Afentra published its admission document yesterday and was readmitted to trading, with shares sharply up on the resumption.
Company CEO Paul McDade said the readmission was ahead of schedule, with the document guided for the fourth quarter of the year. “It sends a good signal that we want to be trading,” he explained to Energy Voice.
“The raison d’etre was to have a material position in Block 3/05 and Block 3/05A, it’s a great foundation for the company,” he said.
Afentra completed its maiden move into Angola with the purchase of a stake from INA in May. It expects the next two deals, which are in motion, to complete later this year.
“The effective date will have a material impact on the amount of cash we pay out on completion,” McDade said. The Sonangol deal has an effective date of April 2022 and Azule Energy of October 2022.
The blocks are producing even while Afentra is waiting for completion. As a result, cash is piling up – reducing the amount the company will have to play on completion.
McDade predicted the completion payment would be around $50 million.
McDade predicted Afentra’s stake in the two blocks could generate around $50mn per year. Some of this cash it would reinvest.
Flowing benefits
Shareholders will vote on the proposal on October 5. McDade is confident of support. After this step, it will be up to the ministry to agree to the sale and then the novation process.
“We’re confident we can complete by year end. We’ve been through it with the INA deal and hopefully we can be more efficient this time around,” he said.
Once Afentra has control of the assets, McDade said the company would close out the year with “value and cash flow”. The completion of the INA deal has seen benefits already, with Afentra selling its first 300,000-barrel cargo from the stake, booking revenue of $26mn.
The Block 3/05 and 3/05A partners will benefit from improved fiscal terms on the blocks. The details have not been published so McDade declined to share specifics but said it would improve the split for private contractors.
The Angolan government “focuses on the oil and gas industry. They see the competition for capital and that the energy transition means there is less capital availability. There’s a need to attract investment and [the government] is willing to provide stability.”
Strategic support
The government’s support for the industry can can be seen in how it extended the Afentra group’s licence. McDade said that while many countries would leave an extension “down to the wire”, Angola has seen that this would delay investment.
Extending the licence from 2025 to 2040 gives a “runway to invest”, he said. “It makes me feel that West Africa as a place to focus has been demonstrated as a good strategic move.”
Agência Nacional de Petróleo, Gás e Biocombustíveis (ANPG) has played a key role in this. McDade noted that the regulator was open to discussions on terms and that it was keen to find a way forwards.
“I cant say enough about the positive investment environment,” he said. Angola is keen to maximise production, while minimising the carbon footprint of its oil, he said, through initiatives such as tackling flaring.
Afentra is clearly considering additional options for growth, following the completion of the Sonangol and Azule deals. Block 3/05A offers opportunities, with around 300 million barrels estimated in place.
More defined plans would see those resource numbers rise, McDade said. “Beyond that there are other discoveries.”
There is also scope for more M&A. Afentra has been able to fund these first three deals from its balance sheet and without needing to raise cash. “It would be great to be able do the next deal without shareholders.”
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