Africa Oil Corp (TSX:AOI) has completed its long-awaited consolidation of Prime shareholding, a move hailed as “transformational” for the company by analysts at Peel Hunt.
The deal doubles Africa Oil's reserves and production through high-quality offshore assets in Nigeria that offer low lifting costs, Brent-linked pricing, and a favorable fiscal environment, analysts highlighted.
“The deal represents a step-change for Africa Oil,” they wrote in a note to clients.
“We model the consolidation leading to group cumulative 2025 to 2027 free cash flow doubling to US$733 million, enabling Africa Oil to fulfil its commitment to raise the annual shareholder dividend 4x from US$25 million to a base of US$100 million.”
Peel Hunt also highlighted that the company has issued “robust” guidance for the fiscal year 2025 for the first time.
Africa Oil provided production guidance exclusively from its Nigerian deepwater assets, expecting output of 28 to 33 million barrels of oil equivalent per day (Mboe/d), with entitlement production projected at 32 to 37 Mboe/d.
Approximately 75% of this will be light and medium crude oil, while the remaining 25% will be conventional natural gas.
Africa Oil anticipates selling 11 to 13 cargoes of 1 million barrels each during the year and expects EBITDAX of $500 million to $600 million and cash flow from operations of $320 million to $370 million, based on an average Brent price of $75 per barrel.
Peel Hunt has a 'Buy' rating on Africa Oil stock.