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Introduction & Market Context
Africa Oil Corp. (OTC:AOIFF) presented its 2024 results and business outlook on February 28, 2025, highlighting a transformative year for the company. The presentation, led by President & CEO Roger Tucker along with the executive team, focused on the company’s strategic repositioning through the imminent Prime acquisition, consistent production performance, and expanding opportunities in the Orange Basin.
The company operates in a challenging but opportunity-rich African energy landscape, where its strategic focus on high-quality assets and shareholder returns aims to differentiate it from peers.
Executive Summary
Africa Oil (TSX:MER) reported meeting its 2024 production targets while returning $67.9 million to shareholders through dividends and share buybacks. The company executed three strategic transactions during the year to strengthen and de-risk its portfolio, with the most significant being the Prime consolidation expected to close around March 7, 2025.
As shown in the following highlights from the presentation:
The company completed the Venus appraisal in Namibia’s Orange Basin and increased its stake in Impact Oil & Gas, enhancing its exposure to what management describes as a key growth asset. These achievements came despite financial challenges in the latter half of 2024, with negative net income reported in Q3 and Q4.
Quarterly Performance Highlights
Africa Oil maintained consistent production throughout 2024, with full-year working interest production of 17,000 barrels of oil equivalent per day (boepd), within the guidance range of 16,500-18,500 boepd. Entitlement production reached 19,400 boepd, also within the guidance range of 18,000-21,000 boepd.
The quarterly production chart demonstrates this consistency:
The company achieved an average 2024 sales price of $84.6/bbl, outperforming the average Dated Brent price of $82.7/bbl. However, no cargos were lifted in Q4 2024, with up to five cargos scheduled for lifting in Q1 2025, which will unwind a significant underlift caused by deferrals.
Financial performance showed concerning trends in the second half of 2024. Net income turned negative in Q3 (-$3.2 million) and deteriorated significantly in Q4 (-$100 million). Prime’s EBITDAX showed a similar declining pattern through Q3 before spiking to approximately $250 million in Q4, while CFFO remained low at around $15 million.
Strategic Initiatives
The most significant strategic development is the imminent closing of the Prime deal, expected around March 7, 2025. This transaction will substantially change Africa Oil’s financial profile and shareholder return policy.
As detailed in the following slide, the company plans to implement a new dividend policy upon closing:
The new policy includes an annual base dividend of $100 million (approximately $0.15 per share), representing a tripling of the current annual distribution of $0.05 per share. Additionally, Africa Oil commits to distributing 50% of free cash flow net of the base dividend towards special dividends and/or share buybacks.
The company ended 2024 with a combined AOC and Prime (100%) cash balance of approximately $461 million, providing a strong foundation for this enhanced shareholder return program.
Growth Opportunities
Africa Oil is strategically positioned in the Orange Basin across Namibia and South Africa, which the company views as a key growth area. The Venus discovery in Namibia has completed a successful appraisal program, with development studies targeting 150,000 barrels of oil per day and a final investment decision expected by H1 2026.
The following map illustrates the company’s position in this promising region:
Africa Oil has increased its shareholding in Impact Oil & Gas to 39.5%, enhancing its exposure to exploration opportunities in the region. Ongoing exploration includes the recently spudded Marula-1X well and the drilled Tamboti-1X well, with Olympe-1X planned for 2025.
In South Africa, the company holds an 18% stake in Block 3B/4B, with TotalEnergies (EPA:TTEF) operating the block following a farm-down that secured up to $46.8 million, including exploration carry for Africa Oil.
Financial Analysis
Africa Oil’s net asset value (NAV) build-out shows significant potential upside compared to the current market valuation. The company’s core NAV is approximately $1.4 billion, with additional value from Namibia (~$350 million) and Block 3B/4B (~$50 million) bringing the total NAV to around $1.8 billion.
This valuation analysis is illustrated in the following chart:
With a share price of C$1.91 as of February 24, 2025, and a market capitalization of approximately US$585 million (C$835 million), the company trades at an implied discount of 35-49% to its pro forma Core and Total NAVs. The pro forma market capitalization is estimated at approximately US$900 million.
The company’s capital allocation strategy focuses on four key areas: balance sheet strength, shareholder returns, organic growth, and inorganic growth opportunities:
Africa Oil aims to maintain minimum liquidity of US$150 million and keep its LTM Net Debt/EBITDAX ratio below 1.0x. The company plans to refinance and optimize Prime’s debt structure while pursuing both organic growth through short-cycle production increases and selective inorganic growth opportunities in Africa.
Forward-Looking Statements
Looking ahead to 2025, Africa Oil outlined its operational plans for Nigeria, focusing on infill drilling following 4D seismic insights at PML 2/3 (Akpo/Egina), with a drilling campaign for Egina commencing in Q1 2025. For PML 52 (Agbami), the company is evaluating seismic for a potential 2026 drilling campaign, with a full-field maintenance shutdown scheduled for Q4 2025.
The company positions itself as an investment opportunity based on high netback production, funded organic growth, a robust balance sheet, and transparent shareholder returns policy:
Management believes Africa Oil is positioned to be a leading player in the consolidation of the Independent (LON:IOG) E&P space, leveraging its strategic assets and financial flexibility to create shareholder value.
While the presentation highlights numerous opportunities, investors should note the significant Q4 2024 loss and carefully evaluate the execution risks associated with the Prime consolidation and the development timeline for the Venus discovery in Namibia.
Full presentation:
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