Africa Oil expects to reach a point of inflection by mid-2024, with no capital expenditure commitments and no debt – opening up the possibility of M&A, CEO Roger Tucker has said.
The executive was speaking at Pareto’s annual E&P conference in London.
The aim is to “derisk the portfolio”, he said. Africa Oil will farm out its Equatorial Guinea business and its South Africa Block 3B/4B. As a result, it will have “no remaining capex requirements for the next three to four to five years”, he said.
“We will be cash generative and have no debt,” bar debt held at the Prime Oil and Gas level in Nigeria.
“We will reach the middle of the year in a very different position than many of our peers. That creates opportunity for us, we may look at M&A or we may consider other options for the company.”
Africa Oil has capitalised on production in Nigeria, providing a sustainable cash stream, while also holding on to exploration opportunities in Namibia. The latter comes via its holding in Impact Oil and Gas, owning just over 30%.
TotalEnergies struck a deal with Impact earlier this month. The French company agreed to provide a loan to carry Impact through to first oil. Impact will then pay back 60% of post-tax revenues to Total after production begins.
Tucker said the company expected to pay the loan back “within three to four years. After which it will carry on producing for 25-30 years.” Africa Oil has invested in Impact in the past to maintain its equity stake and the CEO said it would be keen to invest more.
Total is currently logging Mangetti-1, Tucker said, “and we’re also drilling a well just north of Venus-1A, which is Venus-2”.
Exploration upsides
There is further scope for exploration in the south of Block 2913B, he noted. “The reason we wanted to stay in is in the southern part of the block.” The operator is acquiring 3D seismic on the area, he said, backing up existing 2D seismic.
“This block will see four or five wells probably drilled next year. We couldn’t afford to continue funding this ourself.”
Another area where Africa Oil is seeking a partner is over the border, in South Africa’s part of the Orange Basin. The company recently completed its acquisition of another stake in Block 3B/4B, giving it 26.25%. Eco Atlantic has 20% and Ricocure 53.75%.
“It’s an extremely interesting block”, Tucker said, comparing the seismic results to Shell and Galp’s blocks in Namibia. “Prospect sizes are up to 4 billion barrels”, he said.
South Africa is a more challenging destination to invest than Namibia. Acquiring environmental approval is a challenge, he said. “Some people, because of the issues with South Africa won’t look currently at South Africa.” Despite this, he sounded a positive note on farm-out discussions.