TIDMAET

RNS Number : 1897L

Afentra PLC

09 September 2021

09 September 2021

   Afentra   p l c 

Results for the six months ending 30 June 2021

Overview

Afentra plc ('Afentra' or the 'Company'), together with its subsidiary undertakings (the 'Group'), is an upstream oil and gas company quoted on the AIM market of the London Stock Exchange.

The Company's strategy is to build an oil and gas business of scale through the acquisition of both operated and non-operated production assets and discovered resources in Africa, where its management team have extensive operational experience. Afentra is well positioned to take advantage of the energy transition and associated market dynamics which is creating opportunities for experienced operators with a strong track record to acquire quality producing assets.

The Company currently has a position in the onshore Odewayne exploration block that is operated by Genel Energy, where its 34% interest is fully carried.

Operations summary

-- Odewayne Licence - new Afentra team continue its technical assessment and outlook on block prospectivity in discussion with the operator

-- Business Development - experienced team now in place and actively pursuing potential deals in Africa, primarily focused on operated and non-operated production assets

Corporate summary

-- 18 February 2021: Several institutional and high net worth investors purchased shares sold by existing shareholders including Waterford Finance and Investment Limited (equating to its entire 29.23% shareholding in the Company) and Mistyvale Limited (equating to its entire 15.66% shareholding in the Company)

-- 16 March 2021: Paul McDade and Ian Cloke join the Board of Directors as CEO and COO respectively

-- 30 March 2021: Jeffrey MacDonald and Gavin Wilson join the Board of Directors as Independent non-executive Chairman and Independent non-executive Director respectively

-- 13 April 2021: The Company announced its intention to change its name from Sterling Energy plc to Afentra plc and adopt new articles of association. The proposed changes were approved at the General Meeting held on 30 April 2021

-- 5 May 2021: Afentra plc launched and Anastasia Deulina is appointed as Chief Financial Officer

Financial s ummary

-- Cash resources as at 30 June 2021 of $ 40.8 million (30 June 2020 of $ 43.8 million).

   --              A d j usted  EBI T DAX loss of  $ 1.5 million   (1H 2020: loss  $ 289 k). 
   --              Loss after tax of  $ 2.4 million (1H  2020: loss  $ 866k ). 

-- The Group remains debt free and fully carried for Odewayne operations (Third and the Fourth Period).

Paul McDade, Chief Executive Officer, Afentra plc commented: "2021 has been an eventful period during which we have established Afentra plc and set the company on an exciting strategic path. The market drivers for the energy transition across Africa are presenting a wide range of compelling opportunities and we believe that our proven operating track record, focused ESG agenda, strong balance sheet and supportive shareholder base put us in a unique position to capitalise on these opportunities."

For further information contact:

Afentra plc +44 (0)20 7405 4133

Paul McDade, CEO

Anastasia Deulina, CFO

Buchanan (Financial PR) +44 (0)20 7466 5000

Ben Romney

Jon Krinks

James Husband

Peel Hunt LLP (Nominated Advisor and Joint Broker) +44 (0)20 7418 8900

Richard Crichton

David McKeown

Tennyson Securities (Joint Broker) +44 (0)20 7186 9033

Peter Krens

CEO Statement

I am pleased to provide an update on Afentra's progress in the first half of 2021, a period in which we have launched with a new name, management team and a clearly defined strategic vision. It is also a period, after the economic and industry challenges caused by the pandemic through 2020, in which we have begun to see a steady strengthening of commodity prices and cautious optimism within the sector and wider economies.

Afentra was launched in May 2021 with a clear agenda; to capitalise on opportunities presented by the accelerating energy transition in Africa and in doing so support a responsible transfer of asset ownership that provides beneficial outcomes for all stakeholders involved.

To deliver this vision, Afentra has assembled a high-quality team with a proven track record for operational excellence, commercial focus, environmental stewardship, transparent governance and delivering a positive socio-economic impact. We have ambitious plans for growth and aim to become a leading pan-African operator of scale, delivering long-term value for our shareholders through accretive transactions.

As International Oil Companies (IOCs) seek to meet the expectations of certain stakeholders to rationalise and diversify their portfolios away from carbon intensive activities, they are starting to divest parts of their African upstream assets. This is creating an opportunity rich landscape for responsible companies like Afentra. We are looking at a wide range of operated and non-operated opportunities and, with our experienced team, are well positioned as a credible counterparty for both IOCs seeking to divest assets and an experienced partner for host governments to work with.

Afentra's strong balance sheet and cost discipline also puts the company in an excellent position to review and compete for acquisition opportunities as they arise. The cash at hand also provides optionality with regards to the funding structure for any acquisitions, enabling us to consider smaller compelling opportunities without the need to raise capital.

The strengthening of the oil price is obviously welcomed by the industry, but does not alter the divestment agenda, nor does it have a material impact on the valuations or competitive landscape for our target acquisitions. It does however improve the economics of target assets which will in turn enhance the appetite within the capital markets to fund acquisitions.

Afentra is built upon an effective ESG framework. We have aligned ourselves with the UN Sustainable Development Goals (UNSDGs) and will increasingly meet the specific targets of the UNSDGs as we progress from acquisition through to operatorship and production.

At the heart of our approach is the conviction that African countries must be able to benefit from the positive socio-economic impact of their natural resources during the energy transition, while also upholding the highest possible environmental standards. We believe that it is important for all stakeholders that divested assets end up in the hands of quality operators that are committed to transparent disclosure of environmental data. Afentra believes that through strong environmental stewardship and a focused operating approach, we will be able to reduce the carbon emissions of any acquired assets over time.

With regard to our existing asset in Somaliland, we are currently progressing the technical assessment of Odewayne alongside our partner Genel. Afentra remains fully carried on this asset by Genel and we look forward to gaining a deeper understanding of the appropriate forward work program as that technical evaluation progresses through the second half of the year.

Overall, it has been a very active first half of the year for Afentra and we are making headway with our stated growth ambitions. The market drivers are gathering momentum and your company feels particularly well placed to capitalise on the array of upstream opportunities that will be presented as a result of the energy transition across Africa. We remain patient in our approach and believe we have put in place all the required building blocks to deliver long-term value. We thank our shareholders for their support and look forward to delivering positive outcomes for all our stakeholders through the second half of the year and beyond.

Operations Review

Somaliland

Somaliland offers one of the last great opportunities to target an undrilled onshore rift basin in Africa. The Odewayne block, with access to Berbera deepwater port less than a 100km to the north, is ideally located to commercialise any discovered hydrocarbons. The company has continued to work the reprocessed 2D seismic survey along with field data and legacy geological field studies to determine if a Mesozoic age sedimentary basin is present in the block and its prospectivity.

Odewayne (W.I. 34%) Exploration block

Overview

This large, unexplored, frontier acreage position covers 22,840km2, the equivalent of c. 100 UK North Sea blocks. Exploration activity prior to the 2017 regional 2D seismic acquisition program has been limited to the acquisition of airborne gravity and magnetic data and surface fieldwork studies, with no wells drilled on block.

The Company's wholly owned subsidiary, Afentra (East Africa) Limited ('A(EA)L'), holds a 34% working interest in the PSA (fully carried by Genel Energy Somaliland Limited for its share of the costs of all exploration activities during the Third and Fourth Periods of the PSA). The Odewayne production sharing agreement is in the Third Period, with a 1,000km, 10km by 10km 2D seismic grid acquired in 2017 by BGP. The Third Period has been further extended, through the 8th deed of amendment. This data was reprocessed in 2019 and is currently being reviewed after the disruption caused by Covid in 2020-21.

In 2H 2021 the Company will review the reprocessed 2D seismic data set and will update its technical assessment and outlook on block prospectivity accordingly. Alongside the seismic reprocessing review, the Operator is undertaking a number of work streams and it is anticipated that these will aid the JV partnership in developing an appropriate forward work program to further evaluate the prospectivity of the licence.

Outlook on buy and build strategy

In March 2021 the Company shifted focus to support a responsible energy transition in Africa by establishing itself as a credible partner for divesting IOCs and Host Governments. The Company is specifically targeting producing assets and discovered resources in Africa. The focus will be on operated positions but will also consider non-operated positions alongside credible operators with shared standards and within a joint venture where we can leverage our operating experience to influence outcomes and add value to operator plans. The Company has developed a rigorous ESG agenda which is being utilised in the screening process to ensure any acquisition opportunities meet our risk criteria and provide scope to reduce emissions through focused operational excellence.

An experienced technical and commercial team, of staff and consultants, with deep knowledge of the West African region has been assembled and is screening a number of opportunities.

Financial Rev iew

Selected financial data

 
                                                1H 2021   1H 2020   FY 2020 
 Cash and cash equivalents net to Group ($m)       40.8      43.8      42.7 
---------------------------------------------  --------  --------  -------- 
 Adjusted EBITDAX (1) ($m)                        (1.5)     (0.3)     (0.8) 
---------------------------------------------  --------  --------  -------- 
 Loss after tax ($m)                              (2.4)     (0.9)     (1.9) 
---------------------------------------------  --------  --------  -------- 
 Debt ($m)                                            -         -         - 
---------------------------------------------  --------  --------  -------- 
 NAVPS (2) (at period end) (GBP pence)             20.2      23.9      21.3 
---------------------------------------------  --------  --------  -------- 
 Share price (at period end) (GBP pence)           15.0      11.5       9.4 
---------------------------------------------  --------  --------  -------- 
 

(1) Adju s t ed EBITDAX is cal c u lat ed as earnings be f ore int ere s t, taxat i on, depreciation, amor t i sat i on, impa i r m ent, pr e - l i cence expend i tur e, pr ov isio ns and shar e -ba s ed pa y m ents.

(2) Net asset value per share

Loss from operations

T he loss from operations for 1H 2021 was $2.5 million (1H 2020: loss $1.1 million) for the reasons described below.

During the period, net administrative expenditure increased to $2.5 million (1H 2020: $1.1 million) as a result of exceptional (one off) items relating to costs associated with the migration to Afentra, a change in management and an increase in contractors and advisors. Pre-licence costs for 1H 2021 was $862k (1H 2020: $716k).

Adjusted EBITDAX and loss after tax

A d j usted EBI T DAX totalled a loss of $1.5 million (1H 2020: loss $289k).

Finance inco me of $46k r epre sents inter est r e c eived ($11k) and foreign exchange gains ($35k) on cash h eld by the Group (1H 2020: $288k).

Finance costs totalled $ 23k (1H 2020: $ 56k).

T he loss after tax totalled $ 2.4 million (1H 2020: loss $ 866k ). Basic loss per share was 1.11 USc per share ( 1H 2020: 0.39 USc loss per share ). No dividend is propos ed to be paid for the six months to 30

June 2021   (30 June 2020: nil). 

Cash flow

Net cash outflow from operating activities (pre -working capital move ments) totalled $2.3 million (1H 2020: outflow $988k ). A fter working capital, net cash outflow from operating activities totalled $ 1.8

million  (1H 2020: outflow $ 1.2   million). 

Statement of financial position

At 30 June 2021, Afentra held $40.8 million cash and cash equivalents available for its own use (30 June 2020: $43.8 million).

Group net assets at 30 June 2021 were $61.4 million (30 June 2020 were $64.9 million). Non-current assets totalled $22.0 million (30 June 2020: $22.0 million) with net current assets reducing to $40.1 million (30 June 2020: $43.7 million).

Going Concern

T he Group's business activitie s, togeth er with the factors likely to af f ect its future de v elop ment, performance and position are s et out in the CEO State ment and in the Op erations Re vie w. The financial position of the Group is de scribed in the Financial R e vie w.

T he Co mpany has s u fficient cash re sources for its working capital needs for at l east the n e xt 12 months. As a cons equence, the Dir ectors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. This assessment has been made by the Directors who remain confident the group has sufficient cash resources to meet its liabilities as they fall due for a period of at least 12 months from the date of signing these financial statements, and notwithstanding the impact that Covid-19 has had internationally. The Directors believe that the Group is in a strong position to absorb any potential impact on the Group arising from Covid-19. Accordingly, th ey continue to adopt the going concern basis in preparing the re sults for the s ix months ended 30 June 2021.

Disclaimer

T his document contains ce r tain forward-looking statements that are subj ect to the usual risk factors and uncertainties associated with the oil and gas e xploration and production busines s. Whilst the Group beli e v es the e xpectation re flected he r ein to be reasonable in light of the information available to it at this time, the actual outcome may be materially diff erent owing to factors eith er beyond the Group's control or oth erwise within the Group's control but where, for e xample, the Group decides on a change of plan or strategy. Acco rdingly, no reliance may be plac ed on the figures contained in such for ward -looking statements.

Glossary

 
$                 US Dollars 
2D                two dimensional 
                  ------------------------------------------------------ 
Adjusted EBITDAX  earnings before interest, taxation, depreciation, 
                   amortisation, impairment, pre- 
                   licence expenditure, provisions and share based 
                   payments 
                  ------------------------------------------------------ 
AIM               Alternative Investment Market of the London Stock 
                   Exchange 
                  ------------------------------------------------------ 
Group             Afentra plc, together with its subsidiary undertakings 
                   (the 'Group') 
                  ------------------------------------------------------ 
km                kilometre 
                  ------------------------------------------------------ 
NAVPS             Net asset value per share 
                  ------------------------------------------------------ 
Petrosoma         Petrosoma Limited (JV partner in Somaliland) 
                  ------------------------------------------------------ 
PSA               production sharing agreement 
                  ------------------------------------------------------ 
Seismic           Geophysical investigation method that uses seismic 
                   energy to interpret the geometry of rocks in the 
                   subsurface 
                  ------------------------------------------------------ 
km(2)             square kilometre 
                  ------------------------------------------------------ 
WI                working interest 
                  ------------------------------------------------------ 
 

Condensed consolidated income statement for the six m onths to 30 June 2021

 
                                                                                                     Restated 
                                                      Six months                                   Six months 
                                                              to                                           to                                   Year ended 
                                                       30th June                                    30th June                                31st December 
                                                            2021                                         2020                                         2020 
                                                            $000                                         $000                                         $000 
                                                     (unaudited)                                  (unaudited)                                    (audited) 
                     -------------------------------------------  -------------------------------------------  ------------------------------------------- 
 
 Other 
  administrative 
  expenses                                               (1,605)                                        (382)                                        (953) 
 Pre-licence costs                                         (862)                                        (716)                                      (1,221) 
-------------------  -------------------------------------------  -------------------------------------------  ------------------------------------------- 
 Total 
  administrative 
  expenses                                               (2,467)                                      (1,098)                                      (2,174) 
 
 Loss from 
  operations                                             (2,467)                                      (1,098)                                      (2,174) 
 
 Finance income                                               46                                          288                                          326 
 Finance expense                                            (23)                                         (56)                                         (58) 
 
 Loss before tax                                         (2,444)                                        (866)                                      (1,906) 
 
 Tax                                                           -                                            -                                            - 
 
 Loss for the 
  period 
  attributable 
  to the owners of 
  the parent                                             (2,444)                                        (866)                                      (1,906) 
                     -------------------------------------------  -------------------------------------------  ------------------------------------------- 
 Other 
 comprehensive 
 expense 
 - items to be 
 reclassified to 
 the income 
 statement in 
 subsequent 
 periods 
 
 Currency 
  translation 
  adjustments                                                (5)                                            6                                            7 
 Total 
  comprehensive 
  (expense)/income 
  for the period                                             (5)                                            6                                            7 
                     -------------------------------------------  -------------------------------------------  ------------------------------------------- 
 
 Total 
  comprehensive 
  expense 
  for the period 
  attributable 
  to the owners of 
  the parent                                             (2,449)                                        (860)                                      (1,899) 
                     ===========================================  ===========================================  =========================================== 
 
 Basic and diluted 
  loss per 
  share (US cents)                                        (1.11)                                        (.39)                                        (.87) 
 
 

Condensed consolidated statement of financial position as at 30 June 2021

 
                                                                                      Restated 
                                               As at                                     As at           As at 
                                           30th June                                 30th June   31st December 
                                  Note          2021                                      2020            2020 
                                                $000                                      $000            $000 
                                         (unaudited)                               (unaudited)       (audited) 
                                        ------------  ----------------------------------------  -------------- 
 
 Non-current assets 
 Intangible exploration and 
  evaluation assets                3          21,252                                    21,142          21,209 
 Property, plant and equipment                   746                                       848             844 
                                              21,998                                    21,990          22,053 
                                        ------------  ----------------------------------------  -------------- 
 
 Current assets 
 Trade and other receivables                     228                                       148             193 
 Cash and cash equivalents                    40,772                                    43,798          42,674 
                                              41,000                                    43,946          42,867 
                                        ------------  ----------------------------------------  -------------- 
 
 Total assets                                 62,998                                    65,936          64,920 
                                        ============  ========================================  ============== 
 
 Equity 
 Share capital                                28,143                                    28,143          28,143 
 Currency translation reserve                  (202)                                     (198)           (197) 
 Retained earnings                            33,501                                    36,985          35,945 
 Total equity                                 61,442                                    64,930          63,891 
                                        ------------  ----------------------------------------  -------------- 
 
 Current liabilities 
 Trade and other payables                        825                                       178             209 
 Lease liability                                 120                                        98             205 
                                                 945                                       276             414 
                                        ------------  ----------------------------------------  -------------- 
 
 Non-current liabilities 
 Lease liability                                 576                                       700             581 
 Long-term provision                              35                                        30              34 
                                                 611                                       730             615 
                                        ------------  ----------------------------------------  -------------- 
 
 Total liabilities                             1,556                                     1,006           1,029 
                                        ------------  ----------------------------------------  -------------- 
 
 Total equity and liabilities                 62,998                                    65,936          64,920 
                                        ============  ========================================  ============== 
 
 

Condensed consolidated statement of changes in equity for the six months ended 30 June 2021

 
                                                            Currency 
                                                 Share   translation   Retained 
                                               capital       reserve   earnings     Total 
                                                  $000          $000       $000      $000 
                                 ---------------------  ------------  ---------  -------- 
 
 At 1 January 2020                              28,143         (204)     37,851    65,790 
-------------------------------  ---------------------  ------------  ---------  -------- 
 Total comprehensive expense 
  for the period attributable 
  to the owners of the parent                        -             6      (866)     (860) 
                                                                      --------- 
 At 30 June 2020 - restated                     28,143         (198)     36,985    64,930 
-------------------------------  ---------------------  ------------  ---------  -------- 
 Total comprehensive expense 
  for the period attributable 
  to the owners of the parent                        -           (1)    (1,040)   (1,039) 
 At 31 December 2020                            28,143         (197)     35,945    63,891 
-------------------------------  ---------------------  ------------  ---------  -------- 
 Total comprehensive expense 
  for the period attributable 
  to the owners of the parent                        -           (5)    (2,444)   (2,449) 
 At 30 June 2021                                28,143         (202)     33,501    61,442 
-------------------------------  ---------------------  ------------  ---------  -------- 
 
 

Condensed consolidated statement of cash flows for the six months ended 30 June 2021

 
                                                                                      Restated 
                                       Six months                                   Six months 
                                               to                                           to      Year ended 
                                        30th June                                    30th June   31st December 
                               Note          2021                                         2020            2020 
                                             $000                                         $000            $000 
                                      (unaudited)                                  (unaudited)       (audited) 
                                     ------------  -------------------------------------------  -------------- 
 
 Operating activities: 
 
 Loss before tax                          (2,444)                                        (866)         (1,906) 
 Depreciation, depletion 
  & amortisation                              119                                          166             193 
 Finance income and 
  gains                                      (46)                                        (288)           (326) 
 Finance expense and 
  losses                                       23                                            -              59 
                                     ------------  -------------------------------------------  -------------- 
 Operating cash outflow 
  prior to working capital 
  movements                               (2,348)                                        (988)         (1,980) 
 (Increase)/decrease 
  in trade and other 
  receivables                                (35)                                           84              57 
 Increase/(decrease) 
  in trade and other 
  payables                                    616                                        (262)           (230) 
 Increase in provision                          1                                            -               4 
 Net cash outflow from 
  operating activities                    (1,766)                                      (1,166)         (2,149) 
 
 Investing activities 
 Interest received                             11                                          284             326 
 Purchase of property, 
  plant and equipment                         (9)                                            -            (12) 
 Exploration and evaluation 
  costs                         3            (43)                                         (23)            (90) 
 
 Net cash (used)/generated 
  from investing activities                  (41)                                          261             224 
 
 Financing activities 
 Principal paid on 
  lease liability                           (121)                                        (108)           (237) 
 Interest paid on lease 
  liability                                  (20)                                         (29)            (46) 
 
 Net cash used in financing 
  activities                                (141)                                        (137)           (283) 
 
 Net decrease in cash 
  and cash equivalents                    (1,948)                                      (1,042)         (2,208) 
 
 Cash and cash equivalents 
  at beginning of period                   42,674                                       44,851          44,851 
 
 Effect of foreign 
  exchange rate changes                        46                                         (11)              31 
 
 Cash and cash equivalents 
  at end of period                         40,772                                       43,798          42,674 
                                     ============  ===========================================  ============== 
 
 

Notes to the consolidated results for the six months ended 30 June 2021

   1.            Basis of preparation 

T he financial information contained in this announcement does not constitute statutory financial statements within the meaning of S ection 435 of the Co mpanies Act 2006.

T he financial information for the six months ended 30 June 2021 is unaudited. In the opinion of the Directors, the financial information for this period fairly repre s ents the f inancial position of the Group. R e sults of operations and cash flo ws for the period are in compliance with International Financial Reporting Standards (IFRSs). T he accounting policie s, e stimat es and judg e ments applied are consistent with those disclos ed in the annual financial statements for the year ended 31 De c e mber 2020. The se financial statem ents should be read in con junction with the annual financial statem ents for the year ended 31 De c em b er 2020.

The financial information for the six months ended 30 June 2020 has been restated as a consequence of an IFRS 9 adjustment by the Group.

A ll financial information is pres ented in USD, unle ss oth erwise disclos ed.

An unqualified audit opinion was expressed for the year ended 31 December 2020, as delivered to the Registrar.

The Directors of the Company approved the financial information included in the results on 09 September 2021.

   2.            Results & dividends 

T he Group has r etained earnings at the end of the p eriod of $33.5 million (30 June 2020: $37.0 million r etained earnings) to be carried forward. The Directors do not recom mend the paym ent of a dividend (1H 2020: nil ).

   3.            Intangible exploration and evaluation (E&E) assets 
 
                                              Total 
                                               $000 
                                        (unaudited) 
                                       ------------ 
 
 Net book value at 31 December 2019          21,119 
                                       ------------ 
 Additions during the period                     23 
 Net book value at 30 June 2020              21,142 
                                       ------------ 
 Additions during the period                     67 
 Net book value at 31 December 2020          21,209 
                                       ------------ 
 Additions during the period                     43 
 Net book value at 30 June 2021              21,252 
                                       ------------ 
 
 

Group intangible assets:

Odewayne PSA, Somaliland: SE(EA)L 34%, Genel Energy Somaliland Limited 50%, Petrosoma 16%

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