Africa Energy Corp. an oil and gas exploration company, has announced financial and operating results for the three and six months ended June 30, 2023.

OUTLOOK

The Block 11B/12B¹ joint venture has applied for the Production Right and is contemplating an early production system (“EPS”) for a phased development of the Paddavissie Fairway. The EPS would provide first gas and condensate production from the Luiperd discovery and would accelerate the Block 11B/12B development timeline by utilizing nearby infrastructure on the adjacent block in order to supply natural gas to customers in Mossel Bay for the conversion of natural gas to power and/or liquid petroleum products.

 The EPS would significantly decrease the capital expenditures required to reach first production on Block 11B/12B. The Company expects that a full development of the Paddavissie Fairway would follow the EPS as the gas market expands in South Africa. We are encouraged by the 2D and 3D seismic data that has identified additional prospectivity in the Paddavissie Fairway and to the east, confirming the larglie exploration upside remaining across the block. The development of Block 11B/12B will have positive implications for the South African economy and will be critical in facilitating the country’s energy transition beyond coal with a domestic natural gas supply.

 
HIGHLIGHTS

• On May 10, 2023, the Company notified the joint venture partners on Block 2B of its intention to withdraw from future Block 2B operations.
• At June 30, 2023, the Company had US$1.3 million in cash.

EARNINGS TREND AND FINANCIAL POSITION
(Unaudited; US dollars)

The Company recorded $1.2 million of operating expenses for the three months ended June 30, 2023, compared to $1.3 million for the same period in 2022. Costs were relatively consistent when compared to the prior period.

The Company recorded $3.4 million of operating expenses for the six months ended June 30, 2023, compared to $3.8 million for the same period in 2022. The decrease from the prior period can be mainly attributed to salary and benefit costs, which decreased by $0.5 million due to a reduction in annual bonuses paid compared to the same period in 2022.

At June 30, 2023, the Company had cash of $1.3 million and a working capital deficiency of $4.0 million compared to cash of $6.8 million and working capital of $3.9 million at December 31, 2022. The reduction in cash and working capital since December 31, 2022, can be mainly attributed to cash-based operating expenditures and investments in Main Street 1549 Proprietary Ltd., the company that holds the direct interest in Block 11B/12B.

 In addition, Africa Energy entered into a promissory note agreement on December 23, 2023, with Africa Oil Corp. for $2.0 million, Deepkloof Limited for $2.0 million and Lorito Holdings S.à.r.l. for $1.0 million. The maturity date of the promissory note is January 31, 2024, at a 10% annual interest rate if repaid by October 31, 2023, or 15% annual interest rate if repaid after October 31, 2023. The promissory note has no security and is repayable pro rata any time before maturity without penalty. The Company plans to enter into discussions with the holders of the promissory notes to increase the amount and extend the maturity of the promissory notes.