Yemisi Izuora
Savannah Petroleum PLC, at the weekend said its loss widened in 2017 as operating expenses increased due to exceptional costs associated with its Seven Energy International Ltd transaction.
For 2017, the pretax loss recorded by oil company widened to USD27.4 million from USD8.3 million the previous year, as operating expenses increased to USD27.1 million from USD8.4 million in 2016.
The increase in overall general and administrative expenses during the year was as a result of exceptional business development costs of USD18.5 million in relation to the Seven Energy transaction, the company said.
During the year, Savannah placed USD125 million to fund, inter alia, the expected acquisition of certain assets from Seven Energy. As a result of the transaction, Savannah is expected to hold working interests in two large, producing onshore oil and gas fields in Nigeria as well as a 20 per cent interest in the Accugas midstream business.
Over the course of the year, exploration and evaluation assets grew to USD112.0 million at year end-2017 from USD97.0 million at the end of 2016. Much of this increase related to the successful completion of the R3 East 3D seismic survey.
The oil group also incurred expenditure associated with the signature of its rig contract with Great Wall Drilling Company Niger SARL, and procurement of the necessary long-lead tangible equipment in anticipation of its planned drilling program. A logistics base and pipe yard was constructed on Agadem for use in the campaign, with most of the drilling equipment mobilised on site.
Furthermore, the firm recorded USD15.0 million year-end cash position which excludes proceeds from the second tranche of the placing, down from USD23.0 million in 2016.
No dividend was recommended for 2017, in line with the previous year, although the group announced its intention to commence payment of an annual dividend assuming the successful completion of the Seven Energy transaction. This is initially expected to be USD12.5 million, assuming appropriate business performance during 2018, and payable in 2019.
“The acquisition of assets from Seven Energy creates a full cycle exploration and production company, capable of paying a dividend from the cash flows generated by its upstream assets. The deal also enables us to enhance our operational capabilities and provide the business with a strong platform to deliver further value accretive organic and inorganic growth in the future”, said Savannah CEO Andrew Knott.