AOIFF - Africa Oil Corp. (AOIFF) Q3 2023 Earnings Call Transcript
2023-11-16 17:26:05 ET
Africa Oil Corp. (AOIFF)
Q3 2023 Earnings Conference Call
November 16, 2023, 09:00 AM ET
Company Participants
Shahin Amini - IR and Commercial Manager
Roger Tucker - President and CEO
Pascal Nicodeme - CFO
Conference Call Participants
Presentation
Operator
Hello everyone. My name is Sandra and I will be your conference operator today. At this time, I would like to welcome everyone to the Africa Oil Third Quarter 2023 Results Call and Webcast. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. [Operator Instructions] Please note that this event is being recorded. The recording will be available for playback on the company's website.
I will now like to pass the meeting to Mr. Shahin Amini, Africa Oil Investor Relations and Commercial Manager. Please go ahead, Mr. Amini.
Shahin Amini
Thank you, Sandra. On behalf of management, I thank you for joining us today for third quarter 2023 results call. We are grateful for your interest and support. On the call today we have President and CEO, Dr. Roger Tucker, and our CFO, Mr. Pascal Nicodeme. Roger will kick start with a brief introduction before we present the quarter's highlights, and Roger will then cover Africa Oil's investment case and outlook before we go into a Q&A session.
But first I would like to remind everyone that remarks made during this session are subjects to forward-looking statements, which involve significant risk factors and assumptions and have been fully described in the company's continuous disclosure reports. The information discussed is made as of today's date and time. And Africa Oil assumes no obligation to update these unless as required by law. The company's complete financial statements and related MD&A are available on the company's website and on SEDAR.
On that note, Roger we're ready for you. Please go ahead.
Roger Tucker
Thank you very much, Shahin. So first of all, it is a pleasure to be presenting my first results and participating in this webcast. First of all, a little bit about myself. You can read my resume, if you like on the new website that I'm originally a Geologist, Ph.D. I went into Exxon for many, many years and traveled all around the world doing all aspects of Geology and Geophysics. I then joined British Independent that grew very, very significant across the world, or LASMO. I then have a very interesting adventure working for Mikhail Khodorkovsky in Yukos in Russia. I then did some private equity investing work, and ultimately I -- fairly recently, I ended up as a Senior Vice President in the BG Group, working on stuff in the Americas and also in Europe. And then I've done a series of other private equity based deals.
I'm also a Non-Executive Director of PetroTal. We were based in production interests in Peru. So I've pretty much worked every basin, all across the world, in big companies and small companies and NRCs and independents and private equity investment. So I have been in just four months now. And it has been an incredibly busy four months since I took over.
We've performed a very deep review business that that I inherited. We've been managing this in very significant stakeholder relationships. We've presented a business plan before. And we've reorganized the organization, including bringing in some very key new recruits, including a Senior Vice President of Business Development, and a in-house General Counsel who will be starting in the next week or so.
So as the slide says, what attracted me to this company to come into here is that it had accidentally outstanding existing assets in the portfolio. It needed to have a little bit of a reorganization, but the assets underlying the business of the highest quality. In addition then, we have an extremely strong balance sheet which Pascal will talk about a little bit later on. Our production which we will describe later on is of highest quality with the highest netbacks. And in addition within the portfolio we've got some low risk, high internal rate of return development opportunities in Nigeria.
But then the first thing, the crown on the head of this is our interest in the Orange Basin, which are truly world class investment opportunities. And I'll be talking in more detail about those a little later on in the presentation.
The next slide, Shahin. And so what we've achieved actually this quarter, we've got extremely strong operational results, the Venus-1X test result was positive, as we have described. And as you can see, on the bullets on the right-hand side, the operator has indicated that this would be a field that will be developed in the future.
In terms of production, we've seen an increase in our average production for the first time since Q2, 2021. And Pascal will talk a little bit more about that. We converted OML 127 into new petroleum zones in Nigeria. We received very significant dividends, from Prime of $62.5 million. And we're exiting this quarter with a cash balance of $201.5 million, which completely underpins our corporate balance sheet.
And so passing now over to Pascal to deal with those financial issues and production issues.
Pascal Nicodeme
Thank you, Roger. So we start with a quick update on our production performance, especially the comparison with our management guidance. And we've been very aggressive this quarter since in the first quarter in terms of production since last quarter. We are now at 23,000 barrel of oil per day compared to 22,400 barrel of oil equivalents. So this is a good outcome and especially due to our successful drilling campaign on Egina.
Three wells have been completed two water injectors and one producer. And we can start to see the effect of this positive drilling campaign in this actual entitlement collection, which means that we are confident to add the year of 2023 in the upper end of its production guidance. We are also drilling at the moment on Eco. This will be the first well out of three well campaign. So again, we expect this production to continue to increase by the end of the year and early next year.
Next slide, please. Thank you. So this slide just show the evolution of our financial results on net income over the last quarters. We posted a $47 million profit, this net income this quarter, which had been underpinned by a $57 million net profit from Prime. One cash flow item to mention this quarter is within that 6.5 million of shares in Eco [indiscernible] due to the drop in share price.
We've also posted a $31 million exceptional adjustments due to the release of deferred taxes in Nigeria due to the -- switch -- of OML 127 to the PI, which is also the reason why in Q2 we had an exceptionally good quarter with the release of $173 million of deferred tax liability. But that time it was in relation to OML 130 when we obtain license extension in OML 130, which triggers that switch to the PIA terms and therefore the release in the tax liabilities. Otherwise I think this quarter, it has been pretty stable compared to the history of results and consistent with Prime's performance over the last quarter s.
Next slide please. Thank you. This slide shows the evolution of our cash position. And what I will simply say here is that we received as Roger mentioned, $135 million of dividend from Prime since the beginning of the year. We've lived within our means and the priority for the company has been to return positive cash flow to shareholders via the dividend or the share buyback program. So overall, we distributed the $30 million back to our shareholders in the first nine months of this year.
The other priority for the company has been to continue to invest into Impact and [Indiscernible] on all the cash calls we've received on Venus. I think this is a key priority for the company to stand on corner in Impact. And we've also increased on our equity percentage in Impact during these equity raises. We are now at 31.1% in Impact.
Although since we mentioned, we've started to invest in, in Equatorial Guinea. So that's $17 million that we have invested in exploration, Equatorial Guinea and South Africa together. We have also some exceptional items, as you see in the other columns, which is mainly a settlement via we had in Kenya post with partners and local tax authorities for $18 million. So I think that's it on the slides. Next, next one?
Yeah. So I just wanted to give a quick, quick update on where we were in terms of licenses in Nigeria. So as you know, and we've mentioned before, we have obtained the 20-year license extension, on OML 130. So this has been moved into the PIA tax regime. We have now three production licenses instead of one right now in OML 130, each one covering one field. So one on Akpo, one on Egina and one on Preowei. And as I just mentioned on OML 127, we have voluntarily converted to the PIA terms. Therefore, we are now in the corporate tax regime at 30%, which replaces the Petroleum Profit Tax system, which was at 50%. So significant benefits for the company going forward.
The partners on this block, have also decided to request the extension of the license. This is work ongoing and this is probably a next milestone for us in Nigeria.
Thank you, in terms of our sales. It's been a consistent quarter. Already mentioned that we changed our marketing approach last year, mid-last year, which has given a significant benefit to the company. We consistently have sold oil at a price which is slightly louder than average trends. This quarter we include a bit by timing, since we sort of covered was at the beginning of the quarter, and the oil price actually increased at the end of the quarter. So that's why you will have a slight difference between the sale price we have obtained for cargos and the average Dated Brent.
But overall, since we put this new marketing philosophy in place in Q3 2022, whereby we are basically selling or all our cargoes, but unless the oil cargos goes down below certain thresholds fixed, which will trigger for ourselves in that case, which has only happened a few occasions, since we put these new markets philosophy in place. So you can see the difference in terms of values that we are getting since Q3 2022, compared to what we were getting with the forecast before Q3, 2022. So overall, it's a significant benefit to Prime and Africa Oil.
Next slide. Thank you. So in terms of financial performance, Prime has also been very consistent both in terms of EBITDAX and cash flow. We believe that these level of EBITDAX and cash flow, we remain within original guidance at the Africa Oil level. So overall, it's very good performance again this quarter on Prime and which is able to maintain very stable net debt ratio trend. Could you move to next slide?
Yeah, this slide shows our net debt balance. At this moment, Prime is only at $750 million of oil under their RBL facility which has been defined last quarter with the extension of running on resetting. Our corporate facility at the Africa Oil level is $7. So we have a significant liquidity both at Prime and Africa Oil level with very minimal consolidated debt level. You should take Africa Oil and Prime into consideration together.
Next slide. And I will hand over Roger now.
Roger Tucker
So what we'll do now is we'll have a look at the portfolio. I will describe how we're going to talk to you over the next several months. The first thing is your own you're going to see us focus on four assets. The first is Nigeria, which we'll look at, in some detail, Equatorial Guinea, which we've just ended, and as Pascal said, we started to spend money on. And it's a very particular type of opportunities, which is -- it is exploration, but it will be very quick tie back, should we be successful. You'll see us talk a lot about Namibia. And you'll also hear a lot about block 3B 4B in South Africa. So those four assets of what we are focusing all of our intellectual horsepower on all of our investment potential on over the next the. And that is a significant refocus of the way that we're looking at the business.
In terms of the finances and the metrics, and I'll come on to how those metrics are made up. We have 2B reserves of nearly 56 million barrels, we produce about 23,000 barrels a day, liquidity of 376.5 million barrels, and we've got near term catalysts of significant size in Namibia E&A. And as we also I would after that in 3B 4B. And we are returning capital via the dividend stream. And I'll talk a little bit more about buybacks later on.
So first of all, let's go ahead and look at these assets and what they really are rather than the way we summarize them on this. And I think the -- perhaps you've been a little bit relaxed. And maybe all of you knew this all along. But by not describing the sheer scale of the assets that were invested in, they are three of the top five fields in Nigeria, on a gross basis, they're doing a 320,000 barrels a day. And that level of production, they do receive the 80, if you like of the two operators, which is Chevron and Total. They're genuinely world class production hubs that we have a great fortune are in.
The other thing about them is that 62% of the reserves are in the 2B category, which means that we do not anticipate any significant surprises in the subsurface of any significance. And also the assets themselves on the surface, which were all at DSOs [ph], they've been extremely well maintained. And we don't anticipate any significant changes, or uptime in those assets. Because of the extension of the license, where you do have infill drilling opportunities, and we also have a now doable, new tie back which is going to be Preowei, which wouldn't have been doable if the license hadn't been extended. And we anticipate in getting to that by day on that by the end of the end of next year. So I stress that, again, the underlying production assets are very significant scale, operated by majors with excellent reservoir quality.
And this I think you'll see go through the portfolio. Because the next slide then, what I'm going to do is jump down to what I now consider to be what is developing into the emergence of a new petroleum province. And it's been focused today up in the north in Namibia and our block it with Total and Shell with existing discoveries and the numbers on here are oil in place numbers presented by the Namibian National Oil Company. Graph is 2.6 billion barrels of in place reserves and Venus according to them is 5.1 billion barrels of reserves, Jonker is 2.5, and Lesedi is 0.3 billion barrels.
So this is a province that is emerging. And it's not the first time I've been in such a province because I was with EG when we were with Petrobras and developed the Santos Basin sub-salt place which resulted in eventually about 13 FPSOs going out there. And so I have experience in the way that these plays do develop. What we're going to do now is jump down to block 3B 4B, which is in the south is actually in South Africa.
And combined with our interest in Venus, we are the only independence in this new petroleum province. And 3B 4B is an extremely interesting block it is completely covered in 3D seismic. We are the operator of this. And we are going through at the present time as the -- if you like the rigs are marching down to the south, a farm out process on this, because as it says in the slide that we have derisked the prospective resources in there of over 4 billion barrels of recoverable.
So, people often ask me, are are we giving up on exploration, we're not giving up on exploration, it just so happens that in our portfolio, we have existing exploration opportunities, which are really significant. We're going to set a farm out process at the moment, and there is a high level of interest for major companies to come into this. So this block. And I anticipate that suddenly within 2024, hopefully way before we will concluding the farming into that acreage.
Now I can come up to our interest in Venus in the Venus area. What we actually have got to Venus is what I believe is a world class opportunity in that. In Venus as you see on the bullets on the right hand side, McKenzie have said that there's got 3 million barrels of recoverable reserves. Now go back and think about how many recoverable reserves we've got at the moment? We are 55.6, we have a seizure of equity via 31% interest in, in fact, a 6% in this, which will be the equivalent of us having 180 million barrels of recoverable reserves, which is more than three times -- more than three times the size of the reserves that we've got at the moment.
So get is an asset or us that we have to focus our attention on, because it is at the materiality as we come to the company of our size, which and also to Total size, which is of critical importance to get right.
We also found the block because it is a very, very large block have follow on exploration prospectivity. We are currently drilling a well called Mangetti, which is up into the north of Venus. It's an unusual well, in that it is actually testing a higher fan than, than was encountered an high fan than the Venus fan. But it will also go through that fan to target the northern extension of things. So it's a dual objective well.
We also as a currently no, which isn't on the slide though, are testing the Venus appraisal well. And if you go back, I can say this as a public website to Zoom World, zoom. And you can go back to November 8, and then click through you actually got the screen for each map on. You click through November 8th, 9th, 10th, 11th, I think it was, you will see that there was a major flare up the location of that well. You then goes out because we're doing a build up and then it comes back on again. So we've tested a hydrocarbon to surface at the Venus appraisal well.
The other thing though, about our block in Namibia is that it isn't unlike 3B 4B completely covered in 3D seismic yet. The southern part of the block, which has two significant prospects on it were Damara and South Damara has only covered by 2D seismic, it looks extremely attractive, but the 3D will be shot in the early part of 2024. We're in a position where we've got the financial capacity to stick with this opportunity until we understand what the full value of the entire blocks prospectivity and development potential are. So in terms of next year, this block is going to become a very significant priority for us going forward in terms of capital allocation.
So here are our priorities and assumptions in that. We're going to focus on the core assets. We're going to try to complete the farmhouse of block 3B 4B, EG 31 and EG 80. And if anyone wants to see a little bit more about them, we do have those maps in the appendix. We're going to be extremely disciplined on asset acquisition. And in actual fact, the asset any equity asset acquisition will be in blocks that were already in. And we think it's out of that will be in areas where we've got significant competitive advantage.
And we're going to focus on shareholder capital returns. We will maintain the base dividend policy and share buybacks. We will be initiating the option to do share buybacks. But we're in a very active stage at the moment on understanding what capital we will be needing in the year ahead that we will use the decision to start share buybacks in parallel with understanding what our investment opportunities are in 2024 that will be solely focused on making significant returns for shareholders.
And with that, I would like to conclude and pass over to Shain to get us into Q&A.
Shahin Amini
Yes. So operator, Sandra, back to you just to remind people of the instructions for submitting questions.
Question-and-Answer Session
Operator
Thank you. [Operator Instructions] There are no questions on the phone at this time. Please continue with webcast questions, please.
Shahin Amini
I will do. So thank you, Sandra. Actually, one of our analysts, Teodor did tell me that he will be traveling, I do actually have a number of questions from him. So let's start off with that.
And so his first question is on Nigeria, there is an ongoing process. This is well reported regarding people's divestment by a particular Norwegian NOC. And then Teodor is wondering whether you have any comments on this process. So this is for the [Indiscernible].
Roger Tucker
We are aware of it, the process. And we are also aware that very interesting Prime, we do have a preemption right on this block. And we will be reviewing exercising our preemption might should that look an attractive investment opportunity for us. But we're not at that point of the year at the present time. But I stress it is a block an asset that is of high interest to us, it allows us to use our RBL facility, which gives us a significant competitive advantage. It's in an asset that we know. And those are the types of assets that we ought to be looking at very, very hard, but we're just waiting for our time.
Shahin Amini
Okay. Second question from Teodor is about if Venus is diverse today and Africa Oil does get a cash dividend from Impact, model the uses of that how much credit do returns to shareholders and how much it can be held for further investments.
Roger Tucker
Do you want to try on that, Pascal?
Pascal Nicodeme
Yeah, sure. We started the divdend from years ago, which has been a success. We started a share buyback program as well. Of course, we will have some capital commitments in South Africa and going forward even if we sale that. But clearly in the top of our priority in the connection idea, the returns for our shareholders. So we certainly think seriously about an exceptional buyback or dividend.
Shahin Amini
Okay, thank you so much for that, Pascal. Another question is about the reorganization of the assets ownership. And Roger, we do have some people would argue a convoluted structure. Do you have any views on how you would like to set -- what are your aspirations around simplifying that?
Roger Tucker
The other thing, I mean to sort of to start, the Africa Oil has fantastic assets. They are fantastic. However, they're not optimally owned. It's not -- for me, it's not optimal to be a shareholder in a company that is very -- the operator -- working with the operator at the JOA level. And so, we are looking at a whole series of ways to actually get us on to the JOA level in our two principle assets which in Nigeria and in the Akpo in Equatorial Guinea and in 3B 4B. We are in that position focused that, but there are routes to achieving that in these two assets and we are reviewing them. But you're absolutely right. I see that it is convoluted that it makes it very difficult sometimes for investors to accurately understand the true value and it is at the top of my priority list.
Shahin Amini
And, Pascal, if I may, there's a couple of questions on the stand by the unutilised stand by corporate facility. People are asking, obviously, there's a cost associated with this, is this something that could be drawn down so and obviously, that's a strategic decision. But can you sort of, I suppose the question is, can you justify that custom having this facility in place that?
Pascal Nicodeme
Yes, I think, today for companies like us, it's a privilege to have a syndicate of banks importing and supporting them. So I mean, we kept this group of four or five banks now for two or three years. And I think it's a good financial discipline to keep the contact with these banks, make sure that you comply with a set of covenants and not only about years but also financial covenants. And it's key to keep the bank happy and able to support you going forward in case specific management M&A transaction was to come on, especially specific investment opportunity was -- continuing getting portfolio.
So I think, yes, it was the cost. And we are only paying 40% of the margin as a commitment. So it can be seen as significant write down, but I think it's so significant when you consider that to be too one in terms of [Indiscernible] capacity as of today.
Shahin Amini
Very good. There's a question from Kristen. What economic standards or benchmarks does a company sets in this evaluation of acquisition opportunities? I mean, this is very often, the question spent hours discussing this, but do you have any views on when you're looking at opportunities?
Roger Tucker
I think the main criteria would be starting it. And I think we are strategy focused, instead of complying with a set of predefined internment camps. But of course, we would run all high sensitivities and weighted average cost of capital sensitivities as well. And but we don't have a predefined set of particular payback times or workloads that would actually match in order to make M&A or an acquisition possible. I think we are very open in that sense.
Shahin Amini
Thank you. Question on our capital expenditure guidance for 2023 to remind participants that's in the range $80 million to $100 million. Could you guide to what the level could be for next year? And also what it could be for fourth quarter because we've only spent $35 million in that guidance. So any views on the fourth quarter and also looking at ---
Roger Tucker
That's correct. We I've been behind capital expenditures, mainly because of the drilling campaign in Nigeria was starting late. And so we are running a bit late on this drilling campaign. And clearly what has not been done in 2023 will move to 2024. But so to answer specifically, that question, we are going to be pulling deal guidance in terms of getting capital expenditures in 2023. And I would say that the 2024 guidance would be in line with what we were in 2023.
Shahin Amini
And I think it was bit unfair to ask it was 2024 guidance. Because there is a process underway. So again, we have just two ways and present this guidance in due course. And it could be perhaps early next year. But so thank you for additional color there, of course.
So couple of questions on when the timeline for us to have a better handle on Impact's budget for next year. Is that something that is currently on the way being analyzed? And do you expect to have that information early next year?
Roger Tucker
So we rely only under IFRS of course, as you can imagine, yes, provide such an estimate. And usually, operators don't provide track budget before early December, was bought by the partners. So I think we will have to wait a little bit before we know more about it. What I can just mention is that in terms of Venus, Total is keen to continue to invest in this new plant. They are drilling with [indiscernible] at the moment or they have to at least mobilize on the block. We don't expect to change this drilling scheme for next year. So they will probably keep to raise a ton running for most of next year, which means that we expect the capital expenditure budget will be in the same order of magnitude as it was in 2023.
Shahin Amini
Thank you. There's a question regarding, this is from one of our private investors in Sweden about valuations on Nigerian that we presented last year. And basically saying with high oil prices, what could be the direction for the valuation of a Nigerian assets.
If I may, I will tackle that. Obviously, what we present is also with our NICC 1101 disclosure, and there is a process underway. And there will be a reports with our on Nigerian valuation in late February, early March. And we will give that with our year end results. Obviously, it would be inappropriate to sort of speculate what that could be. But just looking at this, generally speaking and looking at the Nigerian, Pascal, do you have any views on what could be the main value drivers for broadly speaking in Nigeria?
Pascal Nicodeme
I think the main driver, as far as I see is ability to maintain an increased production. I think we've seen the first benefit of this infill campaign on Egina this year. We expect it to continue for the next year, especially with the drilling on that boat. So I think that will be the number one driver for propagation next year.
Shahin Amini
Wonderful. And I think it's also important to remind people that when the ones, [Indiscernible], we've actually reduced our effective tax rate that can be low enough, Nigeria, which gets sort of bad publicity is one of the future restrictions, but you lower tax rates, when you compare it to places such as the UK. So we are actually not very complacent.
There's a question here from Gordon [ph], I really like it because it says, if you have gas from EG will be priced on European prices or local prices? Well Gordon I like your optimism because obviously we need to drill an exploration well first, but assuming we are successful and modular I mean, what would you say about EG 31 opportunities?
Roger Tucker
Actually, so why don't we put it up, and so we can talk to actually [Indiscernible]. So it is a very interesting opportunity. The team is as identified, it genuinely is an infrastructure lead exploration opportunity, because it is a block that is one that completely surrounds an LNG facility which has got a significant knowledge within it. So there are a whole series of what looked like gas prospects with seismic anomalies, which would be very short time backs to an existing piece of infrastructure.
However, in terms of gas pricing, we're not going to be getting European nat gas prices for it. It will be equivalent to whatever has been received by the operator of the LNG facility at the present time. In terms of the level of interest in this block, it has been, frankly, it's been staggering. We have a data room open, in which we still have nine companies reviewing this opportunity, and they're not all small independents, such as ourselves. And this is the real opportunity that this was brilliant by the team to come up with this.
But in terms of gas prices, in the economics, we just assumed, this gas prices going into the field at the present time. So we're not going to be an off taker of LNG in this. We just -- we've just feed for the LNG facility.
Shahin Amini
Roger, you mentioned the data room for EG 31. There are a number of questions for EG 31 farmhouse and 3B and 4B. Just wondering what could be a possible timeline for that farm out process.
Roger Tucker
The exact timeline on EG 31, we weren't going to ask the bids by the -- towards the end of December, mid-December. But because there has been such a level of interest in it, we're not going to get everyone through. We've just extended the bid deadline to I believe February 1 for that. So I think we had to extend that because there's too many people in there.
In terms of 3B 4B, we have had -- we haven't had significant discussions with one major already in that block. And we have just brought into that data room. Actually three other majors have asked to come in and so that one is going to take a little bit longer because I think it's worth standing on the sidelines and not leaping necessarily at the first opportunity, because there has been this sudden uptick in the level of interest in that book. And so I would say that, that one might want to give it the time to get everything in, I think is probably towards the end of the first quarter, probably, depending on the level of interest.
Shahin Amini
Question from [Indiscernible], will you stay focused on Africa offshore, could you consider other jurisdictions? So I think you've already answered that question. I think it's important, the fact that that question is to reiterate the [multiple speakers] on the existing portfolio.
Roger Tucker
In the next 18 months, this company has so much work to do on maximizing the value of this existing portfolio. You're not going to see us jump into another country, doing a big M&A transaction until we've got this portfolio to its maximum points of value realization, if you like. At that point, we will have a discussion with the board of where we take the company to next. And there have been discussions about could we take it into different domains. And that is not off the table. But for the next 18 months, expect us to see focus solely on [Indiscernible] around.
Shahin Amini
One of our covering analyst, Tom Arrack has a question. Are you considering opportunities or scenarios where you could acquire Impact? Do you like to answer it?
Roger Tucker
In respect to Impact, I will be very nice. We're getting to the point where something is going to happen in terms of Impact. So Pascal said, we're going to be getting the Total budget through where there will be another funding requirements. It's an unusual situation that that in fact holding, I've made it clear to you that we would like to stay and also told you that there is a big process on. And so if we find, that there is an absolutely outstanding offer comes in, then we would accept that. And I would think that there are going to be changes if you like within the Impact domains. I can't say exactly what they're going to be, but we're looking at a whole series of options that range from selling the asset to increasing our interest or spending as we are.
And I'm sorry, that's all I can do unless you can think of anything other. So it's a fantastic asset. We'd love it. We're not in love with it, that we keep it forever. But we need to consider the best option for the showers.
Shahin Amini
So maximize optionality around Venus. Pascal, let's continue, question on the Africa Energy, though, that we've given, what is the rationale for it? Any views on that?
Pascal Nicodeme
Well, the rationale was just to provide your short term liquidity to, Africa Energy. As you know, we know that the project in 11B, 12B going to take a long time to develop. And we are not there yet in terms of cash monetization. So I think this was just an option to give more time for Africa Energy to solve the manipulation of the gas. So we basically gave them an extra 12 months to make the deposit.
Shahin Amini
Thank you very much for that. Roger, back to you, Ed is asking the question. Can you outline scenarios, or share your thoughts on where the company can be bought to five years with respect to Nigeria and Venus. That's a very -- where you could say a lot of for quite that's a quite high long time horizon.
Roger Tucker
Post five years, well, I think that the, what we've done with the whiteboard and in terms of the premium business plan here and setting if you like a strategic direction as we tried to create optionality. The first step is to maximize the value of the quality of stuff that we already hold. You will see as possibly cleaning up some of the other assets, referral assets. Then once we get the portfolio cleaned up as best we can, we will then look at other strategic options and one of those could be significantly trying to grow the business from this portfolio. And we will look at the series of options, but the board has not given us approval to do that.
We just want this first step done the if you like, crosswords in the row that we can then make the decision, judging what the market is doing, and what is the best way to create shareholder value going forward. And one of them could be significant maybe via M&A. But that has not been agreed at the present time.
In terms of size, I think this industry does have a materiality interest which you get significant increases in evaluation metrics. And we've got a long way to get there. But personally, I'd like to see us get there. I'll leave it at that. Now whether it's easier along the way to monetize the company as it is, we'll decide in 18 months time.
Shahin Amini
On a lighter note, there's a question by [Indiscernible] and Swedish investors Swedish friends. Roger when he was coming to Stockholm, for example. So we probably could --
Roger Tucker
I'm doing the same, because [Indiscernible] out there, I was going to get as part of the question, I will say that that Pascal and I have done 50 investor presentations over the last six weeks. We attended the Bretta Conference, and we have been unbelievably busy on this portfolio in terms of its strategic direction. But I commit that I will come to Stockholm to do the Townhall by the end of the first quarter, yeah by the end of the first quarter. But you just have to give me a little bit of a stay of execution here. Because of the -- we are in a very active situation there on Nigeria and in what I was going to say inbound impact of the growth in farm out needs to focus for quality.
Shahin Amini
Very good. So we have mobile friends from Bloomberg Intelligence. And first of all, congratulations on the solid quarter and keep the last encouraging and supportive statements. Any color and a timeframe for main guessing drilling and initial results for Mangetti and also for Venus-1A?
Roger Tucker
Well as I sort of mostly told you, if you go back to this Zoom Earth website, focusing on the Namibia offshore, click on the calendar settings on the bottom left, select heat map, you will see that the thing as well has been tested and build up. And we would expect to see results within Impact in the next couple of weeks on that. In terms of when those are announced, we're obviously in a difficult situation, or an unfortunate situation with Total. And that they may not released the results until that February, Capital Markets Day, but there has been a testing.
In terms of Mangetti. Mangetti will be in the deeper object -- both objectives by the mid to end of December. And so that is imminent, as well.
Shahin Amini
But again, what I tell our investors is really the operator has its capital, well not capitalized, because they've got full Total results in early February. And I think, as always, it's important to direct everyone to what the operator has to -- have to say. So I encourage everyone to have that as your back stop date for news on both Mangetti and Venus-1A.
There is not a question well, the statements may be a critical statements in saying that, well, look, if the asset market is very competitive, just buyback your shares more aggressively, is going to create a lot of shareholder value? I think we've answered that. We are interested in share buyback.
Roger Tucker
I think we heard the message and it's one of the options we are considering at the moment.
Shahin Amini
Yeah. And of course the priority of really trying to think where we stand in terms of investments in our core portfolios will get up to be balanced very, very carefully.
Very good. There's another repeat questions here. So let's see. Operator, are there any calls on the on the line? I don't see any. But could you just do just want to offer the opportunity to see if anyone wants to ask a question?
Operator
[Operator Instructions].
Shahin Amini
Okay, well look doesn't seem a one's raising their hands, Sandra. There are plenty of other questions. And I'm wondering, are we running out of time? So let's get back to the webcast.
Perhaps one for you, Pascal, in growing the company debt financing operational account a cash flow other than preferred source of financing. And what are your thoughts on raising new equity is another option?
Pascal Nicodeme
I think it's a good question. If we were assuming that we are fully valued at, then I think it's going to be something that we would consider. At the moment, we don't think that the share prices really valued. So we would probably not go for an equity raise at the moment. And yeah, in terms of further yields or acquisitions, if we can favor cheap sources of capital, like the prime out here, for instance, or cheap, syndicated loans at the Africa Oil level, then I think that would fairer assumption just from a pure financial engineering perspective.
Shahin Amini
Very good. Question on Kenya? Is it 100% behind us? Or could that be lingering liabilities of future expenses in that sort of exiting that project?
Roger Tucker
I think we are going up at the end of the beginning, for sure. We have find all that, with all documents, and we are waiting while the congestion issue of the Government of Kenya. So that will be an important milestone. But officially now we are out of Kenya in terms of midstream basically. So this is done.
Of course, now we have to wind up the legal entities and in order to be able to do so we need clearance from documents on customs. So yes, I mean, the answer, we can't say, yes, we are completely out of Kenya as of today. But most of the average [Indiscernible].
Shahin Amini
There is one question I'm going to answer is when is this deck going to be available. So soon after this presentation, the slide deck will be posted on our website. And in the next 24 hours or so there will also be a recording of this webcast. So please keep an eye out for that if you want to go through it again.
So let's see what else we have. I think we've really gone through most of the questions. But just to make sure that I haven't missed anything. There's an important one here on the fiscal regime in Nigeria. And it's in the reduction in the tax rate, which we covered in our third quarter MD&A on press release from 15% to 13%. It's not just for OML 127. Pascal things, of course, to give a refresher on what we did earlier this year as well on 130?
Pascal Nicodeme
Yes, so it's valid for both. And when we obtain license extension on the OML 130, of course subject to as converting the PIA on OML 130. So yeah, today we can say that both were covered by the substantial terms and they are consistent with the PIA. So on post-close, we are subject to cover income tax of 13%.
Shahin Amini
Very good. Very good. There is a question on that oil price hedging. Do you think what strategy of hedging oil prices when they fought is the optimal? I think that's not quite right, because we actually hedged when the prices fall. And reminder on all oil markets and strategy I think is useful.
Pascal Nicodeme
Yeah. So what we're doing basically each time we want to set a calendar, we basically set the specials, which is the average forward curve at the moment when we plan to obtain the cargo to which we take a 20% discount and we set basically the threshold for that cargo. And then if anytime between the moment we give the instruction in the moment the cargo one month before the cargo is actually have taken the oil price falls below that threshold, then you'll take your concealed to cargo forward. So it's not exactly making policy, it's not 100% perfect, it's not 100% equivalent to a production even if it looks really like a production.
But I think in upward markets, it's very useful because it avoids to get locked into your forward curves, which basically potentially run into significant losses if the oil price continues to go up, which is basically what happens in 2021-2022, when the oil price started to go up again. We have basically 60% to 70% of our cargo sold forward, we are bit stuck. And we touched few hedge losses. But as you see from mid-2022, I mean the mechanism we have in place is very efficient to track the average to the grant. So we are basically selling stock now with a form of downward protection if the oil price was to go down significantly.
So I think that's a good prediction, not to answer these questions fully. If we were to increase leverage at primary level, and if we wanted to maximize the level at Prime level, we would probably have to come to a more robust hedging instrument than the one we have. So it could be declining stock options, buying productions. It could be starting to forward curve again or maybe more sophisticated instruments I've covered. So -- but I think we will look into that if we decide to do a large acquisition at Prime level and we decide to introduce that.
Shahin Amini
Very good. And question from one of our longstanding shareholders. And Nick, anything you can say on the actual for what size of 2P likely production from the Preowei, and gentlemen, if it's okay, I'm going to answer this. We haven't actually provided that level of detail as of now. I think it's very important for us to coordinates our public statements with Prime and our operator. So Nick, please bear with us. I will work on that as a priority. And we'll get back on the level of detail.
As of now, we can't go into that level of detail. We don't want to upset relationships and step on anyone's toes, particularly the operator.
And look, I'm mindful that we've only got a minute or two left. So I propose that we finish here. And I'll hand over back to the operator for the finishing remarks.
Well, nothing there. Roger, you want to say anything?
Roger Tucker
Thank you very much, all for attending. And we look forward to seeing you on another webcast soon.
Shahin Amini
Yes. And just to remind everyone that the recording of the webcast is available, even give it another 24 hours and it will be on. And as always, please reach out to me if doubt or questions. Thank you so much for your time. Very grateful for your support and continuing interest in Africa Oil. On that note, goodbye.
Operator
This concludes today's conference call. Thank you for participating. You may now disconnect.
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Africa Oil Corp. (AOIFF) Q3 2023 Earnings Call Transcript