Mr. Rob Nicolella reports

AFRICA ENERGY ANNOUNCES 2023 YEAR END RESULTS

Africa Energy Corp. has released financial and operating results for the year ended Dec. 31, 2023.

Rob Nicolella, chief executive officer of Africa Energy, said: "Our year-end results have been negatively impacted by a $114.2-million (U.S.) non-cash loss on revaluation of our investment in block 11B/12B, which was due to changes in base assumptions for discount rates, future development costs and future operating costs applied in the discounted cash flow model for valuing our interest in block 11B/12B. Notwithstanding, the government of South Africa is focused on resolving the current energy crisis and believes that natural gas will play a critical role in the energy transition, including the potential use of indigenous gas from the block 11B/12B discoveries as a potential domestic supply option, as identified in integrated resource plan 2023."

On March 6, 2023, the President of South Africa created a new role, appointing Dr. Kgosientsho Ramokgopa as Minister of Electricity, in an effort to deal with the electricity crisis in South Africa. On Oct. 26, 2023, the National Assembly issued a draft of the Upstream Petroleum Resources Development Bill, highlighting the importance of national energy security and the role of gas in the energy transition in its objectives. As part of South Africa's commitment to the Paris climate agreement, it must diversify energy mix, reducing its reliance on aging coal-fired power plants. In an effort to fulfill this commitment, the Department of Mineral Resources and Energy announced the IRP 2023 in January, 2024, designed to balance demand and supply of energy until 2050, as the country transitions its energy mix accordingly and provides the country with reliable baseload generation capacity while ensuring compliance with emission reduction plans. IRP 2023 is a two-phased approach to dealing with the electricity crisis, with phase 1 focusing on power system requirements up to 2030 and phase 2 focusing on long-term energy mix pathways to guide long-term policy choices. Phase 2 of IRP 2023 identifies the need to role out dispatchable power including gas to provide security of power supply to South Africa and references more than seven gigawatts of new gas-to-power requirements. The company believes the program for phase 2 with associated transmission network upgrades needs to begin earlier if energy supply security is the objective of the IRP 2023. The use of indigenous gas, including the discovered resources from block 11B/12B, as part of the solution to South Africa's energy crisis, will have positive implications for the South African economy. In addition to IRP 2023, the government of South Africa has committed to the unbundling of the government-owned electricity supplier into separate entities -- transmission, generation and distribution -- creating an entity focused on expansion of the electricity grid, which is critical to allow future tie-in of potential gas-to-power projects.

Outlook

The block 11B/12B joint venture has applied for the production right and is contemplating an early production system for a phased development of the Paddavissie fairway. The EPS would provide first gas and condensate production from the Luiperd discovery and would accelerate the block 11B/12B development timeline by utilizing nearby infrastructure on the adjacent block to supply natural gas to customers in Mossel Bay for the conversion of natural gas to power and/or liquid petroleum products. The EPS would significantly decrease the capital expenditures required to reach first production on block 11B/12B. The company expects that a full development of the Paddavissie fairway would follow the EPS as the gas market expands in South Africa. It is encouraged by the 2-D and 3-D seismic data that have identified additional prospectivity in the Paddavissie fairway and to the east, confirming the large exploration upside remaining across the block.

Highlights:

• The company incurred a $114.2-million (U.S.) non-cash loss on revaluation of its financial asset during the fourth quarter of 2023. The non-cash loss on revaluation of the financial asset relates to the company's investment in block 11B/12B, and was due to changes in base assumptions for discount rate, future development costs and future operating expenditures.
• On Nov. 7, 2023, the company executed an amendment to its promissory note, increasing the total amount available under the promissory note to $8.3-million (U.S.) from $5.0-million (U.S.), with an extended maturity date of March 31, 2025.
• On May 10, 2023, the company notified the joint venture partners on block 2B of its intention to withdraw from future block 2B operations.
• The joint venture partnership submitted an application for a production right on Sept. 7, 2022. As part of the production right application process, the block 11B/12B joint venture also submitted a draft environmental and social impact assessment. At the request of the operator, the final ESIA deadline has been extended and is due Aug. 30, 2024. The approval of the production right application will not occur until after the final ESIA has been submitted by the block 11B/12B joint venture.
• At Dec. 31, 2023, the company had $1.7-million (U.S.) in cash.

The financial information in the attached table was selected from the company's audited consolidated financial statements for the year ended Dec. 31, 2023, which are available on SEDAR+ and the company's website.

Earnings trend and financial position (audited, U.S. dollars)

The company recorded $119.0-million of operating expenses for the year ended Dec. 31, 2023, compared with $20.8-million for the same period in 2022. The company recorded a $114.2-million non-cash loss on revaluation of the financial asset during the fourth quarter of 2023. The non-cash loss on revaluation of the financial asset relates to the company's investment in block 11B/12B, and was due to changes in base assumptions for discount rate, future development costs and future operating expenditures. The company impaired the full amount of its intangible exploration assets in block 2B, resulting in a $14.7-million impairment during the fourth quarter of 2022.

At Dec. 31, 2023, the company had cash and working capital of $1.7-million compared with cash of $6.8-million and working capital of $3.9-million at Dec. 31, 2022. The reduction in cash and working capital since Dec. 31, 2022, can be mainly attributed to cash-based operating expenditures and the investment in Main Street 1549. On Dec. 19, 2022, the company entered into a promissory note for $5.0-million. On Nov. 7, 2023, amendments were made to increase the total amount available under the promissory note to $8.3-million, with a maturity date of March 31, 2025. On Dec. 29, 2023, the company was advanced $1.0-million of the additional $3.3-million available.

Next earnings report release

The company plans to report its results for the three months ended March 31, 2024, on May 14, 2024.

About Africa Energy Corp.

Africa Energy is a Canadian oil and gas exploration company focused on South Africa. The company is listed in Toronto on the TSX Venture Exchange (ticker AFE) and in Stockholm on the Nasdaq First North Growth Market (ticker AEC).

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