Afentra upbeat on completion of Sonangol acquisition

Afentra announced the successful completion of its acquisition of non-operating interests in Block 3/05 and Block 23, offshore Angola, from Sonangol on Friday.

The AIM-traded firm said the acquisition included a 14% interest in Block 3/05 and a 40% interest in Block 23.

Its subsidiary Afentra Angola executed a sale and purchase agreement with Sonangol on 20 April 2022, later amended and restated on 18 July this year.

This acquisition would expand Afentra's stake in Block 3/05 to 18%, with plans for it to reach 30% on the completion of the ongoing Azule acquisition.

The cash consideration for the Sonangol acquisition, payable on completion, was $21.1m after adjustments for cash flow as of the transaction's effective date in April 2022.

Additionally, Afentra inherited crude oil stock valued at about $11.9m at $75 per barrel, or 158,691 barrels.

Furthermore, Afentra acquired a 40% non-operating interest in Block 23 for $0.5m, presenting long-term growth potential.

Block 3/05's gross production stood at about 20,560 barrels per day, and the company expected its net debt to be around $20.7m by the end of the year, with crude oil stock of about 300,000 barrels valued at $22.5m, at $75 per barrel.

In relation to the Sonangol acquisition, Afentra said it had published a supplementary admission document, encouraging shareholders to review it.

The acquisition constituted a reverse takeover under the AIM rules, with the company applying for the readmission of 220,053,520 shares to trading on AIM at 0800 on Friday.

It said the Azule acquisition, involving the purchase of non-operated interests in Block 3/05 and Block 3/05A from Azule Energy Angola Production, was still in the government approval process, with completion expected in the first quarter of 2024.

Afentra added that it had signed an addendum to the production-sharing agreement with improved fiscal terms, positively impacting cash flow related to the Block 3/05 asset.

The Government of Angola had completed terminating and redistributing the contribution share investment interests, increasing Afentra's current interest in Block 3/05A from 4% to 5.33%, with a further increase to 21.33% on completion of the Azule acquisition.

"Completion of the Sonangol acquisition is a major milestone for Afentra that reflects the efforts on all sides to get this transformative transaction completed," said chief executive officer Paul McDade.

"The effective date of the agreement ensures Afentra has benefitted from 18 months of net interest cash flow from the quality 3/05 asset, which significantly reduces the cash payment at completion.

"I would like to thank Sonangol and ANPG for their pragmatism and support through the prolonged process and we look forward to working alongside them and our joint venture partners as we seek to maximise the value of the portfolio for the benefit of all stakeholders over the long-term."

McDade said completion of the Azule transaction would give Afentra more materiality through greater exposure to the cash flow and upside from the assets, and while the completion timing was expected in the first quarter of 2024, the company would benefit from cash flow from the 1 October 2022 effective date.

"The Block 3/05 asset continues to perform strongly following successful implementation of the initial work programme designed to optimise production, with field production at the top end of internal 2023 production estimates.

"We look forward to continuing to contribute Afentra's technical insights and value to the partnership in parallel with showing our strong investment proposition to the market."

At 1348 GMT, shares in Afentra were up 6.06% at 33.3p.

Reporting by Josh White for Sharecast.com.