Africa Oil Corp

TSX:AOI

Earnings Call Analysis

Africa Oil Posts Q3 Profit and Ups Production

This quarter, Africa Oil reported a noteworthy performance with a profit of $47 million, supported by a $57 million net profit contribution from Prime. The company's production increased to 23,000 barrels of oil per day from 22,400, marking the first production uptick since Q2 2021. Moreover, Africa Oil has focused on rewarding its shareholders, distributing $30 million through dividends and share buybacks in the first nine months of the year. Their investment in Impact has risen to 31.1% alongside a $17 million commitment towards exploration in Equatorial Guinea and South Africa. They've also settled tax and partner disputes in Kenya for $18 million. Additionally, Africa Oil has optimized its tax position by transitioning to the Petroleum Industry Act (PIA) tax regime in Nigeria, reducing the tax rate from 50% to 30% after a 20-year license extension on OML 130.

Stewardship Under New Leadership

The third quarter of 2023 began a new chapter for Africa Oil under the guide of Dr. Roger Tucker, a seasoned geologist with a robust background in both small independent companies and industry majors like Exxon and BG Group. Having embarked on a deep review of the business, Tucker has overseen a reorganization to refocus on high-quality assets and a firming up of the company's financial footing, thanks to strategic recruits and clear future investment plans.

Operational Achievements and Financial Health

This quarter saw strong operational results, with a positive outcome from the Venus-1X test and an uptick in production for the first time since Q2 2021, reaching an average of 23,000 barrels of oil per day. The company successfully navigated the conversion of Nigerian oil mining licenses to new petroleum terms, boosting its financial standing with substantial dividends resulting in a robust cash balance of $201.5 million.

Consistency and Stability in Sales and Finances

Africa Oil's mindful change in its marketing approach has paid off, with consistent sales slightly above average Brent prices, despite timing effects on cargo sales. This quarter resulted in $47 million in profit, cushioned by a $57 million net profit from its Prime initiative, despite impairing $6.5 million in shares of Eco Atlantic due to a share price dip. The overall financial results remain predictable and consistent with Prime's performance.

Strategic Focus on High-Potential Assets

Investor interest has been directed towards four key assets: Nigeria, Equatorial Guinea, Namibia, and Block 3B/4B in South Africa. These assets represent significant focus points for the company's intellectual and investment capital. With 2P reserves nearing 56 million barrels and existing production facilities being well-maintained, ongoing infill drilling opportunities promise a buoyant outlook for the future of these assets.

Exciting Prospects and Shareholder Returns

There are promising operational and strategic moves on the horizon, including anticipated completions of farm-outs, disciplined asset acquisition, and a commitment to returning capital to shareholders. This approach is balanced against the need to preserve capital allocation for 2024, which sees a strategic focus on making significant returns for shareholders through base dividend policy and potential share buybacks.

Looking Ahead: Capital Expenditures and Asset Valuations

The capital expenditure budget is expected to remain on par with 2023's figures. Valuations on Nigerian assets, a focal point of the business model, are set to be reported in early 2024 and are anticipated to be influenced by production maintenance and enhancement, especially from drilling operations on fields like Akpo. With changes in tax regimes in key operating territories like Nigeria, the company finds itself favorably positioned for potentially enhanced asset valuations.

Long-Term Strategic Vision

Africa Oil is intent on maximizing the value of its existing high-quality assets and clearing up peripheral assets to streamline its portfolio. In the next 4 to 5 years, there may be a strategic move towards significantly growing the business from this honed portfolio. The company, under the current leadership, is working towards creating a base of optionality from which to strategically pivot and potentially diversify, ensuring they follow a Board-approved path to value maximization.

Earnings Call Transcript 2023-Q3

[Operator]

Hello, everyone. My name is Sandra, and I will be your conference operator today. At this time, I would like to welcome everyone to the Africa Oil Third Quarter 2023 Results Call and Webcast. [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 Investor Relations and Commercial Manager. Please go ahead, Mr. Amini.

[Shahin Amini, executive]

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.

[Roger Tucker, executive]

Thank you very much, Shahin. So first of all, it is a pleasure to be presenting my first result and participating in this webcast. First of all, a little bit about myself. You 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, very significantly across the world called Lasmo. I then have a very interesting adventure working for Mikhail Khodorkovsky in Yukos in Russia. I then did some private equity investing work. And ultimately, I -- fairly recently, I ended up as a Senior Vice President in the BG Group, working on stuff in the Americas and also in Europe. And then I've done a series of other private equity-based deals. I'm also a Non-Executive Director of PetroTal who are based in -- with production interest in Peru. So I've pretty much worked every basin all across the world, in big companies, in small companies, in NOCs, in independent and private equity investing.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 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 at 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. So, next slide, Shahin.And so, what we achieved actually this quarter? I think that we've got extremely strong operational results. The Venus-1X test result was positive as we have described. And as you can see on the bullets on the right-hand side, the operator has indicated that this would be a field that will be developed in the future. In terms of production, we have 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 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.

[Pascal Nicodeme, executive]

Thank you, Roger. So we'll start with a quick update on our production performance, especially the comparison with our management guidance. And we've been very encouraged this quarter since it's been the first quarter up in terms of production since last quarter. We are now at 23,000 barrel oil per day compared to 22,400 barrel of oil equivalent. So this is a good outcome and especially due to our successful drilling campaign on Egina. 3 wells have been completed, 2 water injectors and 1 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 3 well campaigns. So again, we expect this production to continue to increase by the end of the year and early next year.Next slide, please. Thank you. So this slide just show the evolution of our financial result on net income over the last quarters. We posted a $47 million profit this net income this quarter, which has been underpinned by $57 million net profit from Prime. One exceptional item to mention this quarter is we've impaired $6.5 million of our 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 seven 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 obtained license extension in OML 130, and -- which triggered that switch to the PIA terms and therefore, the release in the deferred tax liabilities. Otherwise, I think this quarter has been pretty stable compared to our history of results and consistent with Prime's performance over the last quarters.Next slide, please. Thank you. This slide shows the evolution of our cash position and what I would simply say here is that we've received, as Roger mentioned, $125 million of dividend from Prime since the beginning of the year. We've lived within our means. And the priority for the company has been to return 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 9 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 calls 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, yes.So I just wanted to give a quick update on where we were in terms of the licenses in Egina. So, 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 3 production licenses instead of 1 OML in OML 130, one -- each one covering one field. So one on Akpo, one on Egina, one on Preowei. And as I just mentioned, on OML 127, we have voluntarily converted to the PIA terms. Therefore, we are now under corporate tax regime at 30%, which replaces the petroleum profit tax system, which was at 50%. So a significant benefit for the company going forward. The partners on this block have also decided to request the extension of the license. This is work ongoing and this is probably 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 oil at a price which is slightly larger than average Brent. This quarter, we've been quite a bit by timing since we sold our cargoes 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 cargoes and the average dated Brent. But overall, since we've put this new marketing philosophy in place in Q3 2022, whereby we are basically selling all our cargoes but unless the oil price goes down below certain thresholds fixed, which would trigger a full oil sale in that case, which has only happened in 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 for ] oil 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 in term -- 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 very good performance again this quarter from Prime, and -- which is able to maintain a very stable net debt ratio range.You could move to the next slide. Yes, 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 of OML 130. Our corporate facility at the Africa Oil level is still [ ongoing ]. So we have 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.

[Roger Tucker, executive]

So what we'll do now is we'll have a look at the portfolio. And I will describe how we're going to talk to you over the next several months. The first thing is you're only going to see us focus on 4 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 a expiration but it will be very quick tie-back should we be successful. You'll see us talk a lot about Namibia. And you'll also hear a lot about Block 3B/4B in South Africa. So those 4 assets are what we are focusing all of our intellectual horsepower on all of our investment potential on over the next year. And 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 barrels. And we've got near-term catalysts of significant side in Namibia E&A. And actually also, I would add to that in 3B/4B. And we are returning capital via the dividend stream. And I'll talk a little bit more about buybacks later on.So first of all, let's go in and look at these assets and what they really are, rather than the way we summarize them on this. And I think perhaps you've been a little bit lax and maybe all of you knew this all along, but by not describing the sheer scale of the assets that we are invested in, they are 3 of the top 5 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 2 operators, which is Chevron and Total. They're genuinely world-class production hubs that we by 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 tie-back, which is going to be Preowei, which wouldn't have been doable if the license hadn't been extended. And we anticipate in getting to 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.We go to the next slide then. What I'm going to do is jump down to what I now consider to be what is developing into the emergence of a new petroleum province. And it's been focused 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 billion barrels and Lesedi is 0.3 billion barrels. So this is a province that is emerging. And it's not the first time I've been in such a province, because I was with 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 going to do now is jump down to Block 3B/4B, which is in the south -- is actually in South Africa. And combined with our interest in Venus, we are the only 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 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, 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. And I anticipate that certainly within 2024, hopefully, way before, we will have concluded a farm into that acreage.Now to come up to our interest in Venus, in the Venus area. What we actually have got -- we'll go to the next -- is what I believe is a world-class opportunity in there. 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 a 31% interest in Impact of 6% in this, which would be the equivalent of us having 180 million barrels of recoverable reserves, which is more than 3 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 and also to Total size, which is of critical importance to get right.We also have [ formed ] 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 to 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. So 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. And if you go back, I can say this, there's a public website to -- what's it called, Zoom World.

[Pascal Nicodeme, executive]

Zoom Earth.

[Roger Tucker, executive]

Zoom Earth. And if you go back to November 8th, and then click through -- you actually put the screen for heat map on, you click through November 8th. 9th, 10th, 11th, I think it was, you will see that there is a major flare at the location of that well. It then goes out because they're doing a build-up and then comes back on again. So we tested hydrocarbon to surface at the Venus appraisal well.The other thing though, about our block in Namibia, is that it isn't unlike 3B/4B, completely covered in 3D seismic here. The southern part of the block, which has 2 significant prospects on it, called Damara and South Damara, is only covered by 2D seismic. It looks extremely attractive, but the 3D will be shot in the early part of 2024. We're in a position where we've got the financial capacity to stick with this opportunity until we understand what the full value of the entire block's prospectivity and development potential are. So in terms of next year, this block is going to become a very significant priority for us going forward in terms of capital allocation.So our year ahead priorities, then, as I've said some of it in that business, we're going to 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. And in actual fact, the asset -- any asset acquisition will be in blocks that we're already in. And if it [ take us ] out of that, it will be in areas where we've got significant competitive advantage.And we're going to focus on shareholder capital returns. We will maintain the base dividend policy and share buybacks. We will be initiating the option to do share buybacks, but we're in a very active stage at the moment on understanding what capital we will be needing in the year ahead that we will use the decision to start share buybacks in parallel with understanding what our investment opportunities are in 2024, but we'll be solely focused on making significant returns for shareholders.And with that, I would like to conclude and pass over to Shahin to get us into Q&A.

[Shahin Amini, executive]

Yes. So, operator, Sandra, back to you just to remind people of the instructions for submitting questions.

[Operator]

[Operator Instructions] There are no questions on the phone at this time. Please continue with webcast questions, please.

[Shahin Amini, executive]

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 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. So this is OML 128.

[Roger Tucker, executive]

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 to our time.

[Shahin Amini, executive]

Okay. A second question from Teodor is about if Venus is divested and AO does -- Africa Oil does get a cash dividend from Impact, what would be the uses of that? How much could it be returned to shareholders and how much it could be held for further investments?

[Roger Tucker, executive]

Do you want to try that one, Pascal?

[Pascal Nicodeme, executive]

Yes, sure. 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 energy 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 dividend.

[Shahin Amini, executive]

Okay. Thank you so much for that, Pascal. Another question is about the reorganization of the asset ownership. Roger, we do have -- some people would argue, a convoluted structure. Do you have any views on how you would like to say -- what are your aspirations around simplifying that?

[Roger Tucker, executive]

I think the thing I think I said at the start, Africa Oil has fantastic assets. They are fantastic. However, they're not optimally owned. It's not -- for me, it's not optimal to be a shareholder in a company that is then the operator -- working with the operator at the JOA level. And so we are looking at a whole series of ways to actually get us on to the JOA level in our 2 principal assets, which are Nigeria and in Namibia, of course, in Equatorial Guinea and in 3B/4B. We are in that position. But there are routes to achieving that in these 2 assets, and we are reviewing them. But you're absolutely right. I see that it is convoluted as it makes it very difficult sometimes for investors to accurately understand the true value. And it is at the top of my priority list.

[Shahin Amini, executive]

Pascal, if I may, there is a couple of questions on the standby, that are unutilized standby corporate facility. People are asking, obviously, there is a cost associated with this, is this something that could be drawn down soon? 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?

[Pascal Nicodeme, executive]

Yes, I think today, for companies like us, it's a privilege to have a syndicate of banks supporting me and supporting them. So -- I mean, we kept this group of 4 or 5 banks now for 2 or 3 years. And I think it's a good financial discipline to keep the contact with these banks. Make sure that you comply with a set of covenants, not only about ESG, but also financial covenants. And it's key to keep these banks happy and able to support you going forward in case 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.

[Shahin Amini, executive]

Very good. There's a question from Christian. What economic standards or benchmarks does a company set in its evaluation of acquisition opportunities? 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?

[Pascal Nicodeme, executive]

I think the main criteria would be strategy, and 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. And -- but we don't have a predefined set of, in particular, payback times or WACC hurdles that would have to be met in order to make M&A or an acquisition possible. I think we are very open on that terms.

[Shahin Amini, executive]

Thank you. Question on our capital expenditure guidance for 2023 to remind participants that's in the range USD 80 million to USD 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...

[Pascal Nicodeme, executive]

No, I think that's correct. We are a bit behind capital expenditures, mainly because of the drilling campaign in Nigeria was 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 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 really what we've been throwing in 2023.

[Shahin Amini, executive]

Thank you. And I think there's a bit unfair to ask you for 2024 guidance because that is the process underway. 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 a couple of questions on when -- the timeline for us to have a better handle on Impact's budget for next year. Is that something that is currently underway, being analyzed? And do you expect to have that information ready, say early next year?

[Pascal Nicodeme, executive]

So we rely only on the operator, of course, as you can imagine, provide such an estimate and usually operators don't provide drag budget before early December for 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 is to rise -- At the moment, well, they have to [ rise to ] mobilize on the block. We don't expect to change this drilling scheme for next year. So they will probably keep [ to raise ] 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.

[Shahin Amini, executive]

Yes. Thank you. There is a question regarding -- this is from [ Mikael ], one of our private investors in Sweden, about valuation from Nigerian that we presented last year. And basically saying with high oil prices, 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 that 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'd be inappropriate to sort of speculate what that could be.But 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?

[Pascal Nicodeme, executive]

I think the main driver, as far as I see it, is our ability to maintain and increase production. I think we've seen the first benefit of this infield 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.

[Shahin Amini, executive]

Wonderful. And I think it's also important to remind people that both OML 127 and 130, we've actually reduced our effective tax rate. And that can bizarrely enough, Nigeria, which gets so much about publicity, is one of the few jurisdictions where you have lower tax rates 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 about this EG-31 opportunity?

[Roger Tucker, executive]

Actually, why don't we put it up? It's in the appendix and so we can talk to 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 -- this is 31 completely surrounds an LNG facility which has got significant outage within it. And so there are a whole series of what look like gas prospects with seismic anomalies, which would be very short tie-backs 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 -- frankly, it's been staggered. We have a data room open in which we still have 9 companies reviewing this opportunity. And they're not all small independents such as ourselves. So this is a real opportunity that was brilliant by the team to come up with this. But in terms of gas prices, in the economics, we just assume the standard price that's going into the field at the present time. So we're not going to be an offtaker of LNG in this. We're just feed for the LNG facility.

[Shahin Amini, executive]

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?

[Roger Tucker, executive]

Well, actually I'm giving you the exact timeline on EG-31. We were going to ask for bids by the -- towards the end of December, mid-December. But because there has been such a level of interest in it, we're not going to get everyone through. We've just extended the bid deadline to, I believe it's the 1st of February for that. So we've had to extend that because there's too many people in there.In terms of 3B/4B, we have had significant discussions with 1 major already in that block and we have just brought into that data room. Actually, 3 other majors have asked to come in and so that one is going to take a little bit longer because I think it's worth standing on the sidelines and not leaping necessarily at the first opportunity because there has been this sudden uptick in the level of interest in that block. So I would say that 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.

[Shahin Amini, executive]

Question from Peter -- [ Peter Dams ]. 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 to find out that question is not to reiterate the focus of the existing portfolio.

[Roger Tucker, executive]

In the next 18 months this company has so much work to do on maximizing the value of this existing portfolio. You're not going to see us jump into another country, 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 [Technical Difficulty] that we've got at the moment.

[Shahin Amini, executive]

One of our covering analysts, Tom Erik, has a question, difficult one to answer. Are you considering opportunities or scenarios where you could acquire Impact? You don't have to answer it.

[Roger Tucker, executive]

In respect to Impact, I'll be very honest. We're getting to the point where something is going to happen in terms of Impact. As Pascal has said, we're going to be getting the Total budget through, there will be another funding requirements. 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 big 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 going to be changes, if you like, within the Impact domain. I can't say exactly what they're going to be, but we're looking at a whole series of options that range from selling the assets to increasing our interest to staying as we are. And I'm sorry, that's all I can do, unless you can think of anything other. So it's a fantastic asset. We love it. We've not been in love with it, that we'd keep it forever. But we need to consider the best option for the shareholders.

[Shahin Amini, executive]

So maximize optionality around Venus. Pascal, let's come to you. A question on the Africa Energy line that we've given. What is the rationale for us? Any views on that?

[Pascal Nicodeme, executive]

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. 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.

[Shahin Amini, executive]

Thank you very much for that. Roger, back to you. Ed is asking the question. Can you outline scenarios or share your thoughts on whether company could be 4 to 5 years with respect to Nigeria and Venus? That's a very -- you could say a lot. That's quite a time -- long time horizon.

[Roger Tucker, executive]

4 to 5 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. And we've got a long way to get there. But personally, I'd like to see us get there. I'll leave it at that. Now, whether it's easier along the way to monetize the company as it is, we'll decide in 18 months' time.

[Shahin Amini, executive]

On a lighter note, there's a question by [ Sidmore ] as an invitation from our Swedish investors, Swedish friends. Roger, when are you coming to Stockholm for a town hall? So we probably could plan, I think when we...

[Roger Tucker, executive]

It's funny because Siraj warned me that I was going to get this type of question. I will say that Pascal and I have done 50 investor presentations over the last 6 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 -- by the end of the first quarter, we'll say, shall we?

[Pascal Nicodeme, executive]

Yes.

[Roger Tucker, executive]

Yes, by the end of the first quarter. But you just have to give me a little bit of a say of execution here because we are in a very active situation here in both Nigeria and in -- what we say inland in Impact at the present time, which needs the focus of all the team.

[Shahin Amini, executive]

Very good. So we have one of our friends from Bloomberg Intelligence. First of all, congratulations on a solid quarter. Thank you for that encouraging and supportive statement. Any color on the time frame for Mangetti drilling and initial results for it, and also for this Venus-1A?

[Roger Tucker, executive]

Well, as I sort of notably told you, if you go back to this Zoom Earth website, focusing 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 release the results until their February Capital Markets Day. But there has been a test. In terms of Mangetti, Mangetti will be in deep -- both objectives, have been to both objectives by mid to end of December. And so that is imminent as well.

[Shahin Amini, executive]

But again, what I tell our investors is really the operator has its capital -- well, not capital markets. So they've got the short-term results in early February. 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-1A.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 going to create a lot of shareholder value. I think we've answered that. We are committed to share buyback.

[Pascal Nicodeme, executive]

We heard the message and I think it's clearly one of the options we are considering at the moment in order to [indiscernible]

[Shahin Amini, executive]

Yeah. And of course, the priority of really trying to think where we stand in terms of investments in our core portfolio as well. They have to be balanced 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?

[Operator]

[Operator Instructions]

[Shahin Amini, executive]

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.And 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?

[Pascal Nicodeme, executive]

I think 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 yes, 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 Oil level, then I think we would favor this option just from a pure financial engineering perspective.

[Shahin Amini, executive]

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?

[Pascal Nicodeme, executive]

I think we are closer to the end than the beginning, for sure. We have signed all the withhold documents and we are awaiting for the countersignature of the government of Kenya. So 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.

[Shahin Amini, executive]

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.So, let's see what else we have. I think we've really gone through most of the questions. But just to make sure that I haven't missed anything. There's an important one here on the fiscal regime in Nigeria and 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 to give a refresher on what we did earlier this year as well in terms of 130.

[Pascal Nicodeme, executive]

Yes. So it's valid for both. And when we obtained license extension on OML 130, it was of course subject to us converting to the PIA on OML 130. So, yes, today we can say that both OMLs are covered by the same fiscal terms and they are consistent with the PIA. So on both blocks, we are subject to cover income tax of 30%.

[Shahin Amini, executive]

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.

[Pascal Nicodeme, executive]

Yes. So what we do is basically each time we want to sell a cargo, we basically set the threshold, which is the average forward 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 anytime between the moment we give the instruction and the moment the cargo, or one month before the cargo is actually off-taken, the oil price falls below that threshold, then the offtaker can sell the cargo forward. So it's not exactly an hedging policy. It's not 100% perfect, it's not 100% equivalent to a put option, even if it looks really like a put option.But I think in an upward market, it's very useful because it avoids to get locked into forward sales, which are basically potentially running to 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% to 70% of our cargoes 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 spot now with a form of downward protection if the oil price was to go down significantly. So I think that's a good protection.Now, to answer these questions fully, if we were to increase leverage at Prime level, and if we wanted to maximize the leverage 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 starting to forward sales again, or maybe have more sophisticated instruments like collars. 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.

[Shahin Amini, executive]

Very good. A question from one of our long-standing shareholders, 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 going to 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 on that as a priority, and we'll get back on the level of detail. As of now, we can't go into that level of detail. We don't want to upset relationships and step on anyone's toes, particularly the operator.Look, I'm mindful that we've only got a minute or 2 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...

[Roger Tucker, executive]

Thank you very much all for attending, and we look forward to seeing you on another webcast soon.

[Shahin Amini, executive]

Yes. And just to remind everyone that the recording of the webcast is available, give it another 24 hours and it will be on. And as always, please reach out to me if there are questions. Thank you so much for your time. Very grateful for your support and continuing interest in Africa Oil. So on that note, goodbye.

[Operator]

This concludes today's conference call. Thank you for participating. You may now disconnect.