Africa Oil Corp (TSX:AOI)'s Namibia interests have received a major boost as Impact Oil and Gas, a company part-owned by AOC, agreed to sell a stake in the Venus discovery to its partner TotalEnergies.
Total is taking an additional 9.5% of offshore Blocks 2912 and 2913B, which host the Venus discovery, by committing to cover Impact’s share of the project costs through to first commercial production. The French oil major is also paying Impact some US$99 million of cash for its past costs.
The transaction promises to drive the Nambia project forward and, importantly, it validates and underscores the value of the project.
Africa Oil holds a 31% shareholding in Impact, which in turn held 20% of the Venus discovery prior to the deal and will retain around 9.5% of the project going forward.
Importantly, Impact will now be ‘carried’ to production – with a ‘carry loan’ via Total, repayable with a share of Impact's post-tax cash flow once the field is in operation and generating oil sales.
During the repayment period, Impact will pool its entitlement barrels with Total for more regular off-takes and a more stable cashflow profile.
"The farmout agreement allows Africa Oil to retain a very attractive growth opportunity in a major energy project, that is expected to add significant reserves and production to our portfolio from the late 2020s through the 2030s and beyond, without stretching our balance sheet or exposing ourselves to the execution risk on a large-scale deepwater project,” chief executive Roger Tucker said in a statement.
“It also reinforces our view of TotalEnergies' confidence in the development outlook for the Venus oil discovery and the follow-on prospectivity of the two blocks.”
Tucker added that collaboration between Impact and its major stakeholders Africa Oil and Hosken Consolidated Investments (HCI) played a pivotal role in navigating what are described as "the complexities of the transaction".
Now, he highlighted, Impact and its stakeholders can “retain the upside potential from the on-going exploration and appraisal campaign on Block 2913B with significant prospects scheduled to be drilled in 2024, with zero capital expenditure”.
Tucker added: “This farmout agreement delivers on Africa Oil's stated objective of focusing on and enhancing the value of its core assets.
“Also, with the funding secured for Impact's Namibian assets through to first commercial production and no further demand on our balance sheet, we can accelerate the work to consolidate our assets ownership, and to consider other capital allocation options including shareholder capital returns and other growth opportunities."