets principally comprise the Nigerian midstream assets associated with the Group's network of gas transportation pipelines, oil and gas processing facilities and gas receiving facilities. Other assets typically include vehicles, office equipment and building improvements. Following management's assessment of the gas pipelines, the expected useful life of these pipelines was increased from 25 to 40 years from the comparative of the reporting period. This had the effect of reducing the depreciation charge for the year ended 31 December 2020. This change resulted in a reduction in the Infrastructure assets depreciation charge amounting to US$8.5 million, had no change in useful life been made. During 2020, the Group undertook a more detailed technical assessment of the decommissioning provision cost estimates using an independent contractor. The associated decommissioning asset has been adjusted to reflect the new cost estimates. The new asset value will be depreciated over the remaining life of the respective assets. Following the acquisition of the Nigerian assets in 2019, the Group completed the restructuring of economic interests in the Uquo field with its partner, Frontier Oil Limited. The agreement granted economic ownership and control of 100% of the gas operations, and its partner was granted economic ownership and control of 100% of the oil operations at the Uquo field. Under the terms of the restructuring, the Group made an advance payment of cash calls of US$20.0 million to its partner. A further US$14.1 million of advance cash calls is payable in three yearly instalments, with the first instalment of US$5.0 million paid in December 2020. The advanced cash call amounts were recorded within Receivables from a joint arrangement in 2019. During 2020, these receivables (amounting to US$30.8 million) were reclassified to Oil and gas assets as the substance of this agreement was determined to be a re-alignment of the respective parties' economic interests and therefore similar in nature to a "signature bonus". It is being depleted in line with similar assets.    

14.  Trade and other receivables

  30 June 2021  31 December 2020 
  US$'000  US$'000 
  Unaudited  Audited 
Trade receivables  62,564  72,832 
Contract assets  83,687  58,246 
Receivables from a joint arrangement  396  419 
Other receivables  5,496  5,548 
  152,143  137,045 
Expected credit loss  (16,474)  (17,213) 
  135,669  119,832 
VAT receivables  251  185 
Prepayments  2,750  2,383 
  138,670  122,400 

 The following has been recognised in the Condensed Statement of Comprehensive Income relating to expected credit losses for the period:

  2021  2020 
  US$'000  US$'000 
Six months ended 30 June  Unaudited  Unaudited 
Net release of expected credit losses  739 
Expected credit loss and other related adjustments  739 

15.  Cash at bank

  30 June 2021  31 December 2020 
  US$'000  US$'000 
  Unaudited  Audited 
Cash and cash equivalents  72,972  74,258 
Amounts held for debt service  61,078  30,105 
  134,050  104,363 

Cash and cash equivalents includes US$1.1 million (31 December 2020: US$1.2 million) of cash collateral on the Orabank revolving facility. The cash collateral was at a value of XOF629.4 million (31 December 2020: XOF621.7 million). Amounts held for debt service represents Naira denominated cash which is held by the Group for debt service, and this has been separately disclosed from Cash and cash equivalents. In total, approximately US$100.8 million (31 December 2020: US$78.9 million) will be paid for the debt service from bank accounts designated as Amounts held for debt service, and from Cash and cash equivalents.    

16.  Trade and other payables

  30 June 2021  31 December 2020 
  US$'000  US$'000 
  Unaudited  Audited 
Trade and other payables     
Trade payables  41,426  40,590 
Accruals  37,126  35,565 
VAT and WHT payable  7,743  7,825 
Royalty and levies  6,062  6,261 
Employee benefits  73  74 
Deferred consideration  7,500  7,500 
Other payables  4,133  4,160 
  104,063  101,975 
Other payables - non-current     
Employee benefits  4,884  4,648 
  4,884  4,648 
  108,947  106,623 

 The Directors consider that the carrying amount of trade and other payables approximates to their fair value.  

17. Borrowings

  30 June 2021  31 December 2020 
  US$'000  US$'000 
  Unaudited  Audited 
Revolving credit facility  12,568  12,998 
Bank loans  377,647  376,509 
Senior Secured Notes  96,029  106,513 
Other loan notes  18,878  18,642 
  505,122  514,662 
  30 June 2021  31 December 2020 
  US$'000  US$'000 
  Unaudited  Audited 
Current borrowings  99,689  89,995 
Non-current borrowings  405,433  424,667 
  505,122  514,662 

18. Contract liabilities Contract liabilities represents the value of gas supply commitment to the Group's customers for gas not taken but invoiced under the terms of the contracts. The amount has been analysed between current and non-current, based on the customers' expected future usage gas delivery profile. This expected usage is updated periodically with the customer. 

  30 June 2021  31 December 2020 
  US$'000  US$'000 
  Unaudited  Audited 
Amount due for delivery within 12 months  8,828  5,065 
Amount due for delivery after 12 months  201,970  185,172 
  210,798  190,237 
  30 June 2021  31 December 2020 
  US$'000  US$'000 
  Unaudited  Audited 
As at 1 January  190,237  121,994 
Additional contract liabilities  27,281  86,881 
Contract liabilities utilised  (10,483)  (23,632) 
Unwinding of discount on contract liabilities  3,763  4,994 
As at end of period  210,798  190,237 

 The unwinding of the discount on contract liabilities relates to the fair value adjustments made under IFRS 3: Business Combinations following the acquisition of the Nigerian assets and entities in 2019. The fair value adjustment was calculated as the discounted, expected cost of the future deliveries of gas volumes under the terms of customer take-or-pay contracts. This discounted amount unwinds relative to an apportioned amount of the contract liabilities volumes at the date of acquisition that have subsequently been utilised.  

19. Cash flow reconciliations

The changes in the Group's liabilities arising from financing activities can be classified as follows:

  Borrowings  Lease liabilities  Total 
  US$'000  US$'000  US$'000 
At 1 January 2021 (audited)  514,662  8,061  522,723 
Cash flows       
Repayment  (8,794)  (335)  (9,129) 
Realised loss on loan repayment  175  175 
  (8,619)  (335)  (8,954) 
Non-cash adjustments       
Payment in kind adjustment/accretion of interest  1,380  262  1,642 
Unpaid invoices  (291)  (291) 
Net debt fees  1,752  1,752 
Borrowing fair value adjustments  (3,042)  (3,042) 
Foreign translation  (1,011)  79  (932) 
Balance at 30 June 2021 (unaudited)  505,122  7,776  512,898 
  Borrowings  Lease liabilities  Total 
  US$'000  US$'000  US$'000 
At 1 January 2020 (audited)  532,052  5,570  537,622 
Cash flows       
Repayment  (22,107)  (76)  (22,183) 
Proceeds  3,835  3,835 
  (18,272)  (76)  (18,348) 
Non-cash adjustments       
Payment in kind adjustment/accretion of interest  1,791  337  2,128 
Net debt fees  (4,618)  (4,618) 
Borrowing fair value adjustments  3,674  3,674 
Foreign translation  (819)  (404)  (1,223) 
Balance at 30 June 2020 (unaudited)  513,808  5,427  519,235 

Source: EvaluateEnergy® ©2021 EvaluateEnergy Ltd