VANCOUVER, BC, Aug. 12, 2021 /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 June 30, 2021, and to provide selected results
for Prime Oil and Gas Cooperatief UA ("Prime"), a company in which
Africa Oil has a 50% equity interest. View PDF version.
Highlights
- Net income of $38.4 million
(first half 2021 total of $77.3
million) and end of quarter cash balance of $35.1 million.
- Received a dividend for $37.5
million from Prime during the quarter and a further
$37.5 million dividend in July.
- On August 2, 2021, Africa Oil
announced the closing of its corporate debt facility with
$160 million committed. The Company
utilized $98 million of this new
facility to fully repay its BTG term loan ("Term Loan") with the
undrawn balance of $62 million
available to Africa Oil until May
2022. This can be utilized for general corporate purposes,
subject to customary covenants.
- At end of July 30, 2021, AOC had
an approximate cash balance of $42
million and net debt of $56
million.
- Selected Prime's second quarter 2021 results net to Africa
Oil's 50% shareholding*:
-
- end of quarter cash position of $292.8
million that includes an amount of $152.5 million, which is 50% of the security
deposit received from Equinor in relation to the Agbami field;
- average daily working interest ("W.I") production of 28,100
barrels of oil equivalent per day ("boepd) and economic entitlement
production of 30,500 boepd (84% light and medium crude oil and 16%
conventional natural gas)2,3; and
- EBITDA4 of $155.1
million (first half 2021 total of $298.2 million) and cash flow from operations of
$252.3 million (first half 2021 total
of $338.2 million).
- Post period, in July 2021, the
OML 130 Gas Sales and Purchase Agreement was signed by Prime and
all other parties, settling historical gas sales from July 2018. This will result in an additional
$36 million of sales revenue with a
net cash payment of $21 million
expected in the third quarter 2021, in each case net to Africa
Oil's 50% shareholding.
- Field operational performance remains strong and was enhanced
by the removal of production limitations on Egina due to OPEC
constraints.
Africa Oil President and CEO Keith
Hill commented: "We are going from strength to strength
on the back of excellent operational performance and strong cash
flows from our Nigerian assets. We have significantly deleveraged,
reduced our cost of capital and improved liquidity. I am very
pleased with the strong cash position in Prime at end of the second
quarter, standing at $293 million net
to our 50% shareholding. I am also encouraged by the initial
positive indications of Nigeria's
Petroleum Industry Bill, which is expected to facilitate new
project investments and support early license extensions. Our
Kenya project continues to gain
momentum and we look forward to the drilling of two high impact
exploration wells, Venus and Gazania, by end of the year. With the
improved financial position, Africa Oil is considering the option
to institute a shareholder capital return program by end of this
year, which could include a dividend policy and/or share buyback
program, subject to the necessary approvals."
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* Important
information: Africa Oil's interest in Prime is accounted for as an
investment in joint venture. Refer to Note 1 on page 4 for further
details. Please also refer to other notes on page 4 for important
information on the material presented.
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2021 Second Quarter Financial Results
(Thousands
United States Dollars, except Per Share and Share Amounts)
|
30 June
2021
|
31 December,
2020
|
|
|
Cash and cash
equivalents
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35,090
|
40,474
|
|
|
Total
assets
|
992,288
|
910,499
|
|
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Short-term
debt
|
123,000
|
-
|
|
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Long-term
debt
|
-
|
141,000
|
|
|
Total
liabilities
|
165,574
|
156,212
|
|
|
Total equity
attributable to common shareholders
|
826,714
|
754,287
|
|
|
|
|
|
|
|
|
|
|
|
|
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Six months
ended
|
Six months
ended
|
Three months
ended
|
Three months
ended
|
|
30 June,
2021
|
30 June,
2020
|
30 June,
2021
|
30 June,
2020
|
Share of profit from
investment in joint venture
|
97,378
|
117,316
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48,564
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31,731
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Share of
(loss)/profit from investment in associates
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(2,090)
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57
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(1,205)
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(1,413)
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Total operating
income
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95,288
|
117,373
|
47,359
|
30,318
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Net operating
income/(expense)
|
88,339
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(103,983)
|
44,133
|
27,004
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Net
income/(loss)
|
77,304
|
(118,648)
|
38,384
|
19,234
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Net income/(loss) per
share - basic and diluted
|
0.16
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(0.25)
|
0.08
|
0.04
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Weighted average
number of share outstanding - basic ('000s)
|
472,703
|
471,631
|
473,253
|
471,950
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Weighted average
number of share outstanding - diluted ('000s)
|
475,848
|
471,631
|
476,398
|
475,150
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Number of shares
outstanding ('000s)
|
473,360
|
471,950
|
473,360
|
471,950
|
|
|
|
|
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Cash flows (used in)/
provided by operations
|
(6,841)
|
(754)
|
(3,065)
|
(1,525)
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Cash flows used in
investing
|
30,623
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(467,634)
|
32,525
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(13,629)
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Cash flows (used
in)/provided by financing
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(29,154)
|
178,429
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(23,800)
|
(17,923)
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Total change in cash
and cash equivalents
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(5,384)
|
(290,036)
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5,655
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(33,097)
|
|
|
|
|
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Total change in
equity
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72,427
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(112,010)
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44,504
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17,598
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The financial
information in this table was selected from the Company's unaudited
consolidated financial statements for the three months ended June
30, 2021. The Company's consolidated financial statements, notes to
the financial statements, management's discussion and analysis for
the three months ended June 30, 2021 and 2020, and the 2020 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).
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FINANCIAL POSITION AND EARNINGS
The Company recognized net operating income amounting to
$44.1 million during the three months
ended June 30, 2021, compared with a
net operating income of $27.0 million
during the same period in 2020. Included in the Company's share of
profit from equity investments is profit from its 50% investment in
Prime of $48.6 million in the second
quarter of 2021 compared with $31.7
million during the second quarter of 2020. Prime's profit in
the second quarter of 2020 was affected by a non-cash impairment
charge in the Egina field, reducing the profit from share of joint
venture by $72.4 million.
As at June 30, 2021, the Company
had cash of $35.1 million, compared
with cash of $40.5 million at
December 31, 2020.
Prime distributed one dividend to its shareholders in the second
quarter of 2021 with $37.5 million
received by Africa Oil. Prime distributed a further dividend in
July 2021 with another $37.5 million received by Africa Oil. Since
completing the acquisition of a 50% shareholding in Prime in
January 2020 for $520 million, Africa Oil has received 8 dividends
from Prime for a total amount of $275.0
million.
On May 13, 2021, the Company
signed a new corporate loan corporate loan facility ("Corporate
Facility"), with an amount up to $150.0
million and a three-year term, with $130 million committed at that time. Post
signing, the facility amount and commitments were increased to
$160 million. Completion occurred on
July 16, 2021. On July 30, 2021, $98.0
million was drawn down under the Corporate Facility in order
to repay the existing Term Loan in full, and an additional
$62.0 million can be drawn until
May 12, 2022, subject to the
satisfaction of customary covenants. As at 30 July, 2021, the Company has a cash balance of
$42.0 million and a net debt position
of $56.0 million.
PRIME'S SECOND QUARTER 2021 PERFORMANCE
Production from the Egina field continued to be affected in the
second quarter of 2021 by the OPEC+ quotas, but these were relaxed
in June, with further increases to production planned in the second
half of 2021. These quotas limited production from Egina in the
second quarter of 2021 to an average of approximately 162,000 bopd,
which compares to the first quarter 2021 average of 152,000 bopd.
The quotas in June in respect of the Egina field were approximately
173,000 bopd. The approved July and August quotas are approximately
181,000 and 177,000 bopd respectively. In July 2021, OPEC+ members announced they would be
gradually increasing the crude production quotas by 400,000 barrels
per month from August 2021 to
September 2022. This will result in
Nigeria's production output
increasing from 1.554 mb/d to 1.829 mb/d.
Prime's second quarter 2021 average daily W.I. production was
28,100 boepd and economic entitlement production was 30,500 boepd
(84% light and medium crude oil and 16% conventional natural gas),
net to Africa Oil's 50% shareholding in Prime.
During the second quarter of 2021, Prime was allocated four oil
liftings with total sales volume of approximately 4.0 million
barrels or 2.0 million barrels net to Africa Oil's 50%
shareholding.
Prime has sold forward or hedged 100% of its second half 2021
cargoes at an average price of $58/bbl. These contracts are with counterparties
including oil supermajors and commodity trading houses. The
counterparties are part of groups with investment grade credit
ratings. Only 21% of cargoes in 2022 have been hedged at an average
price of $67/bbl, giving the Company
exposure to improving oil prices associated with economic
recovery.
Second quarter 2021 average operating cost of $6.0 per boe compares to first quarter 2021
average operating cost of $6.4 per
boe.
Prime achieved second quarter 2021 sales revenue of $127.6 million (first half 2021 total of
$280.9 million); EBITDA4
of $155.1 million (first half 2021
total of $298.2 million) and cash
flow generated from operating activities of $252.3 million (first half 2021 total of
$338.2 million), in each case net to
Africa Oil's 50% shareholding. Capital expenditure during the
quarter, net to the Company's shareholding was $3.1 million (first half 2021 total of
$5.7 million).
On June 25, 2021, Prime signed a
Securitization Agreement with Equinor and Chevron, whereby Equinor
agreed to pay a security deposit to the two other partners to
secure future payments due under that Securitization Agreement,
pending a comprehensive resolution being reached among all unit
parties in respect of the tract participation in the Agbami field.
In accordance with the Securitization Agreement, on June 29, 2021 Prime received from Equinor its
portion of the security deposit in the form of a cash payment of
$305 million. A provision has been
recorded to reflect the mechanism pursuant to which any such
imbalance payments due from Equinor to Prime under the terms of any
future agreement among the Agbami parties will be set-off against
this security deposit. The parties will continue ongoing
discussions in an attempt to seek final resolution of the formal
redetermination of the Agbami tract participation.
As of June 30, 2021, Prime had a
cash balance of $585.5 million or
$292.8 million net to Africa Oil's
50% interest. Prime also had an outstanding debt balance of
$1,114 million or $557 million net to Africa Oil's 50%
interest.
2021 OPERATIONAL OUTLOOK
Nigeria's House of
Representatives and Senate, that make up the National Assembly,
passed the Petroleum Industry Bill ("PIB") in July 2021 which is expected to change the terms
that are applied to Prime's licenses. This is expected to be signed
into law by the President in 2021. A number of amendments to fiscal
terms are currently envisaged and the impact of these is unclear
until the PIB is published in final form. One of the amendments may
include the imposition of deep-water royalties on the Company's
producing assets in Nigeria. It is
also anticipated that the PIB will eliminate the existing Petroleum
Profit Tax and introduce a new corporate income tax regime with a
lower headline tax rate. It is possible the PIB, once passed into
law, could reduce investment uncertainties and facilitate new
project investments, and support early extension of licenses that
would benefit the Company's Nigerian assets.
In July 2021, the OML 130 Gas
Sales and Purchase Agreement was signed by Prime and all other
parties, settling historical gas sales from July 2018. Payment is anticipated in the third
quarter. This will result in an additional $72 million of sales revenue to Prime
($36 million net to Africa Oil's 50%
shareholding) for the three-year period from July 2018. This agreement has de-risked Prime's
future cash flow generation as it facilitates regular payments to
Prime for future gas sales from OML 130 assets.
There is no change to 2021 Management Guidance announced on
February 26, 2021, which is copied
below:
Guidance for Prime, net
to AOC's 50% shareholding:
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W.I. production
(boepd)
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24,000-28,000
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Economic entitlement
production (boepd)
|
26,000-30,000
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Cash flow from
operations (million)
|
$310-$440
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Capital investment
(million)
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$35-$50
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Net Debt Repayment
(million)
|
$210-$280
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Africa Oil's corporate
budget (million)
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$18-$20
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Through its 30.9% shareholding in Impact Oil & Gas
("Impact"), the Company has exposure to the Venus-1 exploration
well in Block 2913B, offshore
Namibia which is expected to spud
by the end 2021. Venus-1 will target a large basin floor fan system
with significant undiscovered petroleum initially in place that has
been identified using 3D seismic data.
Africa Oil has interest in Block 2B, offshore South
Africa through its direct and indirect (through Impact)
shareholdings (effective combined interest of 31.2%) in Africa
Energy Corp. ("Africa Energy").The Block 2B joint venture partners are finalizing the
procurement of a rig to drill the Gazania-1 oil exploration
well offshore South Africa in
order to start drilling by the end 2021. Block 2B has significant contingent and prospective
resources in shallow water close to shore and includes the A-J1
discovery from 1988 that flowed light sweet crude oil to surface.
Gazania-1 will target two prospects in a relatively low-risk rift
basin oil play up-dip from the discovery.
In Kenya, the JV partners are
designing a field development plan for the South Lokichar
development in collaboration with the government of Kenya in order to optimize the economics of
the project, enhance its sustainability performance and secure a
long-term extension of the licenses, while minimizing expenditures
in the short term. The Company expects to provide a project update
in September 2021.
NOTES
- 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/Loss and Comprehensive Income/Loss. Any dividends received
by Africa Oil from Prime are recorded as Cash flow from Investing
Activities. The guidance presented here is for information
only.
- 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.
- 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.
- Earnings Before Interest, Tax, Impairment, Depreciation and
Amortization ("EBITDA") 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 EBITDA that
may be used by other public companies. Non-IFRS measures should not
be considered in isolation or as a substitute for measures prepared
in accordance with IFRS.
- All dollar amounts are in United
States dollars unless otherwise indicated.
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. The
information was submitted for publication, through the agency
of the contact persons set out above, at 5:30 p.m. ET on August 12,
2021.
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 instituting a
dividend policy or implementing a share buyback program,
utilization and drawdown under the new Corporate Loan facility,
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, OPEC+ quota impact on production, 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.