FULLTEXT DEL 1 AV 2
Kvartalsrapport Q4 2024
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Suite 2500
666 Burrard Street,
Vancouver, B.C. Canada V6C 2X8
info@africaoilcorp.com
africaoilcorp.com
* Important information: Africa Oil's interest in Prime is accounted for as an investment in joint venture. Refer to Note 1 on page 7 for
further details. All dollar amounts in this press release are U.S. Dollars unless otherwise indicated.
NEWS RELEASE
AFRICA OIL ANNOUNCES 2024 FOURTH QUARTER & FULL-YEAR
RESULTS, ITS YEAR-END 2024 STATEMENT OF RESERVES AND THE
IMMINENT COMPLETION OF THE PRIME CONSOLIDATION
February 27, 2025 (AOI–TSX, AOI–Nasdaq-Stockholm) – Africa Oil Corp. (“Africa Oil”, “AOC” or the
“Company”) today published its financial and operating results for the three and twelve months ended
December 31, 2024, and posted its 2024 statement of reserves on SEDAR (www.sedar.com) as part of its
Annual Information Form. The Company is also pleased to announce the imminent completion of the
amalgamation to consolidate all the Prime Oil & Gas Coöperatief U.A (“Prime”) shareholding in Africa Oil
(“Proposed Reorganization”).
Africa Oil President and CEO, Roger Tucker commented: “2024 was a transformative year for the
Company as we executed several strategic initiatives that have simplified and strengthened the
fundamental business proposition. It was also a year in which we returned a record $67.9 million to our
shareholders, a trend that will continue following the impending completion of the Prime consolidation. This
transformational milestone will significantly enhance our scale, financial strength, and ability to deliver
meaningful shareholder value. The enlarged Africa Oil will benefit from robust long -term free cash flows
and a strong balance sheet with low leverage. We will have direct interests in producing assets in Nigeria,
complemented by funded development and exploration projects in the prolific Orange Basin. These pillars
position us to implement steady and predictable shareholder returns and to pursue new growth
opportunities focused on producing assets in a disciplined manner.”
Highlights*
• The completion of the Proposed Reorganization is expected on or about March 7, 2025, a strategic
milestone to double the Company’s reserves and production and allowing it to take direct control
of Prime’s cash flows and balance sheet.
• The Proposed Reorganization will position the Company to significantly increase its annual base
dividend distribution to at least $100 million (U.S. Dollars) or approximately $0.15 per share
(assuming pro-forma issued and outstanding share count of ~675 million), which is approximately
3x the current annual base distribution of $0.05 per share, subject to customary board approval
and consents.
• The Company intends to declare the first quarterly dividend of $25 million or approximately $0.037
per share on the completion of the Proposed Reorganisation, subject to customary board approval
and consents.
• During 2024, the Company returned $67.9 million to its shareholders through the base dividend
policy and share buybacks, the highest annual capital return in its history.
• During 2024, the Company materially increased its shareholding in Impact to 39.5% from 31.1% at
a total cost of approximately $88.6 million, enhancing the Company’s influence and control over a
core strategic asset and value driver in the Namibian Orange Basin, containing the Venus field.
• Significant year-end 2024 combined AOC and Prime (100% basis) cash balance of $460.9 million.
• Post year-end 2024 received a $31.6 million dividend from Impact Oil & Gas Limited (“Impact”).
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• Prime’s highlights and results net to Africa Oil’s 50% shareholding:
o Recorded full -year average daily working interest (“ W.I.”) production2 of approximately
17,000 barrels of oil equivalent per day (“boepd”) and average daily lifting entitlement
production3 of approximately 19,400 boepd. These compare with mid -range 2024
Management Guidance of 17,500 boepd and 19,500 boepd for W .I. and lifting entitlement
production, respectively.
o Recorded full-year 2024 cashflow from operations4,5 of $267.8 million which compares with
mid-range 2024 Management Guidance of $275.0 million.
o Prime’s cash position of $199.7 million and debt balance of $375.0 million resulting in a
Prime net debt position of $175.3 million at December 31, 2024.
• Africa Oil’s year-end 2024 reserves based on the Company’s 50% ownership in Prime 6:
o 101% Proved reserves (“1P”) and 7 7% Proved plus Probable reserves W.I. Reserves
Replacement7 for year-end (“YE”) 2024.
o YE’24 reserves determination has delivered after -tax 1P NPV(10) and 2P NPV(10)
valuations of $624 million (YE’23: $722 million) and $1,064 million (YE’23: 1,192 million)
respectively8.
o YE’24 W.I. and net entitlement9 1P reserves of 29.9 MMboe (YE’23: 29.8 MMboe) and 35.4
MMboe (YE’23: 35.6 MMboe), respectively.
o YE’24 W.I. and net entitlement 2P reserves of 50.8 MMboe (YE’23: 52.2 MMboe) and 58.2
MMboe (YE’23: 59.6 MMboe), respectively.
2024 Fourth Quarter Results Summary
(Millions United States Dollars, except Per Share and Share Amounts)
Three months ended Years ended
Unit December 31,
2024
December 31,
2023
December 31,
2024
December 31,
2023
AOC highlights
Net income / (loss) $’m 6.2 (88.8) (279.1) 87.1
Net income / (loss) per
share – basic
$/ share 0.02 (0.19) (0.62) 0.19
Cash position $’m 61.4 232.0 61.4 232.0
Prime highlights, net to
AOC’s 50% shareholding(1)
W.I. production(2) boepd 17,200 18,500 17,000 19,800
Lifting entitlement
production(3)
boepd 19,500 21,700 19,400 22,400
Cash flow from operations
(4,5)
$’m 52.9 64.1 267.8 300.4
EBITDAX(4) $’m 242.3 112.3 519.5 460.3
Free Cash Flow(4) $’m 8.8 16.7 197.2 149.1
Net debt $’m 175.3 298.9 175.3 298.9
The financial information in this table was selected from the Company’s audited consolidated financial statements for the year ended December 31,
2024. The Company's consolidated financial statements, notes to the financial statements, management's discussion and analysis for the year ended
December 31, 2024 and 2023 and the 2024 Report to Shareholders and Annual Information Form have been filed on SEDAR (www.sedar.com) and
are available on the Company’s website (www.africaoilcorp.com).
As at December 31, 2024, the Company had $61.4 million cash on hand, compared with a cash balance of
$232.0 million as at December 31, 2023. The Company received a dividend from Prime of $36.0 million,
returned $67.9 million to shareholders by way of share buybacks and dividends, paid $87.8 million to
increase its shareholding in Impact, paid the second and third tranches totaling $6 .5 million to Azinam in
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relation to the increased working interest in Block 3B/4B, received $3.3 million as part of the farm out deal
in Block 3B/4B, incurred capital expenditure in respect of the licenses in Equatorial Guinea and South
Africa, settled working capital balances and incurred general and administrative costs.
As at December 31, 2024, the fair value of the Company’s existing shareholding in Prime was calculated
to be $328.4 million based on the implied value of the Proposed Reorganization, resulting in an accounting
non-cash impairment loss on the investment in Prime of $436.7 million for the year ended December 31,
2024, which does not reflect the asset valuation presented in the Year-End 2024 Statement of Reserves.
The fair value of the existing 50% shareholding in Prime decreased as the fair value considers the number
of Africa Oil shares that were agreed in relation to the purchase of the additional interest in Prime and the
trading value of Africa Oil shares, as this is an observable fair value input under IFRS Accounting Standards
The fair value has been calculated based on the Africa Oil share price of CAD 1.97 as of December 31,
2024, and the USD/CAD exchange rate of 1.4384 as of December 31, 2024. The consideration under the
Proposed Reorganization will be based on the share price and exchange rate as of the date of completion
of the Proposed Reorganization and may therefore change materially compared to the fair value of $328.4
million as at December 31, 2024. This might therefore result in the recognition of additional impairmen t
charges or the reversal of previously recognized impairment charges based on the movements in the Africa
Oil share price and the USD/CAD exchange rate between December 31, 2024, and the closing date of the
transaction.
The figures below , which explain the movements in the results of Prime , are based on Prime’s gross
balances as per its financial statements.
Prime revenues decreased by $342.8 million in Q4 2024 compared to Q4 2023, driven by no liftings in Q4
2024 compared to four liftings in Q4 2023. There was a decrease in costs of sales of $274.3 million, primarily
driven by an underlift movement during Q4 2024 of $204.8 million compared to an overlift movement in Q4
2023 of $63.0 million. This resulted in a decrease in gross profit to $72.4 million in Q4 2024 from $140.9
million in Q4 2023. In Q4 2023 there was an impairment recognized of $263.3 million and no impairment
recognized in Q4 2024. Other operating income increased by $329.7 million in Q4 2024 compared to Q4
2023 relating to other operating income recognized by Prime in Q4 2024 under the Securitization
Agreement as no comprehensive resolution was reached among all unit parties in respect of the tract
participation in the Agbami field by December 27, 2024. Finance income decreased by $10.2 million in Q4
2024 compared to Q4 2023, mainly driven by an accounting loss on derivatives in Q4 2024. There wa s a
tax charge in Q4 2024 of $46.6 million compared to $11.7 million in Q4 2023. The increase was mainly
driven by capital gains tax in Q4 2024 in relation to the income recognized by Prime under the Securitization
Agreement at a Capital Gains Tax rate in Nigeria of 10 percent. This has resulted in Prime’s profit increasing
from a loss of $158.6 million in Q4 2023 to a profit of $318.7 million in Q4 2024, an increase of $477.3
million.
Year-End 2024 Statement of Reserves
The Company has posted its 2024 statement of reserves on SEDAR (www.sedar.com) as part of its Annual
Information Form. This disclosure is based on an independent reserves evaluation, effective December 31,
2024, prepared by RISC (UK) Limited (“RISC”) for Africa Oil in accordance with Canadian National
Instrument 51-101 – Standards for Oil and Gas Activities ("NI 51 -101") and the Canadian Oil and Gas
Evaluation Handbook ("COGE Handbook").
Africa Oil’s statement of reserves is based on the Company’s 50% ownership interest in Prime. Prime’s
main assets are an indirect 8% interest in Petroleum Mining License (“PML”) 52 (previously part of Oil
Mining Lease (“OML”) 127) and an indirect 16% interest in PMLs 2, 3, 4 (previously part of OML 130); both
are deep-water Nigeria concessions. PML 2, PML 3 and PML 4 are operated by affiliates of TotalEnergies
SE and contain the producing Akpo and Egina fields and the undeveloped Preowei field. PML 52 is operated
by affiliates of Chevron Corporation and contains the producing Agbami field.
The year-end 2024 reserves and reconciliation of changes in W.I. reserves summarized in the following
tables pertain to 50% of Prime’s W.I. and net entitlement reserves:
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Summary of Oil and Gas Reserves (Forecast Prices and Costs)
Light and Medium Oil Conventional
Natural Gas Natural Gas Liquids
Reserve Category Gross
(MMstb)
Net
(MMstb)
Gross
(Bcf)
Net
(Bcf)
Gross
(MMstb)
Net
(MMstb)
Proved
Developed Producing 13.2 17.0 37.2 37.2 - -
Developed Non-Producing - - - - - -
Undeveloped 9.2 11.0 7.6 7.6 - -
Total Proved 22.4 27.9 44.9 44.9 - -
Probable 17.1 18.9 23.0 23.0 - -
Total Proved plus Probable 39.5 46.8 67.9 67.9 - -
Possible 15.5 15.8 15.1 15.1 - -
Total Proved plus Probable plus
Possible 55.0 62.6 83.0 83.0 - -
Notes:
i. Figures in the table may not add up precisely due to rounding errors.
ii. Units are MMstb (million stock tank barrels) and Bcf (billion cubic feet).
iii. Gross Company reserves are the total project sales volumes multiplied by Company’s working interest.
iv. Net oil reserves are Company’s net entitlement calculated using economic limit testing.
v. Gross and net reserves for sales gas are equal as the gas terms are set out in the Gas Sales and Purchase Agreement rather th an the
Production Sharing Agreement (“PSA”), and the net reserves are based on Company’s working interest.
The following table provides a reconciliation between the Gross W.I. Reserves disclosed on the February
27, 2024 (effective date December 31, 2023) and this disclosure (effective date December 31, 2024).
Gross Light and Medium Oil (MMstb) Conventional Natural Gas (Bscf)
Proved Probable Proved +
Probable Proved Probable Proved +
Probable
Effective date
31 December
2023
25.7 18.0 43.6 24.9 26.4 51.3
Extensions and
Improved
Recovery
0.0 0.0 0.0 0.0 0.0 0.0
Resource
Transfers 0.0 0.0 0.0 0.0 0.0 0.0
Technical
Revisions 1.5 -0.9 0.6 28.7 -3.4 25.3
Discoveries 0.0 0.0 0.0 0.0 0.0 0.0
Acquisitions 0.0 0.0 0.0 0.0 0.0 0.0
Dispositions 0.0 0.0 0.0 0.0 0.0 0.0
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Economic
Factors 0.0 0.0 0.0 0.0 0.0 0.0
Production 4.8 0.0 4.8 8.7 0.0 8.7
Effective date
31 December
2024
22.4 17.1 39.5 44.9 23.0 67.9
Notes:
i. Figures in the table may not add up precisely due to rounding.
ii. Gross Company Reserves are the total project sales volumes multiplied by AOC’s share of Prime’s working interest.
iii. RISC notes that the Proved + Probable Reserves reconciliation for oil and gas is lower than the Proved in some categories. Th is results in a
negative Probable increment. The difference is due to a larger increase in Proved Reserves than the Proved + Probab le, compared to last
year.
Outlook
Consolidation of the Ownership in Prime
On June 23, 2024, the Company entered into a definitive agreement (the “Amalgamation Agreement”) with
BTG Pactual Oil & Gas S.a.r.l. (“BTG Oil & Gas”) and BTG Pactual Holding S.a.r.l. ("BTG Holding"), the
entity which holds the interests of BTG Oil & Gas i n Prime, to reorganize and consolidate their respective
50:50 shareholdings in Prime (the “Proposed Reorganization”). On completion of the Proposed
Reorganization, which is expected on or about March 7, 2025, Africa Oil will hold 100% of Prime with BTG
Oil & Gas receiving 239,828,655 newly issued common shares in Africa Oil, representing approximately
35.5% of the outstanding share capital of the enlarged Africa Oil as of February 26, 2025.
The Proposed Reorganization provides the enlarged Africa Oil with a number of strategic and financial
benefits, including:
• 100% increase in working interest Proved plus Probable (“2P”) reserves and production on a pro -
forma basis, for BTG receiving approximately 35.5% of the shares in the enlarged Africa Oil.
• Increased scale and balance sheet strength along with the potential to benefit from lower
borrowing costs.
• The introduction of a long-term cornerstone shareholder that is strategically aligned with Africa Oil
and committed to growing a sustainable upstream oil and gas business, will, after completion,
deliver superior value creation and shareholder capital returns.
• BTG Oil & Gas’ support has the potential to increase Africa Oil’s access to business opportunities
and potentially unlock new sources of growth capital, while complementing Africa Oil’s disciplined
capital allocation and financial decision making through BTG Oil & Gas' participation on the Board.
• Enabling direct control of Prime’s cash flows and balance sheet through the consolidation of Africa
Oil and BTG Oil & Gas' respective interests in Prime versus the equity accounting method that is
followed by Africa Oil today for its investment in Prime. This in turn will facilitate greater
transparency and visibility of Prime’s financial performance for Africa Oil’s shareholders.
• Significant scope to streamline the business processes and decision making to achieve cost
savings.
The enlarged Africa Oil is expected to have significant scale with robust long -term free cash flows and a
low leverage balance sheet, driven by large -scale and high netback assets in deepwater Nigeria. This will
be complemented by funded development and exploration projects in the prolific Orange Basin.
These pillars will provide a strong platform for the enlarged Africa Oil to implement steady and predictable
shareholder returns underpinned by an enhanced base dividend policy, whilst delivering organic growth
from its core assets and pursuing inorganic g rowth opportunities supported by a long -term and committed
strategic shareholder. The enlarged Africa Oil’s objective is to deliver a superior investment case relative
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to its peer group through a combination of financial discipline, sustainable total shareholder returns, and
funded growth.
Namibia Orange Basin Appraisal and Exploration Campaign
Block 2913B, offshore Namibia, contains the Venus light oil field, discovered by the Venus -1X well, drilled
in 2022 and subsequently successfully appraised with three further wells and four drill stem tests. The Joint
Venture is continuing to progress the proposed development of the Venus Field, with development studies
ongoing. The Venus Field is expected to be the first development in Block 2913B, producing 150kbopd
(gross field) of ~45° API oil, with final investment decision expected by the end of H1 2026.
During 2024, two additional 3D seismic acquisition programs were completed to facilitate further exploration
over the southern and northern parts of the Blocks. This has resulted in most of the licensed area now
being covered by 3D seismic. This data is cu rrently being processed and interpreted and will help further
evaluate prospects and leads in the far northern and southern parts of the Blocks.
On February 3, 2025, the Deepsea Mira drilling rig spud the Marula-1X exploration well within the southern
part of Block 2913B. This well will target Albian -aged sandstones, within the Marula fan complex and has
the potential to unlock further exploration targets across the south, which is an area lying at the heart of the
prolific Kudu source -rock kitchen. Deepsea Mira is also expected to drill the Olympe prospect, targeting
Albian sands within a structural closure on Block 2912 by the end of 2025.
As announced on February 6, 2025, the Tamboti-1X well encountered black oil within 85m of net reservoir
of lower quality Upper Cretaceous sandstones, belonging to the Mangetti fan system. As reported by
Impact, the drill stem test (“DST”) program was concluded at the Tamboti-1X location, and results from the
acquired log, core and DST data are currently under analysis.
On January 10, 2024, the Company announced a strategic farm down agreement between its investee
company Impact Oil and Gas Limited (“Impact”), and TotalEnergies, that allows the Company to continue
its participation in the world class Venus oil development project, and the follow -on exploration campaign
on the Blocks with no upfront costs. This transaction frees up the Company’s balance sheet for the pursuit
of other growth opportunities and shareholder capital returns. As announced on November 1, 2024, thi s
farm down deal closed following the receipt of the final approval from Government of Namibia.
At the date hereof, AOC has an interest in this program through its 39.5% shareholding in Impact, which in
turn has a 9.5% WI in each of Block 2913B (PEL 56) and Block 2912 (PEL 91).
Nigeria
Agbami field performed in line with expectations throughout 2024. Planned maintenance on one of the three
compressors commenced at the end of Q4 2024 and continued into Q1 2025. The remaining two
compressors will also be overhauled over the coming 2 years to maintain high equipment uptime.
Processing of the 4D -M3 seismic acquired in Q3 2024 is underway and other preparations for the next
drilling campaign, scheduled for 2026, are continuing as planned. A planned full -field shut down for
maintenance activities is scheduled for Q4 2025.
The Egina field completed the year above the production plan thanks to its high production efficiency and
successful well interventions during Q3 2024 and Q4 2024. Well planning for a 2025 drilling program based
on the 4D-M2 acquired in Q2 2024 is ongoing with drilling commencing in Q1 2025.
The Akpo field ended the year with production rates in line with those at the start of 2024, primarily due to
the Akpo West wells performing above expectation and the infill well on Akpo main offsetting natural decline
in the field. A total of 3 new producers and 1 new injector were completed and tied back to the Akpo FPSO
in 2024. Overall, for 2024, production was below the production plan due to drilling delays pushing the
expected production gains from drilling to the second half of the year. Well planni ng for additional infill
drilling, based on the 4D-M4 seismic acquired in Q1 2024, and potential near field exploration are underway.
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The 2023 and 2024 Egina and Akpo drilling campaign was paused in November 2024 to allow time to
mature drilling opportunities from the 2024 seismic acquisition campaigns. The 2025 campaign kicked off
in January 2025 as planned.
Progress on phase 2 of the Preowei Field front end engineering design (“FEED”) is now subject to further
cost optimization and the results of ongoing field development studies on the basis of the 4D baseline
seismic acquisition acquired in Q2 2024. These w ork streams are aimed at supporting an FID decision on
the project and enabling Engineering, Procurement, Construction and Installation (“EPCI”).
South Africa Orange Basin, Block 3B/4B
Block 3B/4B lies to the southeast and on trend with a number of Orange Basin oil discoveries including
Venus. There is approximately 14,000 km of 2D seismic and 10,800 km 2 of 3D seismic over the block,
identifying a large opportunity set of exploration prospects.
On August 28, 2024, the Company announced the completion of the farm down agreement with
TotalEnergies and QatarEnergy for the Orange Basin Block 3B/4B. The Company retained a 17.0% interest
in Block 3B/4B and transferred the operatorship of the block to TotalEnergies, for a maximum consideration
of $46.8 million, including the exploration carry of its retained interest.
On January 10, 2025, the Company completed a separate transaction with Azinam, a subsidiary of Eco for
the transfer of a 1.0% (one percent) interest to the Company, increasing the group’s direct interest in Block
3B/4B to 18.0%. The Company will have the b enefit of exploration carry for the additional 1.0% interest
assigned to it by Azinam.
An Environmental Authorization for exploration activities (drilling of up to 5 exploration wells) was granted
by the Department of Mineral Resources and Energy for the Republic of South Africa on September 16,
2024. The legislative notification and appeals process is in progress with the relevant regulatory agencies.
TotalEnergies, as the block operator, has stated its expectation for the first exploration well on this block to
be drilled in 2026.
Equatorial Guinea
On December 23, 2024, the Company was granted a 1 year extension to the first exploration sub period on
both two exploration licenses (EG-18 and EG-31), offshore Equatorial Guinea. The Company also received
approval of the first amendment to the EG -31 Prod uction Sharing Contract (PSC). The amendment
expanded the block boundary to ensure that the full extent of the two main exploration prospects were
captured fully within the block boundary.
The Company is continuing with the farm down process for Blocks EG-18 and EG-31 as well as subsurface
studies to enhance the definition of multiple targets already identified. The Company holds an operated WI
of 80.0% in each of Blocks EG-18 and EG-31.
2025 Management Guidance
Management guidance for 2025 will be announced following the completion of the Proposed
Reorganization, expected on or about March 7, 2025.
Notes
1. The 50% shareholding in Prime is accounted for using the equity method and presented as an investment in joint venture
in the Consolidated Balance Sheet. Africa Oil’s 50% share of Prime’s net profit or loss will be shown in the Consolidated
Statements of Net (Loss) / Income and Comprehensive (Loss) / Income. Any dividends received by Africa Oil from Prime
are recorded as Cash flow from Investing Activities.
2. Aggregate oil equivalent production data comprised of light and medium crude oil and conventional natural gas production
net to Prime’s W.I. in Agbami, Akpo and Egina fields. These production rates only include sold gas volumes and not those
volumes used for fuel, reinjected or flared.
3. Lifting entitlement production is calculated using the economic interest methodology and includes cost recovery oil, tax oil,
royalty oil and profit oil and is different from working interest production that is calculated based on project volumes multiplied
by Prime’s effective working interest in each license.
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4. Includes non-GAAP measures. Definitions and reconciliations to these non-GAAP measures are provided in Fourth Quarter
2024 MD&A.
5. Cash flow from operations before working capital adjustments and interest payments.
6. Please refer to the oil and gas advisory on page 9 for important information.
7. Reserves replacement ratios are based on full-year 2024 production of 6.2 MMboe, positive 1P and 2P reserves technical
revisions of 6.3 MMboe and 4.8 MMboe, respectively.
8. Based on Brent oil price forecast of ($/bbl): 2025 - $75.0; 2026 - $76.5; 2027 - $78; 2028 – 79.6; 2029 - $81.2; 2030 and
beyond escalation rate of 2.0%.The valuation include the impact of a lower oil price deck used in this report relative to the
deck used for YE’23, including a lower long term escalation factor of 2.0% compared to 2.5% used for the YE’23 report.
9. Net entitlement reserves are calculated using the economic interest methodology and include cost recovery oil, tax oil and
profit oil, but exclude royalty oil, and are different from working interest reserves that are calculated based on project volumes
multiplied by Prime’s effective working interest.
Management Conference Call
Senior management will hold a conference call to discuss the results on Friday, February 28, 2024 at 09:00
(EST) / 14:00 (GMT) / 15:00 (CET). The conference call may be accessed by dial in or via webcast.
Participants should use the following link to register for the live webcast:
https://edge.media-server.com/mmc/p/rfzp6we6/
Participants can also join via telephone with the instructions available on the following link:
https://register.vevent.com/register/BI57e8456656ec4d65bb4257b575487d35
1. Click on the call link and complete the online registration form.
2. Upon registering you will receive the dial-in info and a unique PIN to join the call as well as an email
confirmation with the details.
3. Select a method for joining the call;
i. Dial-In: A dial in number and unique PIN are displayed to connect directly from your phone.
ii. Call Me: Enter your phone number and click “Call Me” for an immediate callback from the
system. The call will come from a US number.
About Africa Oil
Africa Oil Corp. is a Canadian oil and gas company with producing and development assets in deepwater
Nigeria, an interest in the Venus light oil and associated gas discovery, offshore Namibia, and an
exploration/appraisal portfolio in West and South of Africa. The Company is listed on the Toronto Stock
Exchange and on Nasdaq Stockholm under the symbol "AOI".
For further information, please contact:
Shahin Amini
Head of Investor Relations and Communications
shahin.amini@africaoilcorp.com
T: +44 (0)20 8017 1511
Burson Buchanan
Financial PR & Communications Advisor
Energy@Buchanan.uk.com
T: +44 (0)20 7466 5000
Additional Information
This information is information that Africa Oil is obliged to make public pursuant to the EU Market Abuse Regulation.
The information was submitted for publication, through the agency of the contact persons set out above, at 8:00 p.m.
EST on February 27, 2024.
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Advisory Regarding Oil and Gas Information
The terms boe (barrel of oil equivalent) and MMboe (millions of barrels of oil equivalent) are used throughout this press
release. Such terms may be misleading, particularly if used in isolation. Year -end 2024 reserves estimates are based
on a conversion ratio of six thousand cubic feet per barrel of oil equivalent (6 Mcf: 1 boe), which is based on an energy
equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the
wellhead. Given that the value ratio based on the current price of crude oil as compared to natural gas is significantly
different from the energy equivalency of 6:1, utilizing a conversion on a 6:1 basis may be misleading as an indication
of value.
RISC’s report was prepared using Brent oil price forecast of ($/bbl): 202 5 - $75.0; 2026 - $76.5; 2027 - $78.0; 2028-
$79.6; 2029 – 81.2; 2030 and beyond escalation rate of 2. 0%. There is no assurance that the forecast prices will be
attained and variances could be material. The recovery and reserves estimates of crude oil, natural gas liquids and
natural gas reserves provided herein are estimates only and there is no guarantee that the estimated reserves will be
recovered. Actual crude oil, natural gas and natural gas liquids reserves may be greater than or less than the estimates
provided herein.
The reserves estimates presented in this press release have been evaluated by RISC in accordance with NI 51-101
and the COGE Handbook, are effective December 31, 2024. The reserves presented herein have been categorized
accordance with the reserves and resource definitions as set out in the COGE Handbook. The estimates of reserves
in this press release may not reflect the same confidence level as estimates of reserves for all properties, due to the
effects of aggregation.
Reserves
Reserves are estimated remaining quantities of commercially recoverable oil, natural gas, and related substances
anticipated to be recoverable from known accumulations, as of a given date, based on the analysis of drilling,
geological, geophysical, and engineering data, the use of established technology, and specified economic conditions,
which are generally accepted as being reasonable. Reserves are further categorized according to the level of certainty
associated with the estimates and may be sub-classified based on development and production status.
Proved reserves are those reserves that can be estimated with a high degree of certainty to be recoverable. It is likely
that the actual remaining quantities recovered will exceed the estimated proved reserves.
Probable reserves are those additional reserves that are less certain to be recovered than proved reserves. It is equally
likely that the actual remaining quantities recovered will be greater or less than the sum of the estimated proved plus
probable reserves.
Oil and gas reserves and production referred to in this release are for conventional light and medium gravity oil and
conventional natural gas.
Forward-Looking Information
Certain statements and information contained herein constitute "forward -looking information" (within the meaning of
applicable Canadian securities legislation) , including statements related to: the enlarged base dividend distribution;
annual dividend distribution of $100 million; the declaration of the $25 million quarterly dividend; schedules and costs
of drilling activity including those offshore Namibia and Nigeria; the outcome of exploration and appraisal activities
including those offshore Namibia; the development of the Venus discovery; the completion of the Proposed
Reorganization, i.e. Prime consolidation on or about March 7, 2025 ; the ability of the enlarged Africa Oil to deliver
further growth or increased shareholder returns; the continuing benefits from funded, high value growth opportunities,
including the Venus oil project in the Orange Basin ; the completion and timing of the Proposed Reorganization ; the
Proposed Reorganization creating a differentiated upstream oil & gas company with stable production and free cash
flow; the anticipated strategic and financial benefits of the Proposed Reorganization; expectations regarding free-cash
flow; statements regarding access to business opportunities in Africa Oil’s regions of focus and unlocking new sources
of growth capital ; and the structure of the Proposed Reorganization . Such statements and information (together,
"forward-looking statements") relate to future events or the Company's future performance, business prospects or
opportunities.
All statements other than statements of historical fact may be forward -looking statements. Statements concerning
proven and probable reserves and resource estimates may also be deemed to constitute forward -looking statements
and reflect conclusions that ar e based on certain assumptions that the reserves and resources can be economically
exploited. Any statements that express or involve discussions with respect to predictions, expectations, beliefs, plans,
projections, objectives, assumptions or future event s or performance (often, but not always, using words or phrases
such as "seek", "anticipate", "plan", "continue", "estimate", "expect, "may", "will", "project", "predict", "potential",
===== SIDA 10 =====
- 10 -
"targeting", "intend", "could", "might", "should", "believe" and similar expressions) are not statements of historical fact
and may be "forward -looking statements". Forward -looking statements involve known and unknown risks, ongoing
uncertainties and other factors that may cause actual results or events to differ materially from those anticipated in such
forward-looking statements, including statements pertaining to performance of commodity hedges, uninsured risks,
regulatory and fiscal changes, availabilit y of materials and equipment, unanticipated environmental impacts on
operations, duration of the drilling program, availability of third party service providers and defects in title , the
sustainability of Africa Oil across oil and gas price cycles , the enhanced visibility and certainty over the use of capital ,
and statements regarding capital priorities . Forward-looking statements are based on a number of assumptions,
including but not limited to, the ability of Africa Oil to delivery further growth , the ability to have a Board comprised at
all times of a majority of independent non-executive directors, high value growth opportunities will continue to be funded,
and the ability to access business opportunities in Africa Oil’s regions of focus. No assurance can be given that these
expectations will prove to be correct and such forward -looking statements should not be unduly relied upon. The
Company does not intend, and does not assume any obligation, to update these forward -looking statements, except
as required by applicable laws. These forward -looking statements involve risks and uncertainties relating to, among
other things, changes in macro -economic conditions and their impact on operations, changes in oil prices, reservoir
and production facility performance, contractual performance, results of exploration and development activities, cost
overruns, uninsured risks, regulatory and fiscal changes including defects in title, claims and legal proceedings,
availability of materials and equipment, availability o f skilled personnel, the need to obtain required approvals from
regulatory authorities, timeliness of government or other regulatory approvals, actual performance of facilities, joint
venture partner underperformanc e, availability of financing on reasonable terms, availability of third party service
providers, equipment and processes relative to specifications and expectations and unanticipated environmental,
health and safety impacts on operations , satisfaction of the conditions to consummate the Proposed Reorganization;
failure to complete the Proposed Reorganization; the amount of costs, fees, expenses and charges related to the
Proposed Reorganization; and the failure to realize the anticipated benefits of the Proposed Reorganization . Actual
results may differ materially from those expressed or implied by such forward-looking statements.
===== SIDA 11 =====
REPORT TO
SHAREHOLDERS
AFRICAOILCORP .COM
AFRICA OIL CORP.
FOR THE YEAR ENDED DECEMBER 31, 2024
===== SIDA 12 =====
PAGE 2
Report to Shareholders | December 31, 2024 Africa Oil Corp.
GLOSSARY
A
“Africa Energy” means Africa Energy Corp. an international oil and gas exploration company that holds an effective
4.9% participating interest in the Exploration Right for Block 11B/12B offshore South Africa.
“Africa Oil” , “AOC” , or the
“Company” means Africa Oil Corp.
“Amalgamation
Agreement”
means the definitive agreement between the Company, BTG Oil & Gas and BTG Holding the entity
which holds the interests of BTG Oil & Gas in Prime, to reorganize and consolidate their respective
50:50 shareholdings in Prime.
“Applicable law” means all laws and regulations issued by authorities that have appropriate jurisdiction over the
Company.
“Azinam” means Azinam Ltd.
B
“Bcf” means billion cubic feet.
“Blocks” means blocks 2912 and 2913B.
“boepd” means barrels of oil equivalent per day.
“BTG Holding” means BTG Pactual Holding S.a.r.l.
“BTG Oil & Gas” means BTG Pactual Oil & Gas S.a.r.l.
C
“CGU”
means Cash Generating Unit. A Cash Generating Unit is defined as assets that are grouped together
into the smallest group of assets that generates cash inflows from continuing use that are largely
independent of the cash inflows of other assets or groups of assets.
“Chevron” means Chevron Corp.
“CIT” means Corporate Income Tax.
“Concessions” , “PSC”
or “Production Sharing
Contract”
means concessions, production sharing contracts and other similar agreements entered into with a
host government providing for petroleum operations in a defined area and the division of petroleum
production from the petroleum operations.
“Corporate Facility” means the $200.0 million facility dated October 20, 2022, with a three-year term, as amended from time
to time.
D
“DD&A” means Depreciation, Depletion and Amortization.
“DST” means Drill Stem Testing.
E
“EPS” means Early Production System.
“EBITDAX” means Earnings Before Interest, Taxes, Depreciation & Impairment, Amortization and Exploration
Expenses.
“Eco”
means Eco (Atlantic) Oil & Gas Ltd, an international oil and gas exploration company that holds working
interests in four exploration Blocks offshore Namibia and operates one exploration Block offshore
South Africa and is party with the Company in Block 3B/4B, offshore South Africa and holds working
interest in two exploration Blocks offshore Guyana.
“Entitlement production” means production that is calculated using the economic interest methodology and includes cost oil,
profit oil, tax oil and royalty oil.
“ESG” means Environmental, Social and Governance.
“ESHS” means Environmental, Social, Health and Safety.
“ESIA” means Environmental and Social Impact Assessment.
F
“FCCPC” means Nigeria’s Federal Competition & Consumer Protection Commission.
“FCF” means Free Cash Flow.
“FDP” means Field Development Plan.
“FEED” means Front End Engineering and Design.
“FID” means Final Investment Decision.
“FPSO” means Floating Production Storage and Offloading.
G “GHG” means Greenhouse Gas.
I
“IFRS Accounting
Standards”
means International Financial Reporting Standards as issued by the International Accounting Standards
Board.
“Impact”
means Impact Oil and Gas Ltd, a privately owned exploration company with a strategic focus on large
scale, mid to deep water plays of sufficient materiality to be of interest to major companies. Impact has
an asset base across the offshore margins of Southern and West Africa.
===== SIDA 13 =====
PAGE 3
Report to Shareholders | December 31, 2024 Africa Oil Corp.
J “J V ” means Joint Venture.
K “Kenya entities” means Centric Energy Kenya Limited, Africa Oil Kenya B.V Branch and Africa Oil Turkana Limited.
L
“LTI” means loss time injury.
“LTIP” means Long Term Incentive Plan.
M
“Mcf” means million cubic feet.
“MD&A” means Management’s Discussion and Analysis.
“Mbbl” and “MMbbl” means one thousand and one million barrels, respectively.
“Mboe” and “MMBoe” means thousands of barrels of oil equivalent and millions of barrels of oil equivalent, respectively.
N
“NCIB” means Normal Course Issuer Bid.
“NI 51-101” means National Instrument 51-101 — Standards of Disclosure for Oil and Gas Activities of the Canadian
Securities Administrators and the companion policies and forms thereto, as amended from time to time.
“NI 52-109” means National Instrument 52-109 – Certification of Disclosure in Issuers’ Annual and Interim Filings
and the companion policies and forms thereto, as amended from time to time.
“NUPRC” means Nigerian Upstream Petroleum Regulatory Commission.
O
“OML” means Oil Mining Lease.
“OML 127” means the oil mining lease on Block 127, offshore Nigeria which was converted to a petroleum mining
lease under the new PIA regime in Q3 2023 with effective date 1 March 2023
“OML 130” means the oil mining lease on Block 130, offshore Nigeria which was converted to three new petroleum
mining leases and one petroleum prospecting license under the new PIA regime in Q2 2023
P
“Petrovida” means PetroVida Holding B.V.
“PIA” means Petroleum Industry Act.
“PML” means Petroleum Mining License.
“PML 2” means the Petroleum Mining License containing the Akpo field.
“PML 3” means the Petroleum Mining License containing the Egina field.
“PML 4” means the Petroleum Mining License containing the Preowei field.
“PML 52” means the Petroleum Mining License containing the Agbami field.
“PPL” means Petroleum Prospecting License.
“PPL 261” means the Petroleum Prospecting License containing the South Egina prospect.
“PPT” means Profit Petroleum Tax.
“Prime” or “Prime Oil &
Gas Coöperatief U.A.”
means Prime Oil & Gas Coöperatief U.A., previously known as Prime Oil & Gas B.V., a company that
holds interests in deepwater Nigeria production and development assets.
“Proposed
Reorganization”
means the proposed reorganization and consolidation of the 50:50 shareholdings of the Company and
BTG Holding in Prime announced by the Company on June 24, 2024.
“PSA” means Petroleum Sharing Agreement.
“PSU” means Performance Share Unit.
“PXF Facility” means Pre-Export Finance Facility.
R
“RBL” means Reserves Based Lending.
“RSU” means Restricted Share Unit.
S “spud” or “spudded” means the initial drilling for an oil well.
T
“TotalEnergies” means TotalEnergies SE and subsidiaries.
“TSX” means Toronto Stock Exchange.
U “US” means United States.
V “VAT” means Value-added tax.
W
“WI” means working interest.
“WI production” means production based on the percentage of working interest owned.
===== SIDA 14 =====
PAGE 4
Report to Shareholders | December 31, 2024 Africa Oil Corp.
MANAGEMENT’S DISCUSSION AND ANALYSIS
The Management’s Discussion and Analysis (“MD&A”) focuses on significant factors that have affected the Company during the year
ended December 31, 2024, and such factors that may affect its future performance. To better understand the MD&A, it should be read
in conjunction with the Company’s audited consolidated financial statements for the years ended December 31, 2024, and 2023, and
related notes thereto.
The financial information in this MD&A is derived from the Company’s audited consolidated financial statements which have been
prepared in US dollars, in accordance with International Financial Reporting Standards as issued by the International Accounting
Standards Board (“IFRS Accounting Standards”).
This MD&A was reviewed and approved by the Board of Directors. The effective date of this MD&A is February 27, 2025.
Additional information about the Company and its business activities is available on the Company’s website at www.africaoilcorp.com
and on SEDAR at www.sedar.com.
PROFILE AND STRATEGY
Africa Oil is a Canadian oil and gas company with producing and development assets in deep-water offshore Nigeria. The Company
also has a portfolio of development and exploration assets in West and South of Africa.
The Company’s Common Shares are listed on the Toronto Stock Exchange in Canada and the Nasdaq Stockholm Exchange in Sweden,
under the symbol ‘AOI’.
Africa Oil’s long-term objective is to implement a steady and predictable total shareholder returns model underpinned by an enhanced
base dividend policy, whilst delivering organic growth from its core assets and pursuing disciplined inorganic growth opportunities
focused on producing assets. This plan is supported by the Company’s high netback production assets in Nigeria that are included in its
interests in PMLs 2, 3, 4 (previously part of OML 130) and PML 52 (previously part of OML 127). These PMLs provide the Company with
a long-life cash flowing asset base, to support its business objectives over the long term, and also present development opportunities
for supporting future production.
The Company’s other core assets are comprised of its Orange Basin opportunity set including Blocks 2912 and 2913B offshore Namibia
and Block 3B/4B, offshore South Africa, as well as Equatorial Guinean exploration blocks (EG-18 and EG-31).
The Company is a unique investment opportunity, amongst its publicly-listed independent E&P peer group, for its Orange Basin
opportunity set that includes an effective interest in the Venus light oil and associated gas discovery offshore Namibia. The Venus
discovery, understood to be the largest oil discovery globally in 2022, has partially de-risked a new petroleum province in the Orange
Basin that has significant prospectivity.
HIGHLIGHTS AND OUTLOOK
Full-Year 2024, Q4 2024 and Post Period Highlights
• The completion of the Proposed Reorganization is expected on or about March 7, 2025, a strategic milestone to double the
Company’s reserves and production and allowing it to take direct control of Prime’s cash flows and balance sheet.
• The Proposed Reorganization will position the Company to significantly increase its annual dividend distribution to at least $100
million or approximately $0.15 per share (assuming pro-forma issued and outstanding share count of ~675 million), which is
approximately 3x the current annual base distribution of $0.05 per share, subject to customary board approval and consents.
• The Company intends to declare the first quarterly dividend of $25 million or approximately $0.037 per share on the closing of the
Proposed Reorganisation, subject to customary board approval and consents.
• During 2024, the Company returned $67.9 million to its shareholders through the base dividend policy and share buybacks.
• During 2024, the Company materially increased its shareholding in Impact to 39.5% from 31.1% at a total cost of approximately
$88.6 million, enhancing the Company’s influence and control over a core strategic asset and value driver in the Namibian Orange
Basin, containing the Venus light oil field.
• Significant year-end 2024 combined Africa Oil and Prime cash balance of $460.9 million.
• Post year-end 2024 received a $31.6 million dividend from Impact.
• Prime’s highlights and results net to Africa Oil’s 50% shareholding:
» Recorded full-year average daily WI production of approximately 17,000 barrels of oil equivalent per day (“boepd”) and average
daily entitlement production of approximately 19,400 boepd. These compare with mid-range 2024 Management Guidance of 17,500
boepd and 19,500 boepd for WI and entitlement production, respectively.
» Recorded full-year 2024 cashflow from operations of $267.8 million which compares with mid-range 2024 Management Guidance of
$275.0 million.
» Prime’s cash position of $199.7 million and debt balance of $375.0 million resulting in a Prime net debt position of $175.3 million at
December 31, 2024.
===== SIDA 15 =====
PAGE 5
Report to Shareholders | December 31, 2024 Africa Oil Corp.
HIGHLIGHTS AND OUTLOOK - CONTINUED
FINANCIAL SUMMARY (1)
Three months ended Years ended
Unit
December 31,
2024
December 31,
2023
December 31,
2024
December 31,
2023
AOC highlights
Net income/ (loss) $’m 6.2 (88.8) (279.1) 87.1
Net income/ (loss) per share – basic $/ share 0.02 (0.19) (0.62) 0.19
Cash position $’m 61.4 232.0 61.4 232.0
Prime highlights, net to AOC’s 50% shareholding
WI production boepd 17,200 18,500 17,000 19,800
Entitlement production boepd 19,500 21,700 19,400 22,400
Cash flow from operations (2) $’m 52.9 64.1 267.8 300.4
EBITDAX $’m 242.3 112.3 519.5 460.3
Free Cash Flow $’m 8.8 16.7 197.2 149.1
Net debt $’m 175.3 298.9 175.3 298.9
(1) The table includes non-GAAP measures. Definitions and reconciliations to these non-GAAP measures are provided on pages 13-16.
(2) Cash flow from operations before working capital adjustments and interest payments.
OUTLOOK
Consolidation of the Ownership in Prime
On June 23, 2024, the Company entered into a definitive agreement (the “Amalgamation Agreement”) with BTG Pactual Oil & Gas
S.a.r.l. (“BTG Oil & Gas”) and BTG Pactual Holding S.a.r.l. (“BTG Holding”), the entity which holds the interests of BTG Oil & Gas in Prime,
to reorganize and consolidate their respective 50:50 shareholdings in Prime (the “Proposed Reorganization”). On completion of the
Proposed Reorganization, which is expected on or about March 7, 2025, Africa Oil will hold 100% of Prime with BTG Oil & Gas receiving
239,828,655 newly issued common shares in Africa Oil, representing approximately 35.5% of the outstanding share capital of the
enlarged Africa Oil as of February 26, 2025.
The Proposed Reorganization provides the enlarged Africa Oil with a number of strategic and financial benefits, including:
• 100% increase in working interest Proved plus Probable (“2P”) reserves and production on a pro-forma basis, for BTG receiving
approximately 35.5% of the shares in the enlarged Africa Oil.
• Increased scale and balance sheet strength along with the potential to benefit from lower borrowing costs.
• The introduction of a long-term cornerstone shareholder that is strategically aligned with Africa Oil and committed to growing a
sustainable upstream oil and gas business, will, after completion, deliver superior value creation and shareholder capital returns.
• BTG Oil & Gas’ support has the potential to increase Africa Oil’s access to business opportunities and potentially unlock new sources
of growth capital, while complementing Africa Oil’s disciplined capital allocation and financial decision making through BTG Oil &
Gas’ participation on the Board.
• Enabling direct control of Prime’s cash flows and balance sheet through the consolidation of Africa Oil and BTG Oil & Gas’ respective
interests in Prime versus the equity accounting method that is followed by Africa Oil today for its investment in Prime. This in turn will
facilitate greater transparency and visibility of Prime’s financial performance for Africa Oil’s shareholders.
• Significant scope to streamline the business processes and decision making to achieve cost savings.
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PAGE 6
Report to Shareholders | December 31, 2024 Africa Oil Corp.
HIGHLIGHTS AND OUTLOOK - CONTINUED
The enlarged Africa Oil is expected to have significant scale with robust long-term free cash flows and a low leverage balance sheet,
driven by large-scale and high netback assets in deepwater Nigeria. This will be complemented by funded development and exploration
projects in the prolific Orange Basin.
These pillars will provide a strong platform for the enlarged Africa Oil to implement steady and predictable shareholder returns
underpinned by an enhanced base dividend policy, whilst delivering organic growth from its core assets and pursuing inorganic
growth opportunities supported by a long-term and committed strategic shareholder. The enlarged Africa Oil’s objective is to deliver a
superior investment case relative to its peer group through a combination of financial discipline, sustainable total shareholder returns,
and funded growth.
Namibia Orange Basin Appraisal and Exploration Campaign
Block 2913B, offshore Namibia, contains the Venus light oil field, discovered by the Venus-1X well, drilled in 2022 and subsequently
successfully appraised with three further wells and four drill stem tests. The Joint Venture is continuing to progress the proposed
development of the Venus Field, with development studies ongoing. The Venus Field is expected to be the first development in Block
2913B, producing 150kbopd (gross field) of ~45° API oil, with final investment decision expected by the end of H1 2026.
During 2024, two additional 3D seismic acquisition programs were completed to facilitate further exploration over the southern and
northern parts of the Blocks. This has resulted in most of the licensed area now being covered by 3D seismic. This data is currently
being processed and interpreted and will help further evaluate prospects and leads in the far northern and southern parts of the Blocks.
On February 3, 2025, the Deepsea Mira drilling rig spud the Marula-1X exploration well within the southern part of Block 2913B. This
well will target Albian-aged sandstones, within the Marula fan complex and has the potential to unlock further exploration targets
across the south, which is an area lying at the heart of the prolific Kudu source-rock kitchen. Deepsea Mira is also expected to drill the
Olympe prospect, targeting Albian sands within a structural closure on Block 2912.
On January 10, 2024, the Company announced a strategic farm down agreement between its investee company Impact Oil and Gas
Limited (“Impact”), and TotalEnergies, that allows the Company to continue its participation in the world class Venus oil development
project, and the follow-on exploration campaign on the Blocks with no upfront costs. This transaction frees up the Company’s balance
sheet for the pursuit of other growth opportunities and shareholder capital returns. As announced on November 1, 2024, this farm
down deal closed following the receipt of the final approval from Government of Namibia.
At the date hereof, AOC has an interest in this program through its 39.5% shareholding in Impact, which in turn has a 9.5% WI in each
of Block 2913B (PEL 56) and Block 2912 (PEL 91).
Nigeria
Agbami field performed in line with expectations throughout 2024. Planned maintenance on one of the three compressors commenced
at the end of Q4 2024 and continued into Q1 2025. The remaining two compressors will also be overhauled over the coming 2 years
to maintain high equipment uptime. Processing of the 4D-M3 seismic acquired in Q3 2024 is underway and other preparations for
the next drilling campaign, scheduled for 2026, are continuing as planned. A planned full-field shut down for maintenance activities is
scheduled for Q4 2025.
The Egina field completed the year above the production plan thanks to its high production efficiency and successful well interventions
during Q3 2024 and Q4 2024. Well planning for a 2025 drilling program based on the 4D-M2 acquired in Q2 2024 is ongoing with
drilling commencing in Q1 2025.
The Akpo field ended the year with production rates in line with those at the start of 2024, primarily due to the Akpo West wells
performing above expectation and the infill well on Akpo main offsetting natural decline in the field. A total of 3 new producers and 1
new injector were completed and tied back to the Akpo FPSO in 2024. Overall, for 2024, production was below the production plan
due to drilling delays pushing the expected production gains from drilling to the second half of the year. Well planning for additional
infill drilling, based on the 4D-M4 seismic acquired in Q1 2024, and potential near field exploration are underway.
The 2023 and 2024 Egina and Akpo drilling campaign was paused in November 2024 to allow time to mature drilling opportunities
from the 2024 seismic acquisition campaigns. The 2025 campaign kicked off in January 2025 as planned.
Progress on phase 2 of the Preowei Field front end engineering design (“FEED”) is now subject to further cost optimization and the
results of ongoing field development studies on the basis of the 4D baseline seismic acquisition acquired in Q2 2024. These work
streams are aimed at supporting an FID decision on the project and enabling Engineering, Procurement, Construction and Installation
(“EPCI”).
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PAGE 7
Report to Shareholders | December 31, 2024 Africa Oil Corp.
HIGHLIGHTS AND OUTLOOK - CONTINUED
South Africa Orange Basin, Block 3B/4B
Block 3B/4B lies to the southeast and on trend with a number of Orange Basin oil discoveries including Venus. There is approximately
14,000 km of 2D seismic and 10,800 km2 of 3D seismic over the block, identifying a large opportunity set of exploration prospects.
On August 28, 2024, the Company announced the completion of the farm down agreement with TotalEnergies and QatarEnergy for
the Orange Basin Block 3B/4B. The Company retained a 17.0% interest in Block 3B/4B and transferred the operatorship of the block to
TotalEnergies, for a maximum consideration of $46.8 million, including the exploration carry of its retained interest.
On January 10, 2025, the Company completed a separate transaction with Azinam, a subsidiary of Eco for the transfer of a 1.0% (one
percent) interest to the Company, increasing the group’s direct interest in Block 3B/4B to 18.0%. The Company will have the benefit of
exploration carry for the additional 1.0% interest assigned to it by Azinam.
An Environmental Authorization for exploration activities (drilling of up to 5 exploration wells) was granted by the Department of
Mineral Resources and Energy for the Republic of South Africa on September 16, 2024. The legislative notification and appeals process
is in progress with the relevant regulatory agencies.
Equatorial Guinea
On December 23, 2024, the Company was granted a 1 year extension to the first exploration sub period on both two exploration
licenses (EG-18 and EG-31), offshore Equatorial Guinea. The Company also received approval of the first amendment to the EG-31
Production Sharing Contract (PSC). The amendment expanded the block boundary to ensure that the full extent of the two main
exploration prospects were captured fully within the block boundary.
The Company is continuing with the farm down process for Blocks EG-18 and EG-31 as well as subsurface studies to enhance the
definition of multiple targets already identified. The Company holds an operated WI of 80.0% in each of Blocks EG-18 and EG-31.
SUMMARY OF 2024 MANAGEMENT GUIDANCE AND ACTUALS
Prime, net to AOC’s 50% shareholding: 2024 Actuals 2024 Updated Guidance
WI production (boepd) (1) 17,000 16,500 – 18,500
Entitlement production (boepd) (1) 19,400 18,000 – 21,000
Cash flow from operations (million) (2, 3) $267.8 $260.0 - $290.0
Capital investment (million) $76.3 $80.0 - $110.0
(1) All of the Company’s production is contributed solely by its shareholding in Prime. Entitlement production is calculated using the economic
interest methodology and includes cost oil, profit oil, tax oil and royalty oil and is different from WI production that is calculated based on
project volumes multiplied by Prime’s effective WI.
(2) Cash flow from operations before working capital adjustments and interest payments.
(3) Prime does not pay dividends to its shareholders, including the Company, on a fixed pre-determined schedule. Previous number of
dividends and their amounts should not be taken as a guide for future dividends to be received by the Company. Any dividends received by
the Company from Prime’s operating cash flows will be subject to Prime’s capital investment and financing cashflows, including payments of
Prime’s RBL principal amortization, which are subject to semi-annual RBL redeterminations, and Prime’s minimum cash on hand requirements.
Africa Oil will announce its 2025 Management Guidance on the closing of the Proposed Reorganization, which is expected on or about
March 7, 2025.
===== SIDA 18 =====
PAGE 8
Report to Shareholders | December 31, 2024 Africa Oil Corp.
THE COMPANY’S SHAREHOLDING AND WORKING
INTERESTS
The Company’s material interests and material exploration partnership interests as at December 31, 2024, are summarized in the following
table:
Africa Oil’s Shareholding in Prime Oil & Gas Coöperatief U.A. (50%) (1)
Country Concession License renewal Working Interests
NIGERIA
PML 52 November 24, 2044(2)
Prime
Chevron Corporation
Famfa Oil
8%
32%
60% (carried)
PML 2, 3, 4 and
PPL 261 – PSA May 24, 2043(2)
Prime
TotalEnergies
SAPETRO
32%
48%
20% (carried)
Africa Oil’s Shareholding in Impact Oil & Gas Limited (39.5%)
Country Concession License renewal Working Interests
NAMIBIA
PEL 56 (Block 2913B) April 1, 2025
Impact
TotalEnergies
QatarEnergy
NAMCOR
9.5%
50.5%
30%
10% (carried)
PEL 91 (Block 2912) October 1, 2027
Impact
TotalEnergies
QatarEnergy
NAMCOR
9.5%
47.2%
28.3%
15% (carried)
Africa Oil’s Direct Working Interests (3,4)
Country Concession License renewal Working Interests
SOUTH AFRICA Block 3B/4B October 26, 2024 (5)
AOC
TotalEnergies (Operator)
QatarEnergy
Azinam
Ricocure (Pty) Ltd
17% (6)
33%
24%
5.25%
19.75%
EQUATORIAL
GUINEA
EG-18
EG-31 March 1, 2026 AOC (Operator)
GEPetrol
80%
20%
(1) At December 31, 2024, the Company had a 50% shareholding in Prime. On completion of the Proposed Reorganization, the Company will hold
a 100% interest in Prime. Completion of the Proposed Reorganization is targeted to occur on or about March 7, 2025.
(2) Renewal of the rights under OML 130 resulted in the award of three new petroleum mining leases and one petroleum prospecting license.
These cover some of the areas previously covered by OML 130, with some of the areas also relinquished. These are PML 2 (Akpo field), PML
3 (Egina), PML 4 (Preowei) and PPL 261 (South Egina). 50% of the production (currently from PMLs 2 and 3, future production from PML 4 and
potential future production from PPL 261) is covered by a PSA framework, in which Prime owns a 32% WI. Prime’s net WI in these assets is
therefore 16%. Conversion of OML 127 to the new PIA earlier this year also resulted in the new designation of PML 52 for the license area that
contains part of the Agbami oil field.
(3) Net WI are subject to back-in rights or carried WI, if any, of the respective governments or national oil companies of the host governments.
(4) The Company has agreed with its JV parties its withdrawal from the entirety of the production sharing contracts and joint operating agreements
for Blocks 10BB, 13T and 10BA in Kenya with effect on and from June 30, 2023. The Company is waiting for government consent to complete
its withdrawal and the transfer of rights and future obligations.
(5) The operator has submitted an application for license renewal. This is currently awaiting Government approval.
(6) As at December 31, 2024, the Company held a non-operated WI of 17%. On January 13, 2025, the Company announced the completion of
the agreement with Eco for the acquisition of an additional 1% from Azinam, as a result of which the Company increased its interest to 18%.
Information on the Company’s equity interests in Africa Energy, Eco and Impact is included in ‘Equity Investments in Associates’ on pages
18-19.
===== SIDA 19 =====
PAGE 9
Report to Shareholders | December 31, 2024 Africa Oil Corp.
BUSINESS UPDATE
Macroeconomic conditions
Q4 2024 was the most subdued quarterly period during 2024 for international oil price decks. Average Bloomberg Dated Brent price of
$74.7/bbl compared to an average of $80.3/bbl for Q3 2024, and full-year 2024 average of $80.7/bbl. During Q4 2024 Bloomberg Date
Brent traded at a high of $81.2/bbl and a low of $71.3/bbl.
Full-year 2024 average price of $80.7/bbl was approximately 2% lower than full-year 2023 average of $82.6/bbl and approximately 5%
lower than the preceding 3-year average of $84.8/bbl.
The overall price weakness during 2024 was driven by the negative outlook for Chinese economic activity, above-average OPEC spare
capacity and the outlook of growing supplies from non-OPEC countries. These factors were countered by geopolitical tension in the
Middle East and concerns over a widening conflict in the region.
The conflict in the Middle East impacted maritime traffic through the Red Sea, including the flow of oil tankers, during 2024 and highlighted
the risks to oil supplies from the region, which remains a key production area for the global markets. These challenges reiterated the
strategic advantage of West African oil production for the Atlantic basin markets.
Nigeria economic environment
Nigeria’s year-on-year headline inflation rate reached a new record of 34.8% in December 2024 driven by higher transport costs and
consumer spending during the holiday season. This followed an upward trend in inflationary pressure from August 2024, after a brief
reversal with inflation falling from 34.2% in June to 32.2% in August. Inflationary pressures, exacerbated by the devaluation of the country’s
currency, Naira, have resulted in significant economic hardship leading to social unrest in the country. The Central Bank of Nigeria raised
interest rates six times last year in an attempt to control inflation, and the government of Nigeria expects headline inflation to drop to 15%
during 2025, in part helped by lower imports of petroleum products. However, the outlook for Nigerian economic activity, productivity
gains and in turn inflationary direction remains highly uncertain.
Prime’s business in Nigeria has limited exposure to these local economic developments with its revenues denominated in US Dollars.
Also, considering the location of the producing assets in deepwater, offshore Nigeria, Prime’s operations are shielded from the security
challenges faced onshore Nigeria.
SHAREHOLDER RETURNS
On completion of the Proposed Reorganisation, subject to the customary consents and approvals, including Africa Oil’s board approval,
the Company plans to implement an enlarged annual base dividend of $100 million, to be distributed to its shareholders on a quarterly
basis. The Company also intends to distribute 50% free cashflows net of the base dividend of $100 million in supplementary special
dividends and/or share buybacks, subject to the customary consents and approvals.
On February 27, 2025, the Company announced its intention to declare the first quarterly dividend of $25 million or approximately $0.037
per share, on the closing of the Proposed Reorganisation. This and other future dividend distributions are subject to customary board
approval and consents.
During 2024 the Company returned $67.9 million to shareholders through its base dividend policy and share buybacks executed under
its Normal Course Issuer Bid (“NCIB”).
The Company distributed two semi-annual dividends for a total of $0.05 per share (approximately $22.6 million) during 2024. The
Company views the 2024 distributions to have been prudent with due consideration for its capital allocation options and the priority of
maintaining a strong balance sheet in a range of market scenarios.
The Company repurchased its shares under a NCIB program that was launched on December 6, 2023, and which expired on December
5, 2024, as well as a new program that was launched on December 6, 2024. In total, during 2024, the Company repurchased a total of
26,519,932 at an average price of C$2.34 per share with an aggregate amount of $45.3 million.
During Q4 2024, the Company repurchased a total of 4,587,700 shares at an average price of C$1.90 per share.
Pursuant to the current NCIB (launched on December 6, 2024) Africa Oil is authorized to repurchase through the facilities of the TSX,
Nasdaq Stockholm and/or alternative Canadian trading systems, as and when considered advisable by Africa Oil, up to 18,362,364
Common Shares of the Company, which represented 5% of its “public float” of 367,247,289 Common Shares as at November 22, 2024.
Purchases of Common Shares may occur over a period of up to twelve months commencing December 6, 2024, and ending on the earlier
of December 5, 2025, the date on which the Company has purchased the maximum number of Common Shares permitted under the
NCIB, and the date on which the NCIB is terminated by Africa Oil. There cannot be any assurances as to the number of Common Shares
that will ultimately be acquired by the Company. Any Common Shares purchased by Africa Oil under the NCIB will be cancelled.
In Canada, Bill C-59 sets out taxes on repurchases of equity, with a 2% tax applying to the net value of shares repurchased by any
corporation resident in Canada whose shares are listed on a designated stock exchange. Bill C-59, was enacted on June 20, 2024, and the
Company has accrued for the tax payable on shares purchased during 2024.
===== SIDA 20 =====
PAGE 10
Report to Shareholders | December 31, 2024 Africa Oil Corp.
BUSINESS UPDATE - CONTINUED
EQUITY INVESTMENT IN PRIME – NIGERIA
The Company’s 50% equity interest in Prime as at December 31, 2024, is accounted for as an investment in joint venture under the equity
method on the Balance Sheet. During the period the Company recorded a 50% share of Prime’s net income or loss as well as a 50% share
of its other comprehensive income or loss in the period in the Consolidated Statement of Net (Loss)/ Income and Comprehensive (Loss)/
Income. Dividends received are disclosed as a cash flow from investing activities in the Consolidated Statement of Cash Flows.
The main assets of Prime are an indirect 8% WI in PML 52 and an indirect 16% WI in PMLs 2, 3 and 4 as well as PPL 261. PML 52 is
operated by affiliates of Chevron and covers part of the producing Agbami field. PMLs 2, 3 and 4 and PPL 261 are operated by affiliates of
TotalEnergies and contain the producing Akpo and Egina fields. The three fields in these PMLs 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, whilst Agbami associated gas is mostly reinjected.
All amounts included in the narrative discussions below are net to the Company’s 50% shareholding in Prime as at December 31, 2024,
unless otherwise noted.
Production and Operations
Production Metrics – rounded
Three months ended Years ended
Unit
December 31,
2024
December 31,
2023
December 31,
2024
December 31,
2023
Total gross field production boepd 270,300 296,700 273,600 314,200
Net to AOC’s 50% shareholding:
Average daily WI production (1) boepd 17,200 18,500 17,000 19,800
Average daily entitlement production boepd 19,500 21,700 19,400 22,400
Oil volumes sold MMbbl - 2.0 4.5 6.4
Gas volumes sold bcf 2.5 2.4 8.7 9.5
Oil/gas percentage split % 74%/26% 80%/20% 77%/23% 81%/19%
(1) Production allocation occurs periodically and can result in a change in production numbers previously reported.
The total gross field production in Q4 2024 was lower than Q4 2023, primarily due to the expected natural reservoir decline across all
assets.
The total gross field production in 2024 was lower than 2023 primarily due to a planned maintenance shutdown at the Akpo FPSO and
the expected natural reservoir decline across all assets. The Agbami and Egina fields production was in line with the plan for 2024. The
Akpo field underwent a full field shutdown in mid-March to perform maintenance on equipment with production resuming in mid-April.
New wells drilled and completed in Akpo continue to exceed expectations and assist offsetting the natural production decline of the field.
Entitlement production is calculated using the economic interest methodology and includes cost oil, profit oil, tax oil and royalty oil. It
differs from WI production which is calculated based on field volumes multiplied by Prime’s effective WI in each Block. The cargoes lifted
by Prime and described below represent Prime’s share of cost oil, profit oil and included in the comparative period part of income tax oil
in relation to the period prior to conversion to the new PIA regime. The remaining part of income tax oil and royalties was either lifted and
sold by the operator or paid in cash, to settle the tax and royalty obligations to the Nigerian state. From August 2023, Prime has been lifting
its own entitlement production and paying its tax in cash. Aggregate oil equivalent production data comprises of light and medium crude
oil and conventional natural gas production net to Prime’s WI in the Agbami, Akpo and Egina fields. These production rates only include
sold gas volumes and not those volumes used for fuel, reinjected or flared.
In Q4 2024, Prime was allocated no oil liftings. Cargos initially scheduled for Q4 2024 have been pushed into Q1 2025 resulting in a large
underlift position at the end of Q4 2024. Up to 5 cargos are scheduled to be lifted in Q1 2025 unwinding this large underlift position.
In Q4 2023, Prime was allocated 4 oil liftings with total sales volume of approximately 3.9 million barrels or 2.0 million barrels net to the
Company’s 50% shareholding at an average realized oil price of $86.6/bbl.
In 2024, Prime was allocated 9 oil liftings with total sales volume of approximately 9.0 million barrels or 4.5 million barrels net to the
Company’s 50% shareholding at an average realized oil price of $84.6/bbl. In 2023, Prime was allocated 13 oil liftings with a total sales
volume of approximately 12.9 million barrels or 6.4 million barrels net to the Company’s 50% shareholding at an average realized oil price
of $84.6/bbl.
===== SIDA 21 =====
PAGE 11
Report to Shareholders | December 31, 2024 Africa Oil Corp.
BUSINESS UPDATE - CONTINUED
Financial
Prime’s financial information is presented in note 5 of the financial statements on a 100% basis, with a reconciliation to the Company’s
50% share of Prime’s net assets and net income. In Q4 2024 and full year 2024, the result from the 50% investment in Prime was an
income of $159.3 million and $226.0 million respectively (Q4 2023 and full year 2023 – loss of $79.3 million and a profit of $228.0 million
respectively). As at December 31, 2024, the Company’s investment in Prime was $328.4 million (as at December 31, 2023 - $572.5 million)
following the recognition of a non-cash impairment charge of $436.7 million as a result of the significant decrease in the Africa Oil share
price between June 24, 2024, when the Company announced the Proposed Reorganization and December 31, 2024. The fair value of the
existing 50% shareholding in Prime decreased as the fair value considers the number of Africa Oil shares that were agreed in relation to
the purchase of the additional interest in Prime and the trading value of Africa Oil shares as this is an observable fair value input under
IFRS Accounting Standards. As at December 31, 2024, the fair value of the Company’s existing shareholding in Prime was calculated to
be $328.4 million based on the Africa Oil share price of CAD 1.97 as of December 31, 2024, and the USD/CAD exchange rate of 1.4384
as of December 31, 2024.
All amounts presented and discussed below are net to AOC’s 50% shareholding in Prime (unless otherwise stated) to reflect AOC’s 50%
shareholding in Prime.
Financial Metrics(1)
Three months ended Years ended
Net to AOC’s 50% shareholding: Unit
December 31,
2024
December 31,
2023
December 31,
2024
December 31,
2023
Total revenues $’m 2.2 173.6 391.4 581.1
Cost of Sales (2) $’m (34.0) 103.1 208.6 299.0
Gross profit $’m 36.2 70.5 182.8 282.1
Opex/boe (3,4) $/boe 9.9 12.0 10.3 9.2
Cash flow from operations before working
capital $’m 52.9 64.1 267.8 300.4
Cash flow from operations $’m 29.3 43.9 273.6 237.9
Free cash flow $’m 8.8 16.7 197.2 149.1
Free cash flow/boe (4) $/boe 4.4 8.4 27.8 18.2
Tax $’m 23.3 5.9 60.3 (122.7)
Capex (5) $’m 20.5 27.2 76.3 88.8
Dividends paid $’m 11.0 50.0 36.0 175.0
Net Debt $’m 175.3 298.9 175.3 298.9
EBITDAX $’m 242.3 112.3 519.5 460.3
Net Debt/EBITDAX (6) ratio 0.3 0.7 0.3 0.7
AOC Net Cash/ (Debt) inclusive of
50% Prime Net Debt $’m (113.9) (66.9) (113.9) (66.9)
(1) The table includes non-GAAP measures. Definitions and reconciliations to these non-GAAP measures are provided on pages 13-16
(2) Given the nature of Prime’s operations in terms of oil cargo liftings and the variability in their frequency from one quarter to next, the non-cash
accounting treatment of underlift/overlift and the timing between recording revenues and receipts of sales cash, leads to high variability in
Prime’s quarterly financial metrics. Please refer to the commentary in the rest of this section for the specific details of this period’s changes
relative to the corresponding historical period.
(3) Opex represents production costs presented on Prime’s Statement of Net Income and Other Comprehensive Income in note 5 to the
financial statements.
(4) Boe is calculated on an entitlement basis.
(5) Full year 2024 amount includes the PML 52 license renewal fee and 2023 amount includes the PMLs 2, 3 and 4 and PPL 261 license renewal
fee both of which have been capitalized to oil and gas interests.
(6) Calculated on a 12-month rolling basis until December 31, 2024, and December 31, 2023, respectively.
===== SIDA 22 =====
PAGE 12
Report to Shareholders | December 31, 2024 Africa Oil Corp.
BUSINESS UPDATE - CONTINUED
Total Revenues
Three months ended Years ended
Unit
December 31,
2024
December 31,
2023
December 31,
2024
December 31,
2023
Per Prime’s financial statements
Total revenue $’m 4.4 347.2 782.7 1,162.2
Net to AOC’s 50% shareholding:
Oil revenue $’m - 170.7 381.1 545.3
Gas revenue $’m 2.2 2.9 10.3 8.1
PPT revenue $’m - - - 19.8
Royalty revenue $’m - - - 7.9
Total revenue $’m 2.2 173.6 391.4 581.1
Realized oil prices (1) $/bbl - 86.6 84.6 84.6
Oil volumes sold MMbbl - 2.0 4.5 6.4
Realized gas prices $/bcf 1.0 1.2 1.2 0.9
Gas volumes sold Bcf 2.5 2.4 8.7 9.5
(1) Realized oil prices might be different to values calculated from the table above due to roundings.
There were no oil liftings in Q4 2024 and therefore no oil revenue was recognized compared to Q4 2023. Cargos initially scheduled for
Q4 2024 have been pushed into Q1 2025 with up to 5 cargos scheduled to be lifted in Q1 2025.
The decrease in oil revenue in 2024 was lower due to lower liftings in 2024 compared to 2023.
PPT revenue is revenue recognized for tax oil, being Prime’s share of entitlement production that is sold by the operators to settle its
tax obligations to the Nigerian state. As the tax oil lifted by the operator on behalf of Prime is sold to 3rd party customers and proceeds
are used to settle Prime’s tax liabilities, this share of PPT is considered to be within the scope of IFRS 15, ‘Revenue from contracts with
customers’. Consequently, this portion of income tax is presented gross in revenue and offset in current income tax expense. Prime has
no longer reported PPT revenue since August 2023 following conversion to PIA as PPT is no longer due under the act with Prime lifting its
own entitlement production and paying its tax in cash.
Up to the end of July 2023, PML 52 royalties were presented gross in both revenue and cost of sales. No royalty revenue has been
reported anymore since August 2023 with PML 52 royalties being paid in cash and presented in cost of sales.
Cost of sales
Three months ended Years ended
$’m
December 31,
2024
December 31,
2023
December 31,
2024
December 31,
2023
Per Prime’s financial statements
Total cost of sales (68.0) 206.3 417.2 598.0
Net to AOC’s 50% shareholding:
DD&A 43.5 43.7 186.0 180.9
Production costs 17.9 24.0 73.1 75.5
Movements on overlift/underlift balances (102.4) 31.5 (85.6) 11.8
Royalties – oil and gas 7.0 3.9 35.1 30.8
Total cost of sales (34.0) 103.1 208.6 299.0
Cost of sales decreased in Q4 2024 and 2024 compared to Q4 2023 and 2023 primarily due to a large underlift movement in Q4 2024 and
2024 compared to an overlift movement in Q4 2023 and 2023. Cargos initially scheduled for Q4 2024 have been pushed into Q1 2025
resulting in a large underlift position at the end of Q4 2024 which is a credit to cost of sales. Up to 5 cargos are scheduled to be lifted in
Q1 2025 unwinding this large underlift position.
===== SIDA 23 =====
PAGE 13
Report to Shareholders | December 31, 2024 Africa Oil Corp.
BUSINESS UPDATE - CONTINUED
Opex/boe
Opex/boe is a non-GAAP measure which represents production costs on a per barrel of oil equivalent basis (using entitlement
production). This allows the Company to better analyze performance against prior periods on a comparable basis. The most direct
financial statement measure is production costs, disclosed in note 5 to the financial statements. Entitlement production is calculated
using the economic interest methodology and includes cost recovery oil, tax oil, profit oil and royalty oil and is different from WI
production that is calculated based on project volumes multiplied by Prime’s effective WI in each Block.
Three months ended Years ended
Unit
December 31,
2024
December 31,
2023
December 31,
2024
December 31,
2023
Per Prime’s financial statements
Production costs $’m 35.6 48.0 146.1 151.0
Net to AOC’s 50% shareholding:
Production costs $’m 17.9 24.0 73.1 75.5
Entitlement production MMboe 1.8 2.0 7.1 8.2
Opex/boe $/boe 9.9 12.0 10.3 9.2
Production costs have decreased in 2024 compared to 2023 because of planned shutdown maintenance costs during H1 2024.
Opex/boe decreased in Q4 2024 compared to Q4 2023 primarily from the lower production costs.
Opex/boe increased in 2024 compared to 2023 as a result lower entitlement production despite a decrease in production costs.
Entitlement production is used as the denominator as production costs include carry of costs that are recovered through entitlement
production.
Cash flow from operations
Cash flow from operations before working capital is a non-GAAP measure. This represents cash generated by removing the impact
from working capital from cash generated by operating activities and is a measure commonly used to better understand cash flow from
operations across periods on a consistent basis and when viewed in combination with the Company’s results provides a more complete
understanding of the factors and trends affecting the Company’s performance. A reconciliation from cash flow from operations to cash
flow from operations before working capital is shown below:
Three months ended Years ended
$’m
December 31,
2024
December 31,
2023
December 31,
2024
December 31,
2023
Per Prime’s financial statements
Cash flow from operations 58.6 87.8 547.2 475.8
Net to AOC’s 50% shareholding:
Cash flow from operations 29.3 43.9 273.6 237.9
Working capital adjustments included in cash flow
from operations
Changes in trade and other receivables (67.2) 56.0 (78.4) 16.0
Changes in over/underlift balances 102.4 (31.4) 85.6 (11.8)
Changes in other working capital balances (11.6) (4.4) (13.0) 58.3
Total working capital adjustments 23.6 20.2 (5.8) 62.5
Cash flow from operations before working capital 52.9 64.1 267.8 300.4
===== SIDA 24 =====
PAGE 14
Report to Shareholders | December 31, 2024 Africa Oil Corp.
BUSINESS UPDATE - CONTINUED
Cash flow from operations before working capital decreased in Q4 2024 compared to Q4 2023. This is primarily from lower oil prices
and lower tax payments in Q4 2024.
Cash flow from operations before working capital decreased in 2024 compared to 2023. This is primarily from lower production
volumes in 2024 compared to 2023 and lower other operating income partly offset by lower tax payments in 2024 Other operating
income recognized in 2023 consisted of investment tax credits which could be offset against PPT which is no longer applicable since
Prime operates under the PIA terms.
Cash flow from operations decreased in Q4 2024 compared to Q4 2023 primarily as there were no liftings in Q4 2024 compared to Q3
2023 with working capital adjustments being relatively consistent.
Cash flow from operations has increased in 2024 compared to 2023 as there were lower liftings in 2024 compared to 2023 and there
was a working capital release in the 2024 compared to a working capital build in 2023.
FCF and FCF/boe
FCF is a non-GAAP measure. This measure represents cash generated after costs, and is a measure commonly used to assess the
Company’s profitability. A reconciliation from total cash flow (a GAAP measure) to FCF (a non-GAAP measure) is shown below:
Three months ended Years ended
Unit
December 31,
2024
December 31,
2023
December 31,
2024
December 31,
2023
Per Prime’s financial statements
Total cash flow $’m (21.2) (85.6) 247.3 (179.5)
Add back dividends $’m 22.0 100.0 72.0 350.0
Add back debt service costs (1) $’m 16.8 18.9 71.9 122.3
Add back derivatives $’m - - 3.2 5.3
FCF $’m 17.6 33.3 394.4 298.1
Net to AOC’s 50% shareholding:
FCF $’m 8.8 16.7 197.2 149.1
Entitlement production MMboe 1.8 2.0 7.1 8.2
FCF/boe $/boe 4.4 8.4 27.8 18.2
(1) Debt service costs comprise interest payments, repayments and drawdowns of third-party borrowings.
FCF and FCF/boe in Q4 2024 has decreased compared to Q4 2023 primarily from the lower cash flow from operations.
FCF and FCF/boe has increased in 2024 compared to 2023 primarily from the higher cash flow from operations and lower tax payments.
FCF/boe is a non-GAAP ratio which represents FCF on a per barrel of oil equivalent basis using entitlement production which allows
the Company to better analyze performance against prior periods on a comparable basis. Entitlement production is calculated using
the economic interest methodology and includes cost oil, profit oil, tax oil and royalty oil and is different from WI production that is
calculated based on project volumes multiplied by Prime’s effective WI in each Block.
Tax
The tax expense is made up of the following items:
Three months ended Years ended
$’m
December 31,
2024
December 31,
2023
December 31,
2024
December 31,
2023
Per Prime’s financial statements
Petroleum Profit Tax - - (2.3) 138.1
Deferred tax income (24.5) (87.3) (80.9) (570.9)
Education tax 2.1 7.9 14.2 21.9
Corporate income tax 17.1 74.9 130.1 134.3
Withholding tax on dividends 15.0 13.0 22.5 28.0
Capital gains tax 33.0 - 33.0 -
Other taxes 3.9 3.2 3.9 3.2
Total tax 46.6 11.7 120.5 (245.4)
Net to AOC’s 50% shareholding:
Total tax 23.3 5.9 60.3 (122.7)
===== SIDA 25 =====
PAGE 15
Report to Shareholders | December 31, 2024 Africa Oil Corp.
BUSINESS UPDATE - CONTINUED
The tax charge was higher in Q4 2024 compared to Q4 2023. Deferred income tax was higher in Q4 2023 compared to Q4 2024
following an impairment recognized in Prime in Q4 2023 which resulted in a deferred tax release. Corporate income tax was lower in
Q4 2024 compared to Q4 2023 from lower revenues in Q4 2024 compared to Q4 2023 and lower corporate income tax rates. Capital
gains tax in Q4 2024 relates to the income recognized by Prime under the Securitization Agreement at a Capital Gains Tax rate in
Nigeria of 10 percent.
There was a tax charge in 2024 compared to an income in 2023. In 2023, Prime renewed the OML 130 license resulting in OML
130 operating under the terms of the new Petroleum Industry Act as from June 1, 2023, and Prime voluntarily converted the OML
127 license. The renewal of the OML 130 license resulted in the award of three new petroleum mining leases and one petroleum
prospecting license. These cover some of the areas previously covered by OML 130, with some of the areas also relinquished. These
are PML 2 (Akpo field), PML 3 (Egina), PML 4 (Preowei) and PPL 261 (South Egina). The conversion of the OML 127 license resulted in
the award of PML 52. Under these terms, PML 2, 3, 4 and 52 and PPL 261 are subject to a 30% Corporate Income Tax regime compared
to the previous 50% PPT regime which resulted in the release of $62.0 million of deferred tax liabilities for PML 52 and $346.0 million
of deferred income tax liabilities PML 2, 3 and 4 and PPL 261 during 2023. Capital gains tax in 2024 relates to the income recognized
by Prime under the Securitization Agreement at a Capital Gains Tax rate in Nigeria of 10 percent.
Petroleum Profits Tax is a tax on the income of companies engaged in upstream petroleum operations in Nigeria. The PPT rate for
petroleum operations under production sharing contracts with the Nigerian National Petroleum Corporation (NNPC) is 50%. Since
operating under the new PSA terms following conversion during 2023, the leases and licenses are no longer subject to PPT.
Education tax is imposed on every Nigerian company at a rate of 3.0% of the assessable profit in the period.
Capital expenditure
Capital expenditure in Q4 2024 and 2024 amounted to $20.5 million and $76.3 million, respectively, net to the Company’s 50%
shareholding in Prime. Capital expenditure in Q4 2024 mainly related to Prime’s share of the PML 52 renewal fee. In 2024, capital
expenditure mainly related to the infill drilling campaign on PML 2, with the drilling and completion of two Akpo West wells, and the
drilling of a third Akpo West well that completed during April 2024 as well as the PML 52 license fee renewal.
Expenditures in Q4 2023 and 2023 of $27.2 million and $88.8 million mainly related to the OML 130 drilling campaign with the drilling
of two production wells on the Akpo West Field. Capital expenditure in 2023 also included the share of the OML 130 renewal fee.
Dividends paid
In Q4 2024, Prime made one dividend payment with a net payment to the Company of $11.0 million (Q4 2023 – one dividend payment
with a net payment to the Company of $50.0 million). In 2024, Prime made two dividend payments with a net payment to the company
of $36.0 million (2023 – three dividend payments with a net payment to the Company of $175.0 million).
Net Debt
Net Debt is a non-GAAP measure. Net Debt is calculated as loans and borrowings less cash and cash equivalents.
As at/ $’m
December 31,
2024
December 31,
2023
Per Prime’s financial statements
Loans and borrowings 750.0 750.0
Cash and cash equivalents (399.5) (152.2)
Net Debt 350.5 597.8
Net to AOC’s 50% shareholding:
Net Debt 175.3 298.9
Net to AOC’s 50% shareholding, Prime has $199.7 million of cash and $375.0 million of debt (as at December 31, 2023 - $76.1 million
of cash and $375.0 million of debt).
During 2024, $250.0 million of the commitments under Prime’s RBL facility were cancelled, reducing the principal amount from $1,050.0
million to $800.0 million. $750.0 million remains drawn and outstanding at December 31, 2024.
===== SIDA 26 =====
PAGE 16
Report to Shareholders | December 31, 2024 Africa Oil Corp.
BUSINESS UPDATE - CONTINUED
EBITDAX and Net Debt/EBITDAX
EBITDAX is a non-GAAP measure. This is used as a performance measure to understand the financial performance from Prime’s business
operations without including the effects of the capital structure, tax rates, DD&A, impairment and exploration expenses. A reconciliation
from total profit (a GAAP measure) to EBITDAX (a non-GAAP measure) is shown below.
Net Debt/EBITDAX is a non-GAAP measure. Net Debt divided by EBITDAX is a measure of the leverage.
Three months ended Twelve months ended
$’m
December 31,
2024
December 31,
2023
December 31,
2024
December 31,
2023
Per Prime’s financial statements
Total profit/ (loss) 318.7 (158.6) 452.0 456.0
Add back:
Tax 46.6 11.7 120.5 (245.4)
Finance costs 22.7 22.7 97.8 89.5
Finance income 8.1 (2.1) (6.4) (6.8)
DD&A and Impairment 87.0 350.6 372.0 625.0
Exploration expenses 1.5 0.3 3.1 2.3
EBITDAX 484.6 224.6 1,039.0 920.6
Net Debt (350.5) (597.8)
Net Debt/EBITDAX 0.3 0.7
Net to AOC’s 50% shareholding:
Net Debt (175.3) (298.9)
EBITDAX 519.5 460.3
Net Debt/ EBITDAX 0.3 0.7
AOC Net Cash 61.4 232.0
AOC Net Cash/(Debt) inclusive of 50% Prime Net Debt (113.9) (66.9)
EBITDAX has increased in Q4 2024 compared to Q4 2023. The increase is mainly relating to other operating income recognized by
Prime in Q4 2024 under the Securitization Agreement as no comprehensive resolution was reached among all unit parties in respect of
the tract participation in the Agbami field by December 27, 2024. This is offset against lower production volumes.
EBITDAX has increased in 2024 compared to 2023. The increase is mainly relating to other operating income recognized by Prime
in Q4 2024 under the Securitization Agreement as no comprehensive resolution was reached among all unit parties in respect of the
tract participation in the Agbami field by December 27, 2024. This is offset against lower production volumes and the fact that no other
operating income related to tax credits is recognized in 2024 as Prime operates now under the PIA terms.
Crude Oil Marketing
In considering Prime’s cargo liftings, the reader should note that the timing and the frequency of these can vary based on a number
of factors such as: reservoir performance; actual realized oil price; capex; opex; underlift/overlift positions and marine logistics. The
revenue numbers reported for Prime include cost oil, profit oil, tax oil and royalty oil where relevant for each field.
Prime uses contingent physical forward sales contracts for the marketing and sale of its lifted entitlement production, to manage
commodity price risk and ensure stability in cash flows in line with the marketing strategy. Prime does not fix the Dated Brent component
of the sales price at the time of entering the contract, instead using a trigger pricing mechanism, whereby Prime gives an irrevocable
instruction to an off-taker to fix the Dated Brent component of a cargo, if the forward curve price goes below a certain trigger based on
a percentage of the Brent forward curve (at the time the instruction was given) for the month of the expected lifting. If the forward curve
price never goes below that threshold, the cargo is sold spot.
In Q3 2024, Prime purchased an Asian put option for one million barrels of oil. This option protects Prime against price movements
below $75.0/bbl in the period between January 2 and March 31, 2025. If the average spot price in the period between January 2 and
March 31, 2025, falls below $75.0/bbl then Prime is compensated in cash for the difference with the strike price of $75.0/bbl. If the
average spot price in the period is above the strike price the option would expire and Prime benefits from the higher price.
===== SIDA 27 =====
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Report to Shareholders | December 31, 2024 Africa Oil Corp.
BUSINESS UPDATE - CONTINUED
In Q3 2024, Prime also entered into a zero-premium Asian Dated Brent Collar transaction for one million barrels of oil. This contract
protects Prime against price movements below $75.0/bbl with a cap of $90.85/bbl in the period between December 1, 2024, and
February 28, 2025. If the average spot price in the period between December 1, 2024, and February 28, 2025, falls below $75.0/bbl
then Prime is compensated in cash for the difference with the strike price of $75.0/bbl. If the average spot price in the period is above
$90.85/bbl then Prime has to compensate in cash for the difference with the strike price of $90.85/bbl. Based on the average spot price
to the date of release of this MD&A, Prime expects no actual cash settlement for this Asian Dated Brent Collar.
The average cargo size lifted is one million barrels of oil.
Oil sales were comprised of the following:
Unit
Three months ended Years ended
Oil Sales
December 31,
2024
December 31,
2023
December 31,
2024
December 31,
2023
Number of cargo liftings - 4 9 13
Of which:
Sold forward with the trigger price
mechanism activated - - 2 2
Sold at spot - 4 7 11
- 4 9 13
Gross crude oil sales
Quantity in Mboe Mboe - 3,943.3 9,012.8 12,891.7
Average sales price $/bbl - 86.6 84.6 84.6
Average Bloomberg Dated Brent for
the period $/bbl - 84.3 82.7 82.6
Subsequent to the period-end, Prime sold three cargos with an average Dated Brent price of $81.6/bbl. Prime is expected to lift 2 more
cargoes before the end of Q1 2025. Of the 7 cargoes expected for the remainder of the year post Q1 2025, 5 cargos are hedged with
an average trigger price of $65.2/bbl. As of the date of this report none of the trigger prices have been triggered.
Other non-GAAP measures related to Prime
This MD&A includes non-GAAP measures, non-GAAP ratios and supplementary financial measures as further described herein.
These non-GAAP figures do not have a standardized meaning prescribed by IFRS Accounting Standards and, therefore, may not be
comparable with the calculation of similar measures by other companies. The Company believes that the presentation of these non-
GAAP figures provides useful information to investors and shareholders as the measures provide increased transparency and the ability
to better analyze performance against prior periods on a comparable basis.
BLOCK 3B/4B – SOUTH AFRICA
On August 28, 2024, the Company announced the completion of the strategic farm down agreement with TotalEnergies and QatarEnergy.
The Company retained a direct 17.0% non-operated interest in the block and operatorship was transferred to TotalEnergies.
Transaction highlights are:
• Maximum transaction value of up to $46.8 million to the Company.
• The Company will receive, subject to achieving certain milestones defined in the farm down agreement, staged payments for a total
cash amount of $10.0 million, of which $3.3 million was received at completion with the remaining balance to be received in two
successive payments conditional upon achieving key operational and regulatory milestones.
• The Company will also receive a full carry of its 17.0% retained share of all JV costs, up to a cap, that is repayable to TotalEnergies
and QatarEnergy from production, and which is expected to be adequate to fund the Company’s share of drilling for 1-2 wells on
the license.
On January 13, 2025, the Company announced the completion of the agreement with Eco to acquire an additional 1.0% (one percent)
interest from Azinam Limited, Eco’s wholly owned subsidiary, in exchange for all common shares and warrants held by the Company in
Eco. The Company now holds 18.0% in Block 3B/4B and is no longer a shareholder in Eco. Africa Oil will benefit from the carry agreed
between Eco, TotalEnergies and QatarEnergy for this incremental interest
The Company expects that the first exploration well on Block 3B/4B can be drilled during 2026.
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Report to Shareholders | December 31, 2024 Africa Oil Corp.
BUSINESS UPDATE - CONTINUED
BLOCKS EG-18 AND EG-31 – EQUATORIAL GUINEA
The Company has two PSCs with the Republic of Equatorial Guinea for offshore Blocks EG-18 and EG-31. The Company holds an
80% operated interest, subject to back in rights by GEPetrol in both Blocks. Work programs on both Blocks include re-processing of
existing 3D seismic surveys and identification of prospects within the first 2-year sub period. A 1-year extension of the first Exploration
sub-period was granted on December 23, 2024, extending the renewal period to March 1, 2026. At the end of 2024, all financial
commitments for the initial exploration period have been met, the 1 year extension should enable the required technical work to be
completed.
EQUITY INVESTMENTS IN ASSOCIATES AND INVESTMENT HELD FOR SALE
As at December 31, 2024, the Company held equity investments in three oil and gas companies, which provides exposure to several
high-impact exploration drilling prospects in South Africa, Namibia, and Guyana.
The Company held the following equity investments in associates and investment held for sale as of December 31, 2024:
Africa Energy Eco Impact (1)
Issued and Outstanding 1,407,812,249 370,173,680 1,139,147,442
Shares held by AOC at January 1, 2024 276,982,414 54,941,744 343,545,659
Shares acquired in the period - - 105,918,737
Shares held by AOC at December 31, 2024 276,982,414 54,941,744 449,464,396
AOC’s holding (%) – December 31 2024 19.67% 14.84% 39.46%
AOC’s holding (%) – December 31 2023 19.67% 14.84% 31.09%
Share price (CAD) on December 31, 2024 0.03 0.21 -
Exchange rate to USD on December 31, 2024 0.70 0.70 -
(1) Impact is a privately held UK company and no share price is available.
Impact
Impact is a private UK oil and gas exploration company with assets located offshore Namibia and South Africa.
In the year ended December 31, 2024, the Company acquired an additional 105,918,737 shares from various parties. The total cost for
these purchases was approximately $88.6 million.
Through these transactions, the Company has materially increased its interest from 31.1% at start of 2024 to 39.5% at end of 2024,
enhancing its rights and influence over a core strategic asset and value driver for Africa Oil.
On February 24, 2022, Impact announced that the Venus-1X exploration well in Block 2913B, offshore Namibia, had discovered
hydrocarbons. 4 subsequent wells, Venus-1X side track, Venus-1A, Venus-2A and Mangetti-1X have been drilled and tested to appraise
the Venus discovery. The Joint Venture is continuing to progress the proposed development of the Venus Field, with development
studies ongoing. The Venus Field is expected to be the first development in Block 2913B, producing 150 kbopd (gross field) of ~45°
API oil, with final investment decision expected by the end of first half of 2026.
During Q1 2025, the joint venture completed the drilling of Tamboti-1X exploration well in Block 2913B. Tamboti-1X was safely
and successfully drilled to a total depth of 6450mMD on Block 2913B, approximately 12km northeast of the Mangetti-1X well and
approximately 25km north-northwest of the Venus-2A well, using the Deepsea Mira semi-submersible drilling rig. Black oil was
encountered within 85m of net reservoir of lower quality Upper Cretaceous sandstones, belonging to the Mangetti fan system. A DST
program was completed at the Tamboti-1X location, and results from the acquired log, core and DST data are currently under analysis.
During 2024, two additional 3D seismic acquisition programs were completed to facilitate further exploration over the southern and
northern parts of the combined blocks. This has resulted in most of the licensed area now being covered by 3D seismic. This data is
currently being processed and interpreted and will help further evaluate prospects and leads in the far northern and southern parts of
the Blocks.
On February 3, 2025, the Deepsea Mira drilling rig spud the Marula-1X exploration well within the southern part of Block 2913B. This
well will target Albian-aged sandstones, within the Marula fan complex and has the potential to unlock further exploration targets
across the south, which is an area lying at the heart of the prolific Kudu source-rock kitchen. Deepsea Mira is also expected to drill the
Olympe prospect, targeting Albian sands within a structural closure on Block 2912.
On November 1, 2024, the Company announced the completion of a strategic farm-down agreement between its investee company,
Impact, and TotalEnergies. Following the closing of this deal, Impact retains a 9.5% interest in the Blocks that is fully carried for all joint
venture costs, with no cap, through to first commercial production. Impact also received a cash reimbursement of approximately $99.0
million for its share of the past costs incurred on the Blocks net to the farmout interests.
This agreement provides Impact with a full interest-free carry loan over all of Impact’s remaining development, appraisal and exploration
costs on the Blocks from January 1, 2024 (“Effective Date”), until the date on which Impact receives the first sales proceeds from oil
production on the Blocks (“First Oil Date”).
On and from the First Oil Date, the carry is repayable to TotalEnergies in kind from 60% of Impact’s after-tax cash flow net of all joint
venture costs, including capital expenditures. During the repayment of the carry, Impact will pool its entitlement barrels with those of
TotalEnergies for more regular off-takes and a more stable cashflow profile and will also benefit from TotalEnergies’ marketing and sales
capabilities.
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Report to Shareholders | December 31, 2024 Africa Oil Corp.
BUSINESS UPDATE - CONTINUED
Africa Energy
Africa Energy is a TSX-Venture (Toronto) and Nasdaq First North Growth Market (Stockholm) listed international oil and gas exploration
company with an interest in Block 11B/12B offshore South Africa. There are two gas condensate discoveries (Brulpada and Luiperd) on
this block in proximity to offshore gas infrastructure and onshore gas market in Mossel Bay, South Africa.
On July 1, 2024, Africa Energy announced that CNR International (South Africa) Limited, a partner in Block 11B/12B, has provided
notice to the joint venture partners that it will withdraw from its 20% interest in the Block. On July 29, 2024, TotalEnergies EP South Africa
B.V., the operating partner on the Block, and QatarEnergy International E&P LLC announced that they will withdraw from their 45%
and 25% operated interests in the Block, respectively. Under the joint operating agreement, the withdrawing parties will assign their
interest free of charge to Main Street 1549 Proprietary Ltd. (“Main Street”), the non-withdrawing partner, which currently has a direct
10% participating interest in Block 11B/12B.
The Company owns 49% of the common shares and 100% of the Class B shares of Main Street. The remaining 51% of the common
shares of Main Street are held by Arostyle. In light of the withdrawal of the joint venture partners in Block 11B/12B, and subject to all
relevant regulatory approvals, Main Street expects to hold a 100% participating interest in Block 11B/12B.
On December 20, 2024, Africa Energy announced that it has entered into a non-binding agreement with Arostyle Investments (RF)
Proprietary Ltd. (“Arostyle”), to restructure their join investment in Main Street. Under the non-binding agreement, Africa Energy and
Arostyle agreed that subject to all relevant regulatory approvals, the Parties will restructure Main Street resulting in the Company holding
a direct 75% participating interest and Arostyle holding a direct 25% participating interest in Block 11B/12B, with the relationship
between the Parties being governed by the existing Joint Operating Agreement in respect to Block 11B/12B.
Africa Energy and Arostyle believe that natural gas will play a critical role in South Africa’s energy transition, and the use of indigenous
gas from Block 11B/12B discoveries are currently the most material domestic supply option in South Africa
Eco
Eco is a TSX-V and AIM-listed oil and gas company that operates and holds WI in four exploration Blocks offshore Namibia and operates
one exploration Block offshore South Africa and is a party with the Company in Block 3B/4B, offshore South Africa. Eco also has a direct
WI and indirect interest in two exploration Blocks offshore Guyana, the Orinduik and Canje Blocks. The Company’s ownership interest
was approximately 14.8% at December 31, 2024.
On July 26, 2024, the Company signed an agreement with Eco to acquire an additional 1.0% interest in Block 3B/4B from Azinam
Limited, Eco’s wholly owned subsidiary, in exchange for all common shares and warrants over common shares held by the Company in
Eco. On January 13, 2025, the Company announced the closing of this transaction. The Company is no longer a shareholder in Eco and
its representative on Eco’s Board of Directors has resigned from this position.
ENVIRONMENTAL, SOCIAL AND GOVERNANCE
The Company is committed to being a responsible company that integrates sustainability considerations throughout its decision-
making and operational management. The Company is focused on the effective identification and management of risk in its operational
activities and, to the extent that it is reasonably able to influence them, those of its JV parties and investee companies. The Company
selects its operating parties in part on their ability and commitment to manage ESG risks effectively. The Company monitors operator
performance and works with operators where possible and necessary to improve performance. The Company’s role as the custodian
of its shareholders’ capital is to ensure robust governance systems are in place to minimize risks and deliver our sustainability goals.
As part of those governance systems, the Company receives operator ESG performance data from Prime on a quarterly basis, which
allows it to monitor alignment with agreed ESG targets and objectives. Prime developed an updated ESG Strategy and GHG Roadmap
in 2024, focused on compliance with IFC Performance Standards, a long term plan for net zero Scope 1 and 2 GHG emissions by 2050
and zero routine flaring by 2030.
Prime has reported good flare performance during 2024 despite flare events on Agbami and Egina related to operational and
maintenance issues.
Reductions in flaring and fugitive emissions will support Prime’s objectives to reduce working interest scope 1 greenhouse gas (“GHG”)
emissions by 25% by 2025 and by 35% by 2030 compared to a 2020 baseline as part of Prime’s Net Zero by 2050 for scope 1 and 2
emissions.
Additionally, Prime commissions independent Environmental, Social, Health and Safety (“ESHS”) monitoring reviews conducted
annually to support its reserves-based lending facility. The 2024 Monitoring Review found that overall, Prime is managing the ESHS
aspects of its business, in its non-operated role, “exceptionally well,” with no significant issues that would impact financing.
The Company has completed an environmental and social impact assessment to support permitting and licensing to support exploration
drilling activities in Block 3B/4B in South Africa. The Company submitted an ESIA application for proposed drilling activities on Block
3B/4B during Q2 2024. An Environmental Authorization was issued by the regulator in September 2024 and that is being followed by
a stakeholder consultation and appeals process which concluded in December 2024. The regulator is then expected to provide its final
decision on the appeals during mid-2025.
As part of its compliance with its PSC requirements in Equatorial Guinea and in line with the Company’s Social Investment Framework,
the Company has funded the renovation of a school at Ayene in mainland Equatorial Guinea. In addition to the PSC requirements,
Africa Oil funded school supplies for all student and classrooms at the recently renovated school.
===== SIDA 30 =====
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Report to Shareholders | December 31, 2024 Africa Oil Corp.
The Company’s environmental and social management system, which is overseen by the Board-level Sustainability Committee
(previously the ESGHS Committee), aims effectively and appropriately to identify, monitor and address environmental, health & safety
and social risks to our business and investments, in addition to identifying opportunities for performance improvement and risk
reduction. The Company maintains a risk register by which it monitors financial, operational and ESG risks to the Company. Africa Oil
regularly undertakes annual independent HSEC audits and engages with a range of ESG ratings assessments in support of investor and
broader stakeholder engagement, as well as to identify opportunities for performance improvement.
Africa Oil is committed to regular review and update of its sustainability strategy to ensure continued alignment with both the Company’s
evolving business and the broader global context.
The Company was awarded a gold rating by the ESG rating agency EcoVadis in February 2024. The independent evaluation undertaken
concluded that the Company was within the top 3% of all companies evaluated for ESG performance.
To the extent possible given its non-Operator role on assets, the Company endeavors to undertake its activities in line with the
International Finance Corporation’s Performance Standards on Environmental and Social Sustainability and independent monitoring
reviews are conducted on a regular basis to assess compliance with those standards. The most recent review was completed in
December 2024. This found that Company management systems were fit for purpose to manage ESG risks. The report is published,
along with all other Independent Monitoring Group reports, on Africa Oil’s website.
The Company’s 2024 Sustainability Report is under preparation and will be disclosed on the Company website, as in previous reports
it will contain information on our performance and strategy.
On an ongoing basis, the Company monitors the development of applicable legislation to ensure compliance with evolving policy and
associated regulatory requirements. As the Company has a primary listing in Canada on the Toronto Stock Exchange and a secondary
listing in Sweden on the Oslo Stock Exchange, this includes sustainability disclosure requirements in both Canada and the EU, including
the EU Corporate Sustainability Reporting Directive.
BUSINESS UPDATE - CONTINUED
===== SIDA 31 =====
PAGE 21
Report to Shareholders | December 31, 2024 Africa Oil Corp.
SELECTED ANNUAL INFORMATION
For the years ended
December 31,
2024
December 31,
2023
December 31,
2022
Statement of Net (Loss)/ Income and Comprehensive
(Loss)/ Income:
Net (loss)/ income attributable to common shareholders ($’m) (279.1) 87.1 (60.3)
Data per Common Share:
Basic (loss)/ income per share ($/share) (0.62) 0.19 (0.13)
Diluted (loss)/ income per share ($/share) (0.62) 0.18 (0.13)
Balance Sheet:
Working capital ($’m) 62.1 214.7 158.6
Total assets ($’m) 615.2 966.2 917.7
In 2024, the Company recorded a net loss attributable to common shareholders of $279.1 million which is a decrease from the net
income of $87.1 million recorded in 2023. In 2024, this is primarily made up of income from the Company’s investment in Prime of
$226.0 million offset against losses from the Company’s investment in associates of $38.7 million and an impairment in the Company’s
investment in Prime of $436.7 million as the fair value of the Company’s existing shareholding in Prime was calculated based on the
implied value of the Proposed Reorganization, which was in excess of the carrying value resulting in a non-cash impairment loss on the
investment in Prime.
In 2023, the Company recorded a net income attributable to common shareholders of $87.1 million which is an increase from the loss
recorded in 2022 of $60.3 million. In 2023, this is primarily made up of income from the Company’s investment in Prime of $228.0
million offset against losses from the Company’s investment in associates of $47.0 million and impairment recognized to its Kenyan
intangible exploration assets of $62.2 million writing these assets down to nil. The net income attributable to common shareholders in
2023 of $87.1 million has increased from a loss of $60.3 million in 2022 as the income from Prime has increased by $81.4 million and
the impairment recognized in relation to the Company’s intangible exploration assets in Kenya has decreased by $108.4 million. This is
offset by an increase in the share of loss from investments in associates of $38.8 million.
In 2024, the basic and diluted loss per share was $0.62 (2023 – the basic income per share was $0.19 and the diluted income per share
was $0.18). The loss per share has arisen primarily from the impairment recognized to the Company’s investment in Prime.
In 2023, the basic income per share was $0.19 and the diluted income per share was $0.18 (2022 - the basic loss and diluted loss per
share was $0.13). The net basic and diluted income per share has increased from 2022 as the income from Prime is higher and the
impairment in Kenya is lower.
In 2024, the decrease in working capital was driven by a decrease in cash balances following the acquisition of additional shares in
Impact and shareholder returns. In 2024 the decrease in total assets is primarily due to the decrease in cash balances and the decrease
to the Company’s investment in Prime from the impairment recognized.
In 2023, the increase in working capital was driven by an increase in cash balances and lower payables following settlement of a
provision for joint venture matters and joint venture payables in Kenya. In 2023, the increase in total assets is primarily due to increases
in cash balances and the Company’s investment in Prime.
===== SIDA 32 =====
PAGE 22
Report to Shareholders | December 31, 2024 Africa Oil Corp.
SUMMARY OF QUARTERLY INFORMATION
Summarized quarterly results for the past eight quarters are as follows:
For the three months ended
31-Dec
2024
30-Sep
2024
30-Jun
2024
31-Mar
2024
31-Dec
2023
30-Sep
2023
30-Jun
2023
31-Mar
2023
Share of profit/ (loss) from equity
investments in joint venture and
associates ($’m)
152.1 18.3 9.7 7.2 (80.8) 51.3 178.0 32.5
Net income/ (loss) attributable to
common shareholders ($’m) 6.2 (289.2) 0.4 3.5 (88.8) 47.1 106.9 21.9
Weighted average shares
– Basic ‘000 442,690 442,960 451,231 460,991 462,231 462,340 456,229 461,199
Weighted average shares
– Diluted ‘000 449,667 442,960 464,890 474,746 472,942 473,959 467,839 473,846
Basic income / (loss) per share ($) 0.02 (0.65) 0.00 0.01 (0.19) 0.10 0.23 0.05
Diluted income/ (loss) per share ($) 0.02 (0.65) 0.00 0.01 (0.19) 0.10 0.23 0.05
SUMMARY OF KEY ITEMS OF FINANCIAL PERFORMANCE IN THE THREE MONTHS AND YEARS ENDED
DECEMBER 31, 2024, AND DECEMBER 31, 2023
Three months ended Years ended
December 31,
2024
December 31,
2023
December 31,
2024
December 31,
2023
Share of profit/ (loss) from investment in joint venture 159.3 (80.8) 226.0 181.0
General and administrative expenses (13.3) (9.0) (32.4) (31.9)
Net income/ (loss) 6.2 (88.8) (279.1) 87.1
Adjusted net (loss)/ income (3.2) 4.9 48.0 84.5
Share of profit from investment in joint venture
In Q4 2024 and 2024, the Company’s share in the result of its 50% equity investment in Prime was $159.3 million and $226.0 million
respectively (Q4 2023 and 2023 – loss of $80.8 million and a profit of $181.0 million respectively).
The figures below explaining the movements in the results of Prime are based on Prime’s gross balances as per its financial statements.
Prime revenues decreased by $342.8 million in Q4 2024 compared to Q4 2023, driven by no liftings in Q4 2024 compared to four
liftings in Q4 2023. There was a decrease in costs of sales of $274.3 million, primarily driven by an underlift movement during Q4
2024 of $204.8 million compared to an overlift movement in Q4 2023 of $63.0 million. This resulted in a decrease in gross profit to
$72.4 million in Q4 2024 from $140.9 million in Q4 2023. In Q4 2023 there was an impairment recognized of $263.3 million and no
impairment recognized in Q4 2024. Other operating income increased by $329.7 million in Q4 2024 compared to Q4 2023 relating
to other operating income recognized by Prime in Q4 2024 under the Securitization Agreement as no comprehensive resolution
was reached among all unit parties in respect of the tract participation in the Agbami field by December 27, 2024. Finance income
decreased by $10.2 million in Q4 2024 compared to Q4 2023, mainly driven by an accounting loss on derivatives in Q4 2024. There
was a tax charge in Q4 2024 of $46.6 million compared to $11.7 million in Q4 2023. The increase was mainly driven by capital gains
tax in Q4 2024 in relation to the income recognized by Prime under the Securitization Agreement at a Capital Gains Tax rate in Nigeria
of 10 percent. This has resulted in Prime’s profit increasing from a loss of $158.6 million in Q4 2023 to a profit of $318.7 million in Q4
2024, an increase of $477.3 million.
Prime revenues decreased by $379.5 million in 2024 compared to 2023, mainly driven by lower liftings and no PPT and royalty revenue
recognized in relation to the Agbami field. PPT revenue has no longer been reported in gross revenues since August 2023 with Prime
lifting its own entitlement production and paying its tax in cash and no royalty revenue has been reported since August 2023 with PML
52 royalties being paid in cash and presented in cost of sales. There was a decrease in costs of sales of $180.8 million, primarily driven
by an underlift movement during 2024 of $171.2 million compared to an overlift movement of $23.6 million in 2023. This resulted in
a decrease in gross profit to $365.5 million in 2024 from $564.2 million in 2023. Other operating income increased by $305.0 million
compared to 2023, mainly relating to $329.7 million of other operating income recognized by Prime in 2024 under the Securitization
Agreement as no comprehensive resolution was reached among all unit parties in respect of the tract participation in the Agbami field
by December 27, 2024. Other operating income in 2023 related to investment tax credits that offset PPT that Prime no longer receives
under the PIA. In 2023 there was an impairment recognized of $263.3 million and no impairment recognized in 2024. There was a tax
charge in 2024 of $120.5 million compared to an income of $245.4 million in 2023. Prime renewed the OML 130 license resulting in
OML 130 operating under the terms of the new Petroleum Industry Act as from June 1, 2023, and Prime voluntarily converted the OML
127 license to operate under the new Petroleum Industry Act from March 1, 2023, with all key conditions precedent fulfilled during
===== SIDA 33 =====
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Report to Shareholders | December 31, 2024 Africa Oil Corp.
2023. Under these terms, OML 127 and OML 130 are subject to a 30% Corporate Income Tax regime compared to the previous 50%
PPT regime which resulted in the release of $62.0 million and $346.0 million of deferred income tax liabilities during 2023 for OML 127
and OML 130 respectively. Prime recognized a capital gains tax charge in 2024 of $33.0 million in relation to the income recognized
by Prime under the Securitization Agreement at a Capital Gains Tax rate in Nigeria of 10 percent. This has resulted in Prime’s profit
decreasing from $456.0 million in 2023 to $452.0 million in 2024, a decrease of $4.0 million.
General and administrative costs
On June 24, 2024, the Company announced that it had reached an agreement with BTG to acquire the remaining 50% interest in Prime in
exchange for newly to be issued common shares in Africa Oil. Completion of this transaction is subject to customary closing conditions
and is expected on or about March 7, 2025. This transaction falls under IFRS 3 Business Combinations under which acquisition related
costs are expensed in the periods in which the costs are incurred, and the services are received.
The table below shows adjusted general and administrative expenses, which is a non-GAAP measure, by excluding the BTG transaction
related expenses and is meant to improve comparability between periods.
Three months ended Years ended
December 31,
2024
December 31,
2023
December 31,
2024
December 31,
2023
General and administrative expenses 13.3 9.0 32.4 31.9
BTG transaction related expenses (0.7) - (6.9) -
Adjusted general and administrative expenses 12.6 9.0 25.5 31.9
Adjusted general and administrative expenses, including share-based compensation charges relating to the LTIP and Stock Option
Plan, amounted to $12.6 million and $25.5 million, respectively, in Q4 2024 and 2024 (Q4 2023 and 2023 - $9.0 million and $31.9
million respectively). Share-based compensation charges amounting to $0.2 million and $1.5 million, respectively, in Q4 2024 and
2024 (Q4 2023 and 2023 – $1.9 million and $11.3 million respectively) are impacted by movements in the share price of the Company.
Adjusted general and administrative expenses excluding share-based compensation charges amounted to $12.4 million in Q4 2024
compared to $7.1 million in Q4 2023 with the increase primarily driven by business development costs and an increase in the number
of employees.
Adjusted general and administrative expenses excluding share-based compensation charges amounted to $24.0 million in 2024
compared to $20.6 million in 2023 with the increase primarily driven by business development costs and an increase in the number of
employees.
Net (loss) / income and Adjusted net (loss)/ income
Net (loss) / income as reported by the Company in its Consolidated Statement of Net (Loss) / Income and Comprehensive (Loss) /
Income can be impacted by items that are not reflective of the Company’s underlying performance for the period. This might impact
the comparability of the results of the Company between periods.
Adjusted net (loss)/ income is a non-GAAP measure. This measure adjusts for the following items and is meant to improve comparability
between periods:
• Impairment and reversal of impairment is adjusted since this affects the economics of an asset for the lifetime of that asset, not only
the period in which it is impaired, or the impairment is reversed.
• Share of loss from investments in associates is adjusted since the associated companies are in the exploration phase with the results
not being reflective of the Company’s underlying performance for the period.
• Other items of income and expenses are adjusted when the impact on net income in the period is not reflective of the Company’s
underlying performance for the period.
• Tax effects of the above-mentioned adjustments to net income.
SUMMARY OF QUARTERLY INFORMATION - CONTINUED
===== SIDA 34 =====
PAGE 24
Report to Shareholders | December 31, 2024 Africa Oil Corp.
A reconciliation from net (loss) / income to adjusted net (loss)/ income is shown below:
Three months ended Years ended
Unit
December 31,
2024
December 31,
2023
December 31,
2024
December 31,
2023
Net income/ (loss) $’m 6.2 (88.8) (279.1) 87.1
Adjusted for:
Impairment recognized by Prime – net to
AOC’s 50% shareholding $’m - 131.7 - 131.7
Tax effect of impairment recognized by
Prime – net to AOC’s 50% shareholding $’m - (39.5) - (39.5)
Deferred tax release recognized by Prime
following PIA conversion – net to AOC’s
50% shareholding $’m
- - - (204.0)
Income recognized by Prime under
Securitization Agreement – net to AOC’s
50% shareholding $m
(164.8) - (164.8) -
Tax effect of income recognized by Prime
under Securitization Agreement – net to
AOC’s 50% shareholding $m
16.5 - 16.5 -
Impairment investment in Prime $’m 131.7 - 436.7 -
Share of loss from investments in
associates $’m 7.2 1.5 38.7 47.0
Impairment intangible exploration assets $’m - - - 62.2
Adjusted net (loss)/ income $’m (3.2) 4.9 48.0 84.5
Adjusted net (loss)/ income attributable to
common shareholders per share
Basic (0.00) 0.01 0.11 0.18
Diluted (0.00) 0.01 0.11 0.18
Weighted average number of shares outstanding
for the purpose of calculating adjusted net
income per share
Basic 442,690,041 463,020,104 449,431,803 462,231,061
Diluted 442,690,041 473,772,143 456,462,277 472,942,487
Adjusted net (loss)/ income amounted to $(3.3) million and $48.0 million, respectively, in Q4 2024 and 2024 (Q4 2023 and 2023 - $4.9
million and $84.5 million respectively).
Adjusted net result in Q4 2024 is a loss compared to an adjusted net income in Q4 2023. This is primarily from higher general and
administrative expenses in Q4 2024.
Adjusted net income in 2024 is lower than 2023. This is primarily from a lower profit from the investment in Prime in 2024 mainly driven
by lower production volumes.
SUMMARY OF QUARTERLY INFORMATION - CONTINUED
===== SIDA 35 =====
PAGE 25
Report to Shareholders | December 31, 2024 Africa Oil Corp.
SUMMARY OF KEY ITEMS OF FINANCIAL POSITION AS AT DECEMBER 31, 2024, AND
DECEMBER 31, 2023
As at
December 31,
2024
December 31,
2023
Assets
Equity investment in joint venture 328.4 572.5
Equity investments in associates 177.6 134.7
Intangible exploration assets 29.3 19.1
Cash and cash equivalents 61.4 232.0
Equity investment in joint venture
As at December 31, 2024, the Company’s investment in Prime was $328.4 million compared to $572.5 million as at December 31, 2023.
The carrying value of the investment mainly decreased from impairment recognized of $436.7 million and dividends received of $36.0
million offset by the Company’s share of Prime’s profit of $226.0 million in 2024.
As a result of the significant decrease in the Africa Oil share price between June 24, 2024, when the Company announced the Proposed
Reorganization and December 31, 2024, the fair value of the existing 50% shareholding in Prime decreased as the fair value considers
the number of Africa Oil shares that were agreed in relation to the purchase of the additional interest in Prime and the trading value
of Africa Oil shares as this is an observable fair value input under IFRS Accounting Standards. As at December 31, 2024, the fair value
of the Company’s existing shareholding in Prime was calculated to be $328.4 million based on the implied value of the Proposed
Reorganization, resulting in a non-cash impairment loss on the investment in Prime of $436.7 million in 2024. The fair value has been
calculated based on the Africa Oil share price of CAD 1.97 as of December 31, 2024, and the USD/CAD exchange rate of 1.4384 as
of December 31, 2024. The consideration under the Proposed Reorganization will be based on the share price and exchange rate as
of the date of completion of the Proposed Reorganization and may therefore change materially compared to the fair value of $328.4
million as at December 31, 2024. This might therefore result in the recognition of additional impairment charges or the reversal of
previously recognized impairment charges in future reporting periods based on the movements in the Africa Oil share price and the
USD/CAD exchange rate between December 31, 2024, and the closing date of the transaction.
Equity investments in associates
As at December 31, 2024, the Company’s investment in associates was $177.6 million compared to an investment value of $134.7
million as at December 31, 2023. The carrying value of the investments increased by $42.9 million in 2024 from the acquisition of shares
in Impact for $88.6 million and the reversal of an impairment in relation to the Company’s investment in Africa Energy Corp, partly offset
by the Company’s share of the associate’s losses and the reclassification of the investment in Eco from equity investments in associates
to an investment held for sale of $7.0 million. The investment in Impact Oil and Gas Ltd, holding the working interests in the Namibia
Orange Basin Blocks 2913B and 2912, makes up $174.8 million of the total equity investments in associates.
Intangible exploration assets
The Company’s intangible exploration assets relate to its interests in Blocks EG-18 and EG-31 in Equatorial Guinea and Block 3B/4B in
South Africa.
December 31,
2024
December 31,
2023
Equatorial Guinea 17.9 13.4
South Africa 11.4 5.7
Net carrying amount, end of the period 29.3 19.1
Equatorial Guinea
The Company signed two Production Sharing Contracts with the Republic of Equatorial Guinea for offshore Blocks EG-18 and EG-31
in February 2023. The Company holds an 80% operating interest in these Blocks. In 2024, expenditure of $4.5 million was incurred
(2023 - $13.4 million).
SUMMARY OF QUARTERLY INFORMATION - CONTINUED
===== SIDA 36 =====
PAGE 26
Report to Shareholders | December 31, 2024 Africa Oil Corp.
South Africa
At December 31, 2024, the Company held a 17.0% participating interest in the Block 3B/4B Exploration Right. In the year ended
December 31, 2024, expenditure of $5.7 million was incurred (years ended December 31, 2023 - $0.6 million) which included $9.0
million payments to Azinam Limited, a wholly owned subsidiary of Eco, for the increase of its operated working interest in Block 3B/4B
by 6.25% to 26.25%. Government approval was obtained on January 19, 2024, resulting in payment of the second tranche of $2.5
million to Azinam and a farm down deal with a third party was completed on August 28, 2024, resulting in the payment of the third
tranche of $4.0 million. The first tranche of $2.5 million was paid during 2023 and was reclassified from prepayments to intangible
exploration assets following government approval.
On August 28, 2024, the Company announced the completion of the strategic farm down agreement with TotalEnergies and
QatarEnergy for the Block 3B/4B Exploration Right, located in South Africa. The Company retained a 17.0% interest in Block 3B/4B
and operatorship was transferred to TotalEnergies. The Company will receive, subject to achieving certain milestones as defined in the
agreement, staged cash payments for a total amount of $10.0 million of which $3.3 million was received at closing of the transaction
with the remaining balance to be received in two successive payments conditional upon achieving key operational and regulatory
milestones.
On July 26, 2024, the Company signed an agreement with Eco to acquire an additional 1.0% interest in Block 3B/4B from Azinam
Limited, Eco’s wholly owned subsidiary, in exchange for all common shares and warrants over common shares held by the Company
in Eco. On January 13, 2025, the Company announced the completion of the transaction and the Company’s interest in Block 3B/4B
increased by 1.0% to 18.0% and the Company ceased to be a shareholder in Eco. Africa Oil will benefit from the carry agreed between
Eco, TotalEnergies and QatarEnergy for this incremental interest.
Cash and cash equivalents
As at December 31, 2024, the Company had $61.4 million cash on hand, compared with a cash balance of $232.0 million as at
December 31, 2023. The Company received a dividend from Prime of $36.0 million, returned $67.9 million to shareholders by way of
share buybacks and dividends, paid $87.8 million to increase its shareholding in Impact, paid the second and third tranches totaling
$6.5 million to Azinam in relation to the increased working interest in Block 3B/4B, received $3.3 million as part of the farm out deal
in Block 3B/4B, incurred capital expenditure in respect of the licenses in Equatorial Guinea and South Africa, settled working capital
balances and incurred general and administrative costs.
LIQUIDITY AND CAPITAL RESOURCES
As at December 31, 2024, the Company had cash of $61.4 million and working capital of $62.1 million. The Company’s primary
source of liquidity is dividends received from Prime. If Prime experiences operational delays, reduced performance or similar adverse
conditions, or reinvest their free cash flow, the dividends received could be reduced in future periods.
Corporate Facility
On May 21, 2024, the Company amended its existing Corporate Facility. At any point before Prime refinances its debt, the availability
under the Corporate Facility will now be $65.0 million until June 30, 2025, $43.0 million from July 1, 2025, until June 30, 2026, and
$22.0 million from July 1, 2026, to May 21, 2027, i.e. its new final maturity date. After Prime refinances its debt, the availability under
the Corporate Facility will be $125.0 million until June 30, 2026, and $63.0 million from July 1, 2026, until May 21, 2027. Commitment
fees of 40% of the margin are payable on the undrawn available portion of the Corporate Facility and commitment fees of 15% of the
margin are payable on the unavailable portion of the Corporate Facility. The Corporate Facility carries interest of 1 month-SOFR plus a
margin of 6.5% in the first year from May 21, 2024, 7.0% in the second year and 7.5% in the third year.
The Corporate Facility is subject to financial and liquidity covenants. The Company shall ensure that total net debt to adjusted EBITDAX
on June 30 and December 31 of each year is no greater than 3.0:1, the FLCR ratio on March 31 and September 30 of each year is not
less than 1.1:1 and that from March 31 and September 30 of each year during each of the four successive quarters there are or will
be sufficient funds available to the Group to meet all relevant expenditure to be incurred in each of these four successive quarters as
they fall due. The Company has been in compliance with the covenants in the three months and years ended December 31, 2024. The
Company has no off-balance sheet arrangements.
Future Funding Outlook
To finance its future acquisition, exploration, development and operating costs, the Company may require financing from external
sources, including issuance of new shares, issuance of debt or executing farmout or disposition arrangements. There can be no
assurance that such financing will be available to the Company or, if available, that it will be offered on terms acceptable to the Company.
The Company believes that its existing cash balances combined with anticipated funds flow from Prime dividends will provide sufficient
liquidity for the Company to meet its financing, operating and capex commitments as they fall due.
SUMMARY OF QUARTERLY INFORMATION - CONTINUED
===== SIDA 37 =====
PAGE 27
Report to Shareholders | December 31, 2024 Africa Oil Corp.
OUTSTANDING SHARE DATA
The following table outlines the maximum potential impact of share dilution upon full execution of outstanding convertible instruments
as at the effective date of the MD&A.
Common shares outstanding 436,602,570
Outstanding share purchase options 457,616
Outstanding performance share units 8,605,860
Outstanding restricted share units 1,672,515
Full dilution impact on Common Shares outstanding 447,338,561
RELATED PARTY TRANSACTIONS
Transactions with Africa Energy:
On December 19, 2022, Africa Energy announced that it had secured a $5.0 million promissory note of which $2.0 million was provided
by the Company and the remaining by other parties. On November 7, 2023, the promissory note provided by the Company and other
parties to Africa Energy was increased by $3.3 million with $1.5 million of the increase to be provided by the Company of which $1.0
million was provided in the year ended December 31, 2024, and $0.5 million was provided in the year ended December 31, 2023. The
note is unsecured and matures on March 31, 2025, when the principal and accrued interest are due in full. The note carries an annual
interest rate of 15%. The note is repayable pro rata any time before maturity without penalty. In the year ended December 31, 2024,
interest on the note amounted to $0.5 million (year ended December 31, 2023 - $0.3 million).
The Company has technical and administrative cost sharing agreements with Africa Energy totaling $0.5 million in the year ended
December 31, 2024 (year ended December 31, 2023 - $0.6 million).
Transactions with Eco:
During the year ended December 31, 2023, Africa Oil SA Corp. signed a legally binding Assignment and Transfer agreement with
Azinam Limited (“Azinam”), a wholly owned subsidiary of Eco, to acquire an additional 6.25% interest in Block 3B/4B for a total cash
consideration of up to $10.5 million, to be paid in tranches on the following milestones:
• $2.5 million within 30 business days after July 10, 2023;
• $2.5 million upon the SA government’s approval for the transfer of the 6.25% interest to Africa Oil SA Corp.;
• $4.0 million upon the completion of a farm-out deal to a third party; and
• $1.5 million upon spudding of the first exploration well on the Block.
The first tranche was paid during 2023, the second and third tranches were paid during 2024.
On July 26, 2024, the Company signed an agreement with Eco to acquire an additional 1.0% interest in Block 3B/4B from Azinam
Limited, Eco’s wholly owned subsidiary, in exchange for all common shares and warrants over common shares held by the Company
in Eco. On January 13, 2025, the Company announced that it had completed this transaction. The Company’s interest in Block 3B/4B
increased by 1.0% to 18.0% and the Company ceased to be a shareholder in Eco. Africa Oil will benefit from the carry agreed between
Eco, TotalEnergies and QatarEnergy for this incremental interest.
Transactions with Impact:
On March 24, 2023, the Company subscribed for 39,455,741 shares in Impact for $31.4 million, payable in two tranches, and directly
following the transaction the Company held 31.1% of the enlarged share capital in Impact. The first tranche of $14.9 million was paid
on April 21, 2023, and the final tranche of $16.5 million was paid on July 21, 2023.
On October 6, 2023, the Company subscribed for 16,524,058 shares in Impact for $13.0 million and directly following the transaction
the Company continued to hold 31.1% of the enlarged share capital in Impact.
Transaction with Director:
On November 23, 2023, the Company entered into an arm’s length agreement with Andrew Bartlett to acquire 106,500 shares in
Impact at a price of £0.65 per share for a total amount of £69,225. This amount was paid during 2023 and the transaction completed
on January 16, 2024.
===== SIDA 38 =====
PAGE 28
Report to Shareholders | December 31, 2024 Africa Oil Corp.
Remuneration of Directors and Senior Management:
Remuneration of Non-Executive Directors and Senior Management includes all amounts earned and awarded to the Company’s
Board of Directors and Senior Management. Senior Management includes the Company’s President and Chief Executive Officer, Chief
Financial Officer, Chief Commercial Officer, Chief Operating Officer, Chief Technical Officer and the Chief Legal Officer.
Directors’ fees include Board and Committee Chair retainers. Management’s short-term wages and benefits include salary, benefits,
bonuses and any other cash-based compensation earned or awarded during the year. Share-based compensation includes expenses
related to the Company’s share purchase option plan as well as the Long-Term Incentive Plan.
For the years ended
December 31,
2024
December 31,
2023
Non-Executive Directors' fees 0.5 0.5
Non-Executive Directors' share-based compensation 0.6 1.1
Managements’ short-term wages and benefits 7.3 5.4
Managements’ share-based compensation 0.5 6.5
8.9 13.5
COMMITMENTS AND CONTINGENCIES
The following commitments and contingencies are representative of AOC’s net obligations at the effective date of the MD&A.
PRIME OIL & GAS COÖPERATIEF U.A:
Under the Prime Sale and Purchase Agreement completed on January 14, 2020, a deferred payment of $118.0 million, subject to
adjustment, may be due to the seller contingent upon the timing of the final PML 52 tract participation in the Agbami field. The signing
of the Securitization Agreement by Prime in 2021 led the Company reassessing its view of the likelihood of making a contingent
consideration payment to the seller. The signing of the Securitization Agreement by Prime does not constitute a redetermination of the
tract participation and therefore does not trigger the payment of a contingent consideration under the Sale and Purchase Agreement
but, at the Company’s discretion, could trigger discussions with the seller. The outcome of this process is uncertain. In 2021, the
Company recorded $32.0 million as contingent consideration and increased this to $37.8 million in the year ended December 31,
2023, and to $40.4 million in the years ended December 31, 2024, increasing the Company’s investment in Prime.
WITHDRAWAL FROM KENYA:
On May 23, 2023, the Kenya entities along with TotalEnergies submitted withdrawal notices to the remaining joint venture party on
Blocks 10BB, 13T and 10BA in Kenya, to unconditionally and irrevocably, withdraw from the entirety of the JOAs and PSCs for these
concessions. The Company concurrently submitted notices to Ministry of Energy and Petroleum, requesting the government’s consent
to transfer all of its rights and future obligations under the PSCs to its remaining joint venture party. Government consent to the transfer
remained outstanding as at December 31, 2024. In accordance with the JOA and PSC the Company retains economic participation for
activities prior to June 30, 2023, which might result in additional costs for the Company. The Company continues to monitor the claim
made against the operator by local communities in relation to past operations which may relate to the period prior to June 30, 2023.
No provision has been recognized for this as at December 31, 2024.
CRITICAL ACCOUNTING ESTIMATES
The Company’s critical accounting estimates are defined as those estimates that have a significant impact on the portrayal of its financial
position and operations and that require management to make judgements, assumptions and estimates in the application of IFRS
Accounting Standards. Judgements, assumptions and estimates are based on historical experience and other factors that management
believes to be reasonable under current conditions. As events occur and additional information is obtained, these judgements,
assumptions and estimates may be subject to change.
USE OF ESTIMATES
The preparation of the consolidated financial statements in conformity with IFRS Accounting Standards requires management to make
estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities
as at the date of the consolidated financial statements, and the reported amounts of revenues and expenses during the reporting
period. Such estimates include unsettled transactions and events as of the date of the consolidated financial statements. Accordingly,
actual results may differ from these estimated amounts as future confirming events occur. Significant estimates used in the preparation
of the consolidated financial statements include, but are not limited to, recovery of exploration costs capitalized in accordance with
IFRS Accounting Standards, equity method accounting, valuation and impairment of equity investments and contingent consideration
arising from the acquisition of Prime.
The Company’ material accounting policies can be found in the Company’s Consolidated Financial Statements for the year ended
December 31, 2024.
===== SIDA 39 =====
PAGE 29
Report to Shareholders | December 31, 2024 Africa Oil Corp.
INTANGIBLE EXPLORATION ASSETS
The Company capitalizes costs related to the acquisition of a license interest, directly attributable general and administrative costs,
expenditures incurred in the process of determining oil and gas exploration targets, and exploration drilling costs. All exploration
expenditures that related to properties with common geological structures and with shared infrastructure are accumulated together
within intangible exploration assets. Costs are held un-depleted until such time as the exploration phases on the license area are
complete or commercially viable reserves have been discovered and extraction of those reserves is determined to be technically
feasible. The determination that a discovery is commercially viable, and extraction is technically feasible requires judgement.
Where results of exploration drilling indicate the presence of hydrocarbons which are ultimately not considered commercially viable,
all related costs are recognized in the Consolidated Statement of Net (Loss)/ Income and Comprehensive (Loss)/ Income. If commercial
reserves are established and technical feasibility for extraction demonstrated, then the related capitalized intangible exploration costs
are transferred into the smallest group of assets that generate cash inflows from continuing use that are largely independent of the
cash inflows of other assets or groups of assets (CGU) within intangible exploration assets. The allocation of the Company’s assets into
CGUs requires judgement.
Intangible exploration assets are assessed for impairment when they are reclassified to property and equipment, and also if facts and
circumstances suggest that the carrying amount exceeds the recoverable amount.
The recoverable amount of an asset or a CGU is the greater of its value in use and its fair value less costs to dispose. In assessing
value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current
market assessments of the time value of money and the risks specific to the asset. Value in use is generally computed by reference to
the present value of the future cash flows expected to be derived from production of proven and probable reserves. In determining
fair value less costs to dispose, recent market transactions are taken into account, if available. In the absence of such transactions, an
appropriate valuation model is used.
The key assumptions the Company uses for estimating future cash flows are the quantity of contingent resources, future commodity
prices, expected production volumes, future operating and development costs, likelihood of a successful farm out process and
subsequent timing of FID and discount rate. The estimated useful life of the CGU, the timing of future cash flows and discount rates are
also important assumptions made by management.
The changing worldwide demand for energy and the global advancement of alternative sources of energy could result in a change
in the assumptions used to determine the recoverable amount and could affect estimating the future cash flows which could impact
carrying amount of the Company’s intangible exploration assets. The timing of when global energy markets transition from carbon-
based sources to alternative energy sources is highly uncertain. Environmental considerations are built into our estimates through
the use of key assumptions in estimating fair value including future commodity prices and discount rates. The energy transition could
impact the future prices of commodities and discount rates used to appraise oil and gas projects. Pricing assumptions used in the
determination of recoverable amounts incorporate markets expectations and the evolving worldwide demand for energy.
EQUITY METHOD
Investments in joint ventures and investments in associates are accounted for using the equity method. Investments of this nature are
recorded at original cost. Investments in joint ventures or associates which arise from a loss in control of a subsidiary are recorded at
fair value on the date of the loss of control. The investment is adjusted periodically for the Company’s share of the profit or loss of the
investment after the date of acquisition. The investor’s share of the profit or loss of the investee is also recognized in the Company’s
Consolidated Statement of Net (Loss)/ Income and Comprehensive (Loss)/ Income. Distributions received reduce the carrying amount
of the investment.
Additionally, estimates associated with investments in joint ventures include the determination of amounts allocated to non-current
assets as well as any negative goodwill associated with the acquisition.
IMPAIRMENT OF JOINT VENTURES AND ASSOCIATES
The amounts for investments in joint ventures and associates represent the Company’s equity interest in other entities, where there
is either joint control or significant influence. The Company assesses investments in joint ventures and associates for an objective
evidence of impairment considering changes in circumstances or events which indicate that the carrying value may not be recoverable.
The process of determining whether there is an objective evidence of impairment or calculating the recoverable amount requires
judgement.
The most material area in which the Company has applied judgement in the period is in relation to the investment in Prime. In assessing
whether there have been any objective evidence of impairment the Company has considered the implied value of its investment in
Prime derived from the Proposed Reorganization. The consideration for the Proposed Reorganization consists of a fixed number of
shares in the Company and the implied value of the transaction has been calculated using the Company’s share price as per the end of
the reporting period and the USD/CAD exchange rate as per the end of the reporting period as this is considered a Level 1 valuation
method under IFRS Accounting Standards.
CRITICAL ACCOUNTING ESTIMATES - CONTINUED
===== SIDA 40 =====
PAGE 30
Report to Shareholders | December 31, 2024 Africa Oil Corp.
CONTINGENT CONSIDERATION
Contingent consideration formed part of the overall consideration for the acquisition of Prime. At the date of acquisition, an estimate
of the contingent consideration is determined and included as part of the cost of the acquisition.
Subsequent to acquisition, contingent consideration can be treated using two acceptable methods, the cost-based approach and
the fair value-based approach. The Company have determined the cost-based approach to give the best estimate of the value of the
contingent consideration. Any revisions to the contingent consideration estimates, after the date of acquisition, are accounted for as
changes in estimates in accordance with IAS 8, to be accounted for on a prospective basis. The change in the liability, as a result of the
revised cash flows, would be adjusted to the cost of the investment and, in accordance with paragraph 37 of IAS 8, recognized as part
of the investment’s carrying amount rather than in profit or loss.
The estimates involved in assessing the value of the contingent consideration include the expected timing of payments, the expected
settlement value, the likelihood of settlement and the probability of the assessed outcomes occurring. There is significant judgement
used in the determination of these estimates.
INTERNAL FINANCIAL REPORTING AND DISCLOSURE
CONTROLS
DISCLOSURE CONTROLS AND PROCEDURES
Disclosure controls and procedures are designed to provide reasonable assurance that information required to be disclosed by the
Company in its annual filings, interim filings or other reports filed or submitted by it under securities legislation is recorded, processed,
summarized and reported within the time periods specified in the securities legislation and include controls and procedures designed
to ensure that information required to be disclosed by the Company in its annual filings, interim filings or other reports filed or submitted
under securities legislation is accumulated and communicated to the Company’s management, including its Chief Executive Officer
and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.
Management, including the Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the design and
operation of the Company’s disclosure controls and procedures. As of December 31, 2024, the Chief Executive Officer and Chief
Financial Officer have each concluded that the Company’s disclosure controls and procedures, as defined in NI 52-109 - Certification of
Disclosure in Issuer’s Annual and Interim Filings, are effective to achieve the purpose for which they have been designed.
INTERNAL CONTROLS OVER FINANCIAL REPORTING
Internal controls over financial reporting are designed to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements in accordance with IFRS Accounting Standards. Management is also responsible for the
design of the Company’s internal control over financial reporting in order to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external purposes in accordance with IFRS Accounting Standards.
The Company’s internal controls over financial reporting include policies and procedures that: pertain to the maintenance of records
that, in reasonable detail accurately and fairly reflect the transactions and disposition of assets; provide reasonable assurance that
transactions are recorded as necessary to permit preparation of the financial statements in accordance with IFRS Accounting Standards
and that receipts and expenditures are being made only in accordance with authorization of management and directors of the
Company; and provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition
of assets that could have a material effect on the financial statements.
Management, including the Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the design and
operation of the Company’s internal controls over financial reporting. As at December 31, 2024, the Chief Executive Officer and Chief
Financial Officer have each concluded that the Company’s internal controls over financial reporting, as defined in NI 52-109 - Certification
of Disclosure in Issuer’s Annual and Interim Filings, are effective to achieve the purpose for which they have been designed. Because
of their inherent limitations, internal controls over financial reporting can provide only reasonable assurance and may not prevent or
detect misstatements. Furthermore, projections of any evaluation of effectiveness to future periods are subject to the risk that controls
may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may
deteriorate.
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PAGE 31
Report to Shareholders | December 31, 2024 Africa Oil Corp.
ADVISORY REGARDING OIL AND GAS INFORMATION
The terms boe (barrel of oil equivalent) and MMboe (millions of barrels of oil equivalent) are used throughout this report. Such terms may
be misleading, particularly if used in isolation. The conversion ratio of six thousand cubic feet per barrel (6 Mcf:1 Bbl) of conventional
natural gas to barrels of oil equivalent and the conversion ratio of 1 barrel per six thousand cubic feet (1 Bbl:6 Mcf) of barrels of oil to
conventional natural gas equivalent is based on an energy equivalency conversion method primarily applicable at the burner tip and
does not represent a value equivalency at the wellhead. Given that the value ratio based on the current price of crude oil as compared
to conventional natural gas is significantly different from the energy equivalency of 6:1, utilizing a conversion on a 6:1 basis may be
misleading as an indication of value.
In this report, references are made to historical and potential future oil production in Nigeria and Kenya. In all instances these references
are to light and medium crude oil category in accordance with NI 51-101 and the COGE Handbook.
Reserves are estimated remaining quantities of petroleum anticipated to be recoverable from known accumulations, as of a given date,
based on the analysis of drilling, geological, geophysical, and engineering data; the use of established technology; and specified
economic conditions, which are generally accepted as being reasonable. Reserves are further classified according to the level of
certainty associated with the estimates and may be sub-classified based on development and production status. Proved Reserves are
those quantities of petroleum, which, by analysis of geoscience and engineering data, can be estimated with reasonable certainty to be
economically producible from a given date forward, from known reservoirs and under existing economic conditions, operating methods
and government regulations. Probable Reserves are those additional quantities of petroleum that are less certain to be recovered than
Proved Reserves, but which, together with Proved Reserves, are as likely as not to be recovered. Possible Reserves are those additional
reserves that are less certain to be recovered than probable reserves. It is unlikely that actual remaining quantities recovered will exceed
the sum of the estimated proved plus probable plus possible reserves.
RISK FACTORS
With Board oversight, the Company proactively manages the identification, assessment and mitigation of risks, many of which are
common to operations in the oil and gas industry as a whole, whilst others are unique to the Company. The realization of any of the risks
listed below could have a material adverse effect on the Company’s business, financial condition, reserves and results of operations,
such list being non-exhaustive.
The risks noted in the risk factors section comprises those that can materially affect the figures presented and disclosures in the
Financial Statements and MD&A. The Company’s Annual Information Form contains a more comprehensive list of risks that can affect
the Company.
RISKS RELATING TO THE PROPOSED REORGANIZATION
There are a number of risks and uncertainties associated with the Proposed Reorganization. These include risks associated with the
completion of the Proposed Reorganization and the expected timeframe to achieve completion as well as the additional obligations
assumed by the Company in connection with the Proposed Reorganization and the restrictions imposed on the Company while the
Proposed Reorganization is pending. These risks are described in more detail in the Risk Factors section of the Company’s Management
Information Circular dated September 13, 2024.
INCREASED COSTS AND SUPPLY DISRUPTION
A failure to secure the services and equipment necessary for the Company’s operations for the expected price, on the expected
timeline, or at all, may have an adverse effect on the Company’s financial performance and cash flows. The Company’s operating
and capital costs could escalate and become uncompetitive due to supply chain disruptions, inflationary cost pressures, equipment
limitations, escalating supply costs, and additional government intervention through stimulus spending or additional regulations.
The Company’s inability to manage costs may impact project returns and future development decisions, which could have a material
adverse effect on its financial performance and cash flows. In addition, with rising inflation levels combined with global cost of living
expenses, the Company may be faced with the challenge of how to attract and retain employees. Though Africa Oil does not directly
control procurement decisions associated with all of our assets, the Company works with its JV parties to ensure adequate contingency
for cost inflation is incorporated into capital and operating budgets and that costs are controlled within budget.
PRICES, MARKETS AND MARKETING OF CRUDE OIL AND NATURAL GAS
Crude oil and natural gas are commodities whose prices are determined based on world demand, supply and other factors, all of
which are beyond the control of the Company. World prices for oil and gas have fluctuated widely in recent years. Any material decline
in prices could have an adverse effect on the Company’s business and prospects. The Company may be required by government
authorities to limit production due to OPEC+ quotas from time to time. The conflicts in Ukraine and the Middle East have impacted
global markets and may continue to result in increased volatility in financial markets and commodity prices. The Company does not
have a direct exposure to operations in Ukraine and the Middle East.
The Company may undertake hedging activities when efficient to do so, however, hedging may not fully mitigate, in whole or in part,
the risk and effect of lower commodity prices.
The Company or its investee company’s ability to market its oil and gas may depend upon its ability to acquire space on vessels or in
pipelines that deliver oil and gas to commercial markets. The Company could also be affected by deliverability uncertainties related
to the proximity of its reserves to pipelines and processing and storage facilities and operational issues affecting such pipelines and
facilities as well as government regulation relating to prices, taxes, royalties, land tenure, allowable production, the export of oil and gas
and many other aspects of the oil and gas business.
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Report to Shareholders | December 31, 2024 Africa Oil Corp.
LIQUIDITY AND CASH FLOW
Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they become due. Liquidity describes a
company’s ability to access cash. Companies operating in the upstream oil and gas industry require sufficient cash in order to fulfil their
work commitments in accordance with contractual obligations, and to be able to potentially acquire strategic oil and gas assets and
face potentially unexpected liabilities.
The Company could potentially issue debt or equity, extend its debt maturities and enter into farmout agreements to ensure it has
sufficient available funds to meet current and foreseeable financial requirements. Concerns around climate change have resulted in a
number of lenders and investors moving away from financing oil and gas activities, and the Company may find access to capital limited,
more expensive or made contingent upon environmental performance standards.
The Company periodically receives dividends from Prime related to the Company’s shareholding in Prime, its main source of income,
the amount and timing of which the Company does not control. However, a significant reduction, infrequent distributions, or no
payment of Prime’s dividends to the Company could significantly reduce the amount of the Company’s anticipated cash flow and could
also expose the Company to financial risk.
The Company actively monitors its liquidity to ensure that its cash flows and working capital are adequate to support these financial
obligations and the Company’s capital programs. The Company will also adjust the pace of its activities to manage its liquidity position.
Notwithstanding any mitigation efforts, the Company remains exposed to erosion of its balance sheet and revenues and may have
difficulty in securing necessary funding, which may lead to insufficient liquidity.
PRIME DIVIDENDS
The Company periodically receives dividends from Prime related to the Company’s shareholding in Prime, which is its main source of
income. A significant reduction, infrequent distributions, or no payment of Prime’s dividends to the Company could have a material
adverse effect on the Company’s business, liquidity and financial condition. Such results could occur due to, among other things, the
following:
• decline in the demand for oil and gas;
• reduction of OPEC+ quotas;
• changes to the applicable tax and other laws and regulations in Nigeria;
• project joint venture party consensus;
• Prime’s off-takers defaulting on forward sale agreements or banks defaulting on hedging agreements;
• significant or extended declines in oil and gas prices;
• Prime’s inability to hedge the production of future assets;
• significant capital cost overruns adversely impacting Prime’s cashflows;
• significant project delays adversely impacting Prime’s future production and cashflows;
• capital or liquidity constraints experienced by Prime, including restrictions imposed by lenders;
• accounting delays or adjustments for prior periods;
• shortages of, or delays in obtaining skilled personnel or equipment, including drilling rigs;
• delays in the sale or delivery of products;
• title defects; and
• global health emergencies impacting operations and significantly reducing oil and gas demand.
CREDIT FACILITIES
The Company is party to credit facilities. The terms of the facility contain covenants and restrictions on the ability of the Company to,
among other things, incur or lend additional debt, pay dividends and make restricted payments, and encumber its assets. The failure of
the Company to comply with the covenants contained in the facility or to repay or refinance the facility by its maturity date could result
in an event of default, which could, through acceleration of debt, enforcement of security or otherwise, materially and adversely affect
the operating results and financial condition of the Company.
FINANCIAL STATEMENTS PREPARED ON A GOING CONCERN BASIS
Africa Oil’s financial statements have been prepared on a going concern basis under which an entity is considered to be able to
realize its assets and satisfy its liabilities in the ordinary course of business. Africa Oil’s operations to date have been financed by equity
financing, dividends received from equity investments, debt financing and the completion of working interest farmout agreements.
Africa Oil’s future operations may be dependent upon the identification and successful completion of additional equity or debt
financing, the achievement of profitable operations (and profitable operations with equity investments) or other transactions. There
can be no assurances that the Company will be successful in completing additional financings, achieving profitability or completing
future transactions. The consolidated financial statements do not give effect to any adjustments relating to the carrying values and
classification of assets and liabilities that would be necessary should Africa Oil be unable to continue as a going concern.
RISK FACTORS - CONTINUED
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Report to Shareholders | December 31, 2024 Africa Oil Corp.
RISK FACTORS - CONTINUED
SUBSTANTIAL CAPITAL REQUIREMENTS
Africa Oil expects to make substantial capital expenditures for exploration, development and production of oil and gas reserves in the
future. The Company’s ability to access the equity or debt markets may be affected by any prolonged market instability. The inability
to access the equity or debt markets for sufficient capital, at acceptable terms and within required time frames, could have a material
adverse effect on the Company’s financial condition, results of operations and prospects.
To finance its future acquisition, exploration, development and operating costs, the Company may require financing from external
sources, including from the issuance of new shares, issuance of debt or execution of working interest farmout agreements. There can
be no assurance that such financing will be available to the Company or, if available, that it will be offered on terms acceptable to the
Company.
If additional financing is raised through the issuance of equity or convertible debt securities, control of the Company may change and
the interests of shareholders in the net assets of the Company may be diluted. If unable to secure financing on acceptable terms, the
Company may have to cancel or postpone certain of its planned exploration and development activities which may ultimately lead to
the Company’s inability to fulfil the minimum work obligations under the terms of its various concessions. Availability of capital will also
directly impact the Company’s ability to take advantage of acquisition opportunities.
CURRENT GLOBAL FINANCIAL CONDITIONS
Global financial conditions have always been subject to volatility. These factors may impact the ability of the Company to obtain equity
or debt financing in the future, and, if obtained, on terms favorable to the Company. Increased levels of volatility and market turmoil can
adversely impact the Company’s operations and the value, and the price of the Common Shares could be adversely affected.
FOREIGN CURRENCY EXCHANGE RATE RISK
The Company is exposed to changes in foreign exchange rates as expenses in international subsidiaries, oil and gas expenditures, or
financial instruments may fluctuate due to changes in rates. The Company’s exposure is partially offset by sourcing capital projects and
expenditures in US dollars. The Company had no forward exchange contracts in place as at December 31, 2024.
INTEREST RATE RISK
The Company has borrowed in the past and has a utilized standby credit facility. Interest payments under potential future borrowings
could be exposed to volatility in interest rates that could constrain the company’s cashflows. The Company’s main income is derived
from its investment in Prime that has outstanding borrowings. Prime’s cash flows can be impacted adversely by increases in interest
rates that in turn could constrain dividend distributions to Africa Oil.
CREDIT RISK
Credit risk is the risk of loss if counterparties do not fulfil their contractual obligations. Most of the Company’s credit exposure relates to
amounts due from its JV parties. The risk of the Company’s JV parties defaulting on their obligations per their respective joint operating
and farmout agreements is mitigated as there are contractual provisions allowing the Company to default JV parties who are non-
performing and reacquire any previous farmed out working interests. The maximum exposure for the Company is equal to the sum of
its cash, restricted cash, and accounts receivable. A portion of the Company’s cash is held by banks in foreign jurisdictions where there
could be increased exposure to credit risk.
LIMITATION OF LEGAL REMEDIES
Securities legislation in certain of the provinces and territories of Canada provides purchasers with various rights and remedies when a
reporting issuer’s continuous disclosure contains a misrepresentation and ongoing rights to bring actions for civil liability for secondary
market disclosure. Under the legislation, the directors would be liable for a misrepresentation. It may be difficult for investors to collect
from the directors who are resident outside Canada on judgements obtained in courts in Canada predicated on the purchaser’s
statutory rights and on other civil liability provisions of Canadian securities legislation.
DECOMMISSIONING
The Company is responsible for compliance with all applicable laws, regulations and contractual requirements regarding the
decommissioning, abandonment and reclamation of the Company’s assets at the end of their economic life, the costs of which
may be substantial. It is not possible to predict these costs with certainty since they will be a function of requirements at the time of
decommissioning, abandonment and reclamation and the actual costs may exceed current estimates. Laws, regulations and contractual
requirements about abandonment and decommissioning may be implemented or amended in the future.
SHAREHOLDER CAPITAL RETURNS
The Company has implemented a base dividend policy and has in the past engaged in share repurchases as part of its commitment to
return capital to the shareholders. The amount and frequency of future returns cannot be guaranteed and the Company’s performance
in this regard is subject to its financial and operational performance that are subject to the risks already outlined. The declaration,
timing, amount and payment of dividends remain at the discretion of the Company’s Board. Also, the amount and the pace of share
buybacks, if implemented, are at the discretion of the Board.
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