Africa Oil Corp (TSX:AOI) has struck a deal to buy out its partner in the Prime Oil & Gas venture, which holds the firm's interests in Nigeria.
The deal, which sees Prime’s part-owners receive Africa Oil shares, is expected to significantly boost cash flow and support a new model for enhanced shareholder returns.
Prime’s other shareholders will own 35% of the enlarged company, subject to shareholder approval and regulatory consents.
For Africa Oil, it doubles its reserves base and gives direct control of the cash flows from production.
As an enlarged company, Africa Oil said it expects 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.
It comes as the Africa Oil is advancing its funded field development projects in the prolific Orange Basin.
"Africa Oil's vision is to be a leading independent pure-play exploration and production company that consistently delivers peer-leading returns,” chief executive Roger Tucker said.
“We have a well-positioned platform with three pillars of a strong balance sheet, high netback production and funded development projects to pursue significant inorganic growth and to take advantage of opportunities in the upstream oil and gas sector as the industry evolves through the energy transition."
Huw Jenkins, Prime chair, meanwhile, commented: "We have high regard for Africa Oil's management team, which has demonstrated its ability to deliver innovative and highly accretive industry transactions, and are pleased to become direct shareholders in Africa Oil.
“We believe that the proposed reorganization will create a unique listed vehicle in the exploration and production sector that is capable of industry-leading total shareholder returns."
Jenkins will join the enlarged company as chair, plus two additional nominee directors will also be appointed. Roger Tucker will continue as group chief executive.