VANCOUVER, BC, Feb. 26, 2021 /CNW/ - (TSX: AOI) (Nasdaq
Stockholm: AOI) Africa Oil Corp. ("Africa Oil", "AOC"
or the "Company") is pleased to announce its operating and
consolidated financial results for the three months and the year
ended December 31, 2020. The Company
is also releasing today, its 2021 Management Guidance including
guidance related to its 50% equity investee, Prime Oil & Gas
Coöperatief U.A ("Prime"). View PDF Version
Highlights
- Africa Oil fourth quarter net income of $79.8 million and full-year net income of
$198.0 million, excluding a
$215.6 million non-cash impairment of
Kenya exploration assets posted in
the first quarter 2020.
- Strong quarterly profit contribution by Prime to AOC's net
income amounting to $59.2
million.
- During 2020, Africa Oil repaid $109
million of its $250 million
corporate term loan facility and has commenced the refinancing
process for the balance with closing expected in July 2021.
- Year-end 2020 cash balance of $40.5
million and working capital of $29.3
million.
- Selected Prime's fourth quarter 2020 results net to Africa
Oil's 50% shareholding*:
-
- quarterly average daily working interest ("W.I") production of
26,200 barrels of oil equivalent per day ("boepd) and economic
entitlement production of 30,100 boepd (83% light and medium crude
oil and 17% conventional natural gas)2,3;
- full-year W.I. production of 28,700 boepd and economic
entitlement production of 33,900 boepd (85% light and medium crude
oil and 15% conventional natural gas) are in line with Third
Quarter 2020 Management Guidance2,3; and
- EBITDA of $128.8 million
(full-year period: $619.5
million)4.
- 2021 Management Guidance (refer to page 3 for more
details):
-
- average daily W.I. production range of 24,000-28,000 boepd and
net entitlement production range of 26,000-30,000 boepd net to
AOC's 50% shareholding in Prime, with approximately 85% expected to
be light and medium crude oil and 15% conventional natural gas;
and
- Prime's cash flow from operations5 of $310-$440 million
net to AOC's 50% shareholding.
Africa Oil President and CEO Keith
Hill commented: "I am pleased to report strong full-year
results for the Company, despite one of the most challenging years
for our industry. Our investment in Prime has performed
exceptionally well with its strong production and free cash flows
that enabled significant deleveraging, both at the Prime and Africa
Oil corporate levels. Prime reduced its RBL debt by $522 million or 29% of the principal amount at
the start of 2020. Africa Oil reduced its corporate term loan
by $109 million or 44% of the
original amount of $250 million that
was drawn in January 2020. We are in
a strong position to continue this strong performance and also plan
to pursue new business development opportunities with a focus on
the acquisition of producing assets, offshore West Africa. We can also look forward to
exciting catalysts through our other portfolio investment
companies. These include further progress in the development of
Block 11B/12B discoveries, offshore South Africa, the drilling of the Venus
exploration well in Block 2913B,
offshore Namibia and the drilling
of the Gazania exploration well in Block 2B, South
Africa. We also continue to work closely with the Government
of Kenya and our JV partners to
progress the South Lokichar development project. I am confident
that we can realize the significant potential in this project
supported by a recovery in the commodity markets and a return to a
normal business climate with the COVID-19 recovery gathering
momentum."
2020 Fourth Quarter Financial Results
(Thousands
United States Dollars, except Per Share and Share Amounts)
|
December 31,
2020
|
December 31,
2019
|
|
|
|
|
|
Cash and cash
equivalents
|
40,474
|
329,464
|
Total
assets
|
910,499
|
812,305
|
Long-term
debt
|
|
141,000
|
|
-
|
Total
liabilities
|
156,212
|
45,602
|
Total equity
attributable to common
shareholders
|
754,287
|
766,703
|
Working
capital
|
29,324
|
290,749
|
|
|
|
|
|
|
Three months
ended
December 31, 2020
|
Three months
ended
December 31, 2019
|
Year ended
December 31, 2020
|
Year ended
December 31, 2019
|
|
|
|
|
|
Share of profit from
investment in joint
venture
|
59,193
|
-
|
208,981
|
-
|
Share of
profit/(loss) from investments in
associates
|
32,041
|
(3,446)
|
31,381
|
(13,664)
|
Total operating
income
|
91,234
|
(3,446)
|
240,362
|
(13,664)
|
Net operating
income/(expense)
|
86,151
|
(147,692)
|
10,633
|
(165,006)
|
Net
income/(loss)
|
79,845
|
(146,198)
|
(17,614)
|
(156,769)
|
Net income/(loss) per
share - basic and
diluted
|
0.17
|
(0.31)
|
(0.04)
|
(0.33)
|
Weighted average
number of shares
outstanding - basic ('000s)
|
471,954
|
471,214
|
471,792
|
471,076
|
Weighted average
number of shares
outstanding - diluted ('000s)
|
475,144
|
471,214
|
471,792
|
471,076
|
Number of shares
outstanding ('000s)
|
471,960
|
471,214
|
471,960
|
471,214
|
|
|
|
|
|
Cash flows provided
by / (used in) operations
|
(1,916)
|
(4,633)
|
(5,348)
|
(4,484)
|
Cash flows provided /
(used in) investing
|
54,418
|
4,142
|
(394,272)
|
(35,125)
|
Cash flows provided
by / (used in) financing
|
(42,541)
|
(334)
|
110,644
|
(1,222)
|
Total change in cash
and cash equivalents
|
10,078
|
(845)
|
(288,990)
|
(40,873)
|
|
|
|
|
|
Total change in
equity
|
73,531
|
(145,797)
|
(12,416)
|
(155,377)
|
|
|
|
|
|
The financial information in this table was selected from the Company's audited consolidated financial statements for the
year ended December
31, 2020. The Company's consolidated financial statements, notes to the financial statements, management's
discussion and analysis for the
year ended December 31, 2020 and 2019 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 $91.2 million and net income of $79.8 million during the fourth quarter of 2020.
The operating income primarily relates to the Company's share of
profit from its investments in Prime amounting to $59.2 million and in Impact Oil and Gas Ltd.
("Impact") amounting to $11.1
million. For the full year, the Company recognized a net
loss of $17.6 million with a total
operating income of $240.4 million
being offset by $229.7 million in
operating expenses, that primarily relates to the recognition of a
$215.6 million non-cash impairment of
intangible exploration assets, relating to the valuation of the
Kenyan development project and Kenyan Block 10BA.
In addition, the Company recognized a dilution gain of
$21.1 million during the three months
ended December 31, 2020 relating to
Africa Energy Corp's Subscription Agreement with Impact.
The Company ended 2020 fourth quarter with cash of $40.5 million and working capital of $29.3 million in comparison to cash of
$329.5 million and working capital of
$290.7 million at the end of 2019.
The reduction in the Company's cash position of $289.0 million is primarily attributed to its
acquisition of a 50% shareholding in Prime for a purchase price of
$519.5 million. This acquisition was
funded with a cash payment of $269.5
million and a term loan facility of $250.0 million.
During the 2020 fourth quarter, Prime paid two
dividends6 for a total of $125.0
million with net payment to Africa Oil of $62.5 million related to its 50% shareholding
interest. The Company applied $35.9
million of the amount received to reduce its term loan,
which at the period end stood at $141.0
million. For the twelve-month period ended December 2020, Africa Oil received six dividend
payments from Prime for aggregate amount of $200.0 million net to its 50% shareholding.
The Company will continue to repay its term loan from the
dividends distributed from Prime and started the refinancing
process of the term loan, with completion expected in July 2021.
PRIME'S FOURTH QUARTER 2020 PERFORMANCE
Prime's fourth quarter 2020 average daily W.I. production was
26,200 boepd and economic entitlement production was 30,100 boepd
(83% light and medium crude oil and 17% conventional natural gas),
net to Africa Oil's 50% shareholding in Prime. Its full-year
average working Interest production was 28,700 boepd and economic
entitlement production was 33,900 boepd (85% light and medium crude
oil and 15% conventional natural gas), net to Africa Oil's 50%
shareholding in Prime.
During the fourth quarter, Prime was allocated three oil
liftings with total sales volume of approximately 2.9 million
barrels or 1.4 million barrels net to Africa Oil's 50%
shareholding. For the full year, Prime was allocated 20 oil
liftings with total sales volume of approximately 19.0 million
barrels or 9.5 million barrels net to Africa Oil's 50%
shareholding.
Prime benefited from a robust oil price hedging program in 2020,
achieving an average sale price of $64/bbl for a total of 20 cargoes (19 mmbbl) via
financial hedges and forward sales contracts.
Prime is continuing its hedging program to 2021 and as of
22 February 2021, has sold forward or
hedged 100% of its H1-2021 cargoes at an average price of
approximately $57 per barrel and 56%
of its H2-2021 cargoes at an average price of approximately
$55 per barrel. These contracts are
with counterparties including oil supermajors and commodity trading
houses with investment grade credit ratings.
Fourth quarter 2020 average operating cost of $5.9 per boe and full-year average operating cost
of $5.2 per boe. No leasing costs are
payable for Prime's Floating Production, Storage and Offloading
("FPSO") platforms because they are fully owned by the joint
venture partners.
Prime achieved fourth quarter 2020 sales revenue of $82.3 million (full-year period: $633.5 million); EBITDA of $128.8 million (full-year period: $619.5 million) and cash flow generated from
operating activities of $146.4
million (full-year period: $582.5
million), in each case net to Africa Oil's 50%
shareholding.
Prime's total 2020 capital expenditure of $30 million is 33% lower than the Third Quarter
2020 Management Guidance of $45
million and 67% lower than initial budget of $91 million. The reduction includes deferral of
infill drilling and activities related to the Preowei field
development project due to COVID-19 and the oil price crash. These
activities are expected to resume in 2021 and 2022 as economic
conditions improve, subject to partners' consent.
2021 MANAGEMENT GUIDANCE
Africa Oil's 2021 production will be contributed by its 50%
shareholding in Prime. Prime's assets include an indirect 8%
interest in Oil Mining Lease ("OML") 127 and an indirect 16%
interest in OML 130. OML 127 is operated by affiliates of Chevron
Corporation ("Chevron") and contains the producing Agbami Field.
OML 130 is operated by affiliates of TOTAL S.A. ("TOTAL") and
contains the producing Akpo and Egina
Fields.
The three fields in these two licenses are all giant deep-water
fields, located over 100 km offshore Nigeria, and are some of the largest and
highest quality in Africa. All
three fields have high quality conventional reservoirs and produce
light and medium, sweet crude oil.
Africa Oil Management Guidance for 2021 includes W.I. production
guidance range of 24,000-28,000 boepd and net entitlement
production range of 26,000-30,000 boepd, net to AOI's 50%
shareholding in Prime, with approximately 85% expected to be light
and medium crude oil and 15% conventional natural gas.
Net entitlement production estimate is based on an average Brent
price of $55 per barrel. It is
calculated using the economic interest methodology and includes
cost recovery oil, tax oil and profit oil and is different from
W.I. production that is calculated based on project volumes
multiplied by Prime's effective working interest.
Based on the above production ranges and Prime's current 2021
hedging program, Africa Oil management estimate Prime to generate
cash flow from operations5 of approximately $310-$440 million
net to Africa Oil's 50% shareholding.
Any dividends6 received by Africa Oil from Prime's
operating cash flows and cash on hand will be subject to Prime's
capital investment and financing cashflows, including Prime's RBL
interest payments and principal amortization. Prime's 2021 capital
investment is expected to be in the range of $35-$50 million and
its net debt repayment in the range $210-$280 million,
in each case net to Africa Oil's 50% shareholding in Prime. Prime
had a cash and cash equivalents balance of $115.7 million net to Africa Oil's 50%
shareholding at year-end 2020.
At present, considering the uncertainties including changes to
OPEC+ quotas and the next RBL re-determination, the management
expect the next Prime dividend to be distributed post first quarter
2021.
Africa Oil's 2021 corporate budget is estimated to be
approximately $18-$20 million and includes pre-FID budget for
Kenya, G&A and exploration
activities. Africa Oil management do not expect incremental
investments in the Company's equity portfolio companies in
2021.
2021 Management Guidance Summary
Guidance for Prime, net
to AOC's 50% shareholding:
|
|
W.I. production
(boepd)
|
24,000-28,000
|
Economic entitlement
production (boepd)
|
26,000-30,000
|
Cash flow from
operations5 (million)
|
$310-$440
|
Capital investment
(million)
|
$35-$50
|
Net Debt Repayment
(million)
|
$210-$280
|
Africa Oil's corporate
budget (million)
|
$18-$20
|
The 2021 Management Guidance ranges presented try to account for
uncertainties around number of parameters including: OPEC+ quotas
for the Egina oilfield; reservoirs performances; possible fiscal
changes, timing of projects and capital investment programs; and
semi-annual RBL re-determination.
COVID-19 UPDATE
During fourth quarter 2020 there were no COVID-19 cases on
Prime's production facilities. Africa Oil employees mostly continue
to work from home and there have been no cases of COVID-19.
2021 EXPLORATION CATALYSTS OUTLOOK
Through its 30.9% shareholding in Impact Oil & Gas, the
Company has exposure to the Venus-1 exploration well in Block
2913B, offshore Namibia which is expected to spud in third
quarter 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. The well will be operated by
a subsidiary of Total S.A. (40%) with partners Qatar Petroleum
(30%.), Impact (20%) and NAMCOR (10%). Africa Oil has a net 6%
indirect economic stake in the license through its shareholding in
Impact.
Venus-1 is a potential basin-opening well and could be an
impactful catalyst for the Company's other interests in the area. A
successful Venus-1 well would demonstrate the presence of an active
regional petroleum system and would increase the prospectivity of
adjacent blocks including Block 3B/4B, where Africa
Oil holds a 20% operated working interest.
Through its shareholding 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 in late
2021 to early 2022. The 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 19.9% shareholding of Africa
Energy. Africa Energy holds a carried 27.5% working interest in
Block 2B with partners Azinam
(Operator, 50% WI), Panoro Energy (12.5% W.I.) and Crown Energy
(10% W.I.).
NOTES
1.
|
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.
|
|
|
2.
|
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.
|
|
|
3.
|
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.
|
|
|
4.
|
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.
|
|
|
5.
|
Cash flow from
operations before working capital adjustments.
|
|
|
6.
|
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
Reserve Based Lending ("RBL") principal amortization, which are
subject to semi-annual RBL redeterminations.
|
|
|
7.
|
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 February
26, 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
five thousand and eight hundred cubic feet per barrel (5.85 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 5.85:1, utilizing a conversion on a 5.85:1 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 2021 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, 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.