REG - Afentra PLC - Afentra acquires additional interests in Angola

AfentraAnnouncement

19/07/2022 07:15

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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
(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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