 Update to a long post made earlier in the year.
RE: Divestment of high quality, mature O&G assets in fiscally attractive / low taxed Angola.
The operating partner of all our Angolan offshore and onshore assets, Sonangol, the NOC, is currently enacting a huge privatisation scheme, which includes the disposal of a material segment of its O&G assets.
This is likely to provide further high quality acquisition opportunities as it's consistent with Afentra's MO and positioning as a key stakeholder to Sonangol:
'Afentra’s entry into Angola in May 2023 saw the Company establish a foothold in a key target geography with a wealth of future growth opportunities. Afentra is acquiring interests in quality assets with scope to enhance and extend production alongside improving environmental performance, while positioning itself as a key stakeholder to support state-owned Sonangol with its transition strategy.
Afentra’s strategy is to build a material diverse portfolio of mid-life producing assets that no longer fit the portfolio of major companies. We seek to optimise, redevelop and extend their lives in a safe, responsible manner whilst reducing harmful emissions. These production assets underpin the business with LOW-RISK cash flow. Over time, Afentra aims to build a portfolio of operated positions, levering the extensive technical operating experience possessed by the team. We will also acquire non-operated positions alongside quality operators and credible JV partners with a shared alignment to operational excellence and environmental stewardship.'
Angola - Sonangol Asset Divestment Programme
In June 2022, Sonangol began a process to hunt for partners in blocks 3/05, 4/05, 5/06, 15/06, 18, 23, 27 and 31 in an effort to attract new investors to boost oil and gas production and also reduce its financial obligations.
Ten years ago and more, a barrel-load of bidders would have battled to enter these blocks, which offer exploration, development and production opportunities aplenty in a country once considered the oil world’s El Dorado.... Upstream 2021
'Admittedly, under the regime of former president Jose Eduardo dos Santos, few companies apart from incumbent supermajors — or those close to Sonangol, the ruling clan and its running dogs — would have had a realistic chance of acquiring these assets.
Many deals would have been agreed behind closed doors, with only those in the know and with strong Angolan relationships standing a chance of being successful.
But times have changed. Angola’s President Joao Lourenco genuinely seems to want things done by the book, with increased transparency the order of the day — as reflected in the formal bid agenda for this Sonangol farm-out process covering deep-water and shallow-water blocks.
While these "open book" efforts are laudable, they coincide with the energy transition, so it will be a challenging time for any competitive acreage bid process.
Jersing, currently business development advisor to privately owned exploration start-up Eburon Resources, described the three offshore blocks as “heartlandR21; plays with significant producing fields plus development and exploration upside. “They will go for hundreds of $millions because they are extraordinary assets,” he said.
Another block with promise is 3/05, where operator Sonangol wants to reduce its 50% stake. A non-operating stake in this asset could be in the sweet spot for acquisitive Afentra, the investment vehicle of former Tullow Oil chief executive Paul McDade, and also Vaalco Energy, Jersing said....."The exercise will attract interest from new companies,” but warned, “we’re not in the golden age of the oil industry......suggested bids could be based on future oil prices of $55 to $60 per barrel." '
Interesting to note that Sonangol elected to choose preferred bidders for the offshore acreage farm-out of their first eight assets put up for divestment.
Afentra was one of six initial bidders on shallow water block 3/05, which proved one of the most highly regarded and bid-on.
After the dust settled and smoke cleared on the auction process, Afentra, indigenous player Somoil, and Namibia’s state oil company Namcor were among the major winners for the various assets, while 10 bidders, many of them high quality O&G companies, failed to make the grade as a 'Preferred Bidder'.
The successful bids and financial return projections for the eight assets up for auction would, without question, have been based/heavily influenced by the $57.28/bbl average oil price during the seven year period prior to the announcement of the auction.
Afentra's Q1/2023 Presentation of the Valuation Summary of the Block 3/05 Deal, confirms this view:
* $70-80/bbl oil has potential to deliver >50% value increase
* Afentra Investment Case/Upside potential provides an additional 30% value increase
* Robust asset economics with a breakeven of $35/bbl
* Potential to improve and maintain Opex @ $20/bbl'
* Every 1% increase in recovery from OIIP of 3 billion bbls delivers 30 mmbbl
* Minimal Capex required to realise 2P case of 115.2 mmbbl
* Significant upside from 2C & 3C resources with potential for further upgrades
Current situation:
At an average 2024 price of Brent of $84.01 to date, Afentra's 3/05 and 3/05A working interests have the potential, after adjustment for the financial benefit accrued from the effective economic date of the deal, to annually throw off free cash in the range of 6-10 times the final $9.7m net price, after adjustments, paid for the assets, at the current 23,000 gross bopd level of 'base' production, which the block's owners believe can be maintained for well over a decade, at a very low capital and operating cost. However:
Upside Potential/Downside Protection - these very high quality 3.5bn bbls of OIP mid life assets have a gross circa 17,000 bopd(+75%) of further low cost production growth potential over the next decade.
To be recently awarded preferred bidder status for a 45% working interest in blocks KON15 and KON19 (since approved) by ANPG the National Concessionaire (Granting Authority), with Sonangol, the Angolan NOC as operator, is no mean feat.....and a good steer as to the likely prospectively, as these blocks also received the most tender offers.
It is inconceivable that Sonangol will not have been given first pick of these blocks as operator in the most recent licensing round. So, for Afentra to have been selected as a preferred bidder and awarded a huge 45% working interest is a major thumbs up with respect to the management's professionalism and competence in establishing itself as a highly credible counter party and partner - a development that will not have been missed by other divesting IOC's in Angola, and across the wider African continent.
'With these initial transactions, we have successfully proved our suitability as a credible counterparty for divesting IOCs/NOCs, our ability to deliver high value accretive deals, and to fund these types of deals through smart deal making.
The market dynamics in Africa continue to support our inorganic growth strategy and we are actively screening compelling opportunities that meet with our commercial criteria. We look forward to updating the market through what will be an active year ahead for Afentra.' |
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