Afentra plc has announced that its wholly-owned subsidiary, Afentra (Angola) Ltd, has signed a Sale and Purchase Agreement (SPA) with Sonangol Pesquisa e Produção S.A  to purchase interests in Block 3/05 and Block 23, offshore Angola for a firm consideration of $80 million and contingent payments of up to $50 million (in aggregate) in the case of Block 3/05 and consideration of $0.5 million in the case of Block 23.

Transaction Overview

Afentra is acquiring a 20% non-operated interest in Block 3/05 and a 40% non-operated interest in Block 23 for a total consideration of up to $130 million. The consideration is comprised of $80 million cash up front, subject to customary completion adjustments, up to $50 million in contingent payments, payable in respect of each of the ten calendar years commencing January 1, 2023 and subject to certain oil price and production hurdles, and $0.5 million in respect of Block 23. The Acquisition has an effective date of 20 April 2022.

This represents a strategic entry into a highly attractive West African jurisdiction with an implied acquisition cost of ~$4/boe, based on 2P reserves1.

The Acquisition is expected to be funded with new debt facilities and existing cash on the balance sheet. Discussions with prospective providers of debt finance are well advanced and will be finalised in due course.

While completion is expected in the third quarter of 2022, next steps in the process include the conclusion of Afentra’s due diligence exercise, the provision of a bank guarantee in respect of the 10% transaction deposit and the completion of the right of first offer process by Sonangol. Government approvals and a license extension for Block 3/05 are anticipated to be granted, with the publication of the AIM re-admission document and resumption of trading anticipated to occur mid-year. In addition to the conditions described above relating to regulatory consents, right of first offer, license extension and due diligence, the Acquisition is subject to the receipt of shareholder approval pursuant to an ordinary resolution to be proposed at a General Meeting and re-admission of the enlarged group to trading on AIM. Further details of the Acquisition and SPA will be set out in the re-admission document.

Asset Overview: Block 3/05

Block 3/05, in which Afentra is acquiring a 20% non-operated interest, is located in the Lower Congo Basin and consists of eight mature producing fields. The discoveries were made by Elf Petroleum (now part of TotalEnergies) in the early 1980s. Development was by shallow-water (40-100m) platforms that included successful waterflood activities with first oil in 1985. Sonangol assumed operatorship from 2005 and has focused on sustaining production through workovers and maintaining asset integrity. No infill drilling campaigns have taken place in the last 15 years. The asset has a diverse portfolio of over 100 wells and currently produces from around 40 production wells and has nine active water injectors. The facilities include 17 well-head and support platforms and four processing platforms, with oil exported via the Palanca FSO.

In 2021, the average daily gross production was 17,000 bopd, with an exit rate of 21,000 bopd, and gross 2P reserves of approximately 100 million barrels1 at year end 2021.

Block 3/05’s existing Production Sharing Agreement (PSA) expires in 2025 and this is expected to be extended to 2040. This extension is a condition to completing the Acquisition. To date, the asset decommissioning costs have been pre-funded.

Sonangol is an experienced operator with a sustained track record across the leading and lagging indicators for safety and environmental considerations, including CO2 emissions and flaring measurements. Afentra looks forward to working with Sonangol to determine action plans to further reduce future emissions.

Post completion of the Acquisition, the JV will be comprised as follows: Sonangol (Operator, 30%), Afentra (20%), M&P (20%), ENI (12%), Somoil (10%), NIS-Naftagas (4%) and INA (4%).

Asset Overview: Block 23

Block 23 is a 5,000 km2 exploration and appraisal block located in the Kwanza basin in water depths from 600 to 1,600 metres and has a working petroleum system. Whilst the large block is covered by modern 3D and 2D seismic data sets, with no outstanding work commitments remaining, the majority of the block remains under-explored.

The block contains the Azul oil discovery, the first deepwater pre-salt discovery in the Kwanza basin. This discovery made in carbonate reservoirs has oil in place of around 150 mmbo and tested at flow rates of around 3,000 – 4,000 bopd of light oil.

Post completion of the Acquisition, the JV is expected to be comprised of: Namcor, Sequa and Petrolog(40% and operator); Afentra (40%) and Sonangol (20%).

Strategic Rationale

The Acquisition is consistent with the strategic objective set by Afentra at the time of its launch in May 2021 to build a balanced cash flow generative portfolio of assets where the Company can contribute to emissions reduction to drive a sustainable transition. These assets give Afentra exposure to a high-quality asset base with long-life, low-cost production, access to additional production optimisation opportunities, upside potential and opportunities to reduce future emissions.

Angola is a jurisdiction where the Afentra team have significant knowledge and previous experience. It offers an attractive operating environment, with good fiscal terms which have been improved in recent years to attract new investment. It is a material hydrocarbon province with a wealth of future opportunities and was a key target country for the Company.

Afentra are acquiring a meaningful interest in Block 3/05 alongside an experienced and credible operator and an aligned JV. Consistent with Afentra’s Purpose and Strategy, Afentra will be working alongside Sonangol to support its transition strategy which is closely aligned with Afentra’s ESG agenda. A key outcome of the due diligence work to date has been to identify the opportunity to work with the JV to enhance the environmental performance of Block 3/05 through emissions reductions.

Commenting on the update, CEO Paul McDade said:

“We are delighted to have agreed terms with Sonangol and signed the SPA for our entry into Block 3/05, Lower Congo basin and Block 23, Kwanza basin in Angola. This transformative deal marks our first acquisition since launch last year, and sees the Company enter Angola, a major oil and gas jurisdiction with significant opportunities ahead to build a material business and positively impact the energy transition in Africa.

This highly accretive transaction gives Afentra exposure to a high-quality asset base, underpinned by strong cash flow from stable and long-life production and 20 million barrels1 of net 2P Reserves. The assets, containing over 3 billion barrels1 of oil in place, provide significant scope for further value creation from production optimisation, infill drilling and incremental developments. The attractive deal metrics and strong cashflow generation demonstrate Afentra’s commercial discipline and focus on robust cash flow. The entry into Block 23 provides us the opportunity to work with Sonangol to better understand and unlock the potential of this exciting and highly prospective exploration area.

We are looking forward to partnering with Sonangol, which has run a very pragmatic and transparent process, and supporting them in delivering an effective energy transition strategy. We are also looking forward to demonstrating our commitment to the ESG principles upon which Afentra was launched and working to create value for all of our stakeholders.

The next steps will be to complete our due diligence process and to conclude our discussions on the debt facility to fund the acquisition, with a view to completing the transaction in the third quarter of 2022.

I would like to thank our shareholders for their patience through this process and hope they share the management’s excitement about the value creation implications of this deal. We look forward to communicating on our progress as we move towards the publication of the re-admission document and the recommencement of trading thereafter.”

Sequa Petroleum N.V. and partners have reached an agreement to acquire 10% of Block 15/06 in Angola from Sonangol P&P through Sungara Energies Limited, a new African entity

Sequa Petroleum N.V. (“SPNV”) is pleased to announce that Sungara Energies Limited (“Sungara”) has entered into an agreement with Sonangol Pesquisa E Produção, S.A. (“Sonangol P&P”) to purchase a 10% participating interest in Block 15/06, 40% participating interest in Block 23 (with operatorship), and 35% participating interest in Block 27 (the “Transaction”). Sungara is jointly owned by three partners: the National Petroleum Corporation of Namibia’s subsidiary NAMCOR Exploration and Production (Proprietary) Limited (“Namcor”), Petrolog Energies Limited (“Petrolog”, a company affiliated with African multinational Petrolog Group), and SPNV’s subsidiary Sequa Petroleum UK Limited (“Sequa”).

Sungara is a new entity with a focus on Sub-Saharan African upstream oil and gas, combining world-class technical expertise with local capability and commitment, able to operate and develop oil and gas assets throughout the region in line with the highest standards of integrity, quality, governance and responsibility. Concurrent with the Transaction, NAMCOR, Petrolog and Sequa have signed a shareholder agreement relating to their interests in Sungara, with equal terms and shareholdings in Sungara for each partner. A general meeting of shareholders of SPNV will be convened to approve its entering into the Sungara partnership.

The Block 15/06 Joint Venture comprises Eni (operator, 36.84%), Sonangol P&P (36.84%) and SSI Fifteen Limited (26.32%). Block 15/06 is one of the most prolific blocks in deepwater offshore Angola with current oil production of more than 100,000 barrels per day through two large floating production and storage facilities. Following successful exploration and appraisal in the past several years, an ongoing development programme is forecasted to increase production in the medium term beyond 150,000 barrels per day. The block has further upside potential which may materialise following future exploration, appraisal and development activity.

Sungara’s 10% participating interest in Block 15/06 provides it with current production of more than 10,000 barrels of oil per day, forecasted to grow beyond 15,000 barrels per day in the medium term, 75 million barrels reserves and resources, and further upside potential. Offshore exploration Blocks 23 and 27 also provide upside value. The consideration for the Transaction is ca. USD 500 million which includes a contingent payment of up to USD 50 million. The Transaction is planned to be funded by Sungara through a combination of equity contributions from each of the Sungara partners and third party debt. The economic effective date of the Transaction is April 2022 and completion, subject to customary conditions and approvals, is planned to occur in 2022.