Afentra Share Discussion Threads

[mount teide] 12/4/2024 13:46

Angola - Afentra's O&G Investment Case View:

'Angola is one of the largest oil producers in Africa with current production of 1.1 million bbl/d from deepwater, shallow water and onshore dating back to 1956. The economy is dependent on responsible management of hydrocarbon resources.

Investment has historically been dominated by IOCs, however assets are starting to change hands. Afentra believes that the situation is similar to the status to the UKCS where a more mature industry transition has already played out.

Global research and consultancy business Wood Mackenzie has identified approx. 15 billion barrels of oil and gas reserves and resources, highlighting the scale of opportunity in Angola.

According to IHS Markit Consulting, close to 300 fields have been discovered with less than half developed (IHS 2022).

Over the last 5 years, the Angolan government led by President João Lourenço has actively sought new oil and gas investors alongside improving fiscal terms and extending licenses. There are large opportunities for growth and limited competition in the independent space.

The regulatory authorities have only shown to demonstrate a pragmatic approach
throughout the negotiation period, providing a strong signal of the Country’s willingness to encourage investment into the upstream sector. This strengthens our confidence that we have entered a supportive market with a firm understanding of the evolving industry landscape, and a recognition of the important role that companies like Afentra can play in delivering a responsible industry transition.'

[mount teide] 12/4/2024 13:35

YY - Ref: Production costs per bbl - have not seen any specific data.

However, what we do know is that after the second working interest on the Block 3/05 asset was announced in July 2022, the following information was provided:

* Break even economics of $35/bbl
* Potential to improve OPEX to $20/bbl
* Average FCF, after Capex, of $30m PA at $75 Brent.
* Average production of circa 16,800 bopd when AET first commenced asset negotiations

Since then, the following changes have been reported based on completion of the Sonangol (18%) and INA (5.33%) deal metrics:

* Potential to improve and MAINTAIN OPEX at $20/bbl
* Average FCF, after Capex, of $35m PA at $75 Brent.
* Full year 2022 gross production of 18,660 bopd
* Minimum Capex to realise P2 Case of 115 million bbls

Post the Azule completion:

* Average FCF, after Capex of $50m PA at $75 Brent based on 18,600 bopd (at $90 Brent and 22,550 bopd the FCF could potentially increase to $60-$70m a year).

* Average production March 2024 of 22,500 bopd (recent peak of 25,000 bopd YE 2023)
* Every 1% incremental recovery factor = 9 million bbls additional resources net to AET

* Debt - If the Azule deal closes during the next few weeks, assuming an average of current Brent price and an average of 22,500 bopd production, AET is likely to be debt free during Q3/2024.

* Apparently 80% of management time has been spent on M&A in the last 18 months . IR confirmed in January 2024 that the next webinar and strategy presentation will come after completion of Azule.

* Infill Drilling Campaign for 2025-26 - first for over 20 years, will be interesting when considering that Pacassa alone has another circa 500m barrels.

Thoughts:
A further 5,000 bopd deal during 2024 with similar non dilutive metrics could well see AET trading at 100p plus.

AIMHO/DYOR

[yumyum] 12/4/2024 09:59

Hi Mount Teide, thank you for your input. Also thanks to others including the earlier thread.

I have been passively invested here ever since before the unsuccessful Repsol deep water drill.

It looks very promising now. I was trying to run some figures and cannot easily find production costs per bbl. Can you tell me what I should be using, just approximately?

Many thanks and best wishes.

[roks] 12/4/2024 09:36

Nice ti see this motoring ahead

[mount teide] 11/4/2024 21:19

Oil - Top traders and forecasters, as well as investment banks, have upgraded their price and demand forecasts in recent weeks on a tightening oil market, over which OPEC+ has now regained control.

OPEC+ Rules in an Increasingly Tight Oil Market - Oilprice.com 10 April 2024

'The OPEC+ group is firmly back in control of the oil market and has the power to have it extremely tight in the second half of the year should it choose to do so, industry executives and hedge fund managers say.

The market is growing increasingly bullish on oil, expecting robust global demand growth and supply constraints, including OPEC and Russia’s production cuts, to push prices even higher in the summer.

With Brent oil prices breaking above $90 a barrel, there is room for further upside amid tighter markets and heightened geopolitical risks, investment banks say, not ruling out $100 oil this year.

The trajectory of oil prices over the next year is largely in the hands of the OPEC+ alliance of the top Middle Eastern producers and Russia, according to Sebastian Barrack, head of commodities at hedge fund giant Citadel, which had $61 billion in investment capital as of April

The OPEC+ group has “definitely regained control” of the market, Barrack said at the FT Commodities Global Summit in Lausanne, Switzerland, this week.

If the alliance decides in early June to keep its current cuts after the end of the first half, we could see an “extremely tight” oil market in the second half of the year, Citadel’s executive said, adding that the timing of OPEC+’s potentially eased cuts and their volume “will define where prices go in the next 12 months.”

Right now, prices are going up, as geopolitical concerns linger in the Middle East, demand holds strong and could turn out stronger than expected, and supply and infrastructure issues hold back production and exports, from Mexico to Russia.

Top traders and forecasters, as well as investment banks, have upgraded their price and demand forecasts in recent weeks.

Oil prices are set to trade in the range between $80 and $100 per barrel this year, Russell Hardy, chief executive at Vitol Group, said at the FT summit this week. The world’s largest independent oil trader also expects robust global oil demand growth in 2024, at around 1.9 million barrels per day (bpd) higher than in 2023, Hardy said.

If this forecast pans out, this year’s growth in oil consumption will not be too far off the bumper increase in demand in 2023.

The U.S. Energy Information Administration (EIA) raised its 2024 and 2025 forecasts of global oil consumption by between 400,000 bpd and 500,000 bpd, due to a revision of historical data for 2022 and to the “current market dynamics,” the EIA said in its monthly Short-Term Energy Outlook (STEO) on Tuesday.

Morgan Stanley sees heightened geopolitical risk pushing Brent prices to $94 per barrel in the third quarter as the bank lifted its price forecast by $4 a barrel compared to its previous projection. Last month, Morgan Stanley had already hiked its third-quarter oil price forecast by $10 per barrel, to $90, on the back of expected tighter markets in the summer.

In recent weeks, banks, including JP Morgan, have said that oil prices could hit $100 per barrel by the end of the summer. However, demand destruction could prevent prices from reaching triple digits, JP Morgan says.

Still, analysts and industry executives believe that OPEC+ would reverse at least part of the cuts if prices run up to $100 as it would look to avoid demand destruction, stronger response to high prices from U.S. shale, and a potential loss of longer-term demand for OPEC+ crude.

If OPEC+ rolls over the cuts beyond June, “we will see a level of tightness in the market that will be very constraining to the market, and high prices will have to go and help destroy demand to solve that problem,” Citadel’s Barrack said at the FT Commodities Global Summit.

As tempting as it may sound for OPEC to sell oil at $100 a barrel, the cartel may not be willing to risk another inflation shock that could cripple demand.'

[excellance] 11/4/2024 18:56

Building nicely, I'm guessing institutions.

[roks] 11/4/2024 18:53

I'd rather the share price continue at this pace than any light weight rns

[onedayrodders] 11/4/2024 14:23

Doubt it's imminent news ... just a justified re-rating on what is already known IMHO

[lauders] 11/4/2024 14:08

Price action more and more encouraging and yet no news. Got to be something soon at this rate. Wish my TXP holding was equally as interesting, but it is going the opposite way at present. Good to spread your risk for sure!

[xxnjr] 11/4/2024 01:01

MT - You make a very good case. Have given you a rec for 101 above.

Just noticed there's a Suezmax class tanker 'Delta Blue' heading for Palanca according to Marine Traffic. Currently off Dakhla, Western Sahara. Making 9.6 knots.

Departure from Tarragona
ES TAR
Arrival at Palanca
AO PAT
Actual time of departure:
2024-04-03 10:30 (UTC+2)
Estimated time of arrival:
2024-04-23 06:00 (UTC+1)

[mount teide] 10/4/2024 17:42

xxnjr - thanks for your further thoughts.

If McDade were to significantly veer from following a strategy other than identifying and buying attractively priced, high quality second phase O&G assets with material reinvestment and efficiency improvement potential to maximise reserves recovery, I would look to sell down my holding.

However, McDade clearly believes Afentra has an opportunity to replicate the success of Tullow, Talisman and Apache in the North Sea 20 years ago, not least because fortuitously Afentra has the tail wind of the recovery stage of a new oil market cycle, a strong post pandemic recovery in demand, and a major programme of disinvestment of high quality assets that are no longer material to oil majors and NOC's in a number of mature O&G basins around the world.

The holy grail is to find a lowly valued second phase O&G company with low producing costs, strong cash flow generating assets and highly material organic and inorganic development potential, run by an experienced management in a high growth, high energy price mature market, thinly contested for high quality assets being vacated by oil majors and NOC's, due to owners and Governments willing only to consider companies with management able to demonstrate a previous history of managing O&G assets to the highest operational and safety standards.

Should the company also benefit from a regional Government keen to offer highly material fiscal benefits and long license extensions to attract new investment to maximise recovery from large mature fields, and a drilling/oil service sector still largely beaten down by the ravages of a long recession, and a location in a region with mostly benign sea and weather conditions enabling shallow water offshore field production development and maintenance work to be carried out year round, that would be the icing on the cake.

On the balance of probabilities, over a 2-3 year view, I consider the risk/reward of an investment in Afentra as good as any O&G company in my portfolio.

AIMHO/DYOR

[onedayrodders] 10/4/2024 16:41

Yep, personally I don't care if it's a "borrowed model" as long as ultimately it's a successful one.
And McDade will be well aware of the later Tullow mistakes of chasing "The big one".

So all in all we are benefitting hugely from McDade's time at Tullow whether he was at the wheel or just part of the crew.

ODR

[xxnjr] 10/4/2024 15:50

MT - Appreciate you taking my comments in good spirit! Yeah McDade was an operations guy in UKNS to begin with. Later on he became COO which would have included Africa. Then promoted to CEO when Aidan Heavey stood down. The Esso/BP deals I was referring to established critical mass and pre-dated the Schooner and Ketch 'bolt on', and occurred round about turn of the century. All of those deals were very successful and to be fair our mutual friend was quite good at running the UKNS. The later stuff like Nuon plus an entry into Norwegian NS were ultimately unsuccessful and resulted in large write downs and exits and a court case which they lost(with Nuon i think it was?). Lots of the later deals where our friend was more prominent resulted in large write downs and exits. I have a running total somewhere. We are at about $7bn and counting in write downs afaic recall, although we can't blame our mutual friend for all of that. Uptime on the FPSO's in Ghana was about 75% to 80% under McDade. It's now consistently 97% under the new guy. Just giving a slightly different perspective to the gushing articles you've referenced. However none of the above dissuades me from investing here as, as you have highlighted, and thanks for that, McDade seems to have found a decent asset in Angola and crucially from my perspective, he's not operating it!

Totally agree with your USP wrt mid to late life assets being acquired from exiting players. I guess one of the best exponents in that regard has been privately held Perenco. About 20 yrs ago Tullow and Perenco both each produced about say 45K to 50K boepd. Tullow now not much bigger and mired in debt as a result of chasing exploration in politically challenged locations. Perenco now producing >500K boepd simply by sticking to their trusted model of acquiring mature assets where the exiting party has already done the spade work in equally challenging political locations. Definitely the way to go. Should be able to rinse and repeat.

The main lesson I imagine our mutual friend has learnt is not to have an over stretched balance sheet. Which so far appears to be the case :)

[mount teide] 10/4/2024 13:35

xxnjr - 'apologies for being disagreeable but as a shareholder in Tullow that is not how I remember it.'

Thanks for posting your shareholders perspective.

I took much of McDade's 19 year Tullow background from 2000 from various FT articles, an industry journal interview and the Afentra website.

'Paul McDade, who spent almost two decades at Tullow as chief operating officer then as chief executive' .....FT

McDade's employment at Tullow pre-dated the purchase of two large mature North Sea fields from BP for over £200m.

And in 2005, the acquisition of Shell's and Esso's entire producing interests in the North Sea Schooner and Ketch fields, where Tullow assumed operatorship of both fields.

Further North Sea acquisitions followed during the decade and into 2011 with the €300m cash acquisition of Nuon - for which CEO McDade, said "Tullow had been looking to add to its North Sea portfolio for some time and described the deal as 'modest' but important. It shows our North Sea asset base is still a core part of our business .R01;. . and it helps to provide the group with credibility when operating in developing [regulatory] environments like Ghana and Uganda."

So, Tullow's North Sea business is what I considered Afentra's strategy to be - since it was consistent with McDade's comments shortly after he took over at Afentra:

'McDade compared the situation in Africa to that in the North Sea two decades ago, when the retreat of oil majors from an ageing basin presented an opportunity for smaller companies to take over assets.

Companies including Talisman Energy and Apache Energy (and Tullow) were able to take mature assets off the hands of big groups and run them for more than a decade.'

AIMHO/DYOR

[xxnjr] 10/4/2024 03:10

MT - apologies for being disagreeable but as a shareholder in Tullow that is not how I remember it.

the share price of TLW is about 34p today. In 20 yrs the share price has increased from err 32p to 34p. Nothing much to shout home about.

The business wasn't really built by McDade. It was initially built by founder/CEO Aidan Heavey and CFO Tom Hickey. As far as i can recall they were the ones who would have steered the negotiations on UKNS acquisitions from Esso and BP and they were the ones who negotiated the Energy Africa acquisition in 2003/4 which was arguably the making of Tullow Phase 1.

The explosive share price grown of Tullow Phase 2 which reached £16 at one point (in old money b4 a capital raise) was driven by very high risk frontier exploration with big discoveries in Uganda, Ghana, Kenya, not from buying low risk mature assets from exiting majors.

It all went to their heads in Tullow Phase 3 when in relative terms Tullow probably had the highest exploration spend of any E&P on the planet. billions and billions on exploration. And billions and billions written off on failed wells.

McDade made such a mess of Tullow after being appointed CEO that the company were obliged to fire him.

So yeah, Afentra is a bit like early Tullow Phase 1 was the UKNS.
And hopefully McDade has learnt from past mistakes.....

[mount teide] 09/4/2024 15:43

Worth reposting some of the content of the 'Upstream' article published on 5/9/23 with respect to the production uplift potential of Block 3/05 beyond that from water injection, well workers, and infill drilling etc, which although still in its early stages has lifted production from 16,800 bopd at the effective economic date of the deal to a recent peak of 25,000 bopd (+49%), such has been the complete cessation of production development work from 2014 until 2022, and infill drilling for 19 years(since 2005) on this huge 3.15bn STOIIP asset.

"However, what has also caught Afentras eye is a clutch of unlicensed discoveries close to production facilities in 3/05. 'we tend not to talk about them too much' McDade told Upstream recently but did offer a little more detail. 'Each discovery has at least one well. I think most of them have been tested ...its kind of 1,000, 2,000 bpd but they've just been ignored.

According to a map in a recent company presentation at least 7 discoveries lie within tie back facilities at Palanca and Impala. They were undeveloped because they were just too small for the majors." '


During the last Oil/Commodity supercycle in the noughties, Paul McDade took Tullow from a valuation of 32p to 1,304p - a 40 bagger by primarily focusing on opportunities arising from the exit of the majors and NOC's from maturing assets.

It was a low risk growth strategy based on these maturing assets becoming marginal when competing for CAPEX funds of large O&G companies. The companies weren’t allocating production development capital for the assets and the same is again happening across many of the maturing O&G basins of West Africa and APAC today.

McDade plans to repeat the MO with Afentra by acquiring mature producing assets in large oil fields, most of which have been starved of investment since the oil price collapse of 2014. There are many opportunities becoming available, which like the current acquisition have huge infill well potential/re-investment opportunities, to materially extend the commercial life of these large under-developed assets way beyond the current predicated life.

With a primary focus on material production, and an experienced team with a high level operating capability used to working in the O&G basins of Africa, the company offers an excellent early stage opportunity to get in close to the ground floor for a similar run during this new oil/commodity super-cycle - just the third since 1970's.

The journey has the potential to be as rewarding as in the noughties, since it is not only experiencing the rising tide of a new oil/commodity market cycle but, a strong tail wind too, from the impact of Oil Majors&NOC's exiting high quality, large mature assets, as they increasingly move their capex dollars into major new offshore O&G and renewable energy projects and, Government's like Angola materially improving their O&G fiscal terms to attract investment to avoid being left with stranded assets, as nearly half of Angola's 300+ O&G discoveries are still to be developed.

AIMHO/DYOR

[return_of_the_apeman] 09/4/2024 15:14

I make chart resistance around 57p, 85p and 180p with good news about Azule expected any day now :-)

[jeanesy] 08/4/2024 19:11

Nice breakout today:)

[mount teide] 08/4/2024 17:59

'We expect the Angolan government's approval of the Azule Acquisition to be given in the coming weeks, and this will enable us to proceed with the completion of our third transaction in the country, providing Afentra with meaningful exposure to both of these quality assets.'...Paul McDade - RNS - Company Update - 13 March 2024

Expectation of completion would change from 'weeks' to 'months' at the end of next week.

Chart - easier on the eye than a supermodel on the catwalk. Yet, the RSI and MACD are still positioned very well to strongly extend the current rerate should the Azule completion news drop this week or next.

An Afentra shareholding has generated 82% of capital growth since September 2023 - an average of circa 12% a month!

[mount teide] 08/4/2024 17:25

Another strong closing auction plus other trades totalling 118k at the full 44.3p Ask price.

[roks] 08/4/2024 17:19

Nice finish, breaking out?

[loafingchard] 08/4/2024 17:03

Decent close, volume building...