Afentra (LSE:AET) — Trading Update

0:02 Good morning, and welcome to the AFENTRA PLC Trading Update. Throughout this recorded presentation, investors will be in listen only mode. Questions are encouraged and they can be submitted at any time using the Q and A tab situated on your hand on your screen. Simply type in your questions and press send. The company may not be in a position to answer every question received during the meeting itself. However, the company can review all questions submitted today and publish responses, which is appropriate to do so. Before we begin, I would like to submit the following poll. And I would now like to hand you

0:32 over to CEO, Paul McDade. Good morning to you. Thank you. Good morning, everyone, and welcome to our first half update presentation. In 2025, we've continued to make good strategic progress in Angola, both in the offshore and onshore. Offshore, Iain will take you through the significant progress we've made in Block 205 redevelopment plan. This is laying a very strong foundation for the production growth that will come from the workovers and drilling plan for 2026 and beyond. And as you'll see, we remain on track to materially grow production from these assets over the coming years. And we see that production growth and the associated cash flow being sustained for many years given the reserve and the resource potential of the assets.

1:24 Obviously, the AETU acquisition we announced recently will add additional exposure. And then onshore, again, we'll take you through what con four, which we initial recently, will basically bring to our onshore Kwanzaa strategy. It obviously gives us that additional avenue of field redevelopment opportunity as well as extending the exciting exploration potential that we have already in form fifteen and nineteen. And then as you'll hear from Anastasia, we continue to take a disciplined approach to our finances of the company, and we had a very strong performance in the in the first half. This discipline also applies to our approach to the acquisition opportunities that we continue to screen.

2:09 And you would have seen it in the way in which we've

2:13 acquired AETU as assets within this UO5 area. So let me hand over to Anastasia and Ian to go through the presentation. Thank you very much, Paul, and good morning to everyone. Thank you for joining us. Paul has set the stage for me to talk about the financial framework of AFENTRA and the delivery on our strategic objectives in the first half of this year. We had a very strong first half of two thousand twenty five. Our cash generative asset base continues to support the entirety of the increased capital expenditure, principal and interest repayments on our RBL facility, as well as contingent and acquisition payments.

3:01 The highlights of our performance include strong cash position at midyear, with cash balance broadly flat relative to end of twenty twenty four and end of Q1 twenty twenty five. Our cash balance of $54,900,000 includes $35,400,000 of revenue attributable to a third lifting of the year, which slipped from June 30 to July 1 and resulted in technical revenue recognition and cash recognition in the third quarter of twenty twenty five. Our production has been stable at 6,350 barrels net to AFENTRA, with crude sales of 1,200,000 barrels, inclusive of the July 1 lifting.

3:49 Our balance sheet remains strong with net cash of $19,900,000 after the semiannual debt repayment and contingent acquisition payments made in the first half of the year and also inclusive of the July 1 lifting revenue I mentioned earlier. Our total debt stands at $36,800,000 and down from year end post the semiannual debt amortization payments. This is also a $23,400,000 reduction relative to 06/30/2024, when our debt stood at $60,200,000 We have not utilized our working capital facility in the first half of this year with facility undrawn. We have continued our growth journey in Angola, expanding our presence in Kwanzaa onshore that Ian will talk about, and we additionally consolidated our position in the core producing assets of three zero five and 305A with the acquisition of AETO's stake.

4:51 Our capital allocation remained disciplined with the ongoing focus on cash generation and cost management. Going to the next slide, Slide five. On this page, we present uses of cash in the first half of this year. As I mentioned earlier, our cash generative asset base continues to support the entirety of our expenditures. Also repayments on the RPL facility has been done in the first half of this year, as well as we made our contingent payments and acquisition payments. Negative $8,900,000 of asset cash generation that you can see here is due to timing of revenue receipts versus asset expenditures and reflects the sale of approximately 700,000 barrels of crude versus our 2,000,000 annual target.

5:45 Through the two liftings we've done in February and April 2025. This is set against a full six months of OpEx and CapEx expenditures. Our first half twenty twenty five gs and A includes annual bonus payments and we anticipate that G and A run rate for the balance of the year will reduce. Pro form a for the July lifting, our net cash position has improved relative to year end by $7,300,000 with commodity price realizations approximating first half of twenty twenty five average, which highlights the importance of the increased frequency of liftings that ultimately allow us to achieve market average realizations for the period.

6:32 We maintain a meaningful running room for future growth, including M and A. Turning to Slide six, just a very brief run through the highlights of the AETU transaction we announced in June. With regards to this transaction, this is a very good example of what we do to continue to build on the strong cash flow foundation at AFENTRA. We have included a recap of this consolidation acquisition, including transaction metrics. This acquisition will be funded entirely from the internal resources and subject to the requisite approvals, we anticipate to complete this acquisition towards year end 2025, with AFENTRA owning 35% in Block 3 zero five and twenty eight percent in Block 305A.

7:26 Turning to our offtake and hedging strategy on Slide seven. As guided earlier in the year, we have 2,000,000 barrels of crude planned to lift during the course of 2025. Even though we have a working capital facility to bridge our cash flow exposure in between the liftings, we proactively manage to have smaller quarterly liftings for our joint marketing arrangements with other partners in the Palenka facility. To date, we had three liftings in 2025, with aggregate sales of 1,200,000 barrels, inclusive of the July lifting. That generated revenue of $87,400,000 at an average realized oil price of $71.30 Going forward, we'll firm up the joint lifting schedule.

8:16 Our current plan remains to lift around 420,000 barrels per quarter with an even distribution for the rest of the year. Given the recent volatility in prices, we have been mindful of preserving the commodity price upside where prudent. We have hedged 70% of the third quarter volume and 62% of the fourth quarter volume with the hedging profile you can see on this page. We have currently paused additional twenty twenty six hedging as current hedge pricing is not offering us sufficient value protection. We continue to monitor the market in that regard. Turning to the details of our RBL and working capital facilities on Slide 8.

9:02 We have these facilities in place arranged by Trafigura and MCB. We secured those facilities in the second quarter of twenty twenty one to complete the completion of the Angola transactions. Both facilities have been secured at competitive market rates.

9:21 We made a repayment on the RBL facility in the first half of twenty twenty five, and our current debt position stands at $36,800,000 Our next scheduled repayment is in third quarter of twenty twenty five. We might choose to make it slightly earlier as soon as we get proceeds over July 1 lifting to save some of the interest costs. Post that repayment, our RBL balance will drop to around $32,000,000 For the company that generated over $90,000,000 of EBITDAX in 2024, We remain largely unlevered and continue to maintain material headroom in our assets, should we choose to refinance into a bigger facility in the future to support our growth plans.

10:08 Most likely, we will continue to hold the existing facility until we have an acquisition to finance. And in that case, we will consider refinancing. Overall, still a very healthy picture. We have no concerns around our ability to service the debt, and 2025 so far has been a healthy year. Finally, turning to Slide nine. So this is a final slide before Ian will talk about the operational update at AFENTRA. Our core objectives are centered on positioning AFENTRA for scalable growth and long term returns. We have a disciplined three to five year approach that prioritizes flexibility, balance sheet resilience and scalable capital deployment positioning AFENTRA for sustainable value creation in the long run.

11:00 We maintain strong liquidity with a prudent leverage position with selected use of debt to fund strategic growth and to build future capacity. Our key priority remains the ongoing reinvestment into our existing assets to drive future growth. We prioritize short circle production and development opportunities, and we invest in existing production facilities to optimize performance, protect value and to build capacity for future cash generation. We have a limited onshore exploration budget, which provides exposure to significant upside potential. Our next priority is an ongoing search for the value accretive deals on par with the deals we have completed to date. We can't comment on the likelihood of the deals and their timing, but we can reassure you that we continue to actively pursue value accretive transactions in Angola and other West African jurisdictions.

11:57 We review both small and large transactions, but would only pursue those deals that are accretive to our story and priced for AFENTRA shareholder value creation. The AETU deal we announced in June is a good example of an accretive transaction that will not be limiting our ability to pursue larger transactions in the future. As we mentioned in our prior communications, we continue to aim to minimize equity dilution while leveraging available debt and existing asset capacity to support future acquisitions. Our focus remains on reinvesting cash into accretive growth opportunities with return of capital for dividends or buybacks remaining under consideration. In July, the Employee Benefit Trust commenced buying 6,500,000 shares to cover founders and staff awards for the balance of 2025 and 2026, avoiding dilution and capitalizing on current share price levels.

12:57 Long term value creation remains our commitment. With that, I'll hand it over to Ian to cover the operational update. Thank you. Thank you, Anastasia, and also for Paul for the introduction, good morning to everyone. Over the next set of slides, I'll outline the operational highlights for the first half. First the first slide here, I'm going to just focus on three main items: the asset performance, I'll talk a little bit about AETRA acquisition after you've heard from Anastasia and then all on onshore delivery. So first on asset performance. We remain on track for increased production in future years. Since we entered the asset and partner group back in 'twenty two, there's been a turnaround in production and with steady increase delivered from 'twenty two onwards each year.

13:47 The focus initially has been on stabilization and reversing the decline. And then since 2024, we've been preparing the infrastructure for the increases that we see in production through new drilling activities. The improved performance is also reflected in the latest CPR that we released in February, and that showed 140% reserve replacement over an eighteen month period or 15,400,000 barrels. Essentially, if you go back to when we entered the asset in 2022, we've replaced all production since we entered the block and increased the reserve and resource base. So secondly, on the AETRA acquisition, I won't talk a lot about it, but just as Anastasia shared, this is a nice deal.

14:37 It consolidates our position in this large asset. It gives us increasing exposure for no more effort, smart deal making. Third, onshore delivery. Very happy with how this has progressed. We've built a niche position onshore at very low cost. We've been successful in a competitive license round where we picked up two blocks and also, as we shared on Con IV, in direct negotiations. It gives us exposure to field redevelopment. It gives us our first operatorship in Angola in Con IV as well as low cost onshore exploration in Con 4, Con 15 and Con 19, where we're working with local partners. We take a strategic approach to the basin.

15:23 We want to understand the large scale to focus on the small scale, and then we'll be selective in blocks that we look to enter. We move on to the next slide.

15:37 So on the next slide, I've just included this in for reference and remind everybody who's new to the story about the scale of the prize. I think the numbers on the right really speak for the slide. We've got an asset or a series of assets of 3,500,000,000 barrels all in place. 1,430,000,000 barrels has been produced, 42% recovery factor. We're targeting over 50%. In three zero five a, the orange discoveries sitting in the asset, we're currently assuming a recovery factor of 10%, and we're targeting over 30%. Essentially, this is a world class shallow water asset where we can increase production, replace reserves, while also reducing emissions.

16:27 So the next couple of slides cover the investment that the partner group has been making in the asset. We've been readying it so that we can increase production, and we can ensure we get the value through it. Maybe just to remind you a bit on the history of the asset. The asset was built by Total in the eighties through the nineties, and then in the early two thousands transferred across to soluble. So over the last fifteen years since they took on the asset, they've been maintaining it. But as we look forward, and to enable it to produce through to 2040, it needed investment to ensure it was in the the the right shape to go for another fifteen plus years. So we've included some examples here. First one is FSO, the the floating storage and offloading system.

17:16 Here, the recertification is almost complete. Highlight here, it's performed on station with production throughput throughout. We expect the certificate in the second half of the year, and there's some photos just on the right progressing through to to finished job. Next, power generation and infrastructure. This is a multiyear project across the main platforms to provide stable and sustainable power. We need this for the water injection and also the artificial lift, which will increase the recovery factor. And that's currently focused on the COBOL platform. Again, there's a couple of photos there of the power systems. The other element is the revamping. This was a multiyear project that was kicked off in 2024.

18:02 It's supported by its own dedicated barge, which is moored next to the Como Platform at the moment. To put in perspective, offshore at the moment, there's 600 addition 600 people offshore on the asset, double what we'd normally have. The focus is on upgrading the infrastructure, both surface and subsea lines, so it all can be operated safely and with high uptime. So this investment is critical to take us through to 2040 to ensure safety, ensure that we we can have reliable flow and and production growth. We've got material progress, secures the asset as we make incremental investments into increasing production. The next slide, some of you might be familiar with it, it's about the water injection infrastructure.

18:52 It's a key enabler to increase your recovery. And I'll just highlight the the focus that's been made here. The trajectory since 2015 to 2020, when we had zero water injection into the field, has been steady. It's been steadily upwards. In the first half, we averaged 35,000 barrels a day through the pumps. We've hit spot rates of over a 100,000 on two pumps, so the capacity is there. What we now need to do is ensure it's sustainable. Year end target is 85,000 barrels steady on two pumps. And then looking out to 2026, three pumps putting 150,000 barrels of water into it. The progress has been slower than I'd like, but importantly, it is trending upwards.

19:40 The other area of work that the team have been focused on is delivering the next phase, the step change in production growth. So this is a new slide for you. And I can share that the partner group has been making steady progress here to drilling in 2026. We've got a number of boxes here that step through the progress that we've made. I think it's important to share here is that that we need to take our time to plan and prepare to ensure because we want to make ensure that we reduce the risk, deliver the program as cost effectively as possible. Ranking progress process is well advanced. Options include new production wells, sidetracks, heavy workovers, as well as infrastructure led exploration. So that's the box on the left.

20:27 Surveys of the well of the platforms have been conducted, and that's important to understand rig access. The last major activity here was in 2010. Well planning is the next box. That's well advanced with QAQEC on board, and importantly, long lead items ordered to to allow twenty twenty six activities. Finally, rig mobilization execution. We're targeting rig mobilization in '26. Rigs are being selected to deliver a multi well activity program.

21:06 And all the while, the onshore the offshore team has been delivering LLIs, and we'll be continuing to deliver that to sustain the production. So we've talked about the offshore. Now talk about the onshore. This segment shares the progress we've made. We shared quite a lot of this at the recent webinar, so I'll try and keep this at a high level. And there is, if you want to listen to the recent webinar, that's online on our website. So what do we see here? We see this as a low cost addition

21:41 to our offshore production development asset. It offers both an early production opportunity via field redevelopment with cash flow generation using the existing infrastructure, but also a low cost exploration in a proven basin. We're using the experience we've built up in Africa to evaluate the best opportunities. One thing I'd highlight here is we've been an active technical adviser to the regulator on FTE, FTG across the whole of the onshore Kwanzaa Basin. And this technology is something we've got experience, extensive experience across Africa. It's very high resolution technology, high resolution radiometry, which has been was commercialized back in the nineties by The US by the with with the US military. Those old enough, if you can remember the movie Red October or the hunt for Red October with Sean Connolly, it's what The US submarines use to navigate underwater.

22:35 So this was a conscious decision by us to to advocate for the regional acquisition. We've we've acquired across the the whole basin, and that provides us with a regional grid that even now is allowing us to understand the prospectivity of individual blocks. And the map on the right has hashed to the right. That's fully acquired. And then to the left, Con four and Con 15 will be completed in third quarter. And that will provide critical input to find our next steps, essentially where would we like to potentially drill in the future. When we look at onshore, what do we see? We see limited investment but with significant upside potential based on the analogies that we have along the coast of Africa, West Africa.

23:22 So next slide talks about Confort. That's our most recent announcement, and it's a block where we've consciously chosen to operate. The block has been initialed and is now undergoing government approval, which we expect in in the latter part of second half of the year.

23:39 However, the one thing I'd say on this is it's not stopped us commencing data collection interpretation. EFTG is partially acquired. We're using it to interpret across the block. The block contains not only redevelopment opportunities, but also pre and post salt prospectivity. Oil developments are located about 20 kilometers by Blacktop Road to the Luanda refinery shown on the map. The news flow on Con four is gonna focus on EFTG, the results of that, well reentry plans and planning, two d seismic across the block, and eventually drilling. The next slide talks about the exploration opportunity. So this covers not only COL four, but also fifteen and nineteen where we were successful in the recent license round.

24:27 Our partners here are Sonogol, ACREP, and Enercol, and we're progressing on these blocks already.

24:35 We see the potential pre and post salt prospectivity. We treat the three blocks as one opportunity set and the synergies of working out as well. All the blocks have proven petroleum systems. We've got oil fields that have been on production for many years and then abandoned in the late late late nineties. But we've also got exploration wells that actually flowed oil to surface, a number of these. So we're looking at these carefully. What's the news flow on this one? Well, the news flow is gonna be completion of the FTG, two d seismic planning and exploration well planning. As I said, there's more detail in the onshore webinar replay if you want to look online to update yourself. Finally, the last slide. We've collated this. We've put this slide together to give people an idea on the level of activity as we look out across the portfolio, look out from 25 through to '27.

25:32 And hopefully, gives you an option a view on the optionality that we have, The organic growth in the portfolio that can come from both the production and development, you can see the the LWIs, the heavy workovers, the wells for Block 305, and the satellite discoveries for Block 305 A. But then in the onshore, the redevelopment planning on Con 4 and the exploration in Con 415 And 19. So I think this distinguishes us from from a number of others. We've got both organic opportunities that we can choose to invest in as alongside inorganic MMA. So that concludes my segment. I'll hand back to Paul. Thank you, Ian, and Anastasia. As this slide states, it's the experience of the team and the strategic clarity we set out with four years ago when we created AFENTRA that's really resulted in us delivering pretty much everything we stated we would over that period.

26:32 We've used that experience to build a successful oil company from a cash shell and in doing so have delivered material value to our shareholders. As we look forward, we intend to continue to use our experience to leverage the very significant opportunities that exist within both the offshore and the onshore Angolan portfolio that Ian just described to create further value for shareholders. In addition,

26:59 we continue to screen new opportunities both within Angola and elsewhere in West Africa. However, we will only pursue these opportunities where we consider you can add material value to our shareholders. So with that, let me hand over to Ben and see if we have any questions.

27:20 Thank you very much. I'm gonna deal with the pre submitted questions first. One for you, Anastasia. I know you walked through the cash waterfall. We had a question about the net cash has increased by $7,000,000 during H1. Why is this? Can you just reiterate the response to that, please? Sure. Sure. So the cash increase was from $12,600,000 to 19,900,000 This is after the July 1 lifting that I spoke about earlier. That cash flow is after all the expenses in the first half of two thousand twenty five, which includes all the capital commitments, all the operating costs, all the tax payments.

28:09 Debt repayment, we made a repayment on our RBL facility. We also satisfied all the contingent payments with regards to the three transactions that we announced earlier. Those are the Sonangol, the INA, and the Azul payments. We also made a deposit on the AETU transaction. It covered all of our g and a commitments. And the 7,000,000 increase in cash is really on plan. So there is nothing unexpected really in the first half of twenty twenty five. So that's all we have to say on this. Great. Thank you. Got a question here on the commencement of the buybacks. Are you able to give more details on the 6,500,000 shares covering FSP and LTIP awards? When are they paid out?

29:01 What conditions are there that need to be met? And would you consider buying back a further $6,500,000 for the benefit of the wider shareholders? Yes. Thanks, Ben. I think of the $6,500,000 that we said, the majority of those shares are required to fulfill commitments under the FSP plan, the executive FSP plan that was laid out clearly in our annual reports over the last couple of years. The conditions for those shares have already been met. They they were met on the first measurement date in 2024 and the second measurement date in 2025. So we know those shares will be required when we get to March 26 because they're held held back for the executive.

29:50 So we are in the market trying to acquire them, and we think that's beneficial to avoid any dilution. And also, when we look at the valuation that we think is better. The LTIPs have conditions. Again, kind of details of these various conditions are laid out in our annual reports and remuneration, so we'll go into them here. But there are some conditions and basically what we have is an estimate of what we think will have to be delivered to our team over the coming twelve month period. Okay. Thank you, Paul. Question here, can you provide guidance for free cash flow with oil at $70 and $60 please? Yeah. I I I think Anastasia has already kinda gone through the cash balances for the first half.

30:37 When you look at the run rate for the first half of the year, basically, we we delivered about 26,000,000 of cash asset level. That includes some kind of forward lifting into July. So it's not quite exactly a half year point. So I think what it demonstrates is that even after pretty significant capital investment, the asset is generating a substantial amount of cash. And I think our focus is not so much on the run rate of cash flow right now, which obviously, as Anastasia pointed out, is supporting all of the investments, supporting our debt repayments, supporting our growth ambitions and the things that Ian talked about onshore and offshore.

31:22 It's more we look forward on the offshore assets to the cash generation when we ramp up production. And we think over the next decade, there will be very substantial cash generation, whether oil prices at 60 or 70 or beyond. Okay. Great. Question for you, Anastasia, regarding the facility. Given that you're paying 12% on the RCF, is there an opportunity to pay it back faster than 2028? So as we mentioned earlier, there are no restrictions on making prepayments on that facility. So the answer is yes, we can, and we'll consider it along with other potential uses of cash. Great. I've got one for you, Ian, here. Are there opportunities in the Lower Congo Basin further north or Kabinda?

32:14 Yeah. I mean, we're we're familiar with the Lower Congo Basin in North Shore in Kabinda. We're we're familiar with the operators there. They're partners with us elsewhere in in Angola, E2 and Accra. We review opportunities throughout West Africa, and we evaluate them where we think we have a competitive advantage. We we risk and rank those against our own organic portfolio. I think that brings we're really happy with where we are. Organic portfolio at the moment is. It's it's the cheapest way to get access, and it provides competition for for both for inorganic opportunities as well, if you can invest organically. Okay. Great. We've got another one for you here, Ian.

32:59 If Block three zero five drilling is scheduled to begin in Q3 of twenty twenty six, does that mean that gross production from the asset is likely to be roughly flat until late twenty twenty six? So the production at the moment, I mean, we've got ongoing investment going on with the LWIs. The LWIs kicked off in sort of mid twenty three, and we've been sustaining and growing production. So that program will continue throughout until we kick off that next program on the drilling. Great. Well, thank you. That's all the questions submitted so far. So I'll hand back to Paul just for some concluding comments. Yeah. Thanks, Ben.

33:44 I'd just say thank you to everyone for taking the time to listen in this morning and listen to our update for the first half of twenty twenty five. We look forward to keeping you posted as we go through the second half of twenty five and hopefully continue to deliver across the whole portfolio. Thank you. That's great, Paul, Anastasia, Ian, thank you once again for updating investors today. Could I please ask investors not to close this session as you will now be automatically redirected to provide your feedback in order that the Board can better understand your views and expectations? This will only take a few moments to complete, and I'm sure will be greatly valued by the company. On behalf of the management team of AFENTRA PLC, we'd like to thank you for attending today's presentation, and good morning to you all.