Africa Oil announces its financial and operating results for the three and nine months ended September 30, 2022.

Highlights

• The Company received one dividend from its shareholding in Prime for $50.0 million1 in Q3 2022 (first nine-month 2022 total of $212.5 million). Total amount of the dividends received so far in 2022 is $250.0 million, including $37.5 million received in October 2022.
• Cash balance at September 30, 2022, of $207.3 million (at December 31, 2021 - $58.9 million), with no debt outstanding and an undrawn corporate facility of $100.0 million.
• The Company launched a Normal Course Issuer Bid (share buyback) program on September 27, 2022. Since that date, until November 11, 2022, a total of 15,757,710 Africa Oil common shares were repurchased, at a bid cost of $35.7 million.
• Paid the second semi-annual dividend of $0.025 per share to the Africa Oil shareholders for a total 2022 distribution of $23.8 million, which combined with the share buyback, represents a total shareholder capital return of $59.5 million year to date.

Selected Prime's results net to Africa Oil's 50% shareholding:

• achieved an average realized oil price of $101.5/bbl, the highest quarterly average since the acquisition of a shareholding in Prime, compared to the average Bloomberg Dated Brent price of $99.1/bbl for Q3 2022;
• average daily W.I. production of 22,100 boepd and economic entitlement production of 25,200 boepd (84% light and medium crude oil and 16% conventional natural gas) in Q3 2022 (Q3 2021: 27,500 boepd and 30,100 boepd respectively)
• cash position of $309.6 million and debt balance of $474.7 million at September 30, 2022 (net debt of $165.1 million), which combined with the $207.3 million cash balance at the Africa Oil corporate level, results in a net cash position of $42.2 million;
• in Q3 2022, EBITDAX6 of $210.6 million (Q3 2021 - $192.1 million); and cash generated from operating activities of $62.1 million (Q3 2021: $122.2 million); and
• robust Net Debt to EBITDAX6 ratio for the twelve months ended September 30, 2022, of 0.3x (twelve months ended December 31, 2021 – 0.4x).

Africa Oil President and CEO Keith Hill commented: 
"We have continued to deliver on our commitment to shareholder capital returns with the launch of our share buyback program in third quarter 2022. Together with our dividend policy, from start of the year through to November 11, 2022, we have returned almost $60 million to our shareholders whilst growing our cash position. This has been made possible by the robust performance of our Nigerian assets that provide us with high quality and long life production and cash flows. We can look forward to potentially high impact catalysts in the next few months, including the results of Gazania-1 exploration well, and the Venus appraisal program. Africa Oil has an attractive full-cycle opportunity set for sustainable shareholder value growth and a bright future."

3Q performance

Prime achieved an average realized oil price of $101.5/bbl in Q3 2022 (Q3 2021: $58.6/bbl),  including premium adjustments. This the highest quarterly average price since the acquisition of a 50% shareholding in Prime and is partly due to the application of its revised crude marketing strategy. 

Prime's third quarter 2022 average daily working interest ("W.I.") production was 22,100 boepd and economic entitlement production was 25,200 boepd (84% light and medium crude oil and 16% conventional natural gas), net to Africa Oil's 50% shareholding in Prime. These compare to third quarter 20214 average daily W.I. production of 27,500 boepd and economic entitlement production of 30,100 boepd (84% light and medium crude oil and 16% conventional natural gas). For the first nine months of 2022, W.I. production of 24,200 boepd and entitlement production of 26,500 boepd are in the mid range expectation. These compare with first nine months of 2021 W.I. production of 27,800 boepd and entitlement production of 30,300 boepd.

The full year production outlook remains within the management guidance range for both W.I. production (22,500 – 25,500 boepd) and economic entitlement production (23,000 – 27,000 boepd).

Outlook

The Company's debt-free balance sheet, its share of Prime's cash flows and access to debt funding on competitive terms, supports a range of opportunities for the Company to achieve accretive growth and create shareholder value.

Prime and its upstream partners are currently working on the early conversion to the new PIA terms and renewal of OML 127 and OML 130 licenses. It is expected that OML 130 conversion and renewal, which accounts for most of the reserves, production and value in Prime's portfolio can be delivered by end of 2022, although a successful outcome on this timeline can't be guaranteed. It is further expected that a successful early conversion and renewal of OML 130 could provide the basis for concurrent refinancing of Prime's RBL and PXF debt, that in turn could support Prime increasing dividend distributions to its shareholders including Africa Oil in the near term.

Conversion and renewal of OML 130 could also facilitate the final investment decision for the Preowei oil discovery development project. Preowei oil field is to the north of Egina FPSO and is a low-risk development opportunity through a satellite subsea tie-back project to the Egina FPSO.

Management now expects the delayed Egina infill drilling program to commence in 2023. The Company will present its 2023 Management Guidance, including working interest and entitlement production ranges, with its Fourth Quarter 2022 results release in Q1 2023.

Eco, the operator of Block 2B, offshore South Africa, announced the start of drilling operations on the Gazania prospect on October 4, 2022. The Gazania-1 exploration well is targeting over 300 million barrels of light oil. The results from this exploration campaign are expected by end November 2022. Africa Oil has a material 16.5% indirect interest in this block through its investments in Eco, Africa Energy and Impact.

Management expect the start of the first appraisal program on the Venus light oil and associated gas discovery (Block 2913B, offshore Namibia) in Q1 2023. This program, operated by TotalEnergies, will involve drilling of new appraisal wells and production flow tests to refine remaining uncertainties on reservoir distribution and dynamic behavior. Africa Oil has an indirect interest in this opportunity through its 30.8% shareholding in Impact, which in turn has 20% interest in the block.

The Company has a 20% operated interest in Block 3B/4B offshore South Africa. This block is on trend with Venus and Graff oil discoveries (the Company has no interest in Graff) in the Orange Basin. The application to extend the Block 3B/4B license and to move into the first extension period of 2 years was approved on October 27, 2022. The Company is also continuing its technical studies on Block 3B/4B with the aim of maturing exploration prospects for possible future drilling. The Company and JV Partners are working together to collectively farmout up to 55% gross WI in Block 3B/4B.

In 2021, the Company and its partners initiated a farmout process for Project Oil Kenya. Advanced discussions are on-going with the interested parties. A successful farmout is viewed by the Company as a critical step towards the FID for Project Oil Kenya being achieved over the course of the next year. There is no guarantee that the Company can successfully conclude a farmout to new strategic partner(s) on favorable terms.

KeyFacts Energy: Africa Oil Nigeria country profile