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 speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star one one on your telephone keypad. If you would like to withdraw your question, please press star one and one again. Please note that any time participants in the webcast can submit their questions using the Q&A box on the webcast interface. Please note that this event is being recorded. The recording will be available for playback on the company's website. I would now like to pass the meeting to Mr.
Shahin Amini, Africa Oil's Investor Relations and Commercial Manager. Please go ahead, Mr. 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 kickstart 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 subject 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.
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 will have read my resume, if you like, on the new website, but I'm originally a geologist, a PhD. I went into Exxon for many years and traveled all around the world, doing all aspects of geology and geophysics. I then joined a British independent that grew very significantly across the world, called LASMO. I then had a very interesting adventure working for Mikhail Khodorkovsky in Yukos, in Russia. I then did some private equity investing work. And ultimately, I, my...
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, who are based in with production interests in Peru. So I pretty much worked every basin all across the world, in big companies, in small companies, in NOCs, in independents, and private equity investment. It's been... So I've been here just four months now, and it has been an incredibly busy four months since I took over. We've performed a very deep review of the business that I inherited. We've been managing some very significant stakeholder relationships.
We've presented a business plan to the board, and we've reorganized the organization, including bringing in some very key new recruits, including a senior vice president of business development and an 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 has absolutely outstanding existing assets in the portfolio. It needed to have a little bit of a reorganization, but the assets underlying the business are 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 the 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 I suppose 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. Next slide, Shane. What have we achieved actually, this quarter? I think that we've got extremely strong operational results. The Venus-1X test result was positive, as we've 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've converted OML 127 into the new petroleum terms in Nigeria. We've received a very significant dividend 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. So passing now over to Pascal to deal with those financial issues and production issues.
Thank you, Roger. So I will start with a quick update on our production performance, especially the comparison with our management guidance. We've been very encouraged this quarter, since it's been the first quarter up in terms of production since the last quarter. We are now at 23,000 barrel equivalent compared to 22,400 barrel 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 net entitlement production.
Which means that, we are confident to end the year 2023 in the upper range of this production guidance. We are also drilling at the moment on Akpo. This will be the first well out of a 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 shows 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 has been underpinned by a $57 million net profit from Prime.
One exceptional item to mention this quarter is, we've impaired $6.5 million of shares in Eco Atlantic due to the drop in share price. We've also posted a $31 million exceptional adjustment due to the release of deferred taxes in Nigeria due to the switch of OML 127 to the PIA. 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, when we obtained license extension, in, in OML 130, and, and, which triggered that, that switch to the PIA terms and, and therefore, the, the release in the deferred tax liabilities. Otherwise, I think this, this quarter has been pretty stable compared to, our history of, of results, and, and consistent with, Prime's performance, over the last quarters. Next slide, please. Thank you. So this slide shows the evolution of our, of our cash position, and, what I, I will simply say here is that we received, as, Roger mentioned, $125 million of dividend from, from Prime since, the beginning of the year.
We've lived within our means, and the priority for the company has been to return part of this cash to our shareholders via the dividend or the share buyback program. So, overall, we distributed $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 stand our corner on all the cash flows we've received on Venus. I think this is a key priority for the company to stand our corner in Impact. And we've also increased our equity percentage in Impact.
During these equity raises, we are now at 31.1% in Impact. Other things to mention, we've started to invest 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 we had in Kenya, both with partners and the local tax authorities for $18 million. So I think that's it on this slide. Next one. Yeah, so I just wanted to give a quick update on where we were in terms of licenses in Nigeria.
So as you, as you know, and we mentioned before, we have obtained a 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 OML in OML 130. One 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 under a corporate tax regime at 30%, which replaces the petroleum profit tax system, which was at 50%. So significant benefit for the company going forward.
The partners on this block have also decided to request the extension of the license. So this is work ongoing, and this is probably the next milestone for us in Nigeria. Thank you. In terms of oil sales, it's been a consistent quarter. I 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 our oil at a price which is slightly larger than average Brent. This quarter, we incurred a bit by timing, since we sold our cargos 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 our cargos and the average Dated price. But overall, since we've put this new marketing philosophy in place in Q3 2022, whereby we are basically selling all our cargos, but unless the oil price goes down below certain thresholds fixed, which would trigger a full sale in that case, which has only happened on a few occasions since we've put this new marketing 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 full sales before Q3 2022.
So overall, it's a significant benefit to Prime and to 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 this level of EBITDAX and cash flow will remain within management guidance at the Africa Oil level. So overall, it's a very good performance again, this quarter from Prime, and which is able to maintain a very stable net debt ratio. So if you could move to the next slide. Yeah, this slide shows our net debt balance.
At this moment, Prime has only a $750 million loan under their RBL facility, which, as you know, has been refinanced last quarter with the extension to 2030. Our corporate facility at the Africa Oil level is still undrawn. So we have a significant liquidity both at Prime and Africa Oil level, with a very minimal consolidated debt level. If you take Africa Oil and Prime into consideration together. Next slide, and we'll hand over to Roger now.
So what we'll do now is we'll have a look at the, the portfolio. And I will describe how we're going to talk to you over the, the next several months. The first thing is, you're only gonna see us focus on four assets. The first is Nigeria, which we'll look at in some detail. Equatorial Guinea, which we've just entered, and as Pascal said, we started to spend money on. And it's a very particular type of opportunity, which is, it is exploration, but it will be very quick tieback, 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 are what we are focusing all of our intellectual horsepower on, all of our investment potential on over the next year. That is a significant refocus of the way that we're looking at the business. In terms of the metrics, and I'll come on to how those metrics are made up. We have 2P reserves of nearly 56 million barrels. We produce about 23,000 barrels a day, liquidity of $376.5 million, and we've got near-term catalysts of significant size in Namibia, E&A, and actually also, I would add to that in 3B/4B. 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 in and look at these assets and what they really are, rather than the way we summarize them on the, on this. And I think that we've perhaps have been a little bit lax, and maybe all of you knew this all, all along, but by not describing the sheer scale of the assets that we are invested in. They are three of the top five fields in Nigeria. On a gross basis, they're doing 320,000 barrels a day, and at that level of production, they do receive the A team, if you like, of the two operators, which is Chevron and Total. They're genuinely world-class production hubs that we, with a great fortune, are in.
The other thing about them is that 62% of the reserves are in the 2P 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 are all FPSOs, have been extremely well-maintained, and we don't anticipate any significant changes or uptime in those assets. Because of the extension of the license, we do have infill drilling opportunities, and we also have a now doable new tieback, which is gonna be Preowei, which wouldn't have been doable if the license hadn't been extended, and we're anticipating getting to FID on that by the end of next year.
So I stress it again, the underlying production assets are a very significant scale, operated by majors with excellent reservoir quality. And this, I think you'll see, goes through the portfolio. If we go to the next slide. What I'm gonna 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 to date up in the north, in Namibia, and our block, which we're in with Total and Shell, with existing discoveries. And the numbers on here are oil in place numbers presented by the Namibian National Oil Company. Graff is 2.6 billion barrels of in-place reserves. 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, 'cause I was with BG when we were with Petrobras and developed the Santos Basin subsalt plays, which resulted in eventually about 13 FPSOs going out there. And so I have experience in the way that these plays do develop. But what I'm gonna do now is jump down to Block 3B, 4B, which is in the South. It is actually in South Africa. And combined with our interest in Venus, we are the only independent 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 P50 prospective resources in there of over 4 billion barrels of recoverable. So people often ask me, "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 in a, as I said, a farm out process at the moment, and there is a high level of interest from major companies to come into this block.
I anticipate that certainly within 2024, hopefully way before, we will have concluded a farm in, into that that acreage. Now, to come up to, our interest in, in Venus, in the Venus area. What we actually have got there, can you go to the next? Is a, is what I believe is a world-class opportunity in, in Venus. As you see on the bullets on the right-hand side, Wood Mackenzie have said it has got 3 billion barrels of recoverable reserves. Now, go back and think about how many recoverable reserves we've got at the moment. We have 55.6. We have a see-through equity via our 31% interest in, in Impact of 6% in, in this, which would be the equivalent of us having 180 million barrels of recoverable reserves.
Which is more than three times the size of the reserves that we've got at the moment. So this is an asset for us that we have to focus our attention on, because it is the materiality to a company of our size, also to Total size, which is of critical importance to get right. We also, on 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 was encountered, higher fan than the Venus fan. But it will also go through that fan to target the northern extension of Venus.
It's a dual objective well. We also, as I currently know, which isn't on the slide here, are testing the Venus appraisal well. If you go back, and I can say this, there's a public website to, what's it called? Zoom World.
Zoom Earth.
Zoom Earth. And you go back to November the eighth and then click through. You actually put the screen for heat map on. You click through November the eighth, ninth, tenth, eleventh, I think it was. You will see that there is a major flare at the location of that, that well. It then goes out, because they're doing a build-up, and then, then comes back, back on again. So we tested hydrocarbons 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, called Damara and South Damara, is only covered, by 2D seismic. It looks extremely attractive, but it...
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 block's prospectivity and development potential are. So in terms of next year, this block is gonna become a very significant priority for us going forward in terms of capital allocation. So our year-ahead priorities then, as I've said, some of it is we're gonna focus on these core assets. We're going to try to complete the farm outs of Block 3B/4B, EG-31, and EG-18. 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.
In actual fact, the asset, any asset acquisition will be in blocks that we're already in. And if it tinkers out of that, it will be in areas where we've got significant competitive advantage. 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. But we'll be solely focused on making significant returns for shareholders. With that, I would like to conclude and pass over to Shahin to get us into Q&A.
Yes. So, operator, Sandra, back to you, just to remind people of the instructions for submitting questions.
Thank you. As a reminder, to ask a question, please press star one on one on your telephone. That's star one on one, if you wish to ask a question. To withdraw your question, please also press star one on one again. There are no questions on the phone at this time. Please continue with webcast questions, please.
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. So his first question is, in Nigeria. There is an ongoing process, this is well reported, regarding deepwater divestment by a particular Norwegian NOC. And then Teodor is wondering whether you have any comments on this process. And so this is OML 128.
We are aware of it, the process, and we are also aware that via our interest in Prime, we do have a preemption right on this block. And we will be reviewing, exercising our preemption right, should that look an attractive investment opportunity for us, but we're not at that point 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 significant competitive advantage. It's in an asset that we know, and those are the type of assets that we ought to be looking at very, very hard, but we're just waiting our time.
Okay. Second question from Teodor is about if the investment is divested and AI does, Africa Oil does get a cash dividend from Impact, what would be the uses of that? How much of it could it be returned to shareholders, and how much it could be held for further investments?
Do you want to try that one, Pascal?
Yeah, sure. I mean, I mean, we started this dividend program a few years ago, which has been a success. We started this share buyback program as well. Of course, we will have some capital commitments in South Africa, and it will be going forward, even if we sell Impact. But clearly, in the top of our priorities is to maximize the returns to our shareholders. So we certainly think seriously about an exceptional buyback or a dividend.
Okay. Thank you so much for that, Pascal. Another question is about the reorganization of the asset ownership. Roger, would you 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?
I do think the thing that I think I said at the start, Africa Oil has fantastic assets. They are fantastic. However, they're not optimally owned. It's not optimal for me, it's not optimal to be a shareholder in a company that is then the operator or working with the operator at the JOA level. And so we are looking at a whole series of ways to actually get us onto the JOA level in our two principal assets, which are Nigeria and Namibia. Of course, in Equatorial Guinea and in 3B, 4B, we are in that position. 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.
I see it as a... It makes it very difficult sometimes for, for investors to accurately understand the true value, and it is at the top of my priority list.
Pascal, if I may, there is a couple of questions on the standby that are unutilized standby corporate facility. People are asking, obviously, there's a cost associated with this.
Is this something that could be drawn down? So obviously, that's a strategic decision. But can you sort of... I suppose the question is, can you justify that cost of having this facility in place?
Yes, I think today, for companies like us, it's a privilege to have a syndicate of banks 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 governance. Not only about ESG, but also financial governance. And it's key to keep these banks happy and able to support you going forward in case a specific M&A transaction was to come or specific investment opportunity was to come in our existing portfolio. So I think yes, it's worth the cost, and we are only paying 40% of the margin as a commitment fee.
So, it can be seen as significant, but I don't think it's so significant when you consider that we have still $175 million of available debt capacity as of today.
Very good. There's a question from Christian. What economic standards or benchmarks does a company set in its evaluation of acquisitional opportunities? I mean, this is a very open-ended question. We could spend hours discussing this, but do you have any views on when you're looking at opportunities?
I think the main criteria would be strategy.
I think we are strategy focused instead of complying with a set of predefined economic terms. Of course, we would run oil price sensitivities and weighted average cost of capital sensitivities as well. But we don't have a predefined set of, in particular, payback times or work hurdles that would have to be met in order to make a M&A or an acquisition possible. I think we are very open on that terms.
Thank you. Question on our capital expenditure guidance for 2023. To remind participants, that's in the range of $80 million-$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 of that guidance. So any views on the fourth quarter and also looking at next year?
I think that's correct. We are a bit behind our capital expenditures, mainly because of the drilling campaign in Nigeria. We started 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 probably below guidance in terms of capital expenditures in 2023. And I would say that the 2024 guidance will be in line with what we've been through in 2023.
Thank you. I think it was a bit unfair to ask you for 2024 guidance because that is a process underway.
Exactly.
So we just have to wait and present this guidance in due course, and it could be perhaps early next year. But thank you for additional color on the fourth quarter. So couple of questions on when, you know, the timeline for us to have a better handle on Impact's budget for next year. Is that something that is currently underway, being analyzed, and do you expect to have that information ready say early next year?
So we rely only on the operator, of course, as you can imagine-
Yes
... to provide such an estimate. Usually, operators don't provide draft budget before early December, approved by the partners. So I think we will have to wait a little bit before we know more about this. What I can just mention is that in terms of Venus, Total is keen to continue to invest in this block. We know that they are drilling with two rigs at the moment, or they have two rigs to mobilize on the block. We don't expect to change this drilling scheme for next year, so they will probably keep two rigs up and running for most of next year. Which means that we expect the capital expenditure budget to be in the same order of magnitude as it was in 2023.
Thank you. There is a question regarding... This is from one of our private investors in Sweden, about valuation for Nigerian, that we presented last year. And basically saying with higher oil prices, you know, what could be the direction for the valuation of our Nigerian assets? If I may, I will tackle that. Obviously, what we present is all to do with our NI 51-101 disclosure, and there is a process underway, and there will be a report with our 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.
Just looking at this, generally speaking, and looking at the Nigerian, Pascal, Roger, do you have any views on what could be the main value drivers for, broadly speaking, in Nigeria?
I think the main driver, as far as I see it, is our ability to maintain an increased production. I think we've seen the first benefit of this infill campaign on Egina this year. And we expect it to continue over next year-
... especially with the drilling on Akpo. So I think that will be the number one driver for valuation, next year.
Wonderful. I think it's also important to remind people that both OML 127 and OML 130, we've actually reduced our effective tax rate.
Exactly.
Bizarrely enough, Nigeria, which gets so much bad publicity, is one of the few jurisdictions where you have lower tax rates.
Exactly
... when you compare it to places such as the U.K. So we are actually in a very good place. There is a question here from Goran. I really like it because it says: "If you have gas from EG, would it be priced on European prices or local prices?" Well, Goran, I like your optimism, because obviously we need to drill an exploration well first. But assuming-
... we are successful, Roger, I mean, could you say more about this EG-31 opportunity?
Actually, why don't we put it up?
Yeah.
It's in the appendix, so we can talk about, actually, a slide. So this is a very interesting opportunity that the team has identified. And it genuinely is an infrastructure-led exploration opportunity because it is a block that, EG-31, completely surrounds an energy facility which has got significant oil and gas within it. And so there are a whole series of what look like gas prospects with seismic anomalies, which would be very short tiebacks to an existing piece of infrastructure. However, in terms of gas pricing, we're not going to be getting European gas prices for it.
But it will be equivalent to whatever is being 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, and 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. So this is a real opportunity that is brilliant by the team to come up with this. But in terms of gas prices in the economics, we've just assumed the standard prices going into the field at the present time. So we're not gonna be an offtaker of LNG in this.
We're just feed for the LNG facility.
Roger, you mentioned a data room for EG-31. There are a number of questions both on EG-31 farm out and 3B, 4B. Just wondering what could be a possible timeline for the farm out process?
Well, actually, the exact timeline on EG-30, 31, we were gonna ask for bids by towards the end of December, mid-December. But because there has been such a level of interest in it, we're not gonna get everyone through. We've just extended the bid deadline to, I believe it's the first of February, 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 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 gonna 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 block. And so I would say that one, I want to give it the time to get everything in. I think it's probably towards the end of the first quarter, probably, depending on the level of interest.
Question from Peter Damp. Will you stay focused on Africa offshore, or could you consider other jurisdictions outside Africa? I think you've already answered that question, but I think it's important the fact that that question is asked. To reiterate the focus on the existing portfolio.
In the next 18 months, this company has so much work to do on maximizing the value of this existing portfolio. You're not gonna see us jump into another country and do a big M&A transaction, until we've got this portfolio to its maximum point 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 the assets that we've got at the moment.
One of our covering analysts, Tom Eric, has a question. Difficult one to get answered. Are you considering opportunities or scenarios where you could acquire Impact? You don't have to answer it. Just any thoughts.
In respect to Impact, I will be, I'll be very honest. We're getting to the point where something is gonna happen in terms of Impact. As Pascal said, we're gonna be getting the total budget through, but there will be another funding requirement. It's an unusual situation that Impact holding. I've made it clear to you that we would like to stay. I've also told you that there is a bid process on, and so if we find that there's an absolutely outstanding offer comes in, then we would exit. But I would think that there are gonna be changes, if you like, within the Impact domain.
I can't say exactly what they're gonna be, but we're looking at a whole series of options that range from selling the assets to increasing our interest, to staying as we are. I'm sorry, that's all that I can do on this. You can think of anything other. It's a fantastic asset. We love it. We're not in love with it, that we keep it forever, but we need to consider the best option for the shareholders.
So maximize optionality-
Yeah.
-around the asset?... Pascal, let's come to you. A question on the Africa Energy loan.
That we've given.
Yes.
What is the rationale for it? Any views on that?
Well, the rationale was just to provide short-term liquidity to Africa Energy, as you know. We know that the project in 11B/12B is going to take a long time to develop, and, I mean, we are not there yet in terms of gas monetization. So I think this was just an option to give more time for Africa Energy to sort the monetization of the gas. So we basically gave them an extra 12 months to make the project happen.
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 could be in four to five years with respect to Nigeria and Venus? That's a very you could say a lot because that's quite a long time horizon.
four to five years. Well, I think that what we've done with the board in terms of improving the business plan here and setting, if you like, a strategic direction, is we're trying to create optionality. The first step is to maximize the value of the stuff that... the quality stuff that we already hold. You will see us possibly cleaning up some of the other assets, the peripheral 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 that we will significantly try to grow the business from this portfolio.
And we will look at a series of options, but the board has not given us approval to do that. We just want this first step done, if you like, the crossroads in the road, 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 that we significantly grow it, and 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, at which you get significant increases in valuation metrics.
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.
On a lighter note, there's a question by Siraj, or as a petition from our, Swedish, investors, Swedish friends. Roger, when, when are you coming to Stockholm for a town hall? So we probably could plan something in the new year.
It's funny because Siraj warned me that I was gonna get this type of question. I will say that Pascal and I have done 50 investor presentations over the last-
Yeah.
Over the last six weeks. We attended the Pareto 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 a town hall in the near... by the end of the first quarter, we'll say, shall we?
Yes.
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 here on in both Nigeria and in, well, I was going to say, and in Impact at the present time, which needs the focus of all the team.
Very good. So we have one of our friends from Bloomberg Intelligence. First of all, congratulations on a solid quarter. Thank you for that.
Thank you.
Encouraging and supportive statement. Any color on the timeframe for Mangetti drilling and initial results for it and also for this Venus- 1A?
Well, as I sort of naughtily told you, if you go back to this Zoom Earth website, focus in on the Namibia offshore. Click on the panel, which I think is on the bottom left, select Heat Map, you will see that the Venus well has been tested, and it's had a 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 in that they may not re-release the results until their February capital markets day, but there has been a test.
In terms of Mangetti, Mangetti will be in both objectives, I think in both objectives by the mid to end of December. And so that is imminent as well.
But again, what I tell our investors is really the operator has its capital... Well, not capital markets, so they've got the-
Full results.
Results in early February.
Yes.
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 backstop date for news on both Mangetti and Venus one A. There is not a question, more of a statement, maybe a critical statement. In saying that, well, look, if the asset market is very competitive, just buy back your own shares more aggressively. That is how you're gonna create a lot of shareholder value. I think we've answered that. You know, we are committed to share buybacks.
We heard the message, and I think it's clearly one of the options we are-
Yeah
- considering at the moment.
Yeah.
It's on the top of the list.
Yeah. And of course, the priority of really trying to think where we stand in terms of investment-
Yes
in our core portfolio as well. They have to be balanced-
Exactly
... very, very carefully.... Very good. There's a lot of repeat questions here, so, let's see. Operator, are there any calls on the line? I don't see any. But could you just, do you just want to offer the opportunity to see if anyone wants to ask a question?
As a reminder, if you wish to ask a question, please press star one and one on your telephone. That's star one and one, if you wish to ask a question.
Okay, well, look, doesn't seem that anyone's raised their hands, does it, Sandra? There are plenty of other questions, and I'm mindful we're running out of time, so let's get back to the webcast. Perhaps one for you, Pascal. In growing the company, debt financing and operational cash flow, are they the preferred source of financing, and what are your thoughts on raising new equity? Is that an option?
It's a good question. If we were assuming that we are fully valued, then I think it would be something that we would consider. At the moment, we don't think that the share price is fully valued, so we would probably not go for an equity raise at the moment. And yeah, in terms of further deals or acquisitions, if we can favor cheap sources of capital, like the Prime RBL, for instance, or cheap syndicated loans at the Africa or local level, then I think we would favor this option, just from a pure financial engineering perspective.
Very good. Question on Kenya. Is it 100% behind us, or could there be lingering liabilities or future expenses in sort of exiting that project?
I think we are closer to the end than the beginning, for sure. We have signed all the relevant documents, and we are waiting for the counter signature of the government of Kenya. So that's, that would be an important milestone. But officially now, we are out of Kenya since mid-June, 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 the department, from 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 liabilities, I believe, are behind us.
Very good. There's one question which 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. 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 and press release from 50% to 30%. Is that just for OML 127?
Pascal, I think it's important you give a refresher on what we did earlier this year as well, OML 130.
So, yeah, so it's valid for both. And when we obtain license extension on OML 130, which was, of course, subject to us converting to the PIA on OML 130. So yeah, today we can say that both OMLs are covered by the same fiscal terms, and they are consistent with the PIA. So on both, both blocks, we are subject to covering in terms of 30%.
Very good. Very good. And there is a question on oil price hedging. Do you think your strategy of hedging oil prices when they fall is the optimal? I think that's not quite right because we don't actually hedge when the prices fall. A reminder on our oil marketing strategy, I think is useful here.
Yeah. So what we do is basically each time we want to sell a cargo, we basically set a threshold, which is the average for our curve at the moment when we plan to offtake the cargo, to which we take 20% discount, and we set basically the threshold for that cargo. And then, if any time between the moment we give the instruction and the moment the cargo, or one month before the cargo is actually offtaken, the oil price falls below that threshold, then the offtaker can sell the cargo forward. So it's not exactly a hedging 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 a upward market, it's very useful because it avoids to get locked into a forward sales, which are basically potentially run into significant losses if the oil price continues to go up, which is basically what happened in 2021, 2022, when the oil price started to go up again, and we had basically 60%-70% of our cargo sold forward, we were a bit stuck, and we unfortunately had a 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 Dated Brent. 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, that's a good prediction. Now, to answer these questions fully, if we were to increase leverage at Prime level, and if we wanted to maximize the level at Prime level, we would probably have to turn to a more robust hedging instrument than the one we have. So it could be buying stock options, buying put options. It could be, it could be, starting to forward sales again, or maybe have more sophisticated instruments like others. So but I think we would look into that if we decide to do a large acquisition at Prime level and we decide to increase leverage.
Very good. A question from one of our longstanding shareholders, and Nick, anything you can say on Akpo West size of 2P likely production from the 3 wells? And, gentlemen, if it's okay, I'm gonna answer this. We haven't actually provided that level of detail as of now, and I think it's very important for us to coordinate our public statements with Prime and the operator. So Nick, please bear with us. I will work that, on that as a priority, and we'll get back on, on, 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, specifically the operator. Look, I'm mindful that we've only got a minute or two left, so I propose that we finish here.
I'll hand over back to the operator for the finishing remarks. Well, nothing there. Roger, do you want to say anything before we-
No. Thank you very much all for attending, and we look forward to seeing you on another webcast soon.
Yes, and just to remind everyone that the recording of the webcast is available. You can give it another 24 hours, and it will be on. And as always, please reach out to me if, if there are questions. Thank you so much for your time. Very grateful for your support and continuing interest in Africa Oil. On that note, goodbye.
This concludes today's conference call. Thank you for participating. You may now disconnect.