Savannah Petroleum has dropped plans for a reverse takeover, opting instead to carry out a placing and press ahead with its work programme in Niger. The London-listed minnow, in statements on July 5 and 7, said it had carried out a substantial amount of seismic work and plans to drill its first exploration wells in early 2017.
“Following significant technical and commercial progress across our assets, today's fundraise enables us to recommence ground activities at Agadem,” said Savannah’s CEO, Andrew Knott. “We plan to acquire 3-D seismic over the R3 PSC Area, starting over the coming months, and expect to follow this with the drilling of our first exploration wells in [the first quarter of] 2017.
Work on the ground should restart in the second half of 2016, with the acquisition of 3-D seismic on the R3 PSC. This will be followed by a “multi-well 3-D seismic backed exploration drilling campaign”, it said.
The company has found 118 leads and prospects in its Niger acreage, up from 51 reported in May 2015. A review of 12 example targets by CGG Geoconsulting found 10 to be low risk, with the remaining two being less proved. The 10 are in the R1 and R3/R4 production-sharing contracts (PSCs), while the other two are in the R2 PSC. Of the latter two, one is lower risk, with a deep structural target, Jimna, while the second carries a higher technical risk, with a stratigraphic target, Koro.
The 10 proven play targets are estimated to hold around 494 million barrels of unrisked mean recoverable resources, while the two targeting unproven plays may hold 407 million barrels of unrisked mean recoverable resources.
The proven play is in the Upper Sokor sandstone reservoirs, of Oligocene age. A number of discoveries have been made in this play in the Agadem Rift Basin, outside Savannah’s acreage. This formation sits above Eocene leads, offering potentially stacked targets.
CGG also upped its overall estimate of Savannah’s gross best estimate to 2.19 billion barrels, from 1.19 billion in July 2015.
Changes are also planned to the PSC terms and petroleum code. A new code is expected to be adopted by the end of 2016, Savannah reported the Ministry of Energy and Petroleum (MEP) as saying. This would set extensions for the company’s PSCs for two years, from the current one year extension. An extension is offered in return for a company committing to finalise a commerciality study after making a discovery.
The new code would also provide for an increase in the cost recovery ceiling under the PSC, to 80% from 70%.
Should a discovery be made, Savannah would have the right to become an equity holder in any potential oil export infrastructure, it said.
Savannah suspended its shares in January, in order to allow the company to work on a non-binding heads of terms on a deal that would have been classified as a reverse takeover. This move describes the injection of another company into an existing company, in this case listed on the Alternative Investment Market (AIM).
Plans for the reverse takeover were officially terminated as of July 7, when Savannah said it had completed a placing. This involved the issue of 79.84 million shares, raising gross proceeds of around US$40 million.
“Savannah believes that it is in shareholders' best interests to commence this planned operational activity. The net proceeds of the placing are therefore intended to be used to fund the group's planned seismic programme as well as its initial drilling campaign and for general corporate purposes,” Knott continued.
Mirabaud Securities acted as sole bookrunner and joint lead manager, Panmure Gordon (UK) acted as joint lead manager and Merriman Capital and Auerbach Grayson & Company acted as US placing agents. Strand Hanson acted as Nominated Adviser. “From here we can now look forward to the imminent recommencement of ground operations with the 3-D seismic programme at R3, which will in turn help us maximise the chances of a successful drilling campaign in 2017,” Knott said.
Savannah did not rule out bringing in a partner to work on its assets in Niger. Discussions are being held with various potential parties, it said. However, it suggested the question of price would be critical to such a deal being executed. A deal would only be struck at a point when Savannah believes it would “enable the R1/R2 PSC Area and R3/R4 PSC Area to be explored and appraised in a value accretive manner”.