TIDMAET
RNS Number : 9448S
Afentra PLC
19 July 2022
This announcement contains inside information for the purposes
of article 7 of Regulation 2014/596/EU (which forms part of
domestic UK law pursuant to the European Union (Withdrawal) Act
2018) ('UK MAR'). Upon publication of this announcement, this
inside information (as defined in UK MAR) is now considered to be
in the public domain. For the purposes of UK MAR, the person
responsible for arranging for the release of this announcement on
behalf of Afentra is Paul McDade, Chief Executive Officer.
19th July 2022
AFENTRA PLC
Afentra acquires additional interests in Angola
Afentra plc ('Afentra' or the 'Company') is pleased to announce
that its wholly-owned subsidiary, Afentra (Angola) Ltd, has signed
a Sale and Purchase Agreement ('SPA') with INA - Industrija Nafte,
d.d. to acquire a 4% interest in Block 3/05 and a 5.33% interest(1)
in Block 3/05A, offshore Angola (the "INA Transaction"). This
transaction builds upon the acquisition of a 20% interest in Block
3/05 from Sonangol announced in April 2022 (the "Sonangol
Acquisition"). The INA Acquisition has an effective date of 30(th)
September 2021.
Transaction Highlights:
-- Strategic Rationale - Incremental acquisition builds upon
Afentra's strategic entry into Block 3/05, a mature, shallow water,
production asset with material upside
-- Block 3/05 - Acquisition results in a combined equity ownership of 24%(2)
o Initial consideration of $9 million
o Additional consideration of $10 million, payable upon licence
extension(3)
o Contingent consideration of up to $6 million over 3 years,
subject to certain oil price hurdles and an annual cap of $2
million
-- Block 3/05A - Acquisition of 5.33% interest in a license
adjacent to Block 3/05, providing the opportunity to tie back
existing discoveries to the Block 3/05 infrastructure
o Initial consideration of $3 million
o Contingent consideration of up to $5 million linked to the
successful future development of certain discoveries and oil price
hurdles
-- Combined Interests - the INA Transaction and the previously
announced Sonangol Acquisition are expected to be financed through
new debt facilities and existing cash, discussions with selected
debt provider are well advanced
o Combined 2P reserves of 24 million barrels and production of
4,680 bbl/day
o Overall low-cost entry with implied acquisition cost of $4/ 2P
bbl(4)
o Attractive asset breakeven economics of $35/bbl
o Average net FCF after capex of $35 million p.a. @ $75/bbl over
next 5 years
o Payback in less than 3 years at $75/bbl based on 2P production
alone
Transaction Overview
Further to the RNS issued on 28 April 2022, in which Afentra
announced that it had signed an SPA with Sonangol to purchase
interests in Block 3/05 and Block 23, offshore Angola, the Company
is pleased to announce an attractive acquisition from INA, of a
further 4% non-operated interest in Block 3/05 and entry into
adjacent Block 3/05A with the acquisition of a 5.33% non-operated
interest.
The acquisition will take Afentra's combined interest in Block
3/05 to 24%(2) with a combined implied acquisition cost of $4/ 2P
bbl(4) and asset breakeven costs of $35/bbl. Block 3/05 production
averaged 19,500 bopd in the first half of 2022 and has material
production growth potential. Upon completion of both the Sonangol
and INA transactions, Afentra will have initial 2P Reserves of c.24
million barrels (20 and 4 mmbo respectively) and daily production
of c.4,680 bbl/d. (3900 and 780bopd respectively).
The asset interests being acquired under the INA Transaction
generated an EBITDA of US$ 5.3 million for the year ended 31
December 2021, as extracted from unaudited management information
for the year, with EBITDA being defined as "earnings before
interest, tax, depreciation and amortisation".
Block 3/05, in which Afentra is acquiring a further 4%
non-operated interest, is located in the Lower Congo Basin and
consists of eight mature producing fields. The discoveries were
made by Elf Petroleum (now part of TotalEnergies) in the early
1980s. Development was by shallow-water (40-100m) platforms that
included successful waterflood activities with first oil in 1985.
Sonangol assumed operatorship from 2005 and has focused on
sustaining production through workovers and maintaining asset
integrity. No infill drilling campaigns have taken place in the
last 15 years. The asset has a diverse portfolio of over 100 wells
and currently produces from around 40 production wells and has nine
active water injectors. The facilities include 17 well-head and
support platforms and four processing platforms, with oil exported
via the Palanca FSO.
The entry into Block 3/05A also provides Afentra with access to
existing light oil and associated gas discoveries that could be
tie-back developments to the existing Block 3/05 infrastructure.
Block 3/05A contains an oil in place of 300 mmbls, including one
partially developed and two un-developed oil discoveries. There is
potential for material incremental gross production of circa 10,000
bbl/d.
Both 3/05 and 3/05A provide scope for broad based ESG impact in
the form of emissions reduction, gas utilisation opportunities and
positive socio-economic impacts. Consistent with Afentra's purpose
and strategy, Afentra will be working alongside Sonangol to support
its transition strategy which is closely aligned with Afentra's ESG
agenda. A key outcome of the due diligence work to date has been to
identify the opportunity to work with the JV to enhance the
environmental performance of Block 3/05 through emissions
reductions.
The acquisition of the assets from INA is expected to be funded
through the same debt and existing available funds as those being
utilised for the Sonangol transaction and discussions with the
selected debt finance provider are well advanced and will be
finalised ahead of re-admission.
Transaction Timings and RTO Update
The INA Acquisition is subject to satisfaction of Conditions
Precedent customary for a transaction of this nature which mainly
relate to Governmental approvals and waiver of state pre-emption
rights, these are expected in Q3/Q4 2022.The licence extension of
Block 3/05 which will trigger the incremental payment of $10
million is also expected to be granted in Q3/Q4 2022.
The ongoing Sonangol transaction and associated RTO process,
with publication of the AIM re-admission document and resumption of
trading is expected to occur in the coming weeks. The General
Meeting to approve the Sonangol Acquisition will follow in line
with regulatory timelines.
Transaction Presentation
A presentation providing further details of the INA transaction
has been uploaded to Afentra's website and can be viewed via the
following link:
https://afentraplc.com/wp-content/uploads/2022/07/Afentra-Second-Acquisition-final.pdf
Commenting on the update, CEO Paul McDade said:
"This incremental acquisition is strategically attractive as it
enhances the materiality of our entry into Angola and provides
additional exposure to proven assets with significant upside. Block
3/05 is a high-quality asset with stable and robust cash flow and
material production growth potential. The acquisition of an
additional 4% demonstrates our commitment to both the asset and our
plan to work with the operator, Sonangol, to maximise the
production and recovery from this material asset for the benefit of
all stakeholders.
Together, the Sonangol and INA transactions provide a solid
foundation for Afentra's growth in Angola, and elsewhere within
Africa, our geographic focus. They also demonstrate the significant
opportunities that exist in the region, for a responsible and
ambitious independent like Afentra, that are resulting from the
transition that is ongoing in the oil and gas industry in
Africa."
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
Chris Judd
Peel Hunt LLP (Nominated Advisor and Joint Broker) +44 (0)20
7418 8900
Richard Crichton
Paul Gillam
David McKeown
Tennyson Securities (Joint Broker) +44 (0)20 7186 9033
Peter Krens
About Afentra
Afentra plc (AIM:AET) is an upstream oil and gas company focused
on opportunities in Africa. The Company's purpose is to support
a responsible energy transition in Africa by establishing itself
as a credible partner for divesting IOCs and Host Governments.
Afentra has a current carried interest in the Odewayne Block
onshore southwestern Somaliland.
Technical Information
The technical information contained in this announcement has
been reviewed and approved by Robin Rindfuss, Head of Sub-Surface
at Afentra plc. Robin Rindfuss has over 25 years of experience in
oil and gas exploration, production and development and is a member
of the Society of Petroleum Engineers (SPE). The OIIP and 2P
Reserves information set out herein are currently determined by
Afentra and are subject to the ongoing preparation of an
independent Competent Persons Report.
Continued suspension of trading
The Sonangol Acquisition constitutes a reverse takeover in
accordance with Rule 14 of the AIM Rules for Companies. An AIM
re-admission document setting out, inter alia, details of the
Sonangol Acquisition (including a competent person's report on
Block 3/05) and the INA Acquisition will be published and sent to
Afentra's shareholders with a notice of general meeting in late
July. Accordingly, the Company's ordinary shares will remain
suspended from trading on AIM until either the publication of an
AIM admission document or until confirmation is given that the
Sonangol Acquisition is not proceeding. The Company will release
further announcements as and when appropriate.
Standard
Estimates of reserves and resources have been prepared in
accordance with the June 2018 Petroleum Resources Management System
("PRMS") as the standard for classification and reporting.
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END
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