VANCOUVER, BC, May 12, 2022
/CNW/ - (TSX: AOI) (Nasdaq-Stockholm: AOI) – Africa Oil
Corp. ("Africa Oil", "AOC" or the "Company") is pleased to
announce its financial and operating results for the three months
ended March 31, 2022. View PDF
version.
Highlights
- Venus-1X exploration well makes a significant light oil
discovery on Block 2913B, offshore
Namibia. AOC has a 6.2% interest
through its investment in Impact Oil and Gas Limited.
- Q1 2022 net income of $45.6
million (Q1 2021: $38.9
million) and end of quarter cash balance of $140.6 million (December
31, 2021: $58.9 million).
- The Company paid its maiden semi-annual dividend of
$0.025 per share (approximately
$11.9 million) to its shareholders.
This is the initial step in delivering on the Company's commitment
of returning capital to the shareholders.
- The Corporate Facility was amended to provide the Company with
a stand-by line of liquidity of $100.0
million, available for general corporate purposes, including
acquisitions, until end 2022.
- Prime drew down a further $150.0
million under its pre-export finance facility ("PXF
Facility"), increasing the outstanding balance to $300.0 million and further extending the duration
of its debt profile.
- The Company received one dividend from its shareholding in
Prime, totaling $100.0
million1.
- Selected Prime's results net to Africa Oil's 50%
shareholding*:
-
- Average daily W.I. production of 25,400 boepd and economic
entitlement production of 27,400 boepd (83% light and medium crude
oil and 17% conventional natural gas) in Q1 2022 (Q1 2021: 26,200
boepd and 30,100 boepd respectively)3,4,5;
- Cash position of $265.7 million
and debt balance of $501.0 million at
March 31, 2022; Robust Net Debt to
EBITDAX6 for the twelve months ended March 31, 2022, of 0.4x (twelve months ended
December 31, 2021: 0.4x);
- in Q1 2022, EBITDAX6 of $122.2 million (Q1 2021: $143.4 million); and
- in Q1 2022, cash generated from operating activities of
$116.6 million (Q1 2021: $78.8 million)7.
Africa Oil President and CEO Keith
Hill commented: "I am pleased to report another strong
quarter of operating and financial results. We received our largest
dividend payment from Prime to date for $100
million. This takes our total dividend receipts to
$500 million since our acquisition of
a 50% interest in Prime in January
2020 for $520 million. Also,
our share of Prime's cash at end of first quarter 2022 of
approximately $266 million, compares
to about $70 million at the time of
the acquisition. Prime's performance, that includes achieving
positive reserves replacement ratios for the last two years, has
exceeded all our expectations. However, I view the news of the
Venus light oil discovery as the most important and exciting update
in the first quarter of this year. Most immediately, we can look
forward to the high-impact Venus appraisal drilling program and the
Gazania exploration well, both of which are expected to commence
later this year. We also have further prospectivity on Block
3B/4B,
which we operate with a 20% interest and on Impact's Orange Basin
Deep Block, both are in Orange Basin and on trend with the Venus
discovery."
|
* Important
information: Africa Oil's interest in Prime is accounted for as an
investment in joint venture. Refer to Note 2 on page 4 for further
details. Please also refer to other notes on page 5 for important
information on the material presented.
|
2022 First Quarter Financial Results
(Thousands United
States Dollars, except Per Share and Share Amounts)
|
March 31,
2022
|
December 31,
2021
|
Cash and cash
equivalents
|
140,607
|
58,885
|
Total assets
|
1,029,380
|
991,618
|
Short-term
debt
|
-
|
-
|
Long-term
debt
|
-
|
-
|
Total
liabilities
|
43,832
|
43,560
|
Total equity
attributable to common shareholders
|
985,548
|
948,058
|
|
|
|
|
|
|
|
Three months
ended
|
Three months
ended
|
|
March 31,
2022
|
March 31,
2021
|
Share of profit from
investment in joint venture
|
51,005
|
48,814
|
Share of profit/ (loss)
from investment in associates
|
2,733
|
(885)
|
Total operating
income
|
53,738
|
47,929
|
Net operating
income
|
46,789
|
44,206
|
Net income
|
45,608
|
38,920
|
Net income per share -
basic
|
0.10
|
0.08
|
Net income per share -
diluted
|
0.09
|
0.08
|
Weighted average number
of share outstanding - basic ('000s)
|
475,090
|
472,147
|
Weighted average number
of share outstanding - diluted ('000s)
|
485,113
|
475,011
|
Number of shares
outstanding ('000s)
|
477,141
|
473,252
|
|
|
|
Cash flows used in
operations
|
(4,780)
|
(3,401)
|
Cash flows provided by/
(used in) investing
|
99,332
|
(2,338)
|
Cash flows used in
financing
|
(12,812)
|
(5,288)
|
Total change in cash
and cash equivalents
|
81,722
|
(11,039)
|
|
|
|
Total change in
equity
|
37,490
|
27,923
|
The financial
information in this table was selected from the Company's unaudited
consolidated financial statements for the three months ended March
31, 2022. The Company's consolidated financial statements, notes to
the financial statements, management's discussion and analysis for
the three months ended March 31, 2022 and 2021, and the 2021 Report
to Shareholders and Annual Information Form have been filed on
SEDAR (www.sedar.com) and are available on the Company's website
(www.africaoilcorp.com).
|
FINANCIAL POSITION AND EARNINGS
The Company recognized a total operating income of $53.7 million and net income of $45.6 million during the first quarter of 2022.
The operating income primarily relates to the Company's share of
profit from its investments in Prime amounting to $51.0 million.
The Company ended first quarter 2022 with cash of $140.6 million in comparison to cash of
$58.9 million at the end of 2021. The
Company has no outstanding debt. During first quarter 2022, Prime
paid one dividend for $200.0 million
with net payment to Africa Oil of $100.0
million, related to its 50% shareholding interest. Since the
acquisition of a 50% shareholding in Prime in January 2020 for $519.5
million, the Company has received 11 dividends from Prime
for a total amount of $500.0 million,
representing 96% of the closing purchase price has been returned in
less than two years.
On January 31, 2022, the Company
announced that all lenders to its Corporate Facility had approved
increasing the available amount to $100.0
million from the then unutilized amount of $62.0 million, and extending the availability
period to December 31, 2022, from
May 13, 2022. The Corporate Facility
maturity date of May 13, 2024, and
interest margins were unchanged.
On February 28, 2022, the Company
announced that its Board of Directors had declared an initial
aggregate annual dividend of $0.05
per share (approximately $24.0
million) to be paid semi-annually, with the first payment
payable on March 31, 2022, to
shareholders of record at the close of business on March 17, 2022.
This initial annual dividend has been determined by the Board to
strike a prudent balance between allocating capital for potential
acquisitions, shareholder capital returns and maintaining a robust
balance sheet in a range of oil market conditions. The Board will
regularly review this policy and depending on the Company's
progress in maturing acquisition opportunities and the market
outlook, the Board may approve additional distributions and/or
share buybacks, subject to the customary approvals. As always, the
declaration of dividends is at the discretion of the Board.
PRIME'S FIRST QUARTER 2022 PERFORMANCE
Prime's first quarter 2022 average daily W.I. production was
25,400 boepd and economic entitlement production was 27,400 boepd
(83% light and medium crude oil and 17% conventional natural gas),
net to Africa Oil's 50% shareholding in Prime. These compare to
first quarter 20215 average working Interest production
of 26,200 boepd and economic entitlement production of 30,100 boepd
(83% light and medium crude oil and 17% conventional natural gas),
net to Africa Oil's 50% shareholding in Prime.
During the first quarter 2022, Prime was allocated 5 oil
liftings with total sales volume of approximately 5.0 million
barrels or 2.5 million barrels net to Africa Oil's 50%
shareholding. These volumes only represent Prime's share of cost
and profit oil, with its share of tax oil lifted and sold on its
behalf by the operators to settle its tax liabilities.
Prime achieved an average realized oil price of $68.8/bbl in Q1 2022 (Q1 2021: $58.1/bbl) including hedging.
Prime achieved first quarter 2022 sales revenue of $204.4 million (Q1 2021: $162.2 million8); EBITDAX of
$122.2 million (Q1 2021: $143.4 million) and cash flow generated from
operating activities of $116.6
million (Q1 2021: $78.8
million7), in each case net to Africa Oil's 50%
shareholding.
During the first quarter 2022, Prime increased its PXF Facility
on the back of the approval by the PXF lenders received last year
and drew down a further $150.0
million, increasing the PXF Facility amount and outstanding
balance to $300.0 million. The PXF
Facility is arranged by Shell Western Supply and Trading Limited
and Africa Finance Corporation and has a 7-year tenor, extending
the duration of Prime's debt profile on very competitive cost terms
that are comparable to Prime's reserves-based lending ("RBL")
facility.
As at March 31, 2022, net to the
Company's 50% shareholding, Prime had $265.7
million of cash and debt of $501.0
million (as at December 31,
2021 - $258.9 million of cash
and debt of $508.4 million).
The debt outstanding has decreased slightly following gross
repayments on the RBL Facility of $164.8
million which net off a drawdown on the PXF Facility of
$150.0 million. Net to the Company's
50% shareholding, the overall debt has reduced by $7.4 million during Q1 2022. The next repayment
under the RBL facility will not occur until September 2022. The PXF repayments will also
begin in September 2022.
As at March 31, 2022, Prime has a
Net Debt of $470.6 million (as at
December 31, 2021 - Net Debt of
$498.9 million) and a Net
Debt/EBITDAX of 0.4x for the twelve months ended March 31, 2022, (0.4x for the twelve months ended
December 31, 2021) as Net Debt and
EBITDAX remained similar. The strength of this ratio demonstrates
the low leverage of Prime compared with industry peers. This strong
Net Debt/EBITDAX ratio, combined with the full repayment of the
Company's Corporate Facility in 2021 means the Company and Prime
are well placed to raise more debt in the future if required. Net
Debt/EBITDAX is a non-GAAP measure and a reconciliation is
performed in Note 6 on page 5.
OUTLOOK
Performance of the Company's investment in Prime has continued
to exceed expectations with strong cash flows, dividend
distributions and very modest investments on the upstream assets,
offshore Nigeria. Higher oil
prices and a strengthening outlook for the oil markets support
increasing capital investments to arrest production declines and
monetize undeveloped assets, such as the Preowei field, a low-risk
satellite tie-back project to the Egina Floating Production,
Storage and Offloading platform ("FPSO").
The successful drilling and completion of Akpo-P4 infill well,
that came onstream late last year and which was ramped up to 6,000
bopd, is very encouraging for the upcoming drilling program on OML
130. The operator is finalizing an extendable one-year rig contract
with the plan to drill up to 9 development wells and up to 2 near
field exploration/appraisal wells on the current rig schedule, with
the drilling expected to commence at end of Q3 2022. Processing of
the 2021 Egina 4D seismic survey is ongoing and is helping to
confirm the final well locations. Up to 3 development wells are
expected to be completed on the asset by the end of this year, with
further infill drilling or near field exploration/appraisal
expected after the completion of the first 3 infill wells on Egina.
The rig will move to Akpo upon completion of the Egina drilling
campaign.
The Company will work to maximize Prime's dividends by
distributing its excess cash, whilst maintaining a prudent treasury
management policy at Prime. The near-term priority is to extend
Prime's debt tenor with the primary objective over the next year of
refinancing Prime's RBL facility, possibly facilitated by the
voluntary early conversion of Prime's licenses in Nigeria to the new PIA terms. The Company's
management will also work with Prime to assess other financing
options that could extend Prime's debt maturity profile on
competitive costs, such as the PXF facility that was arranged by
Prime in 2021.
Through its 30.9% shareholding in Impact Oil & Gas, the
Company has an indirect interest of 6.2% in Block 2913B, offshore Namibia. The Company announced the Venus light
oil and associated gas discovery on this block on February 24, 2022. Venus' initial results have
exceeded pre-drill estimates and along with the recently announced
Graff discovery on a neighboring block, has opened a new petroleum
province in the Orange Basin with significant upside potential.
Venus and Graff discoveries support the exploration case for Block
3B/4B,
which is operated by the Company with a 20% working interest and
Impact's Orange Basin Deep Block, both located on trend in the
Orange Basin, South Africa. The
Company's management expect the Venus appraisal drilling program to
commence later this year providing shareholders with potentially
high impact catalysts.
Through its shareholdings in Africa Energy, the Company has
exposure to the Gazania-1 exploration well that will be drilled in
Block 2B offshore South Africa, with a target spud date by end
of 2022. Gazania-1 will test a prospect in the A-J rift basin that
is near but updip of the A-J1 oil discovery (1988) that flowed
36o API oil to surface. A success at Gazania-1 would
de-risk a large inventory of prospects in the block that have been
identified from 3D seismic data. Africa Oil has an indirect 5.5%
economic interest in Block 2B through
its 19.8% shareholding of Africa Energy. Africa Energy holds a
carried 27.5% working interest in Block 2B with partners Eco Atlantic (Operator, 50% WI),
Panoro Energy (12.5% W.I.) and Crown Energy (10% W.I.).
During 2021, the Company and its JV Partners (Tullow Oil and
TotalEnergies) have completed the redesign of Project Oil Kenya to
ensure it is technically, commercially and environmentally robust.
The Company and its partners initiated a farm-out process for
Project Oil Kenya in 2021. Advanced discussions are on-going with
the interested parties. A successful farm-out is viewed by the
Company as a critical step towards the FID for Project Oil Kenya
being achieved over the course of next year. There is no guarantee
that the Company can successfully conclude a farm-out to new
strategic partner(s) on favorable terms. The Company will update
the market on this process in due course.
The Company has been actively working on the acquisition of
strategic producing assets that are accretive on per share
valuation and cashflow metrics. The Company has maintained a very
disciplined approach towards this goal with detailed technical,
commercial and legal due diligence applied for each opportunity and
the primary goal of not diluting or risking the current strong
investment case. The Company's focus remains on buying producing
assets offshore West Africa and
the management will consider both operated and non-operated
opportunities as well as oil and natural gas assets. The Board may
also consider corporate merger and acquisition opportunities if
there is strong strategic rationale for such a transaction with
strong prospects to increase shareholder value. There is no
guarantee that the Company can complete such transactions and it
will update the market during the year on its efforts.
NOTES
1.
Prime does not pay dividends to its shareholders, including Africa
Oil, on a fixed pre-determined schedule. Previous number of
dividends and their amounts should not be taken as a guide for
future dividends to be received by Africa Oil. Any dividends
received by Africa Oil from Prime's operating cash flows will be
subject to Prime's capital investment and financing cashflows,
including payments of Prime's RBL principal amortization, which are
subject to semi-annual RBL redeterminations.
2.
The 50% shareholding in Prime is accounted for using the equity
method and presented as an investment in joint venture in the
Consolidated Balance Sheet. Africa Oil's 50% share of Prime's net
profit or loss will be shown in the Consolidated Statements of Net
Income and Comprehensive Income. Any dividends received by Africa
Oil from Prime are recorded as Cash flow from Investing Activities.
The guidance presented here is for information only.
3.
Aggregate oil equivalent production data comprised of light and
medium crude oil and conventional natural gas production net to
Prime's W.I. in Agbami, Akpo and Egina fields. These production
rates only include sold gas volumes and not those volumes used for
fuel, reinjected or flared.
4.
Net entitlement production is calculated using the economic
interest methodology and includes cost recovery oil, tax oil and
profit oil and is different from working interest production that
is calculated based on project volumes multiplied by Prime's
effective working interest in each license.
5. Q1
2021 comparative figures have been revised from those previously
reported to ensure comparability and consistency of calculation as
a result of a change in the conversion factor (to 6 Mcf:1bbl from
5.8:1bbl) used in converting gas production to barrels oil
equivalent.
6.
Earnings Before Interest, Tax, Impairment, Depreciation,
Amortization and Exploration Expenses ("EBITDAX") is not a
generally accepted accounting measure under International Financial
Reporting Standards ("IFRS") and does not have any standardized
meaning prescribed by IFRS and, therefore, may not be comparable
with definitions of EBITDAX that may be used by other public
companies. This is used by management as a performance measure to
understand the financial performance from Prime's business
operations without including the effects of the capital structure,
tax rates, DD&A, impairment and exploration
expenses. Non-IFRS measures should not be considered in
isolation or as a substitute for measures prepared in accordance
with IFRS. A reconciliation from total profit (a GAAP measure) to
EBITDAX (a non-GAAP measure) is shown below.
|
Three months
ended
|
Twelve months
ended
|
$'m
|
March 31,
2022
|
March 31,
2021
|
March 31,
2022
|
December 31,
2021
|
Per Prime's
financial statements
|
|
|
|
|
Total profit
|
102.0
|
97.6
|
446.0
|
441.6
|
Add
back:
|
|
|
|
|
Tax
|
85.2
|
91.5
|
453.7
|
460.0
|
Finance
costs
|
(12.7)
|
18.0
|
69.7
|
100.4
|
Finance
income
|
(0.1)
|
(0.1)
|
(0.4)
|
(0.4)
|
DD&A and
Impairment
|
69.4
|
79.2
|
293.6
|
303.4
|
Exploration
expenses
|
0.5
|
0.6
|
3.8
|
3.9
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EBITDAX
|
244.3
|
286.8
|
1,266.4
|
1,308.9
|
Net to AOC's 50%
shareholding:
|
|
|
|
|
EBITDAX
|
122.2
|
143.4
|
633.2
|
654.5
|
|
|
|
|
|
7. Q1
2021 comparative figures have been revised to ensure compatibility
and consistency of calculation as a result of a change in the
classification of items between cash generated from operating
activities, cash used in investing activities and cash used in
financing activities.
8. Q1
2021 comparative figures have been revised to ensure compatibility
and consistency of calculation. Royalties were previously
recognized net in Prime's income statement and are now presented
gross in both revenue and cost of sales.
9.
All dollar amounts are in United
States dollars unless otherwise indicated.
Management Conference Call
Senior management will hold a conference call to discuss the
results on Friday, May 13, 2022 at
10:00 (ET) / 16:00 (CET). The conference call may be accessed by
dial in or via webcast:
Canada
|
+1 647 484
0472
|
North America toll
free
|
800-207-0148
|
Sweden
|
+46 (0)8 5664
2754
|
Sweden toll
free
|
0200 898
697
|
UK
|
+44 (0)330 165
3641
|
Participant
Passcode
|
858894
|
Webcast URL
|
https://event.webcasts.com/starthere.jsp?ei=1549259&tp_key=fea75ba35e
|
Please join the event conference 5-10 minutes prior to the start
time. A recording of the webcast will be available on the Company's
website after the event.
About Africa Oil
Africa Oil Corp. is a Canadian oil and gas company with
producing and development assets in deepwater Nigeria; development assets in Kenya; and an exploration/appraisal portfolio
in Africa and Guyana. The Company is listed on the Toronto
Stock Exchange and on Nasdaq Stockholm under the symbol "AOI".
Additional Information
This information is information that Africa Oil is obliged to
make public pursuant to the EU Market Abuse Regulation and the
Swedish Financial Instruments Trading Act. The information
was submitted for publication, through the agency of the
contact persons set out above, at 5:30 p.m.
ET on May 12, 2022.
Advisory Regarding Oil and Gas Information
The terms boe (barrel of oil equivalent) is used throughout this
press release. Such terms may be misleading, particularly if used
in isolation. Production data are based on a conversion ratio of
six thousand cubic feet per barrel (6 Mcf: 1bbl). This conversion
ratio is based on an energy equivalency conversion method primarily
applicable at the burner tip and does not represent a value
equivalency at the wellhead. Given that the value ratio based on
the current price of crude oil as compared to natural gas is
significantly different from the energy equivalency of 6:1,
utilizing a conversion on a 6:1 basis may be misleading as an
indication of value.
Forward Looking Information
Certain statements and information contained herein constitute
"forward-looking information" (within the meaning of applicable
Canadian securities legislation). Such statements and information
(together, "forward looking statements") relate to future events or
the Company's future performance, business prospects or
opportunities.
All statements other than statements of historical fact may be
forward-looking statements. Statements concerning proven and
probable reserves and resource estimates may also be deemed to
constitute forward-looking statements and reflect conclusions that
are based on certain assumptions that the reserves and resources
can be economically exploited. Any statements that express or
involve discussions with respect to predictions, expectations,
beliefs, plans, projections, objectives, assumptions or future
events or performance (often, but not always, using words or
phrases such as "seek", "anticipate", "plan", "continue",
"estimate", "expect, "may", "will", "project", "predict",
"potential", "targeting", "intend", "could", "might", "should",
"believe" and similar expressions) are not statements of historical
fact and may be "forward-looking statements". Forward-looking
statements involve known and unknown risks, ongoing uncertainties
and other factors that may cause actual results or events to differ
materially from those anticipated in such forward-looking
statements, including statements pertaining to the 2022 Management
Guidance including production, cashflow from operation and capital
investment estimates, performance of commodity hedges, the results,
schedules and costs of exploratory drilling activity, uninsured
risks, regulatory and fiscal changes, availability of materials and
equipment, unanticipated environmental impacts on operations,
duration of the drilling program, availability of third party
service providers and defects in title. No assurance can be given
that these expectations will prove to be correct and such
forward-looking statements should not be unduly relied upon. The
Company does not intend, and does not assume any obligation, to
update these forward-looking statements, except as required by
applicable laws. These forward-looking statements involve risks and
uncertainties relating to, among other things, changes in
macro-economic conditions and their impact on operations, changes
in oil prices, reservoir and production facility performance,
hedging counterparty contractual performance, results of
exploration and development activities, cost overruns, uninsured
risks, regulatory and fiscal changes, defects in title, claims and
legal proceedings, availability of materials and equipment,
availability of skilled personnel, timeliness of government or
other regulatory approvals, actual performance of facilities, joint
venture partner underperformance, availability of financing on
reasonable terms, availability of third party service providers,
equipment and processes relative to specifications and expectations
and unanticipated environmental, health and safety impacts on
operations. Actual results may differ materially from those
expressed or implied by such forward-looking statements.
SOURCE Africa Oil Corp.