Afentra (LSE:AET) — INA Completion & Angola Update

0:05 Okay. Well, look, Paul, thank you very much indeed for joining us this morning. Obviously, you've issued an update today on the Angola transactions. I wonder if you could just give us a brief overview of what that looks like. Yeah. Thanks, Mark. Yeah. This morning we announced that we finally completed the INA transaction in Angola.

0:26 So that's us formally on the license, entered Angola and joined the JV partnership of Block three zero five and three zero five A. So really a major step for the company's development and progress. In addition, we also announced that on Block three zero five, the regulatory NPT and the JV partners have now aligned and agreed on a license extension and that's also equally important because that's a critical element in us completing the subsequent transaction which is the Senegal acquisition. Great, thank you. But look, let's deal with the INA first given the impact that that's going to have on the significant impact that's going to have on your investment case. It appears that the capital outlay at closing benefited strongly from cash flow since the effective date. Maybe just expand on that for us.

1:21 Yeah, I mean, while we would obviously prefer the completion to have run to the timeline that we originally indicated.

1:30 The structure of the transaction means that we benefit from the asset revenues since the effective date and that the effective date for the INE transaction is actually September 21, So therefore we've accrued a significant oil stock valued at around $16,500,000 We expect to sell that oil in the salt water, meaning we'll get the proceeds from that later in the year. So when you put that together with the overall cash outlay of the transaction which is 27,000,000 that includes 10,000,000 that we're putting in escrow for a payment to I and E when the license extension is effective, that $27,000,000 outlay is offset by effectively the stock that we've inherited, which I mentioned was about $16,500,000 So really, when you look at the numbers, it demonstrates the exceptional kind of asset value and the creative nature of the deals that we've done here.

2:32 Thank you. And obviously a natural question will be around funding, guess. So how is the INA completion being funded? I guess what payments remain outstanding?

2:42 Yeah so as I mentioned there's a 27,000,000 out late ten of which is going into ESCO for a future pivot to INE and that has funded about 18,500,000 from debt facilities and RBL that we've already got in place and some working capital facility we have in place. And then the balance, the 8,400,000 balance will be from our cash resources. So, you know, again, this delay was you know, you always prefer to not have transactions delayed. The delay means that we're having to have less cash outlay and then leaving us with a kind of stronger liquidity position post the I and E transaction. In terms of future payments, there are a couple of follow contingent payments that we would pay depending on oil price, so 2,000,000 per annum for two years as long as oil prices above $75 per barrel and then on the block three zero five a did if we develop some of those discoveries there's a contingent payment structure there as well.

3:50 And am I right in thinking that this is a positive update regarding the progress on the license extension for Block three zero five?

3:57 Yeah, what's really important is that, post INA, it's great to get that deal completed. It's 4%. Our our entry into Block three 05 and 305 is is for 4% equity. The bigger transaction, the Sonogold transaction, when we complete it, will give us 20% of Block three zero five. So therefore a lot more significant in terms of cash flow and progress to the company. So what has been holding up the Senegal transaction has been this license extension and there's been quite an intense negotiation between the regulatory NPG and the existing JV partners about the terms of that license extension and what we're able to announce today was the agreement around those terms.

4:47 So therefore, there's now an agreement between the AFPG and the JV partners on the fiscal terms of that license extension, and that allows the regulator to now proceed to gain government approval. And that also allows us to now seek government approval for our transaction with Senegal. So really an important milestone for us in the bigger transaction of acquiring the Sonegal equity of 20%, and that that really allows us to stay

5:18 on our already guided timeline of getting that deal completed by before the end of June. Okay. I also saw that you issued an operations update regarding the assets. What would you say would be the key takeaways that one should look for? Yeah, mean, I think importantly the assets are performing as we expected. Come production from the asset is around 90,000 barrels per day for the ENA deal that we're doing that's net in a seven eighty. They're about seven fifty barrels per day. Obviously, when we complete both and Senegal, our share of that 19,000 would be about four and over four and a half thousand barrels a day. So so performance has been good on the production side. It has recently been a little bit lower because we've been working hard, but the the operators have been working hard in improving the performance of the assets, upgrading things like water injection power.

6:15 So, you know, overall performance since we've been involved in the asset has has been as expected. And we also posted today a short presentation on our website which lays out the future work program over '23 and '24 for the asset which is looking at further ramping water injection rates, light well interventions, all focused on continuing to improve that production level. And most importantly, you know, of the things when we went into this asset, we recognized the emissions are high on the asset, but importantly we identified opportunities to reduce those emissions. So again that's another area of focus over 2023 and '24 working with the operator of Senegal to reduce the emissions from the asset overall.

7:09 Right, well look, congratulations, everything seems to be going incredibly well with completion of these transactions inside. What's next? Well, I think there's kind of two or four things we know needs to go on with. We have been working closely with the partnership, so we've been involved in the asset, we're very aware of the performance, but now actually formally joining the partnership, we can get more involved and really start to work with the operator and our JV partners in improving the performance of the Block three zero five and three zero five b assets and really getting them to their full potential, which is beyond the kind of reserve and production levels that are at at the moment. So that's one important area we're going to have to look for and cover. Equally importantly is business development. You know, we we have an ambition to grow AFENTRA to a material operating position and non operating position, much larger production levels.

8:05 And we've been very busy as we've said, working on other potential business development opportunities, and active in a number of those right now. So really, as we look forward, you know, we feel like the overall strategy is playing out, and I'm confident that AFENTRA will successfully deliver further repeated deals, hopefully, in 2023, but certainly twice beyond beyond as we grow AFENTRA into a kind of material African focused independent oil and gas company. Paul, thank you very much indeed. Yeah. Thank you, Bob.