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Africa Energy Corp
Symbol AFE
Shares Issued 1,407,812,249
Close 2024-05-14 C$ 0.10
Market Cap C$ 140,781,225
Recent Sedar Documents

Africa Energy has cash of $1.62M (U.S.) at March 31

2024-05-14 18:04 ET - News Release

Mr. Jeromie Kufflick reports

AFRICA ENERGY ANNOUNCES CORPORATE UPDATE AND FIRST QUARTER 2024 RESULTS

Africa Energy Corp. has released a corporate update and financial and operating results for the three months ended March 31, 2024.

Financial and operational update

The company's financial results for the three months ended March 31, 2024, have been negatively impacted by a $23.1-million (U.S.) non-cash loss on revaluation of the company's investment in Block 11B/12B, which was due to changes in base assumptions for discount rates applied in the discounted cash flow model for valuing its interest in Block 11B/12B.

On April 25, 2024, the National Council of Provinces approved the Upstream Petroleum Resources Development Bill (UPRDB), which will now be tabled for presidential assent. Once presidential assent of the UPRDB is obtained, the industry will have more certainty and clarity, which is expected to drive investment in South Africa.

As part of South Africa's commitment to the Paris Climate Agreement, it must diversify energy mix, reducing its reliance on ageing coal-fired power plants. In an effort to fulfill this commitment, the Department of Mineral Resources and Energy announced the draft Gas Master Plan (GMP) in April, 2024, and the Integrated Resource Plan 2023 (IRP 2023) in January, 2024, both designed to balance demand and supply of energy, including the use of natural gas, until 2050 as the country transitions its energy mix accordingly and provides the country with reliable base load 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 2ofocusing on long-term energy mix pathways to guide long-term policy choices. Phase 2 of IRP 2023 identifies the need to roll 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, potentially including the discovered resources from Block 11B/12B as identified in IRP 2023 and the draft GMP, will be part of the solution to South Africa's energy crisis and will have positive implications for the South African economy. In addition, 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 (EPS) 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 in order 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. The company 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 $23.1 million (U.S.) non-cash loss on revaluation of its financial asset during the first quarter of 2024. 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.
  • 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 (ESIA). 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 March 31, 2024, the company had $1.6-million (U.S.) in cash.

The financial information in this table was selected from the company's unaudited condensed interim consolidated financial statements for the three months ended March 31, 2024, which are available on SEDAR+ and the company's website.

Earnings trend and financial position

(unaudited; United States dollars)

The company recorded $23.8-million of operating expenses for the three months ended March 31, 2024, compared with $2.2-million for the same period in 2023. The company recorded a $23.1-million non-cash loss on revaluation of the financial asset during the first quarter of 2024. 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.

At March 31, 2024, the company had cash of $1.6-million and working capital deficiency of $6.0-million compared with cash and working capital of $1.7-million at Dec. 31, 2023. The reduction in working capital since Dec. 31, 2023, can be mainly attributed to the amount due on the promissory note becoming a current liability, as it is due March 31, 2025. 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. At March 31, 2024, the company had $2.0-million remaining available on the promissory note.

Corporate update

Africa Energy's board of directors has agreed that Robert Nicolella, the company's chief executive officer, be appointed as a board nominee for election to the board as an executive director at the annual general and special meeting on June 20, 2024.

Next earnings report release

The company plans to report its results for the six months ended June 30, 2024, on Aug. 13, 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 TSX Venture Exchange (ticker AFE) and in Stockholm on Nasdaq First North Growth Market (ticker AEC).

We seek Safe Harbor.

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