Deal Reporter
Canada-listed Africa Oil Corp [TSX:AOI] is looking to farm out 50% of its core Kenyan block portfolio before the end of the year, CEO Keith Hill told this news service.
An investor would need to bring a total consideration of CAD 1bn (USD 769.2m) to the table, of which Africa Oil would net CAD 350m (USD 269.2m) with the remainder carried toward further development costs, he said.
Hill identified Blocks 10BB, 13T and 10BA as Africa Oil's key assets for sale, all of which it shares a 50% interest in with Tullow Oil [LON:TLW]. A farm-down would result in a reduction of Africa Oil’s stake to 25%.
A data room has been open for some time and has already been accessed by around a dozen interested parties, he said. JPMorgan has been mandated to conduct the dual sales process, he added.
A likely investor would be an international oil company or national sector peer, he said. The upside to such a deal would involve further exploration potential, he added.
The stronger cash and market position may lead to Africa Oil acquiring distressed assets and/or companies, he said.
The company would not look to sell its 41% ownership of Africa Energy Corporation, Hill added.
Company sale update
Africa Oil is continuing to seek a sale of the entire company, Hill said, and would look for bids worth around CAD 2bn-CAD 2.5bn (USD 1.5bn-USD 1.9bn) net to its shareholders, Hill said.
The company closed a CAD 121.6m (USD 100m) private placing in May 2015, with the capital earmarked for asset development, Hill said.
The equity was acquired by Stampede Natural Resources, an entity owned by a fund advised by Helios Investment Partners, and it now owns 12.37% of the issued and outstanding common shares of Africa Oil.
Other major shareholders include the Lundin Group, Standard Life Investments, Nordea Investment Management and Janus Capital Management, Hill said.
A farm-down of its key assets would not alter the company’s overall valuation, Hill said, as it would have the cash consideration from the deal plus the value of the development carry included in its ultimate price.
Africa Oil wants to see market stability before any sale and it is willing to wait up to a year or 18 months before accepting offers, Hill said.
A likely buyer would be a national oil company from China, Japan, South Korea or India, he said. A Chinese buyer looking to secure supply would make a lot of sense, he added.
The company is looking to reach 1bn barrels of 2C reserves before a sale, Hill said, and is currently at around 800m but will have a more accurate idea after a reassessment in 4Q15.
Africa Oil’s assets are cash flow positive at USD 20 per barrel, he said. Such a large, proven asset is ideal for a national oil company, he added.
A positioning decision made today on the crude oil pipeline linking Uganda to the Indian Ocean in Kenya will add value to Africa Oil’s assets as it reduces the risk of them becoming stranded resources, he said.
The company was looking to perform similar transactions to conclude in early 2015, this news service reported Hill as saying in 2013.
Africa Oil would very likely have done a deal by now if oil prices had not unexpectedly crashed, Hill said.
Africa Oil has assets in Kenya and Ethiopia as well as a 41% equity interest in Africa Energy Corp. The company is listed on the Toronto Stock Exchange and on Nasdaq Stockholm and has a market capitalisation of CAD 829.2m at the time of writing.