Mr. Roger Tucker reports

AFRICA OIL ANNOUNCES FOURTH QUARTER AND FULL YEAR 2023 RESULTS

Africa Oil Corp. has released its operating and consolidated financial results for the three months and the year ended Dec. 31, 2023, together with its 2024 management guidance.

Highlights:

• Successfully met 2023 management guidance on production and cash flow from operations;
• The company received three dividends totalling $175.0-million in 2023 from its shareholding in Prime, including one dividend of $50.0-million in Q4 2023. Africa Oil's cash and cash equivalents at Dec. 31, 2023, of $232.0-million;
• 2023 full-year net income of $87.1-million (2022: net loss of $60.3-million) or 19 cents per share (2022: net loss of 13 cents per share);
• The company launched a new NCIB (normal course issuer bid) share buyback program on Dec. 6, 2023, and after the year-end, on Jan. 10, 2024, started share buybacks under the new NCIB. The company will pay a dividend of 2.5 cents per share on March 28, 2024;
• OML 130 renewed for 20 years securing Africa Oil's long-term production base and enabling the refinancing of Prime's debt. Prime's OML 130 and OML 127 were converted to operate under Nigeria's new Petroleum Industry Act (PIA) and are now subject to a corporate income tax regime of 30 per cent compared with the previous petroleum profit tax (PPT) regime of 50 per cent;
• Commenced the appraisal campaign for the Venus light oil and associated gas discovery, with the positive results supporting the commercial development of the field;
• Subsequent to the year-end, the company announced a strategic farmout agreement between its investee company, Impact Oil and Gas Ltd., and TotalEnergies, that allows the company to continue its participation in the world=class Venus oil development project, and the follow-on exploration and appraisal campaign on blocks 2913B and 2912 with no upfront costs;
• Selected Prime's results net to Africa Oil's 50-per-cent shareholding*:
  • Recorded full-year average daily WI (working interest) production of approximately 19,800 barrels of oil equivalent per day (boepd) and average daily net entitlement production of approximately 22,400 boepd. These compare with mid-range 2023 management guidance figures of 20,000 boepd and 22,000 boepd for WI and net entitlement production, respectively;
  • Recorded cash flow from operations of $298.8-million, which compares with the guidance midpoint of $290.0-million;
  • Prime's cash position of $76.1-million and debt balance of $375.0-million, resulting in a Prime net debt position of $298.9-million at Dec. 31, 2023.

* Important information: Africa Oil's interest in Prime is accounted for as an investment in joint venture.

Africa Oil president and chief executive officer Roger Tucker commented: "Two thousand twenty-three was a very good year for Africa Oil. Two highlights are the renewal of Prime's OML 130 licence for a further 20-year period and the successful appraisal of the Venus discovery, which supports the case for its commercial development. The OML 130 renewal not only secured the long-term future of our core producing assets, it also facilitated the refinancing of Prime's debt on competitive terms and allowed a dividend distribution of $175-million to Africa Oil for the year. The renewal also supports further investments, including in the Preowei development project.

"The appraisal of the Venus field during 2023 was very encouraging and we note the operator's positive public statements regarding the development of this world-class discovery. We are also excited by the wider prospectivity in the area, as evidenced by the recent Mangetti discovery. Postperiod-end, we announced the farmout agreement between Impact and TotalEnergies. Under this transformational agreement, Africa Oil will retain exposure to the Venus field and associated exploration upside at no upfront cost and with no further demand on our balance sheet.

"Our focus for 2024 is to enhance the value of our core assets, including our operated exploration assets through strategic farm-down transactions, and pursuing opportunities to consolidate and streamline our asset ownerships."

2023 full-year and fourth quarter results summary

In 2023, the company recorded a net income attributable to common shareholders of $87.1-million. This is primarily made up of income from the company's investment in Prime of $228.0-million, offset against losses from the company's investment in associates of $47.0-million and impairment recognized to its Kenyan intangible exploration assets of $62.2-million writing these assets down to nil. The net income attributable to common shareholders in 2023 of $87.1-million has increased from a loss of $60.3-million in 2022 as the income from Prime has increased by $81.4-million and the impairment recognized in relation to the company's intangible exploration assets in Kenya has decreased by $108.4-million. This is offset by an increase in the share of loss from investments in associates of $38.8-million.

The share of profit from the company's 50-per-cent investment in Prime in Q4 2023 was impacted by a non-cash impairment of $131.7-million recorded by Prime, mainly due to Prime applying a higher discount rate in its valuation and from changes in the technical assumptions in OML 130.

The figures used in the explanations for movements period on period below are based on Prime's gross balances per the financial statements.

Prime revenues decreased by $284.1-million in 2023 compared with 2022, mainly driven by lower liftings. Prime also recorded an increase in cost of sales of $41.7-million, primarily driven by an increase in DD&A (depreciation, depletion and amortization) of $99.0-million as Prime has changed the method of depletion on its facilities, including FPSO from straight line to unit of production, to better reflect the consumption of the economic benefits of the reserves. This resulted in gross profit in 2023 to be $325.8-million lower than 2022. In addition, there was a decrease of $88.1-million in other operating income, primarily consisting of investment tax credits, which can be offset against PPT, an increase of $181.0-million in impairment charges and a tax income in 2023 of $248.6-million, compared with a tax charge of $519.4-million in 2022. Prime renewed OML 130, resulting in OML 130 operating under the terms of the new PIA as from June 1, 2023, and Prime voluntary converted OML 127 to operate under the new Petroleum Industry Act from March 1, 2023, with all key conditions precedent fulfilled during 2023. Under these terms, OML 127 and OML 130 are subject to a corporate income tax regime of 30 per cent, compared with the previous PPT regime of 50 per cent, which resulted in the release of $62.0-million and $346.0-million of deferred income tax liabilities during the year for OML 127 and OML 130, respectively. This has resulted in Prime's profit for 2023 increasing by $156.6-million compared with 2022.

Outlook

2024 priorities and business plan

The company's focus for 2024 is to advance its main opportunity set, comprising its core assets in deepwater Nigeria, Orange basin offshore Namibia and South Africa, and Equatorial Guinea. Management will also evaluate the options for consolidating the ownership of its core assets and streamlining of the company's business structure.

Africa Oil has made a strong start in the delivery of its 2024 business plan with the strategic farmout agreement between its investee company, Impact, and TotalEnergies for the interests in blocks 2912 (PEL 91) and 2913B (PEL 56), offshore Namibia, which was announced on Jan. 10, 2024. This transaction gives the company the opportunity to continue its participation in the world-class Venus light oil development project, and the follow-on exploration and appraisal program on the blocks at no upfront cost. This frees up the company's balance sheet for the pursuit of other growth opportunities and shareholder capital returns.

Namibia Orange basin appraisal and exploration campaign

The successful Venus-1X drill stem test and Venus-1A appraisal well, both completed in 2023, support the commercial development case for the Venus oil field. The appraisal program and the development studies to be carried out during 2024 are expected to define the Venus development concept. The Mangetti-1X exploration well, located approximately 35 kilometres to the northwest of the Venus-1X well, intersected hydrocarbon-bearing intervals in the Mangetti fan prospect, a separate fan system to the Venus oil discovery. Mangetti-1X also achieved its secondary objective of successfully intersecting and appraising the northern area of the Venus discovery. Drilling continues at the Venus-2A appraisal well, approximately 17 kilometres to the northwest of the Venus-1X location. The results from these wells will be incorporated in the development studies.

In addition to the Venus opportunity, the company has retained upside exposure to the exploration opportunities that in case of success could significantly increase the existing discovered resource base. Furthermore, the processing of the 3-D seismic data that is currently being acquired could better define the prospectivity on block 2193B to the south of the Venus discovery. It is possible that the JV could drill further high-impact exploration wells on separate fan structures on this block during 2024 or 2025.

At the date of this report, Africa Oil has an interest in this program through its 31.1-per-cent shareholding in Impact, which in turn has a 20.0-per-cent WI in block 2913B (PEL 56) and 18.9 per cent in block 2912 (PEL 91). On closing of the farmout transaction with TotalEnergies, Impact will retain a carried 9.5-per-cent WI in each of the two blocks.

Nigeria

The OML 130 drilling campaign that commenced on Feb. 22, 2023, has completed a total of five wells. One production well and two water injection wells have been brought on line at Egina. Two production wells have been completed at Akpo West and brought on stream over the Akpo FPSO during Q1 2024. The multiwell program is planned for up to nine wells on the OML 130 asset during 2023 and finishing in 2024, with a further option to extend the rig contract to drill additional wells in the block.

Acquisition of 4-D monitor seismic surveys are planned for Akpo, Egina and Agbami during late 2023, through 2024. The acquisition plan also includes a baseline 4-D seismic survey of the Preowei field. The surveys will support future drilling decisions across both OML 127 and OML 130.

Full-year 2023 production was in line with the midpoint of the management guidance for both working interest and economic entitlement. Beyond the aforementioned drilling campaign on Egina and Akpo, which will offset production decline, there is a planned maintenance shutdown for the Akpo field, which will occur in Q1 2024; this was previously planned for Q4 2023. A planned maintenance shutdown will also be executed on Agbami during the first half (H1) of 2024.

Following the 20-year renewal of OML 130 on May 28, 2023, FEED (front-end engineering design) studies have recommenced, which could facilitate the final investment decision for the Preowei oil discovery development project. The Preowei oil field is to the north of the Egina FPSO (floating production storage and offloading) and is a development opportunity via a satellite subsea tie-back project to the Egina FPSO.

South Africa Orange basin, block 3B/4B

Following the approval from the government of the Republic of South Africa of the transfer of a 6.25-per-cent interest in block 3B/4B from Azinam to the company on Jan. 19, 2024, at the date of the MD&A (management's discussion and analysis), the company holds an operated WI of 26.25 per cent in the block.

The company and its JV (joint venture) parties are progressing plans to conduct a two-well campaign on block 3B/4B and are in discussions with various potential parties to farm out a share of their working interest in the block. The JV parties are also working with a leading South African environmental consulting firm to conduct a comprehensive ESIA (environmental and social impact assessment) process in preparation for permitting and drilling activity on the block.

Equatorial Guinea

The company continued its geological and geophysical works for blocks EG-18 and EG-31 with subsurface studies conducted during 2023 defining multiple prospects on both blocks. Seismic reprocessing and subsurface studies will continue over the coming months to further refine and rank the identified prospects, identify any further prospects, and prioritize a potential drilling target on the shallow-water EG-31 block for drilling in 2025. The company's objective is to farm down part of blocks EG-18 and EG-31 in 2024.

The company holds an operated WI of 80.0 per cent in each of blocks EG-18 and EG-31.

2024 management guidance

The company's 2024 production will be contributed solely by its 50-per-cent shareholding in Prime. The 2024 management guidance includes WI production guidance range of 16,500 to 19,500 boepd and net entitlement production range of 18,000 to 21,000 boepd, with approximately 78 per cent expected to be light and medium crude oil and 22 per cent conventional natural gas.

Prime is expected to sell 10-13 cargoes of approximately one million barrels each during 2024. Based on the above production and Prime's current 2024 cargo lifting schedule, the company's management estimates Prime to generate cash flow from operations of approximately $230.0-million to $320.0-million net to the company's 50-per-cent shareholding. These estimates are based on a 2024 average Brent price of $82 per barrel (bbl).

Any dividends received by the company from Prime's operating cash flows and cash on hand will be subject to Prime's capital investment and financing cash flows, including Prime's RBL interest payments and principal amortization. Net to the company's 50-per-cent shareholding, Prime's 2024 capital investment is expected to be in the range of $100.0-million to $130.0-million. Prime had a cash and cash equivalents balance of $76.1-million net to the company's 50-per-cent shareholding at Dec. 31, 2023.

Dividends and AGM (annual general meeting)

The company is pleased to announce that its board of directors has declared the distribution of the company's semi-annual cash dividend of 2.5 cents per common share. This dividend will be payable on March 28, 2024, to shareholders of record at the close of business on March 8, 2024. This dividend qualifies as an eligible dividend for Canadian income tax purposes.

Dividends for shares traded on the Toronto Stock Exchange will be paid in Canadian dollars on March 28, 2024; however, all U.S. and foreign shareholders will receive U.S.-dollar funds. Dividends for shares traded on Nasdaq Stockholm will be paid in Swedish kronor in accordance with Euroclear principles on April 2, 2024.

To execute the payment of the dividend, a temporary administrative cross-border transfer closure will be applied by Euroclear from March 6, 2024, up to and including March 8, 2024, during which period shares of the company cannot be transferred between the Toronto Stock Exchange and Nasdaq Stockholm.

Payment to shareholders who are not residents of Canada will be net of any Canadian withholding taxes that may be applicable. For further details, please visit the company's website.

The company's annual general meeting is planned to be held on May 23, 2024.

2023 annual filings

The company's 2023 annual filings document, MD&A, annual information form and financial statements are available for download from the company's website.

Management conference call

Senior management will hold a conference call to discuss the results on Tuesday, Feb. 27, 2024, at 9 a.m. ET (2 p.m. GMT) (3 p.m. CET). Participants should register on-line for the live webcast.

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About Africa Oil Corp.

Africa Oil is a Canadian oil and gas company with producing and development assets in deepwater Nigeria and an exploration/appraisal portfolio in west and south of Africa, as well as Guyana. The company is listed on the Toronto Stock Exchange and on Nasdaq Stockholm under the symbol AOI.

Additional information

This information is information that Africa Oil is obliged to make public pursuant to the EU market abuse regulation and the Swedish Financial Instruments Trading Act. The information was submitted for publication, through the agency of the contact persons set out above, at 6:30 p.m. ET on Feb. 26, 2024.

Advisory regarding oil and gas information

The term boe (barrel of oil equivalent) is used throughout this news release. Such terms may be misleading, particularly if used in isolation. Production data are based on a conversion ratio of 6,000 cubic feet (mcf) per barrel. This conversion ratio is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. Given that the value ratio based on the current price of crude oil as compared with natural gas is significantly different from the energy equivalency of 6:1, utilizing a conversion on a 6:1 basis may be misleading as an indication of value. Petroleum references in this press release are to light and medium gravity crude oil and conventional natural gas in accordance with National Instrument 51-101 and the COGE (Canadian Oil and Gas Evaluation) handbook.

We seek Safe Harbor.