Revenue Loss Pushes Savannah Energy’s H1 Operating Profit Down By 48.33%
Operating profit of Savannah Energy Plc fell to $27.9 million in the first half of this year, from $54 million in H1 2021, the group’s financial result for the six months ended June, 30 2022, has shown.
The company attributes the decrease to a combination of lower revenues among which include unscheduled downtime suffered by certain of its customers (which does not reduce its total revenues under the terms of the take-or-pay gas contracts).
There was also a 10 per cent increase in operating expenses, plus administrative expenses which resulted from the investment made in growing the business infrastructure in preparation for completion of the acquisition of the Chad and Cameroon Assets as well as continued investment into the efficiency of the Nigerian assets.
Referred to as earnings before interest and tax (EBIT), operating profit is equal to gross profit minus operating expenses before deduction of interest and taxes.
A British independent energy company, Savannah Energy supplying gas to enable over 10 per cent of Nigeria’s thermal power.
The results showed that the group recorded a loss before tax to $11.3 million in H1 2022, from profit before tax of $7.7 million in H1 2021. Its loss after tax widened to $20.5 million in H1 2022, from $1.4 million in H1 2021.
Revenue fell by 13.98 per cent to $85.8 million in H1 2022, relative to $99.4 million in the prior period; received only from gas, oil and condensate that has been delivered.
However, total revenues of $128.7 million was reported in H1 2022 compared to $116.5 million in H1 2021, representing a growth of 10.47 per cent.
The revenues were gotten from 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.
Adjusted earnings before interest, taxes, depreciation, and amortisation (EBITDA) rose by 9.62 per cent to $100.3 million in H1 2022, as against $91.5 million in H1 2021.
Savannah Energy has continued to benefit from over $4 billion of contracted future gas revenues in Accugas Limited, a subsidiary company, with annual price escalation clauses related to United States consumer price inflation.
However, the costs of financing its operations in the review period fell to $36.8 million from $38.7 million in the prior period. From the costs, bank and loan note interest were put at $27.9 million in H1 2022 from $26.8 million in H1 2021on an average interest rate of 10.7 per cent and 10.3 per cent respectively.
Savannah Energy paid a total tax of $9.2 million in the current period against $9.1 million in the prior period, made up of a current tax charge of $2.8 million ($2.2m in H1 2021) and a deferred tax charge of $6.4 million ($6.9m H1 2021).
The company states that the current tax charge principally arises on Nigerian profits and the deferred tax charge is a result of utilisation of unused losses in Nigeria.
The group’s net debt rose to $327.1 million as at June 30, 2022 from $370 as at December 31, 2021, as work continues on the proposed refinancing of the Accugas debt facility.
Commenting on the result, the Chief Executive Officer (CEO), Savannah Energy, Andrew Knott, hinted that the company’s average daily production to September 26, 2022, increased by 55 per cent to 34.8 thousand barrels of oil equivalent per day (Kboepd) against 22.5 Kboepd H1, and 118 per cent from 16.0 Kboepd level at the time of acquisition in November 2019.
“This H2-to-date growth reflects the impact of the three new gas sales contracts and the contract extension we have announced in 2022, with Accugas now supplying gas to approximately 24 per cent of Nigeria’s thermal power generation capacity as compared to approximately 10 per cent at the time of the original acquisition,” he said.
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