West Africa oil and gas company Savannah Petroleum (SAVP) has finally got the sign-off from the government on its takeover of producer Seven Energy.
The acquisition of the struggling gas producer was announced in 2017 and was expected to be completed by March 2018, but Savannah's shareholders have seen several deadlines missed as the company kept guessing when the approval would come through.
Following the news Nigerian president Muhammadu Buhari had finally given the merger the nod, Savannah's shares were up 50 per cent, to 18.8p, although they are still down a third year-to-date.
The deal will see the developer, which also has projects in Niger, take parts of Seven’s assets in a complicated deal that had to be agreed by the producer's bondholders. It will have a 75 per cent stake in one producing gas field, Uquo, 51 per cent of another, as well as 75 per cent of the Accugas gas processing plant and marketing business. Savannah forecasts net take-or-pay production to be 18,900 barrels of oil equivalent per day.
Panmure Gordon analyst Colin Smith estimated Savannah would receive between $74m (£61m) and $94m in new funds from the debt restructuring process and the further sale of 25 per cent of Accugas and part of its share in the Uquo gas field for $70m. A company spokesman could not give an estimate for the total cost of the acquisition.
Savannah raised $125m from shareholders and borrowed $50m last year. Seven was up for sale because of its struggles with debt, with its net borrowings hitting $900m in 2016 and annual interest costs at $100m.
Savannah will add debt through the takeover. There are $470m in borrowings linked to the Accugas midstream assets, with $371m of that with a hefty 10.43 per cent plus Libor interest rate, although this is ring-fenced from the rest of the company.
