Afentra (LSE:AET) — Investor Presentation

0:01 Good afternoon, and welcome to the AFENTRA PLC investor presentation. Throughout this recorded presentation, investors will be in listen only mode. Questions are encouraged, they can be submitted at any time just based on the q and a tab that's situated on the top right hand corner of your screen. Simply type in your questions and press send. The company may not be in a position to answer every question received in the meeting itself. However, the company can review all the questions submitted today and publish responses where it's appropriate to do so. Before we begin, I'd like to submit the following poll. I'd now like to hand you over to CEO Paul McDade. Good afternoon to you, sir. Thank you. Welcome everyone and thank you for joining us this afternoon to hear our thoughts on the onshore Kwanzaa Basin in Angola and why we are so excited about the potential of the licenses we secured earlier in the year and the most recent license that we've been discussing Confor.

0:50 For a start, I'll introduce the AFENTRA team that's here with me in the room. Ian Clark, AFENTRA COO, will be leading this afternoon's presentation. Christine Woodcliffe, AFENTRA head of IR, who's with us who put together this afternoon's session. And Antonio Fernandez, AFENTRA head of m and a and commercial, who was involved in negotiating the entry into all of our onshore blocks. Before I pass over to Ian to lead this afternoon's presentation, let me give you a few of my perspectives on the onshore Kwanzaa.

1:27 When we were approached by A and P G, who's the Angolan regulator for the oil and gas, to get involved in the nine in the 2023 license round, our initial thoughts were we're a p and d company. Really, that's our focus area, and it was a little bit early for us to start to get involved in exploration at that time. However, given the regulator, it asked us invited us to look at the area, we decided it was courteous and appropriate to at least go and have a look at the onshore Kwanzaa. As we started to study the area in more detail, the work that we did made us realize a couple of things. The the very significant potential of the basin both from an exploration and the potential redevelopment of existing oil fields.

2:22 Again, the ability for us to have an early mover advantage as we did in our entry into block three zero five. And also, it was clear that A and P G were keen for us to bring our experience, particularly from our previous involvement on the large discoveries in Uganda and Kenya onshore, bring that experience to this basin and the operation of this basin and the exploration and potential redevelopment of some of the existing fields in that basin. And we realized that would help us in any discussion and application for any of the licenses that were of interest to us. Over a period of time, we identified a number of areas to pursue. From an exploration perspective that was con fifteen and nineteen.

3:11 However, the block we announced on Monday yesterday was actually the block that I think most people in Angola were pursuing block con four, and that's due to the significant redevelopment opportunity as well as the exploration potential. So to be able to announce on Monday that we were not only have an agreement on entry into Con four, but have been appointed to operate this license both demonstrates a reputation and continued good relations that we have in Angola. It's also very important for the future growth of the company and the overall value of our business as we move forward.

3:56 So with that, let me hand over to Ian who will explain in detail why we're so excited about the Kwanzaa Onshore. Okay. Thank you very much, Paul, and good afternoon, everybody. Thank you for joining. So a little bit of background on the Kwanzaa Onshore, and then I'll take you into some of the detail on the blocks. So historically, Kwanzaa onshore was once a production partner. So back in the the nineteen fifties when production commenced here, with some of the discoveries here, Benfica, etcetera. And over 15,000 barrels a day was produced into the sixties and seventies, but was abandoned due to unrest and the shift offshore shift offshore into assets like Block 305 that we're in with operator.

4:51 Importantly, the basin's got a proven petroleum system. We've got over 400,000,000 barrels of oil in place. And since the early production in this basin, about 90,000,000 barrels was produced until 1998 when it was abandoned. So when you look at it, though, it hasn't seen new technology or exploration since the nineteen eighties. I think the last exploration was in '78. There's substantial potential, untapped potential across the fields, And we have had a number of wells, 150 wells ready for modern reevaluation and redevelopment. Importantly, from a perspective of Angola, there's the favorable investment environment, active licensing that you've seen from AMPG over the last number of years. AMPG is very supportive from a policy perspective.

5:47 And as we look at the onshore, there's good infrastructure that sets the stage for fast track value creation. So we we we look at this. We look at this as one of the classic overlooks opportunity

6:01 where our experience and a phased approach rapidly unlock both legacy redevelopment and exploration.

6:11 So first, if we step back, just look at a bit of a regional comparison. The slide titled Kwanzaa onshore regional comparison compares it to some of the nearby onshore basins. So in the in the top, Gabon Basin, that has about three and a half billion barrels that's been discovered and produced, and the Lower Congo, literally next door to Angola, which had about 2,350,000,000 barrels produced there. It's they they they all have similar geological potential. If you look at the number of wells that have been drilled, 600 wells drilled in onshore Gabon, 350 wells drilled in in the Lower Congo, only about a 130 wells drilled in in onshore Kwanzaa, of which very, very few have gone through to the pre salt.

7:07 So you can look at the the creaming curve there. We've got orange, which is for the Kwanzaa. The Lower Congo is in in blue, and then greenish is the Gabon Basin. And what you'll see is that from about '19 the nineteen seventies, the Kwanzaa Basin was essentially flat, And that was due to the period of unrest, the the political uncertainty, and the inactivity. And by the time that probably people did return to it, the offshore had really developed with block one, block zero, block two, and block three. So we see a lot of potential here. The base other bases up up and down the margin have delivered quite significant hydrocarbons, and the qualms could follow with the right investment in modern exploration.

7:58 So this is an early stage entry, could potentially be a high growth basin, and uniquely positioned to catch up as other the analogs mature. We've got deep experience from experience across East And West Africa, which we can apply. And one of the examples of that is actually the the EFTG, which were one of the cornerstone investors, which has been in the process of acquisition. So if we move on to Con and commercialization of these 16 fields. So Con 4 was one of the last fields to to be discovered. It was discovered in 1968. Holds a significant oil in place of over 200,000,000 barrels, but only a fraction has been recovered, about 46.

8:47 We think there's quite a lot of upside here from overlooked legacy fields. The field peaked at over twenty twelve thousand barrels a day and shows that the basin's delivered all the at least some of the fields' proven deliverability. So as we look at field, the plan is phase reactivation. We enter existing wells. We've been out to the sites and identified a number of the wells or new wells. We'll be looking to apply modern technology and begin early production within the initial license phase. As we look at how we could commercialize this, well, to the north of us, about 30 to 40 kilometers away, is Luanda refinery.

9:33 That's been operational since 1958, and we have blacktop roads to to get to the refinery. The refinery was expanded in 2022. It's got the capacity to refine 60,000 barrels a day. So there's potential to to be a source for for some of the oil required in that refinery. So this this part of the basin, the commercialization of existing fields, we we see this as a low risk, high return restart play. We'll look to leverage historical data and then near term execution to to quickly generate the cash flow.

10:17 So the other area of the basin is what we're seeing as an underexplored working hydrocarbon basin. And this is not only CONFL. This is CONFL 15 and CONFL 19. So fifteen and nineteen, you'll hopefully remember we we announced announced last year and earlier this year the normal operating ones with ACREP and SOLOMO. CON four is the first operatorship that AFENTRA has achieved in Angola. And what we're looking at in the basin here, I mean, quite onshore as you look up and down this basin, which comes about 25,000 square meters square kilometers. It's proven. It's neglected from a perspective on data.

11:06 The two d data is very sparse, but you can see from the fields discovered and the wells that are drilled that there is a working petroleum system across both the pre salt and the post salt and very limited modern exploration. I mean, effectively, no new wells, no new exploration wells have been drilled for over 45. So potentially, there there could be significant upside from both pre salt and and post salt targets. So what technologies are we using? So we were one of the cornerstone investors in the EFTG. So this is technology, high resolution gravity that we have used elsewhere in East And West Africa, and that commenced acquisition last year.

11:58 We have a regional grid that covers the whole of the Kwanzaa onshore. And at the moment, we'll be or in the next few months, we'll be getting detailed maps, detailed acquisition across COM 15 and COM four to complete the survey. But at the moment, it's it can be used to evaluate the basin and also prospects. So we have a clear low cost exploration plan in place. That will lead to define drill drop decisions within the initial phase and said we've commenced already with the support of the AFTG survey. So when you consider this from a perspective of investment, this isn't greenfield wildcatting. It's targeted data driven exploration in a proven hydrocarbon system, which we view as as low risk.

12:52 In terms of a stakeholder strategy, this slide just briefly outlines the environmental considerations, the social impact, the major compliance, and security and safety. We've got extensive experience delivering high standards in complex onshore environments. What we have seen in Kwanzaa as we've been up and down through the base is manageable across ESG ESG, security, regulatory fronts. And we're also addressing all key stakeholder areas proactively. From demining, there is a history of mines, so we we need to be careful as we commence acquisition, safety planning, environmental oversight, and local community engagement. It's been done with structure, intent backed by strong local partners, clear compliance framework, track record of responsible onshore operations.

13:47 And at that, I'll pass over to to Paul to just summarize up the presentation. Thanks, Ian. So as you can see, the onshore Kwanzaa in addition to our other acreage offshore provides really two strong avenues for value creation. The first is Ian highlighted is that field reentry, redevelopment. A lot of progress in technology if we think what's happened just in the last decade or slightly more on the onshore US. So a lot of technology that can be applied to these fields that we consider maybe larger than currently viewed, and certainly we consider they were potentially abandoned from prematurely.

14:38 So that really provides a really early value creation opportunity. And then thinking over the short to medium term, there's the low cost exploration play across all three blocks. And as Ian highlighted, regional analogs suggest that there could be material volumes particularly in the in the pre salt once we work our way through the FTG and start to think about further further seismic. So we, will now be getting on and starting to make progress. We are looking forward to CON four, being, formally awarded later this year. But in the meantime, as you can see, we're we're making good progress not just in '15 and '19, but we're actually already making some progress in in Conform.

15:31 So with that, I'll hand over for q and a. Perfect. Well, thanks very much for the presentation. Ladies and gentlemen, please do continue to submit your questions. You can do so just by using the Q and A tab situated on the top right hand corner of your screen. But just for the company to take a few moments to review the questions that have been submitted today, I'd like to remind you that the recording of this presentation along with a copy of the slides and the published q and a can be accessed via your investor dashboards. As you can see, we have received questions throughout today's presentation. And, Ben, at this point, I'll hand over to you to share the q and a, and I'll pick up from you at the end. Thanks very much. I'm gonna deal with the questions on on Confour first because we've also had some questions on a on a general and strategic basis. So the first question is what level of royalties are you targeting with AMPG?

16:20 I I think at the moment you'll see in in the in the pack, we haven't really defined the detailed terms of the the license that we have an issued. I think that's very appropriate given it's still got a formal review and approval process to go through at the ministry. What we can see is we we find the terms that we've negotiated today very attractive,

16:47 and we will, as always, be able to share those terms at the right time. Thanks, Paul. And that is the same answer for another question, which is information on the cost Convoy license. Well, probably what we can say on that one is just that onshore operations are much cheaper and an offshore operation is simpler to perform. So we're not we can't give out details of the full cost structure, but it is, as we view it, a relatively low cost opportunity. Okay. Thanks, Ian. I've got a couple of technical questions. What's the the timeline for reactivating Quengela? Is first oil achievable in 2026? I think 2026 is maybe a bit optimistic.

17:36 First, we first, we have to go in study, survey the the wells. And then once we've assembled all the data, then we'll establish how quickly we can get in. But we'll be proceeding in the quickest, safest manner, establishing when we can get in. Okay. There's a question regarding the aquifer at Tobias. And the question's saying, might you have a a similar challenge with reactivation on QAM 4? Yes. So Tobias if I take that one. Tobias is a carbonate reservoir, fractured carbonate reservoir, which was obviously depleted.

18:22 Kingella North, in the North of of Con 4, is quite different. It's tertiary age, so versus Cretaceous. It's not carbonate. It's clastics, and the reservoirs are quite different. I mean, from an AET perspective, we know that Cangela North did have water injection. Water injection, given the connectivity of the reservoirs, they're quite thin, was it worked in places. It it didn't work in all of the places in the field. So it it's a it's quite a different structure. It can get a north to to Tobias. Okay. Got a question here about how many wells might you reenter and what sort of IP per well might you expect?

19:12 Probably just on just to say about the wells. I mean, the commitment at the moment is is to do a couple of reentries. That's part of the potentially, the initial phase. We need to get in and assess the wells. These are wells that were drilled in the 1960s, late 1960s to '70s. So we're not sure how all of those have been left. Once we've been into a couple of those, we can decide if if reentering more is the right thing to do or to drill to drill drill new wells and bring a rig in to trim those wells.

19:46 Right. I think you just answered part of this question about how many existing wells could be reused in percentage terms. And then there's a follow on, which is are the well sites still in place and the oil treatment facilities as well? Mix is the answer on that. The tank farm was left, so there is oil tanks still there. There's actually a working gas well that still produces. Most of the the wells, though, were were temporarily abandoned. So there there are some of them above ground, others still in their their cellar. So we'd have to go back in and and check how we'd reenter them.

20:35 Got a question on rigs. Will one or more drilling rigs be moved from Cabinda or Gabon to the Kwanzaa?

20:45 Do we have to look at the opportunities? Will it be actually redriven, or could it be just light well, light sort of intervention opportunities? Again, it comes back to let's understand the the opportunity first, and then we can decide what's the most appropriate way to to to to move forward. I think I think maybe adding to that, as Ian said earlier, the thing we like about this is the onshore nature of it, which means as Ian highlighted costs are low, but also access to equipment is is high. There are are already rigs available within the country. So again, we don't have the challenges of either high cost inflation or access to equipment that has been a recent challenge in some of the deeper offshore areas. I think the other the other bit on this one is is also sharing of opportunity or mix of opportunities. So other companies will be potentially moving forward in drilling activities elsewhere.

21:47 The same on on seismic acquisition. Think there was a question earlier about Con sixteen. You know, we that that people will be acquiring seismic up and down this basin. That by one team coming in, we can acquire across many blocks. And the same really applies with with rig sharing potentially. Great. Question here. What were the production rates on Q1 for at the time that the wells were shut in? At the end in '98, it was producing about a thousand barrels a day across the facility.

22:23 If you think back to '98, oil price was down at about $89 a barrel. Really didn't make sense for them to continue with this.

22:33 Meanwhile, also in the offshore, you had hundreds of thousand barrels a day with block two, block three, and block zero producing. So it was part of the reason it was shut in was it just wasn't material for all those bigger bigger companies back then. And I guess a sort of follow on is is what what's the production potential in in the next few years?

23:00 That's a good question. It all depends on let let's say if we we get depleted reservoirs, it could be in the hundreds to a few thousands depending on where you are in the field. If you could get virgin pressure, then we could be getting quite a lot more than that. It all depends on on the type of opportunity and the reservoirs that that we find. Okay. Question on the the significance of being awarded the operatorship. Do you think this will allow you to progress Con four quicker given that you're operating?

23:35 Yeah. I as people have noted, we we chose not to operate Con 15 and Con 19. We see them very much as exploration licenses. And and our role in those two blocks, I think we're better placed to bring our exploration technical capabilities and support.

23:58 In one case, a CREP and the other, Sonogol as they operate over the medium term. In con four, because of the not only the expiration, but this development potential, we did see it as an advantage for us to take operatorship and really drive the agenda and the pace on con four. So that that we we believe if there is potential there as Ian's highlighted that we that we can move forward commercially, then we're best placed to do that ourselves as as operator with the full support of the partnership. Got a question on infrastructure here. I mean, in terms of once in production, would it require building a pipeline to Luanda, or are there better options for the late production?

24:50 Yeah. I think the I mean, from from the infrastructure thing in place, if you look at it from the type of road network that we've got, you could be able to get a trucking operation going very quickly. We've we've tracked in certainly a lot less hospitable places than than here in Angola. So when we first went down into Kwanzaa, what we were looking at was the quality of the blacktop roads. They're they're they're good. And also the bridges across the Kwanzaa River and others, what weight of trucks can they take. So we already established that you could you could get trucking operating. There's multiple access or exit routes through to the Luanda Refinery. Obviously, you've got to make sure that you're driving safely since there is you will be driving through some populated areas.

25:45 So that for a smaller type activity set, let's say several thousand barrels a day, you could be trucking. I think if you could get into the above 10, then you're gonna have to look at maybe a slightly higher or a slightly more complex evacuation, maybe a truck to a tank farm, and then a boat round to or barge round to go out and to offtake. So there's and again, the the population density is quite low. So you you could design that. But I think the nice thing is is the the infrastructure gives you the ability to to move quite quickly if we have success. Had a couple of questions asking who the remaining 65% interest in Confor is being awarded to. So I just ask you to reiterate your earlier answer. Yeah. I I think, obviously, we we know who the other partners are.

26:42 We don't think it's appropriate for us to be announcing that at this time if they choose to announce it. That that would be their choice. But, certainly, when the license is ultimately awarded as as with all the other license, the full partnership will be publicized. Okay. And associated question, what what's the the rough timeline on the Commvault license award? I I mean, certainly, we will expect it to be awarded this year, and we certainly hope maybe that we get awarded sometime in the third quarter. But we'll we'll see. I mean, it just depends on the time it takes for the the process to go. There there's a very clear process that this has to follow,

27:27 and really it just depends on how long it takes to follow that process. But we'll we'll certainly be trying to push it for third third quarter. But I think as Ian said and and I mentioned earlier, we're it's not like we're sitting doing nothing. We're actually we're we're already looking at some low density, I guess, FTG. We're thinking about what is the work program. So this is not not wasted or lost time between now and then. Thanks, Paul. Couple of questions about wider Angola.

28:02 Question here about thoughts on partnering with CoreCell for CON sixteen, the other UK listed E and P with with exposure in Angola. Yeah. We know the team at Corsell very well and have to congratulate them. They've they've done a great job of building up the company. And I know it's recently their their venture with Santana, I think is a great step forward. I think there's there's plenty of space in the onshore Kwanzaa for for many many companies. So we do collaborate. I think Ian mentioned, you know, the fact that we know the team there. At some point, we'll hopefully be collaborating over acquiring seismic, maybe collaborating over drilling wells at some some point in the future. And and more broadly, we continue to review as as we work the data, we continue to review other areas in the onshore quanta and the attractiveness of them and the potential maybe to continue to expand the footprint.

29:01 Question here from James saying, are there any issues or opportunities from the collapse of the Namco deal with Sonangol regarding blocks 23, 15 o six, and 27?

29:13 Yeah. We we are as aware as everyone else's of the Namco, the original deal that that was a deal that was announced at the same time as we announced our original block three zero five and three zero five a. You'll ask back in, I guess, '21 or thereabouts, '22. So we are aware that that's not progressing. I think what we can see is, you know, we we know Stornigold very well. They know us well and they know our aspiration to continue to grow. So I think if if opportunities do become available, I would like to think that we certainly be be a consideration for some of them. I think particularly given the good working relationship and partnership we have with them on block three zero five five five eight.

30:03 Great. Question on local content in Angola. Are there any restrictions on working with expats and specialists from abroad? Is there a requirement to work with locals? I mean, Ian Ian has probably even more I'll I'll just say a few words. I think what you find in Angola is the majority of the expertise you require is is already there within Angola for the source of operations we're looking at on the onshore, etcetera. Where you do need specialist, whether it's people or equipment and you're bringing that to the country, I'm not aware of any particular restrictions. I think Angola is a very mature hydrocarbon province, understands one, the importance and of developing local skills and capacity and capability, and they've done a great job of that. But they also are very prone to the fact that there are certain skills that they might need to import for for specialist jobs.

31:04 So far, we haven't come up against any any issues in the work we're doing in 03/2005 and Three Zero Five a along the cycle. Yeah. I'll just say, I mean, that they've got a very long history of exploration development production and people with extensive experience. So that there is good local capacity. There will be some areas that the technology isn't available in country, which you can resource. So for instance, a good example of that is Meta Tech came in with their EFTG. They're the only countries, I think, that really could probably deploy that within countries, probably The US because of the skill.

31:45 Meta Tech came in and required the FTG. They partnered with a local company as well with some of the technology transfer with A and PG and also Sonnybrook. I mean, maybe so just to add one other point there, it makes me think what you mentioned is the the AFTG, as far as I understand, the AFTG processing, interpretation, and analysis is quite a specialist area. And so that that would be somewhere even we as AFENTRA, we have knowledge and capability within AFENTRA, but we know of people that have worked with us in the past who have real deep skills in interpreting and analyzing that data. And so they that would be sort of people we would involve in the operation temporarily, and and they would be working with our operators in '15 and '19, which again, as he said, is really great way to bring new ideas, new technologies, and new skills to within Angola.

32:45 Great. I'm not sure if you're able to answer this yet. It's on pricing. What's the discount to international crude you expect at the Luanda Refinery? I think we we don't expect any discount to international is the straight answer. And maybe people aren't aware, but, you know, we lift cargoes from Block 305. Some of those cargos over the last couple of years have been sold to the refinery. And the you're aware that the the oil we sell in Block 305 has a premium to bring, and we get similar levels of premium at the refinery as we would do in the international market. So that that's why it's a great great place to be in terms of look out because if we start producing crude onshore, we have a market there, but the refinery where we can get international pricing.

33:37 Yeah. The refinery originally was built for cost of crude. So it's obviously expanded for when the oil fields were discovered in the offshore, but originally expected for quasi crude. Great. Those are general sort of strategy questions now. Will you still pursue inorganic growth through acquisitions? Yes. And you've seen that, I guess, I've lost which day of week. It was last week, but I think it was last Thursday. We announced the signing of an SPA with AETU, our partner on 03/2005. So I I think a great example of our continued inorganic growth and and really seeking out accretive deals that make sense to us.

34:27 So I think that's a good example where we continue to look at deals of that scale and deals are significantly larger than that. Okay. Brilliant. But a question here about what's the current thinking with regards to buybacks? Yeah. This is a matter we we discussed kind of at length with various stakeholders and investors and and what you would have seen in our last, results, note or RNS that we plan to go and acquire shares. Our employee benefit trust is going to require a number of shares over the next year for various awards. So rather than issue new shares and have dilution, we will begin into the market over the second half of the year and acquiring, I think it we're looking at around about 6,000,000 shares is what we announced.

35:23 So that that continues to be a plan. I'd point out we haven't started that program yet. We expect to execute the program in the second second half of the year. Great. And a and a question on on hedging. Given recent geopolitical developments and oil price movements, has the company decided to hedge future h two twenty five and h one twenty six lifts at current pricing? So I think again in our last presentation, the current investor presentation, you can see the program of hedging that we have in place for 2025 including the second half of twenty five. So we in terms of our policy, we're fully hedged for the second half of twenty five with floors of predominantly 65, some some with 60, but predominantly 65.

36:11 And a few percentage about 34% with call offs of around eighty, eighty, eighty four dollars. So we're very well positioned and have been through '25. We have initiated our program for 2026. But over the last, we say maybe two months, we've actually paused our hedge program given the volatility in the market and how that is impacting pricing in the hedging market. We we don't see particular good value at the moment due to that volatility in the hedging market. And that's something we keep on the constant review. Actually, we we have a review in the coming days to see whether we pick up a program again. There is something we we watch. So our intent would be to restart our 2026 hedging program and and continue to put in place hedging to give us some surety on on floor levels.

37:06 Right. So there's no more questions. There is a a statement from James, which I'll just read out to to end on which is the team is doing a great job. Thanks on behalf of all of us shareholders. So with that, I'll hand back to you, Paul, just for any closing comments. Yeah. Thanks again for taking the time. We we've been keen to show this presentation for a little while, but we thought it was appropriate to wait until we had initial con four so that we could show you what we see as a full potential of the Kwanzaa Basin, not just the exploration potential. So thanks for taking the time to listen to that. It's been a good week for us with the AETU announcement last week and the Kwanzaa announcement this week, And we will continue to pursue value opportunities to kinda drive value for our shareholders and and all of our other stakeholders.

38:02 So thanks again for taking the time. That's great. Well, thank you for updating investors today. Could I please ask investors not to close the session as you now be automatically redirected to provide your feedback, and management team can better understand your views and expectations. On behalf of management team of AFENTRA PLC, we'd like to thank you for attending today's presentation, and good afternoon to you all.