Q2 2021 Africa Oil Corp Earnings Call
Ladies and gentlemen, you'll currently on hold for today's conference call at this time, yet assembling today's audience and plan to be underway shortly.
For your patience and please remain on the line.
[music].
Hello, everyone. My name is Nathan and I will be your conference operator today.
At this time I would like to welcome everyone to the Africa oil second quarter 2021 results call and webcast.
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After the Speakers' remarks, there will be a question and answer session.
If you would like to ask a question. During this time simply press Star then the number one on your telephone keypad.
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The recording will be available for playback on the company's website.
I would now like to pass the meeting to Mr. Shaheen Amini of FICO oils Investor Relations I'm commercial manager. Please go ahead Mr. <unk>.
Thank you Anita on behalf of managements are thank you for joining us today for second quarter 'twenty to 'twenty 2021 results cool and we appreciate your interest and support.
Due to exceptional unforeseen circumstances, our chief Financial Officer, Mr. Pascal Nicola is unfortunately unavailable to join us. So on the Covid, we have president and Chief Executive Officer, Mr. Chief Hill.
Keith and I will take you through the highlights of our second quarter at.
Our results and then Keith will cover Africa oil investment case on the outlook before we start the Q&A session I.
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.
Question discussed is made as of today's date on time in Africa oil assumes no obligation to update or revise this information to reflect maybe events or circumstances, except as required by law.
Companies complete financial statements and related MD&A are available on the company's website and on SEDAR.
Keith we are ready for you. Please go ahead.
Alright, Thanks Rahim.
I appreciate everyone calling in today.
What we're planning to do today is kind of go through first the quarterly results and then we're going to talk about kind of the updated corporate presentation. So the corporate presentation has now been put on our website and we will be walking through the slides as we go I think.
Overall news in the second quarter.
Really good.
There's been quite a bit of positives coming out of Nigeria in particular.
We've really gone from strength to strength.
King.
Our investment really coming to fruition.
Thank you.
The refinancing and the deleveraging of the company has been something we've been working on for the last 18 months and I think that will go into a bit of detail about how we've done that but we.
Refinance the corporate loan and we paid down a significant amount of debt. We also then getting a fairly regular.
Dividend from Prime.
We had a.
Two pronged to dividends.
One in the last quarter and one of them just in this quarter. So youll see that the total dividends received $75 million.
Of course, when you look at what we've got from the <unk> since we did the acquisition of $275 million since we did.
The acquisition it was roughly 53% of our closing cash payment.
That's been quite good.
I think the fact that we've got deleveraging of 61% corporate debt, 39% of Prime that is also quite an accomplishment. During these low oil prices and the Covid times.
That was due to a very strong hedging program last year that we were able to put so much money to that.
I also want to point about cash and cash is obviously cash king in this in this market.
Still have $293 million net to ALC in the bank accounts at Prime.
We have eight more cargo was we're going to be selling this year for about $500 million gross or about $250 million net so we're really pushing out over $500 million of cash.
In the bank.
<unk> by the end of the year and I think thats really the headline number.
We're going to talk a little bit off Piv's. Many of you probably saw yesterday. The PIV had been finally signed after almost two decades of negotiation.
Got.
That work, so I think thats a great accomplishment.
What we're seeing so far is quite positive in the PIV I think the.
The call from the.
The investment community.
Friendly legislation in there to try to encourage investments has been heard by the <unk>.
Julian minorities, and we'll walk through and talk a little bit about what we think.
Outcomes of that is but I would say generally it's quite it looks quite positive for us.
So moving on to the operational highlights I think.
Obviously, the first thing everybody looks at is our guidance on our production.
The assets have been performing quite well.
The top of the range or probably slightly over the range of both are working into production and our entitlement production.
You see that carrying on strong I think we will get one more quarter, but I think youll see us potentially revising upward our guidance at the end of next quarter. If we continue this.
<unk> and one of the reasons, we're performing above expectations, just because the OPEC quota.
Imaging that have now been removed or basically.
The quarters that are now given to us.
Essentially allowed us to produce that field.
So I think that's quite a positive as well.
Moving to the next slide.
The other operational highlights.
We've had 2 million barrels of listings.
ALC.
The average sale price of $58 a barrel.
Many have commented that slightly below what the actual price was we did give back a little bit of our hedging gains from last year, but I think youll see when we talk about our hedging program, we still have quite a bit of upside exposure to oil price I think given our debt situation, we have to be a little bit conservative on our hedging and I think we'll be talking about what our.
Plan is going forward.
Production costs again quite low kind of industry leading.
We're down to $6 a barrel oil equivalent.
I think this is a this is a.
Continued trend I think we're going to see even potentially further improvement of that in the short term.
As we continue to refine these assets.
The nice thing is that we're not spending much capex. So during the quarter, we only spent $3 million in capex. So these really are in harvest mode.
We're not having to put a lot of money into these assets I think the only significant investment we're going to be making in the near term is just the <unk> development, which I think about the PIV past Youll see us gaming accelerating interest in <unk>.
On the hedging again I mentioned this briefly but.
We have hedged the entire remainder of our cargoes for the rest of this year, we got $58 a barrel again slightly below the current market, but I think that gives us.
A lot of credibility with our banks were going in for that.
Debt.
Redetermination.
At the end of this month early next month I think.
The banks are quite happy that we've locked in all of that.
$500 million of additional cash flow coming in this year. So I think I think that's a necessary evil.
I think next year, we've only 21% of our cargoes.
At a significantly higher price almost.
After todays price of $67 a barrel.
We are looking at doing some hedging the rest of next year I think it's still very prudent to keep our hedging policy up but we are looking at ways to protect the upside I'm still one of the big oil bowls I think.
We're looking at 70 to $80.90 oil is almost.
Impossible to stop the demand growth.
Cover from Covid.
Supply constraints.
The way I think.
We will be looking at our hedging program trying to make sure that we have hedging that protects our downside. It makes our banks happy but also gives us access to that upside as well there are many instruments, we can use to do that.
So turning now to the financial highlights I'll turn it back to shine, even let them kind of walk through some of the financial highlights.
Well, Keith I'm actually delighted to say all of them.
Pascal against all odds has managed to join us.
It may be Bruce loved it but he is here with US Pascal are you online.
Additionally, our Wi Fi in Poland.
Finally on yes, so I will I will present the slides.
So yes.
The main highlight for this quarter and semester is that we have posted solid first half.
Net income of $77 million.
Which compares to <unk>.
Also $418 million for the first half last year.
We are also very pleased with the dividends we have received.
In the first half we received $37 million on behalf.
In June.
Sure.
Out of this dividend, we repaid $18 million.
Louise BTG and therefore at the end of the second quarter that was down $223 million and post period end, we've received another 37 and half mediums on our dividend.
And we have also completed.
The refinancing oval acquisition on BTG.
And therefore, we've ended.
July was $42 million.
Cash balance and debt caused debt of $98 million.
After the refinancing of the BTG BTG.
So just a few metrics I would like to quote in relation to prime net to our 50% shareholding.
Prime is posted for the first half and this is going to show you the I mean the.
Very strong cash generation capacity of law.
Prime 50%.
So in the first half prime is posted.
EBITDA of almost $300 million net to our 50% shareholding in cash flow from operation was $338 million. They've also ended the period with almost $300 million cash balance net to our 50% shareholding and that's $557 million I'd like to mention mentioned something here.
Is that are these figures include.
Deposit.
That prime has received in relation to any form of home equity now.
She is a 300.
$5 million of course that they are received from <unk> in relation to a security.
Agreement that <unk> signed.
With <unk>, which basically.
Tools.
Got it.
The determination of the <unk> field.
The private party perspective. So that's that's these figures include the $305 million.
Prime is received.
In June 2021.
It could move onto the next slide here we go.
So that one one highlight that I that I mentioned is not.
Refinance.
Our corporate facility, we added we as we add with BTG with another.
Yeah.
Yes.
Which is now due to mature in May 2024.
That's a significant.
Lower cost of capital than we had with BTG the new facility.
Carries interest for the first half.
For the first year of LIBOR, plus 605% maturity as I said has been extended to May 2024, and it is being provided by a syndicate of five banks.
Which which we're keen to support since you pulled all the Brooklyn going forward. So that's also a very good news on the from a financing perspective that we also reported by these five banks going forwards and as a.
As of end of July so the facility was increased to $160 million only Nike H millions on our school and so we have an availability of $62 million.
For general corporate purposes until May.
May next year. So again these are significant fee income increased.
Liquidity position of the company.
So adding back to Keith now on the cash goes disappeared.
Do you want to take that site.
Okay. Thanks Pascal.
You made us and it's only a lifestyle problem, we're getting concerns.
No.
So yes, obviously the cash flow side is the one that I think most people get impressed about because.
For those of you who have been in this little adventure of Africa oil for a while.
We bit off a fairly large portion of the.
When we bought all of <unk> and I think.
The two partners that pulled out at the last minute.
At some point, we thought maybe we'd bitten off more than we can chew.
I think youll see the same really has performed as we expected and it really has become a real cash cow for us. So I think if you are.
Let's go back to that.
Previous five there.
Yeah.
Sorry shame.
Yes, So I think if you look at the amount of cash that is going to be generated.
At reasonable oil prices, we're kind of using $65 or those that are most likely case you can see that.
A huge amount of.
Amount of cash just in the next four years.
Turning to our market cap, so I think that's something that we.
We're becoming quite quite happy with the amount of cash coming out of this and we still have quite a bit of leverage to upside the oil price.
Sure.
Our free cash flow is going to be less than four years to basically pay our market cap. So.
Mentioned that cash balance $293 million sitting in the bank met to US we have been keeping this cash balance high because we kind of wanted to see how things unfolded.
PIV and with others.
Our debt amortization, but I think we will be we'll be looking at trying to keep this cash balance.
Lower and dividend in that out to partners.
This thing continues to be Derisked.
So.
Obviously people can say what are you going to do with this cash I mean, the important thing is.
But.
I think we're at the point now where we have a number of alternatives.
You see we still want to pay down some of our debt, even though that we've got in their corporate facility, we'd like to see that pay down a bit more even though it's lower interest rates longer term.
We still have a little work to do on the debt, but I think we now have a quite a bit of free cash and I think one of the questions.
We keep being asked is are you going to use it to buy things or are you going to give it back to shareholders.
I think from my perspective, I think the easy answer is we can do both we have enough cash here.
I think it's very likely that by the end of the year, We will institute some type of shareholder return.
Packaged whether it would be dividends or whether it be share buyback. So I think we're still having that debate.
But maybe both.
But it still leaves us enough that we can grow the company.
Start looking at some strategic assets.
So I think we're in quite a quite a strong position on this.
If you move to the next slide <unk>.
Think the Nigeria assets really are in harvest mode. Now I think it's been quite an accomplishment, especially over the Covid times to take our net debt down from 1.1 dollars 65 billion.
<unk> thousand $680 million in 18 months, so I think that.
As a testament to these assets and how strong the cash flow.
So again now we're using the.
The money to pay down dividends and I think the other thing is that we don't have a lot of capex coming up.
Full year Capex guidance for 2021, its 30 to 50, 35% to $50 million.
Next year, we will start probably spending some money on pre away, but it's still very low capex very much in harvest mode. At this point.
So I'm excited to talk about the PIV obviously.
Stability offered them and I think people are nervous about the PIV for 20 years, but I think what the.
The legislation is passed and now been signed by President Laurie actually seem to be very well balanced so aside.
Yesterday.
And I think there's some good news for us and I think the overall thing is it is good news. So the petroleum profit tax which was a 50% rate has been eliminated.
Corporate income tax rate of 30%.
Initiated so we do see significant tax savings.
We're also.
Very clear that there is a royalty holiday for new projects of which Gino will qualify and our new field.
Will qualify.
The exact nature of that is still being debated.
Clear in what we've seen so far in the bill that I think it's very very clear there will be a holiday and that actually has a big impact for us not only on existing production but.
Is it really giving us the incentive to accelerate that as well.
The investment tax credits, there's a very large investment tax credits still working on that.
Gina Newbuild those cater for the allowance of the investment tax credit.
The other thing is almost more important for US is the license extension so now.
When and if we convert to the PIV on both of our licenses we will get an early license extension of 2020 year license extension.
For us that's important because right now our RVO is amortizing fairly quickly.
When that extension is obtained.
We can get that back with the banks.
We extend that out probably a minimum of seven years.
Perhaps even with some repayment holidays for the first for a second.
I think the overall is quite good is that we expect.
All of our economics for offshore projects.
Moving onto the next slide I think.
We've talked about this before.
It's just these good fields that do it themselves.
<unk> reserves are still 86 million barrels, we had 117% reserve replacement this year.
Entitlement production coming along nicely 30000 barrels a day lifting costs LOE free.
Cash flow breakeven.
Number is less than $35 a barrel.
A new one they were down in the bottom corner and we're going to talk a bit about that.
These these are fairly low.
Carbon signatures, so I'm going to spend a little bit of time about our new aspirations on the on the carbon front.
We're starting in a good place it's only 12.3.
Kilograms per ton.
Versus an industry average of about 20. So these are fairly well performing assets and I think we even think they can get better with a little bit more improvement.
Now moving on to the next slide.
Again. This is the production profile you can see a fairly steep decline at some of the existing deals, but we have a lot of stuff to put in there we have three big DSO.
Have OLED capacity.
One of the main goals here is to infill drill to add satellite fields, which we've already.
Discovered undeveloped.
Phil and basically had to keep those off dsos as full as possible.
Okay.
Next slide again, we talked a bit about this but.
Certainly some of the comments I made in the press release from the surrounding our.
Our second quarter results have hit a nerve and I would say I have got.
Almost.
But the idea that we started giving money back to shareholders. I think we're getting very good momentum on <unk>. So I think unless something untoward happens by the end of the year I think we will be instituting some type of shareholder return.
Program, obviously, we have approvals.
Do all the necessary approvals to do this.
We'd love to get our existing corporate debt down before we do this but again with the amount of cash being generated not only do I think we can institute that but I actually think we can go out and still have opportunity to do some new acquisitions, but I do believe this is a great acquisition market West Africa.
<unk> has a number of.
A number of things that.
Are quite appealing the majors are all divesting their assets there just aren't that many buyers. So I think the thing.
The idea that.
We can do both of these things return money to shareholders and still get attractive acquisitions and grow I'm feeling quite confident about.
So if you look at our overall company the slide there.
Everybody everybody says they trade at a discount to NAV, but I think we trade at a fairly obscene discounting that so if you look at just Nigeria and you put the oil prices, we talked about before we are trading at a huge discount to our current math.
You take it take the <unk>.
Take that.
The value of Nigeria.
Even at fairly low oil prices 55, you subtract our debt we're still at a very significant discount to our NAV and that's not counting kind of the rest of the company I think I think the idea here is you kind of get the rest of the company for free So we've got.
Or the investment in our portfolio of companies that has kind of a hard value in other words, what the trade shares are trading for now.
But then above and beyond that we've got not only the exploration value of the wells about to be drilled.
Which are fully funded but also Kenya and don't forget about Kenya, Kenya, We've made great strides I think tullow will be talking about Kenya in more detail but has.
<unk> has the potential to add a significant amount of value to us.
I'll spend a little bit of time talking about that but I think tullow is planning to update the market in there and their capital market days in September and I would say, we're getting a lot more excited about Kenya that seem to be getting a lot more momentum I will be traveling down there next week to have meetings with the government and I think.
We are actively out looking for partners.
So on some interest there so I think.
Can you still are still a very.
Near and Dear to my heart.
And the good news is we're not spending very much money to keep that option moving forward.
But I think.
It really shows that youre kind of getting all of that for free.
If we didn't have any of that you'd still want to buy the stock or just our Nigerian assets, but you basically get all of that the rest of that for free.
So moving on to Kenya, again, I don't want to spend too much time on this.
I know people have lost.
Faith in Kenya, we've been here, a long time, and we Havent hit our promises on this but I think we have with the new management at Tullow and the redesign of the project.
Whole new project.
Much better economics, I think we're aligned with the government and with our partners. We all agree now on the path forward as far as reserves production and I think youll see that this is a much better project than it is and we have been working we're not sitting around quietly not doing anything we've made significant progress on land.
The Port has now been opened.
And we have a birthday or reserve for US we've got our ESI done we've got the water rights.
All of the things we need to make this project work are now starting to fall into place. So again, let's not give up on Kenya, because it does have a huge amount of value to us. If we can we can make it work.
Also in the next slide.
The exploration, we don't give up on exploration either.
We've made a very good discovery in South Africa.
Energy and I think you'll see that one gaming.
Momentum that's hotels just announced.
Early production system, there and I think I think that's a great place to be finding gas, especially from an ESG standpoint.
Using cleaner natural gas displacing some of the coal fired power plants I think theres a very good all around story, we've got three exploration wells coming up by the end of this year or at least putting by the end of this year.
South Africa to be maybe.
Maybe at the Venus prospects and also don't forget about Guyana Echo Atlantic and our investment there. We've got another well just about to spud by the end of this month.
And the <unk> block in sapote, which looks quite compelling as well. So again, we don't these are all fully funded we don't have to put any more money into this.
But we basically get a free ride on all of these exploration wells and they are huge impact Venus in particular is probably the biggest volume exploration well this year or probably even this decade. So we're quite we're quite encouraged staying on that.
Let me go to the next slide.
I think.
That shows the Venus prospects.
So that shows the Venus prospects and it's huge it's 600 square kilometers four times the size of Marlin field.
So I think that one could be a big impact project.
<unk> bought two B, we've got a very low risk kind of more like Kenya Rift basin. We now have contracted the rig for that rig is on its way should spud in December and I think the.
That prospect also looks like it could have a big impact.
Africa energy.
Share price.
So again I'm committed to exploration I know, it's not the flavor of the month.
Our disciplined we arent, putting a lot of money back in we're not going to be taking money out to do exploration of the expensive returning money to shareholders and I think thats. The message that we don't have to we can sit back and.
Just watch the scale.
So moving on to ESG and I don't mean to put this last because it.
Is becoming one of the biggest priority.
Priorities of our industry.
We have spent a lot of time on this and a lot of effort and I think we now are in a position where we can we can capitalize on a number of things that we've already started and I think we've always been good on the I would call. The SLR G. The society in the social and the governance part of this I think we get awards from IFC are being.
Leader in classroom, Kenya, I think South Africa, Nigeria I think.
Our our operators their world class guys to do the right things, but I think the thing that we've been kind of missing a little bit as the as the E part, which is getting the most focused model of the car Park and I do think now we are in a position where we can go to the market and say that.
We've sorted that out and we are going to become one of the industry leaders on that so if you look at the next slide I think.
The messages that we've looked at our pathway to carbon neutrality by 2025.
Both the management and the board believe it is achievable.
So.
We do start with a fairly low carbon based so we don't have quite as much to offset as some others, but when you look at the past.
What we would need to do to get to carbon neutral by 2025, we don't think it's quite achievable.
I think this is going to be an industry thing.
If youre not part of this solution.
You are going to be part of the problem and you are going to be an investable.
The message is clear for everyone in our industry. So we've set this target for ourselves I think it's quite achievable that we will not be buying credits, we will be doing greenfield exploration greenfield the offset projects by ourselves we've already started to have those.
We see the pathway is something that we feel is quite achievable any new investment. We look at will have to be part of this discussion.
And we will have to have.
Correlate pathway to carbon neutrality for anything we buy as well.
So I do think.
There's a number of components here, we need to keep working to get our emissions down, but we need to get into that offset market and do it in a sustainable way that we can repeat and have control of as opposed to just buying carbon offsets.
The penalties for flaring and for achieving this are going to be greater and greater so I think we're going to we want to get on top of this.
For the year.
So again to sum up our move to the next slide.
Sure we leave enough time for Q&A, but.
The dream, we had about becoming a real full cycle oil company and rather than just the Kenya exploration company I think we are there now.
I think with the acquisition of Nigeria, I think we've got reserves production cash flow and it's fueling the engine I think our exploration appraisal program in some of our exploration portfolio of companies and in Kenya.
Still.
Has the capacity to add a lot of value.
And our development in Kenya, and Nigeria, some of the satellite fields in Nigeria, I think will continue to increase that production.
And of course now we're finally for those of you have been watching US we've added that orange box in the upper left.
Shareholder returns and I think those companies that showed capital discipline and return some of their money to shareholders.
We'll get a better rating in the stock and I think you've seen as we've been discussing that our stock has reacted quite positively and I think when we are able to.
And I'll say definite program, which again I think.
And to the end of the year end of the first quarter is really our targets.
Announced that program I think we'll see continued support.
So anyway I think.
Once again I appreciate everybody, calling in I think the company is in the best shape, it's ever been and I think we do see a great market ahead.
Transitioning will happen, but it's not going to happen for the next 10 to 15 years and I think that's going to be opportunity for companies like ours.
See some some real benefits as we move forward and I do think we still look at growth, but I do think shareholder returns are also important.
Okay.
So with that I'll.
I think we should put up the reader advisors just to make sure everybody's read everything.
Advising what we what we said, but happy to open up for questions.
Thank you Keith and each please can you just remind those joining us on the conference call at the instructions for submitting your questions.
Thank you as a reminder, please.
Wanted to ask a question and to remove yourself from the queue. Please.
Scott.
And so let's give it a minute or so for people to submit their questions. In the meantime, I wanted to go to actually Unfortunately couple of the analysts that cover us.
We're not able to join us, but they have submitted their questions by email. So I've got a couple from James Hosie from Barclays capital.
He's basically his first question is that.
Okay. So youre not considering a show called the return program at the end of 2021, what criteria are you using to determine if this would be appropriate.
And.
There was an indication of a third the acquisition is that also on the agenda.
So Keith Pascal would you mind touching that in the first instance, please.
Well like I said in my remarks, I mean, we are looking at a lot of acquisitions, we've actually made a couple of bids on acquisitions, but I think we won't do that at the expense of our of our balance sheet.
So this is still even though our share price has improved significantly in the last few months I think we still don't like the idea of using our shares as currency.
Think acquisitions with the majors, we do have some headroom on our are our corporate facility right now.
We have a lot more cash coming in.
So I think we'll be able to fund those without issuing new equity in general depending on the size.
And I think we're quite reluctant to issue new equity at this time, so I think when we look at the year end results and we look at the stability.
Now happen, Nigeria with PIV.
I think.
Returning money to shareholders will come to the top of the list. So whether it's the end of this year or the end of the first quarter I think we have to see how things develop in terms of oil price in terms of.
<unk> and paying off our debt, but I think it's very likely that we'll be in a position.
We can institute.
Either a buyback or a dividend.
Policy.
At the end of the at.
At the latest the end of the first quarter and there was a bit of controversy on which one of those things. We're about split down the middle of people, who would rather do buybacks people, who would rather give dividends. So I think thats something we will be looking at over the next quarter or so to try to try to optimize that.
Pascal any comments from you or us.
No no comments come in.
Alright very good.
Also had E mailed questions from <unk> from Renaissance capital.
And his question is not that the petroleum industry Bill has been signed into law also the next steps for prime in relation to license renewals.
So if you've been following so shell is just on their license renewal for all metal 118.
I think I think that's kind of the guideline of the way we would see it going forward. So I think.
We'll be specific things, we talked about what the government in terms of.
<unk> tax credits in terms of the.
The royalty holidays, and there will be a payment to be made for license extension generally the theres a.
Calculation, that's done in Nigeria for license extension, which is somewhere between.
2% to 3%.
The remaining NPV historically.
That's been the number but I think that is in negotiation. So for US I think that's one of the reasons, we're keeping a little bit of cash in the company.
There probably will be a payment to be made associated with license extension.
I think thats.
It's something that we now have precedents on and I think it's something that's got a very high likelihood that we will have the opportunity to extend both <unk> 27, a M O M. L. One third.
The good side of that of course is that once as soon as we get that 20 year extension and then we go to the <unk> banks.
A fair amount of our cash for the next two years or three years has been will be going to amortizing debt that will come off the table and we'll be able to spread that out over a longer period, possibly even get a one or two year debt repayment holiday at the beginning of that so I think that's that's sort.
That's a real positive for us having that excess cash.
Not only allow us to perhaps.
Accelerate shareholder returns, but also.
Give us a.
Financial strength to go out and do some of the acquisitions we've been evaluating.
Very good thank you.
Are there any questions on the conference call.
Mr. <unk> will take the first question John Okay.
Alright the securities.
Please go ahead.
Thank you this is.
Part of the Securities. So just following up on the topic of <unk>.
Potential early license extension.
And what that could mean for for extending the OBL.
Any more details in terms of timing when that might might be and also prior to that happening.
Could you remind us what the.
<unk> amortization.
It looked like for the rest of this year.
<unk>.
Next year 2022. Thanks.
Yeah, I'll take the first one and I'll deflect the second wanted to our Pascal, but her side, we will immediately engaged now with now that the PID.
As an aside.
Our operator, <unk> and Chevron as our operator.
I'll now 127 will immediately engage with this license renewal discussions so timing is a little bit hard to estimate I would guess I think our goal is to have it by the end of the year, but.
There'll be others, having that so kind of think around six months would be a reasonable timeframe.
I do think.
We are starting to see momentum. So the fact that 118 got settled the fact that the <unk> side I think there is a renewed interest in Nigeria to finalize these types of legislation.
Foreign direct investment.
It's very important to Nigeria, the oil business.
Revenue from oil is quite important so we hope that it's going to be sooner than later.
Again, we will.
We'll try to get as soon as we can.
So Pascal, perhaps you could kind of talk about amortization this year and next year.
Sure.
The expected amortization.
They are.
Two of your domination.
One in March and one in September each year for this facility. So the last Redetermination was in March.
We repaid $136 million.
Of the of the Albion Prime is repaid $166 million.
In June and we expect according to the existing and growing base amortization schedule.
Another 280 million got off to be repaid.
Before the end of December.
And then we will be we will be left basically.
A bit more than 800 million alcohol is of the prime.
By January next year. So then the amortization, we should we should amortize balance if another full Andrew meander around next year.
Unless the amortization is lower in the September only determination that anytime munition, India in 2022.
I think one important thing about this <unk>.
We are trying to raise.
Prime is trying to raise.
Pre exposed financing.
Both this I'll be out to basically repay the amortization and Keith.
The total debts are not the same so that would be indicative push back the amortization of the <unk> and at the moment.
Do you expect your the amount of this.
<unk> is $150 million.
We would target to increase that PX, both financing to 300 by the end of this year so in.
In all instances, we are we are trying to push back this amortization on the ambient as much as we as we can and of course, if we get license extension.
We would.
All of this amortization be beyond the <unk> date.
Okay. That's great. Thank you.
Thank you there are no further questions at this time.
Right.
So actually just noticed we've got so many questions on the webcast I just feel without going through all of them.
So, let's let's just trying to make.
Well, let's start.
<unk> on Kenya, and the question as well.
Are you looking alongside <unk> are you looking for new partners and how much of your ownership would you consider farming outs.
So yes, I think we are jointly with Tullow and hotel looking for a partner to come in and be a primary funding partner I.
I think the idea is that we'd be willing as a group to give up 50% interest in <unk>.
Essentially operators shift to the right company coming in so.
So the exact terms of that.
We'd be obviously you'd want to get the best deal we could.
Now if we could kind of keep half of our.
Interest and be mostly carried to production I think that would be a great outcome, but I think we'll just have to.
Work with potential partners, we have seen quite a bit of interest on this and I do think the project is so much better so.
I'm hopeful that we will be able to bring a partner in on this.
To get a strong group of moving forward.
And another question from the webcast is when do you expect venous wants to spot.
Yes, thanks, Thats being pushed back I think total hours.
Had some.
Drilling extensions in Kenya, and the Angola.
I think that that rig is slated to come to bemis.
Yeah.
But it's looking more like a December spot at this point.
Okay, Here's an interesting one that caught my eye will you consider a London listing.
Yes, I think we look at that and many times and I think.
No.
Some of the bigger acquisitions that we've talked about.
Even some bigger corporate merger. So we think that it makes sense at some point to move to London, We don't see a huge amount of liquidity increase.
Most traders are quite happy to trade on the Swedish market, but I do think it would open up some additional bigger investment companies.
Kind of make us one of the one of the go to.
London Stock Exchange company so.
We continue almost every quarter, we have a look at that again, we certainly wouldn't rule it out I think.
We had a premium listing.
I think that's something.
We do think at some some value to it.
And Pascal any views on that.
No I think he is it sounds like you're right I think one thing we need to keep in mind is that the increased cost.
Listing in London.
I mean today, we are very lean on the LOE G&A company.
If we start to list on that.
We need to take that into account as well and it will need to be on the back of the significant transaction in equity raise in order to create liquidity in London, otherwise it wouldn't make sense.
No.
There is one question that I'm going to tackle.
I'm actually going to be willing to answer. This there's one thing that you have cash flow from operations of $580 million for 2020, and you're only talking about $600 million to $800 million over the next four to five years.
Understand that good to me.
It's very important and I'll put the slide back up again.
You get your cash flow is mixed up cash flow from operations before capital expenditure, it's before debt repayment will be showing here on this slide.
Free cash flow to equity. So this is all share of prime cash flow.
That is available to be.
Repeated as dividends. So please please please do not get your cash flows mixed up.
There was a pretty spectacular numbers quite frankly.
Going back to the question list.
Well I mean, Keith you've already answer this in a way, but let's just touch it once again, what is the extent of the timeframe for extending the Nigerian licenses.
It keeps coming up.
By law Nigerian licenses has to be expensive extended as long as you are in compliance in other words, you've paid your taxes you've done your work broke fulfilled commitments. So there has never been a light Nigerian license that hasnt been extended.
There is a negotiation that goes along with that where there is a payment to the government.
Extend the license and then it does take some time, but we are quite confident that in the worst case in 'twenty late 'twenty 'twenty four early 2025, when the licenses are up for extension they will be extended.
What we'd like to do is accelerate that and do it earlier and again, primarily because we'd like to take right. Now these assets are extremely under Levered.
We paid off so much of the debt here that if you look at them compared to other companies, we are actually quite under Levered as a company.
The reason, we're under Levered as because banks cannot extend below my past the extension date.
That's the way banks do things so.
Pascal talked about the trade financing trade financing, we can we can extend that aspect extension date at.
At some point in the bond market is looking better we would look at if we can do a traditional RVO, which would be our first choice maybe the bond market comes into play for US. It's all about utilizing these assets not over leveraging them, but just making sure. We've got the right financial leverage and the timing of that so I think what we're not really looking to put.
More leverage on these assets, we're really looking to spread out the amortization schedule.
Again, I am quite confident the extension is automatic.
As I said, there's never been a company that has had gotten their extension that chevron produced for four years and got paid for years without an extension on one of their key assets. So.
I'm not worried about that but I do want to accelerate if we can because I think the opportunity to.
Extend that leverage and not have to pay the amortization.
It's not it's not the end of the world that we pay off all of our debt by the end of 2023.
But I don't think it's utilizing our balance sheet.
Well as we could.
And Keith you like this one does a question on exploration.
First of all can go anywhere.
First of all congratulations on the hard work and great results and well. Thank you for that comment. The question is what are your plans for block freebie for BP in the next 18 months.
Yeah, we're kind of watching what happens with Venus there. So I mean, we are reprocessing the seismic we've got some pretty interesting prospects on there that we're trying to get a little better.
At some point, maybe bringing a partner in on that makes sense, but I think Venus is going to be a big driver of their success of Venus. The same play trends and Theres also a well being drilled by shell on the old Cosmos block just in board of Venus.
Both of those play concepts are found out three before me so if we find that.
One of those are successful.
It makes it quite a bit more attractive.
That's kind of the answer is so what.
Let's let's work on those prospects get them in the best shape, we can and then hope for some positive results either from Venus or from it.
Michelle.
So do we have any more questions on the conference call.
We will take our next question Sir from Panic, and then six independent.
Please go ahead.
Good day gentlemen.
Two questions the first for Keith.
Africa oil recently funded eco Atlantic concurrently eco paid $10 million through J Hei.
<unk>, 1% interest in Mckenzie block valuing the final well in a three well program at $900 million. After the first and only two on this block came up dry.
Recently I wrote a letter to the board, arguing that Africa oil contender for half of the float one year's cash flow.
Which would be accretive by more than 50% and that for sure.
So why buy a lottery ticket in the form of ultra deepwater Wildcat drilling on our block with no evidence of commercial hydrocarbons at a nearly $1 billion per well evaluation.
Over a low risk high return on investment and stock buybacks and self tenders.
<unk> been granted directorships at both <unk> and <unk> in addition to Africa oil.
How can you justify this doesn't sound allocation of shareholder capital and I have a follow up thanks.
Yes, I think I think your math is a bit wrong I think we had a pre money valuation of about $200 million that we invested on.
And again it was a pretty small amount of money that we actually ended up putting in ourselves, but I do I do appreciate that exploration is not something that is.
Isn't real focus right now, but if you Guyana is one of the few places that we do see.
A potential huge upside now if you look with our friends at Exxon and total have done just to the south of us.
Guyana and Suriname.
This is the number one place on Earth to find oil and gas.
Right, we have drilled two dry holes, we drilled there was one drilled before we came in one drilled after.
Sure.
The first one I think we understood quite well the second one is actually a little bit puzzling. It had all the things we wanted from a geophysical standpoint.
And we're looking at that now there is a third well just about to be spud in again.
When we were carried for the first two wells.
The next one we start paying our own our own share of those wells, but.
Again that company has about $50 million in the bank is quite well funded so I.
Thank you.
While I appreciate that.
Not everybody is focused on exploration there is no place on Earth that youre going to get more value.
For your Buck in doing drilling exploration wells I think being in bed with the guys that understand Exxon is the operator took housing major partner those are the two guys that understand the play better than anyone.
I do think exploration has a place.
I don't think we have committed huge amounts of money to it in the future in fact, I think for now we're pretty well fully funded our exploration. This was a special circumstance that allowed us to get into the comm J block, which I still think it's probably one of the best blocks.
In Guyana and.
I'm quite happy that we are in there.
I appreciate your comments.
I know you had E mailed that we'd read before them.
I do think there is youre not youre not alone voice that says exploration thats, probably something we don't want to be spending a lot of time and money on it but I will point out shell today, just announced that they are putting a $1 billion.
Exploration in the Gulf of Mexico.
For those companies that have a little bit longer.
Neil.
Long-sighted long term plan.
The majors are spending a lot of.
Money and effort in Africa.
South America, both in Brazil, Guyana.
In West Africa exploration, So I don't I don't think our days and explore is gone I think there still is a lot of upside to be had.
Thanks.
Follow up I guess a question for Pascal.
Any idea of the timing of the distribution of the 127 settlement proceeds from Ecuador.
And.
I guess.
Also wondering about.
Increasing the principal balance.
Yes.
<unk> debt, which is.
<unk> fairly low now.
Yes.
Yes. Thanks.
Yes.
And then the question on the <unk> deposit.
But at the moment.
They put it sits with <unk>.
And NTT in Nigeria, and we.
We need to keep in your taxes that would be due on that deposit before we move it. So we don't expect.
And your payment, especially any dividend payments in the short term on that deposit. So at the moment is just staying in Nigeria, and we serve as a working capital to prime.
We don't expect any.
And you shorten dividend from it so that's that's the answer.
In terms of the Albion as Keith mentioned, we can't I mean.
We cant refinance and.
Extended till increase it until we have clarity on the.
On the licensing you will so I think the priority will be to first get the license.
And of course the.
Uh huh.
The passing of the <unk> is certainly good news.
And that's the first step in getting the license and then once the license is benign you then we will aim at refinancing that facility.
Facility young potentially increase it back to bill.
And then on that it was closer to the $1.8 billion net debt it was hedging any.
Pascal This is Shawn just wanted to ask for one clarification, the monies within Nigerian entities, but it is actually in offshore accounts outside of New Jersey is that correct, yes, yes, it's correct.
Okay. Thank you.
Just.
Oh, yes, sorry.
Sorry, I was wondering about the gas.
Off take agreement and how should we model revenues.
Prices and volumes.
Future payments from Nigeria.
Yes, that's a good point.
Dan you want to take the question.
Yes of course in terms of so looking in our announcement, we did say that that with three years of accrued sales revenue from July 2018. So this year, obviously, we're getting a nice big check and niche optical oil it's around $20 million. That's that's the receipts, which is good but.
Moving forward.
Just say ballpark figure for the next couple of years, if you would say.
At the currents.
Current estimates of production profile, we expect anywhere between $8 million to $10 million.
Revenue and Thats Africa oil so it's not the cake is the icing on the cake right. So obviously the real cash generation is going to be the oil production.
And in terms of gas price, then you'd be looking at less than $1, an mcf so we'd be looking at around 700 to hsn's.
Does that answer your question.
Net.
$35 million in revenue 21, net for past production is that net of tax.
Yes.
Okay.
Well no just just very quickly.
The $20 million would be net of tax and other costs.
Perfect. Thanks.
Okay.
Well, we've only just got a couple of minutes left so I'm just going to go back to an email I have from James how do you see.
Well actually no I am not because Pascal just realize you've answer that question as well it was on the AG Balmy re determination.
Look as we are running out so Tom I, just wanted to take this opportunity to try and to everyone.
I think it's been very good interaction both on the call through email and on the webcast splits Alaska. We have run out of time I will reach out to those who submitted questions that we haven't had time to answer.
So on this on this at this time I ask any thoughts to bring the call took place.
Thank you. This concludes today's call. Thank you for your participation you may now disconnect.
[music].
Yes.
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<unk>.