UK-headquartered and AIM-listed company Afentra plc has completed the acquisition of interests in two blocks offshore Angola from Croatia’s INA-Industrija Nafte. This marks the UK player’s entry into Angola.
FSO Palanca; Source Stapem Offshore
Following a sale and purchase agreement (SPA) from July 2022, Afentra announced the receipt of approval from Angola’s Ministry of Mineral Resources, Oil and Gas in January 2023 for the acquisition of a 4 per cent interest in Block 3/05 and a 4 per cent interest in Block 3/05A offshore Angola from INA-Industrija Nafte. Due to documentation delays, the process took longer than anticipated, however, the UK player announced the completion of the acquisition on Wednesday, 10 May 2023.
As a result, the company believes to be “well positioned” to build a material production business in Angola and contribute to “a responsible energy transition for the country.” According to Afentra, the transaction effective date of 30 September 2021 results in a net upfront consideration at the completion of $17 million, which is offset by the firm inheriting crude oil stock with an approximate value of $16.6 million at $80/bbl (207,868 bbls).
Moreover, the company also set aside $10 million into an escrow deposit at completion, which will be paid to INA after the Block 3/05 licence extension is formally completed. The net upfront consideration and escrow deposit will be funded by $18.9 million from the agreed reserve based lending (RBL) and working capital facilities and $8.1 million from cash resources.
Furthermore, the upfront consideration of $17 million comprises a $12 million initial consideration, $4.8 million in working capital and interest and $2 million in payments of crystallised contingent consideration, adjusted downwards by $1.8 million due to positive net asset cashflows. The UK player confirmed that Mauritius Commercial Bank (MCB) had entered both the RBL and working capital facilities as the lender to the company. As Trafigura retains an interest in the RBL facility, it will continue as an offtake provider for the Block 3/05 crude.
Afentra expects to sell its first cargo of crude oil in 3Q 2023, monetising the inherited crude oil stock and subsequent production. While Block 3/05 current gross production in April averaged approximately 19,000 bbl/d (net 760 bbl/d), the production in 1Q 2023 averaged 17,206 bbl/d as a result of downtime experienced through planned restoration works on power generation and the distribution network.
After ERCE completed its annual update of the Competent Persons Report (CPR) on the Block 3/05 assets with an effective date of 1 January 2023, the updated 2P gross reserves are 108 mmbbls (net 4.3 mmbbls) and the updated 2C gross resources are 43 mmbbls (net 1.7 mmbbls). In addition, long-term testing started in Block 3/05A, at the Gazela field, of an additional circa 1,100 bbl/d, enabling the framing of potential development options.
Paul McDade, Afentra’s CEO, commented: “We are very pleased to complete the INA acquisition and we would like to thank all involved, especially our shareholders, for their continued patience and support. The indicative transaction metrics upon sale of crude inventories speak to the competitiveness with which we have been able to structure this deal and we are pleased to mark the inception of our partnership with Sonangol in Blocks 3/05 and 3/05A.”
Block 3/05, located in the Lower Congo Basin, consists of eight mature producing fields discovered by Elf Petroleum – now part of TotalEnergies – in the early 1980s. This block has a diverse portfolio of over 100 wells. Currently, it produces from around 40 production wells with nine active water injectors. The facilities include 17 wellhead and support platforms and four processing platforms, with oil exported via the FSO Palanca.
What’s happening with the Sonangol acquisition?
Based on the SPA signed on 28 April 2022 between Afentra’s wholly-owned subsidiary and Sonangol regarding the purchase of non-operating interests in Block 3/05 (20 per cent) and Block 23 (40 per cent) offshore Angola, an important condition precedent for the Sonangol acquisition is the approval of the extension of the Block 3/05 production sharing agreement (PSA) until at least 31 December 2040.
In its update on the progress of this acquisition, Afentra highlighted that the Block 3/05 JV partners and ANPG, the Angolan oil and gas regulator, had agreed on the terms of the Block 3/05 licence extension, extending the production sharing agreement from 1 July 2025 to 31 December 2040 with improved fiscal terms that strengthen the economics of the permit.
In light of this, ANPG will now begin the process of obtaining the requisite governmental approvals for the licence extension. Afentra claims that the agreement between ANPG and the JV partners on the terms for the licence extension, allows Sonangol to start the process of obtaining the requisite government approvals for the Sonangol transaction which remains on track to be completed by 30 June 2023.
“It is also highly encouraging that the terms for the Block 3/05 licence extension award have been agreed; this represents a major step towards completion of the Sonangol transaction within our previously guided timeline. We now look forward to working with the partnership to enhance production and reserves to a level that reflects the potential of this very material asset,” added McDade.
