REG - Afentra PLC - Completion of INA Acquisition

AfentraAnnouncement

10/05/2023 07:00

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RNS Number : 8630Y  Afentra PLC  10 May 2023

10 May 2023

AFENTRA PLC

 

Completion of INA Acquisition

 

Afentra plc ('Afentra' or the 'Company') provides the following update
regarding the previously announced Angolan acquisitions.

 

Completion of INA Acquisition

Afentra is pleased to announce completion of the acquisition from
INA-Industrija d.d. ('INA') of a 4% interest in Block 3/05 and 4% interest(1)
in Block 3/05A offshore Angola (the 'INA Acquisition') pursuant to a sale and
purchase agreement between INA and Afentra's wholly owned subsidiary, Afentra
(Angola) Ltd, dated 18 July 2022 ('SPA'). This acquisition marks Afentra's
entry into Angola where it is well positioned to build a material production
business and contribute to a responsible energy transition for the country.

·      The transaction effective date of 30 September 2021 results in a
net upfront consideration at completion of $17.0m, which is offset by the
Company inheriting crude oil stock with an approximate value of $16.6m at
$80/bbl (207,868 bbls(2))

·      The Company has also set aside $10.0m into an escrow deposit
("Escrow") at completion, which will be paid to INA after the Block 3/05
licence extension is formally completed

·      The net upfront consideration and escrow deposit will be funded
by $18.9m from the agreed Reserve Based Lending ('RBL') and working capital
facilities and $8.1m from cash resources

·      The Company expects to sell its first cargo of crude oil in Q3
2023, thereby monetising the inherited crude oil stock and subsequent
production

·      Block 3/05 current gross production in April averaged ~19,000
bbl/d (net 760 bbl/d)

The upfront consideration of $17.0m comprises a $12.0m initial consideration,
$4.8m in working capital and interest(3) and $2.0m in payments of crystallised
contingent consideration,(4) adjusted downwards by $1.8m due to positive net
asset cashflows.(5)

The Company is pleased to announce that Mauritius Commercial Bank ('MCB') has
entered both the RBL and working capital facilities as the lender to the
Company. Trafigura retains an interest in the RBL facility and will continue
as offtake provider for the Block 3/05 crude. The principal terms and
conditions for both the RBL and working capital facility remain unchanged. The
combination of MCB and Trafigura is a further positive step as the Company
strengthens its credit relationships with two lenders who are supportive of
the energy sector.

We have uploaded a short presentation to the Afentra website:
https://afentraplc.com/investors/ (https://afentraplc.com/investors/)

Sonangol Acquisition Update

The Block 3/05 JV partners and ANPG, the Angolan Oil & Gas regulator, have
now agreed the terms of the Block 3/05 licence extension, extending the
production sharing agreement ('PSA') from 1 July 2025 to 31 December 2040 with
improved fiscal terms that strengthen the economics of the permit. ANPG will
now begin the process of obtaining the requisite governmental approvals for
the licence extension.

 

The agreement between ANPG and the JV partners of the terms for the licence
extension, which is a Condition Precedent to the Sonangol acquisition, now
allows Sonangol, as seller, to start the process of obtaining the requisite
government approvals for the Sonangol transaction where we remain on track to
complete by 30 June 2023.

 

The Company looks forward to providing shareholders with further updates in
due course.

Operations Update

Production from Block 3/05 averaged 17,206 bbl/d in Q1 2023 as a result of
downtime experienced through planned restoration works on power generation and
the distribution network. Recent production levels have improved with April
volumes averaging ~19,000 bbl/d. Furthermore, long-term testing commenced in
Block 3/05A, at the Gazela field, of an additional ~1,100 bbl/d, enabling
framing of potential development options.

Updated Competent Persons Report

ERCE has completed its annual update of the Competent Persons Report ('CPR')
on the Block 3/05 assets with an effective date of 1 January 2023. The updated
2P gross reserves, at the new effective date, are 108 mmbbls (net 4.3 mmbbls)
and the updated 2C gross resources are 43 mmbbls (net 1.7 mmbbls). The outcome
is in-line with previous CPR expectations taking into account 2022 production.

Commenting on the update, CEO Paul McDade said:

"We are very pleased to complete the INA Acquisition and we would like to
thank all involved, especially our shareholders, for their continued patience
and support. The indicative transaction metrics upon sale of crude inventories
speak to the competitiveness with which we have been able to structure this
deal and we are pleased to mark the inception of our partnership with Sonangol
in Blocks 3/05 and 3/05A. It is also highly encouraging that the terms for the
Block 3/05 licence extension award have been agreed; this represents a major
step towards completion of the Sonangol transaction within our previously
guided timeline. We now look forward to working with the partnership to
enhance production and reserves to a level that reflects the potential of this
very material asset."

 

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

 

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 4% non-operated interests in
the producing Block 3/05 and adjacent development Block 3/05A offshore Angola
in the Lower Congo Basin. In addition, Afentra maintains a carried interest in
the Odewayne Block, onshore southwestern Somaliland.

 

Inside Information

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.

(1) Subject to final approval of the distribution of the China Sonangol
International ('CSI') interest to the remaining joint venture partners,
Afentra's working interest in Block 3/05A increases from 4% to 5.33%

(2) As at 30 April 2023

(3) Working capital adjustments and interest on consideration from effective
date to completion date

(4) Further Contingent consideration of up to $9m will also become payable to
INA subject to certain oil price hurdles on Block 3/05 and upon successful
future development of discoveries and oil price hurdles on Block 3/05A. This
$9m is split as follows: up to $4 million over 2 years on Block 3/05, subject
to certain oil price hurdles and an annual cap of $2 million; and up to $5
million on Block 3/05A linked to the successful future development of certain
discoveries and oil price hurdles.

(5) Asset cashflow generation from effective date to completion, comprising
crude oil sales less cash calls paid, excluding significant stock in tank
inherited at completion

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