REG - Afentra PLC - 2023 HALF YEAR RESULTS
12/09/2023 07:00
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RNS Number : 0740M Afentra PLC 12 September 2023
12 September 2023
AFENTRA PLC
2023 HALF YEAR RESULTS
Afentra plc ('Afentra' or the 'Company'), the upstream oil and gas company
focused on acquiring mature production and development assets in Africa,
announces its half year results for the six months ended 30 June 2023 (the
'Period').
Financial Summary
· Cash resources as at 30 June 2023 of $15.7 million, which
includes restricted funds of $8.0 million(1) (30 June 2022; $35.1 million
included restricted funds of $8.0 million(1))
· Crude oil stock as at 30 June 2023 of approx. 245,000 bbls (30
June 2022: nil), including crude oil stock inherited from the INA Acquisition
and subsequent net entitlement production from Blocks 3/05 and 3/05A
· Adjusted EBITDAX loss of $0.8 million (H1 2022: loss $1.2
million)
· Loss after tax of $3.9 million (H1 2022: loss $2.9 million)
· Debt drawdowns: Reserve Based Lending Facility (The "RBL
Facility") $12.8 million and Working Capital Facility $9.1 million
Angolan Acquisitions
The Company completed the INA Acquisition in May 2023 and is progressing its
two strategically consistent and complementary transactions in Angola.
· INA Acquisition: completed the acquisition of interests in Block
3/05 (4%) and Block 3/05A (5.33%)(2) offshore Angola for a net $17.0 million
payment on 10 May 2023 with a subsequent $10.0 million contingent payment made
to INA on 17 May 2023 upon the extension of the Block 3/05 licence from 31
December 2025 to 31 December 2040. The $27.0 million net upfront consideration
was funded through $18.9 million in agreed debt facilities and $8.1 million
cash. The Company also inherited crude oil stock of 207,868 bbls, which has
subsequently been sold Post-Period in August (details below).
· Block 3/05 License Extension: satisfaction of a key condition
precedent of the Sonangol Acquisition following the Block 3/05 Licence
Extension to December 2040. Improved fiscal terms have also been agreed
between the JV partners and ANPG and are now proceeding through the formal
government approval process.
· Block 23 License Extension: the exploration licence has been
extended until 2 December 2026.
· Financing Agreements: Mauritius Commercial Bank entered both the
RBL and working capital facilities becoming lender to the Company. Trafigura
retains an interest in the RBL facility and will continue as an offtake
provider.
Post Period end, announcement of intended acquisitions:
· Azule Acquisition: acquisition of interests in Block 3/05 (12%)
and Block 3/05A (16%)(2) offshore Angola for a firm consideration of $48.5
million and contingent payments of up to $36 million(3). Transaction will be
funded through the agreed capacity within debt facilities with Mauritius
Commercial Bank and Trafigura and existing cash on balance sheet. A 10%
transaction deposit of $4.85 million has been placed in escrow as per the Sale
and Purchase Agreement ('SPA').
· Amended Sonangol Acquisition: acquiring a reduced working
interest from Sonangol in Block 3/05, from 20% to 14% in order to ensure an
appropriate balance of equity interests in Block 3/05. Firm and contingent
considerations reduce to $56 million and up to $35 million, respectively(4)
(terms including the effective date of 20 April 2022 remaining unchanged).
Combined with existing ownership and the Azule Acquisition, Afentra's working
interests will be 30% in Block 3/05 and 21.33%(2) in Block 3/05A. The
consideration for the 40% interest in Block 23 remains unchanged at $0.5
million.
Operations Summary
Existing operations and impact of ongoing acquisitions(5)
· Block 3/05 (4% interest): a programme of successful light well
interventions ('LWI') has been ongoing in 2023, delivering incremental
production; combined with further interventions (post-period) gross daily
production rates have exceeded 20,000 bbl/d since end July. An additional LWI
campaign commenced in August and will continue through to year end. Water
injection upgrades are also ongoing with injection rates more than doubling
YoY (averaging approx. 38,000 bw/d during H1 2023), injection volumes are
expected to continue to increase through H2 2023. This improved water
injection is expected to impact oil production in the medium term as reservoir
pressure increases.
· Block 3/05A (5.33%):(2) production was restored at the Gazela
field in March and at end-July was approx. 1,450 bbl/d. This extended test
will help to establish the long-term resource potential and appropriate
development strategy.
· Production: consolidated net H1 2023 production from Blocks 3/05
and 3/05A
Production (bopd)
Current Equity Post Transactions(5)
Block 3/05 720 5,400
Block 3/05A 65 260
Total 785 5,660
· Reserves and resources: following an updated CPR, effective 1
July 2023, reserves replacement in the first half of 2023 has been in excess
of 150%.
2P Reserves (mmbbls) 2C Resources (mmbbls)(6)
Current Equity Post Transactions(5) Current Equity Post Transactions(5)
Block 3/05 4.4 32.9 1.7 13.1
Block 3/05A - - 2 7
Total 4.4 32.9 3.7 20.1
· Odewayne block: offshore Somaliland (34% interest fully carried
by operator, Genel Energy), the operator and Afentra completed updated
petroleum systems and satellite seep studies with borehole planning in
progress.
Post Period end
· Suspension of shares and reverse takeover: in accordance with the
AIM Rules for Companies, the Company's ordinary shares were suspended from
trading on AIM from 19 July 2023 as the Azule Acquisition and Amended Sonangol
Acquisition each constitute a reverse takeover ('RTO') under Rule 14 of the
AIM Rules. Trading in the Company's ordinary shares will remain suspended
until such time as either an admission document is published, or an
announcement is released confirming that the Azule Acquisition and Amended
Sonangol Acquisition are not proceeding.
· AIM Readmission process and General Meeting: the Company has made
encouraging progress with respect to the recommencement of trading on AIM and
expects to publish an Admission Document shortly, with both the Azule
Acquisition and the Amended Sonangol Acquisition being subject to shareholder
approval thereafter. We expect both transactions to complete, subject to
shareholder approval, in Q4 2023.
· First crude cargo sale: the Company sold its first cargo of
300,000 bbls of crude oil in August comprising crude oil stock and subsequent
production from the INA Acquisition. The sales price inclusive of the Brent
premium was $88/bbl, generating pre-tax sales of $26.4 million net to Afentra.
· Block 3/05 fiscal terms: the enhanced fiscal terms associated
with the Block 3/05 PSA extension remain subject to requisite government
approvals and we look forward to providing shareholders with further updates
in due course.
Paul McDade, Chief Executive Officer, Afentra plc commented: "Having
identified Blocks 3/05 and 3/05A as assets that align with the strategic
purpose of Afentra, we targeted acquiring a material ownership in both
licenses. This year we have made substantial progress towards that goal. In
the first half of 2023, we achieved a significant milestone through the
completion of our inaugural deal with INA to introduce these producing and
development assets to the Company. This was followed with the announcement of
the Azule SPA and Amended Sonangol transaction post-period, allowing us to
maximise our ownership in both Block 3/05 and Block 3/05A while ensuring an
appropriate balance of interests in the partnership. The positive news on the
license extension and the favourable improvement of the fiscal terms that are
proceeding through the approval process, underpins our belief that Angola is
an attractive investment environment where we can maximise the value of these
high-quality assets over the long-term.
In August we achieved another important milestone selling our first cargo of
crude, at an attractive price, allowing us to monetise the barrels acquired at
the completion of the INA transaction and generate Afentra's first revenues.
On the operational side, the assets have performed well following the
maintenance, light well intervention and water injection programmes undertaken
and we take confidence in the positive influence the Afentra team have had
working alongside Sonangol and our JV partners. The enhanced production and
solid reserve replacement achieved through an active work programme
demonstrates the considerable upside that we believe can be realised from
Block 3/05 out to the current license period of 2040.
The RTO process has progressed both efficiently and cost effectively thus far,
ensuring that the suspension period for our shares is minimised. We look
forward to demonstrating the highly value-accretive nature of the Azule
transaction, and the amended Sonangol transaction, when they complete in the
coming months, and meanwhile due to the effective dates we continue to benefit
from the associated cash flow of those interests, which will be further
enhanced by the improved fiscal terms.
Finally, we look forward to ending the year having completed all three
transactions which will underpin the Company with material proven reserves,
robust production and cash flow, and significant upside potential from a
high-quality asset base."
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
Barry Archer
George Pope
Peel Hunt LLP (Nominated Advisor and Joint Broker) +44 (0)20 7418 8900
Richard Crichton
David McKeown
Georgia Langoulant
Tennyson Securities (Joint Broker) +44 (0)20 7186 9033
Peter Krens
(1) Please refer to Note 6 (notes to the accounts) for further detail on
restricted funds
(2) Assumes that the default China Sonangol interests have been redistributed
pro-rata amongst existing Partners, increasing Afentra's interest in Block
3/05A from 4% to 5.33% post-INA Acquisition and from 16% to 21.33% post-Azule
Acquisition completion
(3) Up to $21 million in contingent payments payable on a sliding scale above
Brent price of $75/bbl with an annual cap of $7 million over the years 2023,
2024 & 2025; and up to $15 million in contingent consideration linked to
the successful future development of the Caco-Gazela and Punja discoveries
(split $7.5 million equally), payable 1 year after first oil subject to a
Brent price of $75/bbl and production hurdles
(4) Firm and contingent considerations reducing from $80 million to $56
million and from up-to $50 million to up-to $35 million (capped at $3.5
million p.a. for an unchanged 10-year period commencing 1 January 2023 and oil
price hurdle of $65/bbl)
(5) Subject to completion of the Azule and Amended Sonangol Acquisitions,
Afentra's working interest increases from 4% to 30% in Block 3/05, from 5.33%
to 21.33% in Block 3/05A,(2) and from 0% to 40% in Block 23
(6) Block 3/05A 2C resources of 33 mmbbls (gross) based on Afentra resource
estimate effective 1 July 2023
CEO Statement
The year thus far has seen Afentra take considerable strides towards its
long-term growth objectives. Through the first-half period, our focus was to
progress the Angolan transactions to ensure that we secured a material equity
position in both Block 3/05 and Block 3/05A.
The completion of the INA transaction in May represented a watershed event for
Afentra as we succeeded in underpinning the Company with proven reserves and
robust cash flow from the 4% interest in Block 3/05, as well as obtaining
exposure to the adjoining Block 3/05A in which we see significant long-term
upside potential. The commercial terms structured for this transaction have
been shown to be clearly attractive for Afentra with the Company benefitting
from the long duration of associated production from the acquired assets since
the effective date of 30 September 2021. Indeed, selling this inherited crude
oil stock and subsequent production at $88/bbl in August generated pre-tax
sales of $26.4 million.
Subsequently in May, we were able to satisfy a key condition precedent on the
Sonangol SPA with the extension of the Block 3/05 PSA term to 31 December 2040
following a prolonged period of negotiation between the Angolan regulator ANPG
and the Block 3/05 partners. The improved fiscal terms associated with the
extension, when approved, are anticipated to enhance the economics of the
assets for the contracting partners and encourages the partners to invest to
deliver maximum value from these high-quality assets through to 2040.
While resulting in delays to completion of the Sonangol transaction there is
no doubt that the better terms achieved will benefit Afentra as we move
forward within the 3/05 partnership, especially in the context of the more
material position we have since obtained in the license. The regulatory
authorities have only shown to demonstrate a pragmatic approach throughout the
negotiation period, providing a strong signal of the Country's willingness to
encourage investment into the upstream sector. This strengthens our confidence
that we have entered a supportive market with a firm understanding of the
evolving industry landscape, and a recognition of the important role that
companies like Afentra can play in delivering a responsible industry
transition.
Post-period in July, Afentra announced signing of the SPA with Azule to
acquire an additional 12% non-operated interest in Block 3/05 and up to 16%
interest in Block 3/05A for a firm consideration of $48.5 million and
contingent payments of up to $36 million. In order to ensure an appropriate
balance of equity interests in Block 3/05 post completion of all previously
announced transactions, the Company decided in tandem with Sonangol to amend
the terms of the Sonangol SPA, reducing the working interest in Block 3/05
associated with that transaction from 20% to 14%, and reducing the associated
firm and contingent considerations on a pro-rata basis. Other terms including
the effective date remain unchanged so Afentra continues to benefit from the
net share of production dating back to the effective date of 20 April 2022. At
the time of the announcement, we explained why the acquired Azule barrels are
attractive to us (low cost, more advantageous contingent payment structure and
higher (on a relative basis) inherited cost pool) but also the strategic
significance of obtaining a meaningful interest in the attractive development
Block 3/05A.
As the Azule Acquisition constituted a reverse takeover by AIM Rules, the
Company's ordinary shares were suspended from trading on AIM from 19 July
2023. While disruptive to enter another period of suspension with the Sonangol
transaction having neared completion, we took the strategic decision to pursue
the Azule transaction as a compelling opportunity that delivers numerous
strategic and commercial benefits for Afentra. The parallel amendment to the
Sonangol transaction was deemed to better align interests in the Block 3/05 JV
going forward whilst allowing Afentra to become a significant partner in Block
3/05A.
Following completion of the Azule and Sonangol transactions, now expected to
occur in Q4'23, Afentra will have material equity in both Block 3/05 (30%) and
Block 3/05A (21.33%), resulting in net 2P reserves of approx. 33 mmbbls, net
2C resources of approx. 20 mmbbls and net production of approx. 5,700 bbl/d,
and increased exposure to the significant upside potential of these material
production, near-term development assets and additional prospective resources
located around existing Block 3/05 fields.
The strategic rationale to acquire a more meaningful interest in these Blocks
aligns with Afentra's desire to ensure the Company can utilise its technical
and commercial expertise to influence the operational and environmental
performance of the assets in which it is involved. In that regard, the Company
continues to undertake technical work on the assets which it is evaluating
alongside its new partners as we jointly seek to realise maximum value from
these assets for the benefit of all stakeholders.
In terms of operational performance through the period, production from Block
3/05 averaged approx. 18,000 bbl/d, with production trending upwards to
average 19,100 bbl/d in June and rates exceeding levels of 20,000 bbl/d since
July, demonstrating the benefit of continued restoration works over Q1'23 in
addition to the well intervention activities underway. Furthermore, reserves
replacement in the first half of 2023 has been in excess of 150% and will be
reflected in an updated CPR associated with the RTO process.
Alongside efforts to deliver strategic growth, the Company continued its
commitment to governance through the appointment of Mr. Thierry Tanoh to its
Board as Independent Non-Executive Director and Chairman of the Audit
Committee. The appointment of Mr. Tanoh, whose previous roles included
leadership positions within the International Finance Corporation (IFC), CEO
of pan-African banking conglomerate Ecobank Group and Minister of Oil, Energy
and Renewables of Cote d'Ivoire, reflected the Board's commitment to ensure it
maintains the appropriate level of experience and independence, as well as its
ambition to build a credible business capable of attracting such impressive
talent.
In summary, the strategic progress delivered through the first half of the
year and beyond maintain Afentra's strong momentum as we continue to identify
and execute value enhancing transactions. The second half of the year looks
set to be transformative for the Company, as we seek to complete the Azule and
amended Sonangol acquisitions, and the associated RTO process, in an efficient
and timely manner. Upon completion, Afentra will have transformed itself into
one of the leading African focused independents listed in London and a company
with a strong growth platform from which to deliver its more ambitious growth
objectives.
Operations Review
Angola
Angola is one of the largest oil producers in Africa with current production
of 1.1 million bbl/d from deepwater, shallow water and onshore dating back to
1956. The economy is dependent on responsible management of hydrocarbon
resources. Investment has historically been dominated by IOCs, however assets
are starting to change hands. Afentra believes that the situation is similar
to the status to the UKCS where a more mature industry transition has already
played out. Global research and consultancy business Wood Mackenzie has
identified approx. 15 billion barrels of oil and gas reserves and resources,
highlighting the scale of opportunity in Angola. According to IHS Markit
Consulting, close to 300 fields have been discovered with less than half
developed (IHS 2022). Over the last 5 years, the Angolan government led by
President João Lourenço has actively sought new oil and gas investors
alongside improving fiscal terms and extending licenses. There are large
opportunities for growth and limited competition in the independent space.
Equity interests shown below relate to post completion of Sonangol and Azule
transactions.
Block 3/05 (30%)
Block 3/05 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
achieved in 1985. Sonangol assumed operatorship from 2005 and has focused on
sustaining production through workovers and maintaining asset integrity. The
asset has a diverse portfolio of over 100 wells and currently produces from
approx. 40 production wells and has approx. 16 active water injectors. The
facilities include 14 well-head and support platforms, four processing
platforms, a logistics and living quarter barge, 3 subsea wells and oil is
exported via the Palanca FSO.
In the H1 of 2023 average daily gross production was approx. 18,000 bbl/d with
an exit rate for June 2023 at approx. 19,100 bbl/d following good results from
well intervention activities carried out during Q2 2023. Additional well
interventions are ongoing through H2 2023 to enable further production rate
increments during this period. Re-instatement of water injection has
progressed steadily with H1 2023 averaging approx. 38,000 bw/d, more than
double the 2022 average, with further ramp-up planned for the second half of
the year. Gross 2P reserves are 110 mmbbls as of 30(th) June 2023 and 2C
resources are 44 mmbbls. Block 3/05's existing Production Sharing Agreement
('PSA') has successfully been extended to the end of 2040. To date, the asset
decommissioning costs have been pre-funded to the amount of $554 million.
Post completion of the Acquisitions, the JV will be comprised as follows:
Sonangol (Operator, 36%), Afentra (30%), M&P (20%), Etu Energias (10%) and
NIS-Naftagas (4%).
Block 3/05A (21.33%)
Block 3/05A, which is located adjacent to Block 3/05, contains the undeveloped
discoveries Punja, Caco and Gazela with an estimated in place resource of 0.3
billion barrels. The 2C resources estimated by Afentra is 33 mmbbls. The
Gazela field was produced from 2015, with approximately 2 mmbls recovered,
prior to a wellbore shutdown in 2017. The well was successfully restarted at
the end of March 2023 at approx. 1,200 bbl/d on an extended well test,
increasing to 1,450 bbl/d post-period. Assessments to define an optimal
development framework of these fields benefitting from the use of the nearby
Block 3/05 facilities and infrastructure is ongoing.
Post completion of the Sonangol and Azule Acquisitions and subject to final
approval of the distribution of the CSI interest, the JV will be comprised as
follows: Sonangol (Operator, 33.33%), M&P (26.67%), Afentra (21.33%), Etu
Energias (13.33%), and NIS-Naftagas (5.33%).
Block 23 (40%)
Block 23 is a 5,000 km(2) exploration and appraisal block located in the
Kwanza basin in water depths from 600 to 1,600 meters and has a working
petroleum system. Whilst the large block is covered by modern 3D and 2D
seismic data sets, with no outstanding work commitments remaining, the
majority of the block remains under-explored.
The block contains the Azul oil discovery, the first deepwater pre-salt
discovery in the Kwanza basin. This discovery made in carbonate reservoirs has
oil in place of approx. 150 mmbbls and tested at flow rates of approx. 3,000 -
4,000 bbl/d of light oil.
Post completion of the Acquisition, the JV is expected to be comprised of:
Namcor, Sequa and Petrolog (40% and operator); Afentra (40%) and Sonangol
(20%).
Somaliland
Somaliland offers one of the last great opportunities to target an undrilled
onshore rift basin in Africa. The Odewayne block covers 22,840 km(2) ,and with
access to Berbera deepwater port less than a 100km to the north, is ideally
located to commercialise any discovered hydrocarbons.
Odewayne Block (34%)
In H1 the operator completed an updated petroleum system analysis complemented
by a satellite seep study. Both the operator and Afentra have now confirmed
the presence of trace oil in the sample taken at the water well drilled by the
Ministry of Water Resources Development at the village of Baha-Dhamal in 2022.
The likely source for the oil is a Mesozoic age source rock which fits with an
Upper Jurassic source rock.
In H2 2023 the Company will work alongside the Operator in developing an
appropriate forward work program to further evaluate the prospectivity of the
license, including attempting to resample the fluid with a new borehole at the
original well location to define the future work program.
The Company's 34% working interest in the PSA is 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.
Financial Review
From a financial perspective, the completion of the INA transaction in H1 2023
and the associated activation of the Reserve Based Lending and Working Capital
facilities brings to fruition a long period of careful planning, negotiation
and preparation for deal completion and Financial and Commercial JV
operations. A robust and conservative approach towards cash management
continued to be a focus area during H1, as did the progression of both the
Sonangol and Azule transactions and the screening of further M&A
opportunities in the West Africa Region. Looking to the second half of the
year, we will look to become an active and supportive commercial partner in
Blocks 3/05 and 3/05A, manage our cash and debt obligations robustly and
prepare for the completion of the Sonangol and Azule transactions, whilst
ensuring a successful re-admission of trading on the AIM market.
Selected financial data
H1 2023 H1 2022 FY 2022
Cash and cash equivalents net to Group ($m) 7.7 27.1 20.4
Restricted Funds 8.0 8.0 10.2
Adjusted EBITDAX(1) ($m) (0.8) (1.2) (5.2)
Loss after tax ($m) (3.9) (2.9) (9.1)
Debt facilities:
Reserve Based Lending Facility ($m) 12.8 - -
Working Capital Facility ($m) 9.1 - -
Share price (at period end) (GBP pence) 24.5 14.6 26.4
(1)Adjusted EBITDAX is calculated as earnings before interest, taxation,
depreciation, amortisation, impairment, pre-licence expenditure, provisions
and share-based payments.
Revenue
Currently, all of the Group's production is from Block 3/05 and Block 3/05A
with net production in the period averaging c.a. 785 bbl/day. No revenue was
recognised in H1 2023 (first cargo of crude oil sold in August 2023).
Loss from operations
The loss from operations for H1 2023 was $3.4 million (H1 2022: loss $2.9
million).
During the period, net administrative expenditure increased to $3.4 million
(H1 2022: $2.9 million) predominantly as a result of increased headcount and
costs relating to the Angolan Acquisitions and its associated workstreams.
Pre-license costs for H1 2023 were $2.2 million (H1 2022: $1.6 million).
Adjusted EBITDAX and loss after tax
Adjusted EBITDAX totaled a loss of $0.8 million (H1 2022: loss $1.2 million).
Finance income of $0.1 million represents interest received on cash held by
the Group (H1 2022: $2k).
Finance costs totaled $0.6 million (H1 2022: $0.1 million).
The loss after tax totaled $3.9 million (H1 2022: loss $2.9 million). Basic
loss per share was 1.8 US¢ per share (H1 2022: 1.3 US¢ loss per share).
No dividend is proposed to be paid for the six months to 30 June 2023 (30 June
2022: nil).
Cash flow
Net cash outflow from operating activities (pre-working capital movements)
totaled $2.9 million (H1 2022: outflow $2.8 million). After working capital,
net cash outflow from operating activities totaled $5.8 million (H1 2022:
outflow $2.5 million).
Net cash used in investing activities totaled $25.1 million (H1 2022: $8.0
million) primally due to the acquisitions of Block 3/05 and Block 3/05A,
offset by a reduction in the restricted funds (payable on closing of the INA
transaction, detailed in Note 6).
Net cash generated in financing activities totaled $18.3 million (H1 2022:
used $0.1 million) primally as a result of the drawdowns on debt facilities of
$21.9 million offset by the associated financing fees for the Angolan
transactions of $2.9 million.
Statement of financial position
At 30 June 2023 Non-current assets totaled were $62.6 million (30 June 2022:
$21.8 million), the increase related to the acquisition of Block 3/05 and
Block 3/05A (detailed in Notes 4, 5 and 9).
At 30 June 2023, Current assets stood at $34.5 million (30 June 2022: $35.4
million) including; oil inventories of $9.7 million (30 June 2022: nil), cash
and cash equivalents of $7.7 million (30 June 2022: $27.1 million), restricted
funds of $8.0 million (30 June 2022: $8.0 million) and trade and other
receivables of $9.0 million (30 June 2022: $0.3 million). The increase in
trade and other receivables related to Joint Venture working capital items
(Block 3/05 and Block 3/05A).
At 30 June 2023, Current liabilities were $23.5 million (30 June 2022: $0.9
million) including borrowings of $11.5 million (30 June 2022: $ nil),
provisions of $1.4 million (30 June 2022: $ nil) and trade and other payables
of $10.6 million (30 June 2022: $0.8 million). The increase in trade and other
payables relates to Joint Venture working capital items (Block 3/05 and Block
3/05A).
At 30 June 2023, Non-current liabilities were $27.6 million (30 June 2022:
$0.4 million) including borrowings of $10.5 million (30 June 2022: $ nil) and
provisions of $17.0 million (30 June 2022: $32k).
Group net assets at 30 June 2023 were $45.9 million (30 June 2022 were $55.9
million), with net current assets reducing to $10.9 million (30 June 2022:
$34.4 million). The reduction in both Group net assets as well as net current
assets is due to the impact of the INA acquisition reducing cash balances and
increasing current and non-current liabilities (borrowing), partially, offset
by higher PP&E balances representing the consideration for tangible assets
purchased.
Going Concern
The Group's business activities, together with the factors likely to affect
its future development, performance and position is set out above (pages 1 and
2) and within the CEO Statement, Operations Review and Financial Review. The
financial position of the Group is described in the Financial Review.
The Group has sufficient cash resources for its working capital needs and its
committed capital expenditure programme at least for the next 12 months.
Consequently, the Directors believe that the Group is well placed to manage
its business risks successfully.
The Directors have at the time of preparing the results for the six months
ended 30 June 2023, 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, notwithstanding the impact of the situation in
Ukraine and the impact to commodity prices and foreign exchange rates. With
respect to the completion of the Sonangol and Azule Angolan asset
acquisition's (refer to subsequent events Note 10), the Directors believe that
the Group is in a strong position, due to significant liquid resources being
available, resulting from a combination of on balance sheet cash reserves, a
conventional RBL arrangement, and a revolving working capital facility, in
place with Trafigura and Mauritius Commercial Bank. The board has also looked
at scenarios associated with additional acquisitions and believe that
liquidity is sufficient through existing and further debt funding arrangements
to pursue further opportunities and cover all financial covenants. As a
consequence, the Directors believe that the Group is in a strong position and
thus, they continue to adopt the going concern basis in preparing the results
for the six months ended 30 June 2023.
Disclaimer
This document contains certain forward-looking statements that are subject to
the usual risk factors and uncertainties associated with the oil and gas
exploration and production business. Whilst the Group believes the expectation
reflected herein to be reasonable in light of the information available to it
at this time, the actual outcome may be materially different owing to factors
either beyond the Group's control or otherwise within the Group's control but
where, for example, the Group decides on a change of plan or strategy.
Accordingly, no reliance may be placed on the figures contained in such
forward-looking statements.
Glossary
$ US Dollars
2D two dimensional
3D three 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
ANPG Agência Nacional de Petróleo, Gás e Biocombustíveis (holder of the mining
rights of Exploration, Development and Production of liquid and gaseous
hydrocarbons in Angola)
Azule an incorporated Joint Venture between Eni and bp
Block 3/05 the contract area described in and covered by the Block 3/05 PSA
Block 3/05A the contract area described in the Block 3/05A PSA
Block 23 the contract area described in and covered by the Block 23 PSA
bbl/d barrels of oil per day ('k-' / 'mm-' for thousand / million)
Bopd Barrels of Oil per day
CPR Competent Persons Report
CSI China Sonangol International
ERCe Independent and qualified Reserves and Resources evaluator (CPR)
Group Afentra plc, together with its subsidiary undertakings (the 'Group')
INA Industrija Nafte, d.d
IOCs international oil company
JV joint venture
Km kilometre
km(2) square kilometre
Mmbo million Barrels of Oil
Petrosoma Petrosoma Limited (JV partner in Somaliland)
PSA production sharing agreement
RBL Reserve-Based Lending
Reserves reserves are those quantities of petroleum anticipated to be commercially
recoverable by application of development projects to known accumulations from
a given date forward under defined conditions. Reserves must satisfy four
criteria; they must be discovered, recoverable, commercial and remaining based
on the development projects applied. Reserves are further categorised in
accordance with the level of certainty associated with the estimates and may
be sub-classified based on project maturity and/or characterised by
development and production status
RTO reverse takeover (pursuant to Rule 14 of the AIM Rules)
Seismic Geophysical investigation method that uses seismic energy to interpret the
geometry of rocks in the subsurface
SOFR Secured Overnight Financing Rate
SPA Sale and Purchase Agreements
Sonangol Sonangol Pesquisa e Produção S.A.
Trafigura Trafigura PTE
WI working interest
Condensed consolidated income statement for the six months to 30 June 2023
Six months to Six months to Year ended
30th June 2023 30th June 2022 31st December 2022
$000 $000 $000
(unaudited) (unaudited) (audited)
Revenue - - -
Cost of Sales - - -
Gross loss - - -
Other administrative expenses (1,278) (1,301) (5,484)
Pre-licence costs (2,155) (1,574) (3,491)
Total administrative expenses (3,433) (2,875) (8,975)
Loss from operations (3,433) (2,875) (8,975)
Finance income 135 2 86
Finance expense (575) (73) (197)
Loss before tax (3,873) (2,946) (9,086)
Tax - - -
Loss for the period attributable to the owners of the parent (3,873) (2,946) (9,086)
Other comprehensive expense - items to be
reclassified to the income statement in subsequent periods
Currency translation adjustments (9) (21) -
Total comprehensive expense for the period (9) (21) -
Total comprehensive expense for the period attributable to the owners of the (3,882) (2,967) (9,086)
parent
Basic and diluted loss per share (US cents) (1.8) (1.3) (4.1)
Condensed consolidated statement of financial position as at 30 June 2023
As at As at As at
Note 30th June 2023 30th June 2022 31st December 2022
$000 $000 $000
(unaudited) (unaudited) (audited)
Non-current assets
Intangible exploration and evaluation assets 3 21,346 21,305 21,324
Property, plant and equipment 4 28,531 542 540
Other non-current assets 5 12,718 - -
62,595 21,847 21,864
Current assets
Inventories 9,735 - -
Trade and other receivables 9,008 290 419
Cash and cash equivalents 7,725 27,096 20,384
Restricted Funds 6 8,000 8,000 10,200
34,468 35,386 31,003
Total assets 97,063 57,233 52,867
Equity
Share capital 28,143 28,143 28,143
Currency translation reserve (211) (223) (202)
Retained earnings 17,994 28,007 21,867
Total equity 45,926 55,927 49,808
Current liabilities
Borrowings 7 11,465 - -
Trade and other payables 10,579 836 2,689
Provisions 8 1,378 - -
Lease liability 114 111 210
23,536 947 2,899
Non-current liabilities
Borrowings 7 10,473 - -
Provisions 8 16,982 32 33
Lease liability 146 327 127
27,601 359 160
Total liabilities 51,137 1,306 3,059
Total equity and liabilities 97,063 57,233 52,867
Condensed consolidated statement of changes in equity for the six months ended 30 June 2023
Currency
Share translation Retained
capital reserve earnings Total
$000 $000 $000 $000
At 1 January 2022 28,143 (202) 30,953 58,894
Total comprehensive expense for the period attributable to the owners of the - (21) (2,946) (2,967)
parent
At 30 June 2022 28,143 (223) 28,007 55,927
Total comprehensive expense for the period attributable to the owners of the - 21 (6,140) (6,119)
parent
At 31 December 2022 28,143 (202) 21,867 49,808
Total comprehensive expense for the period attributable to the owners of the - (9) (3,873) (3,882)
parent
At 30 June 2023 28,143 (211) 17,994 45,926
Condensed consolidated statement of cash flows for the six months ended 30 June 2023
Six months to Six months to Year ended
Note 30th June 2023 30th June 2022 31st December 2022
$000 $000 $000
(unaudited) (unaudited) (audited)
Operating activities:
Loss before tax (3,873) (2,946) (9,086)
Depreciation, depletion & amortisation 491 119 244
Finance income and gains (135) (2) (86)
Finance expense and losses 575 15 197
Operating cash outflow prior to working capital movements (2,942) (2,814) (8,731)
Increase in inventories (1,690) - -
Decrease/(increase) in trade and other receivables 175 (2) (131)
(Decrease)/Increase in trade and other payables (1,371) 318 2,170
Increase/(decrease) in provisions 2 (4) (3)
Net cash outflow from operating activities (5,826) (2,502) (6,695)
Investing activities
Corporate acquisitions 9 (26,995) - -
Interest received 135 2 86
Purchase of property, plant and equipment 4 (457) (1) (127)
Exploration and evaluation costs 3 (22) (16) (35)
Decrease/(increase) in restricted funds 6 2,200 (8,000) (10,200)
Net cash used in investing activities (25,139) (8,015) (10,276)
Financing activities
Draw-down on loan facilities (net of transaction fees) 7 19,000 - -
Interest paid (531) - -
Principal paid on lease liability (115) (99) (204)
Interest paid on lease liability (12) (14) (21)
Net cash generated/(used) in financing activities 18,342 (113) (225)
Net decrease in cash and cash equivalents (12,623) (10,630) (17,196)
Cash and cash equivalents at beginning of period 20,384 37,727 37,727
Effect of foreign exchange rate changes (36) (1) (147)
Cash and cash equivalents at end of period 7,725 27,096 20,384
Notes to the consolidated results for the six months ended 30 June 2023
1. Basis of preparation
The financial information contained in this announcement does not constitute
statutory financial statements within the meaning of Section 435 of the
Companies Act 2006.
The financial information for the six months ended 30 June 2023 is unaudited.
In the opinion of the Directors, the financial information for this period
fairly represents the financial position of the Group. Results of operations
and cash flows for the period are in compliance UK adopted International
Accountings Standards.
The accounting policies, estimates and judgements applied are consistent with
those disclosed in the annual financial statements for the year ended 31
December 2022, and are also consistent with additional policies, estimates and
judgements as noted below.
Critical Accounting judgements and Estimates.
In the application of the Group's accounting policies, the Directors are
required to make judgements, estimates and assumptions about the carrying
value of assets and liabilities that are not readily available from other
sources. The estimates and associated assumptions are based on historical
experience and other factors that are relevant. Actual results may differ from
these estimates.
Inventory (Oil).
Inventory is stated at the lower of cost and net realisable value, as are
underlifts and overlifts which may occur because of imbalances between
cumulative entitlement to production and cumulative liftings.
Business Combinations and Asset Acquisitions
The Group reviews acquisitions to determine whether the acquisition should be
accounted for as an asset acquisition or a business combination. For each
transaction, the Group may elect to apply the concentration test under IFRS 3
to determine if the fair value of assets acquired is substantially
concentrated in a single asset (or a group of similar assets). If this
concentration test is met, the acquisition qualifies as an acquisition of a
group of assets and liabilities, not of a business. Accounting for business
combinations under IFRS 3 is applied once it is determined that a business has
been acquired. Under IFRS 3, a business is defined as an integrated set of
activities and assets conducted and managed for the purpose of providing a
return to investors. A business generally consists of inputs, processes
applied to those inputs, and resulting outputs that are, or will be, used to
generate revenues.
Where the group have acquired a non-controlling participating interest in an
asset, when determining a suitable accounting policy the group has regard to
the guidance in included in IFRS 11 - Joint arrangements and where applicable
accounts for its interest in the joint operation by accounting for its share
of the income, expenses, assets and liabilities from the acquisition date.
Financial Liabilities
Borrowings and Loans. Interest bearing bank loans and overdrafts are recorded
at the proceeds received. Finance charges relating to securing the loans and
overdrafts are capitalised as a prepayment on the balance sheet and amortised
over the repayment term period of the loan.
Development & Production Assets (PP&E)
Costs associated with Development and Production assets, including the costs
of facilities, wells and subsea equipment are capitalised within Property,
Plant & Equipment. These costs are depreciated on a unit of production
basis based on the total proved and probable reserves of the asset.
Decommissioning
Provisions for Decommissioning are recognized in accordance with IAS37 and are
recorded at the present value of the expenditures expected to be required to
settle the Group's future obligations. Reference note 5.
These financial statements should be read in conjunction with the annual
financial statements for the year ended 31 December 2022. All financial
information is presented in USD, unless otherwise disclosed.
An unqualified audit opinion was expressed for the year ended 31 December
2022, as delivered to the Registrar.
The Directors of the Company approved the financial information included in
the results on 11 September 2023.
2. Results & dividends
The Group has retained earnings at the end of the period of $18.0 million (30
June 2022: $28.0 million retained earnings) to be carried forward. The
Directors do not recommend the payment of a dividend (H1 2022: nil).
3. Intangible exploration and evaluation (E&E)
assets
Group intangible assets:
Total
$000
(unaudited)
Net book value at 31 December 2021 21,289
Additions during the period 16
Net book value at 30 June 2022 21,305
Additions during the period 19
Net book value at 31 December 2022 21,324
Additions during the period 22
Net book value at 30 June 2023 21,346
Odewayne PSA, Somaliland: A(EA)L 34%, Genel Energy Somaliland Limited 50%,
Petrosoma 16%.
4. Property, plant and equipment
Oil and Computer and office
gas assets Office Lease equipment Total
Group $000 $000 $000 $000
Cost
At 31 December 2021 - 1,203 279 1,482
Modification during the period - (54) (12) (66)
Additions during the period - - 1 1
At 30 June 2022 - 1,149 268 1,417
Modification during the period - (6) 4 (2)
Additions during the period - - 126 126
Disposals during the period - - (49) (49)
At 31 December 2022 - 1,143 349 1,492
Modification during the period - 22 9 31
Acquisitions 27,992 - - 27,992
Additions during the period 453 - 4 457
At 30 June 2023 28,445 1,165 362 29,972
Oil and Computer and office
gas assets Office Lease equipment Total
$000 $000 $000 $000
Accumulated depreciation and impairment
At 31 December 2021 - (598) (159) (757)
Charge for the period - (96) (22) (118)
At 30 June 2022 - (694) (181) (875)
Charge for the period - (91) (35) (125)
Disposals during the period - - 49 49
At 31 December 2022 - (785) (167) (952)
Charge for the period (354) (91) (44) (489)
At 30 June 2023 (354) (876) (211) (1,441)
Net book value at 30 June 2023 28,091 289 151 28,531
Net book value at 31 December 2022 - 358 182 540
Net book value at 30 June 2022 - 455 87 542
Net book value at 31 December 2021 - 605 120 725
Block 3/05 PSA, Angola: Afentra Angola 4%, Sonangol (Operator) 50%, M&P
20%, Azule 12%, Etu Energias 10% and NIS-Naftagas 4%.
Block 3/05A PSA, Angola: Afentra Angola 4%, Sonangol (Operator) 25%, China
Sonangol International 25%, M&P 20%, Azule 12%, Etu Energias 10% and
NIS-Naftagas 4%. Should the China Sonangol interest be redistributed pro-rata
amongst existing Partners, Afentra's interest in Block 3/05A would increase
from 4% to 5.33%.
5. Other non-current assets
The Group have reviewed the accounting treatment for the Decommissioning Fund
held by the Block 3/05 Operator and have recognised a Non-Current Asset and an
offsetting Non-Current Liability for $12.7 million, which equates to the
present value of the future Decommissioning Liability. It is Management's view
that the future liability for Decommissioning is represented by the totality
of the funds held by the Operator, specifically for such purposes.
6. Restricted Funds
The Company has provided a bank guarantee issued by Nedbank Limited to
Sonangol in respect of a $8.0 million cash deposit in respect of the Sonangol
Acquisitions that would otherwise have been required to be paid shortly after
the signing of the Sonangol Acquisition Agreement. This guarantee has been
fully cash collateralised by the Company.
Movement in the period of $2.2 million relates to the release of Escrow funds
held by Citibank, in respect of the INA Acquisitions.
7. Borrowings
The Group has activated elements of both the RBL Facility and Working Capital
facility in order to facilitate the completion of the INA acquisition. As of
June 30th, 2023, the Group has borrowings of $12.8 million (RBL) and $9.1
million (Working Capital) with the following key terms:
RBL Facility up to $75 million
· 5-year tenor
· 8% margin over 3-month SOFR (Secured Overnight Financing Rate)
· Semi- annual linear amortisations
· Key financial covenant of Net Debt to EBITDA < 3:1
Working Capital up to $30m revolving facility
· 5-year tenor
· 4.75% margin over1-month SOFR
· Repayable with proceeds from liftings
Total
$000
Current
Reserve Based Lending Facility 2,327
Working Capital Facility 9,138
At 30 June 2023 11,465
Non-current
Reserve Based Lending Facility 10,473
At 30 June 2023 10,473
A charge is placed on Afentra (Angola) Ltd shares to Mauritius Commercial Bank
Limited as required by the terms of the debt facilities.
8. Provisions
Contingent consideration
Provisions include contingent consideration payable to INA on blocks 3/05 and
305/A:
· 3/05 of up to $4 million over 2 years, subject to certain oil
price hurdles and an annual cap of $2 million; and
· 3/05A of up to $5 million linked to the successful future
development of certain discoveries and oil price hurdles.
Management have reviewed the contingent payments related to the INA
acquisition, which are dependent upon future oil price hurdles and future
B3/05A developments. Judgement has been applied to the probability of the
circumstances occurring that would give rise to some or all of the future
payments. In addition, Management has applied a discount rate that
approximates to the Company's cost of capital in arriving at a present value
at the balance sheet date of the probable future liabilities. Management is
therefore comfortable with the liabilities recorded at the balance sheet date
in respect of these contingent future events.
Decommissioning provision
As detailed in note 5.
Total
$000
Current
Contingent consideration 1,378
At 30 June 2023 1,378
Non-current
Contingent consideration 4,228
Decommissioning 12,718
Other 36
At 30 June 2023 16,982
9. Acquisition
During the period the Company completed the acquisition of interests in Block
3/05 (4%) and Block 3/05A (4%) offshore Angola for a net $17.0 million payment
with a subsequent $10.0 million contingent payment made upon the extension of
the Block 3/05 licence from 31 December 2025 to 31 December 2040.
Block 3/05 Block 3/05A Total
$000 $000 $000
Consideration
Initial consideration 9,000 3,000 12,000
Actual adjustments from effective date 765 2,202 2,967
Contingent consideration - Extension of Block 3/05 licence 10,000 - 10,000
Contingent consideration - Oil price linked 2,028 - 2,028
Consideration paid 21,793 5,202 26,995
Contingent consideration - Oil price linked / future developments 2,318 3,288 5,606
Total consideration 24,111 8,490 32,601
Block 3/05 Block 3/05A Total
$000 $000 $000
Net assets
Oil and gas properties 18,456 9,536 27,992
Inventory (Oil Stock) 7,957 88 8,045
Joint Venture partner balance (2,165) 627 (1,538)
Joint Venture working capital (137) (1,761) (1,898)
Net assets acquired 24,111 8,490 32,601
The Group performed an assessment of the INA acquisition to determine whether
the acquisition should be accounted for as an asset acquisition or a business
combination. For the INA transaction, the Group elected to apply the
concentration test under IFRS 3 to determine if the fair value of assets
acquired are substantially concentrated in a single asset (or a group of
similar assets). This test was met and thus the Group have deemed the
acquisition to qualify as an acquisition of a group of assets and liabilities,
not of a business. Furthermore, the Group gave regard to guidance included
under IFRS 11- Joint Arrangements, and will account for its share of the
income, expenses, assets, and liabilities from the acquisition date.
10. Subsequent Events
Subsequent to the Balance Sheet date of June 30(th), the following business
activities are anticipated to occur:
· Azule Acquisition: acquisition of interests in Block 3/05 (12%)
and Block 3/05A (16%)(2) offshore Angola for a firm consideration of $48.5
million and contingent payments of up to $36 million(3). Transaction will be
funded through the agreed capacity within debt facilities with Mauritius
Commercial Bank and Trafigura and existing cash on balance sheet. A 10%
transaction deposit of $4.85 million has been placed in escrow as per the Sale
and Purchase Agreement ('SPA').
· Amended Sonangol Acquisition: acquiring a reduced working
interest from Sonangol in Block 3/05, from 20% to 14% in order to ensure an
appropriate balance of equity interests in Block 3/05. Firm and contingent
considerations reduce to $56m and up to $35m, respectively (terms including
the effective date of 20 April 2022 remaining unchanged)(4). Combined with
existing ownership and the Azule Acquisition, Afentra's working interests will
be 30% in Block 3/05 and 21.33%(2) in Block 3/05A. The consideration for the
40% interest in Block 23 remains unchanged at $0.5 million.
· Suspension of shares and reverse takeover: in accordance with the
AIM Rules for Companies, the Company's ordinary shares were suspended from
trading on AIM from 19 July 2023 as the Azule Acquisition and Amended Sonangol
Acquisition each constitute a reverse takeover ('RTO') under Rule 14 of the
AIM Rules. Trading in the Company's ordinary shares will remain suspended
until such time as either an admission document is published, or an
announcement is released confirming that the Azule Acquisition and Amended
Sonangol Acquisition are not proceeding.
· AIM Readmission process and General Meeting: the Company has made
encouraging progress with respect to the recommencement of trading on AIM and
expects to publish an Admission Document shortly, with both the Azule
Acquisition and the Amended Sonangol Acquisition being subject to shareholder
approval thereafter. We expect both transactions to complete, subject to
shareholder approval, in Q4 2023.
· First crude cargo sale: the Company sold its first cargo of
300,000 bbls of crude oil in August comprising crude oil stock and subsequent
production from the INA Acquisition. The sales price inclusive of the Brent
premium was $88/bbl, generating pre-tax sales of $26.4 million net to Afentra.
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