Africa Energy – Minutes of the Call with the Company

Africa Energy is a 10% owner of the block 11B/12B, on of the largest gas condensate discoveries globally in the last few years. The block is majority owned and operated by Total. Total is now working on commercialisation of the plot.

We had a call with Africa Energy yesterday. Below are minutes of the call.


  • AEC announced on Monday a USD 5 million bridge loan from its main shareholders — Africa Oil, HCI (the largest shareholder of Impact Oil & Gas) and the Lundin family. No other borrowing facilities currently.
  • The company had a cash balance of USD 7 million as of the end Q3 and spent approximately USD 5 million on the Gazania well in Q4
  • Total disposable cash, therefore is about USD 6 million (projected as of Q4 end) after the bridge loan and Q4 overhead
  • Annual burn is about USD 3 million
  • The South Africa team is working for Africa Oil as well – costs reimbursed to AEC
  • The company has very little CAPEX until the investment decision in 2024
  • Only investments are into Total’s development plans and analysis, which are not significant

Block – 2B

  • Eco still sees an upside there. AEC assumes zero value and zero future spending

Block 11B/12B

  • AEC is now a pure play on Block 11B/12B
  • Block 11B/12B is potentially bigger than John Svedrup, Europe’s largest operating offshore oil field. AEC owns a 10% stake in 11B/12B
  • The operator, Total, applied for production rights in September 2022. Approval is expected in 12-18 months after submission – early 2024
  • Final Investment Decision (FID) expected shortly after PR approval – in 2024
  • Luiperd production wells should be drilled in 2025
  • The Subsea pipeline should be built in 2026
  • The first gas and condensate production is expected 24-36 months after FID – most likely in 2027
  • Total is now negotiating an offtake agreement with two potential customers in Mossel Bay – Eskom and PetroSA 
  • A government guarantee is required to reduce the credit risk of both off-takers 
  • Total is motivated to do this asap
  • South Africa has rolling blackouts for 6 hours per day and has no other large infrastructure projects to help the economy. SA should act fast, but SA civil servants in state-owned companies like Eskom and PetroSA are worried about making big decisions during corruption investigations (The CEO of Eskom stepped down recently)
  • SA can make a lot of money from tax and royalties when Block 11B/12B is producing

11B/12B economics

  • Block 11B/12B had five identified prospects on 2D seismic in the Paddavissie Fairway 
  • Of the five prospects, two were large discoveries: Brulpadda (2019) and Luiperd (2020)
  • Discovered deposits are estimated by the government at 3.4 trillion cubic feet of gas and 192 million barrels of condensate; AEC says over a billion barrels of oil equivalent have been discovered
  • Brulpadda and Luiperd discoveries have de-risked the other three prospects, which now also have 3D seismic 
  • The phase 1 development is proceeding only with Luiperd. Other prospects will come later as the local gas market grows
  • Luiperd could supply Mossel Bay customers for at least 20 years
  • IF the offtake agreement is set above the price that PetroSA was recently paying for gas (USD 6 per thousand cubic feet), AEC could receive net USD 50 million in free cash per year for its 10% interest (net to AEC after all taxes and royalties) 
  • AEC’s 10% share of the capital expenditures for Phase 1 would represent approximately USD 250 million, but this spending does not start until after the final investment decision in 2024 
    • 70% can be financed with development loan financing
    • 30% (USD 75 million) by AEC – potentially by Scandinavian bonds
    • A small part of the 30% may be financed by an equity issuance in 2024
  • The aggregate Luiperd net CF to AEC is estimated to be at least USD 1 billion over 20 years period
  • Total is also looking at FLNG as an alternative to supplying Mossel bay customers. The costs of FLNG might be a bit higher, the timing might be broadly similar, but the FLNG would have a higher production (since it would not be limited by the Block 9 pipeline capacity) and a higher international sale price for the gas with less credit risk for the offtake.
  • Luiperd is just one of the five 11B/12B prospects. Total upside is blue sky
  • Block sale strategy – the best time to exit – after the gas agreement and development concept is finalized


  • 66% of shares are held by insiders – 36% Impact, 20% Africa Oil, 6% Lundin family, 4% Management
  • 34% are retail and institutional investors

Near-term Catalysts

  • Town hall meeting with shareholders – early in 2023
  • Gas price agreement finalization – could come early in 2023
  • Completion of the development concept – who we are supplying under what terms
  • Resource report by an independent auditor – after the offtake price and development concept are known
  • Exit or develop Block 11B/12B

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The goal of the blog is to provide investment ideas for further research. I/we have a beneficial position in the shares discussed above either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article. The article does not represent investment advice. Please do your own research before making any investment action.

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