London-listed Afentra wants West African oil assets after deal to buy blocks in Angola

By David Whitehouse
Posted on Monday, 15 August 2022 06:00

A woman walks past the head office of Angolan state oil company Sonangol in the capital Luanda
Angola’s Sonangol will continue to operate offshore block 5 after AIM-listed Afentra completes its purchase. REUTERS/Siphiwe Sibeko

London-listed Afentra, which is in the process of buying oil production and exploration assets offshore Angola, wants to purchase production stakes in West Africa, CEO Paul McDade tells The Africa Report.

“We are looking at a number of other countries in West Africa,” says McDade, a former CEO of Tullow Oil. He aims to turn Afrenta, formerly known as Sterling Energy, into a medium-sized company holding a range of African oil-producing assets.

Afentra shares resumed trading on London’s Alternative Investment Market on 10 August. Trading was suspended due to proposed Angola purchases from state-owned oil and gas company Sonangol and Croatia’s INA. That was because the scale of the assets in relation to the company meant the deal qualified as a “reverse takeover”.

The shares were trading at £0.28 ($0.34) in London on 12 August, compared with a suspension price of £0.1455.

Research from Tennyson Securities suggests there may be more upside to come. Tennyson calculates an unrisked per share net asset value of £0.37.

The company is buying a 24% working interest in Block 3/05, which is in production, 5.33% in Block 3/05A, which is a development asset, and 40% in the Block 23 exploration asset for a maximum of $163.5m, including future contingent payments.

  • Shareholders will vote at a general meeting on 30 August on whether to approve the purchase.
  • McDade is confident of getting their approval and said that most investors have come on board due to the new management team at Afentra. “We expect to get full support,” he says.
  • The transaction will be financed through cash held on the balance sheet and a debt facility of up to $75m with commodities trader Trafigura.
  • The purchase still requires ministerial approval in Angola. McDade hopes for its completion in the fourth quarter of this year.

A focus on older assets

Gaining further exposure to Angola is one future option for growth. The country “is an important part of the future,” McDade says.

“Angola has woken up to the fact that they need small and medium-sized investors as well as the international oil companies.” The company is also looking for possible purchases across West Africa, he adds.

According to IHS, Angola has 300 discovered oil fields, less than half of which have been developed.

The inclusion of an exploration field in the assets being bought is likely to be an exception rather than the rule. “We are focused on acquiring producing assets,” McDade says.

Older assets are especially attractive as oil majors are less interested in them and tend to sell them, as shown by the history of ownership in the North Sea, McDade says.

Those types of assets still have the potential to contribute to the national economy, he says. Block 3/05 in the Lower Congo Basin offshore Angola has been in production since the 1980s and comprises eight mature fields but only 43% of the reserves have been recovered.

  • Afrenta will be able to work with Sonangol to “materially increase” recovery from the asset, with a production increase to 30,000 barrels per day being possible, McDade says.
  • He argues that hydrocarbons will remain “an important part of the energy mix” in an energy transition, which will “take time”.
  • Environmental, social and governance agendas need to focus on the socio-economic benefits of oil development for African countries as well as on the climate, McDade concludes.

Understand Africa's tomorrow... today

We believe that Africa is poorly represented, and badly under-estimated. Beyond the vast opportunity manifest in African markets, we highlight people who make a difference; leaders turning the tide, youth driving change, and an indefatigable business community. That is what we believe will change the continent, and that is what we report on. With hard-hitting investigations, innovative analysis and deep dives into countries and sectors, The Africa Report delivers the insight you need.

View subscription options