Africa Oil (OTC:AOIFF) Corp (ticker: AOI) has reported a productive first quarter in 2024, with significant transactions aimed at derisking its portfolio and a net income of $3.5 million. The company's management presented these results during an earnings call, emphasizing a disciplined approach to liquidity and shareholder returns. Africa Oil highlighted its operations in Nigeria, Equatorial Guinea, Namibia, and South Africa as focal points for growth. The company is also in the process of acquiring an additional stake in Impact and extending its corporate facility.
Key Takeaways
- Africa Oil Corp reported a net income of $3.5 million for the quarter.
- The company has an active strategy for portfolio consolidation, including a farmout to Total and offers to increase equity interest in Impact.
- Africa Oil is focused on organic growth and has completed 38% of its share buyback program.
- The company has returned $130 million to shareholders since 2022.
- Africa Oil achieved an average sale price of over $85 per barrel, higher than the average Brent price.
- The Lundin family has exited their position, with Fidelity becoming the second-largest shareholder.
Company Outlook
- Africa Oil is aiming to grow through its existing portfolio and consolidate core assets.
- The company is working to extend its corporate facility and simplify its legacy portfolio.
- Management is committed to maintaining a strong balance sheet.
Bearish Highlights
- The company is taking a cautious approach to capital allocation and spending in the pre-production stages.
- There is a delay in fully funding transactions to ensure zero CapEx.
Bullish Highlights
- Africa Oil has operations in key areas with a focus on asset consolidation, particularly in Nigeria.
- The company has achieved higher sale prices for its oil compared to the average Brent and Dated Brent prices.
- Africa Oil is actively pursuing asset consolidation in Nigeria.
Misses
- No specific details were provided on the plans to rationalize the non-core assets portfolio.
- The company did not provide further details on the asset consolidation in Nigeria.
Q&A Highlights
- The company is satisfied with the current guidance on Nigerian production.
- Africa Oil is fully committed to shareholder capital return and may consider a special dividend in the future.
- Discussions included Prime's cash and debt balance, performance of the Akpo wells, and project updates in Namibia.
- The management discussed the industry's ongoing learning about reservoirs and hydrocarbon distribution.
Africa Oil Corp's first quarter of 2024 reflects a company in transition, focusing on strategic priorities such as consolidating existing assets, maintaining financial flexibility, and emphasizing shareholder returns. The company is navigating through a period of portfolio rationalization and disciplined capital allocation, with an eye on future growth opportunities in its core operational regions. Investors and stakeholders can look forward to the upcoming AGM on May 23 for further insights into the company's progress and strategic direction.
InvestingPro Insights
Africa Oil Corp's first quarter in 2024 has shown a disciplined approach to liquidity and a commitment to shareholder returns, which is echoed in the company's strong financial metrics and analyst expectations. According to InvestingPro data, Africa Oil Corp boasts a market capitalization of $788.23 million and maintains a healthy P/E ratio of 11.73, which adjusts slightly to 11.56 for the last twelve months as of Q1 2024. These figures underscore the company's solid market position and investor confidence in its earning capabilities.
InvestingPro Tips suggest that Africa Oil Corp holds more cash than debt, indicating a robust balance sheet that could support its growth and acquisition strategies. Additionally, liquid assets exceed short-term obligations, providing the company with financial flexibility to navigate market uncertainties. Analysts predict the company will be profitable this year, which aligns with the net income of $3.5 million reported for the quarter. Furthermore, the company has been profitable over the last twelve months, and it has delivered a strong return over the last five years.
Investors interested in a deeper dive into Africa Oil Corp's financial health and future prospects can access additional InvestingPro Tips by visiting https://www.investing.com/pro/AOIFF. Currently, there are four more tips available, which could be particularly useful for stakeholders evaluating the company's performance and potential. Remember to use coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, unlocking further insights and data to inform investment decisions.
Full transcript - Africa Oil Corp. (AOIFF) Q1 2024:
Operator: Hello, everyone. My name is Sharon, and I will be your conference operator today. At this time, I would like to welcome everyone to the Africa Oil Corp First Quarter '24 Results Management Presentation. [Operator Instructions] 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 Manager. Please go ahead, Mr. Amini.
Shahin Amini: Thank you, operator. On behalf of management, I thank you for joining us today for our first quarter 2024 results presentation. On the call today, we have President and CEO, Roger Tucker; our CFO, Pascal Nicodeme; and our Chief Commercial Officer, Oliver Quinn. There will be a presentation of around 25 minutes before we go into the Q&A session. 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 that 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 or revise this information to reflect new events or circumstances, except as required by law. The company's complete financial statements and related MD&A are available on the company's website and on SEDAR. Roger, we are ready for you. Please go ahead.
Roger Tucker: Thank you very much, Shahin. And if we can get [technical difficulty] up. So, what this shows is that we have had an extremely active first quarter of 2024. And if you can see on this -- on this timeline that I since -- well, since I started is where it starts. But if you actually focus in on the first quarter, you will see that we've had a significant number of transactions, which has effectively changed the shape of [technical difficulty] one was the farmout to Total of our interest or part of our interest in Impact in Namibia in return for a full carry right the way through [technical difficulty] and this was, as you can imagine, an incredible transaction. And so, we have completely derisked that part of our portfolio. In addition to that, we then continued in March with the farmouts against Block 3B/4B in return for a two-well carry through the initial exploration phase of that block. And we anticipate that we will see drilling in that block in 2025. [technical difficulty] we have effectively removed all CapEx from the company on a point forward basis -- the point forward basis, therefore, significantly derisking the future of the company. Then in March, you will also note that we have made an offer to the minorities within Impact to increase our interest -- our equity interest holding in the Namibian block, and that process is ongoing. So, in the next slide, let's go and look at what underpins what we're trying to do with the company. So, [technical difficulty] the next slide. And so, what we're setting is, these are our strategic principles. It's not a strategy, but it's our principles. And if we go around the circle in the center, we are going to grow our business through the existing portfolio. And the existing portfolio, which we'll go on to look at, is based around Nigeria for our production, Equatorial Guinea, the developments that we're now into with exploration in Namibia and our exploration -- carried exploration in [technical difficulty] Block 3B/4B. We are partnered with Tier 1 operators, notably Total, as I've just mentioned, and Chevron (NYSE:CVX), and we're going to try to maintain our interests and focus our attention on our existing asset [technical difficulty] assets, first of all. So, in other words, you're not going to see us leap into a new country entry or anything like that, because we believe that we've got significant running room within the assets that we that we hold. You can see that a key fundamental element of this is that we're going to try to consolidate our own core assets and we're in the process of doing that at the moment in Impact in Namibia. And our current growth strategy is to grow around those existing assets. Next slide, please. And so, let's focus then on what you're only going to hear us talk about. There is still some noise in our portfolio, which we're trying to clean up, and I'm sure there's going to be questions about that at the end, but you're going to see us talk about Nigeria, which is where we are actually in three fields, which are three of the top five fields in the whole of Namibia, operated by Chevron and Total. You will see us talk about Equatorial Guinea, where we've just entered as an operator, are in the process of trying to farm down that area. You'll see us talk about Namibia, where we're in with Total, another world-class operator there. And you'll see us talk about Block 3B/4B in the western side of South Africa. And we believe that what we're doing at the moment is creating, from the position that I inherited, a -- effectively, a world-class independent E&P company, exposed to some fairly significant growth opportunities and very stable production base. So, next slide, please. So, let's go and look in some detail at what we hold. And you -- anyone's been with us for a long time, you will actually know this. And one of the things which is different in the way that I am describing the company since I came in is that we often used to just say that we produced circa 20,000 barrels in Nigeria. In actual fact, what we do is we have an equity interest in the three fields, which are actually doing over 300,000 barrels a day. They are mature, well-known, stable assets. And what's going on at the present time is shown on this diagram. First of all, our OML 130 was extended for further 20 years, which gives you an indication of how long those assets are going to produce for. We have an ongoing drilling program and that actually is ongoing at the present time, and we've just extended the rig to continue drilling in Egina. And so, the next slide, please. And in this area, you are going to see organic growth, because the Preowei field in PML 4 has gone through the FEED process and we are preparing to develop that field, which will add fairly significant production to us, about 6,000-odd barrels a day. But again, a very material development [technical difficulty] on the bottom bullets here, that is actually going to produce at a gross level of 65,000 barrels a day over the existing infrastructure. So, a big, big development that we have a reasonably material position in. Next [technical difficulty]. And then if we leap down and have a look at what's going on in Namibia, we're in two licenses there, but they're both encompassed by the red line around the around the two of them. And this is an area receiving significant activity at the present time. And what we have in this area is a very significant major oil discovery, where Total are beginning to FEED out into the market the sheer scale of this. The first deal, Venus, has been now drilled and appraised by four wells, which have been tested, the most recent of which is Mangetti, up in the north of the block, which is a fantastically interesting well, because that [technical difficulty] extension of the Venus field. We also tested a younger fan on the top of Venus reservoir, which is also hydrocarbon-bearing. So, we now effectively have two fields identified [technical difficulty] actively reviewing development options. And you will have seen that Total is beginning to present data, both on the subsurface geology and in their Capital Markets Day have given an indication [technical difficulty] to FEED on the development, which will be Venus, sometime this year. Next slide. And I'm -- what I'm going to do now is pass this over to Pascal, and I hope [technical difficulty] you can see the slide.
Pascal Nicodeme: I can see the slide. Thank you, Roger. So yes, let me go through the financial highlights for the quarter. We are posting for the quarter $3.5 million net income, which is relatively lower than the usual run rate profit that we are posting. And this is due to a loss that has been posted by Africa Energy. They posted -- they impaired their working interest in 11B/12B block in South Africa by $114 million. So we have picked up our net share of that impairment via Africa Energy directly, but also indirectly via our ownership in Impact. So, as a consequence, we've also reversed part of the impairment that we had ourselves booked in the last quarter. So we reversed more or less half of that net loss, which means that the net impact this quarter of that Africa Energy loss is about $14 million net to Africa Oil, which explains the relatively low net income in this quarter. If you look on the right-hand side of this slide, you can see that the Prime performance has been stable. We are having continued strong EBITDAX and cash flow from operation, $95 million of EBITDAX for the quarter and $77 million of cash flow from operation, which is explained by a sustained strong production. We -- as Roger mentioned, we have two new wells in production on Akpo. The actual net entitlement production for the quarter has been in the upper range of our guidance. And as Roger also mentioned, the current REIT contract has been extended until October, so we expect to see a continued improvement in production in the second half of the year. Next slide, please. So, this shows how disciplined we've continued to be in terms of managing our liquidity. We started the quarter with $232 million of cash. The main use of that cash during the quarter has been the shareholder return program via the payment of a dividend end of March, about $12 million, and the continued share -- purchase of share since January 2024 when we restarted the share buyback program after the announcement of the farm down to Total. So, in total, we've returned in the quarter more than $25 million to the shareholders, and our cash balance is now down to $195 million. Prime has continued to have stronger cash balances. The Prime net debt was, at the end of the quarter, $240 million. And combined with our own cash balance, it's a net debt position of $45 million. Next slide, please. In terms of oil sales, again, very stable behavior. Again, this quarter, we managed to get a sale price which is higher than the average Dated Brent for the quarter, which is due to the efficiency of our new marketing strategy, as I explained in the previous quarters, and we achieved 85 -- more than $85 per barrel average sale price versus an $83 average Brent over the same period, and post period, we also sold -- Prime has sold two cargoes, again, with average sales of 93 million -- $93 per barrel, sorry, compared to an average Dated Brent of $90 per barrel. Next slide, please. So, focusing on our capital framework and the main priorities that the company has, I think we've explained that in the previous quarters, but we want to keep a strong balance sheet. Prime continued to deleverage and repay the RBL facility and the objective in the medium term is to get their RBL facility extended in order to make the amortization of that debt profile smoother. On our side, we are working with our lenders at the moment to extend our corporate facility and we should -- we've obtained credit approval from our four banks to extend the existing facility for another three years at a lower amount, because we believe that at this stage, we don't need so much available liquidity. So it will be renewed at a level of $65 million initially against the existing $175 million. So -- and in terms of order of priority, organic growth, of course, we are focusing on developing our existing assets. The farm down to Total in Namibia has been very good news and it has freed our balance sheet basically from potential capital expenditures to come in the future. Therefore, the new focus on shareholder returns and the resumption of our share buyback program, we've completed about 38% of that NCIB since January. And since 2022, we've returned $130 million to our shareholders. Next slide, please. And I will hand over to Oliver now.
Shahin Amini: Oliver, can you hear us? You may be on mute.
Oliver Quinn: Yes, thanks, Shahin. Minor technical difficulty. Thanks, Pascal. So I think Roger mentioned earlier, we, of course, announced in March an offer to Impact minority shareholders to acquire up to an 8% incremental stake in Impact at a valuation of 100% Impact to $805 million, which would have been a maximum spend of $64 million. Again, the rationale is, of course, as we've talked about on this call, consolidation of the current portfolio. With the CapEx taken out of Impact and Namibia through the Total deal earlier in the year, it represents an important long-term growth opportunity for us. So, more [technical difficulty] of Impact, we think, provides extra strength in that long-term portfolio. So, the process has gone well. I think, as you'll see on the slide, we're nearing the end of that process and we'd expect to close and give an update on the final conclusion before the end of the second quarter, so kind of next six weeks, really. Next slide, please. So I think that just as a brief comment here, we've talked about consolidating the current portfolio, and I think we've made kind of good progress on that. The transactions, obviously, Namibia, South Africa, again, as just discussed, buying a little bit more of Impact. So, that helps, and I think there's a couple more things to go there. As Roger mentioned earlier, there's the wider kind of legacy portfolio that we're working on to simplify as well. So I think, again, that's the next step, is to try and just continue, if you like, the simplification of the business. And again, to the capital framework, it's discipline on capital and simplification, and that's -- that will be the focus as we move into the third and fourth quarters here. So, I'll hand back to Roger.
Roger Tucker: Thank you very much, Oliver. So, the next slide, which is now up. The strategic priorities that we focus on, and this has evolved since I've been here, is that the easiest place to consolidate your business is in assets that you know. And so, we will continue to attempt to consolidate and beef-up our portfolio in existing world-class assets. We are going to maintain our financial flexibility in order to accelerate growth. And you will hear, as we go through these presentations, that we're now focused entirely on capital allocation. And you've seen the benefits of that by removing all CapEx from the future portfolio. And that we are now -- we're also, at the corporate level, completely debt free. We're focused on shareholder returns. And as you see in the moment that we managed to farm out and remove the risk, the capital risk, if you like, of investing in the development in Namibia, we recommenced a very significant share buyback program, which is continuing to date [technical difficulty] and always to maintain our balance sheet strength when we then use that balance sheet to try to identify additional growth opportunities. And with that, I'm going to pass this over to Shahin to administer the Q&A session, which we will [technical difficulty] three executives that you've got on the table -- around the table. Thank you very much.
A - Shahin Amini: Thanks, Roger. And Sharon, if you could remind people on how to submit their questions on the conference call, please.
Operator: [Operator Instructions] We will now go to our first phone question. One moment, please. And your first question comes from the line of Teodor Sveen-Nilsen from SB1M. Please go ahead.
Teodor Sveen-Nilsen: Good morning, guys or good afternoon, and thanks for taking my questions. A couple of questions for me -- actually, three questions. First, on guidance, you have provided production guidance, working interest from -- in the range of 16,500 to 19,500 for the year. I noticed that first quarter production was 17,000 approximately. Is there any downside risk to that, or should we expect production to stay flattish at the current level throughout the next few quarters? And second question is on the Venus CapEx. Of course, a great deal you did there on the farm down, but could you just remind me of the estimated value of the CapEx carry? And then final question is on the cleanup of the entire structure with the Impact, Eco Atlantic (LON:ECOE), and Africa Energy. And of course, you briefly discussed that, but could you just give us an update on how we should expect this to look like going forward? Thanks.
Roger Tucker: Okay. Shahin, there were three questions there.
Shahin Amini: Yes.
Roger Tucker: But here in Montreal, actually, that didn't come across terribly clearly. So, can you actually just summarize the first question?
Shahin Amini: Yes. So the first question -- first question is on production guidance.
Roger Tucker: Yes.
Shahin Amini: And do we see downside risk over the next few quarters to that?
Roger Tucker: Pascal, do you want to do that, or do you want me to do it?
Pascal Nicodeme: I can do it, if you wish. So, I mean, I tell everyone, I think the -- I mean, it's clear that production in Nigeria has been declining, when looking at the Q1 last year, production was higher, obviously, than this quarter. But as Roger mentioned, the current drilling campaign has been extended. So we expect this decline to continue to be compensated by these new wells coming onstream. So we had recently two new Akpo wells that came onstream, which is extremely good news for us. So we expect these new wells to at least compensate for the decline. So, the answer to your question is, yes, we expect the production to be at least stable for the rest of the year and probably increase slightly.
Roger Tucker: Yes, I'll just add in there. What you're seeing in the Q1 numbers is a [technical difficulty] work program as well. I mean, the shutdown was extended slightly, so we lost production there due to the shutdown, and we are actively drilling. But these fantastic fields are over their peak of production and they will decline over the next sort of 30 years, if you like, on a steady basis. There is no indication that there is a -- either a subsurface problem that we don't understand or a problem with the infrastructure on the surface [technical difficulty] you'll see is a delayed -- an effectively delayed work program and there is no fundamental problem with the underlying asset. It's a delay in the work program. But at some point, these assets, they are going to decline. And that's one of the great -- actually, one of the great things about them. They are so well known in the subsurface. When we give you guidance on the production, barring some major issue in the operability of the infrastructure, they will perform as we predicted. They're extremely well known in the subsurface. Pascal, do you want to add anything more to that?
Pascal Nicodeme: No, no. Not at all.
Roger Tucker: Next question, Shahin, if you want to just cover that off, because we couldn't hear it exactly.
Shahin Amini: Yes, it's on Venus CapEx.
Roger Tucker: Yes.
Shahin Amini: Could you just remind listeners and participants on the expected value of the CapEx carry?
Roger Tucker: Yes. And so, we can't give you the exact number, but you can start to work it out yourself, because Total have indicated that we are already into a two FPSO case on Venus. And you'll have seen that from their Capital Markets Day, although strangely, the headline in offshore and all of the industry pundits talk about 180,000 barrels a day. That is actually per FPSO, and there are two on the way. Now, you can work out the numbers now and start to get a slightly clearer idea of the numbers, but I can't give you the internal numbers from Total. But it is multi, multi billions of dollars that is going to be spent in this. And as I say, we are completely carried through it. And that's all I can give you at the moment. But you can go on to the -- and talk in the industry about how much two FPSOs will cost you, and you can work out that what we've got here is a very, very significant carried situation that we've managed to negotiate.
Shahin Amini: I think Teodor's line is still open. So, before going to his third question, I want to revert back to him and to see whether he has any follow-on on the responses to first two questions.
Teodor Sveen-Nilsen: Well, no, actually. I think I'll fine with all of that. Well, then maybe also importantly, on production, there's no downside risk on the current guidance as far as I interpret. Is that correct?
Roger Tucker: Yes. What we're trying to point to here is -- I mean, this is the oil and gas industry. But as we model it at the moment the fields, we are happy with our guidance on Nigerian production.
Teodor Sveen-Nilsen: Sure. Understood. That makes sense.
Shahin Amini: And I believe Teodor's third question was to do with our non-core assets and how the company could be looking in the future. Teodor, do you want to elaborate on that and perhaps repeat your question, if necessary?
Teodor Sveen-Nilsen: Yes, sure. Absolutely. Yes, you already discussed it briefly, but I just wanted the structure you have with the Impact, Eco, and Africa Energy, and then maybe in particular Eco and Africa Energy. How should we expect this structure to look like in the future? Are you looking to divest Eco Atlantic and/or Africa Energy shares, or will that be merged into Africa Oil, or what to expect here to get a simpler structure in the future?
Roger Tucker: Obviously, [technical difficulty] we can't any sort of forward statements in here, because we're actually talking about the Q1 results. But -- and I pointed to in the presentation that we are actively looking at rationalizing our portfolio. And I would prefer us to get [technical difficulty] from the historic way that we've held equity interests in companies. And so, we are looking at options for those which we are evolving, as we speak. But I won't give you a forward statement on what we're going to do, but [technical difficulty] that is going on at the moment.
Teodor Sveen-Nilsen: Understood. Thank you.
Operator: Thank you. [Operator Instructions] I will now hand back to Shahin for web questions.
Shahin Amini: Thank you, operator. Just a quick note from me. There was one question on the webcast on why there is no video broadcast for this event today. The management team, because of business travel, are actually joining you from three different locations. So that's the reason why for this particular event we haven't followed our usual approach of broadcasting video. So, let's go to questions submitted over the webcast system. And there's a couple of questions to do with special dividends. So they're kind of related. So let's get them addressed in the same go. So there's a comment that's on Slide 13, there was a reference to a special dividend upon monetization events. And the related question is, what needs to happen for shareholders to see a special dividend? So, Pascal, you may want to address this, please?
Pascal Nicodeme: Yes, sure. I mean, the question is about special dividend in case of monetization. Well, we don't plan to monetize any of our assets at the moment. We -- I mean, we had potentially the intention before signing the farm down to Total to monetize our participation in Venus, which has not happened since we prefer to stay for the longer term in the development. So there is no envisaged special dividend that would be related to a monetization event, for sure. I'm sure the investors and the shareholders have noticed that we have significantly stepped up our current returns to the shareholders, especially via the share buyback. And we are buying our shares at the moment at the almost the maximum rate we can buy the shares at, both in Toronto and Stockholm. We want to preserve some liquidity. As you know, we have an outstanding offer for the Impact minorities at the moment. So, until we know the final result of that process, we want to remain cautious in terms of managing our liquidity. So, therefore, we are -- I would say, to answer the question, that we are fully committed to the existing NCIB. And depending on the outcome of the offers we've made to the Impact minorities, we might reconsider this or increase the pace of the returns.
Shahin Amini: And I suppose the very important underlying message here is that we remain fully committed to shareholder capital return. So, at some time in the future, if there is a liquidity event, at that time in the future, it is possible the company, subject to Board approval, could pay a special dividend. But that is part of our commitment...
Pascal Nicodeme: Exactly.
Shahin Amini: -- and see what happens in the future. Thank you, Pascal. Right, there is a question on Prime's cash and debt balance. So they have $268 million in cash and $750 million outstanding in debt. Why don't they pay down debt? And the follow-on question from the same participant is, have the Akpo wells met expectations? So, Pascal, perhaps you could tackle the first part of that question, which is Prime's debt management.
Pascal Nicodeme: Yes, sure. So, the shareholder agreement we have with Prime provisions that Prime needs to keep at least $150 million of cash balance at all time. So the fact that they have slightly more than $150 million of cash at the moment is exactly because they are planning to repay part of the RBL facility in the next quarters from their existing cash balance. So, that's certainly done. And the way the RBL facility works is that they are six monthly redeterminations, where the banks at the end of March and the end of September are basically determining the new maximum outstanding amount under the facility. So, Prime would typically wait for April/May to repay the borrowing based out to the maximum level and then again in September. So that process is ongoing. And the fact that they have more cash at the moment than the $150 million is just to prepare for future amortization and also the fact that they are paying cash cost at the moment for the drilling campaign. So that -- the two elements explains why Prime has this slightly larger cash balance than expected.
Shahin Amini: And I will have a -- I'll go first in trying to address the second part, which was on the Akpo wells' performance. Yes, there were two Akpo West wells that were completed in Q1, as we have described in our first quarter 2024 MD&A shareholder reports. Those wells did exceed expectations. However, please recall that the Akpo field then went into a planned maintenance shutdown. That program is over and the field is ramping up. So we will be able to provide further updates on that in due course when the field is out of this ramp-up phase. I don't know if Roger, Oliver, Pascal, you want to add anything else to that on the Akpo wells?
Roger Tucker: No, I don't -- I think that's absolutely accurate. The wells have come in as predicted. We're pursuing an active [technical difficulty] program. And so, they gave no surprises at all.
Shahin Amini: Very good. There's a number of questions on Namibia, specifically on Block 2913B. So this is Venus and Mangetti. One question, when do you expect that there could be a possible appraisal on the Mangetti fan there?
Roger Tucker: Well, the Mangetti well came in, in a very favorable situation, if you like. And at that time, what we were doing, what the other operation was going on is we were acquiring the 3D seismic to the south to make sure to [technical difficulty] got a complete coverage of 3D over the whole block. And as I mentioned to you in previous calls, one of the reasons that we wanted to stay in this license is there wasn't complete 3D in the south and we liked the look of the Damara prospect. Now, what then happened is Mangetti, that 3D seismic that was going on in the south of the block was temporarily terminated, if you like, and the acquisition of 3D seismic moved to the north and east of Mangetti, which gives you an indication we like the look of this Mangetti discovery. Now, on the map that you can see that we have up there, what it looks like is that the Mangetti fan heads off the block. It's very significant on our block, but it heads on to the Chevron block up towards the Galp discovery. And it will undoubtedly be appraised. But who's going to do the appraisal? Is it going to be us or is it going to be Chevron? How is this going to work? So I cannot guarantee to you that in 2024 Mangetti is going to be drilled on our block. [technical difficulty] is highly likely that the extension of that feature at some point in the near future will be drilled, because it does look extremely attractive. Does that answer the -- that's basically all I can say at the moment. So...
Shahin Amini: Yes.
Roger Tucker: Don't wait necessarily for it to be us and Total to do it, but it -- that feature is going to get drilled at some point.
Shahin Amini: I think it's important to highlight that, obviously, during this most recent appraisal exploration program on Block 2913B, operator TotalEnergies (EPA:TTEF) has acquired a lot of data and also have shot 3D seismic. So, there is a treasure trove of data that needs to be processed and analyzed. And we -- as we've always said, we will update the market in coordination with our investor company, Impact, and operator, TotalEnergies, when there is a material work plan confirmed. And we -
Roger Tucker: And what I will do is -- whilst we're supposed to be talking about the Q1 results, there is another well immediately adjacent to us that is very important, too, which is Shell (LON:SHEL)'s Enigma-1X, which is also a success. And you can plot it on a map and see where that is. And that is a -- what looks potentially like a significant discovery, is right adjacent from our Damara feature. And so, the -- what -- as I've tried to explain when I talk about Namibia, we're in the midst of the development, if you like, of a major new global petroleum province. The drilling isn't all going to be ours, and you need to keep your eye on what the other people are doing. And I think I've seen some of the questions there, people are asking about what Galp has discovered and whatever. And you're going to see that we are in a very privileged position as a very small -- relatively small independent, exposed to drilling that's going to go on around us, which will delineate the shape of this entire province. And that's going on as we speak. And it's very, very -- sort of like in the development of this province, because the first discovery in the area, which was a Shell discovery, only occurred in 2022, and it's just been one after another in the area. There will be a limit to it, I mean, at some point. But the industry is going through a learning curve on how these reservoirs work, the distribution of the hydrocarbons. And it's important that any investor in us keeps their eye on what's going on around our block as well, what we're doing on our own block.
Shahin Amini: Yes. And there's a question that does specifically mention Galp, because Galp did put out a press release saying there's 10 billion barrels of oil equivalent in place on the Mopane discovery. I'll suppose that some of our shareholders, investors are continuing to wonder when can we expect to have similar statements, say, on Venus or Mangetti or other opportunities that we have in our portfolio.
Roger Tucker: Well, I think it's -- I think it's interesting to -- I mean, it was a fantastic press release. I mean, there's no question about that. And the motivation behind it may -- Galp are going through a farmout process at the time. But then if you go to the Total Capital Markets Day, what Patrick said when he was asked a very similar question, and I would tend to agree, it is very, very early, having just drilled two wells, to say exactly what the in-place reserves are. It is a very bold statement. We haven't actively seen all of the data. Galp is a very well respected company, but it is going to take a while to work out exactly what the -- and what I will say is that you've seen that Total have announced that it's a two FPSO development. What you're going to start to see, because these are such big developments, is it's going to be reserves producible by each FPSO. And the positioning of the FPSO, the resource base, is a really critical thing to work out so that you maximize the overall recovery. And that is the work that is ongoing at the present time. In terms of when we can make an announcement is, what we have to do because of the way that we hold our interest in this, is follow Total, and Total will, hopefully, when they go into FEED, make a more fulsome announcement of what the reserves base is. But we will follow Total as a good partner.
Shahin Amini: Very good. Thank you, Roger. I think it's only fair to give you and Pascal a break and maybe could put a question to Oliver, if that's okay with you, Oliver. But we have a question on, basically, capital allocation and the long-term strategy for the company. The question is, how do you measure and calculate return on investments? And what hurdle rates will you have? As an example, would you have a threshold internal rate of return in around 20% for investments? And I know you've been very busy, Oliver, with some of those strategic points. Are you able to shed some color on our thinking?
Oliver Quinn: Yes. Thanks, Shahin. I think it's a good question. I think it's probably a couple of ways to address it. I think the first one, of course, is what's our cost of capital, right? And particularly, what's the cost of capital in the for the company, but in the jurisdictions that we're in, right? And I think -- we think about IRR and Nigeria, where, of course, we've got production through Prime. We're not going to do things there that are low rate of return, right? I mean, there is a -- typically a discount around the NAV and the asset value that you get for assets in those jurisdictions. So, again, that drives -- as you talk about in capital allocation slide here, drives a discipline around that. I think the second point is, I don't think -- it's probably not helpful to put a specific number out there, because [technical difficulty] it's opportunity specific. Of course, some of the infill wells that Roger and Pascal talked about, they have very high IRR, because they pay back extremely quickly. There are other things with lower but robust IRRs, but they're different shape of profile and longer-term cash profiles, right? And [technical difficulty] in fairly active mode. You see that through the transactions that we've done. So just simply commercially, I think it's no advantageous to throw numbers out there that might distract us from executing there. But I think -- again, I point to the capital allocation framework, the discipline, and the execution around that discipline, both in taking CapEx out of the business and, as Pascal talked about, the share buybacks, right, which tells you how we ultimately see the value of the money, if you like, in returns.
Shahin Amini: Thank you. Oliver. There's a couple of follow-on questions on FPSOs for Venus. I think it's fair to say that at this stage, the operator still is analyzing data and developing a potential possible development concept. And the questions are, are there going to be two FPSOs producing from the beginning? And we haven't said that, but Roger, perhaps you just want to clarify that point that it's, likely -- well, not likely, but it's possible that there could be two FPSOs on Venus, but they don't necessarily are going to be there producing in parallel from day one. Correct?
Roger Tucker: Yes. Listen, often people say that this is the first time they've ever seen anything like this and it's unique in the world. I actually was lucky enough to see a very similar situation playing out [technical difficulty] with the development of the Santos basin, and I believe that this is going to follow the same route. There will, obviously, be a phasing. When the FPSOs arrive, it would be extremely rare if both FPSOs [technical difficulty] at the same time, maybe not even in the same yard. But there is a commitment to start the development with two FPSOs. What the delay in between the first and the second is dependent on the way that these FPSOs come through the yard process. I can't [technical difficulty] logical thing to do to try to commission to at exactly the same time. And it would be more cost-effective if you did one and then another arrived and then the same team carried on and commissioned the next one. But this is me talking and it's not what Total has [technical difficulty] in public. And all I'm doing is give you my experience after living through a very similar thing with BG in the Santos basin. Does that answer the question?
Oliver Quinn: Well, it might be worth just refreshing people on the carry, as we talked about earlier, and the development funding and how that works in that context, because it's all spent on the blocks pre first oil. So even if you go down the road, as Roger described, where you just, let's say, there's a phased development of two FPSOs, of course, the spend on the second FPSO up to the point of first oil on the [technical difficulty] block FPSO is also covered. So I think that's a really important component that we're actually insured against that development timeline, if you like. So if it comes very aggressive and very early, that's okay, because we're carried, and if it comes later, that's okay, because we're receiving cash flow from the asset to fund our future obligations. So -- yes.
Shahin Amini: Thank you. I think that does answer the question well. We have three questions from one of our longstanding shareholders. First one, will Preowei development cost be -- cost recoverable against the production from Egina and Akpo or only from Preowei? Pascal, do you want to have a go at that, or I'll be happy to start, and then you can correct me if I get it wrong.
Pascal Nicodeme: Yes, go ahead.
Shahin Amini: So, first of all, I think on Preowei, one thing is that -- well, certainly my understanding is it will benefit from a five-year royalty holiday. So that's a positive. So that needs to be accounted for. And that, basically, Prime is now paying corporate tax, right? And -- but obviously, in terms of the cost recovery that will come under the PSA arrangement, so yes, it will have the benefits of that under the PSA for those assets. Pascal, do you want to confirm that or tell people -
Pascal Nicodeme: Yes, confirmed. Yes.
Shahin Amini: Excellent. Thank you. So, second question from our investor, how much maintenance related downtime was there in Q1 for Egina, Akpo, and Agbami, and how much downtime do we expect in the second quarter? Well, certainly we didn't have any downtimes on Egina and Agbami. It was only on Akpo. And I believe that starts on March 19. So, in Q1, we would have had around 10 days to 11 days of downtime. Roger, do you have any expectation for number of days those fields could be down in second quarter? Or Pascal?
Pascal Nicodeme: As you say, the -- what we know from that planned shutdown, it took slightly longer than expected and that at the moment, they are ramping up production again, though, we are not back to the previous production level. So it's now mid-May. So there will be definitely an impact on production for the second quarter.
Shahin Amini: Okay. But we don't expect any impact on Egina or Agbami for this quarter?
Pascal Nicodeme: No.
Shahin Amini: Very good. There's a couple of questions on Equatorial Guinea. Basically, people want an update, and do we have a timing expectation for the farm down of EG-31 and EG-18?
Oliver Quinn: Yes, so lost you for a second, Shahin, but I can take that. So I think the process is ongoing. There's been several companies through that data room. I think the guidance that's probably most useful is that, go back to capital allocation framework and what we're saying there is, we're going to be very, very disciplined about spend, particularly in the kind of early stage pre-production work. So I think what we're doing there is, saying, look, we should take a little bit longer, but take a little bit longer to [technical difficulty] that fulfills those strategy, if you like, that gives us a place where there's minimal -- zero CapEx in that. So there's probably slightly longer than people are expecting, but I think that's the reason, is to -- again, capital discipline and ensuring that we get things fully funded through those transactions and [technical difficulty].
Shahin Amini: Thank you, Oliver. Operator, can I just check with you? Are there any further questions on the telephone line?
Operator: There are currently no further questions on the phone line.
Shahin Amini: Thank you for checking. Right, there's a question on our, effectively, ownership of assets in Nigeria. Are there plans underway for us to consolidate those? Is that -- well, we have indicated that's one of our aspirations. But Oliver, perhaps you like to share your thoughts on that? I think we may have lost Oliver and Roger again.
Roger Tucker: Hang on. Sorry. What I'll do is cut across that. I mean, it's a good question, but what we need to do is focus on the Q1 results that we've -- we just published today. We have an aspiration to consolidate in the assets that we like, but we're not going to today give you any indication of [technical difficulty] tighten the doability of any of that. But you've seen from the transactions that we've done in this first quarter that it is pointing you to a direction of travel that we are actively pursuing. And I think I prefer just to [technical difficulty]
Shahin Amini: Yes.
Roger Tucker: Shahin, if you're happy with that.
Shahin Amini: No, absolutely. I think that's a very fair comment. Very good. So I'm just looking at the remaining list of questions. There's one question on what is the company's relationship to the Lundin Group. I will take this one. The Lundin family did exit the position, and we were very fortunate that we had a blue chip international fund that took that position and are now a second largest shareholder in Africa Oil.
Roger Tucker: Which is Fidelity.
Shahin Amini: Yes. And I think on that note -- yes, I think we've answered all these other questions that I still see on the queue, and we've only got a minute left. So, on that note, Roger, do you have any final comments that you want to share with the audience?
Roger Tucker: I don't think I do, Shahin, unless you think that we missed something. And I'd just like to thank everyone for dialing in and listening to this. And just watch this space, because we are in a very active mode. And that's all that I will say from my point of view.
Shahin Amini: Thank you, Roger. A final comment from me. We will be hosting our AGM next week on May 23. I will be preparing a press release with details for shareholders that want to join a Q&A session, and we expect to send the details of that later today. So yes, just a reminder, our next event is our AGM next week. And please, operator, I'll hand it back to you to end this call.
Operator: Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.
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