Africa Oil Corp (TSX:AOI) said its investee company, Prime Oil & Gas Cooperatief UA, has successfully completed its debt refinancing, bolstering its debt capacity and extending its debt maturity profile.
The company said this enables Prime to distribute dividends to its shareholders, with the first dividend of 2023 amounting to $125.0 million, or $62.5 million net to Africa Oil's 50% stake in Prime. The dividend will be distributed on June 21, 2023.
The refinancing follows the recent renewal of Oil Mining License (OML) 130 for a 20-year period.
As of the end of the first quarter of 2023, Prime had an outstanding reserves-based lending (RBL) facility and a pre-export finance facility (PXF), with a combined outstanding debt of $720.3 million ($360.2 million net to Africa Oil). Both facilities have been refinanced, with the retirement of the PXF and the closing of a new RBL facility, which has a principal amount of $1,050.0 million ($525.0 million net to Africa Oil) and a tenor of six years. Prime had a cash position of $396.9 million ($198.5 million net to Africa Oil) at the end of Q1 2023.
Africa Oil acquired a 50% shareholding in Prime in January 2020 for $519.5 million and has received a total of $712.5 million in dividend payments, including the upcoming $62.5 million dividend on June 21, 2023. The company achieved the payback of its Prime investment in less than three years.
Additionally, Africa Oil announced an increase in the available amount of its standby credit facility from $100.0 million to $200.0 million. The facility, which remains undrawn, has an availability period until April 20, 2024, and a maturity date of October 20, 2025. As of the end of Q1 2023, Africa Oil boasted a debt-free balance sheet and held a cash position of $158.2 million.
In a statement, Keith Hill, president and CEO of Africa Oil, said that "the expansion and closing of Prime's debt refinancing, the payment of a $125.0 million dividend by Prime and the renewal of OML 130 license are important achievements in the first half of 2023."
He added: "As a result, Africa Oil and Prime have greater flexibility in their near-term capital allocation decision-making, underpinned by strong balance sheets in both businesses. At Africa Oil, we are well-positioned to pursue our ambitions for further growth and improved shareholder returns at the appropriate time. Our plans are complemented by the potentially transformational Orange Basin appraisal and exploration campaign, offshore Namibia, which is currently underway with the Venus appraisal and Nara exploration program."
Africa Oil CFO Pascal Nicodeme commented: "We are grateful for the continuing support of our relationship banks. The doubling of the available amount for our standby credit facility to $200.0 million, is a testament to the quality of our assets and our disciplined financial management. Strong banking support is a key competitive advantage in the independent E&P sector. We look forward to further collaboration with our relationship banks as we execute our business plan."
Africa Oil is a Canadian oil and gas company with production and development assets in deepwater Nigeria, along with an exploration and appraisal portfolio in West and South Africa, as well as Guyana.
Contact the author at jon.hopkins@proactiveinvestors.com