Chariot Ltd (AIM:CHAR, OTC:OIGLF) has spent years accumulating exploration acreage across Africa, but Friday's announcement marks something fundamentally different: a direct route to oil production revenues at a time when the commodity it hopes to sell has rarely been more valuable.
The deal, structured through Angolan independent Etu Energias, gives Chariot economic exposure to approximately 4,000 barrels of oil equivalent per day from Block 14, a mature, Chevron-operated deepwater asset offshore Angola that has produced more than 900 million barrels since 1999 and carries a licence now extended to 2038.
Cavendish, the company's house broker, values that exposure at $114 million on a net present value basis at a flat $60 per barrel oil price, against an upfront cash outlay from Chariot of just $12 million.
That ratio underscores the appeal of the structure even before accounting for the current oil price environment, in which Brent crude has surged well above $100 a barrel following the disruption to flows through the Strait of Hormuz.
At $80 per barrel, Cavendish's valuation rises to $155 million, and the broker notes that higher prices will also reduce the final consideration payable on completion by swelling interim period cash flows, further improving the economics for Etu and Chariot alike.
The financing architecture is equally noteworthy: Shell Trading, one of the world's largest energy traders and an existing lender to Etu, is providing an acquisition facility of up to $170 million in return for future offtake barrels, effectively underwriting the transaction without diluting Chariot's equity position beyond the shares already issued in a recent fundraise.
Cavendish has reinstated its 'buy' rating with a target price of 7.2p, against a current share price of 1.24p, and frames the Block 14 transaction as the opening move in a broader Chariot-Etu partnership targeting further Angolan production opportunities.