Company Name: Africa Oil Corp

Company Ticker: AOI CN Equity

Date: 2021-08-17

Q2 2021 Earnings Call

Company Participants
Keith C. Hill, President & Chief Executive Officer
Pascal Nicodeme, Chief Financial Officer
FINAL

Shahin Amini, Investor Relations & Commercial Manager

Other Participants
Analyst
Johan Spetz

Presentation

Operator
Hello, everyone. My name is Anita, and I will be your conference operator today. At this
time, I would like to welcome everyone to the Africa Oil Second Quarter 2021 Results Call
and Webcast. All lines have been placed on mute to prevent any background noise. After
the speakers remarks, there will be a question-and-answer session. (Operator Instructions)
Please note that this event is being recorded. The recording will be available for playback
on the Company's website.
Bloomberg Transcript

I would now like to pass the meeting to Mr.Shahin Amini, Africa Oil's Investor Relations
and Commercial Manager. Please go ahead, Mr.Amini.

Shahin Amini {BIO 21222913 <GO>}

Thank you, Anita. On behalf of management, I thank you for joining us today for second
quarter 2021 results call, and we appreciate your interest and support. And that due to
exceptional unforeseen circumstances, our Chief Financial Officer, Mr.Pascal Nicodeme is
unfortunately unavailable to join us. So, on the call we have, President and Chief Executive
Officer, Mr.Keith Hill. Keith and I will take you through the highlights of our second quarter
results and then Keith will cover Africa Oil's investment case and outlook, before we start
the Q&A session.

I would like to remind everyone that the remarks made during this session are subject to
forward-looking statements, which involve significant risk factors and assumptions and
have been fully described, it accompanies continuous disclosure reports. And the
information discussed is made as of today's date and time and Africa Oil assumes no
obligation to update or revise this information to reflect new events or circumstances,
except as required by law.

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 Company Name: Africa Oil Corp
Company Ticker: AOI CN Equity
Date: 2021-08-17

The Company's complete financial statements and related MD&A are available on the
Company's website and on SEDAR.

Right, Keith, we are ready for you. Please go ahead.

Keith C. Hill {BIO 3881022 <GO>}

All right. Thanks, Shahin. Appreciate everyone calling in today. What we're planning to do
FINAL

today is, kind of, go through first, the quarterly results and then we're going to talk about
kind of the updated corporate presentation. So, the corporate presentation has now been
put on our website and we will be walking through the slides as we go.

I think the overall news in the second quarter has been really good. I think, there have
been quite a bit of positive coming out of Nigeria in particular, and I think we've really
gone from kind of strength to strength and then we're seeing our investment really
coming to fruition. So, I think the refinancing and the deleveraging of the company has
been something we've been working on for the last 18 months and I think that will go into
a bit of detail about how we've done that, but we've refinanced the corporate loan and we
paid down a significant amount of debt.

We also been getting a fairly regular dividend from Prime. We had two dividends in one in
the last quarter and one in just in this quarter, so you'll see that the total dividends
received $75 million. And of course, when you look at what we've got from the -- since we
did the acquisition that's $275 million since we did the acquisition, it was roughly 53% of
the -- our closing cost cash payment. So, I think that's been quite good.
Bloomberg Transcript

I think the fact that we've got deleveraging to 61% of corporate debt, 39% of Prime debt is
also quite an accomplishment during these low oil prices in the COVID times. And I think
that was due to a very strong hedging program last year that we were able to put so much
money to debt.

But I also want to point about cash, I mean, cash is obviously a cash king in this market. We
still have $293 million in net to AOC in the bank accounts at Prime, and we have eight
more cargos we're going to be selling this year for about $500 million gross or about
$250 million net. So, we're really pushing over $500 million of cash in the bank net to
AOC by the end of the year, and I think that's really the headline number.

We are going to talk a little bit about the PIBs. Many of you probably saw yesterday that
PIB had been finally signed after almost two decades of negotiation and work, so I think
that's a great accomplishment. And what we're seeing so far is quite positive in the PIB. I
think the call from the investment community to put friendly legislation in there to try to
encourage investment has been heard by the Nigerian authorities, and we'll walk through
and talk a little bit about what we think the outcomes of that is. But I would say, generally,
it's quite -- it looked quite positive for us.

So, moving on to the operational highlights. I think, obviously the first thing everybody
looks at is our guidance and our production, and the assets have been performing quite

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 Company Name: Africa Oil Corp
Company Ticker: AOI CN Equity
Date: 2021-08-17

well. We're at the top of the range of probably slightly over the range of both our working
into production and our entitlement production. And we see that carrying on strong. I
think, we'll give one more quarter, but I think, you'll see us potentially revising upward on
guidance at the end of the next quarter if we continue this performance. And one of the
reasons we're performing above expectations is because the OPEC quotas that we're on
Egina have now been removed. Or basically, the quotas that are now given to us,
essentially allow us to produce that field at (Inaudible). I think, that's quite a positive as
well.
FINAL

So, moving to next slide, I think the other operational highlights. We've had 2 million
barrels of liftings net to AOC, the average sale price of $58 a barrel. Many have
commented that's' slightly below what the actual price was, we did give back a little bit of
our hedging gains from last year, but I think you'll see when we talk about our hedging
program, we still have quite a bit of upside exposure to oil price. I think given our debt
situation, we had to be a little bit conservative on our hedging and I think, we'll be talking
about what our plan is going forward.

Production costs, again quite low, kind of industry-leading, we're down to $6 a barrel oil
equivalent. And I think this is a continued trend I think we're going to see even potentially
further improvement of that in the short term, as we continue to refine these assets.

The other nice thing is that we're not spending much CapEx. So, during the quarter, we
only spend $3 million in CapEx, so these really are in harvest mode. We're not having to
put a lot of money into these assets. I think the only significant investment we're going to
be making in the near term is the pre-OA[ph] development, which I think now the PIB
pass, you'll see us gaining and accelerating the interest in pre-OA.
Bloomberg Transcript

On the hedging, again, I mentioned this briefly, but we have hedged the entire remainder
of our cargoes for the rest of this year. We got $58 a barrel, again, slightly below the
current market. But I think that gives us a lot of credibility with our banks. We're going in
for a debt re-determination at the end of this month, early next month. And I think the
banks are quite happy that we've mocked in all of that $500 million of additional cash flow
coming in this year. So, I think, that's a necessary evil. I think next year, we'll only hedge
21% of our cargoes and -- a significantly higher price, almost close to today's price $67 a
barrel. We are looking at doing some hedging the rest of next year, I think it's still very
prudent to keep our hedging policy up, but we are looking at ways to protect the upside
and still one of the big oil bulls. I think, we're looking at $70, $80, $90 oil is almost
impossible to stop with the demand growth as we recover from COVID and the supply
constraints. But anyway, I think we will be looking at our hedging program, trying to make
sure that we have a hedging that protects our downside and makes our banks happy, but
also gives us access to that upside as well. And there are many instruments we can use to
do that.

So, turning now to the financial highlights, I'll turn back to Shahin and let him kind of walk
through some of the financial highlights we have in the quarter.

Shahin Amini {BIO 21222913 <GO>}

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 Company Name: Africa Oil Corp
Company Ticker: AOI CN Equity
Date: 2021-08-17

Well, Keith, I'm actually delighted to say, I think, Pascal against all odds has managed to
join us. He may be bruised and bloodied, but he's here with us. Pascal are you online?

Pascal Nicodeme {BIO 21222906 <GO>}

Yes, and I apologize for the Wi-Fi permitter[ph] and finally owned yes, so I will present the
slides.
FINAL

So, yes, the main highlight for this quarter and semester is that we've posted for the first
half a net income of $77 million, which compares to a loss of $418 million for the first half
last year. We are also very pleased with the dividends we have received. In the first half,
we've received $37.5 million. In June, out of this dividend, we've repaid $18 million overall
loan with BTG, and therefore at the end of the second quarter, the debt was down to $123
million. And post period and we've received another $37.5 million dividend, and we have
also completed the refinancing of our acquisition along with BTG. And therefore, we've
ended July with $42 million of cash balance and debt -- post[ph] debt of $98 million after
the refinancing of the BTG loan.

So, just a few metrics I would like to quote in relation to Prime net to our 50%
shareholding. Prime has posted for the first half and this is going to show you the very
strong cash generation capacity of overall, Prime 50%. So, in the first half, Prime has
posted an EBITDA of almost $300 million net to our 50% shareholding and cash flow from
operation of $338 million. They've also ended the period with almost $300 million of cash
balance net to our 50% shareholding and debt of $557 million.

So, I'd like to mention something here is that, these figures include deposits that Prime has
received in relation to Agbami from Equinor. And this is a $305 million costs that they
Bloomberg Transcript

have received from Equinor, in relation to a security agreement that they have signed with
Equinor, which basically settles the determination of the Agbami field from the private
party perspective. So that's -- these figures include the $305 million that Prime has
received in June 2021.

You could move on to next slide, yes, here we go. So, that one highlight that I mentioned
is that, we've refinanced the corporate facility -- we had -- as we -- we had with BTG with
another RCF[ph], which is now due to mature in May 2024 at a significant lower cost of
capital than we had with BTG. The new facility carries interest for the first half -- sorry, for
the first year of LIBOR plus 6.5%. Maturity, as I said, has been extended to May, 2024. And
it's been provided by a syndicate of five banks, which working to support us and support
our development going forward. So that's also a very good news from a financing
perspective that we are supported by these five banks going forward. And as of end of
July, the facility was increased to $160 million, only $98 million was drawn, so we have an
availability of $62 million for general corporate purposes until May next year. So again, this
has significantly increased the liquidity position of the company.

So, handing back to Keith now on the cash flows. Keith, if you are on -- if you want to take
that side?

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 Company Name: Africa Oil Corp
Company Ticker: AOI CN Equity
Date: 2021-08-17

Keith C. Hill {BIO 3881022 <GO>}

Okay. Thanks, Pasco. I'm glad to see you made it and it's only a Wi-Fi problem, we're
getting concerns.

Pascal Nicodeme {BIO 21222906 <GO>}

No.
FINAL

Keith C. Hill {BIO 3881022 <GO>}

So, anyway, obviously, this cash flow slide is the one that I think most people get
impressed about because for those of you who have been in this little adventure of Africa
Oil for a while, we bid off a fairly large portion of the -- of when we bought all of POGBV.
And I think the -- we had two partners that pulled out at the last minute, and at some
point, we thought maybe we bitten off more than we can chew. But I think you'll see this
thing really has performed as we expected and it really has become a real cash cow for us.

So, I think if you go back to that previous slide there, -- sorry, Shahin. So, I think, if you look
at the amount of cash that is going to be generated at the reasonable oil prices. We're
kind of using 65 as our most likely case. You can see, it's a huge amount of cash just in the
next four years compared to our market cap. So, I think that's something that we're
becoming quite happy with the amount of cash coming off of this, and we still have quite
a bit of leverage to upside oil price.

So, our EV free cash flow is going to be less than 4 years to basically pay our market cap.
Bloomberg Transcript

So -- and I mentioned that cash balance $293 million sitting in the bank meant to us. We
have been keeping this cash balance high, because we kind of wanted to see how things
unfolded with the PIB and with our debt amortization, but I think we'll be looking at trying
to keep this cash balance lower and dividending that out to partners as this thing
continues to be at de-risk.

So, obviously, people are going to say, what are you going to do with this cash? I mean the
important thing is that -- I think we're at the point now where we have a number of
alternatives. Obviously, we still want to pay down some of our debt, even that debt we've
got in our corporate facility, we'd like to see that pay down a bit more, even though it's
lower interest rate in longer term. I think, we still have a little work to do on the debt. But I
think, we now have a quite a bit of free cash. And I think one of the questions that we keep
being asked is, are you going to use it to buy things or you're going to give it back to
shareholders? I think, from my perspective, I think, the answer is, we can do both. We have
enough cash, we have it -- I think, it's very likely that by the end of the year, we will institute
some type of shareholder return package, whether it'd be dividends or whether it'd be
share buybacks. I think we're still having that debt, but maybe both. But it still will leave us
enough that we can grow the company and start looking at some strategic assets as well.
So, I think, we're in quite a strong position on this.

If you move to the next slide, Shahin. I think the Nigeria assets really are in harvest mode
now. And I think it's been quite an accomplishment, especially over the COVID times to

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 Company Name: Africa Oil Corp
Company Ticker: AOI CN Equity
Date: 2021-08-17

take our net debt down from $1.165 billion down to $680 million in 18 months. So, I think
that is a testament to these assets and how strong the cash flow they have.

So again, that we're using the money to pay down dividends. And I think the other thing is
that, we don't have a lot of CapEx coming up. So, the full year CapEx guidance for 2021 is
$30 million to $35 million. Next year, we will start probably spending some money on pre-
OA, but it's still very low CapEx, very much in harvest mode at this point.
FINAL

So next slide, I'll talk about the PIB. Obviously, the stability offered, and I think people have
been nervous about the PIB for 20 years. But I think, what the legislation that has passed
and now have been signed by President (inaudible), actually seems to be very well
balanced. So, signed just yesterday, and I think there's some good news for us and I think
the overall thing is, it is good news. So, the petroleum profit tax which was at 50% rate has
been eliminated and corporate income tax rate of 30% has been initiated, so we do see
significant tax savings.

We're also -- it's very clear that there is a royalty holiday for new projects at which Egina
will qualify and our new pre-OA will qualify. The exact nature that is still being debated, it's
not that clear and what we've seen so far on the bill but I think it's very clear, there will be
a holiday. And that actually has a big impact for us not only on existing production, but
has really given us the incentive to accelerate pre-OA as well.

And then the investment tax credits. There's a very large investment tax credits still
working on Egina and the new bill does cater for the allowance of that investment tax
credit. The other thing is almost more important for us is the license extension. So now,
when and if we convert to the PIB on both of our licenses, we will get an early license
Bloomberg Transcript

extension, a 20-year license extension. For us, that's important because right now our RBL
is amortizing fairly quickly. When that extension is obtained, we can get that back with the
banks and basically extend that out probably a minimum of 7 years. So perhaps even with
some repayment holidays for the first or second years. I think, the overall is quite good
that we expect to improve all of our economics for our offshore projects.

Moving on to the next slide. I think, we've talked about this before. It's just these good
feels that do it as little. Our entitlement reserves are still 86 million barrels, we had 117%
reserve replacement this year. Entitlement production coming along nicely 30,000 barrels
a day, lifting costs low, free cash flow breakeven number is less than $35 a barrel.

You'll see a new one there down in the bottom corner and we're going to talk a bit about
that. These are fairly low carbon signatures. So, I'm going to spend a little bit of time about
our new aspirations on the carbon front, but we're starting in a good place. It's only 12.3
kilograms per ton versus an industry average of about 20 kilograms. So, these are fairly
well performing assets, and I think, we even think they can get better with a little bit more
improvement.

So, moving on to the next slide. Again, this is a production profile. You can see, a fairly
steep decline at some of the existing fields, but we have a lot of stuff to put in there. We
have three big FPSOs that have oil[ph] capacity. And one of the main goals here is to infill

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 Company Name: Africa Oil Corp
Company Ticker: AOI CN Equity
Date: 2021-08-17

drill and to add satellite field, what we've already discovered and developed through to
fill in basically and to keep those FPSOs as full as possible.

Okay. Next slide. Again, then we talked a bit about this, but certainly some of the
comments I made in the press release was surrounding our second quarter results have
hit a nerve. And I would say, I've got almost the idea that we started giving money back to
shareholders, I think we're getting very good momentum on. So, I think unless something
untoward[ph] happens by the end of the year, I think we will be instituting some type of
FINAL

shareholder return program. Obviously, we now -- our approval started to -- do all the
necessary approvals to do this and we'd love to get our existing corporate debt down
before we do this.

But again, with the amount of cash being generated, not only do I think we can institute
that, but I actually think we can go out and still have opportunity to do some new
acquisitions. I do believe, this is a great acquisition market, West Africa has a number of
things that are quite appealing, the majors are all divesting their assets. There just aren't
that many buyers. So, I think the idea that we can do both of these things, return money to
shareholders and still get attractive acquisitions and grow. I'm feeling quite confident
about.

So, if you look at our overall company the next slide there, everybody says they traded a
discount to NAV[ph], but I think, we traded a fairly subsumed discount to NAV. So, if you
look at just Nigeria and you put the oil prices we talked about before, we are trading at a
huge discount to our current math. And you take that -- the value of Nigeria, even at fairly
low oil prices $55 and you subtract our debt, we're still at a very significant discount to our
NAV, and that's not counting kind of the rest of the company. I think, the idea here is, you
Bloomberg Transcript

kind of get the rest of the company for free. So, we've got the investment in our portfolio
companies that has kind of a hard value, in other words, what the trade shares are trading
for now. But then, above and beyond that, we've got not only the exploration value of the
wells about to be drilled which are fully funded, but also Kenya.

And don't forget about Kenya. Kenya, we've made great strides. I think, Tullow will be
talking about Kenya in more detail. But Kenya has the potential to add a significant
amount of value to the company now. I'll spend a little bit of time talking about that, but I
think Tullow is planning to update the market in their Capital Market Days in September.
And I would say, we're getting a lot more excited about Kenya, and it seem to be getting a
lot more momentum. I will be travelling down there next week to have meetings with the
government, and I think, we are actively out looking for partners and seeing some interest
there. So, I think, Kenya is still -- it's still a very near and dear to my heart. And the good
news is, we're not spending very much money to keep that option moving forward.

But I think the end -- this slide really shows, your kind of getting all of that for free. If we
didn't have on any of that, you'd still want to buy this stock for just our Nigeria asset, but
you basically get all of that, the rest of that for free.

So moving on to Kenya. Again, I don't want to spend too much time on this. I know people
have lost a little faith in Kenya. We've been here a long time and we've haven't hit our

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 Company Name: Africa Oil Corp
Company Ticker: AOI CN Equity
Date: 2021-08-17

promises on this. But I think we have with the new management of Tullow, and the
redesign of the project. It's a whole new project and much better economics. I think we're
aligned with the government and with our partners. We all agree now on the path forward
as far as reserves production. And I think you'll see that this is a much better project than it
is. And we have been working, we're not sitting around quietly, not doing anything. We've
made significant progress on Lamb. The port has now been opened in LeBoeuf[ph], and
we have a birth pairs[ph] reserved for us. We've got our ESIA done, we've got our water
rights done. And all the things we need to make this project work are now starting to fall
FINAL

into place. So again, let's not give up on Kenya, because it does have a huge amount of
value to us if we can make it work.

Also on the next slide, the exploration. We don't give up on exploration either. We've
made a very good discovery in South Africa and then Africa Energy, and I think, you'll see
that one gaining momentum. Total[ph] just announced an early production system there, I
think that's a great place to be finding gas, specially from ESG standpoint using cleaner
natural gas, displacing some of the coal-fired power plants. I think that's a very good all-
around story. We've got three exploration wells coming up by the end of this year, or at
least starting by the end of this year. In South Africa, Block 2B; in Namibia, the Venus
Prospect. And also, don't forget about Guyana, a co-Atlantic and our investment there, we
got another well, just about to spun by the end of this month in (inaudible) Block and
support there which looks quite compelling as well.

So again, we don't -- these are all fully funded, we don't have to put any more money into
this. But we basically get a free ride on all of these exploration wells, and they have huge
impact. Venus in particular, is probably the biggest volume exploration well this year or
probably even this decade. So, we're quite encouraged to staying on that.
Bloomberg Transcript

So, if we go to the next slide, I think that shows the Venus Prospect, sorry, that shows the
Venus Prospect and NHQ, its 600 square kilometers, four times the size of Marlin[ph] field.
So, I think that one could be a big impact project. In Block 2B, we've got a very low-risk
kind of more like Kenya like rift basin. And we now have contracted the rig for that and the
rig is on its way, should start in December. And I think the -- that prospect also looks like it
could have a big impact on the Africa Energy share price.

So again, I'm committed to exploration. I know it's not the flavor of the month and I -- and
we are disciplined. We aren't putting a lot of money back in, we're not going to be taking
money out to do exploration at the expense of returning money to shareholders. And I
think that's the message that we don't have to, we can sit back and just watch these go.

So, moving on to ESG and I don't mean to put this last, because it's -- it is becoming one
of the biggest priorities of our industry. And we have spent a lot of time on this, and a lot
of effort. And I think we now are in a position where we can capitalize on a number of
things that we've already started. And I think we've always been good on the -- I would
call that S and the G, the society and --the social and governance part of this. I think, we
get awards from IFC of being leader in class in Kenya, I think South Africa, and Nigeria, I
think our operators there are world-class guys that do the right things. But I think the thing
that we've been kind of missing a little bit is the E part which is getting the most focus
now, the carbon part. And I do think now we are in a position where we can go to the

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 Company Name: Africa Oil Corp
Company Ticker: AOI CN Equity
Date: 2021-08-17

market and say that, we've sorted that out and we are going to become one of the
industry leaders on that.

So, if you look at the next slide, I think the message is that we've looked at our pathway to
carbon neutrality by 2025 and both the management and the board believe it is
achievable. So, we do start with a fairly low carbon base, so we don't have quite as much
to offset as some others. But when you look at the path of what we would need to do to
get the carbon neutral by 2025, we all think it's quite achievable. And I think this is going
FINAL

to be an industry thing that -- if you're not part of this solution, you are going to be part of
the problem, and you are going to be on investable. And I think the message is clear for
everyone in our industry. So, we've set this target for ourselves. I think it's quite achievable.
We will not be buying credits, we will be doing greenfield exploration, and greenfield
offset projects by ourselves. We've already started two of those, and I think we see the
pathway is, sort of, something that we feel is quite achievable. Any new investment we
look at, will have to be part of this discussion and we will have to have a corollary pathway
to carbon neutrality for anything we buy as well.

So, I do think it's not -- there's a number of components here. We need to keep working to
get our emissions down, but we need to get into that offset market and do it in a
sustainable way that we can repeat and have control of -- as opposed to just buying
carbon offsets. The penalties for flaring and for not achieving this are going to be greater
and greater. So, I think we're going to -- we want to get on top of this and become a
leader in it.

So again, to sum up, move to the next slide, and we want to make sure we leave enough
time for Q&A. But the dream we had of a becoming a real full cycle oil company rather
Bloomberg Transcript

than just a Kenya exploration company, I think we're there now. I think with the acquisition
of Nigeria, I think we've got reserves, production, cash flow and it's fueling the engine.

I think our exploration appraisal program and in some of our exploration portfolio
companies and in Kenya still will -- has the capacity to add a lot of value. And our
development in Kenya and in Nigeria, some of the satellite fields in Nigeria, I think will
continue to increase that production.

And at course, now we're finally -- for those of you who've been watching us, we've added
that orange box in the top upper left, it's shareholder returns. I think those companies that
showed capital discipline and return some of their money to shareholders will get a better
rating in the stock, and I think you've seen as we've been discussing that our stock is
reacted quite positively and I think when we are able to announce a definite program,
which again, I think end of the year, end of the first quarter, is really our target to
announce that program. I think we'll see continued support.

So, anyway, I think, once again, appreciate everybody calling in. I think the company is in
the best shape it's ever been. And I think we do see a great market ahead. The transition
will happen, but it's not going to happen for the next 10 years to 15 years. And I think
there's going to be an opportunity for companies like ours to see some real benefits as we

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 Company Name: Africa Oil Corp
Company Ticker: AOI CN Equity
Date: 2021-08-17

move forward. And I do think we still look at growth, but I do think shareholder returns are
also important and I believe we can do both.

So, with that, I'll I think we should put up the reader advisory just to make sure
everybody's read everything that advising what we said, but happy to open up to
questions.

Shahin Amini {BIO 21222913 <GO>}

FINAL

Thank you, Keith. Anita, please can you just remind those joining us on the conference call,
the instructions for submitting their questions?

Questions And Answers

Operator
(Question And Answer)

Thank you. (Operator Instructions)

A - Shahin Amini {BIO 21222913 <GO>}

And Anita, let's give it a minute or so for people to submit their questions. In the
meantime, I want to go to actually unfortunately a couple of the analysts that cover us
were not able to join us, but they have submitted their questions via email. So, I've got a
couple from James Hosie from Barclays Capital. He is -- basically his first question is that,
Bloomberg Transcript

okay, so you're not considering a show called the return program by end of 2021, what
criteria are you using to determine if this would be appropriate? And if there is an
indication of a further acquisition, is that also on the agenda? So Keith, Pascal, would you
mind taking that in the first instance, please.

A - Keith C. Hill {BIO 3881022 <GO>}

Well, like I said in my remarks, I mean, we are looking at a lot of acquisitions. We've
actually made a couple of bids on acquisitions. But I think we won't do that at the expense
of our balance sheet. So, this is still -- even though our share price has improved
significantly in the last few months, I think we still don't like the idea of using our shares as
currency. So, I think acquisitions with the majors, we do have some headroom on our
corporate facility right now. We have a lot more cash coming in. So, I think we'll be able to
fund those without issuing new equity in general, depending on the size, and I think we're
quite reluctant to issue new equity at this size in time.

So, I think when we look at our year-end results and we look at the stability that we now
have in Nigeria with PIB, I think returning money to shareholders will come to the top of
the list. So whether it's the end of this year or the end of the first quarter, I think we have to
see how things develop in terms of oil price, in terms of PIB and paying off our debt. But I
think it's very likely that we'll be a position we could enter through either a buyback or a
dividend policy by the end of -- at the latest end of the first quarter.

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And there's a bit of controversy on which one of those things, we are about to split down
the middle of people who would rather do buybacks, people who would rather give
dividends. So I think that's something we will be looking at over the next quarter or so to
try to optimize that.

A - Shahin Amini {BIO 21222913 <GO>}

Pascal, any comments from you or is --
FINAL

A - Pascal Nicodeme {BIO 21222906 <GO>}

No. No comment from me.

A - Shahin Amini {BIO 21222913 <GO>}

All right. Very good. And also have emailed questions from Nik from Renaissance Capital,
and his question is now that the petroleum industry bill has been signed into law, what are
the next steps for Prime in relation to license renewals?

A - Keith C. Hill {BIO 3881022 <GO>}

So if you've been following, so Shell has just done their license renewal for OML 118, and I
think that's kind of the guideline of the way we would see it going forward. So I think there
will be specific things we talked about with the government in terms of investment tax
credits, in terms of the royalty holidays, and there will be a payment to be made for
license extension. Generally, there's a calculation that's done in Nigeria for license
extension, which is somewhere between 2% to 3% of the remaining NPV historically, that's
been the number, but I think that is in negotiations.
Bloomberg Transcript

So for us, I think that's one of the reasons we're keeping a little bit of cash in the company.
There probably will be a payment to be made associated with license extension. But
again, I think that's something that we now have precedence on, and I think it's something
that's got a very high likelihood that we'll have the opportunity to extend both OML 127
and OML 130. The good side of that of course is that once as soon as we get that 20-year
extension, then we go to RBL banks and fair amount of our cash for the next two or three
years will be going to amortizing debt that will come off the table and we'll be able to
spread that out over a longer period. And possibly even get a one- or two-year debt
repayment holiday at the beginning of that. So I think that's a real positive for us, having
that excess cash will not only allow us to perhaps accelerate shareholder returns, but also
will give us the financial strength to go out and do some of the acquisitions we've been
evaluating.

A - Shahin Amini {BIO 21222913 <GO>}

Very good. Thank you. Anita, over to you. Are there any questions on the conference call?

Operator
Yes sir. We will take the first question Johan Spetz with Pareto Securities. Please go ahead.

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 Company Name: Africa Oil Corp
Company Ticker: AOI CN Equity
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Q - Johan Spetz {BIO 18303423 <GO>}

Thank you. This is Johan Spetz at Pareto Securities. So just following up on that topic of
potential early license extension and what that could mean for extending the RBL, and any
more details in terms of timing when that might be and also prior to that happening,
could you remind us what the RBL amortizations look like for the rest of this year and
perhaps also next year 2022? Thanks.
FINAL

A - Keith C. Hill {BIO 3881022 <GO>}

Yeah. I'll take the first one and I'll deflect the second one to Pascal. But on the first side, we
will immediately engage now, now that the PIB has been assigned, Total as our operator in
OML 130 and Chevron as our operator in OML 127 will immediately engage with this
license renewal discussions. So, timing is a little bit hard to estimate. I would guess, I think
our goal is to have it by the end of the year, but I think there'll be others having that. So, I
kind of think around six months would be a reasonable timeframe. I do think we are
starting to see momentum. So the fact that 118 got settled, the fact that PIB was signed, I
think there's a renewed interest in Nigeria to finalize these types of legislation. This foreign
direct investment is very important to Nigeria. The oil business and the revenue from oil is
quite important. So, we hope that it's going to be sooner than later. But again we'll try to
get it as soon as we can.

So Pascal, perhaps you could kind of talk about amortization this year and next year.

A - Pascal Nicodeme {BIO 21222906 <GO>}

Yeah. Sure. So the expected amortization as you know, they are two redetermination, one
in March and one in September, each year for this RBL facility. So the last redetermination
Bloomberg Transcript

was in March. We have repaid $136 million of the RBL Prime as we bid around $36 million
of the RBL in June, and we expect according to the existing growing base amortization
schedule another $280 million to be repaid before end of December. So -- and then we
will be left basically with a bit more than $800 million cost of the Prime RBL by January
next year.

So then the amortization, we should amortize about another $400 million next year of the
RBL, unless the amortization is lower in the September redetermination and year-end
determination in 2022.

I think one important thing about this RBL facility is that we are trying to raise -- well, Prime
is trying to raise pre-export financing above this RBL to basically repay the amortization
and keep the total debt amount the same. So that would basically push back the
amortization of the RBL. And at the moment, the expected amount of this pre-export
finances was $150 million and we would target to increase that pre-export financing to
$300 million by the end of this year. So in all instances, we are trying to push back the
amortization of the RBL as much as we can. And of course, if we get license extension, we
would push all this amortization beyond the license renewal date.

Q - Johan Spetz {BIO 18303423 <GO>}

Okay. That's great. Thank you.

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 Company Name: Africa Oil Corp
Company Ticker: AOI CN Equity
Date: 2021-08-17

Operator
Thank you. There are no further questions at this time.

A - Shahin Amini {BIO 21222913 <GO>}

Right. Thank you, Anita. I just actually just noticed because so many questions at the
webcast, I just feel we're not going get through all of them. So let's just try and make --
FINAL

well let's start. A question on Kenya, and the question is, are you looking alongside Tullow,
are you looking for new partners and how much of your ownership would you consider
farming out?

A - Keith C. Hill {BIO 3881022 <GO>}

Yeah. I think we are jointly with Tullow and Total looking for a partner to come in and be a
primary funding partner. I think the idea is that we'd be willing as a group to give up 50%
interest and potentially operators shift to the right company coming in. So the exact terms
of that would be up. Obviously, if we want to get the best deal we could. But if we could
kind of keep half of our interest to be mostly carried through production, I think that
would be a great outcome. But I think we'll just have to work with potential partners. We
have seen quite a bit of interest on this, and I do think the project itself was much better.
So I'm hopeful that we will be able to bring a partner in on this to get a strong group
moving forward.

A - Shahin Amini {BIO 21222913 <GO>}

And another question from the webcast is, when do you expect Venus-1 to spud?
Bloomberg Transcript

A - Keith C. Hill {BIO 3881022 <GO>}

Yeah. I think that's being pushed back. I think Total has had some drilling extensions in
Kenya and Angola. So, I think that rig is slated to come to Venus in Namibia, but it's
looking more like a December spud at this point.

A - Shahin Amini {BIO 21222913 <GO>}

Okay. Here's an interesting one that's caught my eye, will you consider a London listing?

A - Keith C. Hill {BIO 3881022 <GO>}

I think we look at that many times, and I think some of the bigger acquisitions that we have
talked about and even some bigger corporate mergers we think that it makes sense at
some point to move to London. We don't see a huge amount of liquidity increase. Most
traders are quite happy to trade on the Swedish market. But I do think it would open up
some additional bigger investment companies and kind of make us one of the go-to
London stock exchange companies. So, we continue almost every quarter, we have a look
at that again and we certainly wouldn't rule it out. And I think if we had a premium listing
in London, I think that's something that we do think have some value to it.

A - Shahin Amini {BIO 21222913 <GO>}

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 Company Name: Africa Oil Corp
Company Ticker: AOI CN Equity
Date: 2021-08-17

And Pascal, any views on that?

A - Pascal Nicodeme {BIO 21222906 <GO>}

No, I think Keith is perfectly right. I think one thing we need to keep in mind is that -- is the
increased cost of having a listing in London. I mean, today, we are a very lean and lower
G&A company. If we start to list in London, we need to take that into account as well. And
it will need to be on the back of a significant transaction and equity raise in order to create
liquidity in London, otherwise that wouldn't make sense.
FINAL

A - Shahin Amini {BIO 21222913 <GO>}

Yeah. There is one question that I'm going to tackle. I'm actually going to volunteer to
answer this. There is one saying that you have cash flow from operations of $580 million
for 2020 and you're only talking about $600 million to $800 million over the next four to
five years. This doesn't sound that good to me.

I think it's very important. I'll put the slide back up again. Don't get your cash flows mixed
up. Cash flow from operations is before capital expenditure, it's before debt repayment.
What we are showing here on this slide is free cash flow to equity. So this is our share of
Prime cash flow that is available to be distributed as dividends. So please, please, please
do not get your cash flows mixed up. I now think those are pretty spectacular numbers
quite frankly.

All right, going back to the question list, well, I mean, Keith, you've already answered this
in a way, but let's just tackle it once again. What is the extended time frame for extending
the Nigerian licenses? I feel this keeps coming up.
Bloomberg Transcript

A - Keith C. Hill {BIO 3881022 <GO>}

By law, Nigerian licenses have to be extended as long as you are in compliance. In other
words, you paid your taxes and you've done your work, you could fulfill your work
commitments. So there has never been a light Nigerian license that hasn't been extended.
There is a negotiation that goes along with that, that where there is a payment to the
government to extend the license, and that does take some time. But we are quite
confident that in the worst case in late 2024, early 2025, when the licenses are up for
extension, they will be extended.

What we'd like to do is accelerate that and do it earlier. And again, primarily because we'd
like to take, right now these assets are extremely under levered, we've paid off so much of
the debt here that if you look at them compared to other companies, we are actually quite
under levered as a company. The reason we're under levered is because banks cannot
extend the loan life past the extension date. Just that's the way banks do things.

So, Pascal talked about the trade financing. Trade financing we can, we can extend that
past that extension date. At some point, the bond market is looking better, we would look
at if we can do a traditional RBL, which would be our first choice, maybe the bond market
comes into play. For us, it's all about utilizing these assets, not over leveraging them, but
just making sure we've got the right financial leverage and the timing of that. So, I think

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 Company Name: Africa Oil Corp
Company Ticker: AOI CN Equity
Date: 2021-08-17

what we're not really looking to put more leverage on these assets, we're really looking to
spread out that amortization schedule.

So again, I'm quite confident that the extension is automatic. As I said, there's never been
a company that has had not gotten their extension. In fact, Chevron produced for four
years, and got paid for four years without an extension on one of their key assets. So I'm
not worried about that, but I do want to accelerate if we can because I think the
opportunity to extend that leverage and not have to pay that amortization. It's not the end
FINAL

of the world if we pay up all of our debt by the end of 2023, but I don't think it's utilizing
our balance sheet as well as we could.

A - Shahin Amini {BIO 21222913 <GO>}

And Keith, you would like this one. There's a question on exploration. First of all,
congratulations on the hard work and great results. Well, thank you for that kind
comments. The question is, what are your plans for Block 3B, 4B in the next 18 months?

A - Keith C. Hill {BIO 3881022 <GO>}

Yeah. We're kind of watching what happens at Venus there. So I mean, we're reprocessing
the seismic. We got some pretty interesting prospects on there that we're trying to get a
little better. I think at some point, maybe bringing a partner in on that makes sense. But I
think Venus is going to be a big driver there, successive Venus, the same play trends and
there is also well being drilled by Shell, the old Cosmos block just in board of Venus. And
both of those play concepts are found on 3B, 4B. So if we find that, if either one of those
are successful, that obviously makes it quite a bit more attractive. So I think that's kind of
the answer is let's work on those prospects, get them in the best shape we can, and then
hope for some positive results either from Venus or from the Shell well.
Bloomberg Transcript

A - Shahin Amini {BIO 21222913 <GO>}

Anita, do we have any more questions on the conference call?

Operator
We'll take our next question sir from Thomas Adins, Independent Analyst. Please go
ahead.

Q - Analyst
Good day, gentlemen. I have two questions. The first for Keith. Africa Oil recently funded
Eco Atlantic. Concurrently, Eco paid $10 million through JHI for an effective 1% interest in
Canje Block. Valuing the final well in a three well program at $900 million after the first
and only two on this block came up dry. Recently, I wrote a letter to the Board arguing that
Africa Oil contender for half of the flows with one year's cash flow, which would be
accretive by more than 50% NAV per share. So why buy a lottery ticket in the form of ultra-
deepwater wild cat drilling on a block with no evidence of commercial hydrocarbons at a
nearly $1 billion per well evaluation over a low risk, high return investment in stock
buybacks and sell tenders, you have been granted Directorships of both Eco and JHI in
addition to Africa Oil, how can you justify this as a sound allocation of shareholder capital?
And I have a follow-up. Thanks.

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Date: 2021-08-17

A - Keith C. Hill {BIO 3881022 <GO>}

Yeah. I think your math is a bit wrong. I think we had pre-money evaluation of about $200
million that we invested on. And again, it was a pretty small amount of money that we
actually ended up putting in ourselves. But I do appreciate that exploration is not
something that is in real focus right now. But if you -- Guyana is one of the few places that
we do see as a potential huge upside. If you look what our friends at Exxon and Total have
done just to the south of us in Guyana and Suriname, this is the number one place on
earth to find oil and gas.
FINAL

Now you're right, we have drilled two dry holes. We drilled -- there was one drilled before
we came in one drilled after and the first one I think we understood quite well. The second
one does feel a little bit puzzling. It had all the things we wanted from a geophysical
standpoint and we're looking at that now. There's a third well just about to be spud and
again we were carried for the first two wells, the next one we started paying our own share
of those wells. But again that company has now $50 million in the bank and that is quite
well funded.

So I think while I appreciate that not everybody is focused on exploration, there is no

place on earth that you're going to get more value for your buck than drilling exploration
wells. And I think being embedded with the guys that understand, Exxon is the operator,
Total is the major partner, those are the two guys that understand the play better than
anyone. So I do think exploration has a place. I don't think we've committed huge
amounts of money to it in the future. In fact, I think for now, we're pretty well fully funded.
Our exploration, this was a special circumstance that allowed us to get into the Canje
Block which I still think is probably one of the best blocks in Guyana and I'm quite happy
that we're in there.
Bloomberg Transcript

But I appreciate your comments and I know you had sent out an email that we've read
before and I do think there's a -- you're not a lone voice that says exploration is probably
something we don't want to be spending a lot of time and money on. But I will point out
Shell today just announced that they're putting $1 billion in exploration in the Gulf of
Mexico. So for those companies that have a little bit longer -- long-sighted long-term plan,
a lot of majors are spending a lot of money and effort in Africa and in South America both
in Brazil, Guyana and West Africa exploration. So I don't think our day as an explorer is
gone. I think there still is a lot of upside to be had.

Q - Analyst
Thanks. Follow-up, I guess question for Pascal. Any idea of the timing of the distribution of
the OML 127 settlement proceeds from Equinor? And I guess I'm also wondering about
increasing the principal balance of the RBL debt, which is fairly low now? And yeah,
thanks.

A - Pascal Nicodeme {BIO 21222906 <GO>}

Yeah. So the question on the Agbami deposit, but at the moment the deposit sits with an
entity in Nigeria, and we need to clear any taxes that would be due on that deposit before
we move it. So we don't expect any payment, especially any dividend payment in the
short-term on that deposit. So at the moment it is just sitting in Nigeria and we will serve

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 Company Name: Africa Oil Corp
Company Ticker: AOI CN Equity
Date: 2021-08-17

as working capital to Prime and we don't expect any short-term dividend from it. So, that's
the answer.

In terms of the RBL as Keith mentioned, I mean, we can't refinance the RBL, extend it or
increase it until we have clarity on the license renewal. So I think the priority will be to first
get the license renewed and of course, the passing of the PIB is certainly good news, and
that's the first step in getting the license renewed. And once the license has been
renewed then we will aim at refinancing that RBL facility and potentially increase it back to
FINAL

an amount that was closer to the $1.8 billion that it was originally.

Q - Analyst
Pascal, this is Sean. Just wanted to ask for one clarification, the monies with the Nigerian
entities, but it is actually an offshore accounts outside Nigeria, is that correct?

A - Pascal Nicodeme {BIO 21222906 <GO>}

Yes, it's correct.

Q - Analyst
Okay. Thank you. One more if you time. Sorry, I was wondering about the gas offtake
agreements and how should we model revenues, prices and volumes for future payments
from Nigeria?

A - Keith C. Hill {BIO 3881022 <GO>}

Yeah. That's a good point. I mean, well Shahin do you want to take the question?
Bloomberg Transcript

A - Shahin Amini {BIO 21222913 <GO>}

Yes, of course. And in terms of first sort of looking in our announcement, we did say that
there were three years of accrued sales revenue from July 2018. So this year, obviously
we're getting a nice big check and net to Africa Oil, it's around $20 million, that's the
receipt, which is good. But moving forward, I would just say in a ballpark figure, for the
next couple of years, if you were to be looking at the current -- our current estimated
production profiles, we expect anywhere between $8 million to $10 million of revenues
and that's Africa Oil. So it's not the cake, it is the icing on the cake, right. So obviously, the
real cash generator is going to be the oil production. And in terms of gas price then you
will be looking at less than a dollar in Mcf, so we'd be looking around $0.70 to $0.80.

Does that answer your question?

Q - Analyst
Net you said $35 million in revenue, $21 million net for fast production. Is that net -- or net
of --

A - Shahin Amini {BIO 21222913 <GO>}

Yes. Well, just very quickly. So the $20 million would be then net of tax and other costs.

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 Company Name: Africa Oil Corp
Company Ticker: AOI CN Equity
Date: 2021-08-17

Q - Analyst
Perfect. Thanks.

A - Shahin Amini {BIO 21222913 <GO>}

Okay. Well, everyone, we've just got a couple of minutes left. So I'm just going to go back
to an email I have from James Hosie, and well, actually, no. I'm not, because Pascal, just
realized you've answered that question as well, it was on the Agbami redetermination.
FINAL

Look, as we're running out of time, I just want to take this opportunity to thank everyone.
And I think it has been very good interaction both on the call, through email and on the
webcast. But alas, we have run out of time. I will reach out to those who have submitted
questions and we haven't had time to answer. But at this time, I ask any Anita to bring the
call to a close.

Operator
Thank you. This concludes today's call. Thank you for your participation. You may now
disconnect.

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Bloomberg Transcript

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