- SPA with Azule to acquire a further 12% of Block 3/05 and up to 16% of Block 3/05A
- Amended Sonangol Acquisition to acquire 14% of Block 3/05 offshore Angola
- Shares suspended
Afentra has announced that its wholly-owned subsidiary, Afentra (Angola) Ltd, has signed a Sale and Purchase Agreement ('SPA') with Azule Energy Angola Production B.V. ('Azule') to purchase a 12% interest in Block 3/05 and a 16%(1) interest in Block 3/05A, offshore Angola (together the 'Azule Acquisition') for a firm consideration of $48.5 million and deferred contingent payments of up to $36 million subject to oil price, production and development conditions.
In order to ensure support for this additional transaction and an appropriate balance of equity interests in Block 3/05, Afentra has agreed with Sonangol Pesquisa e Produção S.A. ('Sonangol') to amend the terms of the SPA dated as at 20 April 2022 to reduce the interest being acquired by Afentra in Block 3/05 from 20% to 14% (the 'Amended Sonangol Acquisition'). The SPA terms for the Amended Sonangol Acquisition will remain unchanged from those previously announced with the exception that the acquisition consideration will be reduced on a pro-rata basis to reflect the reduced interest acquired. The firm and contingent considerations will therefore reduce to $56 million and up to $35 million, respectively.
In accordance with the AIM Rules for Companies, the Company's ordinary shares will be suspended from trading on AIM with effect from 7:30 a.m. today. Trading in the Company's ordinary shares will remain suspended until such time as either an admission document is published, or an announcement is released confirming that the Amended Sonangol Acquisition and the Azule Acquisition are not proceeding. The Company expects to publish the Admission Document in early Q4 2023, with both the Azule Acquisition and the Amended Sonangol Acquisition being subject to shareholder approval thereafter. We now expect both transactions to complete, subject to shareholder approval, in Q4 2023.
Acquisition Highlights
- Strategic rationale - combined with the previously announced acquisition from INA, the Azule Acquisition and the Amended Sonangol Acquisition provides Afentra with material equity in both Block 3/05 (30%) and Block 3/05A (21.33%).1 We will therefore significantly increase our exposure to the upside potential of these material production and near-term development assets with Block 3/05 benefitting from a recently extended licence term and improved fiscal terms.
- Azule Acquisition - acquisition of additional equity in Block 3/05 (12%) and Block 3/05A (16%)(1)
- Initial consideration of $48.5m
- Contingent consideration of up to $21m over 3 years subject to certain oil price and Block 3/05 production hurdles and an annual cap of $7m
- Contingent consideration of up to $15m linked to the successful future development of certain Block 3/05A discoveries and associated oil price and production hurdles
- Significant associated cost pool(2) has a positive impact on asset economics
- Effective date of transaction 31 October 2022
- Sonangol Acquisition - amended to acquire a reduced working interest (from 20% to 14%) in Block 3/05
- Initial consideration of $56m
- Contingent consideration of up to $35m to be paid over ten calendar years commencing 1 January 2023 subject to certain oil price, production hurdles and an annual cap of $3.5m
- Effective date remains 20 April 2022
- Combined Acquisitions - material equity in both Block 3/05 (30%) and Block 3/05A (21.33%)(1)
- Net 2P reserves of approx. 32 mmbbls and net 2C resources of approx. 20 mmbbls(3)
- Production of approx. 6,000 bbl/d net (including production from Block 3/05A)
- Increased exposure to significant upside potential:
- Improved recovery from over 3 billion bbls of OIIP in Block 3/05
- Development of multiple fully appraised discoveries in Block 3/05A
- Decommissioning costs to date have been pre-funded by previous and existing JV partners
- Funding - the Amended Sonangol Acquisition and the Azule Acquisition will be financed through the existing Mauritius Commercial Bank and Trafigura debt facilities that were utilised to complete the INA acquisition and from existing cash on the balance sheet. The cash payable at completion will be reduced depending on the level of cash flows from the acquired assets between their respective effective dates and their dates of completion.
Management Presentation - 10:00 am 19 July 2023
Afentra will be hosting a Management presentation audiocast via Investor Meet Company today at 10:00 am (https://www.investormeetcompany.com/afentra-plc/register-investor) and a short accompanying presentation has been uploaded to the Afentra website: https://afentraplc.com/investors/.
Commenting on the update, CEO Paul McDade said:
'We are delighted to have agreed terms with Azule and signed the SPA increasing Afentra's interest in the high-quality producing Block 3/05 and a material increase in our Block 3/05A interest offering access to existing discovered resources. This highly accretive transaction further demonstrates the Company's commercial discipline and focus on robust cash flow, increasing our net production to ~6 kbbl/d and 2P reserves to 32 mmbbls.3
As we continually seek to work closely and ensure support from Sonangol, we have sought to amend the Sonangol Acquisition SPA to reduce the acquired equity from 20% to 14%, reducing the upfront and contingent consideration on a pro-rata basis. This helps to ensure a balanced equity ownership in Block 3/05 and to progress the Azule Acquisition; moreover, we view the combined acquisitions as an attractive step forward for the business given the relative value at which we are acquiring the combined interests. Finally, as frustrating as it may be to suspend Afentra shares today, we continue to highlight how attractively structured these acquisitions are given the backdated effective dates - as demonstrated at completion of the INA acquisition - and, in the meantime, we continue to work closely with our joint venture partners to optimise the production and development of these high-quality assets.
I would like to thank our shareholders for their continued patience through these processes and hope they share in Afentra management's excitement about the value creation implications of these deals. We look forward to the timely publication of the Admission Document and the recommencement of trading thereafter with an expectation to complete both Sonangol and Azule transactions in Q4'23.'
Click here for Presentation: Azule SPA and Amended Sonangol Acquisition
Click here for full announcement
Source: Afentra
