Africa Oil Corp. (OTCPK:AOIFF) Q3 2022 Earnings Conference Call November 15, 2022 9:00 AM ET
Company Participants
Shahin Amini – IR and Commercial Manager
Keith Hill – President and CEO
Pascal Nicodeme – CFO
Conference Call Participants
Teodor Sveen Nilsen – SpareBank 1 Markets
James Hosie – Barclays
Matt Cooper – Peel Hunt
Operator
[Call Starts Abruptly] Oil Third Quarter 2022 Results Call and Webcast. All lines have been placed on mute to prevent any background noise. After the speaker’s remarks there will be a question-and-answer session. [Operator Instructions]. Please note that this event is being recorded. The recording will be available for playback on the company’s website.
I would now like to pass the meeting to Mr. Shahin Amini, Africa Oil’s Investor Relations and Commercial Manager. Please go ahead Mr. Amini.
Shahin Amini
[Technical difficulty] for our third quarter 2022 results call.
I’m joined today with our President and Chief Executive Officer, Keith Hill; and our Chief Financial Officer, Pascal Nicodeme. Keith and Pascal will present the quarter’s highlights and the business outlook before we go into the Q-&-A session.
I would like to remind everyone that the remarks made during this session are subject to forward-looking statements which involve significant risk factors and assumptions and have been fully described in the company’s continuous disclosure reports. The information discussed is made as of today’s date and time and Africa Oil assumes no obligation to update or revise this information to reflect new events or circumstances except as required by law. The company’s complete financial statements and related MD&A are available on the company’s website and on SEDAR.
So, Keith, we are ready for you. Please go ahead.
Keith Hill
Alright, thanks, Shahin. And thanks, everybody for dialing in.
Obviously, another good quarter for us. I think we have met or surpassed most of our financial goals this year. We still have a few more catalysts remaining this year as well. So I think it’s still to be an interesting year.
I think most of you have seen this slide here, where I think we’re showing that we’ve become a full cycle oil company not only production and exploration, but cash flow and actually returning money to shareholders for the first time, which I think has been very well received by the market.
So, I think a couple of highlights there on the right side of that slide. We are ending the quarter with a significant amount of cash, over $200 million of cash in the bank. Even after we have done our shareholder returns, so I think we’re in a very good liquidity position.
I also wanted to highlight the — under the carbon neutral target that we have made before. We have made a pledge to be carbon neutral by 2025, roughly 25 years ahead of what the industry is signed on to in most of the accords. And I do want to highlight that we did have a review done by us by for our largest shareholder by EcoVadis. And we came out to be in the top 1% of companies of over 80,000 companies.
So, we’re quite proud of that we’re actually the highest rank oil company in the ESG framework. And I think that’s something we’ll continue to do. As I’ve said before, I think for those who are good ESG operators and part of the solution, I still think oil and gas is going to be investable for the foreseeable future.
So if we move to the next slide, really talks about what we’ve done this quarter, and really the first nine months of the year, obviously, financials are quite robust, Pascal will give them a more detailed account of that. But, as I said, we are now debt free. When you look at cash on the balance sheet versus our share of debt.
In prime, we actually have a net cash position of $42 million. And again, that’s after we’ve done our shareholder returns. So again, a very attractive net-debt-to EBITDAX ratio of 0.3. And you see on the right there, we have started our shareholder returns. We continued the dividend we put in but we’ve also launched the 10% buyback that we discussed at our last meeting. And as of now we spent $35.7 million to repurchase 15.8 million shares. And we intend to continue on with that program throughout the rest of the year.
So again, the total shareholder returns $59.5 million, I think is a testament to the amount of cash that we’re generating and also our commitment to give money back to the shareholders.
Again, that’s all driven by Prime and Prime dividends. We’ve already had $250 million this year, compared to the $200 million, we got in 2020, and 2021. And we’re expecting more this year, the amount of dividend additional dividend this year will be somewhat dependent on getting our license extension in Nigeria, but regardless, there will be more dividends coming this year.
So again, I think the barometer of this acquisition, we’ve already taken $650 million off the table after only paying $519 million. So I think this has been a great acquisition for us.
We’ve also had some very good exploration successes, led by Venus. Now Venus looks like it couldn’t be the largest discovery in Sub Saharan Africa ever. And its early days, we’ve only drilled one well, but the well that we drilled had very good reservoir of 84 meters thick, significantly thicker than we thought, the oil water contact was significantly below where we thought. So, it looks like it could be quite big, again, early days, but we’re getting ready to drill some appraisal wells there. And if that pans out, it can be incredibly material to the company.
So again, the other thing is we’ve opened up a new petroleum province with that, and with the well that shell drilled next door, so we have a very good position in that province as well.
So next slide. And again, we are going to come in on production performance, all of our guidance for this year, we’re going to be at the upper or middle part of the guidance, both working interest production and titling production, we’re going to be well over guidance in in cash flow and dividends received. So I think everything seems to be ticking along well on that. And we will be coming up with guidance at the end of year forecasts. But I think so far these assets just continue to be the gift that keeps giving.
Next Slide. So again, record oil sales since the Prime acquisition. I want to spend a few minutes talking about hedging. Hedging is something that we have talked about a lot in the past, this is — let me go back what I’ve seen.
The sales price versus Dated Brent, in 2020, we were kind of heroes, we actually had hedged all of our production and when COVID hit and the oil price went down to $20 $30 a barrel, we were still getting $60 $70 to $80 a barrel for our crude. So essentially saved the company in 2020 by having a very robust hedging program.
Since then, we’ve given a bit back in 2021. And then 2022, we’ve been doing our best to unwind some of these hedges and come up with a new way of hedging that basically allows us to take full advantage of the current high prices in oil. And I think we’ve accomplished that, if you look at the progression from the first quarter to the third quarter, we’ve actually got to the point now in the third quarter where we’re getting we’re realizing above Dated Brent prices for our crude.
And the way we’re doing that if you go to the next slide, this is a somewhat strange but very effective hedging mechanism where we actually take 50% to 70% of the next 12 months cargoes. And we sent a trigger on those cargoes at 80% of what Brent is trading for. And it’s essentially a floor it’s a three floor, we don’t pay for it.
So what happens is, basically it just chugs along and if we never have a significant downward event in price, we just sell at spot market, which of course we did in November, we just sold two crude — two cargoes of crude over $100 apiece, the triggers never hit.
But I think what it does is it gives us this downside protection if things do go bad if there’s a new wave of COVID, or some of the economic issues with inflation than the overall world economy start turning bad, we’ve always got this cushion that basically stops us from going down below these thresholds. So right now, most of our triggers in the $70 range for the first half of next year. So it shouldn’t be a big issue for us. My goal is that none of those triggers ever get hit.
I think we are still quite bullish on oil prices. So I think this is a pretty interesting strategy that allows us to keep the upside but protect the downside and not actually have to pay for it. So, so far working very nicely.
Next slide. Again, Nigeria is really the core of the company. I think when you look at valuations, I think the majority of our valuation is still done on Nigeria. These are the three largest fields in Nigeria, they are all performing quite well. They’re going to be within guidance, they have low operating costs, but great operators and Chevron and Total. And, we see these as our cash flow going forward, that really underpinning the value of this company going forward.
But they do need investment. If you go to the next slide, I think one thing we will be doing is spending a fair amount of time and some money reinvesting in these oil fields, the primary thing we really want to do is drill development wells on Aegina and ACPO.
We’ve unfortunately had a little bit of a delay in the rig. So we’re hoping the rig shows up in December or January earliest, we have a rig identified as just going through approval procedures in Nigeria, if we can get that rig on location, we find the drill nine wells on Aegina and ACPO, which will really be key to boosting, boosting production and stopping that we’re seeing a bit of the decline, and particularly Aegina that really needs some development wells to shore it up.
We’re also going to drill a couple of exploration appraisal wells, there are a number of good targets right around our FPSOs that we want to start developing to bring online. And of course, pray away the fields, it’s already basically ready for sanctioning. When we get license extension, we hope to have sanctioned that fairly quickly as well.
So I think this is a great asset for us. But it does need some investment. And I think you’ll see in 2022 — 2023 and 2024, we will be putting some money back into these fields to make sure that they continue to produce at the same levels.
Next Slide. So I’ll turn over to Pascal now and let him kind of run through some of the financial highlights.
Pascal Nicodeme
Thank you, Keith. So I think as you said, it’s been a very good culture. We’ve posted $70 million of net income this quarter, which is above the average fall, since we’ve made the acquisition in Prime.
This is also an increase compared to Q2. We’ve been in Q2 we had been affected by a net increase in the net operating position. And this quarter, we’ve seen the exact opposite. So there has been a decrease in cost of sales due to due to the movement in the net over this position by roughly $73 million, which explained this very good quarter.
And yes, as Keith mentioned, we are still sitting on $207 million of cash finance, despite the $35 million of shell that we have pulled back since we started this buyback program.
Next Slide, please. So as I said, I mean, this performance has been underpinned by another good quarter from Prime off shore but it’s on Prime $78 million this quarter, and very strong EBITDAX of $210 million, I’ll share $6 trillion of cash flow from operations.
Price still sit on a very large cash balance more than $600 million of course. And so net to Africa Oil today, is Prime has repaid their net debt to roughly $165 million net worth. So it’s Prime continues to deleverage. And our net shell there of that is decreasing.
I’m curious. So I think as Keith mentioned that since we’ve made the acquisition, we’ve more than repaid the consideration the initial consideration. We’ve received the $650 million dividend since we’ve made the acquisition which was $520 million cash acquisition costs. In the meantime, the net counterbalance to us within Prime has also increased by $85 million. So that’s something to be taken into account in this acquisition. And, as mentioned, the net debt has continued to reduce $450 million, since we made the acquisition.
So we sit on those very significant cash balance today. We have this laundromat under one corporate facility in place. With full banks we’ve agreed with all banks to increase the facility to $200 million as soon as we get a license in OML130 license in Nigeria. So that’s another evidence of the banks that are supporting us at the moment. And we expect to receive another large dividend from Prime, as soon as we get this license extension has.
They will also refinance their RBL facility at the same time. And we close that refinancing as soon as this license is awarded. Keith I think, — over to you. Thank you.
Keith Hill
Alright, thanks, Pascal. So yes, we have a number of catalysts still coming up a couple of these and I was hoping to be reporting today. Unfortunately, everything in Africa seems to take a little bit longer than we’d like to have them in particular, the project oil Kenya farmout in the Gazania well, we were expecting to see this quarter but have still moving forward, but hope to have those literally in a matter of the next few weeks.
So, the biggest one is probably the Venus appraisal drilling program that is going to be next year. Again, we were hoping to have that right here this year. But it seems to be a lucky rig, it’s made a big discovery and up in Cyprus, so they are drilling and testing on that rig now. And as soon as they’re finished, it’ll be coming to us should be there around mid-February, and we’ll start drilling the first Venus appraisal well.
Totality operator has stated that they’re looking to really bring another rig in. So I think we could have two well drilling program going by the second quarter of next year. And, I think, obviously industry interest of our partners is very big on the Venus and Orange basin area.
We are looking at a number of strategic assets producing assets. So I think our criteria is very simple. We want producing cash flowing assets, we’re — our target group is really looking at what majors aren’t divesting. And, we don’t want things that are going to suck up a lot of cash, we want things that are going to be producing cash.
We will be doing exploration, but it’ll be really following up the exploration we’ve got, we don’t see ourselves doing a lot of new frontier exploration out there, it was mostly taking advantage of the portfolio we built. And really, if we buy things it’s going to be focused on Africa and primarily West Africa producing assets.
Another big cannabis as its license renewal, as Pascal mentioned, once we have that renewal, we will be able to refinance the RBL. And the PXF facilities, it frees up an awful lot of cash for us to go do things with potentially shareholder returns potentially acquisitions. So I think we’re very close on that we should all have something on that by the end of this month. And keep an eye on for that because it actually is a pretty important thing for us to get that license renewal.
And then we also are looking to farm out our Block 3B/4B, I’ll show you a little map where that is. But that’s kind of right in the heart of this organization trend. And we’ve had quite a bit of interest from industry on that.
Next Slide. So again, exploration. While it might not be the industry mantra, we still see the building value. We want to make sure that we do it in the right way, what we like to call advantage exploration, we’re not going to be probably going and doing the onshore rig basin type of things that are going to take eight to 10 years to develop, what we see is looking at the areas that could be brought on very quickly, advantage barrels that are either near infrastructure or offshore where we think we could have fast track development similar to what they’ve done in Guyana.
So again, the three companies that we invest in Africa, Energy Impact, and ECO Atlantic, have a very active drilling program going on in South Africa, and a number of very well placed expiration box. So I do think there’s a lot of value here. I think our goal in the next year is to basically figure a way to get that value to shareholders. And I think at some point, we need to consolidate this position where we don’t have these portfolio companies that are either absorbed or sold, or moved forward on
Next Slide. Orange Basins continues to be — I think it is now becoming the hottest, the hottest basin and on Earth. Not only as the Venus discoveries we made, but the Graff Discovery made by Shell, Shell will be bringing Regan as well. So there’ll be potentially two or three rigs working full time here for the foreseeable future. We’re drilling there and Block 2B it’s a slightly different setting. It’s actually a rift basin is not part of the Orange Basin Delta proper. We hope to have results. Well, we will have results on that before the end of the year.
Drilling has been a little slower than we’d like there but good news is we were able to spread the rig and spread the well and keep it moving. And I think we did a very good job on our ESG compliance, to make sure that we weren’t shut down by environmental groups there. So, I think as long as you do things the right way, and you do your consultation, your ESIA, and you prove that you’re a good operator, I think you still can operate almost anywhere in the world. If you do things correctly.
I do want to point out Block 3B before we — we are very keen on this block, this block has a number of prospects that we think are very similar to the Graff and even the Venus discoveries. And we are in a farmout process to bring in a partner. And I always like pointing out that little inset map, on the bottom left, we’ve got an area that’s roughly seven times the size of the Guyana trend. So we’ve drilled two wells and have 2 billion barrel discoveries. So I think this is about as good as you get from an exploration standpoint.
Next Slide. Don’t forget my good friend Kenya, I’ve been telling you about Kenya for 13 years. I know patients has warned them. And I think probably most of the market doesn’t give us much value there. We still think it’s a very good play. And we still think we’ve got a very reasonable chance to get a strategic partner and get this farmed out. So again, I think this is one of those believe it when you see it. But, watch the press, I think there’s a good chance that we will have an announcement on our partnership before the end of the year.
Next Slide. So again, I think you’ve probably seen this slide before. I mean, to me this is, why do you buy Africa oil. I think you buy it because you’ve got Nigeria as the core value and you’re getting Nigeria at a pretty significant discount, depending on what oil price you want to use. If you use today’s oil price, you’re getting it at more than a 50% discount, but you use a longer term price $60 $70 You’re still getting a pretty significant discount on just the Nigerian portion and you get everything else for free.
Now, not everything is going to come good on the snap right side of that slide. But Venus on itself to be almost the same value as our market cap, if it come if the appraisal wells prove up, they work. Kenya is worth — that’s a risk Kenya value is worth at least a couple 100 million, maybe as much as 500 million to us in the long run.
And then we’ve got this portfolio investments, ECO Atlantic has not only drilling a well now, but they’ve put together a nice little portfolio, they have some interesting stuff in Guyana across the across the water. And I think, ECO to me is very interesting, because I think it’s got a lot of upside exploration potential.
Obviously, the discoveries we’ve made in South Africa with Africa Energy. Total is working hard to push those forward and monetize those, they also have a lot of upside in undrilled parts of the basin and potentially even oil upside.
So, I think, Venus is probably the most interesting thing on the right side of that slide. But I think there’s quite a few other things that are quite interesting as well. And I think that’s kind of at the end of the day, why am I a big shareholder of Africa Oil? And why would I buy more? It’s because I think the optionality you get from all the stuff on that right side. And the very low risk you got from all the stuff on the left, the left side makes it a very attractive investment thesis.
So I think that’s all we want to say in the presentation. I think we let you read the advisories at your leisure and I think we’re ready to field some questions.
Question-and-Answer Session
Operator
[Operator Instructions] Now we’re going to take the first question. And the first question comes from the line of Teodor Sveen Nilsen from SpareBank 1 Markets. Your line is open please ask your question.
Teodor Sveen Nilsen
Good afternoon guys. Thanks for taking my questions. And congrats on my strong set of Q3 numbers. Many questions that are but I think I’ll limit myself to two three. And first one is just a production trend and also will some declined during the year in this third quarter production or substantially lower than first quarter productions. So just wondering should we expect this trend to continue into 2023? Or should we expect the new Aegina wells to offset some of the decline we’ve seen recently?
Second question on a Proway. Exciting development, when should we expect Proway to commence production? And then my third question is on just the overall structure of Africa Oil, Africa Energy equal impact, of course, you’re allowed to save a little or it directly or indirectly several days companies. Do you see this structure going also forward or should expect some kind of key in the next structure? Thanks.
Keith Hill
So, I’ve kind of miss the middle question. When the production starting at Proway of a bit?
Teodor Sveen Nilsen
That’s correct. Proway timeline going forward? And when should we expect production from Proway?
Keith Hill
Okay, I’ll take them in order. Yes, decline this is we hate that chart. And the only reason it’s declining is because, normally we would have been out there drilling wells in March of this year to shore up that production, a rest of decline, for sure, and have a very minor decline, and with a little luck, maybe even have an increase in production.
So, it all came down to the rig that we had identified was we — the operator couldn’t come to an agreement with a local partner to get that rig up and running. So they had to go into the market and get another rig. So we’ve got a rig identified that already under contract to Total, and we’re just going through the approvals.
If we get that and we get drilling, I think we’ll be able to stem that decline and level that off, maybe even increase to where the current day production is. So the history of these fields, all three, especially the two older fields ACPO and Agbami is that every 18 months, they drill three to five, development wells. And that’s what keeps the plateau going.
So unfortunately, we haven’t had the opportunity to do that. So I think once we do that, I am pretty confident, we’ll be able to stem that decline, because there’s the field is operating just about the way we expect it to under the under the reservoir models. And there are places in the fields that have untapped vault box that haven’t even got development wells in them yet, those are what are really earmarked for the first program.
So, feel confident about that. Proway is really kind of waiting on this license renewal, even though license renewal is automatic in Nigeria, there’s never been a license that hasn’t been renewed. Once you — if you fulfilled your work commitments and pay your taxes, both of which we have done. License renew automatically. But I think given that we’re going to be putting a significant investment in that we won’t see production until after the license extension date, I think the partnership feels more comfortable going out and spending the money on Proway after we have that license extension.
Like I said, in my talk, I think there’s a very good chance we’ll have that done by the end of the month. But nothing done till it’s done. So I think if you see that, if you see that announcement on the license extension, I think you will see us also moving very aggressively forward on Proway. So we’ve done a field development plan, we’ve done all the engineering studies, we’re pretty ready to pull the trigger, we just want to see that license extension before we do that.
Once we pull the trigger, you’re talking about 2 to 2.5 years for first production.
And then the last one that, I do think it’s unsustainable this portfolio approach that we have with our exploration companies. I think we set it up as a matter of convenience to get into some very good exploration plays. And it worked, we are in some of the hottest plays, and in certainly in southern Africa, and even in Guyana, but I think at some point we need to put this down, put this on a regular basis. We’re not a portfolio company, we’re an oil company. So I think the key well drilling right now is Gazania it is held by both ECO and Africa Energy, between the two of them, they’ve got 87.5%.
So I think that one we need to see the results on that before we see what we want to do, if we’ve got a development project going forward on or appraisal power project or even Gazania. But I think we may have one equation. If we’re not fortunate, on Gazania, I think it’s there’s maybe another path.
But I think my board has told me by the end of next year, we need to get that sorted out and get away from being a portfolio company and holding those blocks. So as I said, I think there’s three options you either absorb them, which is something we would look at all three of those companies, buying out the interest, we don’t have we divest them, selling them off to someone else, in the cases of projects that have been discovered and developed, like Brulpadda Luiperd, and potentially even Venus once we’ve drilled the appraisal wells, an outright sale of those prospect projects.
Or we even looked at spinning out some of these into an exploration vehicle. So I think it’s too early to make that judgment until we see what happens in Venus. What happens with the development project in Luiperd-Brulpadda?
What happens in Gazania? But once we have that data, I think the goal is by the end of next year to have those no longer be portfolio investments in Africa Oil.
Teodor Sveen Nilsen
Okay, thank you. And just if I may ask fourth question here the timing or Graff Oil announcement? Is that like your shortlist is expected anything this week?
Keith Hill
Not sure, we’re still drilling. So I think it’s probably going to be, it’s probably going to be this week.
Teodor Sveen Nilsen
Okay. Understood. Perfect. Thank you.
Operator
Thank you. Now we’re going to take our next question. The next question comes from James Hosie, from Barclays. Your line is open, please ask your question.
James Hosie
Hi, there. Good afternoon, I wondering if you can talk a bit more about the OML 130 conversion renewals Just what standing to secure this? And can you quantify the scale the step up investment they could follow that conversion, guess what you got Aegina drilling until whales plus clearway plus that you mentioned exploration as well, just trying to get an idea of how much more you’re going to be spending on that asset in the next two years.
Keith Hill
Yes, I think the renewal is down to one factor segment, which is the fee. So I mean, there’s a fee that we’re willing to pay, and there’s a fee that the government is willing to get. And there’s still a little bit of gap between those two. But I’m hoping that that closes off before the end of the month. And we get that done.
As far as our decision to invest, I would say in the core fields, does not really dependent on that at all. So all the wells, will we drill it, all the appraisal, all the development wells at Aegina, ACPO. All the even the near field appraisal/exploration wells will be drilled regardless of whether we get extension, the only thing that’s really dependent is, is Proway. And even on that, I think we will continue to move that project forward as much as we can.
So, I think the spending the big D dollars on it, we won’t do until extension. But I think we have put so little capital into these projects, since we bought them. And you do need to take care of these fields. So I think, drilling the eight to nine, development wells is critical. So those will be done as soon as we can get Arabian. And we’ve may even extend that program to keep production up. But I think as far as license extension, the only one that’s really dependent is Proway.
James Hosie
Okay. And I am assuming can you talk about the I guess the fee being outstanding issue. Is that the fee determined by formulas and I guess your negotiating around some of the impacts that formula? Is that the case?
Keith Hill
Yes, there’s, — it is fairly standard. And it’s already been done on several licenses in Nigeria. So we’re not breaking new ground, it comes down to what you use, this is essentially a percentage of the NPV going forward that you pay for license renewal. So, how you calculate that NPV, what reserves you use, what oil price, you use all the parameters go in that that’s the negotiation.
So, it’s fairly standard and we’re not that far apart to be honest with you. So I think we Africa Oil position let’s just finish this and move on. And then we can then we can get after Proway and really start developing these fields.
James Hosie
And then just a second question. How we just learned about supply chain capacity and I’m really — have you secured all the rig capacity and other sort of, let’s say long lead items you need for what you plan to do in 2023? Are you going out to market for some of that still?
Keith Hill
Yes, assuming we get this rig under contract to Total already. I think we’re fine on both and then — I can’t give you a detailed answer and all the supply chain stuff like casing and wellheads and things like that, but, Total is pretty good operator and I’m sure that they have that sorted out.
The second rig going down to Venus, I think is one that still needs to be a bit sorted out. I think they’ve got some candidates and they’re out to tender. But that hasn’t been secured yet.
James Hosie
Okay, thank you.
Operator
[Operator Instructions] Now we’re going to take our next question. And the next question comes from the line Matt Cooper from Peel Hunt, your line is open, please ask your question.
Matt Cooper
Thank you, and thanks for the presentation. So a bit of a follow up to an earlier question is, I wonder if you could quantify how much the delay to a Aegina drilling has impacted your 2022 production? And how much this is offset by the four well, interventions? Is my first question.
Keith Hill
Yes, so we did the four well interventions, and three of them turned out pretty well, which kind of helped stem some of that decline. We are looking at doing some more interventions, as well to try to do that. But, we’re not, it’s not like we’re losing production, we’re just delaying production.
So, not drilling those wells, the reserves remain the same, and we will get those barrels, but obviously, especially in our most high oil price environment that we had in the second half of 2022, we would love to have those barrels coming sooner than later.
So I can’t give you a number, off the top of my head of what it’s cost us. Again, it’s really more of a delay than the actual cost. And of course, we didn’t spend the CapEx, so we did enjoy the cash flow out of that. But, it’s, those are things that keep me up at night. That’s kind of one of my biggest ones, we need to get a rig in there and we need to start drilling these wells and make sure we keep that production going, because that is kind of the lifeblood of the company.
I mean, what is important to reiterate. Sorry, Matt, I just wanted to reiterate that our expectation is to end the year within our 2022 management guidance.
Matt Cooper
Yes, okay. I wish you get the valuable ECO? Sorry about the delay, I guess maybe, a lot of that production from the Aegina wells is maybe going to come in at the back end of this year and into next year. So hence why it’s maybe not had a massive impact on this year’s production and why you’re still within guidance? Well, within guidance.
Keith Hill
An ECO field has always been an over achiever. So it’s definitely it’s producing about 109% of target. And even Agbami is actually had a pretty good year. So Agbami, which we had a little trouble with in previous years, especially with gas, the gas handling capabilities. So it actually done much better this year. So I think if we can get in with that rig into development wells, we’ll be right back on track.
Matt Cooper
Okay, great. And I just wondering if you could give a little bit more color on why the Gazania well reserve has moved back slightly?
Keith Hill
Yes, I’ve got two reasons. So then, I guess I shouldn’t go into too much detail. But, there was a weather delay at the beginning. And then the drilling has been taking longer than expected. So we’re about 15 to 20 days behind prognosis on it. So far, operations are ongoing. There’s no serious problems with the well, and it’s taking longer than one night.
Matt Cooper
Okay, that was great. Thank you.
Operator
Thank you. Speakers, there are no further questions at this time on lines. Ms. Amini, please continue.
Shahin Amini
Thank you very much. Yes, we do have a lot of questions from the webcast on line that we don’t have much time. So we’ll try and get through as many of these as we can.
Keith, Pascal, there’s been a number of one thing that keeps being repeated and let’s tackle this first. And it really is about Africa Oil growing cash pile. And also, what are we where are we? Can there be an update on our business development activities? So perhaps if you want to just share your views on what is your plan?
Keith Hill
Yes, Amini, the two are kind of hand in hand. I mean, we’ve got quite a bit of cash on hand and we get at least $200 million, once we get the latest extension we’ll have $200 million of undrawn debt as well. So we do have a good cash pile to go hunting with.
But you know — and we do have, I would say, a half a dozen, what I think are pretty attractive acquisition opportunities. As we’ve talked before, we will always compare those against buying our own shares back, I can tell you, when our shares were priced at $2.30 and $2.40, things like levels like that, it was pretty hard to find anything that was better than buying our own shares.
Now we’ve got a little bit more potential in the market, we got our share price up to $3.30 $3.40. It’s, even though it’s dropped back just a little bit in the last few days. But I still think it’s a bargain at that price. I think I still think, if you look at that maps, five that we put up and do your own math calculations, I still think even what we paid our maximum price, I think was about CAD338 per share, it’s still a bargain at that price. So we are continuing our buyback program. And we still think it’s a good deal at that price. But when we look at these acquisitions that will always be are these accretive or not.
And I think that’s an important thing. We also want to look at production assets that are going to infill going forward, we are in Nigeria, on the declining asset base. And even with Proway coming in, we would like to see some longer term of robust producing assets to kind of fill in.
So, shall we say, our cash flow from ’24 ‘25 ‘26 onwards. So, there are still deals to be made, there are still more sellers than buyers, I think you have to be prudent and careful in this market, we’re not going to be out there paying %70 $80 oil prices for these assets. But that’s not what the majors are looking for.
They carry these on their books at $60. So as long as they don’t have to write-down and they can get out of this of non-strategic assets and have cash to use on their most strategic assets. I do think there’s deals to be done and that will be a big focus. So, for us as a management team, if you say kind of what are the three things I would really push forward in 2023, one is a strategic acquisition of a producing asset, two, is getting the Venus results, and three is continuing to return money to shareholders as appropriate.
Shahin Amini
Very good. And question for Pascal. And once we have OML 130 license renewal on Prime, does it how given refine? What are your expectations in terms of could there be additional debt?
Pascal Nicodeme
The plan at the moment is really to refine this, both the RBA undertakes that as soon as we get license extension. And the currency, the RBL is slightly below $700 million, and the paycheck is $300. So the plan is not to generate a massive amount of new money with the ISIS extension. So we will probably sign a single RBL refinancing about one video in one video system in direct. And so we are not going to generate a massive amount of money. But the whole purpose of this refinancing is really to extend the maturity of the debt again. And of course to defer all the future. I’m not going be the RBA facility. So we are going to reset the maturity to basically a five-year tenor from the date when we signed the refinancing.
Today, the maturity of these debts is May 2024.
Shahin Amini
Thank you, Pascal. There are a number of questions on Kenya. And Keith perhaps we could put this to you. And now, the question is, how the negotiations progressing in Kenya? And obviously, you covered this earlier in the presentation. But there’s a follow up question about this FTP approval? And what is the timing for that?
Keith Hill
Yes, I’m not sure I can say too much more about negotiations, than I have. We have we had two interested parties. We’re moving forward with one of the two interested parties. No deal, but it, we feel we’re fairly close. And I think there’s a — each person can put his own percentage of chance to success on that. But, I think we have a fairly high chance to get a deal done there.
I think the FTP process is something different. We’re working with the government, as there’s an election there. So there’s a little changeover of some of the administration there. But I don’t see that as a big issue, we’ve submitted to FTP and have been for approval. And we’re just going through the normal course of getting that field development plan approved.
Shahin Amini
So shifting gears to exploration. The question here is sickle bus. I’m sure this is something that you could share your views on case?
The comment is that article has a quick exploration, portfolio going prospects, but how can Africa Oil trends to facilitate speeding up the developments, which at present seems to be rather slow.
Keith Hill
Not sure — I guess you have to almost take them one at a time. I mean, the South Africa, Luiperd-Brulpadda is really a negotiation about monetizing that gas and getting gas prices and getting guarantees and the operator is very focused on that.
The CEO Patrick Lyonnais was recently in South Africa discussing this issue, I think that’s the key to unlocking that value. I’m at least the existing discoveries, we’re also quite keen on some of the exploration on the on the eastern side of the block, which we think has oil potential, which was oil always be easier to monetize than then then gas. So I think at some point, we’d love to see some wells drilled in the eastern part of that block as well.
I think for Venus, I think it can go very fast once we prove it. Right now we have one, well, that’s not tested, when we have at least two wells that are tested, and proving the kind of that not only the lateral continuity of those reservoirs, but the deliverability of those reservoirs. I think you’ll see Total move very quickly into early production phase.
I think on both of those, it’s a question of, do we want to stay in or not? And I think, we’ll just have to look at that at the time check our balance sheet, check the timing of that. But I think what we see is both of those are potential Fast Track developments.
If you look, what was done in Guyana, three to five years from discovery to first production is not an unrealistic target for either one of those projects. So I think, sometimes the Brulpadda and Luiperd, the only delay is getting all the gas term set and getting the commercial agreements set that I think I think we’re in a good position to move those forward. And then it’s really a question, how long do we want to stay in those projects? Or do we seek to monetize them early?
Shahin Amini
Very good. There are a couple of other questions specific on the design your work, but I don’t think it’s appropriate for us to comment on that. I’m sure that the operation on Luiperd Brulpadda in due course, we’ll give an update on that world. So let’s move on.
There are a number of questions on our share buyback program. And the first one is the announcement of the Canadian government is looking to impose a new tax on share buybacks. And the question is, well, how is that going to impact on our program? If I make you blink, we’re looking into this matter in detail, and we’ll give you an update if necessary in due course, something we are aware of, but at this present time, we are just looking at the details. Keith, a couple of investors are asking about the potential for a substantial issuer bid. So to go above and beyond our normal course issuer bid. Do you have any views on that?
Keith Hill
Yes, just a follow up on that first point to that, the tax we’re talking about wouldn’t take effect till 2024. Anyway. So we don’t really see it as a big issue right now. The tax on buybacks, but, yes, I mean, we would look at that. I mean, I think our sister company ITC has been very successful doing that. And, at the end of the day, it’s looking at the amount of money we’ve gotten what we want to spend it on, but, again, certainly it certainly is on our laundry list of ways to spend that money is to potentially do a larger substantial issuer bid on buying back more shares.
But I think we also have to keep in mind, do we have the M&A opportunities that we have and where best to spend our money is the big question.
Shahin Amini
Very good. That was actually a question on the daily dynamics and day orders for share buybacks. And people were wondering, well, can Africa Oil change those parameters? Just want to remind everyone that Africa Oil is in a blackout period. And during the blackout period, we have had this automatic share purchase plan, which allowed our two brokers to continue repurchasing shares on our behalf. And we cannot actually change those parameters until we come out of blackout period and push them forward to Pascal and Keith. Once we come out of black house, what is the medium to longer term plan for the share buyback?
Pascal Nicodeme
Keith, do you want the question. Or I can answer.
Keith Hill
Go ahead. Definitely.
Pascal Nicodeme
Yes. So I think, first, it’s important to know that they are daily limit on the amount we can buy back. So we are limited buy back daily liquidity. I think in improving these parameters proved to be very successful. And so it’s that we will certainly continue to keep that in mind in terms of return to shareholders.
But I think it’s important also to know that we want to keep flexibility going forward, especially in M&A and doing acquisition of producing flexibility. And people options open going forwards. We as Keith mentioned with $30 of cash, we have an own software facility and hold this is certainly will be really well, an acquisition. And so we are currently waiting auctions between doing more M&A or continuing the share buyback program as we did in September.
Shahin Amini
Thank you, Pascal.
Actually for the question, in case you may want to tackle this one. Can you just provide some color on the differentials that Prime’s commonly hit getting on top of Brent’s for his production? Any views on that.
Keith Hill
Yes, so far, we’ve had a couple of nice big spikes, we had like a, I think it was $9 premium to Brent on one of our Aegina cargoes. But we’ve averaged about $4 to $5. So the market really likes these crews, and ACPO and Aegina. So generally, I think that’s what we would plan is to get in that $4 plus or minus range premium to the Brent.
Shahin Amini
Very good. There’s a couple of questions about. What is your shares outstanding balance? We provided a share capital update, you can see the press release with a number on our website?
There is a question which has been battling me since the markets opened this morning and the share price is down 7%. Why — and well Keith, we’ve been discussing this over the last couple of hours. I don’t know whether you have any comments, or [indiscernible 0:52:50].
Keith Hill
Amini, that was good. Because it’s a bit of a mystery for me that you can put up these good numbers on average share price go down.
Pascal Nicodeme
So obviously, I’ve been very busy going through the trade day. So that’s available since the markets opened. I’ve also been speaking to a couple of expert trends in Scandinavia. And one hypothesis which we’re looking into more detail. And that is that quite a few investors in Scandinavia may have been chasing liberated warrants in order to have leveraged exposure to Africa Oil share price performance, and those positions because of technical trading may have started to unwind. And that’s why in the first hour, we had this quite frankly unreasonable irrational performer reaction.
So our results, that is one hypothesis, which we’re looking at. But certainly management team at Africa Oil does not see anything in our results or anything else to explain that further dropped at the trading sources. And so that’s our hypothesis for now.
So on that note, let’s see for any other questions.
Shahin Amini
Number of questions on Prime which we have responded to. There’s one question on tax Pascal. And the fact that the tax rate at Prime seems to be going up. Can you just cover that quickly for us?
Pascal Nicodeme
Yes, I think the main reason is that that actually tried to bring us is that we have exhausted investment tax credits in Nigeria. So we are not able to accept to continue with these and recovered costs. So going forward, we are going to pay a larger effective TPC rates and that’s the main reason why it has increased and it has also translated into your free cash flow.
Shahin Amini
Very good. And if I may just bring one point into this and perhaps you fell so common size. Is it possible to have the conversion to the new PIA says without extending the license? I suppose what I’m trying to communicate with the market is the scope for us to benefit from a lower tax rate on the Nigeria’s petroleum industry?
Pascal Nicodeme
And yes, the answer is yes. And that’s definitely correct, we could convert the PIA immediately without getting the extension. But of course, we are using that conversion to the new PIA in terms as a leverage to get license extension early, since we need this license extension to be able to refinance audio facility and a bit at Prime level. So it’s really a win-win situation to get a license extension and switch to PIAs attention immediately.
Of course, if we can’t get a license extension, immediately, for whatever reason, we would still consider switching to the PIAs.
Keith Hill
And it’s really a fraction of the switching to the PIAs if the headline tax rates exactly was from 50% to 30%, as we move into a pure corporate tax system, while we are in this PPT system at the moment.
Shahin Amini
Very good. Well, I think we’ve tackled most of the questions. And as we’re running out of time, I just want to thank everyone, too, for joining us. Keith do you have any final comments.
Keith Hill
No, I mean, I’m feeling very good about the company, I think, going to be some exciting wells next year, especially Venus. But fingers crossed, we get Kenny over the line and, put some money back into our investments in Nigeria. And I think I’m still a big oil bubble. I think the transition is moving forward, we’re going to be part of that transition. And we’re going to be the top quartile or decile of ESG performers. That’s our goal. But the transition is going to take 30 40 years and I think there’s still a lot of room for oil and gas, as long as you do your business.
So appreciate everyone taking the time today and very excited about moving ahead.
Shahin Amini
And both, thank you, everyone, and I’ll hand back to the operator.
Operator
Thank you. Dear participants that does conclude our conference for today. Thank you for participating, you may now disconnect. Have a nice day.
Be the first to comment