Q1 2021 Africa Oil Corp Earnings Call
Hello every one of my name is Joanna and I will be your conference operator today.
At this time I would like to welcome everyone to the Africa oil first quarter 2021 was that the call and webcast.
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After the Speakers' remarks, there will be a question and answers and.
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I would now like to pass the meeting to of Mr. Shane and many Africa oil of Investor Relations and commercial manager. Please go ahead Mr of many.
Thank you draw and Mark.
On behalf of managements and thank you for joining us today for the first quarter of 2021 results cool and the object of the refinance of optical oils corporate Sandler.
We appreciate your interest and support on.
From the call today, we have president and Chief Executive Officer, Mr. Keep scale, and our Chief Financial Officer, Mr. Pascal and think of them.
And we will present, the quarters highlights and the operational outlook before we start the Q&A session.
I would like to remind everyone that remarks made during the session or subject to forward looking statements, which involve significant risk factors and assumptions and have been fully described and the company's disclosure statements.
Cash and discussed is made as of today's date and time and optical oil assumes no obligation to update or revise this information.
The new events or circumstances, except as required by law.
The company has come to the financial statements and related MD&A are available on the company's website and the C. The websites.
Keith we're ready for you. Please go ahead.
Alright, Thanks Shane.
Thanks, everybody for dialing in and I thought maybe I I do a quick look back a year ago today, the kind of see what we've done and the last year I think of.
A year ago, when we were looking at today the price of Brent was $29. A barrel we were just getting into the whole COVID-19 spinning out of control situation and Oh, we're actually getting a bit concerned that we're actually going and be able to sell our while there's all of these tankers and the storage seemed to be filling up.
And we're worried that the force majeure by our off takers might come in and so I think we were at the pretty dire Straits back that I think we've seen the pretty good turnaround and since then.
Obviously, where doubled our oil price and where over $60 a barrel of oil.
We've COVID-19 and I think as and retreat and I think it's too early to say it's done I think there may still be bumps in the road.
All of that but certainly I think it's sort of.
It's looking better than the past and stuff.
And I think the math is searching for are for oil and if you look at the us driving that's being done and the U S on the.
But the demand in China, it's actually above pre COVID-19 levels, So I think reps.
We are quite optimistic and I think we're on the road to recovery, but I think we are still being a bit fiscally conservative and I think we'll we'll talk about that a bit the in terms of our hedging policy in terms of our keeping cash and part B V and.
And distributing it I think we are we'd like to just see a little bit more water under the bridge before we get a little more aggressive.
Some of this but the financial factors going forward.
But I think we have weathered the storm quite well.
Obviously our share price.
It hasn't left ahead, but the our peer group last year lost about 50 per cent of their share price value on the averages and the our company are maintained.
Maintain roughly a flat share price having.
And having a flat share price, there's nothing that gets us too excited and we all want our share price to go up but I think if you look at the value destruction and not only of the independents, but some of the majors I think we've been able to avoid that of income through the storm quite nicely.
So I think we've moved ahead of our assets and.
Exploration I think we booked.
And the baby and South Africa, we're making good progress of the South African discoveries I think is going to be quite interesting going forward.
And we've got a very big oil coming up and there may be a and another well in South Africa the drill.
And we've also made a great inroads on our debt, we're going to spend a fair amount of time on that today. You know we had of short term debt facility that we've now been able to replace a we have some medium term debt solutions at the Pascal will be talking about and then I think cash from a longer term standpoint, I think we see a.
And the ability to restructure some of our longer term the debt, which will give us the ability to receive more dividends.
And then eventually consider of dividend to our shareholders.
So I I wanted out for those of you who can see the presentation I want to start walking through a few of the points on the presentation.
And I think I think we have had great performance of course.
The fourth consecutive profitable quarter underpinned by the prime assets.
And these are great assets I think of the production has been better than expected even.
Even with the constraints that we've had from OPEC.
The constraints. So our production has been the fields of performing above expectations and I think that's very good news for US I think thats the kind of backed up by if you look at our reserves report, we've been able to replace a 117% of our of our two papers and reserves.
And the net entitlement.
The production of 70.
2007.
72 million barrels.
Of 85 million barrels of.
Compared to year end last year. So I think I think we're doing quite well there.
I think we we've also got rid of this corporate term loan and we have to take what I think was a fairly egregious low to get this deal done I do think our friends of BTG for giving us that most of us three or four day notice the allowed us to get this done but I think it will be it will be happy to see something thats, a little more reasonable out of them and in terms.
Of the cost going forward.
One of the other things we can spend some time on and it's obviously something that's in our industry become a very big topic the sustainability.
So I think we are now.
Really trying to position ourselves to be.
And at one point, and we said we'd like to be at the top quartile of ESG performers I actually think to be sort of to survive in this industry and to get support from shareholders to get support from banks. The considering financing I think you really have to be and the top decile and where mom.
Addling ourselves after our sister company, but the energy and I think is really the industry leader on this and I think you'll see us putting a lot of time and effort into us ESG and sustainability goals and.
And screening all of our new ventures with that and mine. So we will spend some time talking about that today and I'm happy to field questions on that.
So I think turning to the.
The operational highlights again.
We had an average of 27007 hundred.
Bo per.
Productions.
The versus the.
The up from the court last quarter of 26200.
Our guidance is 24 to 28, so we're at and the upper end of that guidance and I think.
We're feeling fairly confident that we're going to be within that window or possibly even above that window.
One of the thing that is limited as the genus production.
Due to OPEC limitations.
Of 152000, and we are seeing easing of that.
While it is not completely official yet we think by the end of the second quarter, we should be able to exceed 165000 barrels a day on the Gina.
And Oh, that's that's still to be determined, but I think we're definitely going and the right direction.
Our unit operating costs is still quite low it went up just a little bit this quarter, because we had some well interventions and aqua and edging up but I think Jeff we're still the and that's kind of industry, leading five of $6 plus or minus a barrel of oil operating costs. So I think the the message for the investors as the.
These assets, which we kind of extended ourselves a bit to buy are performing above expectations and we see the we see that months, becoming more and more attractive.
So I want to turn it over and out to our CFO of Pascal Victor them to kind of walk through of the financial highlights I'm talking about the recent the.
Refinancing.
Okay.
Thank you Keith.
So let me first give a quick of a view of the of the result, this culture I think it's been.
The strong strong quarter underpinned by the excellent performance of the Prime acquisition. How does the is excellent and he has been called the nice to have.
And the full quarter.
So we're supposed to you the 40 to 44 million dollar of net operating income for the health of the culture.
Against the loss of 431 million last year, which was mainly due to the impairment we took on the Kenya and Q1 and 2020.
And this net operating income includes a 48 million of profits coming from all of 50% and investment and in Prime which has been slightly down compared to two basketball to run two onto the first call of till 2020, and while there are two reasons for that is the first reason is the oil price we.
So the old kind of goes on the average at the 58 thrown off the battle in the first quarter compared to 72, I don't off the bell in the AR in the physical till 2020 and the other reason is that we've moved from the net and the lead position to a net of the lead position, which has affected the of the culture.
And you get the lead by around $29 million.
So the.
Please call until we have not received and the dividend from prime is as expected.
And the Prime has been building of large cash position.
At the moment the sits on more than 330 million of cash which are going to be used going from what you are distributes for the dividends and also to to continue to amortize the the LDL facility.
And the last week the ammunition.
We are we are forecasting a $130 million out of repayment net of end of June. So that's why the primary sitting on day, so if that amount of cash.
And at the I pick out oil level weaker and three out of a cash position of $29 million.
<unk>, which compares to 40 million and at the end of Oh from what are you and yeah. I mean, the decrease is due mainly to the interest paid on the on the BTG drilling.
The the corporate facility. This is the the beat the GTO and <unk>.
Standing East currently at $141 million it has not been repaid during the quarter, because we haven't received and your dividend during the quarter.
Shane could you move to next slide please.
So now I will I will move to the.
The refinancing, we've just signed yesterday, which which will basically take outs. Besides just the BTG zone and.
Keith.
Keith mentioned, the the main achievement and the signing of this refinancing is that sort of yeah. We are.
I'll.
Now getting a much more price competitive.
The low and compared to what we had we squeeze BTG and.
And it aligns with the the prices.
We chalk drilling on the market on the oil and gas market. So the.
The new facilities of three year facility.
$113 million and I've been committed initially by and for banks and there is a $20 million increase option that we're considering at the moment to all of the banks out of sealing and credit committees at the moment and all keen to subscribe. These additional 20 million donor. So the the law and we will have the interest at life.
The price six point in fact, the central of the first year.
And then the margin increased to 7% and the second year and seven in the last presenting the sides here.
So what what's going to happen now and that's what I'm going to satisfy all of the conditions precedent to that some of that refinancing and we expect it all on the on the loan.
At the end of July and end of July at the end of the make whole period on this on the existing loan. That's why we we all we are waiting to them.
And so all of this prepayment penalty to expire before we'd all under the new facility.
And of any extra after the repayment of debt of just BTG loan is going to be used for orange and yellow called point of purchase. So so as I said, we are we announced you're walking with two other banks to subscribe the extra 20 million donor and.
And the objective is really two of them to get the facility of $250 million before the end of January.
This the signing of this refinancing of cheap I guess on number one priority and.
For the final team D share PRT objective was to extend the maturity of the BTG drilling and to a reschedule the.
And most physicians we.
We have 12 of the objective from the financial perspective. The second the objective is to continue to work with crime saw them to extend the maturity of the debts and.
And we are considering several options, one option, which which of fully we will close as soon as the and additional trades and ICT 115, and younger lot of trade facility.
The whose maturity would extend beyond the existing maturity of the of the onvia and facilities and that will contribute to.
And extend the maturity of a prime and that's and of course, the other teammates objectives set of objectives.
This is timothy to refinance the debt.
The prime Avia.
And which at the moment is constrained by the the.
And the license of the of the two day announced primes LNG and Nigeria.
So the the objective would be to.
The refineries and the Albion facility and and expand and extend the the maturity of the LDL and <unk>.
Beyond these dates so.
And we know that as part of the discussion at the moment in Nigeria and yet. They are also of discussions on the license extensions and of course, if we a prime obtains the license extension on both oil and now yeah. It will be the perfect opportunity to refinance the Albion facility and the increased the amount of <unk>.
Getting back to and both $1 5 billion and also smooth the Uh huh.
Yeah, and monetization profile going forward.
And I think I'm done from my from my assignments of dates piece of each year.
Alright, Thanks Pascal so.
Yes, I think if you if you read about our company and what the analysts sort of looking for I think our balance sheet and and Nigeria kind of drives the yes.
The the main value drivers.
And are being discussed, but I do think we've got some other value drivers that that should be mentioned as well the Kenya project and is one that we've had for a long time, we've spent a lot of time and money on it and I think cash right now the the consensus of the market is that it's the.
It's not worth very much because they just don't see a clear path of it being developed and executed.
We have spent quite a bit of time and effort on this recently kind of redesigning the field development.
The probably the best news about this is that we now have a partner.
And Tullow.
Has been taken over and kind of Youre seeing the new tullow.
Led by Robin will Dear Raul.
Karen energy when they develop the Rob to stay and project, which is kind of the type project.
This is quite.
Similar to so we were redoing the whole project where were looking at the field development, we're optimizing the project economics and I think.
We're starting to see of project that looks a lot more robust.
And we think you know.
They the there was a.
Search for a partner of about two years ago from our part from our partners, which didn't come to fruition and I think part of the reason that didn't was because the project itself needed. Some redefinition of and I think we're getting close to finishing that we do still think we need a partner and I think Tullow and has also stated that I think this is a big project.
The companies of the size of both Africa oil and the Tullow. So I think that will be of big effort. This this year, but I do want to say that we've made great strides this year and are continuing to work with the government of Kenya to get this thing ready to develop and it is a big the value driver and if we can get this thing over the line. It's a it's sort of it's like.
Huge amount of value to our to our shareholders. So I will be focused on this in fact I'm heading the Kenya of Tomorrow's My first pre COVID-19 the post COVID-19.
Trip to Kenya, and I think we'll be focused on that.
We also are.
Still have some great exploration I think you've seen the success of Africa energy and won't go into too much detail on that because I think Garrett.
The CEO of Africa, and and he does a very good job on that but that thing is moving forward and moving forward with the pace. We've got two good discoveries there, but we've also got two very interesting wells coming up.
Later this year, so Venus the one that you see on the left of the slide the offshore Namibia.
The single largest basin floor fan, but the as it is on drilled and the world and I.
I think that's going to be a very interesting well.
It is risky, but it is oh.
The potentially multibillion barrel of oil discovery.
If it's successful so.
I think that that's kind of be of real driver for our of our portfolio of company impacts and I think we're very much looking forward to that that would be that will be a big driver for our stock to if it's successful.
The other one that maybe is a little bit more under the radar, but there's actually quite a nice prospect of.
And yes, which is the the block the well being drilled and to be offshore South Africa.
It is a little smaller in size, but it's and nice shallow water with good contract terms, it's already got a well on it and thats discovered by the oil.
And so geologically the risk on this is fairly low the.
The real issue is how big is it going to be.
The 50 million barrel feelers of 300 million barrel field of somewhere in between those two.
The good news is you don't need the very big field here to be economic because it's in shallow water and again. It has good terms and South Africa, South Africa is making good progress to you may have seen the recent headline but they they have the the new petroleum Bill has dropped the parliament. So.
I think that's a positive thing not only for a block to be but also for our 11th and <unk>.
Leopard the real product.
And so hopefully that that gains momentum and.
And we start seeing some some value out of our exploration. So people ask me what do we what are we going to do with these portfolio of companies I think the answer is no.
Many of these we don't see ourselves as long term producers. We're in here to make discoveries and then when the time is right, which maybe drilling appraisal wells on the Venus of successful and I'm, probably getting the development of a little well more well defined and the 11% <unk>.
And we would like to monetize those those discoveries.
As I said and the <unk>.
Opening remarks I do think this is a great time and the oil industry and I think we're seeing prices come up. We're also seeing a lot of people trying to rationalize their portfolio. So the majors in particular.
And are looking to sell off a lot of non core properties and a lot of them and in West Africa. We think there is a great market for looking at the producing oil fields were not really looking to expand development. We've got kind of I'd say full of development and the in Kenya.
And we're looking for things that have production and cash flow and the ones that we think we can get it at a reasonable price.
And obviously you know our balance sheet is improving but it's still a bit stretched anything we do to buy new acquisitions, we don't want the stretch our balance sheet anymore. There is a lot of money available to finance these acquisitions, but I think it's all going to be in context of keeping are the positive paths for our balance sheet.
But I do think of as I say and that last point, where there's more sellers than buyers right now and I think we are going to have the chance to pick up some assets at relatively attractive pricing.
The other thing I said and in my remarks, and this is something we are quite a meet me personally quite the committed to is the sustainability part I think and.
Anyone who doesn't get onboard with this is a dinosaur and is not going to be able to compete and our industry, even the big boys who of course.
Of dragged their heels on this are now getting that message loud and clear. So this is something that we want to do and I think it's something we can do.
It's not just you know if you look at ESG as social and governance I think we've been very good on that in fact, we've got the awards from our third largest shareholder IFC on this I think we've always been good on the governance side I think what we're focused on how I saw on the carbon side, we've never produced oil before of last year. So we've never had to actually worried about carbon.
Now I think we're taking the song.
But we're taking the bull by the Hearts and I think you'll see us moving up into the one as I said the top decile, we do have some good opportunities.
And the Kenya, we can there's a lot of renewable power all around the says when there's hydro there's the solar and there was actually thermal side.
I think powering our oil fields with the with the renewable energy I think that's something we'll look at hard and.
And South Africa, we have the chance to replace the sorry.
And coal fired power plants with nice clean gas from our leopard and profile of the discoveries. So I think that's actually a real opportunity as well, but youre going to hear a lot more about this from US as you are hearing a lot more about it from industry and I think our goal is to be one of the leaders of this topic.
So I think if you look at what our what we think the pillars of our value are you know obviously, our core asset as production cash flow right now from prime but.
And perhaps with new ventures of trying to expand that the <unk>.
And cash flow profile, we still see a lot of value and our exploration portfolio.
I think the upcoming wells could add a lot of value to us.
And if they're successful but.
And we see growth from the.
We believe this is of great time to be growing the company and I think Kenny is one big area of growth and new ventures, and another big area of growth.
So I think that's all of the introductory remarks, we wanted to have a you know as I said I think the company is in good shape, we weathered the storm and where and a good position I'm still very much of an oil Bowl I think theres a very good chance that the we're going to see a significant oil oil price increase as demand comes back post COVID-19 and supply continues to be limited by.
Of the lack of expenditures.
So with that I'm happy to turn it over and start to taking any questions from the audience.
Thank you.
Ladies and gentlemen, and we will now begin the question and answer session should you have a question. Please press the star followed by the one on your Touchtone phone you will hear of three Tom perhaps acknowledging your request.
If you are using a speakerphone please lift the handset before pressing any keith.
You may also submit questions using the webcast interface.
First question on the line comes from Peter Nelson at SB, One markets. Please go ahead.
Hello, and good afternoon, and then maybe it's good morning for you guys and congrats of little bit the stroke strong quarter and.
Three questions from the from a personal and is partially.
Plus the related to your and your corporate credit facility.
And the dividend restrictions and that's facility and how should we think around the dividend from Mexico in the.
The long term.
Second question is on the in the.
And the name because I think the pulled surround and then your interest and in the in West Africa, and what's kind of size.
And should we expect you to costly and used youll share as on the.
Payments, making this my of printing new service and Mike and.
The question is around 10, the pulse state to see some developments there, but just for modeling purposes. When should we use her story or should we assume and of course toward the till.
Any thoughts around that the law and I think it's 17.
Difficult to tissue fraud, and and we thought sounds a bit and any force would be useful.
Thank you.
So I.
I guess I'll I'll.
I'll take them in order so the the <unk>.
New facility.
There is restrictions from the.
And it ends that are paid from part of BV the.
The first call is to repay the.
The corporate facility.
And the under ideal World, you will be paying and we'll be paying that corporate facility down relatively quickly using the.
Using dividends from.
From part of BV.
And you are correct and we probably are not in a position where we'll be thinking about dividends to Africa oil shareholders. This year, but we are still very much open to.
The looking at that honestly the bigger driver on that is going to be refinancing.
And the bigger that the <unk> debt.
The power of BV, if the license ours are renewed and were able to extend that debt out or if we find a suitable trade financing or even we're not discounting the bond market right now I think the bonds for us will still be a little too expensive, but as things improve we may look at bonds. So we.
We hear loud and clear from our shareholders they'd love to see the ability to pay dividends and we still have a little bit more work on our balance sheet to be able to do too.
And are positioned to do that.
I think on the on the on the second question.
Looking at West Africa, I think the size, we don't want to do any small deals I think the.
Three to five to 7000 barrel a day deals they don't really move the needle and they're the kind of just as much work as is doing a bigger deal. So I think we're looking at something that's going to be a material increase to our production, let's say, 50% of our current production of our more as kind of the guidance. There are a lot of bigger deals out there.
But the probably multibillion dollar deals, which are too big for us and there are a few partners out there that we could potentially talk to but I would say if youre looking what kind of size, we're dealing with I would say, we're looking at a bit of a minimum of about 10000 barrels a day net to us and the maximum of about 30000 barrels a day net to us.
So I think I think we have to be.
Yes.
As Clint Clint Eastwood says the man's got some of those limitations I think that's about the size we cannot.
And we can bite off right now.
Kenya I think the of the answer to that is it's essentially street and its first of all of the three years from when we pull the trigger.
So.
Right now the goal of this year is get get the position get the project and positions, where it's got all of the boxes ticked and we'll be able to attract the partner I think that's going to be the major goal. This year and we're working on the field development plan part of our license extension is to have of field development plan and ready to serve.
Net by the end of this year.
And then the question goes and what is the what is the next step between the field development plan and I.
And I think the state of goal of our operator is by the end of next year.
So if you do the math there then and you can you can you can say the first oil is three years from the end of 2022.
And now we'd love to accelerate that and I think part of that is getting a partner in.
Once we have a partner in the.
And we can we can start trying to work on getting a day earlier than that and I think everyone in the group and and the Kenyan government would like to see.
Earlier than that and I think that's that's that's that's where we are now.
That answer your question Theodore.
Okay.
Yes, absolutely. Thank you because I didn't just the one minor thing on the of course, it's hard to be too precise and that's all of that somebody from the financing on the potential of that and then the M.
Yeah, and it flips around that.
Yeah.
I didn't answer your question about using our pay for the finance things right now as most people think that we think of our paper is very undervalued and so I think we will we will have difficulty going out and raising equity with our undervalued paper a lot of what we're looking at doing is essentially using other sources of financing debt and trade.
Financing to do the majority of and cash on hand to do the to do some of these transactions but.
And we never say never but we will certainly be.
Happier using our paper is currency when our share price better reflects the of the value of the company.
Makes sense makes sense. Thank you very much.
The next question comes from James Hosie at Barclays. Please go ahead.
Hi, there thank you for Atlas.
Yes, So you mentioned or at least stay the Nigerian petroleum industry, Bill and the impacts from royalty rates for prime and and I also mentioned the momentum.
<unk> <unk> seven and the operators started paying royalties and can you provide any details of the royalty rates being charged and Hawaii is being paid before the PID is finalized and then also of what the position is for royalties from the Hormel once the 30 partnership.
Yeah.
Yeah, that's the.
And you've kind of hit probably the most important question for Africa oil right. Now is how is the whole PIV going to come down and how is it going to affect us and one of the biggest things and there is the royalties.
We have two two majors as operators of Chevron and total Chevron has taken what we think is a fairly cautious approach and.
Started paying royalties.
On the PSA portion of the of.
The Nigeria and license growth.
<unk> has taken the opposite view and said that they're not willing to pay any royalties until such time as.
It's encapsulated and law and the regulations are clear I don't think anybody and Nigeria.
The expecting to pay no royalties.
When the when the deepwater of royalty Bill passed in November of 'twenty of 19.
It's fairly clear that the.
At some point PSA is are going to be subject of royalty and theres.
And Theres, a very large effort right now by the industry to try to mitigate those royalties, especially on new oil fields, which are of Gina would of course qualify us.
And the government is in active dialogue on those we don't know how that's going to come out.
I think the and NBC certainly has made noise about saying that they want to encourage investment foreign direct investment, particularly in the oil industry is very important to Nigeria, and we're hopeful that there'll be something that comes out of it.
It's sort of.
Between the two and members of that.
So.
You'll see we're keeping a lot of money and the bank, we got $330 million of the bank right now and in the public BV.
And we've got two more targets that we sold them and April So we'll have $450 million of the bank at the end of the base. So.
I think we're just being prudent and seeing how that all shakes out.
Hoping of pretty good chunk of that gets paid out of the dividend.
The kind of what we would call of the most likely case comes out of the PIV, which is not just royalties, but it's also of corporate tax there's also and investment tax credits and Bob.
There's a number of things around that.
Gas sales agreements, we are owed money for for our gas that we've been producing as per the last couple of years. So I think we're being a little of prudent right now until we see how that all shakes out and I think we all.
We don't we don't want the B V.
And to come back and have the shareholders for cash later on.
But I think we're pretty confident that under any scenario of the PIV.
We have enough money to pay all of our debt and.
And to have some significant dividends.
Okay, and then I guess related to all of that is can you give any update on the license extensions for both blocks and Nigeria and just what we own.
The happen for you to get those extensions this year.
Well as part of the PIV and again, it's all it's all under negotiation, but as part of the P. I b.
The.
The government is suggesting that.
Once the new terms are employed.
The encapsulates license renewals for all of the licenses to basically adopt those new terms.
So if that happens that's actually the best outcome for us because.
The.
We are not dead late and I mean, if you look at the when you look at our debt ratios. We are one of the.
And the industry, we paid out 50 per cent of our debt and the last 18 months, which I think is of great.
Accomplishment.
Our problem is that.
Because of our B L as our major debt.
They can't extend the RVO and passed the extension of the licenses of Nigeria.
The license extension, Nigeria is by law.
We have the right to extend as long as we paid our bills and we are in conformance with the work program, which we are on all of our licenses.
There's never been and license that Hasnt been extended and Nigeria.
Nigeria for those that have been and compliance so.
Once we have that then we can go back to the <unk> banks and they will do a full redetermination on the amortization and you'll see that our debt will be spread out where we're not actually looking to take more debt on these assets at this point, we're just looking to extend the tenure of that debt. So right now we really have about a two and a half year tenure on that debt.
If we can't do that it's not the end of the world will end up with debt free.
The assets and 2024.
And that are still have a very good production, but.
As I said, we think this is of great time to grow the company and we also appreciate that the shareholders like some of that money back as dividends and if we're able to do that then I think that really unlocks.
The ability for part of BV and starts paying out significantly more dividends and allow us to grow and even consider giving.
Giving a dividend to our shareholders.
Okay and just one.
And more questions from me.
And you're talking about.
Acquiring assets and also screening deals for ESG considerations does that mean, you want to focus on assets that have been already low carbon intensity or is it you are looking for opportunities for Africa oil can contribute to reducing emissions and assets.
Yeah, and I think it's a combination of those two I mean, I think what what the when we screen deals we screen them from an ESG perspective, and carbon footprint as one of the biggest ones. So obviously, we'd love to have lower carbon footprint.
Existing deals, but if they are higher than we would like.
And one of the screening tools. We do is what can we do to change that and I think I think maybe.
And maybe in the past it would be hard to convince operators to go along with some of these programs to really reduce carbon but I think now you're even those the shall we say the you know the.
The bps and the totals and.
And those guys of already jumped onboard that bus and I think some of the bigger companies that hadn't been are now starting to realize they have to so I think.
We don't necessarily set of carbons threshold of what we would consider and while we wouldn't but we look at the carbon threshold and how and how we can improve it and how you know what would it take potentially to offset it and.
And how it would affect our ability to finance the banks are now giving incentives for companies to work on the carbon footprint by the and energy just refinance their debt and they had a very significant reduction in the in the.
And the and the interest rate if they hit their kpis on ESG and carbon reduction and so I think thats the trend and the industry and so I think every deal. We look at we will screen carefully from a carbon standpoint as well.
Okay very good thank you.
Yeah.
Thank you and the next question comes from Nick stuff at the Renaissance Capital. Please go ahead.
Like I said and good afternoon, and thank you for taking my questions and it's mixed of them from rent up and.
Of course, three questions to ask a from me and Keith and I and there's no doubt about the saw adding the two world class assets bought them.
And couple of them off quite mature so if we assume about them the say licenses to get extended the from maybe a couple of more decades and.
And I was just wondering and what kind of like op side and do you see that I mean, clearly we have probably bought the you know I was wondering what else might be of adding the oil men want to seven.
And then you ought to a minimum of 30 and day.
Most of the causes of that day, 60% will be our kitchens to blink, which does well.
So you know I mean, the and any thoughts from that there'll be quite helpful.
Helpful and secondly, the suddenly say east full Pascal and what the what is currently and prime Sim hitting the stride. The John I think you know the Sim and he says.
Slopes and.
Extremely helpful last of year, but the article.
Give the benefit of the of the oil price. So how do you hitch and going forward.
And then finally and at least one is the Keith and you made mention of play potentially monetizing the same exploration them of puts.
<unk>.
You made one of your associates and maintain the in the past couple of years and now mean full force.
Some of them you have quite a lot of steak. So it will create the masimo overhang from the market like can you. Maybe you know took the beat the of how you plan on bringing these you know some of the options you might do like to explore the thank you.
Alright.
So.
Kind of.
Yeah.
Going going to the.
The first question first of I think the Oh, sorry, yeah.
Completely lost my train of thought what was the first question again.
Yeah sure it's about them and.
The upside from the from the obviously it's a.
Yeah.
And much of that stuff.
Sort of written it down and I'm getting to that age. So the upside really on Nigeria is the fact that we own all three of those up Dsos and you touched on it with pre away you know the.
The way, we the way, we kind of keep those fields going.
And keep the value driving the gene is a pretty new oilfield and.
And it Hasnt even started on the client. So it's got a fairly long lives Act Po is one that's probably further along the decline than the other two and balmy up until recently had been very flat, but really what I see as the value drivers for from Nigeria.
Trying to put those satellite fields and pre away as the first one and that one is we're kind of ready to go there's a number of other satellite fields around all three of the <unk> that could be considered and theres even fields outside of those ol's nearby fields that have been discovered and don't really have a way to monetize so I think if you will.
See when you when you were talking about the the longevity of these assets to me that is the biggest single driver if we could take those assets and the.
You are able to.
Put other oil fields in there and you know we own completely those three 200000 barrel a day capacity dsos and the more fields, we can put in the <unk>.
Or we can keep those the that's a great drop value drivers because there's quite a bit of fixed cost associated with that and again once you. Once you keep those for the.
Operating cost per barrel go down dramatically.
And so maybe I'll take the third question and then all of them back.
Two Pascal as far as monetizing the portfolio of companies I.
And I think Youre exactly right and we don't really see the biggest the easiest way to do that as the sell our share position.
And what we really do is and what we really think is probably more reasonable of selling the.
The whole asset.
Gary it's been quite a clear.
Clear on this.
The 11% 12 B is that at some point.
And we see being able to monetize this asset and sell to a bigger company that has the kind of financial wherewithal, the technical wherewithal to see it through the development. So I think the real the real question all of that is when is the right time.
Right now I think total is putting the development plans together, there and discussions with the South Africa and government and.
The time to start marketing that is probably after those those discussions have come to conclusions and we haven't really good idea of what the project is.
I think on Venus, which is our next big well to be drilled.
If we if we make the discovery.
Back to kind of the core model.
We probably still need the drill a couple of appraisal wells on that sheet. Some three D. Seismic before we really could see pull value on that so anythings for sale at any time of the prices right and I think the the idea is we probably need to do a bit more work before we understand that well enough to get the value. So I see that more is not of selling our <unk>.
And and impact us impact, possibly selling the the whole venous stake if it's successful.
I think thats the same of Gabon, I think at the same and Echo Atlantic.
Seeing it through the.
The drill discoveries and once we have the discovery.
The ability to market that the dips.
It depends on how far we want to go down the chain to us that the.
The reach that value so.
And I'll hand over to Pascal and he can go through the hedging.
Yes.
The hedging policy at Prime day.
Fixed basically so we decided to hold it out on the on the basically on the Monsky basis. So there is a certain.
Certain percentage of kind of goes out and have to be edge and the next 12 months and.
It used to be around 70%, which we increased that to above 80% and the for the next 12 months at the moment we are.
We are at around the 80% and.
And at the moment 80, 595 per cent of the 2021 cargoes at our age I'd and AST.
For the 50 <unk> don't have the download Brent.
So the.
I mean, just how did you get prime level.
We don't want to we don't want to be speculative I mean, yeah. The reason why we got $200 million dividends last year, because we had this dividend policy in place.
The.
The whole purpose of net pretty she east to secure the repayment of Prime day and secure the distribution of ticket and so we can't really speculate on the evolution of the oil price even at this moment and to be honest. We are not sure. If you know out of the crisis yet.
So the share.
All of those are all keen to continue to clean and payment that so that dividend is that.
Edging pretty cheap.
That being said we have set.
Much more restrictive criteria of answers that dividend pretty cheap and in particular and now we are looking to edge only.
The price we can secure ease of book 65, Don off the balance for the next cargoes. So that's the.
These criteria that we tried to put in place.
And for the hedging policy going forward.
So I hope the answer your question.
Is it a particular reason, though you and you choose to do swaps as opposed to you know and Kolar So all of that.
Although we.
We are not doing swaps, which we are doing is full of walks and so we are selling the count goes forward.
So we are basically selling the cargos.
612, 18 months and ahead of the lifting dates.
So one of them.
And when you practice, we are securing of a fixed price.
At the center and date before the the leasing data.
Okay, and we are doing and I think.
We did one swap.
In February of this.
Of this year, but.
That's not the general thing that we want to do generally its forward sales.
And I and I think from from a hedging standpoint, obviously, we're quite optimistic on oil price and the.
The the instinct is not to hedge.
Any more than we absolutely have to but we also have the banks to considering all of the banks are also become a lot more.
Calm and pacified when Theres, a strong hedging place the position in place the.
Their oil price forecast the significantly below where we are hedged. So if we are trying to convince our banks to two two.
And keep a reasonable amortization schedule.
Quite helpful to have hedges above the banking case going forward.
So it is a we made the prime made $430 million on hedges last year, we're giving some of that back a little bit of that back this year.
But I think as Pascal said, we don't see ourselves as the oil speculators and.
No.
And I watched the Indian variance and the the.
The South African variants of COVID-19 I'm not sure we're out of that yet. So I think we still have to be a little bit prudent until we were very confident and the recovery has taken place and what we don't want to do is given the position, where we put our balance sheet at risk, which I think I think we're probably being overly conservative now, but I think it's not.
The place to be and at this point.
No understood and just you know and.
A full up and.
<unk>.
From them, the Threep oilfields and you know how hot the them.
And this 100% oil oil do we all the reserves replacement for this year.
And like could you maybe talk 40, each over the feels like which one of you know keep bad today, and I was particularly interested about of Gina.
But the because you know the the will sort of north of well known actually producing.
And the capacity because of the over the and we'll pick of the curtailments and.
And what do you think.
He is going on there. So you could just speaking with them all of the performance.
That's interesting because each field is a little different but yeah.
Expo and when we put out of reservoir models together. They should've started seeing some of these key wells should have started seeing water about six to eight months ago and they have the field.
And to keep chugging, along and the they've kept production high and the.
And the field just keeps over producing but that's kind of been at <unk>. Since day. One it's always produce more than has been expected like balmy was the same way of all me.
The state on plateau for about 11 years and that.
The beautiful field and that they started hitting a bit of water about 18 months ago. So the it started down the decline.
Balmy actually has more of a mechanical issues than it does reservoir of shifts at this point. So that we are fixing some of the of the compression issues and the surface issues that.
It's still a well performing field.
And the start of the bunch of the Gina Gina has just come online a year and a half ago and now.
It's been producing well above expectations.
And constrained by OPEC quota, so it's a little bit hard to tell if we'd have been pulling that the at the full 200000 barrels a day like we plan from day one.
You may have started seeing some decline, but because it's been basically pulled very softly and not up the capacity.
It's still it's still performing quite well.
The Gina accounts for about 75% of our revenue.
And the overall, we have twice as much interest and the backbone of Gina than we do and.
Bobby So the genius of Gina is really our focus field and but the good news is that one seems to be the one that's performing best.
Okay. Thank you.
Thank you there are no further questions on the line and you May proceed.
And thank you all price of debt lots and lots of questions submitted through the webcast and unfortunately, we only have a few minutes left.
And that's just tech who couple of things and there's one for Pascal and.
And the new term loan facility can you just provide a bit more color on the covenants.
The facility.
Yes of course.
The.
The few covenants.
I think the.
The main financial Covenant is the net.
Net debt to EBITDAX ratio of.
The three times, which is oh.
Given the current indebtedness zone, I think not to retroactive.
And he has another covenant and more technical covenant, which is related to the the.
Crime, albeit of a facility.
Well basically we have to ensure that the prime all of the and put us all of that he's.
He's not going to bleach.
I'm sorry.
Sorry, you mean and minimum FRC all covenants. So she lives covered ratio of covenant of one one which is not which is again not to the restaurant.
And the another and all of the covenants, we have ease of use of group liquidity that they still don't know.
Six months of fee basis and.
And each time, we are we make an acquisition and larger than $50 million. So and this one again.
Is the 12 months forward looking test.
Well, we have basically to demonstrate that we have enough sources to cover the the repayment of the existing refinancing and the all the cost cuts the Africa all level. So these are the the three main covenants I would say and and the rest of us He's very standard of Tau and cooperates facility.
Yeah.
And very good and now that you mentioned the net debt EBITDA metric does the there's sort of the related question and from one of the investors, saying that's the ratio of seems very strong and potentially on the sub one and.
Right now potentially in the near future does the company have of particular gearing target ratio.
And how does that fit in with the decision making on capital allocation can you answer that Pascal.
Yeah sure I'll show, no and know exactly I think the on net debt to EBITDA and he's a he's very low at the moment and clearly we don't want to increase day I think you did.
And I'll get to in the next 12 months east to.
The net cash proceeds of basically.
So that's the one that's all main targets.
And Oh of just Lydia the cash.
Cash that we will generate that kind of level.
And I will be used from a thoughtful acquisitions so.
If any opportunity materializing in the in the next 12 months.
And we'll use the cash resources.
To fund.
The equity of thought of these of these new acquisitions. So that's the that's the target.
Okay.
And as we just have a few minutes left just one final question and this is the operational related for Prime and the question is all of the currently and the discussions on further infill drilling and bought me and or actually if the NAS is this.
Is this driven by Ti beyond sort of since the Capex constraints.
The answer is and Ts and Keith can you give them.
And sort of further color on your outlook for infill drilling.
And this assets.
Yes, I think.
Where are the <unk>, one well being planned at <unk> this year.
Which it has been.
I think.
Balmy, where we're playing the shoot a of 40 seismic which I think it will be critical to drilling more infill wells, but.
I think the balmy stay the plateau for so long, partially because they had a very good infill program. They drill two to four wells every.
12 months to 18 months and I think we'll try to return to that we still think there is a untapped oil and at balmy that needs to be.
It needs to be.
Drilled four I think on the Gina again, its still little early of the reservoir models are behaving nicely there isn't the age the Gina infill program that is.
In the works, but I think until because we've been.
Producing below the <unk>.
Capacity I think we've been able to defer that infill program, but certainly I think sometime in 2022 2023.
You'll see us gearing up again to drill infill wells and the Gina.
Okay very good actually let's let's kind of finish with one more question on the on the.
The kind of a nice to have problem. The question is what is the strategy at the end.
And so the impact that you guys strike oil and I've been a small and what could happen.
And.
What do you think he would you have to say.
Well I mean, I saw one of the questions and so have you looked at Marlin.
Size wise the thing is three times the size of Marlin field for almost four times the size of the Marlin and field. So this could be quite big.
If we hit oil and it's.
It's all about.
Reservoir thickness and quality and whether it's oil and gas and weak.
All of the modeling suggests it's a nice the ban and that should have good sand and all of the.
The geochemical modeling suggests it should be oil and Nat gas. So if that is confirmed and we have multibillion barrel type discovery and I think I hope that of that there'd be a lot of people who would be quite keen to come into that and then that'd be willing to offer of price right away.
Cofound when they found the similar type of massive discovery offshore Tanzania as they needed the drill a two or three more appraisal wells before people really would give them credit for full size because of 600 square kilometers.
It's a little hard to extrapolate.
The six inch bore hole over 600 square kilometers. So I think to get full value out of it we may need to drill a couple of appraisal wells and also some very interesting and drill the prospects in that same block.
But that I haven't even been covered by three D. Yet. So I think the answer is as I said before it anythings for sale at any price.
At the right price, but I think to get the right price, we may have to hang in there and do a little bit more work before we are and we get the value we think of it deserves.
There is another question and very good what the.
We did sell it and get a big chunk of money either from the 11 12 B R from.
From Venus up and successful what would you do with that money and the answer is very simple, we would dividend that out to shareholders. Once it once it arrived at ally.
Okay.
And many many more questions unless we just amounts of runoffs of time and lot of them.
These questions are from very important shareholder base in Sweden and of course, we have another opportunity to present to those guys next week, So and of course I'll do my best to answer some of these in the meantime, boots and collaboration with the management team, so and that notes and that sounds.
Back to the operator, and so to conclude this conference call.
Thank you ladies and gentlemen, this does conclude your conference call for today, we do thank you for participating and at this time, we do ask that you. Please disconnect your lines and join the rest of your day.