Meren Energy Inc. (MER) Earnings Call Transcript & Summary

Hello. It's great to be here. And I know it took longer than they originally planned, but it's absolutely great to be here in Stockholm. And well, my name is Shahin Amini, I am Head of Investor Relations and Communications for Africa Oil Corp. Before I start the proceedings, I want to share one safety moment. There are no planned drills for this evening. So if you do hear alarms going, it is a real emergency. There's a fire exit in the corner behind me. You could take that. We'll take you to the street level. Alternatively, there is an emergency exit towards the back, the main entrance that you took into coming from the lift, but don't take the lifts, take the stairs as sign posted. In the event of emergency, we will gather outside and we'll basically meet in the front of the building, opposite the central station or in the corner. If that does happen, we'll wait a few minutes. If the emergency is over, we will come back. If it doesn't, we'll find the nearest wine bar, and we'll do our best to keep this presentation moving forward. So who do we have here today from Africa Oil? We have our President and Chief Executive Officer, Oliver Quinn -- sorry Roger Tucker. I've already slipped up, haven't I? So we have our President and Chief Executive Officer, Roger Tucker, we have our Chief Financial Officer, Pascal Nicodeme, and we have our Chief Commercial Officer, Oliver Quinn. So what is the plan for today. We'll -- our presenters will spend 30 to 35 minutes, and then we'll be going through a number of slides. And once they finish, we'll open up for Q&A. For those of us -- for those of you joining us in-person today, we will stay after the event is finished at the top of the hour, and we will have drinks and we'll stay behind, share drinks and some snacks with you and we can talk further. For those joining this live stream, you can download the slides from our website africaoilcorp.com. It is available on the Investors and Corporate Presentations section. Now I'd like to remind everyone that the remarks made during this session are forward-looking statements and are subject to risks and uncertainties. The information discussed is made as of today's date and time, and we assume no obligation to update or revise these information to reflect new events unless we are required to do so by law. You can find more information on our financial statements and also on this very important forward-looking statements in our financial statements and MD&A that you can find on our website. So on that note, I'll hand you over to Roger.

Thank you, Shahin. And I'm now going to try to drive these slides. What I'm going to try to do today is actually I'm not going to read all of these slides to you. And I want to try to make this as, if you like, as informal as possible. And then when we go into the drinks and canapes afterwards, what I'll do is I'll ask the guys to split up, and they will be able to answer with a common voice any significant question that you've got. So let's start with the first one, which is now dealt with. And this is an important one, actually, because it documents what has happened in this company since I took over the helm, which was back in July 2023. But also there's a step before then. I mean, why did I do this job? Why did I take this company rather than any others? And the simple fact is we -- because I have been buying stock as some of you have seen, are invested in a company which holds world class assets. And there are very few companies of this size, in my view, that hold assets, sometimes not in the most optimal way, but hold assets as high quality as these. And so I saw that there was an opportunity here, provided the Board was going to give me support to create something which would be significantly differentiated, if you like, in this space. And so if you look along the time line, and I'm going to come back to this at the end of my bit. With the discussions with the Board, we agreed the strategy that we are executing. Back in September, it says October on here, but it was actually in September. And put simply, that is a strategy to prepare this company for significant growth, which is what we're trying to do. The first transaction that we did was before them, which is on the bottom. And I'm going to come back to this transaction as well. And that was the acquisition of the extra 6.25% equity in Block 3B/4B. However, I'll leap ahead because you see that we farmed out 3B/4B in January -- February -- March 2024. If you look at the value of that transaction, we've achieved in excess of 3x on the price that we paid to acquire the extra equity to that which we exited in the farm down. So we are very focused on creating value, but you perhaps have not worked that number out. Now in order to grow a company and to deliver on the things that we're going to take you through, as I go through this presentation. You do actually need a team. And I know that there's been criticism of our G&A and how high the G&A is or relatively high. But we, I think, have created here an executive team, which we're very lucky to get which is allowing us to do the commercial transactions that we have done. And so Oliver has joined from Kosmos, a much bigger competitor of ours. And we were lucky to get him on board in September. And the person who isn't here is Joanna Kay, who's our General Counsel, and she joined us and has had a really sort of baptism of fire. She joined us in the December 4, and was immediately thrust into the negotiations with Total in the farm out of Namibia. And so effectively, a difference between, as the company is now and as it was with Keith is actually, we generate nearly all of our opportunities internally. We evaluate the best way to commercially structure those deals, and we only use external advisers to effectively do the drafting. So this is the team that positions us to do rather complex transactions. So if we go along that line, we then participated in extra equity raise in Impact, $40 million went in November 2023. And then the big one, which was January 9, we announced the strategic farm down to Total. And the period between effectively July to January was an incredibly difficult time for this company. And whilst I know many of you asked about share buybacks and why we weren't doing them and why we were carrying so much cash is that we had decided we were going to stay in the asset, irrespective of whether we could do this farm down. And we were going to stay in for another year. Now that is a huge decision to have to make because the wells themselves that are being drilled at the moment are $130 million a time. We know, and it's frustrating for you, you don't know. We know what's down there, and we had committed that we were staying in. Now the transaction that we've done, and I'll go on to it more in detail, it was generated solely internally by Africa Oil. And we negotiated it directly with Total and gave it to Impact to execute. But the reason there were no significant share buybacks until that deal had been done is we were getting ready to use the entirety of that cash to stay in that asset because it is so important to us. So I think that we've got a significant difference where we are now than when I started. We've executed some very significant transactions and the company is in a very, very different position. In terms of our principles, this is not our strategy. Our strategic principles then as we stand today, that we are partnered with Tier 1 operators, Chevron and Total. We want to solely focus on the assets that we've targeted as our best assets, and we'll look at those in a moment, but they're Nigeria, Equatorial Guinea, Namibia, and 3B/4B in South Africa. We want to maintain an equity exposure, which fits -- cuts our cloth, if you like, to fit the money that we've got available. And we're going to consolidate if we can, our ownership of our core assets, the ones that we know as best we can. And you've seen that we've offered a fairly significant amounts of money to acquire additional equity in Impact. And we will try to grow within the portfolio and the type of growth we're looking at, and you're going to see it in a few moments, is the development of the Preowei oil field in Nigeria. And we will target sustainable shareholder returns. And I may come back to that a little bit in the -- at the end. So as I said before, the only assets that you'll ever hear us talking about at the moment are Nigeria, Equatorial Guinea, Namibia, and 3B/4B in the West Coast of South Africa. Now as I said, we are differentiated in that they are truly assets of a scale, which are interested to majors. These are not traditional independent company assets. And every single one of them is in a different phase. So Nigeria is in mature production. Equatorial Guinea is approaching exploration side of the things, and Namibia is going into a development phase, and the 3B/4B is also in exploration. So the overview of them, you know them well. And I think another difference between now and with Keith is that we used to talk about, we produced 22,000 or 20,000 barrels a day of production in Nigeria. We do this. That is a fact. But those 20,000 barrels a day come from fields, which are 3 of the 5 largest fields in Nigeria. I mean this isn't small stuff. 310,000 barrels a day are being produced still through those fields. And that's really, really important in our game because whilst, yes, they're going to go into decline. They're over the rise in production. They've reached plateau, and they're going to start to go down, but they've reached plateau at 310,000 barrels a day. But the great thing about them is that they've got so much production history. The subsurface is known. It would be an exceptional surprise if there was an -- one of these assets fell over. The wells are well known. The reserves are well known. The FPSOs are being maintained at the highest level. So technically, these assets will continue to produce at the levels that they, well the predicted levels with the declines that we predict, but don't expect huge growth from these. These are going to be our foundation, producing assets, supplying the cash for the future. There is infill drilling opportunities, but they will not be able to completely a lay, if you like, the decline. It's a natural decline of producing assets. The other critical number is that 60% number in there. And that 60% of the 2P reserves are in the proven category. And so we're not stretching to find additional reserve. And then there is the Preowei development, which is now going to go ahead. Now the news in terms of operations, we can go into in more detail later, but the -- we have a rig operating down there. It was delayed, and that accounted for some of the issues around CapEx that you've noticed in the -- in our results. The good news is that we've just extended the rig contract and we'll carry on drilling out until the end of '24. And actually, we're in negotiation to extend it again. And it's a fantastic deal that Prime have got because the day rate remains the same whether we can completely fill the schedule, extending it even further is debatable, but we can probably use it for somebody else, but there is an interesting deal. And so we are happy with the way that things are going. We can go into more detail in the question time on it, but performing well. Then Preowei, which is, as it says here, a low-risk development project that wouldn't have been developed unless we've got the license extension that we got last year for another 20 years. And as it says, it is going into the end of feed by Q3 2023. The development will be 16 wells, and it will be an immediate tieback to Egina and it is pretty much on schedule. And it is not small. The gross production of that is going to be 65,000 barrels a day. It's a substantial development and it's on schedule. Now we jump down to the area that is of great interest. And what I do is I describe this area is it is the Orange Basin, it's a basin defined by settlements that have come from the Orange River, which is the river that defines -- separates Namibia from South Africa. What you're seeing here is, I think, and it will roll out is the emergence of a province. This isn't a single field. This is going to be a major petroleum province that evolves over the next I don't know, 10 years or whatever it is. And we're right at the start of it. And so the little up and down sort of snaky thing shows. The first discovery was graph, which is to the east of where we are drilled by Shell. And it's only February 2022. That's the first discovery in this province. Then we followed up with Total, with Venus, which was in February 2022. Shell, with then drilling Jonker, which is next to graph, but actually slightly nearer to us. And that was drilled in March 2023. Then you've just had a well called Mopane, which is the well drilled by I can't point actually, but it's a well drilled by Galp, which, if you like, is the green blob in there between Venus and the Kudu Gas field, and that is a major discovery by Galp. And then we have now drilled again, Mangetti, which you'll have seen was a success and actually tested the another reservoir, the Mangetti fan and had hydrocarbons in both the Mangetti fan and the underlying Venus fan. So it was a combined test of a new play and Venus. And then continuing the trend down, which I think is very exciting in our portfolio is the block to the south, which is 3B/4B in South Africa. Now South Africa is jurisdiction, which is a little bit more difficult to operate, to operate in. But we have now farmed down to, again, Total and QatarEnergy. But this is material to us because of acquiring, if you remember, that extra 6.25% interest back in July or in September, whenever it was last year. We have managed to maintain 17% equity in this license with a [ 2 well ] carry. It's in my view, is a very, very unusual deal in the industry at the moment, but at 17% equity at the size of prospect that we're looking at in here and it says on there, the prospective resources are up to 4 billion barrels. This is potentially very, very important to us. And so a very important transaction. Now this is the frustration for you. It's a frustration for the entire market. What in earth is Venus. I predict that you are going to start to see more information coming out of Total. Last month, I think it was the Senior Vice President of subsurface, Kevin McLachlan did a presentation in London and talked about the scale of the reservoir. He also talked about the fast development plan that is being worked through at the moment. You have all seen and noted that Total have effectively bought a rig, which is very unusual in this industry. You may or may not know that, that rig is now on a 10-year drilling contract for this area. And this is going to get developed. There's no question about it. Time line to first oil, we carry in our models 2029. You can work out whether it's mid-2029 or early 2029, but it is going to be a significant development. In terms of operations in the area, we are still acquiring, actually we've now fully acquired, 3D covers the entire area. And the reason that we were going to bet the bank effectively to stay on in this is that we knew what was in Venus. But the southern part of the block had not been covered with 3D seismic. We could see on the 2D seismic, 2 very significant features, which are called Damara and South Damara and that seismic has now been shot and acquired in actual fact, I'm going to point to something which is very interesting. The seismic was being shot when Mangetti went down. The seismic was stopped, and they were reallocated to reshoot the seismic to the north of Mangetti. And now it's gone back down. And why did they do that? And the reason for that is that there are going to be 3 wells, at least 3 wells drilled in this area again, and one of them is going to be on an extension of Mangetti, I would suggest. And another one is likely to be down in one of the exploration prospects in the South. So the deal that we have negotiated in here, again, wasn't necessarily fully understood by the market when it first came out. But I can guarantee you if you ever talk to anyone from any other oil company about this deal, was it a good deal or a bad deal, is frankly an amazing deal because we are now completely carried through all exploration, all appraisal, all development, all building FPSOs until first oil. And the numbers for development of this scale stratospherically high. We end up paying that returns into a loan. We end up paying that back from post-tax cash flows where initially 60% goes to Total, 40% comes to us. So there will be immediate cash flow. In our current modeling we think we pay that loan off in 3 to 4 years. So it's a very important asset for us and willing to take more questions on it. In terms of timing, actually, I'm not going to say too much more about EG, but we're going through a farmout process there. And maybe later on, we can talk a little bit more about it. And I'll pass over to Pascal now.

Thank you, Roger. So I'm going to give you a brief overview of our financial policies and starting with the capital allocation framework in order of priorities. As you probably noticed, our first priority has been the strength of our balance sheet. Since we made the acquisition of 50% in Prime. We've made sure that we kept the debt level at significant level and certainly below 1x net debt to EBITDA. The reason is that when we did the initial acquisition. We booked an initial acquisition loan of $250 million. That was repaid from the proceeds from the dividends we were receiving from Prime. And we -- once this facility has been repaid actually in a bit more than 2 years, we made sure that Prime was keeping a very low level of debt. So the other priority within our balance sheet has been to keep a liquidity buffer for several reasons. The main one being that being in the oil and gas industry, you want to make sure you can cope with the variation in commodity prices. And also you want to make sure that you have at least 2 years of cost in front of you. So we've always kept this liquidity buffer. And therefore, the existence of our corporate facility, I will come back on that. The beauty of the deal we've done with Prime is that they have at their own level, this -- when we bought the asset, they had a $1.8 billion RBL facility, which is now down to $1 billion. And actually, only $750 million is drawn. But these facilities under very competitive terms. I will come back on that. So altogether, I think it meant that we were financed on a very competitive basis, both at the Prime level and at the Africa level. Second priority for us has been organic growth. We've been really focusing on our existing assets by developing production in Nigeria, carrying out infill drilling in Nigeria, doing a bit of exploration also in Nigeria, successfully on Akpo, namely. And in terms of development, appraisal and exploration, although we've always tried to minimize the commitments in exploration. We wanted to make sure that we were continuing to develop our existing assets within a limited envelope for expenditures, of course. And thanks to the deal that we've signed on 3B/4B in South Africa, and on Impact, we are now carried through exploration and appraisal in Namibia, for instance. The third priority has been once we have cleared the repayment of the acquisition facility on Prime and the situation on Impact to put first baseline dividend in place. So $0.05 a share annual dividend which has been supplemented afterwards with a share buyback program, and I will come back on that. I think that's one of the questions you will want to ask. And the fourth priority, but this is really at the bottom of the list, I would say, has been M&A. We've been doing for some time trying to do asset acquisitions, which has not been successful because this market is extremely competitive. So we really want to focus on the existing portfolio. You saw what Roger talked about the increase in working interest we've done on 3B/4B. We really want to focus on the existing assets and try to consolidate more of the existing portfolio. Therefore, the offer we made to the minority shareholders in Impact. Moving on to the next slide, yes. So coming back on the financing strategy for Prime. So we have this RBL facility at the Prime level that we refinanced when we obtained a license extension in Nigeria under a very competitive term. I think the Prime RBL is probably the cheapest RBL facility you can find in Africa. It's priced at SOFR between 4% and 4.25% depending on drawdowns. It's been extremely successful with the banks It's been refined on several times. And the whole philosophy behind this RBL facility was basically to make sure we could manage the amortization and push back the amortization so that we could maximize the distribution of dividends to the true shareholders, i.e., BTG [ and us ]. So the strategy with that facility is going to stay the same. We are going to continue to try to refinance it, push it forward to make sure that we continue to maximize the dividend coming out of Prime. And this translated in a very stable flow of dividends coming from Prime since we made the acquisition. So the acquisition we paid $520 million. We received $825 million of dividend. So we've more than paid back the acquisition. I think we paid back after less than 2 years. So moving on to next slide and the debt structure, but at Africa's level this time. So you know that we have this standby facility in place at Africa's level, which is actually a legacy from the acquisition facility we had with to purchase Prime. The facility has been repaid, as I said, in more or less 2 years, but we wanted to keep the banks in this facility and provide additional liquidity for the reason I say it. So we wanted to make sure that we have basically 2 years of cost in front of us in terms of liquidity. And also -- so this liquidity headroom is useful in the oil and gas sector, as I mentioned. But also having the main banks of the Prime RBL facility supporting us at the corporate level was also key because we wanted to make sure we had the support of these banks, when, and if we were to refinance the RBL facility. And I think we are still in the situation today where we have 4 very supportive banks at the Africa level, which are the ones who are leading the RBL at the Prime level. So that's key for us to keep these banks supportive. Next slide. So again, coming back on how we manage cash in 2023. I think we've been very disciplined in the way we've managed our cash. We have lived within our means, basically. We received $275 million of dividend from Prime last year. We started the year with more or less $200 million of cash, we finished with $232 million. And you can see on this slide, the main uses we've made. So $29 million have been returned to the shareholders via the dividends and the share buyback program. We spent $17 million -- well, $18 million on exploration, which is actually mainly Equatorial Guinea. It was $12 million on Equatorial Guinea. We decided to continue to fund Impact. That was before the farmout to Total. So we were still funding Total by equity injection, while they were basically standing their corner in the development and appraisal of Venus. So that was $44 million. And without the agreement we've signed with Total, we would probably have had to fund another $100 million this year just to stand our corner in Impact. Corporate G&A is $20 million. So that's all the cash payments in relation to the corporate cost at the Africa level. Other costs, last year, as you know, we exited Kenya. So we had a few exceptional costs in relation to the exit. In Total, it was $26 million. We also funded Africa Energy via the convertible loan. So that's another $0.5 million in that envelope. And so plus the $175 million, as I said, we've increased the corporate cash position of $32 million. And finally, so just to focus on the shareholder return program. So as I said, since 2022, we've put in place a baseline dividend of $0.05 a share annually. We pay twice, so $0.025 a share every 6 months. We've return in total since we started the shareholder return program, we've written $120 million to our shareholders. So not insignificant compared to our existing cases. We have complemented this dividend program with a share buyback. So why share buyback? Why dividend? I think we've talked to our shareholders, and basically the opinions are make some preferred dividends, some preferred share buybacks. Share buyback for us is a more flexible way to return capital to our shareholders. So we decided to start this share buyback. And we've relaunched it actually in December 2023. The reason why we stopped is because due to operational reasons, we had to be in blackout for a certain period of time. So you can't change the instruction you're giving to your brokers at that time. So we decided to stop temporarily. And the reason why we were in discussion with Total to sign this farmout agreement. Therefore, as soon as the farmout agreement was signed, and we had a better visibility on our cash flows. We decided to restart the program. Obviously, without the farmout agreement potentially, we will have to pay about $100 million of capital expenditures on Venus. So we wanted more certainty on Impact on the Venus development before restarting the share buyback. And at the moment, we have restarted at the basically more or less a maximum pace we can afford given the daily liquidity on the stock. So as I said, we have balanced capital allocation. We try to be disciplined as much as possible. And -- but the ultimate objective is to maintain a very strong balance sheet. And now I'm going to hand over to Oliver.

Thanks, Pascal. So what I'm going to do just briefly towards the end of the presentation here is talk a little bit about strategic execution. So Roger has outlined to you the direction and strategy. Pascal has talked about the financial frame and how we think about that. So in this section, starting with '22, I'm going to talk about the Orange Basin transactions in a little bit more detail what our thinking was, why those transactions are important in executing that strategy. So I think the underpinning rationale there is two things really. One is to preserve growth in the company. As Roger mentioned, we have a lot of faith and belief in Namibia, the wider Orange Basin as well. So we did not want to leave that position at the same time as Pascal outlined, to keep going even in the short term, assuming around $100 million in 2024 to hold our corner of Impact, right? So you're caught in the classic scenario where many of our peers, and personally, many of us have experienced this when you make a big discovery, the world is fantastic. What actually you can either monetize and leave early, probably for poor value because you're under pressure to sell or you can try and jump that development gap and get into production where you know you're going to have significant cash flow long-term value. And many of our peers have fallen into that gap. It's a very, very big space, if you like, to jump over. So the art of this transaction was to say, right, we want to stay in, but we do not want to expose ourselves to that gap. So how do we do that? To do that was the farm down to Total, which was to say, well, effectively Total as operator you take half of the equity the Impact have got. But in return for retaining half, it's a full carry, as Roger described, all costs point forward through to first oil. So what do we get as a shareholder and Impact? And what does Impact get is it has clear line of sight to production and cash flow in one of the, what will be one of the world's biggest petroleum provinces through the end of and into the next decade. We also retain there the exposure to the upside as well, which is critical because the carry involves all the other exploration in the block, appraisal, seismic drilling, everything essentially to first oil, the funds that Roger talked about in the South when they get drilled, effectively, that's a free ride for us today, around. The scale of that carry, that carry loan, what will it be depends on development scenario. But I mean you can look at public figures of deepwater FPSO developments, and you can look at what 10% of that would be and it's several hundred million billion-dollar-plus territory, right? So it is a material amount of capital that we've gained access to. The second transaction was the farm down in South Africa 3B/4B in the Orange Basin as well. And again, slightly earlier because this is exploration. But again, what are we trying to do here is we're not trying to exit. We're trying to retain a significant position, 17% in this case, but take the capital risk off the table, right? So what we've got in that transaction which was with Total and Qatar, of course, partners in Namibia with Impact is effectively a full carry on what would be 2 wells. So if 2 wells are drilled in the block, we are fully covered through that. And so actually, if you think about that, what happens is, first of all, it gets drilled potentially in 2025 if the schedule plays out that way and then potential appraisal well. So until we would face any kind of capital demand in that project will have a pretty clear line of sight as to what we've got, right? So again, you're in a much stronger position in that sense. So we're moving capital, retaining growth and what does all of that do? Well, it makes us probably quite unique, but it also underpins the shareholder distributions that Pascal talked about because we've taken the capital demand out of the business. The next thing I'm going to talk about in terms of execution is sequential really. And again, all of this -- I'm not going to the details because it's all in the public domain, but this is the recent offer we made to the minority shareholders in Impact. So this was deliberately timed, of course, to be post the Total transaction, the farm-down transaction so that we know Impact is fully funded, and therefore, we can acquire more of an asset that we really like, but without exposing ourselves to future capital. So what we have put out there is that we will purchase up to another 8% of impact, valuing impact $805 million today. That would be a net maximum spend for us of $64 million. Now we're in the middle of this, so I can't tell you entirely what's going on because we will need to disclose that when it concludes. But we won't buy the entire 8%. That was a cap. It wasn't -- we were always going to buy that. But we will buy a portion of that, which does two things for us. One, it gives us more value because we get more of an Impact and more of Namibia. Second thing that it does is it will take our holding from a current 31.1% to over 33%. Now that in itself is important because at 31.1%, we have very strong negative control over the company over Impact. Over 33%, we have full -- sorry, I'll go back one, we have full negative control over that. So that's a strategic hurdle that is important. Buying more beyond that is value accretive to us. It's about value and scale in the asset. So this transaction will be able to disclose the conclusion of it shortly. As I said, it's live, and that offer has been out there. These numbers are all in the public domain. But again, it's more of the Orange Basin and it's no more capital exposure. So there's a discipline to this as well. People ask the question, why didn't you buy more? Because to Pascal's point, we are still being disciplined about capital allocation. So I think the final thing here, and this is probably something we can get into in Q&A is, as Roger said, we're focused on the current portfolio, consolidation, cleanup, simplification, taking the capital out, preserving the growth. The question then comes, of course, well, okay, what do you do next, okay? And I think this is probably a bigger debate, but what we see in the sector is consolidation is coming. There's been a huge consolidation in the U.S. sector onshore. That trend, if you look historically, typically, those things start in the U.S. as phases of consolidation, then they move international. So in doing all the things we're doing today and focusing on what we've got, where we're effectively strengthening the company. And so, however, that landscape plays out, we'll be in a much stronger position in that environment, right, particularly by removing the CapEx, retaining the growth, giving clear returns. So again, you'll see when we talk about growth in the future. The last point we make is that any growth is disciplined and it's always going to be in combination with the shareholder returns, right? So we're not going to go and take those returns today and do something else. And as Pascal said, M&A on the capital allocation is on the far end for a reason. It's important, but it's the lowest of those priorities today. So I'll hand back to Roger and conclude.

Thanks, Oliver. And just to conclude, I'm actually going to go back to the very first slide. I'm going to press every single one. So where do we find ourselves at the end of this process that we started with the approval of the strategy. We are unique. First of all, we have, as I said, at the start, world-class assets. And point forward, we have no capital going to go out of the door in any significant amount. And we have no debt on the balance sheet at all. And actually, that is what I promised the Board. We would try to deliver in cleaning up this portfolio back in October. To be honest with you, I don't think we're going to get there as quickly as we did. But we now find ourselves in a position where we have to make the next strategic direction decision. And you can cast your eye over the rest of the industry, whether anyone else like us with what we've gotten. And I think that, that probably ought to be the concluding remark, we are significantly differentiated in both the quality of the assets, our financial strength, and the fact that we have no debt on the balance sheet, and we have growth opportunity.

Thank you, Roger. So just to remind those who have joined us on the webcast, you can submit questions on events at africaoilcorp.com, or if you have my e-mail address, e-mail it to me, we already received some questions. We do want to prioritize those received over the webcast because we have more time with those who are in-person here with us today. So I'm going to start with a couple. Actually, can I ask I think it'd be quite good for if you guys come and stand. We look more dynamic for the Q&A. Roger, you've done a great job talking about our core assets and our focus. And this question does keep popping up, which is on the noncore assets. In the past, we've had a question on some of these noncore assets, but there's one specific on whether you have any thoughts you want to share on Africa Energy Block 11B/12B and perhaps the broader South African.

We've -- as you know, we've exited Nigeria -- not Nigeria, we've exited Kenya. The noncore assets are a little bit more difficult to deal with. And I'll be frank with you, it's not our intention to spend any significant amount of money within the Africa Energy portfolio. And the reason for that is it's not going to be material for us. And the time line, we believe, to go through to development for that asset is a good ways out. So we can't give you an update on that, but there will be -- there is ongoing news -- actually not news, there's ongoing activity with that asset which I guess will be revealed over the next month or 6 weeks or so, but it is not core to us. In respect to Eco, we've had a great relationship with [ Gil ]. But effectively, I think that we are at the end of our relationship, if you -- we're not getting to divorce or anything, but it is time that we probably went our separate ways, and we are having some initial discussions on what that will look like. It was a great friendship. We're very happy with where we got with 3B/4B. We hope that Gil achieves great success with the remaining assets that he's got in Namibia and Guinea and whatever. But it's probably time that we cut the umbilical cord with that one. But it does take a lot longer to sort those separations out, if you like. Well, I suppose they are divorces really. Does that answer Shahin?

Well, it does, perhaps a bit more dramatic than I was hoping for, but thank you for that. So let's move to Oliver. You've already given indicative time lines on when we could expect to complete the farm-down agreements. On 3B/4B, is there any concerns, any particular pitfalls along the way? Or are you confident that, that could be done?

No, I think it's a good question because, as Roger said earlier, South Africa is more complex than some of the other jurisdictions that we're in. I think what has happened there is several people have entered the Orange Basin, Total already in the position they've gained with the Qatar is by farming into our block is complementary to their existing blocks. So that's important because they're a good partner because they're a huge acreage holder. So in terms of completion, they're already in the country, which derisk it significantly. The process is well established. So I think when people look at South Africa, they look at the risks, I think they're talking often about the pace of that. So how long does it take? As an example, we farmed in, of course, for a little bit more of 3B/4B in 2023, and that transaction closed this year several months later. So relatively normal pace for the area. So I think, yes, we've got to watch the time line, but there are no fundamental concerns about that. These transactions have -- there are several examples in South Africa. They've gone through. Some have taken longer than others. But in this case, it's all incumbent parties in the country, which always helps, right? There's no new entrant here, which is great.

Thank you, Oliver. Moving on to Pascal. I'm going to look at the crowd because there are a few in the crowd that keep bringing this particular point of, and this is the Africa Oil standby corporate facility. Why do you keep it? And I think Pascal, you are very well qualified to address this. You were at a reserve base. You've been on the lending side. You were at banking. Perhaps you could elaborate further on the importance of these relationships in today's oil and gas financing and why you maintain that facility?

Well, I think I started to answer this question during the presentation, but -- so first, the objective in the standby facility is to keep a liquidity buffer. I think that's clear. As a company, and I mean we are potentially going to spend up to $64 million on buying minorities in Impact. We are scaling up our share buybacks. So clearly, there is a need for potential further outflow. So just sitting on $200 million of cash or maybe less is potentially not enough given our objectives. Then about the facility itself. I mean so as I said, it's been provided by 4 banks, which are the 4 main banks in the Prime RBL facility. We want to keep the Prime RBL facility in place. It's drawn at $750 million at the moment which is quite big compared to the size of the RBL market at the moment. So we want to keep these banks in that facility. Maybe it will be a shorter RBL facility next time we will finance. But still, I think we want to keep about $400 million, $500 million RBL facility in place. And the fact is that the most active banks in the market at the moment are the largest bank in the RBL facility and also other banks in our corporate facility. So it makes sense to have both facilities in place. We are considering refinancing the Prime RBL sometime in 2025, probably. We are in discussion with our banks at the moment to extend the standby facility, probably for a smaller amount because we -- now with the Total farm outside, we don't need such a big buffer as we used to need as I said earlier, I mean, without the Total farm out, potentially this year, we will have to pay a $100 million to Impact just to stand our corner, just to pay the cash flows on Venus.

That was $100 million at 31.1% equity. Some of the partners in there probably weren't going to be able to stand that corner, and we were ready to cover there.

It was potentially up to $200 million. So I mean that's why we want to keep this facility at the record level. At the moment, it's undrawn, we are just paying commitment fees, which are just 40% of the margin. And as I said, the Prime RBL itself is extremely cost competitive. So it's really -- I mean when you look at the cost, you need to look at the blending cost between the two facilities. And you need to keep, I think, the largest bank in your syndicate, happy and happy to support you going forward. So that's why we are keeping this standby facility.

Great. I'm looking at the crowd, who wants to go. Come on, let's do some hands. When I walked in, actually through the -- coming in from the restroom, there's one person that was saying, the one thing I don't like about this company and then everyone said, shish. So I want him to ask his question about the one thing he doesn't like actually.

Okay. Well, I'll let you guys reflect on whether you do want to ask a question, I will go back to the webcast. There is an interesting question from institutional investor in South Africa. So I don't understand why Total gave you such a good offer. So a good deal but it's Namibia.

They didn't give us the opportunity, we solicited the offer [indiscernible]

So is that a real question.

It is a real question. Of course [indiscernible] made itself.

The day that we announced it, actually, there was -- obviously, we were very, very happy. But some of the analysts didn't quite get it about the true value of that deal. And as I have just said that, last quarter of the year when we had made the decision and the Board had made the decision that we were going to stay in. There was this bizarre process to sell going on, was pretty nerve-racking, actually, and there was absolutely no way that we were going to be doing huge share buybacks. But the reason that Total gave us the deal actually is because it gives them certainty that the project is going to go ahead because having a partner that isn't funded properly and the -- because I've been in it on the big company side is an absolute nightmare because the small party can cause all manner of ructions and legal activity and whatever. And I will say the one thing that we have to do to keep this carry alive is that we have to vote with Total. And if we don't vote with Total, the thing disappears. So it is removed for them, the break that small unfunded companies can put on mega projects. And that's why they did the deal that they did. They didn't want to come and acquire us because our company is too complicated. And this just gives them the control of this mega project that's out there.

I've actually taken the liberty of putting this slide up, focusing on 2913B and the Venus discovery.

I'm going to give you one little thing, which you haven't even asked me a question. If you look at our share price, I mean, I do look at the share price, obviously. We had the tremendous fall in September because everyone was speculating on our and on the buildup to Nara. The Nara well was drilled. Actually, Nara was a success. It just wasn't a success at the venous level. It was Nara that discovered the Mangetti fan which was full of hydrocarbons in narrow. But at the Nara level, the Mangetti fan was too thin to produce. And it was Nara that led to the selection of the Mangetti-1 location, which tested this fan that had been found in Nara and also allowed the both sands to be tested in 1 well. And so we had the share price go up, blah, blah, blah, and then Nara was a failure. And the Capital Markets Day, and it has been a bit of a roller coaster ride. And the question that you all have is why don't we release more information on it. And the simple fact of the matter is that we can't because we're bound by confidentiality. We are only a shareholder in Impact. Impact is bound by confidentiality. And we are driven to follow the leader, Total in this is incredibly frustrating. But I do predict that there is going to be more information coming out on this in the near term.

I would like to add a bit more to that final part of Roger's statement, we have met all our obligations on the TSX disclosures. So all material information regarding that have been disclosed. But there are times where we do have to rely on TotalEnergies as the operator for the formal interpretation of data. And if we don't have that, we've got to wait and coordinate with them. But just to be absolutely clear, everything that needs to have been disclosed as material information has been disclosed. Now staying on this, there are a number of questions. Now I remember a couple of years ago, we had a map and we only do short Venus and Nara. And now we've got all these other blocks appearing and we've got Damara and Damara South. There is a question on what of the size we can't give that. We just can't give guidance on days. But on the -- what are your expectations for drilling, and because you mentioned earlier that, obviously, there's 3D seismic to the North of Mangetti Do you expect...

The whole -- to answer the question, the whole block now is covered in 3D seismic. And as I've had conversations with some of you before when we made the decision to stay. If you look where it's as Jonker, Jonker-2A, everything south of that, which included these two big features, the northern 1 is called Damara and the other one is Damara South, was not covered in 3D seismic. And as anyone who knows who sort of plays in this space that whilst the 2D is actually quite high quality. You can't pick well locations on the basis of 2D seismic at these water depths with these types of reservoirs. And so the southern area is now completely covered and that seismic has been reprocessed. The northern area, where you see where the vessel is the new seismic was acquired to the north and east of that, and that is acquired. And the indication is that there will be three more wells lease this year in this area. And one would hope that we don't know yet that one of them could well be in the southern area. In terms of size, these things are huge. I mean I am sounding like Keith, aren't I? If you look at the scale bar at the top, that's 50 kilometers, okay? And you can see that Venus is more than 50 kilometers long. There's been speculation about the in-place reserves and there's all sorts of numbers that have come out, but it's multibillion barrels and Damara and Damara South for the same sort of sites. In Mopane, the Galp well, which is the green blob, the discovery between Venus and going up to Kudu, is actually a different type of feature, but that looks like it's substantial. Chevron in 2813B, they've got a rig and they're going drilling as well. I'm going to give you a little bit of insight. Shell are going around the same, they don't really like their block as much as they thought. And the difference is the volumes. Graff and Jonker probably smaller, probably.

Patrick Pouyanné, Head of TotalEnergies has actually referred to Kokerboom which is actually not shown on that map.

It's sort of -- we Kokerboom is a feature. It sounds really like Keith now isn't big enough to put on this map, is actually a thing that looks like it might be an extension of Jonker. It's sort of a little lob that comes out from Jonker to the north of Damara. And it was rumored to be a location. And the reason it was going to be a location is it is covered with the original 2D seismic not. But now we've got stuff in the South, but there are features of more modest size in the area too.

I'm looking at you Pascal. This one keeps coming up again, and again, and again, why don't you press release dividend received from Prime?

Well, actually, we're going to receive another dividend this week.

We have -- haven't we.

Not yet.

It's on the way.

$25 million. I think clearly from a materiality perspective now receiving a dividend from Prime is not material. And we sort of moved away from press releasing each time we were receiving a dividend because it's usually on a quarterly basis, but the amount is changing. It can be quite variable. And because we are releasing financial statements on a quarterly basis, it actually matches the actual dividends we are receiving from Prime. So it doesn't really make sense to press release each time when we see the dividend. We are just including a part of the financial statements.

Very good. You're not going to like this one. Mention a substantial issue a bit. I think you did a very good job explaining the capital allocation policy. But could you just, just for the sake of answering this question, just run through that again? Because clearly, NCIB good, but SIBs perhaps a step too far from that.

Yes. No, as I said, I mean, we have still some uncertainties on the cash management in the coming months. We have this offer to the Impact minorities. I think we are spending quite significant amount on the existing NCIB. We have -- I mean, dividends coming from Prime are still subject to uncertainty. So -- and we want to keep at least, as I said, 2 years of cost in front of us. So it's not a matter of returning in one go, $150 million to the shareholders because we have $200 million of cash. It's also to preserve the ability for the company to invest in our future, whether in the existing assets or in the -- in potential M&A on the existing asset as well or more consolidation. So that's why we don't want to return, let's say, 95% of our cash balance because we think that it can still be invested in the company on very accretive opportunities.

Yes. We have actually gone past 6, and I was told that if you're in stock on one thing you don't want to do is get between sweets and the alcohol. And we do have beer waiting out there. But if it's okay, we'll carry on for another few minutes for the benefit of those who've joined the live stream. We do have 2 directors who sit on Impact's Board here.

Not me.

So you can't step this away. The question is, once you close the deal, with between TotalEnergies and Impacts. And there's a $99 million reimbursement of historical cost. What's going to happen to it. It's perhaps.

Yes. I mean, so just so everyone's clear, part of the Total deal, and again, it was all released at the time is that some past costs will come to impact. That's $99 million, 100% Impact, if you like. So our net Africa Oil is currently 1/3 of that. So I think, look, the point is it's timing on this, as you said, Shahin, when the deal closes. So the deal closure, we're not worried about risk on that. But the deal does have to close. It requires a ministerial sign-off in Namibia, which is in hand. But I think, frankly, the point for the conversation on the future of Impact between the shareholders is when that deal is closed. We've got that certainty on capital requirements for the future. And then we can look at the portfolio, look at the company and decide what is the optimal way forward amongst the shareholders at that point you...

No, no, exactly. So it differently to the point. Yes.

There's one question left on Namibia which I will answer, if it's okay with you guys. And that is there's a tier -- the 2 additional profit tax, the 2 tiers. The question is, what are they? We can't say because I think there's still confidential. .

Yes.

But what we can say is that they don't really move the economics that much, right?

So I think as you say, the Namibia contracts are not -- unlike many places are not public. So that does add layer of complexity and disclosure. There are tax royalty contracts. So unlike most of Africa, they're not production-sharing contracts, so they're very different in structure. What that means is that by design of those contracts, they typically allow you to get a very reasonable return on your investment before any additional tax kicks in, okay? So there is an additional tax mechanism, but it only occurs after what we would say is a very good return. I think that's probably all we can say because the numbers are not disclosed.

Exactly.

More general point in Namibia is that it's early days but it's extremely stable. We've had extremely good through impact relationships there. Things happen, things get approved, they move forward. And the contracts reflect that this is a very early stage entry as well, right? So there's typically quite attractive contracts that cover Venus and everything else.

Just to wrap things up, let's go to Nigeria. It is on lifeline for now. So a question on the Akpo shutdown. Yes, Akpo is currently down for the planned maintenance. That's, I believe, started on 19th of March. What are your expectations? I was told it's about a 30-day window.

The shutdown has been planned for an awful long period of time. My experience is that shutdowns that are not planned for a couple of years generally go wrong. And this one from what we've seen has been well planned. And I think I would be very surprised if it went beyond what has been planned. It's not a huge shutdown. It's been well planned and is now being executed on time at the moment, and they've got everything that they need.

And we did communicate to the market that Agbami is also another planned maintenance shutdown.

And that is going through the same process and the whole shutdown procedure is being evaluated at the moment. But as I said earlier, both of these facilities are actually in pretty good shape, and it's not like dealing with [indiscernible], but some of the West of [ Shetlands ] FPSOs often reveals really horrible things. once you start the maintenance shutdown, but we would not anticipate having a problem with either of these two shutdowns.

Right. I think it's time to go and have a beer. So for those of you that can stay and join us, we look forward to further discussion and more questions from you. So on that note, I thank those who joined the live stream. Thank you, gentlemen.

Thank you very much.

Great presentation.