Petroleum Africa
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Thursday, April 28, 2022
Afentra has signed a Sale and Purchase Agreement (SPA) with Sonangol to purchase interests in Block 3/05 and Block 23, offshore Angola for a firm consideration of $80 million and contingent payments of up to $50 million (in aggregate) in the case of Block 3/05 and consideration of $0.5 million in the case of Block 23.
Afentra is acquiring a 20% non-operated interest in Block 3/05 and a 40% non-operated interest in Block 23 for a total consideration of up to $130 million. The consideration is comprised of $80 million cash up front, subject to customary completion adjustments, up to $50 million in contingent payments, payable in respect of each of the 10 calendar years commencing January 1, 2023 and subject to certain oil price and production hurdles, and $0.5 million in respect of Block 23. The Acquisition has an effective date of April 20, 2022.
This represents a strategic entry into a highly attractive West African jurisdiction with an implied acquisition cost of ~$4/boe, based on 2P reserves (1).
The Acquisition is expected to be funded with new debt facilities and existing cash on the balance sheet. Discussions with prospective providers of debt finance are well advanced and will be finalized in due course.
While completion is expected in the third quarter of 2022, next steps in the process include the conclusion of Afentra’s due diligence exercise, the provision of a bank guarantee in respect of the 10% transaction deposit and the completion of the right of first offer process by Sonangol. Government approvals and a license extension for Block 3/05 are anticipated to be granted, with the publication of the AIM re-admission document and resumption of trading anticipated to occur mid-year. In addition to the conditions described above relating to regulatory consents, right of first offer, license extension and due diligence, the Acquisition is subject to the receipt of shareholder approval pursuant to an ordinary resolution to be proposed at a General Meeting and re-admission of the enlarged group to trading on AIM. Further details of the Acquisition and SPA will be set out in the re-admission document.
The Acquisition is consistent with the strategic objective set by Afentra at the time of its launch in May 2021 to build a balanced cash flow generative portfolio of assets where the Company can contribute to emissions reduction to drive a sustainable transition. These assets give Afentra exposure to a high-quality asset base with long-life, low-cost production, access to additional production optimization opportunities, upside potential and opportunities to reduce future emissions.
Afentra CEO Paul McDade commented on the announcement: “We are delighted to have agreed terms with Sonangol and signed the SPA for our entry into Block 3/05, Lower Congo basin and Block 23, Kwanza basin in Angola. This transformative deal marks our first acquisition since launch last year, and sees the Company enter Angola, a major oil and gas jurisdiction with significant opportunities ahead to build a material business and positively impact the energy transition in Africa.
“This highly accretive transaction gives Afentra exposure to a high-quality asset base, underpinned by strong cash flow from stable and long-life production and 20 million barrels 1 of net 2P Reserves. The assets, containing over 3 billion barrels 1 of oil in place, provide significant scope for further value creation from production optimization, infill drilling and incremental developments. The attractive deal metrics and strong cashflow generation demonstrate Afentra’s commercial discipline and focus on robust cash flow. The entry into Block 23 provides us the opportunity to work with Sonangol to better understand and unlock the potential of this exciting and highly prospective exploration area.
“We are looking forward to partnering with Sonangol, which has run a very pragmatic and transparent process, and supporting them in delivering an effective energy transition strategy. We are also looking forward to demonstrating our commitment to the ESG principles upon which Afentra was launched and working to create value for all of our stakeholders. The next steps will be to complete our due diligence process and to conclude our discussions on the debt facility to fund the acquisition, with a view to completing the transaction in the third quarter of 2022.
“I would like to thank our shareholders for their patience through this process and hope they share the management’s excitement about the value creation implications of this deal. We look forward to communicating on our progress as we move towards the publication of the re-admission document and the recommencement of trading thereafter.”
The full release with Asset Overviews can be found at Afrenta here.
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