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Africa Oil Corp has taken note of the press release by TotalEnergies announcing the renewal of Oil Mining License (OML) 130 for a period of 20 years 

Africa Oil has an effective 8% interest in OML 130 through its 50% shareholding in Prime Oil & Gas Coöperatief UA. The renewal of OML 130 means that Akpo, Egina and Preowei fields will operate under the terms of the new Petroleum Industry Act, being the first assets to effectively benefit from the PIA fiscal terms.

This license renewal, a condition precedent to the closing of Prime’s debt refinancing, will allow Prime to enhance its debt capacity, reset its tenor to six years and materially increase its near-term liquidity capacity. Closing of the refinancing, expected in the next few days, will provide Prime with the scope to distribute dividends to its shareholders, including Africa Oil, during this year.

The renewal of OML 130 will also allow the company to increase the available amount of its standby corporate credit facility to US$200.0mn from US$100.0mn currently, significantly increasing its liquidity. 

Africa Oil president and CEO Keith Hill commented, “The renewal of OML 130 is very good news for the Company and its shareholders. This license is the core of our Nigerian investment and accounts for most of Prime’s production and cashflows. It also includes attractive growth opportunities such as the undeveloped Preowei oil discovery, which we can now take forward towards a final investment decision. Additional opportunities include step-out exploration and appraisal drilling, that should support production rates over the coming years.

"Africa Oil has a debt-free balance sheet with significant liquidity headroom and a balanced portfolio of production and development assets in Nigeria, plus the industry’s most exciting appraisal and exploration campaign in Namibia’s offshore Orange Basin. Drilling at the Venus-1A well is progressing well and we look forward to updates from the operator in the coming weeks.”

Background information

Africa Oil completed the acquisition of a 50% shareholding in Prime in January 2020 for a cash consideration of US$519.5mn. To date, the Company has received a total of US$650.0mn in dividend payments from Prime and achieved payback of its Prime investment in under three years.

The main assets of Prime are an indirect 8% working interest (WI) in OML 127 (4% net to AOC) and an indirect 16% WI in OML 130 (8% net to AOC). OML 127 is operated by affiliates of Chevron and covers part of the producing Agbami field. OML 130 is operated by affiliates of TotalEnergies and contains the producing Akpo and Egina fields. The three fields in these two OMLs are located over 100 km offshore Nigeria. All three fields have high quality reservoirs and produce light to medium sweet crude oil through FPSO facilities. Akpo and Egina also export associated gas which feeds into the Nigerian liquified natural gas plant. OML 130 license area also covers the Preowei undeveloped oil discovery. This asset is expected to be developed through a satellite subsea tieback to the existing Egina FPSO facility.

At the end of first quarter 2023, Prime had an outstanding reserves-based lending (RBL) facility and a pre-export finance facility with an aggregate outstanding debt amount of US$720.3mn (US$360.2mn net to AOC). Prime will now complete the refinancing of both these facilities through the closing of a new RBL facility. This new facility is for a principal amount of US$1.0bn (US$0.5bn net to AOC) with a six-year tenor. Prime also reported a cash position of US$396.9mn (US$198.5mn net to AOC) at end of first quarter 2023.

At end of first quarter 2023, Africa Oil had a debt-free balance sheet and a cash position of US$158.2mn. The Company’s standby credit facility is available until 20 October, with an available amount of US$200.0mn. This facility has a maturity of 20 October 2025.