Savannah Energy has reduced its Nigerian capital expenditure (capex) by 15 per cent over the 2020-23 period from approximately $118 million to $100 million.
The capital slash has resulted in a reduction in the overall indicative Group capital expenditure plans of around 13 per cent from $137 million to $119 million over the same period.
In reviewing the capital spend, the company said it has amended its planned four-year capital expenditure programme in Nigeria, as originally set out in the Nigeria Competent Person’s Report (the “Nigeria CPR”) published December 2019.
“Overall we have reduced our cost estimate for our indicative 2020–23 capital expenditure programme by around 13%, versus our previous indications and are guiding that we expect our underlying operating costs (which include maintenance expenditures) to track levels consistent with 2020 (in real terms) over the medium term.
It should also be noted that our 2021 guidance excludes contributions from any new gas sales agreements or any contribution from the R3 East development project in Niger, which would be incremental to this,” Andrew Knott, CEO of Savannah Energy, said:
The principal work programme changes will see only one gas well drilled in the 2020–23 period on the Uquo field and the acceleration of the Uquo field compression project previously assumed to commence in 2026/27 to 2021/22.
“As this FY 2020 trading update demonstrates, despite the challenging headwinds, 2020 was a milestone year for Savannah Energy. It was our first full year of operating the high margin assets we acquired in Nigeria and I am delighted to report that we have significantly exceeded all of the original financial guidance we presented to the market this year, as laid out in our corporate Key Performance Indicator statement published within our FY 2019 Annual Report.
In 2020 we grew revenues, reduced our underlying cost base and continued to provide gas contributing to over 10 per cent of Nigeria’s daily national average power generation, highlighting the resilience of the business,” Knott noted.