AFRICA OIL ANNOUNCES SECOND QUARTER 2024 RESULTS
Canada NewsWire
VANCOUVER, BC, Aug. 14, 2024
VANCOUVER, BC, Aug. 14, 2024 /CNW/ - (TSX: AOI) (Nasdaq-Stockholm: AOI) -- Africa Oil Corp. ("Africa Oil", "AOC" or the "Company") is pleased to announce its financial and operating results for the three and six months ended June 30, 2024. View PDF version
Highlights
-- Announced the agreement to consolidate the remaining 50% interest in
Prime within Africa Oil, thereby increasing the Company's ownership in
core cash generating assets and bringing in a new, strategically aligned
cornerstone investor. BTG Pactual, and also enabling enhanced shareholder
returns and creating a materially stronger growth proposition.
-- The Company ended Q2 2024 with a cash balance of $185.6 million and no
debt.
-- During Q2 2024, the Company received a $25.0 million dividend
distribution from Prime, net to its 50% shareholding.
-- During H1 2024, the Company returned a total of $50.6 million to its
shareholders through its base dividend distribution and share buybacks
for amounts of $11.5 million and $39.1 million respectively.
-- The Board of Directors of Africa Oil approved a second semi-annual
dividend of $0.025 per share, payable on September 27, 2024.
-- Post period, the Company reached an agreement with Eco to acquire an
additional 1.00% interest in Block 3B/4B in exchange for its 14.84%
shareholding in Eco, pursuing its strategy to rationalize its portfolio
of exploration investments.
-- Selected Prime's highlights and results net to Africa Oil's 50%
shareholding*:
-- Recorded Q2 2024 daily WI production of approximately 15,800
barrels of oil equivalent per day ("boepd") and average daily net
entitlement production of approximately 18,300 boepd.
-- Post Q2 2024 the rolling monthly daily WI production (as of August
11, 2024) averaged approximately 18,100 boepd and net entitlement
production averaged approximately 20,800 boepd; full-year 2024
management production guidance is unchanged.
-- Recorded Q2 2024 cashflow from operations of $69.6 million.
-- Prime's cash position of $152.8 million and debt balance of $375.0
million resulting in a Prime net debt position of $222.2 million
at June 30, 2024. The AOC Net Debt inclusive of 50% Prime Net Debt
is $36.6 million.
Africa Oil President and CEO, Roger Tucker commented: "It was an incredibly busy first half of the year as we signed three strategic transactions, taking Africa Oil towards the next phase of value creation and shareholder returns. We have high-quality development projects, high-impact exploration and appraisal catalysts that will all be funded on completion of these deals. The quality of our organic growth opportunity set is demonstrated by the size and calibre of our partners.
The Prime consolidation once closed, will see the roll-out of a new transparent capital allocation framework and will create scope for a significantly enlarged capital returns program for our shareholders. Africa Oil stands with a differentiated investment case of offering sustainable shareholder returns, significant organic growth opportunities, and is well-positioned to pursue new opportunities on the back of a strong balance sheet."
* Important information: Africa Oil's interest in Prime is accounted for as an investment in joint venture. Refer to Note 1 on page 6 for further details. Please also refer to other notes on page 6 for important information on the material presented.
2024 Second Quarter Results Summary
(Millions United States Dollars, except Per Share and Share Amounts)
Three months ended Six months ended Year Ended
Unit June 30, June 30, June 30, June 30, December 31,
2024 2023 2024 2023 2023
AOC highlights
Net income $'m 0.4 106.9 3.9 128.8 87.1
Net income per $/
share -- basic share 0.00 0.23 0.01 0.28 0.19
Cash position $'m 185.6 175.7 185.6 175.7 232.0
Prime highlights,
net to AOC's 50%
shareholding
WI production(2) boepd 15,800 19,500 16,700 20,200 19,800
Economic
entitlement
production(3) boepd 18,300 22,400 19,300 22,700 22,400
Cash flow from
operations (4,5) $'m 69.6 88.7 146.7 159.6 298.8
EBITDAX(4) $'m 91.8 117.0 185.4 230.6 458.7
Free Cash Flow $'m 52.6 (27.4) 119.8 47.6 149.1
Net debt $'m 222.2 266.2 222.2 266.2 298.9
The financial information in this table was selected
from the Company's unaudited consolidated financial
statements for the three and six months ended June
30, 2024 and the Company's audited consolidated financial
statements for the year ended December 31, 2023. The
Company's consolidated financial statements, notes
to the financial statements, management's discussion
and analysis for the three and six months ended June
30, 2024 and 2023 and the 2023 Report to Shareholders
and Annual Information Form have been filed on SEDAR
(www.sedar.com) and are available on the Company's
website (www.africaoilcorp.com).
In Q2 2024, the Company recorded a net income attributable to common shareholders of $0.4 million (Q2 2023 net income - $106.9 million). This is primarily made up of share of profit from the Company's investment in Prime of $17.4 million (Q2 2023 share of profit - $212.7 million) offset against losses from the Company's investment in associates of $7.7 million (Q2 2023 share of loss - $34.7 million) and Company's operating expenses of $10.4 million (Q2 2023 expense -- $7.1 million).
The figures below explaining Q2 2024 movements in the results of Prime are based on Prime's gross balances, as per its financial statements.
Prime revenues decreased by $4.3 million in Q2 2024 compared to Q2 2023, mainly driven by no Petroleum Profit Tax ("PPT") and royalty revenue. No PPT revenue has been reported since August 2023 with Prime lifting its own entitlement production and paying its tax in cash and no royalty revenue has been reported since August 2023 with PML 52 royalties being paid in cash and presented in cost of sales.
There was an increase in costs of sales of $32.3 million, primarily driven by an overlift movement during Q2 2024 of $23.8 million compared to an underlift movement in Q2 2023 of $1.9 million. This resulted in a decrease in gross profit to $95.8 million in Q2 2024 from $132.4 million in Q2 2023. There was other operating income of $22.5 million in Q2 2023 relating to investment tax credits that offset PPT that Prime no longer receives under the Petroleum Industry Act ("PIA"). There was a tax charge in Q2 2024 of $31.9 million compared to an income of $302.2 million in Q2 2023. The income in Q2 2023 was mainly from Prime renewing the OML 130 license resulting in the award of three new petroleum mining leases and one petroleum prospecting license. These cover some of the areas previously covered by OML 130, with some of the areas also relinquished. These are PML 2 (Akpo field), PML 3 (Egina), PML 4 (Preowei) and PPL 261 (South Egina). PMLs 2, 3 and 4 and PPL 261 operate under the terms of the PIA as from June 1, 2023. Under these terms, PMLs 2, 3 and 4 and PPL 261 are subject to a 30% Corporate Income Tax regime compared to the previous 50% PPT regime which resulted in the partial release of $346.0 million of deferred income tax liabilities during the period. This has resulted in Prime's profit decreasing from $425.3 million in Q2 2023 to $34.7 million in Q2 2024, a decrease of $390.6 million.
The Company's general and administrative expenses, including BTG transaction related expenses, share-based compensation charges relating to the LTIP and Stock Option Plan, amounted to $10.4 million in Q2 2024 (Q2 2023 - $7.1 million). Adjusted general and administration expenses excluding BTG transaction related expenses amounted to $5.3 million.
Adjusted general and administrative expenses, excluding BTG transaction related expenses and share-based compensation charges, amounted to $4.0 million in Q2 2024 compared to $5.0 million in Q2 2023, a decrease of 20%. The decrease of $1.0 million is primarily driven by lower expenditure in relation to corporate development activities, lower travel costs and higher timewriting recharges to intangible exploration assets.
The Company's cash balance of $185.6 million compares to year-end 2023 cash balance of $232.3 million and end of Q2 2023 cash balance of $175.7 million. During first half of 2024 the Company distributed $11.5 million in dividends to its shareholders and spent $39.1 million on share repurchases for total shareholder capital return of $50.6 million. The Company also used $14.5 million in its operating activities for this six month period and $5.7 million in its intangible exploration activities. These expenditures were offset with a $25.0 million dividend received from Prime during the same period.
Outlook
Consolidation of the Ownership in Prime
On June 23, 2024 the Company entered into a definitive agreement (the "Amalgamation Agreement") with BTG Pactual Oil & Gas S.a.r.l. ("BTG Oil & Gas") and BTG Pactual Holding S.a.r.l. ("BTG Holding"), the entity which holds the interests of BTG Oil & Gas in Prime, to reorganize and consolidate their respective 50:50 shareholdings in Prime (the "Proposed Reorganization"). On completion of the Proposed Reorganization, Africa Oil will hold 100% of Prime with BTG Oil & Gas receiving newly issued common shares in Africa Oil, representing approximately 35% of the outstanding share capital of the enlarged Africa Oil.
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