Annual Report and Financial Statements 2022
Responsibly supporting
the energy transition
for the benefit of all
www.afentraplc.com
Image credit: STAPEM Offshore
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Group Accounts
Independent Auditors’ Report
Consolidated Statement of
Comprehensive Income
Consolidated Statement of
Financial Position
Consolidated Statement of
Changes In Equity
Consolidated Statement of
Cash Flows
Company Statement of
Financial Position
Company Statement of
Changes In Equity
Company Statement of
Cash Flows
Notes to the Financial Statements 95
Appendices
Definitions and Glossary of Terms
Professional Advisors
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118
Introduction
2022 Summary
Overview
Purpose
Afentra’s Approach
Chairman’s Statement
Strategic Report
Market Review
Geographic Focus
Business Model
Chief Executive Statement
Criteria for Value Creation
Asset Summary
Sustainability
Business Risk
Our Stakeholders
Financial Review
Corporate Governance
Board of Directors
Statement of
Corporate Governance
Audit Committee Report
Nominations Committee
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Remuneration Committee Report 65
Extractive Industries
Transparency Initiative
Directors’ Report
Statement of Directors’
Responsibilities
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1
Introduction
Afentra plc (‘Afentra’ or the ‘Company’), together with its subsidiary undertakings (the
‘Group’), is an upstream oil and gas Company listed on the AIM market of the London Stock
Exchange (AIM: AET).
In Somaliland, the Company
currently retains the onshore
Odewayne exploration block that
is operated by Genel Energy, where
its 34% interest is fully carried.
The Company has a
strategy built around
achieving scale through the
acquisition of operated and
non-operated production
assets and discovered
resources resulting from
the accelerating energy
transition in Africa, where
the Company and its
management has extensive
technical, operational and
commercial experience.
Afentra signed two foundational
Sale and Purchase Agreements
(‘SPA’) in Angola, during the
calendar year 2022, with Sonangol
Pesquisa e Producao S.A.
(‘Sonangol’) and INA-Indstrija Nafte
d.d. (‘INA’) to establish a producing
asset base. Progressing these
transactions over the course of the
year ultimately led to our official
entry onto Blocks 3/05 and 3/05A
(with 4% non-operated interests),
offshore in the Lower Congo Basin,
in May 2023 following completion
of the INA transaction.
2Afentra plc Annual Report and Financial Statements 2022 The themes identified as catalysts for the Company’s strategy at launch
have unfolded as we anticipated, with the events in Europe resulting in
some of these themes being as pertinent in Europe as they are in Africa.
Industry and economic market volatility in 2022 (discussed further in
our Market Review) has shifted the narrative on energy transition beyond
just purely climate issues and towards social and energy security impacts
typically associated with developing nations (such as those in Africa) but
now heavily felt across the developed European continent.
The confluence of macroeconomic indicators and the beginnings
of an industrial transition of ownership emerging in West Africa – as
International Oil Companies (‘IOCs’) and National Oil Companies
(‘NOCs’) seek to rationalise portfolios – provides a strong tailwind for
responsible independents with proven operational track records and
best-in-class environmental agendas, like Afentra, to serve a critical role
in this transition while delivering value creation for all stakeholders.
3 2022 Summary
Strategic
• Signed SPAs to acquire non-operated interests from Sonangol
and INA in the producing Block 3/05 (24%) and adjacent
Block 3/05A (4%) offshore in the Lower Congo Basin, and a
40% non-operated interest in the underexplored, deepwater
exploration and appraisal Block 23 in the Kwanza Basin.
• Reverse takeover (‘RTO’) announced under Rule 14 of the
AIM Rules to acquire non-operated interests from Sonangol
in Block 3/05.
underscores Afentra’s confidence in Angola as an attractive
operating and investment jurisdiction.
• Strengthened organisation with recruitment of high calibre
talent into financial, technical and sustainability roles.
The team remains small and focused with a history of
identifying and acquiring high-quality assets and for rapidly
assessing business development opportunities technically,
operationally and commercially.
• Publication of Admission Document on 10 August
• Continued to efficiently screen and evaluate compelling
2022 lifting the suspension of shares in Afentra post
announcement of the transactions. Shareholder approval
received on 30 August 2022.
• Key stakeholder engagement across governmental,
regulatory authorities and industry counterparties
M&A opportunities in line with the Company strategy.
•
Investor outreach and marketing, appealing to new
institutional and high net worth investors
• Strengthened Afentra’s profile within industry as a credible
counterparty of choice.
Cash resources net to the Group at 31 December 2022
excluding restricted funds of $10.2 million
$20.4 million
(2021: $37.7 million)
Adjusted EBITDAX2: Loss for the Group
$5.2 million
(2021: $2.0 million loss)
Financial
• Entered into financing agreements with Trafigura PTE
(’Trafigura’) in relation to financing the Sonangol and INA
Acquisitions, including a Reserve Based Lending (‘RBL’)
and revolving working capital facility:
• 5-year RBL facility with up to $75 million available to
finance the Acquisitions (8% margin over 3-month Secured
Overnight Financing Rate (‘SOFR’));
• Revolving working capital facility for up to $30 million to
finance asset funding requirements between crude offtakes
(4.75% over 1-month SOFR).
• The Company also entered into an offtake agreement
with Trafigura for Afentra’s crude oil entitlement lifted
from the Acquisitions.1
• The Group remains fully carried for Odewayne operations
(Third and the Fourth Period).
1 Subject to the terms of the Trafigura offtake agreement
2 Defined within the definitions and glossary of terms on pages 116 and 117
3 Afentra share of stock-in-tank at completion
4Afentra plc Annual Report and Financial Statements 2022 Operations
• Progressing the Angolan transactions to acquire interests
in Blocks 3/05 and 3/05A (from Sonangol and INA), and an
interest in Block 23 (from Sonangol).
•
Independent ESG due diligence conducted as an integral
part of the Block 3/05 and 3/05A assessment. On signing
the SPAs, Afentra moved from the due diligence stage
to forming a detailed understanding of the assets and
potential options to reduce emissions.
• The Company continued to support the Operator of the
Odewayne block in Somaliland, in progressing the technical
understanding of the block; and continued to review its
technical assessment and outlook on block prospectivity, as
well as contributing to the drought relief program.
Post year end
•
•
In January 2023, Afentra received approval from the
Ministry of Mineral Resources, Oil and Gas for the
acquisition of INA’s 4% interests in Blocks 3/05 and 3/05A.
In March 2023, Afentra extended the long-stop date from
31 March 2023 to 30 June 2023 in order to facilitate
completion of the Sonangol transaction, which is expected
in June 2023.
• On 14 April 2023, the Company and the other Block
3/05A contractor group members received a letter
from ANPG informing us that it had decided to terminate
the interests of China Sonangol International (‘CSI’) in
the Block 3/05A production sharing agreement and it
intendedthat CSI’s interests in the block would revert to
ANPG. If this decision is implemented, the Company
will not acquire the additional 1.33% interest in Block
3/05A attributable to the CSI interests that we would
otherwise have acquired from INA. The contractor group
members are currently seeking clarifications from ANPG
on their decision.
• On 10 May 2023, Afentra announced completion of the INA
acquisition to mark its formal entry into Angola, including
the following completion settlement figures:
• Net completion payment of $17.0 million with Afentra inheriting
crude oil stock of 207,868 bbls3 that can be valued at $16.6
million (based on $80/bbl) on a pre-tax basis.
• $10 million set aside into an escrow deposit account held by
Citibank, which will be paid to INA after the Block 3/05 licence
extension is formally completed.
• Net upfront consideration and escrow deposit to be funded by
$18.9 million from the agreed RBL and working capital facilities
and $8.1 million from cash resources.
• $21.9 million in total debt drawn (RBL and working capital
facilities), which includes $2.9 million in financing costs.
• The Company expects to sell its first cargo of crude oil in Q3
2023, thereby monetising the inherited crude oil stock and
subsequent production.
• Trafigura has transferred both the RBL and working capital
facilities to Mauritius Commercial Bank who will now be the
lender to the Company. Trafigura retains an interest in the RBL
facility and will continue as offtake provider.
• Furthermore, in May, the Block 3/05 JV partners agreed
terms to extend the licence from 1 July 2025 to 31 December
2040. This includes improved fiscal terms that strengthen
the economics of the permit. The process for formal
administration of the licence extension has commenced and
the Company awaits the conclusion of this process.
• Finally, Afentra completed an updated Competent Persons
Report (‘CPR’) on Block 3/05 effective 1 January 2023,
estimating 1P/2P/3P reserves of 72/108/145 mmbbls (gross)
and 2C resources of 43 mmbbls (gross).
5 Overview
Year ended 31 December 2022
Afentra plc Annual Report and Financial Statements 2022
6 7 Purpose
Effecting sustainable change
Our purpose remains to support the African
energy transition as a responsible, well
managed independent, enabling the continued
economic and social development of African
economies and bridging the gap to other/
renewable forms of energy.
Our enabling role in this connected energy ecosystem is to access, redevelop and unleash the full potential of
existing producing fields or undeveloped discoveries that no longer fit portfolios of major companies. We will
do this in a safe, responsible and sustainable manner. By investing in the region, empowering our people and
working with our partners, we can positively impact local economies and deliver significant economic returns
to all stakeholders.
Mission
Our mission is to be the trusted partner of both IOCs and host governments in the divestment of “legacy”
assets. By managing these assets responsibly, we turn these fields or discoveries into profitable assets by
applying focus, innovation, efficient operating practices and smart commercial arrangements. We use our
approach to unleash the full asset potential whilst also reducing carbon emissions, promoting growth through
employment and facilitating socio-economic development.
Defining legacy assets
Producing fields or undeveloped discoveries that:
• May no longer fit with a company’s strategy in Africa
• May need investment, regeneration or upgrading
• May be sub-economic for larger companies
8OverviewCorporate GovernanceStrategic ReportGroup AccountsAfentra plc Annual Report and Financial Statements 2022 Our cultural framework
Afentra’s cultural framework outlines our core principles, philosophies and values that guide our behaviours
and enables us to drive our business forward and deliver on our purpose.
Principles
Values
Approach
Impact
These define our core beliefs
that connect and resonate
strongly with the personal
values of the Afentra team and
those that work alongside us:
These build on our principles
and define how we all behave.
They describe qualities we
always strive for and consider
as the right way to do things:
This defines our core
operating philosophy and
business approach and is
heavily influenced by our
principles and values:
Afentra’s positive impact will
be driven by these principles,
values and approach:
Be respectful
Be transparent
Be inclusive
Be authentic
Inspire
Bring passion and energy
to engage and inspire those
around us
Collaborate
Openly share knowledge
between teams and individuals
Enquire
Think creatively and
constructively challenge the
status quo
Innovate
Be courageous, ambitious,
navigate risk, try, learn and
improve
Think long-term
Work towards the long-term
sustainability of the business
One team
Dynamic, committed and
responsible
Create solutions
Encourage innovation and seek
out opportunity
Positive difference
Changing things for the better,
leaving a positive legacy
Enduring value
Delivering enduring value for all
investors and stakeholders
Leverage learning
Diverse and inclusive approach
that values each others ability
and expertise
Focused and nimble
Stay agile, lean and non-
hierachical
Our framework provides a strong foundation that supports our vision, guides our behaviours and influences
the impact we make on the world around us.
9
Overview
Afentra’s Approach
Supporting the exit strategies
of IOCs, ensuring responsible
transition for host governments
Afentra’s objective is to turn legacy producing fields and discovered resources
into profitable assets for Afentra and all of our stakeholders.
Committed to shareholder returns within
a responsible ESG framework
We target high quality assets that have
stability of earnings and implement
best in class fit-for-purpose margin
enhancing operating techniques.
With the ESG agenda embedded
in our mindset, we have a business
model tailored to generate significant
long-term value for all stakeholders.
Credible counterparty with access to capital
and proven operator experience.
Track record of responsible approach and
partnership with host countries.
Process creates long-term value for all stakeholders through effective transition.
10Corporate GovernanceStrategic ReportGroup AccountsAfentra plc Annual Report and Financial Statements 2022 International Oil Companies
• Safe, efficient and smooth transfer
of assets
• Trusted counterparty with financial
and operating capacity
• Experienced partner acceptable to
host governments
Stakeholder objectives
Host Governments/National
Oil Companies
• Commitment to positive socio-
economic and environmental
outcomes
• Responsible stewardship and
investment in assets
• Continued benefit of O&G
revenues to support longer-term
sustainable transition
Asset
e
u
a
v
l
Quality production assets and
discovered resources with
potential to realise upside and
deliver material cashflow.
11 Chairman’s Statement
A year of material strategic
progress for Afentra
Dear Shareholders
I am pleased to report on a year of material strategic progress by Afentra.
During the year the Company identified and agreed target transactions in Angola in line with our stated strategy.
The transactions announced represent a first step towards Afentra achieving its longer-term growth objectives
and will transform the business into a cash generative company underpinned by strong, reliable cash flow and
proven reserves with material upside potential.
Through executing deals in Angola, Afentra is entering one of the core target markets identified at launch. It is an
O&G jurisdiction that is consistent with our desired parameters in terms of numerous viable opportunities in a
material hydrocarbon province, strong industry framework and supportive operating and fiscal environment.
Energy crisis highlights
Afentra’s purpose
The market experienced a rapid increase
in commodity pricing through H1’22 due
to the events in Ukraine which squeezed
supply and fuelled a global energy crisis
in which energy security was front of
mind the world over, and especially
in Europe given dependence on
Russian gas. This situation was further
exacerbated due to years of industry
under-investment. Commodity prices,
particularly gas, have subsequently
returned to more normalised levels as a
result of a warmer than expected winter,
however the longer-term impact of the
energy crisis remains as governments
across the globe recognise the
importance of continued supply visibility
to ensure energy security.
The impact of the crisis has undoubtedly
created a more pragmatic conversation
on the structure and speed of what a
responsible energy transition should
look like and has underscored the
requirement for continued investment
into the oil and gas supply side to avoid
a recurring energy crisis. Indeed, BP’s
outlook highlights the need for continued
industry investment given fossil fuels
will continue to be at least 20% of global
energy mix as far out as 2050. In this
context, we believe there is a greater
emphasis on the importance of mature/
later life assets to be managed efficiently
to maintain supply and mitigate
environmental impact where possible.
In light of this backdrop, Afentra’s
purpose has become even more
relevant as the industry has a
growing requirement for responsible
counterparties to acquire assets being
divested by IOCs/NOCs. Our thesis of
12OverviewCorporate GovernanceStrategic ReportGroup AccountsAfentra plc Annual Report and Financial Statements 2022 “Capital discipline remains a core priority for Afentra as we seek to maintain a
healthy balance sheet underpinned by strong free cash flow.”
a nascent and opportunity rich industry
transition in Africa is playing out and
we anticipate this will accelerate with
compelling opportunities continuing to
come to market in the coming years.
The core ingredients to enable this
critical industry transition continue
to be the requirement for qualified
buyers with proven operating track
records and a commitment to best
in class environmental agendas. The
essential ingredient to deliver a just
transition and avoid a more severe
and prolonged energy crisis across the
world is the continued investment into
hydrocarbon supply, and specifically
into the independent companies like
Afentra that will serve a critical role in
this transition.
Angola – a market of long-term
opportunity for Afentra
Entry into Angola provides long-term
opportunities – both in terms of the
assets being acquired as well as new
opportunities that present themselves
as the country continues to evolve
through the industry transition. The
market dynamics are encouraging
and the increasingly stable political
backdrop, supported by the re-election
of President João Lourenço for a second
term last year, provide confidence that
Angola is an ideal jurisdiction in which to
begin Afentra’s journey.
country’s industry regulator, National
Agency for Oil, Gas and Biofuels
(‘ANPG’), recognises the need to preside
over an attractive economic and fiscal
regime in order to encourage foreign
investment into the industry and
demonstrates this through a pragmatic
and engaging approach to fiscal terms
and licence extensions.
Based on our engagement to date,
and our assessment of the industry
landscape in-country, the Board believes
Angola will provide the ideal backdrop for
Afentra to deliver long-term growth. In
parallel, we will be making efforts to enter
complementary target markets across
West Africa that provide similar industry
dynamics and opportunities to deliver
our strategy.
The Company has a strong desire to
be a quality partner to Sonangol – and
other stakeholders – and is aligned on
Angola’s primary objectives to deliver
a responsible energy transition that
enables their people to continue to
benefit from the positive socioeconomic
impact of hydrocarbon revenues.
Engagement with Sonangol to date
highlights their pragmatism to partner
with smaller independents like
Afentra which provides a good basis
for partnership going forward and
demonstrates the value of positioning
the Company as the consolidator/
acquirer of choice. Furthermore, the
13 Chairman’s Statement
continued
Managing the business with clear
Strategic Objectives
We believe the past year of volatility
has created a more supportive
tailwind for the delivery of Afentra’s
long-term growth strategy. The Board
remains wholly focused on its strategic
objectives as it seeks to achieve a
balance between creating shareholder
value alongside positive impact for our
broader stakeholders.
Capital discipline remains a core priority
for Afentra as we seek to maintain a
healthy balance sheet underpinned by
strong free cash flow. Longer term the
Company hopes to establish a cash
flow profile that allows for meaningful
shareholder returns in the form of
dividends but the Company is firmly in
the capital growth phase at present and
will define a longer-term dividend policy
in due course.
The opportunities being targeted by
our Company have a common theme
in terms of being value accretive and
providing considerable scope for Afentra
to improve operational performance
by optimising production and reducing
environmental impact. Targets being
screened are a combination of operated
assets as well as non-operated assets,
such as those being acquired in these
initial transactions, that enable Afentra
to bring its technical expertise to the
table to positively influence asset
performance.
The deals in Angola demonstrate
the value uplift that can be achieved
through focused execution of the
M&A strategy and that discipline is
applied to all aspects of Afentra’s
asset selection, valuation modelling
and structuring to ensure they deliver
long-term value to shareholders. This
discipline is particularly important in
a volatile market and it is pleasing to
see that volatility easing, creating a
more stable environment to deliver our
M&A strategy with sensible valuations,
motivated sellers and a more positive
sentiment for investment.
Despite industry and economic
market volatility through the period,
Afentra successfully secured the
funding required to finance these
transactions without the need to raise
equity – an important priority in order to
demonstrate commitment to creating
value for the Company’s shareholders.
Board of Directors
As previously announced to the market,
we will be evolving the Board as the
Company grows to ensure we retain the
right balance of expertise, diversity and
independence befitting a company of
Afentra’s stature and ambition.
The Company launched a process to
secure an independent Non-Executive
Director and Audit Committee Chair in
Q4 2022. Unfortunately, the candidate
identified for the board position has
subsequently been unable to accept
the appointment. As a result, the Board
has relaunched its search process and
we expect to finalise an appointment
during 2023.
14OverviewCorporate GovernanceStrategic ReportGroup AccountsAfentra plc Annual Report and Financial Statements 2022 to executing these transformative
Angolan transactions – and the hard
work undertaken to “hit the ground
running” this year.
I’d also like to thank our shareholders
for their continued patience throughout
what was a lengthy suspension period
associated with the RTO process and
appreciate their ongoing support.
The Board is confident that it has laid
the necessary groundwork this year to
deliver on its long-term objectives and
that the more stable macro environment
we are experiencing presently creates
a positive industry backdrop for the
Company to achieve its goals.
Jeffrey MacDonald
Chairman
15 May 2023
Outlook & Conclusion
Having completed the INA transaction
in May 2023 (and await completion
of the Sonangol transaction), we are
eager to get to work on the ground. The
Company is looking forward to bringing
our technical and environmental insights
to our new partners. The completion
of these transactions will add another
strategic priority to the Company as we
focus on delivery at asset level alongside
the continued disciplined approach to
business development.
Afentra remains active in the M&A
market and the executive team continues
to screen opportunities consistent with
the growth strategy as we seek to build a
company of scale and relevance.
In summary, this has been a year of
significant strategic progress that leaves
the Company well placed to take strides
towards its ambitious growth objectives.
I’d like to commend the Team, under our
CEO, Paul McDade’s trusted leadership,
for their patience, and diligent approach
15 Strategic Report
Year ended 31 December 2022
16TitleSub TitleAfentra plc Annual Report and Financial Statements 2022 17 Market Review
The need for a fair and orderly
energy transition is even more
apparent today than at Afentra’s
inception in 2021
Since Afentra’s inception in 2021 we have
witnessed a marked shift in sentiment
and a growing acceptance that oil and gas
demand will remain resilient and continue
to be a critical component of the global
energy mix despite the structural
evolution of the global energy system
towards a lower carbon future. The
significant price increases seen in 2022,
following the invasion of Ukraine, and
the resulting socio-economic impacts
experienced in Europe and beyond have
sent a clear signal for the ongoing need to
invest in the oil and gas sector to ensure
global energy security. This is likely to
partially reverse the significant reduction
in investment which was triggered by
the oil price downturn in 2014/15 and
sustained due to a shift towards lower
carbon energy.
The themes we identified as catalysts
for the Company’s strategy at launch
are unfolding as expected and have
become even more pronounced in the
past year following the impact to the
structure of the energy market and
elevated prices caused by Russia’s
invasion of Ukraine. The core theme
presented by Afentra was the need for
a fair and orderly energy transition that
does not deprive developing nations of
revenues to deliver essential socio-
economic development. This idea has
become more mainstream in 2022 due
to the focus on maintaining stability
and security of energy supply in the
face of a volatile geopolitical backdrop.
The need to balance the impact of
climate change and socio-economic
consequence, typically associated with
developing nations such as those in
Africa, is now a key consideration in the
developed continent of Europe. We have
seen the unintended consequences of
Western government policy resulting
in countries burning more emissions-
intensive coal or a return to biomass
due to both the supply and price issues
associated with gas and LPG.
These global shifts in the energy
markets have resulted in changes
to the energy transition strategies
of leading global IOCs and NOCs.
However, a key part of these strategies
continues to be the divestment of
non-core, often higher carbon footprint
assets, particularly in the upstream.
Afentra was formed to be positioned
at the heart of the dislocation between
climate/impact-led investment and
the socio-economic needs of African
countries. We aim to continue to focus
on providing a solution by acquiring and
responsibly managing existing oil and
gas assets while creating significant
value for all stakeholders.
18OverviewCorporate GovernanceStrategic ReportGroup AccountsAfentra plc Annual Report and Financial Statements 2022 Africa
As we assess the wider African
continent in the context of the energy
transition, a key theme to emerge from
2022 was that of a “Just Transition” for
the continent, or Global South: countries
that have historically contributed the
least in terms of GHG emissions having
their socio-economic development
restrained as they are denied access to
essential revenues from their proven
reserves of natural resources. This
theme grew with momentum following
COP26 in Glasgow (November 2021)
and further throughout industry
conferences in 2022, not least at the
African Energy Week in Cape Town.
There is now a growing recognition that
the African Energy Transition needs to
be carefully managed, with oil and gas
playing a crucial role in the provision of
much needed national revenues, energy
access and security; and combined
these elements should continue to
positively impact the socio-economic
development across the African
continent. This is critical as millions of
Africans still suffer from energy poverty,
with 2022 seeing the first rise in the
number of people without access to
electricity in decades, with the problem
most severe in Sub-Saharan Africa
where ~43% of the total population lack
access to electricity according to the
IEA’s Africa Energy Outlook 2022.
“The themes we identified as catalysts
for the Company’s strategy at launch
are unfolding as expected.”
19 Market Review
Material opportunity set in Angola for
nimble, credible independents
Angola
Angola is a prime example of a
jurisdiction that has laid strong
foundations in recent years to becoming
an attractive destination for investment
in oil and gas and we are delighted to
establish our business here through
the acquisition of our foundational
assets in Blocks 3/05, 3/05A and 23.
We welcome the stable (and improving)
fiscal and regulatory environment
which we believe is supportive for
credible, reliable independents to
deliver a positive impact through
optimising production and improving the
environmental profile of existing assets.
Allied to the country’s exceptional
resource base – Angola rivalled Nigeria
as Africa’s largest oil producer over the
course of 2022 at 1.1 mmbbl/d from a
proven reserve base of over 9 bnbbls – is
a stable macroeconomic and political
environment, reflected in an improved
stable credit rating (B- Fitch) with a
positive outlook from the major credit
rating agencies. The economy continues
to evolve as the recently re-elected
administration of President Lourenço
implements reforms designed to
continue the improvements to the policy
and investment environment seen since
2017. In 2022, GDP grew by 2.9% and
the IMF predicts sustained broad-based
growth of 4% in the medium-term.
These efforts have already led to
key policy reforms and industry
restructuring, including but not limited
to: rationalisation and divestment of
some of NOC Sonangol’s portfolio
to focus on core business units and
assets; the creation of ANPG assuming
responsibilities previously held by
Sonangol across upstream regulation
and public tendering of licences;
amendment of presidential decrees and
enactment of new laws to help maximise
growth in existing assets by improved
fiscal terms and license extensions;
finally, a planned 6-year licence round
to auction 50 new blocks between
2019-2025. To date, these reforms have
unleashed significant investment into
flagship IOC-operated projects in Blocks
0, 14, 15/06, 17, 31 and 32.
From a transparency perspective, in
June 2022 Angola joined the Extractive
Industries Transparency Initiative
(‘EITI’) as an implementing country
which with the required information
will lead to being formally validated
by 2024. Angola is a signatory to the
World Bank Zero Routine flaring (ZRF)
by 2030 initiative and in 2021 updated
its NDC to the UNFCCC committing to
an unconditional reduction in GHG by
up to 14% by 2025.
Accounting for ~75% of government
revenues, the oil and gas sector
remains a key driver for socio-
economic development and
an essential source of funding
for improving domestic energy
infrastructure to deliver a fair transition,
further incentivising policymakers to
support the sector and drive domestic
and foreign investment.
With IOCs and Sonangol continuing to
rationalise portfolios – to both pursue
their own transition strategies and
allow for a focus on core assets and
development of until now stranded
discoveries – this presents a material
opportunity set for nimble, credible
independents with the local knowledge
and established network to acquire
non-core assets, and is itself an
encouraging validation of Afentra’s
founding strategy.
20OverviewCorporate GovernanceStrategic ReportGroup AccountsAfentra plc Annual Report and Financial Statements 2022 oil and gas will play over the coming
decades as the world continues its
efforts to transition to Net Zero, as
acknowledged (again) by the IEA,
which advocates for dual investment
in hydrocarbons and renewables to
deliver a successful energy transition.
To sustain global oil and gas demand
alone, investment into upstream oil and
gas will need to grow annually by 50%
on average ($470bn in aggregate per
annum) relative to recent years under
the IEA’s STEPS scenario.
In a changing industry landscape where
capital markets return to acknowledge
the continual need to invest in our
sector (and the financial and social
consequences of a failure to do so), we
believe that Afentra is well positioned
to succeed.
Commodity Market and
Global Macro Review
2022 was an important year for the
energy sector, marked as much by
the continued progress of the energy
transition across the developed world
as by the ructions to the structure of
the market and elevated prices caused
by Russia’s invasion of Ukraine. At
the same time, as global economic
activity rebounded post-Covid, further
supported by China’s re-opening in
late 2022, a combination of supply
problems – exacerbated by decades
of underinvestment in upstream
projects and infrastructure – and rising
demand for oil and gas has delivered
a consistently high commodity price
environment with Brent averaging just
over $100/bbl and hitting a high of
$133/bbl in 2022.
These trends are set to persist: the
Bloomberg analyst consensus forecast
for Brent is around $90/bbl for 2023
and through the first half of 2024,
while the IEA’s World Energy Outlook
forecasts global demand for oil growing
until the mid-2030s. As an example,
within this report, the Stated Policy
Scenario (‘STEPS’) forecasts global oil
demand increasing by 8 mmbbl/d by
2030 while production from existing
fields falls by 18 mmbbl/d; this highlights
a distinct shortfall in production that
must be addressed in the context of
the transition and an increased focus
on energy security in light of the
Russia-Ukraine crisis.
Given the urgency of increasing supply
to meet demand and to diversify global
supply away from Russian barrels,
looking to enhance optimisation of
production from existing fields is
a natural direction of travel for the
upstream sector, and this can come via
smart application of technology and
other enhanced recovery techniques.
In parallel, the energy transition is
also highlighting the need to apply
similar techniques to improve the
environmental profile of assets.
Energy security, affordability and
reliability have become increasingly
topical subjects borne out of a global
energy crisis and rampant inflation
in 2022 that emerged from sharp
volatility in commodity prices. What has
clearly emerged is a more pragmatic
conversation on the crucial role that
21 Geographic Focus
Significant opportunity to drive
responsible growth and prosperity
for all stakeholders
African Oil & Gas industry: early stages of transition
Africa’s strong economic growth alongside its growing population underpins our belief in the continent’s long-term oil and gas
demand despite the structural evolution of the global energy system. We see a significant opportunity to drive responsible
growth and prosperity for all stakeholders. Our strategy is simple – we only focus on proven hydrocarbon basins where fields
have been discovered or are currently producing. The significant value opportunity for all stakeholders is clear and Afentra is
determined to unlock this potential efficiently, economically and in a responsible manner.
Afentra was created to take advantage of this transitional opportunity in the African market, emulating the successful
precedents set in the Gulf of Mexico and the North Sea.
Angola is one such proven hydrocarbon basin within West Africa where opportunities of different maturities abound. With a
supportive governmental and operational environment, Afentra’s Management Team identified Angola as an attractive jurisdiction
to establish a core presence through our foundational transactions. We see a wealth of near- and long-term organic and inorganic
production and development opportunities in-country and will continue to treat Angola as a core geography and growth platform.
Meanwhile, with opportunities pertaining to a transition of industrial ownership, scale, know-how and industry relationships, we
believe that we can execute similarly value accretive transactions in other attractive business environments across West Africa.
Therefore, we do not intend to limit our focus on Angola alone and will continue to seek entry into a second anchor country within
West Africa to diversify and provide an attractive portfolio effect.
Africa and the case for a ‘just’ transition
• Hydrocarbon revenues are central to many African countries driving their socio-economic and industrial development
• Energy poverty has to be addressed alongside any transition to a cleaner energy mix
• A requirement for a new responsible approach to reduce carbon footprint of hydrocarbon assets
• Opportunity for new credible operators to manage an effective and responsible transition for the benefit of all stakeholders
• The African transition will mirror the changing asset ownership landscape of the North Sea seen in recent decades and is
expected to be of a similar duration
There is a need for a responsible approach and an ability to create significant value for all stakeholders from an industry transition that
has just commenced.
22OverviewCorporate GovernanceStrategic ReportGroup AccountsAfentra plc Annual Report and Financial Statements 2022 Prolific oil and gas region
c.100 bn boe
Longevity
>20 years
The opportunity
Afentra’s proposition
Africa remains a prolific oil and gas region with
longevity (c.100 billion boe, 20 years+)
Experienced leadership team with proven track
record and established network in Africa
Early stages of an industry transition providing a
significant M&A pipeline
Industry transition experience combined with ability
to identify, high-grade, acquire and integrate assets
Transition will require credible and responsible
operators to manage and optimise assets
Track record of creating value from operating and
asset redevelopment capabilities
Market evolution and investor sentiment towards
sector requires a new approach
Business model focused on value accretive roll-up of
discovered resources generating strong cash flow
Committed to responsible stewardship to ensure
positive socio-economic and environmental impact
23 Business Model
Committed to investor and broad
stakeholder value creation
Our business model is designed to mitigate geological, political and financial risks to enable Afentra to deliver
sustainable returns to its shareholders in the form of capital appreciation and dividends when appropriate.
1. Assess and acquire
Legacy production assets and proven discovered
resources with material upside
2. Optimise and produce
Applying proven & innovative technologies to safely
optimise production, emissions reduction and lower
running cost of operations
Our focus
Opportunities that:
Are value accretive
Our focus
Emissions reduction
Safe optimisation of facilities
Generate robust cash flow
Generation of healthy returns on investment
Have embedded growth opportunities (whether operated
or non-operated interests)
Performance transparency
Are strategically complementary
Short term
Mid term
3. Reinvest and extend
Reinvest in incremental activities and near field
developments to extend production and field life
4. Retire and convert
Responsible stewardship of asset retirement whilst
seeking low-carbon conversion opportunities
Our focus
Infield, field extensions and undeveloped resource
investment opportunities
Funding further value accretive acquisitions
Workforce and community development
Acceleration of the de-carbonisation initiatives
Our focus
Responsible stewardship
Restoration of the natural environment
Safe decommissioning
Mid term
Long term
24OverviewCorporate GovernanceStrategic ReportGroup AccountsAfentra plc Annual Report and Financial Statements 2022 Afentra’s model is directly aligned to the creation of shared value for all stakeholders. Our proposition will increasingly
meet the specific targets of the United Nations Sustainable Development Goals as we progress from acquisition and
development through to operatorship and production.
Integrating United Nations Sustainable Development Goals:
Supporting developing economies, accelerating sustainable change and transferring value to all stakeholders
Pre-asset aquisition
Drivers of change
Asset development
Changing responsibly
Asset Production
Impactful change
25 Chief Executive’s Statement
Building blocks in place to deliver the
strategy set at Afentra’s inception
Dear Shareholders,
This fiscal year marked the
first full year following the
establishment of Afentra in 2021.
The year was defined as a period of
material strategic progress as we
identified and agreed two transformative
acquisitions in Angola that will provide
a strong long-term growth platform for
the Company. These deals are being
delivered on attractive economic terms
demonstrating our focused commitment
to identify value accretive transactions
for our shareholders, and the value
accretive nature of these deals were
reflected in the share price appreciation
during the year.
We are delighted to have established
Afentra’s profile within the industry and
created a brand now recognised across
our focus region of West Africa as a
competent, reputable, and ambitious
counterparty. We have a high calibre
team with established networks, regional
expertise and ability to efficiently
identify, high-grade and execute value
enhancing transactions.
Paul McDade, Chief Executive Officer
Afentra’s initial transactions provide a
good indicator for the type of assets
that we are targeting and establishes a
foothold in a core market that provides
a multitude of long-term growth
opportunities to go after in parallel with
our broader strategy to build a diversified
portfolio of production and development
assets within our other core target
markets across West Africa. Upon
completion, Afentra will be underpinned
by solid cash flow, meaningful reserves,
and a portfolio where we see material
upside potential in both the immediate
and longer-term.
Angola – an ideal market to enter
with first deals
For Afentra, Angola represents a highly
attractive market that provides many
opportunities consistent with the stated
strategy and which provide Afentra
with the scope to optimise production,
improve ESG performance and deliver
long-term value.
Rivalling Nigeria as the largest producer
by volume on the African continent
last year, Angolan waters hold about 15
Billion barrels of discovered yet to be
produced reserves and resources. The
scale of these opportunities is material
and with a shifting industry landscape
characterised by exiting IOCs/
NOCs, smaller indigenous companies
and limited competition from other
independent companies, Afentra’s early
mover advantage provides a unique
competitive edge to consider and
pursue future opportunities that are
complementary to our initial assets.
At our launch we talked about the
African industry transition as IOCs/
NOCs seek to divest legacy assets
to more focused, nimble and limited
number of independents that can
support the host countries with their
energy transition strategies. This
transition is playing out as we anticipated
in Angola and we continue to screen
opportunities of all sizes.
Angola is one of the African leaders
in adapting its energy strategy to
the changing market conditions of
the global energy transition and has
adopted a very pragmatic approach
through which they recognise the
value and mutually beneficial impact
26OverviewCorporate GovernanceStrategic ReportGroup AccountsAfentra plc Annual Report and Financial Statements 2022 “For Afentra, Angola represents a highly attractive
market that provides many opportunities consistent
with the stated strategy.”
of partnering with the likes of Afentra.
The government is encouraging smaller
independent companies to redevelop
these assets to extend their productive
lives by extending existing licenses and
improving fiscal terms, both of which
enhance the economic attractiveness of
the assets and reduce jurisdictional risk
for foreign investors.
Afentra’s first-hand experience to date
in Angola is that the Government is
responding to the structural changes
taking place in their energy sector
and taking the right steps to ensure
fiscal stability. The continuity of
government through the general
election that took place last year only
serves to strengthen that stability
and underscore Afentra’s confidence
in the general direction of travel for
Angola as an operating environment
and investment destination. The
Governance throughout Sonangol’s
divestment process was thorough
and transparent which was of utmost
importance to Afentra and we are
confident that Angola provides the
right mix of supportive industry and
regulatory authorities to create an
environment that will enable Afentra to
access the required capital to deliver its
strategic objectives in country.
A diverse portfolio with
phased opportunities
The portfolio of assets acquired through
the Sonangol and INA transactions
underpins Afentra with solid and
robust cash flow and material reserves
associated with 3/05, as well as exciting
medium and longer-term potential
associated with 3/05A and Block 23.
To briefly summarise the portfolio, Afentra
is acquiring combined 2P reserves of ~26
mmbbls, 2C resources of ~10 mmbbls
and production of ~4,500 bbl/day. These
highly accretive transactions represent
an overall low-cost entry with implied
acquisition cost of less than ~$4 per 2P
barrel and attractive asset breakeven
economics of $35/bbl. We expect
significant cash flow contribution from
the assets and we estimate payback in
less than 2 years at current oil pricing on
2P production alone.
Block 3/05 is a mature, shallow water,
long-life production asset with material
upside and Afentra will support the
Operator in squeezing the asset as we
seek to optimise gross production in near
term, with the potential to significantly
grow production in the longer term.
There are 100 wells in the block but
only half of those wells are active at the
moment providing opportunity to go in
and redevelop those assets over time.
The asset is high quality and material in
size with about 3 bnbbls of light sweet oil
initially in place (OIIP) in the shallow water
block. The asset is economically robust,
with breakeven at about $35/bbl, and the
upside potential is highly attractive with
every 1% increase in recovery from the
OIIP of 3 bnbbls translating to 30 mmbbls
of additional production.
27 Chief Executive’s Statement
continued
The entry into Block 3/05A also provides
Afentra with access to existing light oil
and associated gas discoveries that could
be tie-back developments to the existing
Block 3/05 infrastructure. Block 3/05A
contains an oil in place of ~300 mmbbls,
including one partially developed and two
un-developed oil discoveries. There is
potential for material incremental gross
production of circa 10,000 bbl/d.
Block 23 represents a longer-term
opportunity for Afentra and contains a
working petroleum system and a small
pre-salt discovery; 95% of the basin is
underexplored, with the potential to be
de-risked using advanced geophysics.
The assets are strategically consistent
with the objectives set out at launch
in terms of providing material scope to
optimise production and unlock hidden
value through an enhanced technical
approach. As detailed in the COO’s
Statement (Sustainability – pages
38 and 40) and the Criteria for Value
Creation sections of the Annual Report,
the environmental footprint of the core
3/05 asset is relatively high in terms of
emissions, thereby providing scope for
another critical strategic objective which
is to work closely with the operator to
understand opportunities to improve
the emissions profile on the assets. The
ability to create value and have a positive
environmental impact at the asset level
are two core criteria of Afentra’s asset
selection process, making these assets
the ideal initial projects through which to
demonstrate our strategy in action.
Given these transactions involve the
acquisition of non-operated positions,
it was important for Afentra to ensure
they were entering a Joint Venture with
a solid operator and supportive partners.
The incremental addition of INA not only
provides Afentra with more exposure to a
high-quality asset but it also increases the
influence we believe we can have on the
JV as an active partner which is a critical
aspect of the strategy; we are delighted
to have announced completion of the
INA transaction earlier in May marking
the inception of our partnership with
Sonangol. Ahead of completion of the INA
and (ongoing) Sonangol transactions, the
Company has held constructive dialogue
with the Operator to provide its technical
insights and outline the work programme
that will be delivered in order to enhance
production and reduce emissions over time.
Building an organisation to
reflect ambition
A key area of focus through the year
was the continued strengthening of
the organisation to ensure we have the
appropriate level of competency and
expertise in all the areas to support
our near and longer-term growth. In
that regard the Company has added
key personnel in financial, technical
and sustainability roles. Pleasingly, the
Company has been able to attract high
calibre talent from the top echelons
of the sector, reflecting the type of
inclusive culture and ambition that we
wish to project at Afentra. The strength
and credibility of our personnel at all
levels of the organisation represent a key
differentiator for Afentra compared with
companies of our current size.
As a result of this strengthening of the
team, we are able to punch above our
weight. This has already been evidenced
through our ability to identify and execute
these complex transactions in an efficient
manner. While the suspension period
associated with the RTO took longer
than we had hoped for as a result of
regulatory and legal complexity, the actual
RTO process was delivered in line with
28OverviewCorporate GovernanceStrategic ReportGroup AccountsAfentra plc Annual Report and Financial Statements 2022 I’d like to thank the Board for their guidance
and insights, my team for their hard
work and diligent professionalism, our
shareholders for their stable support, and
all of our new stakeholders in Angola. We
look forward to updating the market on our
progress through this pivotal year ahead.
Paul McDade
Chief Executive Officer
15 May 2023
expectation thanks to the good work of
our in-house finance and legal capabilities.
I’d like to commend my finance colleagues
on a tremendous job of securing the
financing to execute these transactions
on competitive terms and I have full faith in
their ability to secure future growth capital
as required. Afentra places cost discipline
at the core of everything it does and
adopts a strict commitment to maintaining
a prudent approach to debt and its capital
structure. This unwavering focus on G&A
applies to our business development
philosophy in terms of the highly selective
approach to screening opportunities.
In parallel with the work we will be doing
in Angola, we will continue to screen
compelling opportunities in line with our
strategy. We believe the efforts to establish
Afentra as a credible counterparty of
choice have been successful and we
have built up the internal resources and
capabilities to ensure we can deliver the
next wave of growth in tandem with our
new operational focus in Angola. We are
excited about the opportunities that lie
ahead in Angola, and will be active in other
core target markets if we find opportunities
that deliver the criteria we seek in terms
of creating value and delivering positive
outcomes for all stakeholders.
Exciting times ahead
As we enter our third year as Afentra, we
are very satisfied with the progress we
have delivered. Our first year was about
defining the strategy and identifying our
first deals, and the second year was about
putting in the building blocks to deliver
that strategy and execute value accretive
transactions. This current year will be
truly transformative for the Company as
we complete the Angolan deals and set
about working closely with our partners to
deliver mutually beneficial outcomes for
all the stakeholders.
Following a very volatile year for our
sector and global economies in 2022, we
believe the current backdrop provides
a more stable environment for Afentra
to deliver its strategic objectives. The
more stable pricing environment enables
Afentra to achieve a better balance of
delivering value from its acquired asset
base while also progressing business
development through better industry
engagement and a more supportive
environment for accessing the capital to
deliver inorganic growth.
29 Criteria for Value Creation
Asset identification and
acquisition due diligence
Environmental considerations are an equally important aspect,
as we seek to have a positive impact on the carbon intensity
of any acquired asset, either directly through an operating
approach, or indirectly through influence and alignment with
the Operator of the asset. Afentra asked SLR to conduct an
independent ESG audit of the Block 3/05 assets as part of the
initial assessment. This identified a number of areas that we
can work with the contractor group to improve the emissions
profile of the asset. The team have already identified a number
of emissions reduction opportunities and the next stage will be
to understand the future potential of each opportunity and then
screen, rank and prioritise before influencing the contractor
group to invest to reduce the emissions in line with Angola’s goal
of zero routine flaring by 2030.
The approach to valuation of assets remains a critical aspect
in the delivery of Afentra’s acquisitive growth strategy, and this
has become ever more important in today’s rapidly inflated
commodity price environment. Afentra’s team remains
disciplined in its approach to ensure acquisitions completed in
the current market are value accretive through a long-term lens.
If the asset does not meet our metrics we will not pursue it. With
a core asset now secured we will look for opportunities to grow
further but only if these are value accretive for our shareholders.
In 2022 Afentra continued its focus on asset
identification and detailed due diligence whilst also
building a deep understanding of the Block 3/05
assets. All M&A assets reviewed were located in
Africa, our focus geography. Oil and gas assets have
been reviewed from onshore to the offshore. This
resulted in not only the transaction with Sonangol
in Angola, but also Afentra announced the signing
of an SPA with INA for additional interest in Block
3/05 and also further equity in 3 appraised but
undeveloped discoveries in Block 3/05A.
The graphic provides detail on the high-level considerations that
guide our decision-making, with a particular emphasis on the
technical, operational, above-ground and commercial aspects of
any opportunity. Principally, the focus is to identify assets that are
of scale and provide sufficient scope to enhance value through
improved operating techniques and more creative development
solutions. Upside potential from assets often results from them
being under-invested in, under-developed or poorly developed.
Afentra’s technical and commercial expertise is used to identify
and create solutions to exploit that hidden value and is a key
tenet of the growth strategy.
Block 3/05 and 3/05A demonstrates this strategy in action
with Afentra capturing a low cost, long life, cash flow positive,
production asset at a competitive price. Work in 2022 has
uncovered further opportunities that were not initially identified.
Importantly there appears to be far more low cost, short cycle
opportunities that revolve around sustainable water injection
as well as artificial lift. With our entry into Block 3/05A there are
fully appraised development opportunities that could materially
increase production.
30OverviewCorporate GovernanceStrategic ReportGroup AccountsAfentra plc Annual Report and Financial Statements 2022 Ian Cloke,
Chief Operating Officer
High-level
screening
Detailed
screening
Asset
acquisition
Quality producing assets and
discovered resources
• Empowering workforce to operate
efficiently
• Safely optimising to enhance
margins and reduce Opex
• Opportunity to increase
•
throughput to decrease Opex
Increasing production and
unleashing full asset potential:
18-20 kbbl/d in 2023 with
opportunity to grow to in excess
of 30 kbbl/d by 2027
• Reducing carbon and
environmental impact through
lifespan: Opportunity to reduce
flaring to zero with export solution
• Whilst excluding high risk
exploration and expensive
developments: Only exploiting
already discovered resources
or low risk field tie-backs.
Developments predictable and
low risk and low cost
Subsurface screening
• Material production: 18-20 kbbl/d
• High quality reservoirs and hydrocarbons: Fractured
high quality carbonate
• Untapped resource potential: Multiple near term, low
cost opportunities to infill to discovery tie-in
Technology, innovation and hidden value
• Gap in subsurface solutions: Artificial lift not
deployed
• Development innovations: Low cost monopod
platforms not deployed
• Field extension and legacy discoveries: Infill
opportunities and surrounding discoveries
Operations screening
• Leverage existing infrastructure in 2nd owner life
cycle: 14 platforms
• Asset integrity and lifespan: Investing in water
injection revival and power
Technical
Operational
• Focused well stock and facility upgrade: 100 wells
Above Ground
available
Above ground
• Manageable Non-Technical Risk: Stable jurisdiction
with aligned government. Incentives to invest
• Pursue Operatorship: Collaborative approach with
operator
• Aligned JV partners and stakeholders: Consolidating
equities to align partners
Commercial and risk management
• Material cash flow profile: Stable positive cash flow
• Low cost and complexity of development: Shallow
water low cost operations and developments
• Short cycle portfolio options: Multiple investment
opportunities
Commercial
Italics denote how the
Angolan acquisitions fit into
our screening process.
31 Asset Summary
Angola provides an opportunity to build
a material production and development
business whilst contributing to a
sustainable transition
Block 3/05’s existing PSA expires in 2025. In May, the Block
3/05 JV partners agreed terms and the process for formal
administration of the licence extension has commenced. Key
enhancements include; licence extension from 1 July 2025 to
31 December 2040 and improved fiscal terms that strengthen
the economics of the permit. This extension is a condition
to completing the Acquisition of the Sonangol deal and the
Company awaits the conclusion of this process. To date, the
asset decommissioning costs have been pre-funded.
Block 3/05A Production Sharing Agreement expires in 2035,
having commenced in 2015.
Block 23 exploration license has been extended until 2026
allowing the new contractor group time to agree with ANPG
a work program once the Sonangol divestment program is
completed.
Angola Overview
Our entry to Angola, lays the foundations for a
significant core asset base in West Africa which
we will work to leverage and grow from. These
are high quality, shallow water, production assets
with stable and robust cash flow with material
growth potential. The acquisitions span the E&P
lifecycle from exploration, development through to
a mature production base and deliver a significant
legacy asset set within this highly attractive West
African jurisdiction. Whilst we acknowledge current
emissions are high on this asset, we see significant
scope for improvement across multiple projects
and will work to increase momentum and prioritise
emissions reduction opportunities.
Status of deals
Afentra is progressing its transaction to acquire a 20%
non-operated interest in Block 3/05 and 40% non-operated
interest in Block 23 from Sonangol P&P. A complementary
transaction with INA supplies additional 4% equity in Block
3/05 and 4% in Block 3/05A, which completed in May 2023.
32OverviewCorporate GovernanceStrategic ReportGroup AccountsAfentra plc Annual Report and Financial Statements 2022 Post deal interests
Block 3/05
Company
Sonangol (Op.)
Afentra
M&P
Azule
etu energias
NIS Naftagas
Block 3/05A
Company
Sonangol (Op.)
China Sonangol International
M&P
Azule
etu energias
Afentra
NIS Naftagas
Interest
30%
24%
20%
12%
10%
4%
Interest
25%
25%
20%
12%
10%
4%
4%
Block 23
Company
Namcor – Sequa – Petrolog (Op.)
Afentra
Sonangol
Interest
40%
40%
20%
33 Asset Summary
18,660 bbl/d
Block 3/05 fields averaged in 2022
Block 3/05 (Production)
In 2022 the Block 3/05 fields averaged 18,660 bbl/d from
38 wells with a water cut of ~75%. This is 9% higher than
the 2021 production of 17,080 bbl/d. Looking to 2023 and
beyond, we see significant production and value creation
potential in Blocks 3/05 & 3/05A, through integrating near
term asset integrity revitalisation, infrastructure upgrades and
production optimisation, together with longer cycle brownfield
development opportunities such as in-fill drilling and the tie-in
of undeveloped discoveries. A holistic approach focused on
leveraging existing and upgraded infrastructure including the
potential to tie into the nearby ALNG gas pipeline is key to
unlocking the full potential of this acreage whilst aligning with
Angola’s endorsement of the World Banks Zero Routine Flaring
by 2030 initiative. As shared in the Sustainability section, we
believe there are a large number of potential opportunities for
reducing the relative emissions intensity and will work with the
operator and contractor group to ensure these are prioritised.
Importantly, in the next few years, sustaining current production
levels relies on re-instating and sustaining the waterfloods in
tandem with integrity, maintenance and existing well stock
optimisation projects. These activities are all, low cost, rapid
capital return, activities. Incremental production growth relies
on longer term infill drilling and nearby discovered oil and gas
resources in 3/05A being matured and brought on stream.
History
Block 3/05 offshore Angola lies in the southern Congo Basin.
The block consists of 8 mature fields (Palanca, Impala, Impala
SE, Bufalo, Pacassa, Pambi, Cobo and Oombo) from which first
oil was achieved in 1985, with a combined STOIIP of ~3.2 bnbbls
of which 1.34 bnbbls of oil has been produced to date. Peak oil
production was approximately 200,000 bbl/d in mid-1998.
Block 3/05 lies in 60-100m water depth 37km offshore and is
developed via 4 processing platforms and 17 support structures
interlinked by 220km of subsea flowlines. This infrastructure
enables gathering and separation of all produced fluids together
with water injection and gas lift across the fields. The Palanca
Terminal (Floating storage and offloading facility ‘FSO’) is the
offtake route with a maximum storage capacity of 2 mmbbls.
All production to date has been sourced from the prolific
fractured Albian Pinda carbonate reservoir in southern Congo
Basin. The labe and Malembo reservoirs have yet to be
developed. The depth of the Pinda varies from 2,000-3,500m
and ranges in thickness from 330-480m.
Value creation potential
During the field history water injection was successfully
implemented as an enhanced recovery mechanism across 7
of the 8 fields, reaching a peak rate of ~366,000 barrels water
injection per day (‘bwi/d’) in November 1999. Water injection
slowed and ceased due to lack of maintenance investment in
the oil price downturn of 2015/16. Sonangol has made progress
towards re-instating injection capacity post Covid and are
successfully overcoming a series of aging infrastructure hurdles to
deliver availability improvements across the operational system.
Afentra and the Contractor Group anticipate increases in
the recovery potential associated with delivery of sustained
34OverviewCorporate GovernanceStrategic ReportGroup AccountsAfentra plc Annual Report and Financial Statements 2022 waterfloods. This together with existing well stock optimisation
opportunities including artificial lift is focused on accelerating
reservoir throughput and oil recovery. In addition, longer cycle
potential associated with infill drilling campaigns and access to
shallower oil pools in the Iabe and Malembo reservoirs are under
consideration to grow production.
Gross Reserves and Resources (mmbbl)
180
2P + 2C =
157 mmbbl
42
115
-5
+4
-6
2P + 2C =
151 mmbbl
43
108
2C Resources
2P Reserves
0
31/3/22
Production
NFA
Projects
31/12/22
Additional
resource
projects
ERCE conducted an updated CPR at year end 2022, with the
results illustrated in the above waterfall chart. Encouragingly an
enhancement of +4 mmbbls reserves is attributable to better
field performance during April – December 2022. Scheduling
deferrals and re-phasing of projects resulted in -6 mmbls
reserves, for barrels which fall into future tail-end production.
Contingent resources remain largely unchanged, with additional
potential projects to be added via ESP deployment and
re-development of Oombo Field. Additionally, no reserves or
resources are currently booked for Block 3/05A.
35 Asset Summary
300 MBO
Block 3/05A combined STOIIP (2.4 MMbbls recovered to date)
cash flow through monetising early production. A number of
development concepts will be screened and ranked in order to
reach an optimised FID in the near term.
Block 23 (Exploration)
Block 23 Offshore Kwanza has a large aerial footprint of almost
5,000km2 in water depths of 600-1,600m. Block 23 contains
the sub commercial Azule pre-salt carbonate discovery which
tested at 3,000-4,000 bbl/d light sweet crude oil and is
estimated to contain approximately 150 mmbbls STOIIP.
The block is covered by modern 2D & 3D seismic data, with further
follow up prospectivity mapped in both pre and post-salt plays.
There are no outstanding work commitments on the block –
however we are reviewing a possible work program to re-
process 3D seismic which has the potential to de-risk a large
part of the basin, using advanced geophysical techniques.
Block 3/05A (Appraisal)
Block 3/05A contains 3 appraised light oil discoveries (Punja,
Caco & Gazela) with a combined STOIIP of in excess of 300
mmbbls from which only 2.4 mmbbls has been recovered
to date. Long-term testing commenced at the Gazela field,
of ~1,100 bbl/d, enabling framing of potential development
options. The existing Block 3/05 infrastructure and synergies
with the application of fit for purpose technology provides
the opportunity for production growth potential via tie backs.
Our multi-disciplined team is taking a holistic view of Block
3/05A and Block 3/05 together, working with the operator and
contractor group to progress these opportunities towards value
generating appraisal and development. Full field production of
these discoveries could result in an incremental 10,000 bbl/d or
greater of production leveraging the existing facilities.
Given the high gas oil ratio of the Punja field reservoirs, an
integrated gas management plan across both Blocks 3/05A
and 3/05 is essential to optimising the responsible development
of these oil and gas resources. In line with our ESG values, all
alternatives to flaring excess gas from additional developments
will be evaluated with the Joint Venture before proceeding to
sanction future projects. There are a number of zero routine
flaring options that will be evaluated, including commercial export
of excess gas via the ALNG network which is located in close
proximity to existing infrastructure or gas injection into existing
fields. Both options will require review and a potential upgrade of
the existing compression infrastructure located at the Cobo field.
The Joint Venture partnership will be progressing the next
steps to both Punja and Caco-Gazela in a phased approach in
order to gain appraisal data, reduce uncertainty and generate
36OverviewCorporate GovernanceStrategic ReportGroup AccountsAfentra plc Annual Report and Financial Statements 2022 Somaliland
Somaliland offers one of the last opportunities to target an undrilled
onshore rift basin in Africa. The Odewayne block, with access to
Berbera deep-water port less than a 100km to the north, is ideally
located to commercialise any discovered hydrocarbons.
Odewayne (Exploration)
This large, unexplored, frontier acreage position covers
22,840km2, the equivalent of c.100 UK North Sea blocks.
Exploration activity prior to the 2017 regional 2D seismic
acquisition program has been limited to the acquisition of
airborne gravity and magnetic data and surface fieldwork
studies, with no wells drilled on block.
The Company’s wholly owned subsidiary, Afentra (East Africa)
Limited (‘A(EA)L’), holds a 34% working interest in the PSA (fully
carried by Genel Energy Somaliland Limited for its share of the
costs of all exploration activities during the Third and Fourth
Periods of the PSA).
The Odewayne production sharing agreement was awarded in 2005.
It is in the Third Period, with a 1,000km, 10km by 10km 2D seismic
grid acquired in 2017 by BGP. The Third Period has been further
extended, through the 8th deed of amendment to May 2025.
During 2022 the main work program consisted of the dating of
field samples, integrating these with identifying and mapping a
number of leads using the PSTM 2D geophysical data leading to a
risked volumetric assessment. This has resulted in an integrated
semi-regional basin model. From this integrated framework,
further understanding of the Block prospectivity can be worked
during the course of 2023.
During the course of the 3rd quarter of 2022 a water well
drilled by the ministry of Water Resources Development at
the village of Baha-Dhamal, within the Odewayne exploration
license flowed a dark viscous liquid following water. Samples
were collected and geochemical analysis undertaken in order to
define potential hydrocarbon content of the fluid. Initial results
appear to indicate the presence of trace hydrocarbons with
further advanced analysis ongoing. Afentra has also undertaken
independent analysis confirming the presence of trace oil in
a sample. The operator, will as part of its 2023 work program,
attempt to resample the fluid at the original well location to
define the future work program.
Contract Summary
Contract type
Participants
Genel Energy Somaliland Limited (Op.)
Afentra (East Africa) Limited
Petrosoma Limited
PSA
50%
34%
16%
Exploration term
Current Period 3: May 2025
Period 3 work commitment (fully carried):
500km 2D seismic acquisition
Period 4 work commitment (fully carried):
1,000km 2D seismic acquisition and one exploration well
Production term
Twenty five years, renewable for additional ten years.
State participation
State may back in for up to a 20% participating interest in
any development and production area.
37
Sustainability
Across the host countries in which we
conduct our business, we recognise
and understand the need for a Just
Energy Transition
Going beyond the mandatory requirements of an AIM listed company, the information incorporated within
this sustainability review is the result of the Company’s continued engagement with internal and external
stakeholders and is informed by the reporting guidelines of the Global Reporting Initiative (‘GRI’) and the
Task Force on Climate-related Financial Disclosures (‘TCFD’).
Embedding ESG across our activities
Across the host countries in which we conduct our
business, we recognise and understand the need
for a Just Energy Transition by increasing socio-
economic development whilst lowering emissions
and bridging the gap to renewable forms of energy.
We continuously work with our Joint Venture
partners to reduce the environmental impact of
our operations and improve our ESG credentials
through responsible energy use.
In 2021 we shared the importance of shining an
ESG lens on M&A opportunity screening. This
aspect continues to be vital whilst reviewing
and maturing potential additional acquisitions.
We continue to assess opportunities on social
& environmental factors, health and safety and
climate-related matters alongside technical,
operational and commercial aspects.
Our Joint venture equity in Somaliland works on
the basis of supporting the Operator on achieving
best practices through all aspects of sustainable
investment, delivering enhanced socio-economic
development within the areas in which we operate.
During the previous 12 months, we have started to
gain valuable insights into the opportunities and
challenges in Blocks 3/05 and 3/05A Angola and
understand how we can begin to work with our
Joint Venture partners to add material impact.
We are building a deep understanding of the key
issues allowing our integrated team to take a
holistic approach to asset integrity, safety, the
environment, compliance and the emissions
profile. In developing our knowledge of the key
safety and environmental statistics that will form
the core of our data reporting, the team has used
its time purposefully to acquire and screen data,
already adding value to the partnership. Our team
has already started to focus attention on the
importance of accurate and valid baseline data
acquisition such as emissions and is working on
ensuring this crucial component gains the relevant
level of commitment from the Operator. Although
still at an embryonic stage we have commenced
developing concepts and ideas that could reduce
the emissions profile of the asset to support the
Operator in meeting Angola’s stated goal of zero
routine flaring by 2030.
38OverviewCorporate GovernanceStrategic ReportGroup AccountsAfentra plc Annual Report and Financial Statements 2022 39 Sustainability
100%
London office electricity from renewable sources
Assessing our impacts
As we have not yet completed both transactions in Angola the
key reportable ESG component for 2022 will focus on the HSE
performance from our London-based team and associated travel.
Whilst of relatively low impact, during the course of 2022, the
Scope 2 emissions for our London office focussed on electricity
used for heating, cooling and power consumed 42,811kWh which
equates to 8,279kg CO2e based on standard UK grid electricity
conversion factors. We use an energy supplier that generates
100% of its electricity from renewable sources which with offsets
neutralises our emissions. We have also tracked company travel
during Q4 2022, generating 20,836kg CO2e of emissions. Being
cognisant of our environmental impact and recognising the
benefit of carbon offsetting, we are working to identify relevant
environmental projects to invest in that will bring broader benefits
to our host country.
From 2023 onwards, we expect to report the key ESG data
from our Joint Venture operations. Although we are yet to
complete both transactions in Angola (INA asset acquisition
completed in May 2023, with the Sonangol asset acquisitions
yet to complete) this has not prevented us developing
concepts to share with the contractor group on possible
approaches to reduce emissions on the assets.
From a safety perspective, the team takes a very proactive
approach to managing risk across our activities and is developing
the positive aspects of ensuring the risks are understood and
minimised. As there is currently a small team in the London office
there have been no Afentra incidents to date.
In 2022, following our readmission to trading, the team reviewed
and updated our robust set of company policies from Health
and Safety through to Climate Change documents. Active
involvement of the Afentra leadership ensures these policies are
regularly reviewed and fully aligned with the company values.
Making a meaningful contribution
Afentra is committed to promoting the sustainable
development of communities within the countries in which we
have a presence, in line with the United Nations Sustainable
Development Goals. Through Genel, our Joint Venture
Operator in Somaliland, Afentra funded food and drought relief
programmes for 4,000 families within local communities in the
Odewayne district during the summer of 2022.
Throughout 2023 Afentra will review targeted, high-impact social
and environmental projects for future investment in Angola as
part of our commitment to improve lives and increase socio-
economic development within these communities.
Operating with integrity
Afentra takes governance extremely seriously. In 2022 we
updated Our Code of Ethics and Business Conduct (‘Code’)
following our readmission to the market. The Code contains our
Guiding Principles and describes the positive behaviours that we
expect from everyone involved in our business. Afentra maintains
a zero-tolerance approach to Anti-Bribery and Corruption (ABC)
and we had 100% completion by all employees and contractors
of our ABC training module. As part of our transactions in Angola,
we conducted due diligence on Sonangol and similarly they
conducted due diligence on Afentra.
During the year, Angola was accepted to the EITI. As the second
largest oil-producing country in Africa, Angola’s economy is
heavily dependent on oil and gas production, which accounts
for about a third of the country’s GDP. Reporting in line with the
EITI Standard will mean that information regarding beneficial
owners and contracts pertaining to extractive companies, as
well as the management of state-owned enterprises and sector
revenues are made public. We believe that the transparent and
accountable management of the extractive sector and the
effective management of the economic value generated will
contribute to a transformative developmental impact for Angola.
It is our intention to become a corporate signatory to EITI in 2023.
Ian Cloke
Chief Operating Officer
15 May 2023
40OverviewCorporate GovernanceStrategic ReportGroup AccountsAfentra plc Annual Report and Financial Statements 2022 Our ESG Approach
Working Safely
Cultural Framework
At Afentra, we believe that ensuring the health, safety and
security of employees, contractors and local communities is at
the heart of our business.
We seek to draw on the talent of all our people and stakeholders
recognising that a diverse range of backgrounds and experiences
are fundamental to delivering value for all investor and stakeholders.
We demonstrate the correct behaviours to inspire everyone
associated with our activities to achieve a safe and healthy
workplace.
We have a motivated team who take responsibility for the
company H&S performance.
Everyone at Afentra is encouraged to be aware of their individual
responsibilities and to take the appropriate actions if they feel
there is an unacceptable risk.
We plan and prepare for potential emergencies.
Environmental Stewardship
We recognise that oil and gas activities are often associated with
environmental impacts and intensive resource use.
We believe it is right to reduce the environmental impact of
our activities and are committed to responsible environmental
stewardship for the benefit of future generations.
We are committed to taking full responsibility for any impact we
generate and continually look for opportunities to have a positive
impact on the environment.
We recognise the significant challenge presented by climate
change and support the Paris Agreement goal to limit the global
average temperature below 2°C compared to pre-industrial levels.
We are committed to supporting a sustainable energy transition
by minimising our scope 1 and 2 greenhouse gas emissions and
seeking innovative ways to meet this global target at a local level.
We will be open, honest and transparent in engaging with our people,
and provide a fair working environment free from discrimination.
We take a zero-tolerance approach to bribery and corruption and
we conduct our business honestly, fairly and transparently.
Afentra has a zero-tolerance of tax evasion and the facilitation of tax
evasion and we are committed to maintaining effective systems and
controls to ensure this cannot take place in our business.
We seek to operate in a fair and transparent way with our
contractors and suppliers and work with business partners who
share our approach.
We are committed to maintaining the highest standards of integrity,
transparency and business conduct.
Partners for success
Engagement and dialogue with local stakeholders to ensure
that, as far as possible, projects benefit both the Group and the
communities in which the project is located and will do this in a
safe, responsible and sustainable manner.
By investing in the region, empowering our people and working
with our partners we can positively impact local economies
and deliver significant economic returns to all stakeholders.
We will work with our host communities to develop impactful
opportunities in support of a Just Transition.
We work to assess the risk of human and labour rights to our
activities and have taken steps to ensure that underage, forced or
bonded labour has no place in Afentra’s business or supply chain.
41
Sustainability
Our process for responsbile asset management
Vision – Mission – Values – Principles and Policies
Assess
Plan & Prioritise
Execute
In selecting the Right Asset, we:
Upon engagement, determine:
We will deliver by:
Engage with operators that share
our high values/standards
Opportunity roadmap for emissions
reduction projects
Set goals and interim milestones for
both flare and methane reduction
Training and competence of staff
Set KPIs to manage the HSE
performance
Follow our cultural framework of
principles, values, approach and
impact
Carry out thorough due diligence
on the health, safety and
environment of potential options
Engage openly and transparently
to deliver the best value for all
stakeholders
Responsbility In Action
Actively engaging with our
partners to seek continuous
improvement in our HSE
performance
Ranking high impact projects
proposed for execution
Enabling investment into
decarbonisation projects
Providing proactive performance
and activity oversight
Our investment into Block 3/05 Angola
In line with our robust approach, upon engaging with the Operator, we found the current status to be:
Operational Health & Safety
Maintaining Excellence: A Robust Health and Safety
System for Safe Production and Asset Integrity
• Health and safety system aligned to standard
industry benchmarks (TRIF & LTI)
• Historical performance suggests good performance
relative to IOGP benchmarks with zero LTI’s for over
1,000 days
• Multi-year asset integrity plan in place with annual
Environmental Management
Driving Environmental Stewardship: Achievements and
Ambitions for Sustainable Operations
• Elementary environmental KPIs recorded
• Positive improvements throughout 2022 with zero
spills and the oil in water discharge reduced from
25ppm to 19ppm with a future target to reduce further
• Ambition to achieve zero routine flaring by 2030
• Potential identified to improve gas utilisation and
rolling maintenance program
reduce emissions within the asset
• Focus on asset uptime and safe production
42OverviewCorporate GovernanceStrategic ReportGroup AccountsAfentra plc Annual Report and Financial Statements 2022
Environmental transparency and emissions reduction strategies for net zero commitment
We aim to be transparent with environmental data and we are
currently working with the Operator to reliably gather baseline
emissions profiles across the 3/05 asset. We intend to share our
equity portion of Scope 1 data in next year’s Annual Report. This
level of transparency is an important step for us to work alongside
the Joint Venture partnership to achieve Angola’s stated Net Zero
commitment by 2030. A holistic approach to emissions is being
taken in order to understand opportunities to improve operational
efficiencies and reduce emissions, via more resourceful usage.
Significant learnings came out of the Independent ESG report
that has considerably enhanced our understanding and allowed
the team to focus on key areas, utilising a risked Environmental
and Social Action Plan. According to the data provided, flaring
is the primary emitter of CO and VOCs (venting and fugitive
sources excluded), and together with the combustion of fuel gas,
flaring is a significant contributor to the asset’s overall emissions.
Looking ahead our team see substantial opportunities for
emissions reduction which will be worked up throughout the short
term and shared across the Joint Venture for review. The highest
ranking projects will be proposed for execution in the medium to
long-term. Numerous conversations across the Joint Venture
have confirmed that emissions reduction projects have not had
the highest priority with the Operator and we will work to increase
momentum. Whilst we have a strong drive to execute projects
quickly, and gas remains a significant focus, we are aware of
substantial hurdles and anticipate the impact of these projects to
be felt in the medium to long-term. Given the Operator continues
to make steady progress in executing water injection ramp-up, this
will naturally start to reduce produced gas volumes and hence,
flaring will naturally start to decline. An integrated gas management
solution is seen as key to unlocking future developments, driving
down emissions and adding value to these assets.
Gas injection
and storage in
reservoir
P
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Reliable power
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Emissions reductions
Emissions reductions
opportunities
opportunities
n
Long-term gas
m anagement pla
Short term
Medium term
Long term
Eff icient
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S u s t a i n
w a t e r i n j e
43
Sustainability
Climate Risk & Resilience
We are committed to building a resilient business,
attractive to investors and one that meets multiple
stakeholder requirements. Acutely aware of the
need to support the responsible development
of hydrocarbon assets in the context of the
requirement to decarbonise global energy systems,
our strategy is to decarbonise hydrocarbon
production, in collaboration with our partners, and
in balance with the socio-economic requirements
of host countries.
This year, Afentra reviewed the recommendations
set out by the TCFD and began the process to
embed the recommendations as appropriate for a
business of its size and position.
We will continue to mature our position on all
four pillars and 11 recommendations of the TCFD
during 2023.
44OverviewCorporate GovernanceStrategic ReportGroup AccountsAfentra plc Annual Report and Financial Statements 2022 Oversight
Assessing climate risk and resilience
The analysis of climate-related risks has been integrated into
the Group’s existing risk management framework. As such,
our leadership team has primary responsibility for monitoring
and managing climate-related risks and opportunities.
As part of our due diligence process to acquire interests in
the Sonangol assets, offshore Angola, we commissioned the
development of a comprehensive ESG due diligence report,
comprising environmental, health and safety, supply chain
and climate-related analysis.
Our leadership considers all ESG issues when reviewing and
guiding strategy, major plans of action and risk management
policies, as well as when overseeing major capital expenditures,
acquisitions, and divestitures. The best example of this is the
due diligence report delivered by SLR Consulting (‘SLR’) to
support our assessment of all ESG risks of the assets in Angola,
more detail of which is enclosed below.
Our leadership team periodically inform the Board of changes to
Afentra’s risk profile, which includes the assessment of climate-
related risk, and together agree that climate-related risks have
the potential to materially impact the financial performance of
Afentra over the long-term (considered 10+ years).
Details of this assessment and the Group’s approach to the
management of risk are set out on pages 46 - 51.
The purpose of the Climate Change Risk Assessment
(CCRA), prepared in accordance with the requirements of the
Equator Principles (2019) and IFC’s Performance Standards
on Environmental and Social Sustainability (2012), was to
undertake a preliminary assessment of the climate-related
risks to Sonangol’s upstream oil and gas operations.
The assessment utilised two IPCC scenarios for analysis.
These forecast changes in Angola’s climate in the near term
(2021-2040) and medium term (2041-2060), and under two
climate scenarios, namely SSP1-1.9 (best case) and SSP5-8
(worst case).
The transition to a lower carbon economy poses several risks
to Sonangol’s operations with respect to potential changes
in legislation and policy, markets, and technologies. The
transition to a low-carbon economy will also give rise to new
opportunities with respect to resource efficiencies and new
product/service offerings.
This preliminary assessment only identified but did not
assess the significance of the climate-related risks and
opportunities. This is something that the leadership team will
consider upon completion of the transaction.
45 Sustainability
Transition and Physical Risk
The energy transition is expected to impact the O&G industry and change the environment in which we operate. The impact of
these changes depends on many variables, all of which remain uncertain.
Our evaluation of potential risks is described below and relates to the Angola assets only.
In line with TCFD recommendations, potential risks are divided into:
• Transition risks driven by the world’s transition to a lower-carbon economy
• Physical risks driven by the physical impacts of climate change
Physical
Category
Risk driver
Risk
Mitigations
Acute
Acute
Increasing
frequency and
intensity of storm
surges together
with rising sea
levels.
Risk of damage to surface facilities, and
in particular the processing/wellhead
platforms and floating storage and
offloading (FSO) facility, leading to
temporary disruption in production and
revenue losses.
• Develop and implement an early warning system
to allow for early detection of storm surges.
• Update existing emergency response plans to
include storm surges.
• Ensure that rising sea levels are taken into
account in the design of new infrastructure/
upgrades of existing infrastructure.
Increasing
frequency and
intensity of storm
surges together
with rising sea
levels.
Risk of damage to infrastructure, and in
particular the wells, pipelines, and surface
infrastructure, leading to oil spills and
contamination of the receiving environment.
This may result in revenue losses (disruption
in production), increased operating costs
(clean-up of oil spill(s)), and increased risk of
litigation (from environmental NGOs).
• Develop and implement an early warning system
to allow for early detection of storm surges.
• Update existing emergency response plans to
include storm surges.
• Ensure that rising sea levels are taken into
account in the design of new infrastructure /
upgrades of existing infrastructure.
Chronic
Rising mean
temperatures and
increasing number
of very hot days.
Risk of workers suffering from heat
stress, leading to reduced productivity,
and in extreme cases, an increase in
heat-related morbidity.
• Develop and implement an awareness
programme to raise awareness about the
dangers of heat stress and the importance of
staying well hydrated.
Transitional
Category
Risk driver
Risk
Mitigations
Policy and
legal
Pricing of GHG
emissions
and enhanced
emissions-
reporting
obligations.
With growing international pressure,
there is the risk that Angola will introduce
pricing of GHG emissions and enhanced
emissions-reporting obligations, leading to
increased operating costs.
• Closely monitor promulgation of new climate
legislation and policies.
• Actively engage in the law- and policy-making
processes to ensure that potential impacts
on O&G sector are taken into consideration.
Engagement can be through industry
organisations.
46OverviewCorporate GovernanceStrategic ReportGroup AccountsAfentra plc Annual Report and Financial Statements 2022 Policy and
legal
Exposure to
litigation.
With growing global awareness of climate
change and increasing discontent with
major contributors to climate change,
there is a risk of increased climate-related
litigation, leading to increased operating
costs.
• Develop and implement a formal GHG
management plan with reduction targets and
roadmap for achieving these targets.
• Develop and implement an economically viable
roadmap for achieving their commitment of
net-zero routine flaring by 2030.
Market
Increased cost of
production.
Risk of increased output requirements
(e.g., zero flaring of associated gas),
leading to increased production costs.
• Develop and implement an economically viable
roadmap for achieving their commitment of
net-zero routine flaring by 2030.
Technology Substitution
of existing
products with
lower emissions
options.
Market
Changing
customer
behaviour.
Risk of write-offs or early retirement
of existing assets producing carbon-
intensive products (e.g., crude oil) with
the transition to products (e.g., natural
gas) with lower emissions and repricing
of fossil fuel assets, potentially making
these assets loss leading.
Risk of reduced demand for carbon-
intensive products (e.g., crude oil) in the
medium- to long-term with a change
in customer preferences, leading to
revenue losses.
•
•
Incorporate risks associated with transition to
lower carbon products and repricing of fossil
fuel assets into decision making processes
with respect to investments in new assets or
extending the life of existing assets producing
carbon-intensive products.
Incorporate risks associated with transition to
lower carbon products and repricing of fossil
fuel assets into decision making processes
with respect to investments in new assets or
extending the life of existing assets producing
carbon-intensive products.
Opportunities
We believe the energy transition presents opportunities and if managed well we believe these opportunities can materially benefit
Afentra, its partners and host communities.
Opportunities
Type
Resource
efficiency
Category
Opportunity
More efficient production
processes.
Products and
services
Development and/or expansion
of low emission goods/services.
The implementation of energy and GHG reduction initiatives can lead to more
efficient production processes and reduced operating costs. This can also
lead to reduction in liability if pricing of GHG emissions comes into place.
Using existing assets producing carbon-intensive products (e.g., crude oil) to
pivot towards developing/expanding assets producing less carbon intensive
products (e.g., natural gas) in response to shift in consumer preferences.
Products and
services
Products and
services
Development and/or expansion
of low emission goods/services.
With more stringent regulation of routine flaring, there is potential to
increase revenue from the monetisation of associated gas.
Development and/or expansion
of low emission goods/services.
The increase in demand for natural gas as ‘transition fuel’, particularly among
developing countries, may lead to upward repricing of natural gas assets.
47 Business Risk
Managing and mitigating our
material issues
Principal business risks
The long-term success of Afentra depends on the ability to successfully acquire assets that align with the Group’s purpose and strategy
and to manage those assets responsibly and sustainably for the long term creating value for all stakeholders. In achieving that long term
success, the Group is exposed to a number of risks and uncertainties which could have a material adverse impact on the delivery of
the strategy and the future business. The Board and Senior Executive Team recognise and fully understand the need to have a risk
identification, mitigation and management process in place to ensure that key risks to the business are discussed and documented, and
ultimately successfully managed, ensuring transparency of both content and process. The risk management process and associated
risk register is owned by the CFO and is reviewed regularly by the Executive Directors and the Audit Committee.
The risks to the company’s business were refreshed during the year and reflect the imminent acquisitions in Angola and the knock-
on impact to the organisation. As such, documented below are an updated set of principal risks and mitigations in relation to the
delivery of the Group strategy and purpose.
Category
Risk
Mitigation
Change
Strategic and
Economic
• Competition,
• Competitors have greater
financial and technical
resources.
barriers to entry
• Difficulty in capital raising for
• Country risk
• Climate change
new acquisitions and/or to fund
development activities.
• Adverse economic, geopolitical
or social instability, the
associated impacts and/or
sanctions imposed by host or
other governments.
• Climate change and the energy
transition is adding to market
volatility and could have a
negative impact on smaller
independent hydrocarbon E&P
companies.
• Through staff expertise, robust financial systems and
economic models, optimise deal evaluation & bid
processes to move quickly and competitively to value /
price the appropriate opportunities.
• Management has and maintains a proactive dialogue
with existing and prospective debt & equity. investors
and has a strong track record.
• The Board and management monitor and consider
political, regulatory, fiscal and social risks associated
with all target assets. Mitigate through proactive
relations with host governments, and JV partners, utilise
local advisors / expertise if required.
• Climate related risks and opportunities (arising from
a just transition) are core to the company’s vision and
strategy and underpins all evaluation of potential asset
and markets.
►
48OverviewCorporate GovernanceStrategic ReportGroup AccountsAfentra plc Annual Report and Financial Statements 2022 Category
Risk
Mitigation
Change
Operations – Non
Operated
•
• Health and
safety
• GHG Emissions
• Contractor
performance
Incidents occurring on oil & gas
facilities resulting in fatalities, or
serious injuries, environmental
damage and/or loss of
production.
• High levels of flaring results
in non-conformance to Zero
flaring by 2030, reputational
damage and potential fines due
to breaching limits.
• Complexity around contractor
selection and performance
management on a large
development could result in
sub optimal outcomes resulting
in a loss of value.
Organisation
•
IT Systems
• Attracting
and retaining
sufficiently
skilled
personnel
• Risk of an IT systems failure
resulting in the loss of key
data or rendering the business
inoperable for a period, and/
or a cyber security threat
manifesting resulting in loss of
data security and potentially
value.
• Failure to attract and hire
the requisite technical and
functional staff with the right
experience to support the
firm as it grows, resulting in
operational, technical and
functional issues.
• Work with Operators to understand / influence how
the HSE risks at operational facilities are managed and
how they are staffed with experienced and fully trained
personnel. Ensure through robust communications
with the Operators expectations around safety
critical maintenance (undertaken when required and
not delayed), and risk assessment procedures and
practices, ensuring both are fully documented and
rigorously followed by requisite personnel. Look for
verification on facility site visits. Ensure operational risks
are covered by insurance where possible.
•
Influence operators to reduce flaring by the following:
Measure data to understand exact level of flaring,
identify potential solutions to deploy to reduce
flaring from incremental reductions to zero flaring
and influence operator to deploy GHG reduction
technologies. Share emissions reductions concepts
with regulator to influence Operator.
• Support operators, in contractor evaluation and
selection procedures, advise on best practices, jointly
participate in contractor performance management
including kpi selection and on going monitoring.
• Develop and document a fit for purpose DRP and BCP
for business critical functions.
• All legacy seismic data backed up and stored offsite. Any
future seismic data will be held on our Nutanix system
and utilise the same DR system as the Nutanix clusters.
• Non seismic data is backed up daily and stored on site.
• We have a hosted exchange service from Microsoft, the
SLA for downtime on exchange and SharePoint aims to be
less than 45 minutes per month. All incoming and outgoing
email are archived in an immutable form, providing some
protection from Ransomware, Phishing and Malware.
• Additional experienced staff were recruited during 2022,
so the company has the requisite skills and experience to
meet the requirements of 2023 post acquisitions.
• Personnel requirements are assessed regularly, and
plans are in place to ensure business continuity can
continue in the event of a shortage of requisite skills.
• Local market conditions are continually monitored to
ensure a competitive salary, bonus and training framework
is in place to retain and attract new staff when required.
▲
►
49 Business Risk
Category
Financial
• Commodity
(oil) Price risk
• Counterparty
default
• Failure of Anti
Bribery and
Corruption
processes
& Failure to
prevent bribery
Risk
Mitigation
Change
• Volatile commodity prices (both
low or high) impacting buyer –
seller expectations, impacting
ability to acquire assets.
• Low commodity prices
could impact liquidity of the
company, and have a negative
impact on ability to service
debt and generate positive
cash flow.
• Risk of default of bank
holding deposits, off-taker
of production, contractor /
supplier or JV partner not
fulfilling obligations.
• Risk that a partner, business
associate or an employee may in
the course of business, offer to
pay, bribes, unjustifiable fees or
gifts to middlemen, which could
damage Afentra’s reputation
and result in Afentra being
in contravention of laws that
prohibit such action, including
the UK Bribery Act 2010.
• The company will only bid on assets priced within the
group’s financial framework which will include mixtures
of debt and equity capital raises. Key economic KPI’s
will need to be achievable to enable asset bids to be
approved for progression via the Board.
• The company will manage its exposure to fluctuating oil
price via a Board approved hedging program.
• Monitor public announcements and any publicly
available documents / reports for indicators of
financial distress prior to agreeing to future financial
commitments.
• Conduct full financial and legal due-diligence along
with obtaining representations where relevant prior to
entering any new JV or partner relationships.
• Conduct robust due diligence of counter-party,
consider use of insurance cover.
• Group policies including Anti-Bribery and Corruption
Policy, Anti Facilitation and Tax Evasion Policy and the
Code of Ethics and Business Conduct clearly state
Afentra’s position in preventing poor practices. The
Group Anti-Bribery and Corruption procedure, ensures
that any partner or affiliate of a partner maintains a
robust anti-bribery compliance environment.
• The Group provides training for its employees and
contractors on an annual basis with 100% compliance.
• All contracts, purchase orders and service orders
contain business ethics provisions.
►
▲ Increased ▼ Decreased ► Unchanged
50OverviewCorporate GovernanceStrategic ReportGroup AccountsAfentra plc Annual Report and Financial Statements 2022 Internal control
The Directors are responsible for establishing and maintaining the Group and the Company’s systems of internal control including
financial and compliance controls and risk management. These are designed to safeguard the assets of the Group and to ensure the
reliability of financial information for both internal use and external publication.
The Group’s internal control procedures include Board approval for all significant expenditure. All major expenditures require either
senior management or Board approval at the appropriate stages of each transaction. A system of regular reporting of the state of
the Group’s financial affairs provides appropriate information to management to facilitate control. The Board reviews, identifies,
evaluates and manages the significant risks that face the Group.
Any systems of internal control can only provide reasonable, and not absolute, assurance that material financial irregularities will be
detected or that the risk of failure to achieve business objectives is eliminated. The Directors, having reviewed the effectiveness
of the system of internal financial, operational and compliance controls and risk management, consider that the system of internal
control operated effectively throughout the financial year and up to the date the financial statements were signed.
The Audit Committee, on an annual basis, reviews the need for an internal audit function. Given the nature of the Company’s
business and assets, the current internal control procedures in place and the size of the Company, the Board are satisfied that an
internal audit function is unnecessary at this time.
51 Our Stakeholders
Engaging with our key audiences
Section 172 Statement
A director of a company must act in a
way they consider, in good faith, would
be most likely to promote the success
of the company for the benefit of its
members as a whole, and in doing so
have regard (amongst other matters) to
the following factors:
• The likely consequences of any
decision in the long-term,
• The interests of the company’s
employees,
• The need to foster the company’s
business relationships with suppliers,
customers and others,
• The impact of the company’s
operations on the community and
the environment,
• The desirability of the company
maintaining a reputation for high
standards of business conduct, and
• The need to act fairly between
members of the Company.
The Board has regard to the provisions
of s.172 of the Companies Act 2006 in
carrying out their duties and have regard
to the matters set out in s.172 (a) – (f)
in the decisions taken during the year
ended 31 December 2022.
Our stakeholder engagement
The Board identifies a number of key
stakeholders of the Company: JV partners;
regulators and government partners;
communities where our assets are located;
shareholders; and our employees. During
the year the Company actively engaged
with its identified key stakeholders.
The Company is committed to engaging
positively with the communities in which
our assets are located and looks to
support those communities impacted by
our operations.
As mentioned throughout this report, In
Angola, the company has worked closely
with the Concessionaire and Sonangol
at all levels, to progress the completion
of the asset acquisitions on Block 3/05,
Block 3/05A and Block 23.
As set out on page 37 the Company
has worked closely with Genel Energy
during 2022. The Company will continue
to engage with the Operator in relation
to this asset to further evaluate the
prospectivity of the licence.
The Company has a small team of
employees and consultants based in the
UK and Africa, all of whom have direct
contact with either the COO or CFO who
engage directly with the workforce, a
benefit of the current size of the company.
Board meetings are held in the UK office
where several employees and consultants
are invited to join the meeting from time to
time. The Board has day-to-day business
interactions with various employees of the
Group, so they receive direct employee
feedback and engagement.
The Directors regularly engage with
investors via the AGM, EGM (2022
shareholder approval for the Sonangol
Acquisitions was received) and at other
times during the year. Continued access
to the capital markets is key to the
success of the Company’s M&A strategy
and so the management team and the
Board work to ensure that the Company’s
investors have a sound understanding of
the Company’s strategy and ambitions
and how this may be implemented.
Investors’ views are sought by the
Directors to guide the Company’s strategy
and its M&A activities. This activity and
engagement will continue in 2023. The
Company’s M&A strategy has become
more targeted towards seeking assets in
specific jurisdictions, as discussed in the
Chairman’s and CEO’s statements.
Principal decisions during 2022
The approval to proceed with two
proposed asset acquisitions in Angola
– the Sonangol farm down of interests
in Block 3/05 and Block 23, and INA
disposal of its interests in Block 3/05 and
3/05A - were critical Board decisions
taken during the year. Further decisions
made by the Board related to other
M&A opportunities that were reviewed
during the year, and discussed through
the lens of strategic fit, long-term value
accretion, and sustainability (including
understanding the potential impact on
communities and the environment). In
2023, the Board will continue to review
potential M&A opportunities.
52TitleSub TitleOverviewCorporate GovernanceStrategic ReportGroup AccountsAfentra plc Annual Report and Financial Statements 2022 53 Financial Review
2022 has been a truly transformational
year for Afentra
Our focus on value accretive M&A, accessing proven resources
and delivering robust cash flows, has been evidenced by the
progress made with the two inaugural acquisitions in Angola.
These highly cash generative acquisitions provide entry into a core
jurisdiction for the company and a platform from which we plan to
access further opportunities and to grow Afentra in line with our
strategy to ultimately deliver sustainable shareholder returns.
Our acquisitions will be financed through a mix of debt and cash
on the balance sheet.
Despite a shrinking financing market with a number of mainstream
banks no longer lending into the oil and gas space Afentra has been
successful in securing a conventional Reserve Based Lending
(‘RBL’) arrangement for up to $75 million of the Sonangol and INA
acquisitions’ costs as well as a Working Capital facility of up to $30
million with Trafigura and Mauritius Commercial Bank.
The resulting aggregate split between debt and equity (cash) at
completion of both deals is likely to be in the 70% / 30% range
with cash contribution made from Afentra cash reserves.
In addition, Afentra has access to a $35 million accordion RBL
to finance a third transaction in Angola.
Key Terms - RBL, up to $75 million:
• 5-year tenor
• 8% margin over 3-month SOFR (‘Secured Overnight
Financing Rate’)
• Semi-annual linear amortisations
• The key financial covenant for the RBL is the ratio of Net
Debt to EBITDA (less than 3:1)
Key Terms - Working Capital, up to $30 million revolving facility:
• 5-year tenor
• 4.75% margin over 1-month SOFR
• Repayable with proceeds from liftings
Looking forward, our focus for 2023 remains unchanged from
an M&A perspective. We will look to uncover potential further
opportunities to grow and expand our presence in Angola.
We will also continue to seek opportunities to enter new
geographies within West Africa.
From a more general finance perspective, we will be working
hard to become a constructive and reliable commercial partner
working alongside the Operator (Sonangol) to help optimise
the assets safely and sustainably. We will also ensure that we
successfully manage our RBL and working capital facilities,
including hedging a portion of our future production, all
executed within a sound internal control framework.
Selected Financial Data
Year end cash net to the Group $million
$million
Restricted funds
$million
Adjusted EBITDAX
$million
Loss after tax
Pence
Year end share price
2022
20.4
(10.2)
(5.2)
(9.1)
26.4
2021
37.7
-
(2.0)
(5.0)
14.6
Non-IFRS measures
The Group uses certain measures of performance that are not
specifically defined under IFRS or other generally accepted
accounting principles. These non-IFRS measures can include
capital investment, debt and adjusted EBITDAX.
Income statement
The loss from operations for 2022 was $9.0 million (2021: loss
$5.0 million). During the year, net administrative expenditure
increased to $9.0 million (2021: $5.0 million) predominantly as
a result of exceptional (one off) costs associated with the RTO
process ($2.6 million in the period) and a 2022 bonus provision of
$1.5 million, payable on completion of the Sonangol transaction.
In 2022, a portion of the Group’s staff costs and associated
overheads have been expensed as pre-licence expenditure ($3.1
million), or capitalised/recharged ($32k) where they are directly
assigned to capital projects. This totalled $3.1 million in the year
(2021: $2.4 million).
Finance income (interest received on deposits) in the year of
$86k (2021: $36k).
54OverviewCorporate GovernanceStrategic ReportGroup AccountsAfentra plc Annual Report and Financial Statements 2022 Anastasia Deulina,
Chief Financial Officer
Finance costs during 2022 totalled $197k (2021: $45k),
represent by foreign exchange losses ($154k) on cash held by the
Group and other finance charges of $43k).
The loss for the year was $9.1 million (2021: loss $5.0 million):
$
million
(5.0)
(4.0)
(0.1)
(9.1)
Loss for year 2021
Increase in G&A and pre-licence costs
Increase in finance expense
Loss for year 2022
Adjusted EBITDAX and net loss
Group adjusted EBITDAX loss totalled $5.2 million
(2021: $2.0 million loss):
Loss after tax (page 88)
Interest and finance costs
Depletion and depreciation
Pre-licence costs
Total EBITDAX (Adjusted)
2022
$ million
(9.1)
0.1
0.2
3.5
(5.2)
2021
$ million
(5.0)
0.0
0.2
2.7
(2.0)
The basic loss per share was 4.1 cents per share (2021: loss 2.3
cents per share). No dividend is proposed to be paid for the year
ended 31 December 2022 (2021: $nil).
Cash flow
Total decrease in cash and cash equivalents in the year was $17.3
million (2021: $4.9 million), for the reasons described above. A full
reconciliation is provided in the Consolidated Statement of Cash
Flows on page 91.
During the year there were minimal cash investments on the
Odewayne Block in Somaliland due to the Group’s interest being
fully carried by Genel Energy Somaliland Limited for its share of
the costs during the Third and Fourth Periods of the PSA.
Accounting Standards
The Group has reported its 2022 and 2021 full year accounts
in accordance with UK adopted international accounting
standards.
Cautionary statement
This financial report contains certain forward-looking statements
that are subject to the usual risk factors and uncertainties
associated with the oil and gas exploration and production
business. Whilst the Directors believe the expectation reflected
herein to be reasonable in light of the information available up to
the time of their approval of this report, the actual outcome may
be materially different owing to factors either beyond the Group’s
control or otherwise within the Group’s control but, for example,
owing to a change of plan or strategy. Accordingly, no reliance
may be placed on the forward-looking statements.
Statement of financial position
At the end of 2022, non-current assets totalled $21.9 million
(2021: $22.0 million) the majority of which relates to the
Odewayne block ($21.3 million).
Anastasia Deulina
Chief Financial Officer
15 May 2023
Net assets/total equity stood at $49.8 million (2021: $58.9
million) and net current assets reduced to $28.1 million (2021:
$37.3 million).
The Strategic Report was approved by the Board of Directors
and signed on its behalf by:
At the end of 2022 cash and cash equivalents totalled $20.4
million (2021: $37.7 million) with the reduction due to a transfer of
$10.2 million to restricted funds (in relation to the Sonangol and
INA transactions) with the balance related to spend on G&A.
Paul McDade
Chief Executive Officer
15 May 2023
55
Corporate Governance
Year ended 31 December 2022
56Afentra plc Annual Report and Financial Statements 2022 57 Board of Directors
Executive team
Paul McDade
Chief Executive Officer
Ian Cloke
Chief Operating Officer
Anastasia Deulina
Chief Financial Officer
A Petroleum engineer with over 35 years
within the international oil & gas business
has provided Paul with a rich and diverse
set of relevant experiences. From his early
international experience in challenging
operational, social, security and safety
environments, to his 19 years as COO and
then CEO of Tullow Oil, he has essential
first-hand experience of what is required
to build a successful African-focused,
responsible oil & gas company.
His strong focus on delivering
stakeholder value, shared prosperity,
environmental performance and
strong governance, coupled with his
understanding of the role that oil and gas
has to play in both the global and African
energy transitions, makes him the ideal
leader to deliver Afentra’s ambitious
growth strategy, a company that will
have stakeholder objectives and ESG
embedded at its core.
A Geoscientist with over 25 years of
international oil & gas experience and
a proven track record of deploying
innovative technologies across global
upstream projects that positively impact
operational, technical and commercial
results for the benefit of all stakeholders.
As EVP at Tullow Oil, he led multi-cultural
and diverse teams focused on safely
improving production and operations at
pace across Africa and South America,
effectively managing risk and social-
environmental sensitivities whilst
embedding strong financial discipline.
He has first-hand experience in making a
difference in countries having discovered
and successfully delivered commercial
oil & gas in Uganda, Kenya and Guyana
amongst others. Having lived and travelled
throughout Africa, he has enjoyed the
full spectrum of life and business on the
continent, making him an ideal founding
partner and COO of Afentra.
Anastasia’s multicultural upbringing
and over 20 years of working in the
energy sector within global, multinational
investment banks, private equity and
corporates has given her extensive
experience in strategy development, deal
origination, structuring and execution,
M&A and business transformation.
Her primary focus is always on driving
sustainable business growth that has a
visible positive impact on the bottom-
line. This, along with her significant prior
Board experience, both as a NED and
committee member, and her strong global
business development and financial
network means that Anastasia provides
expert leadership as Afentra’s CFO.
58OverviewCorporate GovernanceStrategic ReportGroup AccountsAfentra plc Annual Report and Financial Statements 2022 Non-executive team
Jeffrey MacDonald
Independent non-executive Chairman
Gavin Wilson
Independent non-executive Director
Jeffrey MacDonald was a former
managing director with private equity
firm, First Reserve, with responsibility
for investment origination, structuring,
execution, monitoring and exit strategy,
with particular emphasis on the oil &
gas sector.
Gavin Wilson has held the position of
Investment Director at Meridian Capital
Limited, a Hong Kong based international
investment firm, for over a decade,
managing an oil & gas portfolio focused
on world-class assets in emerging
markets.
Before joining First Reserve, he was
a founder and CEO of Caledonia Oil
& Gas Ltd., a U.K. based exploration
and production firm, and a founding
member and managing director of
Highland Energy Ltd. Most recently he
held the position of Interim CEO and,
prior to that, non-executive Director, of
Kris Energy.
Mr. Wilson founded and managed, for over
seven years, two successful investment
funds - RAB Energy and RAB Octane.
Previously he was Managing Partner
of Canaccord Capital London’s Oil &
Gas division, responsible for Sales and
Corporate Broking/Finance.
59 Statement of Corporate Governance
Afentra has been established to help facilitate a responsible energy transition
on the African continent that delivers positive outcomes for all stakeholders.
Our purpose is to support the African energy transition as a responsible,
well managed independent, enabling the continued economic and social
development of African economies and bridging the gap to other/renewable
forms of energy. We aim to be the trusted partner of IOCs, NOCs and host
governments in Africa in the divestment of legacy assets.
Our approach is to manage assets
responsibly, achieving the full asset
potential whilst also reducing carbon
emissions. We aim to achieve this using
robust ESG principles embedded in the
core fabric of our business model and
operating structure.
The Board has been appointed to lead
the Company to achieve our purpose
and to work with the management team
to set out our culture and ensure we
succeed in our mission.
The Company follows the principles
of best practice set out in the Quoted
Companies Alliance Governance Code
(the ‘QCA Code’). The appropriate
Corporate Governance Code will remain
under review as the Company grows and
evolves. Following the appointment of the
new Board and executive team last year,
the Company has developed its corporate
governance and is satisfied with the
structure now in place. Our governance
structure will continue to evolve as the
company develops and grows and we
will ensure stakeholders remain informed
through regulatory announcements and
updates on our website.
Corporate culture
Afentra is building its business on
a strong ESG foundation and the
core elements of those principles
are embedded in our strategy and
business model. Our vision is to
establish the Company as a leading
pan-African operator with an unwavering
commitment to operational excellence,
environmental stewardship, transparent
governance, positive socio-economic
impact, and strong sustainable
shareholder returns. Oil and gas remain
important in the energy mix and as IOCs
change their business models with a view
to developing a lower-carbon footprint
driven by societal and investor pressure,
these assets must continue producing
to meet global demand, enable an
effective energy transition and allow
the host countries to benefit from the
revenues they generate. Afentra seeks
to be a credible acquirer of these assets,
enabling IOCs and host governments to
have confidence that those assets will
be managed in a responsible way, with
strong environmental stewardship and
transparent governance ensuring we
hold ourselves to account as a best-in-
class operator.
To implement our acquisition and
growth strategy we have a thorough
due diligence process to scrutinise
opportunities for their suitability. Initial
high-level screening covers subsurface,
operational, commercial and risk
management before progressing
to more detailed assessment of a
potential target asset against our
acquisition criteria. The Board is
focused on reducing and managing
identified risks rather than eliminating
all risk. Any acquisition of hydrocarbon
assets inherently includes technical,
subsurface, operational, above ground
and commercial risks and the Board
has regard to such risks within its
acquisition parameters. The Board
seeks to eliminate HSSE risks and
reputational risk.
Board composition
The composition of the Board remains
unchanged from last year with Jeffrey
MacDonald serving as non-executive
Chairman and Paul McDade as CEO.
Ian Cloke continues as COO and
Anastasia Deulina remains CFO, Gavin
Wilson continues as an independent
non-executive Director. The Board will
60OverviewCorporate GovernanceStrategic ReportGroup AccountsAfentra plc Annual Report and Financial Statements 2022 continue to search for an additional
non-executive Director in 2023, as the
candidate approached during 2022 was
ultimately unable to take up the position.
basis and will continue to serve in that
capacity until a further appointment
has been made with the requisite
financial knowledge and experience.
Gavin Wilson holds 1.35% of the issued
share capital of the Company. He also
has a consultancy agreement in place
with YF Finance Limited who own
9.90% of the issued share capital of the
Company. Gavin Wilson is, however, not
appointed to the Board as a shareholder
representative of YF Finance and,
accordingly, the Board considers him to
be independent.
The Directors acknowledge that
shareholder expectation is that at
least half of the Directors of the Board
will be independent NEDs and, as
mentioned above, the Company is
currently undertaking a search process
to appoint a third independent NED.
Composition of the various Board
Committees remains under review
and will change once the further
independent non-executive Director
has been appointed to the Board.
Anastasia Deulina was appointed to
the Audit Committee on a temporary
Functioning of the Board
The Board is responsible to
the shareholders for the proper
management of the Company. A
Statement of Directors’ Responsibilities
in respect of the financial statements is
set out on pages 76 and 77.
Each Director takes their continuing
professional development seriously
and undertakes training from relevant
professional and industry bodies
in the form of attending seminars,
conferences and continual updates
of knowledge and industry practice.
Each Director and the employees of
the Company are required to undertake
Anti-Bribery and Corruption training
on an annual basis as well as regular
updates on new and evolving areas of
governance and compliance.
The Directors have access to the
Company’s other advisors as required
including legal advisors and auditors
and have the authority to obtain
external advice as deemed necessary.
The Remuneration Committee, has
sought advice from FIT Remuneration
Consultants LLP (‘FIT Remuneration’)
regarding the Company’s remuneration
policy as well as PWC and further
details regarding this can be found in
the Remuneration Committee’s report
on pages 65 - 72. The Independent
non-executive Chairman is available to
all shareholders and staff if they have
concerns which, through the normal
channels of contact, have not been
resolved or for which such contact
is inappropriate. The Company has
not historically detailed the roles of
Chairman, non-executive Director
and Company Secretary however this
will be reviewed going forward. The
CEO, CFO and COO have contractual
obligations to the Company.
61 Statement of Corporate Governance (cont.)
Conflicts of interest
Whilst conflicts should be avoided, the
Board acknowledges that instances
arise where this is not always possible.
In such circumstances, Directors are
required to comply with the Company’s
Conflicts of Interest Policy and notify the
Chairman before the conflict arises and
the details are recorded in the minutes.
If a Director notifies the Board of such
an interest, they may be, if requested by
the Chairman, excluded from any related
discussion and will always be excluded
from any formal decision.
Retirement and re-election
The Company’s Articles of Association
require that each Director (other than
any Director appointed since the date of
the notice of Annual General Meeting for
that year), retire and stand for re-election
at each Annual General Meeting. All new
Directors appointed since the previous
Annual General Meeting are required to
stand for election at the following Annual
General Meeting.
Meetings and time commitment of
the Board
The Board and each of the Board
Committees are provided with timely
and accurate information sufficiently
ahead of each scheduled Board and
Committee meeting to enable Board
and Committee members to have
sufficient time to review and analyse the
information provided. The Board and
its sub committees meets at least four
times a year and in addition holds ad hoc
meetings. The Audit Committee meets
at least once a year, the Remuneration
Committee and the Nominations
Committee meet as required.
The Chief Executive, Chief Operating
Officer and Chief Financial Officer
are full-time positions. Non-executive
Directors are expected to commit
sufficient time to ensure they are fully
aware of the Company’s affairs and it is
expected that this time commitment
will vary over the course of the term with
intensive periods requiring significant
director focus.
The following table summarises the
number of Board and committee
meetings held during the year ended 31
December 2022 and the attendance
record of the individual Directors:
Number of meetings in year
Paul McDade
Ian Cloke
Anastasia Deulina
Jeffrey MacDonald
Gavin Wilson
Board
Meetings
Audit
Committee
Remuneration
Committee
Nominations
Committee
3
3
3
3
3
3
1
-
-
1
-
1
1
-
-
-
1
1
-
-
-
-
-
-
No formal Board performance evaluation took place in 2022, this will take place during 2023, post acquisitions.
Jeffrey MacDonald
Independent non-executive Chairman
15 May 2023
62OverviewCorporate GovernanceStrategic ReportGroup AccountsAfentra plc Annual Report and Financial Statements 2022 Audit Committee Report
Members
This Committee currently
comprises:
• Gavin Wilson (Chairman)
• Anastasia Deulina (Chief
Financial Officer)
Committee composition
During the year a search was undertaken
for a new non-executive Director with the
requisite skills and experience to Chair
the Audit Committee. Whilst a candidate
was identified and offered the position,
the candidate subsequently became
unable to accept the appointment and,
as a result, the Board has relaunched its
search process and expects to finalise
this appointment later in 2023. Until the
search is complete and a new non-
executive director is recruited, Anastasia
Deulina, the CFO, will continue as a
member of the Audit Committee.
The Audit Committee met once during
2022. The Auditors have unrestricted
access to the Chairman of the Audit
Committee. Audit Committee meetings
are attended by the Auditor where and
when appropriate and, by invitation, the
other Directors and senior management.
Summary of responsibilities:
• monitoring the integrity of the
Group’s financial statements,
including review of the financial
statements of the Company
including its annual and half-
yearly reports and any formal
announcements relating to its
financial performance;
reviewing the effectiveness of the
Group’s financial reporting, internal
control policies and procedures for
the identification, assessment and
reporting of risk;
•
• monitoring the effectiveness of the
internal control environment;
• making recommendations to the
Board on the appointment of the
Auditors;
• making a recommendation to the
Board on Auditors’ fees;
• agreeing the scope of the Auditors’
annual audit programme and
reviewing the output;
• ensuring the independence of the
Auditors is maintained;
• assessing the effectiveness of the
audit process; and
• developing and implementing policy
on the engagement of the Auditors
to supply non-audit services.
The Audit Committee has considered
the Group’s internal control and
risk management policies and
systems, their effectiveness and the
requirements for an internal audit
function in the context of the Group’s
overall risk management system. The
Committee is satisfied that the Group
does not currently require an internal
audit function, however, it will continue
to periodically review the situation.
An essential part of the integrity of
the financial statements lies around
the key assumptions and estimates or
judgments to be made. Key estimates
reviewed by the Committee included
the expected credit loss model
prescribed by IFRS 9 and the discount
rate to be used (IFRS 16, leases). The
Committee reviews key judgments
prior to publication of the financial
statements, as well as considering
significant issues throughout the year,
which included the carrying value of
investments and impairment of assets
(IFRS 6, Exploration for and Evaluation
of Mineral Resources). The Committee
reviewed and was satisfied that the
judgments made by management
contained within the Report and
Financial Statements are reasonable.
In 2023 the Audit Committee will
consider the INA and Sonangol
transactions and the accounting
treatment on completion.
The external audit function plays
an important part in assessing the
effectiveness of financial reporting and
internal controls, and the effectiveness
and quality of audit is of key importance.
Our Auditors, BDO LLP, have been
in place since 2010. The Committee
notes that it is considered best practice
for companies to put the external
audit contract out to tender at least
every ten years. In line with the audit
profession’s own ethical guidance, the
current audit engagement partner
is due to rotate off the Company’s
account in the year ending 31 December
2022, having served for a period of five
years. Having considered the Financial
Reporting Council’s (‘FRC’s’) guidance,
the Committee’s current intentions
are that it will initiate a re-tendering
process during 2023. The Committee
has recommended to the Board that
shareholders support the re-appointment
of BDO LLP at the 2023 AGM.
Further disclosure relating to the Auditors
is set out within the Directors Report.
Details of fees payable to the Auditors
are set out in Note 4.
Gavin Wilson
Chairman of the Audit Committee
15 May 2023
63 Nominations Committee
Members
This Committee currently
comprises:
• Jeffrey MacDonald (Chairman)
• Gavin Wilson
• Paul McDade
Roles and responsibilities
The Committee is focused on ensuring
that the composition of the Board and
Committees of Afentra and its balance is
optimal in order to help Afentra achieve
its vision and deliver its strategy to its
stakeholders. The Committee considers
governance best practice taking
account of the stage of development of
the Company.
Key responsibilities include:
• Reviewing the structure, size and
composition of the Board taking
into account the skills, knowledge,
experience and diversity of the
various Board members and making
recommendations to the Board
regarding potential changes;
• Considering succession planning for
directors and senior management
and identifying and nominating
for approval of the Board any
candidates to fill Board vacancies as
and when they arise;
• Reviewing the leadership needs of
the Group, both executive and non-
executive, with a view to ensuring
that the Company can continue to
deliver its strategy to stakeholders;
• Reviewing the time commitment
required from non-executive
Directors;
• Appointing any external advisors
to facilitate the search for Board
candidates or approving the use of
open advertising; and
• Facilitating Board evaluation.
Report on activities
The Committee is focused on ensuring
that the composition and balance of the
Board is optimal to help the Company
to achieve its purpose of supporting the
African energy transition as a responsible,
well managed independent oil and gas
development and production company.
The Committee is confident that it has an
exceptional leadership team with a proven
track record of operational excellence,
value creation and stakeholder
engagement across Africa.
2022 to assist in the search process
to identify and appoint a further
independent non-executive Director.
Preng were requested to perform a
search to identify candidates who would
strengthen the overall composition of
the Board and in particular take over
as Chair of the Audit Committee from
Gavin Wilson. A successful search was
performed and a shortlist of candidates
were interviewed by the Nomination
Committee, although a candidate
was identified and had accepted the
appointment in principle, the candidate
subsequently became unable to accept
the appointment. As a result, the
Company has relaunched its search
process and expects to finalise this
appointment during 2023.
As at the date of this report, the
Committee is satisfied that, subject
to the appointment of a further non-
executive Director as described
above, the composition of the Board
is appropriate for the Company at this
stage of its development.
Following a review of the composition of
the Board carried out by the Committee
with a particular focus on the ongoing
Angolan acquisitions, the Company
engaged Preng & Associates during
Jeffrey MacDonald
Chairman of the Nominations
Committee
15 May 2023
64OverviewCorporate GovernanceStrategic ReportGroup AccountsAfentra plc Annual Report and Financial Statements 2022
Remuneration Committee Report
Members
This Committee currently
comprises:
• Gavin Wilson (Chairman)
• Jeffrey MacDonald
I am pleased to present the
Remuneration Committee’s report
for 2022. The report sets out how the
Board was paid during the year ended
31 December 2022 and how it will be
remunerated to support the delivery of
the Company’s strategy and purpose
during the year ending 31 December
2023 under our remuneration policy.
Details of the Remuneration
Committee and its operation
The Remuneration Committee
makes recommendations to the
Board, within its agreed terms of
reference, on the structure and
quantum of remuneration packages for
executive Directors and it reviews the
remuneration for senior management.
The Committee consists entirely of
non-executive Directors and, where
appropriate, will invite other individuals
such as the Chief Executive, HR
Manager and external advisors
to attend meetings to provide
suitable context for its discussions.
Only members of the Committee
participate in discussions and reach
conclusions on matters for which the
Committee is responsible. No member
or attendee is authorised to participate
in matters relating to their own
remuneration. Committee composition
will remain under review and may be
subject to change when the Company
appoints a further independent non-
executive Director to the Board. The
Company Secretary acts as secretary
to the Committee.
Summary of responsibilities:
•
recommending to the Board
a remuneration policy for the
remuneration of the Chairman,
non-executive Directors,
executive Directors and other
senior management;
• within the agreed policy, determining
individual remuneration packages
for the executive Directors and
other senior management;
• agreeing the policy on terms and
conditions to be included in service
agreements for the Chairman,
executive Directors, and other senior
management, including termination
payments and compensation
commitments, where applicable; and
the approval of any employee
incentive schemes and the
performance conditions to be used
for such schemes including share
performance targets.
•
Advisors to the Committee
FIT Remuneration Consultants LLP
(‘FIT Remuneration’) was consulted
during 2022 in respect of the operation
of the Remuneration Policy. FIT
is a member and signatory of the
Remuneration Consultants Group and
voluntarily operates under the Code
of Conduct in relation to executive
remuneration consulting in the UK,
details of which can be found at www.
remunerationconsultantsgroup.com.
In addition, PricewaterhouseCoopers
LLP (‘PwC’) continued to advise the
Committee on the structure and terms
of the Founders Share Plan (‘FSP’) which
is described further below.
This report presents:
• The Directors’ Remuneration
Policy, which summarises the
Remuneration Policy which
was originally introduced by
the Committee following the
appointment of the new Board in
2021 and which will evolve as the
Company grows; and
• The Annual Report on
Remuneration, which details how
the Committee operated the Policy
for 2022 and how it intends to
operate the Policy going forwards.
65
Remuneration Committee Report (cont.)
Title
Sub Title
Directors’ Remuneration Policy
The Remuneration Policy is designed to align with the Company’s strategy, purpose and vision and recognises the experience of the
leadership team which continues to lead the transformation of the Company and facilitate new opportunities for shareholders and
other stakeholders. To recognise this and ensure the new Executive team are adequately incentivised by sharing in the value created
from the corporate strategy, the Founder Share Plan (‘FSP’) was established last year and awards were made under the FSP to the
Executive team, conditional upon completing a material acquisition. Details of the FSP, which is designed to ensure that rewards
from this plan are only available following significant value creation relative to the share price at the time the new Executive team
joined the Company, are set out below.
In addition to the FSP, a market consistent Long-Term Incentive Plan (‘LTIP’) was adopted last year to ensure that all members of staff
can share in the value created from the new corporate strategy. Awards under the LTIP were made to employees in 2022, conditional
upon, and with formal grant to occur on, completion of a material acquisition.
The Remuneration Policy is set out below.
Base salary
Purpose and link to strategy
To recruit and reward executives of the quality required and with appropriate skills to manage
and develop the Company and deliver the strategy.
Operation
• Base salary is normally reviewed annually taking into account the executive Directors’
performance, individual responsibilities and experience.
• The Committee may use market data where appropriate and will also consider matters of
retention, motivation and economic climate as well as the challenges facing the business.
• The Committee will also consider pay increases awarded to the Company’s employees
when determining increases for the executive Directors.
• There is no maximum opportunity.
Benefits
Purpose and link to strategy
Operation
To provide appropriate levels of benefits to executives of the quality required and appropriate
skills to manage and develop the Company successfully.
• Benefits may include life assurance, travel insurance, income protection, subsidised gym
membership and private medical insurance (or associated cash plan which is subject
to an annual limit). Where appropriate some of these benefits are linked to base salary.
Given the international nature of the business, relocation and expatriate benefits and
reimbursed business expenses (including any tax liability) incurred when travelling overseas
in performance of duties may be provided. This will be reviewed by the Committee as the
Company delivers its buy and build strategy.
• The maximum potential value is the cost of the provision of these benefits.
Pension
Purpose and link to strategy
To provide appropriate levels of pension provision to executives of the quality required and
appropriate skills to manage and develop the Company successfully.
Operation
•
10% of salary (delivered as a pension and/or a cash allowance).
66OverviewCorporate GovernanceStrategic ReportGroup AccountsAfentra plc Annual Report and Financial Statements 2022 Annual bonus
Purpose and link to strategy
To incentivise and reward the delivery of the Company’s short-term strategic objectives.
Operation
• Maximum opportunity is up to 100% of salary p.a.
• Annual targets are normally set at the start of the relevant financial year (or shortly after a new
executive joins the Board) based on financial, operational, strategic and/or personal performance.
• Any bonus payment is subject to the Company’s malus and claw-back policy.
Long-term incentives
Purpose and link to strategy
To retain, incentivise and reward the delivery of the Company’s strategic objectives, and to
provide further alignment with shareholders.
Operation
The Company has introduced a Founder Share Plan (‘FSP’) whereby:
• participation will be limited to the founders (being those executive Directors who have
invested their own funds in the Company’s shares);
• participants will share in the growth delivered by the Company above a threshold that the
Directors believe represents a challenging hurdle;
• malus and clawback provisions will apply.
Further details of the FSP are set out below.
•
In addition, a market standard Long-Term Incentive Plan (‘LTIP’) has been introduced.
• The LTIP is initially intended to operate for below Board employees albeit the Committee
may extend the plan to Executive Directors in the future (subject to the FSP).
• LTIP awards will normally be granted annually to employees with vesting subject to
continued service and the achievement of stretching performance targets (whether share
price based, financial, operational or strategic).
• The maximum annual opportunity is 100% of annual salary and there is an aggregate limit
whereby the Company may issue no more than 15% of its share capital within a ten-year period
to satisfy awards to participants in the LTIP, FSP and any other employee share plan.
Shareholding guideline
Purpose and link to strategy
To align executive and shareholder interests.
Operation
• The Committee recognises the importance of executive Directors aligning their interests
with shareholders through building up significant shareholdings in the Group. Executive
Directors are expected to buy, and/or retain all shares acquired on the vesting of share
awards (net of tax) until they reach a 100% of salary ownership guideline.
67 Remuneration Committee Report (cont.)
Non-executive Director fees
Purpose and link to strategy
To attract and retain a high-calibre Chairman and non-executive Directors by offering
appropriate fees.
Operation
• The Chairman and non-executive Directors will receive an annual fee (they will not be
eligible to participate in the Company’s pension arrangements or annual bonus plan). Fees
may be delivered in shares (in part or in full) to the extent that this is not considered by the
Board to impair independence.
• Fees are normally reviewed annually taking into account the Directors’ role, time
commitment and comparator data where relevant.
• Each non-executive Director is entitled to be reimbursed travel and business associated
expenses (including any tax liability) incurred in the normal course of business.
Service contracts and termination of employment
No Director currently has a notice period greater than 12 months and the service contract of the executive Directors contain no
provision for pre-determined compensation on termination which exceeds 12 months’ salary and benefits. If an executive Director’s
appointment is terminated within three months of a change of control of the Company, the relevant executive Director will be
entitled to an amount equivalent to the gross value of (i) one year’s salary and other contractual benefits (save in respect of holiday
entitlement) and (ii) sixty five per cent. (65%) of the annual bonus (if any) paid or to be paid to that Director in respect of the financial
year immediately preceding the financial year in which notice of termination was given to the Director, less any sums paid to the
Director by way of notice or payment in lieu of notice.
Termination payments made to Directors on loss of office that are not provided for within their service contracts are only made if the
Committee considers them appropriate, has recommended them to the Board and the Board has given its approval.
A bonus payment will not normally be made to a Director under notice, although there may be circumstances where one or more
clear, specific and determinable KPIs has been achieved which justify a limited bonus payment.
Introduction of the Founder Share Plan (‘FSP’)
The Company has adopted an incentive arrangement for the founders of the Company, designed to incentivise participants
to deliver exceptional returns for shareholders over a five-year period. Under the FSP, participants are eligible to receive 15% of
the growth in returns of the Company from 16 March 2021 (being the date on which Paul McDade and Ian Cloke were appointed
to the Board), should a hurdle of doubling of the total shareholder return be met. For further capital raises that occur during the
performance period, additional tranches under the FSP will be created with their own threshold values, which will be calculated
with reference to the growth rates required for the initial award, as well as the time remaining to each of the measurement dates.
Additional tranches will follow the same timetable as the initial awards (i.e. performance will be measured on the same dates).
Not more than 10% of the Company’s issued ordinary share capital may be issued under the FSP and no more than 15% of the
Company’s issued share capital may be issued in aggregate under the FSP, LTIP and any other share plan of the Company.
Value delivered will be determined by stretching performance conditions as set out in the table below. A share price of £0.15 (being
the share price at which new investors acquired their interest in the Company) will be used to measure the level of return at each
measurement date. Testing of the level of return achieved will be at the end of years three, four and five from the 16 March 2021.
At each measurement date the value of the award will be driven by the return generated above the initial price of £0.15, being the
threshold value.
68OverviewCorporate GovernanceStrategic ReportGroup AccountsAfentra plc Annual Report and Financial Statements 2022 Measurement Date
Threshold Total Shareholder Return
Measurement Total Shareholder Return
First Measurement
Date
25.99% compound annual growth from the initial
price of £0.15 as at the First Measurement Date.
16 March 2024
Second
Measurement Date
16 March 2025
Third Measurement
Date
16 March 2026
The higher of:
•
•
18.92% compound annual growth from the initial
price of £0.15 as at the Second Measurement
Date; and
the highest previous measurement total
shareholder return which resulted in Conversion.
The higher of:
•
•
14.87% compound annual growth from the initial
price of £0.15 as at the Third Measurement
Date; and
the highest previous measurement total
shareholder return which resulted in Conversion.
Average of the market value for the Company’s
shares for the 30-day period ending on the
First Measurement Date plus the dividends
paid per share from 16 March 2021 to the First
Measurement Date.
Average of the market value for the Company’s
shares for the 30-day period ending on the
Second Measurement Date plus the dividends
paid per share from 16 March 2021 to the Second
Measurement Date.
Average of the market value for the Company’s
shares for the 30-day period ending on the
Third Measurement Date plus the dividends
paid per share from 16 March 2021 to the Third
Measurement Date.
If at the Measurement Dates in years three and/or four the threshold value has been reached, then nil cost options will be awarded of
which half will vest and can be exercised immediately. The remaining half will be deferred until the Measurement Date at year five. All
nil cost options awarded in respect of the Measurement Date at year five will vest immediately.
Awards of all nil cost options will be made after approval by the Remuneration Committee taking into account the overall
performance of the Company during the performance period. Malus and clawback provisions apply.
FSP Awards
The following awards were made under the FSP, conditional upon, and with formal grant to occur on, completion of a material
acquisition. These are expressed in each case as a percentage of the nil cost options to be awarded to the Executive team in
aggregate in the event that the threshold conditions for the award of nil cost options is met. These awards are conditional upon the
completion of a material acquisition:
Founder
Paul McDade
Ian Cloke
Anastasia Deulina
% Entitlement of
Total Allocation
41.5%
31.0%
27.5%
The Long-Term Incentive Plan (‘LTIP’)
In addition to the FSP, a market standard LTIP has been adopted, initially to be used for below Board employees. The terms of the
LTIP are set out in the Policy table above.
69 Remuneration Committee Report (cont.)
Annual Report on Remuneration
Remuneration of Directors for the year ended 31 December 2022
The table below reports single figure remuneration of the Directors received in 2022 and the prior year.
2022 Remuneration
Executive Directors:
Paul McDade
Ian Cloke
Anastasia Deulina
Non-executive Directors:
Jeffrey MacDonald
Gavin Wilson
Fees and
basic salary
Bonus1
Defined
contribution
pension2
Benefits
in kind
Single figure
remuneration
Total 2022
£
£
£
£
£
350,000
350,000
285,000
285,000
285,000
285,000
35,000
28,500
28,500
9,999
7,968
3,555
744,999
606,468
602,055
96,000
45,000
-
-
-
-
-
-
96,000
45,000
Aggregate remuneration 2022 (£)
1,061,000
920,000
Aggregate remuneration 2022 (US$)
1,310,891
1,107,588
92,000
113,730
21,522
2,094,522
26,606
2,558,815
2021 Remuneration
Fees and
basic salary
Bonus
Defined
contribution
pension
Benefits
in kind
Single figure
remuneration
Total 2021
Executive Directors:
Paul McDade (appointed 15 March 2021)
Ian Cloke (appointed 15 March 2021)
Anastasia Deulina (appointed 4 May 2021)
Tony Hawkins (resigned 15 March 2021)
Non-executive Directors:
Jeffrey MacDonald (appointed 30 March 2021)
Gavin Wilson (appointed 30 March 2021)
Michael Kroupeev (resigned 30 March 2021)
Leo Koot (resigned 30 March 2021)
Ilya Belyaev (resigned 30 March 2021)
Aggregate remuneration 2021 (£)
Aggregate remuneration 2021 (US$)
£
291,667
237,500
244,000
130,836
72,738
33,750
52,800
26,400
19,050
1,108,741
1,526,585
1 Accrued in 2022, payment is contingent on the completion of the Sonangol acquisition.
2 Defined pension contributions paid as cash..
£
-
-
-
-
-
-
-
-
-
-
-
£
£
£
29,167
23,750
19,000
5,625
-
-
-
-
-
7,775
6,001
2,876
858
-
-
-
-
-
328,609
267,251
265,876
137,319
72,738
33,750
52,800
26,400
19,050
77,542
106,666
17,510
1,203,793
24,087
1,657,338
70OverviewCorporate GovernanceStrategic ReportGroup AccountsAfentra plc Annual Report and Financial Statements 2022 Annual Bonus Awards for 2021
The annual bonus KPIs for 2022 were based on a combination of the delivery of the Company’s “buy and build” acquisition strategy
and the effective management of the 2022 budget.
• Progress on Buy and Build strategy – The Company made significant progress on the buy and build strategy in 2022 signing an
SPA for the Sonangol transaction in April 2022 and signing a further SPA in respect of the INA acquisition in July 2022. These
deals are fully aligned with Afentra’s strategy of delivering value accretive acquisitions that provide access to production assets
that deliver material cashflow and have significant development upside. Whilst it had been hoped that both acquisitions would
complete in 2022 this has been delayed into 1H 2023.
• 2022 budget – The underlying 2022 G&A costs were delivered within 1% of budget agreed with the Board. This was considered
an exceptional outcome given this was the first full year of operation for Afentra and the very significant amount of planned and
unplanned work completed on both the Angola deals and other opportunities.
The Remuneration Committee has considered the progress made against the two KPI’s set at the beginning of 2022 along with
overall corporate progress at Afentra over the year. Given the significant progress made on the buy and build strategy by securing
and signing SPA’s on two acquisitions in Angola which will transform the Company when completed, this KPI is considered to be
fully met subject to both deals completing. Cost management across the Company has been strong and, given that 2022 was the
first full year of operation, meeting the overall G&A budget to within 1% of the target set was an excellent outcome. Given the overall
performance of the team versus the targets that were set and the very significant progress the Company has made in 2022, the
Executive Directors will receive the maximum annual bonus of 100% of salary. However, the Committee has decided that the bonus
payment will not be made until completion of the Sonangol acquisition.
Board Changes
No Board changes took place during 2022.
Remuneration Policy for 2023
A summary of how the Committee intends to operate the Policy for 2023 is set out below.
There is no change to remuneration policy in 2023 and it is recommended that an increase of 5% of base salary is awarded to
the Executive team. This increase is considered reasonable based on the salary revisions made for other employees, the external
environment and in recognition of the fact that no increase was awarded to the Executive team in 2022. A summary of the revised
salaries and how the Policy will be implemented is as follows:
Base salary
Pension
Annual bonus
The Executive Directors received base salary increases of 5% from 1 January 2023 in line with the
average workforce increase. As such, the current salaries for Paul McDade, Ian Cloke and Anastasia
Deulina for 2023 are £367,500, £299,250 and £299,250 respectively.
10% of salary in line with the Remuneration Policy.
Annual Bonus will continue to be capped at 100% of base salary. Performance metrics will be based on
Business Development delivery (45%), Asset and ESG performance (45%) and G&A budget delivery
(10%). Unless considered commercially sensitive, the targets and performance against these targets will
be disclosed in the Remuneration report for the year ending 31 December 2023.
FSP
Awards have been made to the Executive team under the FSP, conditional upon completion of a
material acquisition.
Non-executive fees
The non-executive Chairman and non-executive Director will receive fees for 2023 of £96,000 and
£45,000 respectively. The structure and quantum of Non-Executive Director fees will be reviewed
during 2023.
71 Remuneration Committee Report (cont.)
Statement of Directors interests (audited)
The current Directors’ beneficial interests in the issued share capital of the Company are as follows:
Ordinary shares of 10p each
15 May 2023
31 December 2022
31 December 2021
Executive Directors:
Paul McDade
Ian Cloke
Anastasia Deulina
Non-executive Directors:
Gavin Wilson
Jeffrey MacDonald
3,088,192
2,128,009
1,048,072
3,088,192
2,128,009
1,048,072
2,267,000
1,920,555
954,141
2,981,666
2,981,666
2,681,666
-
-
-
Beneficial shareholdings include the shareholdings of a Director’s spouse and infant children.
Directors’ and Officers’ liability insurance
The Company has granted an indemnity to its Directors (including subsidiary undertakings) under which the Company will, to
the maximum extent possible by law, indemnify them against all costs, charges, losses and liabilities incurred by them in the
performance of their duties.
The Company provides limited Directors’ and Officers’ liability insurance, at a cost of approximately $74.8k in 2022 (2021: $59.9k).
External directorships
None of the executive Directors receive fees in relation to directorships in other companies.
Gavin Wilson
Chairman of the Remuneration Committee
15 May 2023
72OverviewCorporate GovernanceStrategic ReportGroup AccountsAfentra plc Annual Report and Financial Statements 2022 Extractive Industries Transparency Initiative
In accordance with the Transparency Criteria as set out by the EITI, the following payments to Government bodies have been made
during the year ended 31 December 2022:
Somaliland - Odewayne 1
1 Payments made by Genel Energy. Afentra (East Africa) Ltd fully carried for its share of cost.
2022
$000
75
75
2021
$000
75
75
73 Directors’ Report
The Directors present their Annual Report and Financial
Statements on the affairs of the Company and its subsidiaries,
together with the independent Auditors’ Report for the year
ended 31 December 2022
Principal activity and business review
With Africa as its geographic focus, the principal activities of the
Group and Company throughout the year were progressing the
Angolan asset transactions, (including financing arrangements)
and identifying further acquisition targets. The future strategy
and prospects for the Group are reviewed in detail in the
Chairman’s Statement, Chief Executive Officer’s Statement
and the Strategic Report section of this report.
The Group operates through subsidiary undertakings as
appropriate to the fiscal environment. Subsidiary undertakings
of the Group are set out in Note 11 to the financial statements.
In 2022 the Group used several KPIs to assess the business
performance against strategy including M&A led growth
initiatives and acquisitions, managing the Group’s financial
exposure to its existing assets and controlling its G&A expenses.
In 2023 the future developments of the Group will be focused
on the completion of the Sonangol acquisition and further
M&A, as described in the Strategic report pages 18 - 55.
Results and dividends
The Group loss for the financial year was $9.1 million (2021: loss
$5.0 million). This leaves accumulated Group retained earnings
of $21.9 million (2021: retained earnings of $31.0 million) to be
carried forward. The Directors do not recommend the payment
of a dividend (2021: $nil).
Directors Liabilities
Qualifying third-party indemnity provisions for the benefit of all
the Directors were in force throughout the financial year and
they remained in force as at the date of approval of the Annual
Report as described in the Remuneration Committee report
pages 65 - 72.
Going concern
The Group business activities, together with the factors likely
to affect its future development, performance and position are
set out in the Asset summary on pages 32 - 37. The financial
position of the Group and Company, its cash flows and liquidity
position are described in the Financial Review on pages 54 and
55. In addition, Note 19 to the financial statements includes
the Group’s objectives, policies and processes for managing its
capital financial risk: details of its financial instruments and its
exposures to credit risk and liquidity risk.
The Group has sufficient cash resources for its working capital
needs and its committed capital expenditure programme
at least for the next 12 months. Consequently, the Directors
believe that both the Group and Company are well placed to
manage their business risks successfully.
The Directors have at the time of approving the financial
statements, a reasonable expectation that the Group has
adequate resources to continue in operational existence for
the foreseeable future. This assessment has been made by the
Directors who remain confident the Group has sufficient cash
resources at the date of signing the annual report to meet its
liabilities as they fall due for a period of at least 12 months from
the date of signing these financial statements, notwithstanding
the impact of the situation in Ukraine and the impact to
commodity prices and foreign exchange rates. With respect to
the completion of the INA Angolan asset acquisition (refer to
subsequent events Note 21) and the anticipated completion of
the Sonangol asset acquisition (post signing of the accounts),
the Directors believe that the Group is in a strong position, due
to significant liquid resources being available, resulting from a
combination of on balance sheet cash reserves, a conventional
RBL arrangement, and a revolving working capital facility, in
place with Trafigura and Mauritius Commercial Bank (refer to
the Financial Review). The Board has also looked at scenario’s
associated with additional acquisitions and believe that
liquidity is sufficient through existing and further debt funding
arrangements to pursue further opportunities and cover all
financial covenants. Thus the Board believes its appropriate
to continue to adopt the going concern basis of accounting in
preparation of the financial statements..
Capital structure
Details of the issued share capital, together with details of the
movements in the Company’s issued share capital during the
year, are shown in Note 15 to the financial statements. The
Company has one class of ordinary share, which carries no
right to fixed income. Each share carries the right to one vote
74OverviewCorporate GovernanceStrategic ReportGroup AccountsAfentra plc Annual Report and Financial Statements 2022 at general meetings of the Company. There are no specific
restrictions on the size of a holding nor on the transfer of shares,
which are both governed by the general provisions of the
Articles of Association and prevailing legislation. The Directors
are not aware of any agreements between holders of the
Company’s shares that may result in restrictions on the transfer
of securities or on voting rights. No person has any special
rights of control over the Company’s share capital and all issued
shares are fully paid.
Business risk
A summary of the principle and general business risks can be
found within the Strategic Report on pages 46 - 51.
Financial instruments
Information about the use of financial instruments, the Group’s
policy and objectives for financial risk management is given in
Note 19 to the financial statements.
Directors
The Directors who served during the year were as follows:
Subsequent events
Details of the subsequent events given in Note 21 to the
financial statements.
• Mr. Paul McDade
• Mr. Ian Cloke
• Ms. Anastasia Deulina
• Mr. Jeffrey MacDonald
• Mr. Gavin Wilson
Biographical details of the current serving Directors can be found
in the Board of Directors section of this report on page 58.
Directors and election rotation
With regard to the appointment and re-election of the Directors,
the Company is governed by its Articles of Association,
the Companies Acts and related legislation. The powers of
Directors are described within this report.
Significant shareholdings
Except for the holdings of ordinary shares listed below, the
Company has not been notified by or become aware of any
persons holding 3% or more of the 220,053,520 issued ordinary
shares of 10 pence each of the Company at 15 May 2023:
Askar Alshinbayev
YF Finance Limited
Denis O'Brien
Kite Lake Capital Management (UK)
LLP
Number
26,315,423
21,789,361
15,750,000
13,500,000
%
11.96
9.90
7.16
6.13
Athos Capital Limited
6,887,073
3.13
Auditors
Each of the persons who are a Director at the date of approval
of this Report and Financial Statements confirms that:
• so far as the Director is aware, there is no relevant
audit information of which the Company’s Auditors are
unaware; and
•
the Directors have taken all the steps that they ought
to have taken as a Director in order to make themselves
aware of any relevant audit information and to establish
that the Company’s Auditors are aware of that information.
This confirmation is given and should be interpreted in
accordance with the provisions of section 418 of the
Companies Act 2006.
BDO LLP has expressed its willingness to continue in office as
Auditors and a resolution to appoint BDO will be proposed at
the forthcoming Annual General Meeting to be held on
20 June 2023.
Paul McDade
Chief Executive Officer
15 May 2023
75 Statement of Directors’ Responsibilities
The Directors are responsible for preparing the Annual Report and the Financial Statements in accordance with applicable law
and regulations.
Company law requires the Directors to prepare Financial Statements for each financial year. Under that law the Directors are required
to prepare the Group and Company Financial Statements in accordance with UK adopted International Accounting Standards. Under
company law the Directors must not approve the Financial Statements unless they are satisfied that they give a true and fair view of the
state of affairs of the Group and Company and of the profit or loss of the Group for that period.
In preparing these financial statements, the Directors are required to:
• select suitable accounting policies and then apply them consistently;
• make judgements and accounting estimates that are reasonable and prudent;
• state whether they have been prepared in accordance with UK adopted international accounting standards subject to any
material departures disclosed and explained in the financial statements;
• prepare the Financial Statements on the going concern basis unless it is inappropriate to presume that the Group and the
Company will continue in business.
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company’s
transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to
ensure that the Financial Statements comply with the requirements of the Companies Act 2006. They are also responsible for
safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and
other irregularities.
76OverviewCorporate GovernanceStrategic ReportGroup AccountsAfentra plc Annual Report and Financial Statements 2022 Website publication
The Directors are responsible for ensuring the Annual Report and the Financial Statements are made available on a website.
Financial Statements are published on the Company’s website in accordance with legislation in the United Kingdom governing the
preparation and dissemination of Financial Statements, which may vary from legislation in other jurisdictions. The maintenance and
integrity of the Company’s website is the responsibility of the Directors. The Directors’ responsibility also extends to the ongoing
integrity of the Financial Statements contained therein.
Disclosure of audit information
In the case of each person who is a Director of the Company at the date when this report is approved:
• So far as they are individually aware, there is no relevant audit information of which the Company’s auditor is unaware; and
• Each of the Directors has taken all the steps that they ought to have taken as a Director to make themselves aware of any relevant
audit information and to establish that the Company’s auditor is aware of the information.
For and on behalf of the Board
Paul McDade
Chief Executive Officer
Anastasia Deulina
Chief Financial Officer
15 May 2023
15 May 2023
77 Group Accounts
Year ended 31 December 2022
78Afentra plcAfentra plc Annual Report and Financial Statements 2022 79 Independent Auditor’s Report
to the members of Afentra Plc
Opinion on the Financial Statements
In our opinion:
•
•
•
the Financial Statements give a true and fair view of the state of the Group’s and of the Parent Company’s affairs as at 31
December 2022 and of the Group’s loss for the year then ended;
the Group Financial Statements have been properly prepared in accordance with UK adopted international accounting standards;
the Parent Company Financial Statements have been properly prepared in accordance with UK adopted international
accounting standards and as applied in accordance with the provisions of the Companies Act 2006; and
•
the Financial Statements have been prepared in accordance with the requirements of the Companies Act 2006.
We have audited the Financial Statements of Afentra Plc (the ‘Parent Company’) and its subsidiaries (the ‘Group’) for the year
ended 31 December 2022 which comprise the consolidated statement of comprehensive income, the consolidated statement
of financial position, the consolidated statement of changes in equity, the consolidated statement of cash flows, the company
statement of financial position, the company statement of changes in equity, the company statement of cash flows and the
notes to the Financial Statements, including a summary of significant accounting policies. The financial reporting framework
that has been applied in their preparation is applicable law and UK adopted international accounting standards and, as regards
the Parent Company Financial Statements, as applied in accordance with the provisions of the Companies Act 2006.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities
under those standards are further described in the Auditor’s responsibilities for the audit of the Financial Statements section of our
report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Independence
We remain independent of the Group and the Parent Company in accordance with the ethical requirements that are relevant to our
audit of the Financial Statements in the UK, including the FRC’s Ethical Standard as applied to listed entities, and we have fulfilled our
other ethical responsibilities in accordance with these requirements.
Conclusions relating to going concern
In auditing the Financial Statements, we have concluded that the Directors’ use of the going concern basis of accounting in the
preparation of the Financial Statements is appropriate. Our evaluation of the Directors’ assessment of the Group and the Parent
Company’s ability to continue to adopt the going concern basis of accounting included:
• Verifying the opening cash position used in the cash flow forecast.
• Reviewing and recalculating forecast covenants included in the RBL facility.
• Obtaining and assessing the reasonableness of the Group and Parent Company’s base case cash flow forecasts and underlying
assumptions which have been approved by the Board by reviewing historic forecasts against actuals in order to assess the
ability of Management to forecast accurately.
• Reviewing licence agreements to check that committed expenditure is appropriately included in forecasts.
80Afentra plcOverviewCorporate GovernanceStrategic ReportGroup AccountsAfentra plc Annual Report and Financial Statements 2022 • Comparing the level of committed exploration and investment spend per the Group’s and Parent Company’s contractual
arrangements to the level of such expenditure included in the going concern model.
• Reviewing stress test scenarios including scenarios relating to future acquisitions, increase in capital and operating expenditure, and
reduced commodity prices.
• Reviewing and considering the adequacy of disclosures in the Financial Statements relating to the Directors’ assessment of the going
concern basis of preparation in order to conclude whether the disclosure reflects our understanding of the business and evidence
obtained during the course of the audit.
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that,
individually or collectively, may cast significant doubt on the Group and the Parent Company’s ability to continue as a going
concern for a period of at least twelve months from when the Financial Statements are authorised for issue.
Our responsibilities and the responsibilities of the Directors with respect to going concern are described in the relevant sections
of this report.
Overview
Coverage
100% (2021: 100%) of Group total assets and loss before tax
Key audit matters
Carrying value of exploration and evaluation assets
Carrying value of investments in subsidiaries in the Parent Company Accounts
Materiality
Group Financial Statements as a whole
• $790k (2021: $900k) based on 1.5% (2021: 1.5%) of total assets
2022
2021
Yes
Yes
Yes
No
An overview of the scope of our audit
Our Group audit was scoped by obtaining an understanding of the Group and its environment, including the Group’s system
of internal control, and assessing the risks of material misstatement in the Financial Statements. We also addressed the risk of
management override of internal controls, including assessing whether there was evidence of bias by the Directors that may have
represented a risk of material misstatement.
Our Group audit scope focused on the Group’s principal operating entities, Afentra plc and Afentra Northwest Africa Holdings
Limited. We have identified both entities as significant components for the purposes of our Financial Statement audit, based on their
relative share of total assets. Full scope audits were performed on these significant components.
The remaining components of the Group were considered non-significant and these components were principally subject to analytical
review procedures, together with additional substantive testing over the risk areas detailed above where applicable to that component.
All audit work (full scope audit or review work) was conducted by BDO LLP.
81 Independent Auditor’s Report (cont.)
to the members of Afentra Plc
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the Financial
Statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to
fraud) that we identified, including those which had the greatest effect on: the overall audit strategy, the allocation of resources in the
audit, and directing the efforts of the engagement team. These matters were addressed in the context of our audit of the Financial
Statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
Carrying value of exploration and evaluation asset
The Group’s exploration and evaluation asset (‘E&E asset’) per Note 9 of the Financial Statements represents a significant asset
on the consolidated statement of financial position.
See Note 1f and Note 2 for details of the accounting policy, critical accounting estimate, and judgements relating to this key audit matter.
The Group holds a 34% interest in the Odewayne Block, fully carried by Genel Energy Somaliland Limited (‘Genel’) for its share of
the costs of all exploration activities during the Third and Fourth Periods of the production sharing agreement.
Management performed an impairment indicator review in accordance with accounting standards to assess whether there were
any indicators of impairment for the exploration asset and whether a full impairment assessment was required. Following this
assessment, Management concluded that there were no impairment indicators.
Given the materiality of the E&E asset in the context of the Group’s statement of financial position and the significant judgement
involved in making the impairment assessment, we have considered this to be a key audit matter.
How the scope of our audit addressed the key audit matter
Our specific audit testing in regard to this included:
• Reviewed Management’s impairment indicator assessment and considered whether there are any indicators of impairment
in line with criteria set out under the accounting standards including, results of recent exploration work performed in the year,
future planned expenditure as well as publicly available information;
• Obtained and reviewed the oil and gas licenses and checked that the Group still has legal title;
• Reviewed the audited Financial Statements of the joint venture partner to identify if there were adverse information or
impairment relating to Odewayne. We additionally reviewed public information relating to the joint venture partner’s outlook for
exploration activities in Somaliland.
• Reviewed and considered Management’s position on whether there is an intention to develop the asset and whether it remains
commercially viable;
• Reviewed the FY 23 budget and work programmes to confirm the Group’s intention to continue to fund exploration activity on
the Odewayne block; and
• Reviewed Financial Statements disclosures to confirm that disclosures are in line with the accounting standards.
Key observations
Based on the procedures performed, we found the judgements made by Management regarding its impairment indicator review
of the Group’s E&E asset to be reasonable.
82Afentra plcTitleYear ended 31 December 2022OverviewCorporate GovernanceStrategic ReportGroup AccountsAfentra plc Annual Report and Financial Statements 2022 Carrying value of investments in subsidiaries in the Parent Company Accounts
See Note 1j and Note 2 for details of the accounting policy, critical accounting estimate, and judgements relating to this key audit matter.
Details of the parent Company’s investments in subsidiaries are provided in Note 11.
The recoverability of the investments in subsidiaries is intrinsically linked to the successful development of the underlying
exploration and evaluation asset as the main asset held in the subsidiaries’ investments is that of the exploration license.
Management has performed an impairment indicator review in accordance with the accounting standards to assess whether
they are indicators that the carrying value of its investments in subsidiaries may be higher than its recoverable amount.
Based on this assessment management has concluded that no impairment indicators exist and that no impairment of the
investments is required.
The material value of the investments in subsidiary companies and the significant judgement involved in determining impairment
indicators makes this a key area of focus for our audit, and we have considered this to be a key audit matter.
How the scope of our audit addressed the key audit matter
Our specific audit testing in regard to this included:
• We have reviewed management’s impairment indicator assessment for the investment in subsidiaries in accordance with the
accounting standards and considered whether there were any indicators of impairment;
• Reviewed the estimates and assumptions used in management’s impairment indicator assessment and checked for
consistency with the assessment of the carrying value of the exploration asset and checked for any evidence that could
indicate that the E&E asset would not be developed or could be sold for a value less than its carrying amount;
• Obtained and reviewed management’s assessment of the projects and related results within each subsidiary, and their conclusions
reached on whether the projects are considered to be successful or unsuccessful. This included consideration of technical data, the
award of the necessary licences, the ability to raise finance to develop the projects and the ability to sell the project; and
• We have reviewed minutes of meetings and press releases to corroborate management’s assessment of the status of each project.
Key observations
Based on the procedures performed, we found the judgement and estimates made by management in their impairment
indicator review of the investments held in subsidiaries are reasonable.
83 Independent Auditor’s Report (cont.)
to the members of Afentra Plc
Our application of materiality
We apply the concept of materiality both in planning and performing our audit, and in evaluating the effect of misstatements. We
consider materiality to be the magnitude by which misstatements, including omissions, could influence the economic decisions of
reasonable users that are taken on the basis of the Financial Statements.
In order to reduce to an appropriately low level the probability that any misstatements exceed materiality, we use a lower materiality
level, performance materiality, to determine the extent of testing needed. Importantly, misstatements below these levels will
not necessarily be evaluated as immaterial as we also take account of the nature of identified misstatements, and the particular
circumstances of their occurrence, when evaluating their effect on the Financial Statements as a whole.
Based on our professional judgement, we determined materiality for the Financial Statements as a whole and performance
materiality as follows:
Group Financial Statements
Parent Company Financial Statements
2022
$’000
790
2021
$’000
900
2022
$’000
592
2021
$’000
675
Materiality
Basis for determining materiality
1.5% total assets
75% of Group
Rationale for the benchmark
applied
We consider total assets to be the most
significant determinant of the Group’s
financial performance on the basis that the
Group’s principal activity is the development
of oil and gas exploration assets.
We consider total assets to be one of the
principal considerations for users of the
Financial Statements.
We considered aggregation risk within the
Group and therefore set the materiality at
75% of the Group’s level.
Performance materiality
592
675
444
506
Basis for determining
performance materiality
Rationale for the percentage
applied for performance
materiality
75% of the above materiality level.
In reaching our conclusion on the level of performance materiality to be applied we
considered a number of factors including the expected total value of known and likely
misstatements (based on past experience), our knowledge of the Group’s internal controls
and management’s attitude towards proposed adjustments.
Component materiality
For the purposes of our Group audit opinion, we set materiality for each significant component of the Group, based on a percentage
of 75% (2021:75%) of Group materiality dependent on the size and our assessment of the risk of material misstatement of that
component. Component materiality for the significant components was $592k (2021: $675k). In the audit of each component, we
further applied performance materiality levels of 75% (2021:75%) of the component materiality to our testing to ensure that the risk of
errors exceeding component materiality was appropriately mitigated.
Reporting threshold
We agreed with the Audit Committee that we would report to them all individual audit differences in excess of $15k (2021: $18k). We also
agreed to report differences below this threshold that, in our view, warranted reporting on qualitative grounds.
84Afentra plcOverviewCorporate GovernanceStrategic ReportGroup AccountsAfentra plc Annual Report and Financial Statements 2022 Other information
The Directors are responsible for the other information. The other information comprises the information included in the Annual
Report and Financial Statements other than the Financial Statements and our auditor’s report thereon. Our opinion on the Financial
Statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not
express any form of assurance conclusion thereon. Our responsibility is to read the other information and, in doing so, consider
whether the other information is materially inconsistent with the Financial Statements or our knowledge obtained in the course
of the audit, or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material
misstatements, we are required to determine whether this gives rise to a material misstatement in the Financial Statements
themselves. If, based on the work we have performed, we conclude that there is a material misstatement of this other information,
we are required to report that fact.
We have nothing to report in this regard.
Other Companies Act 2006 reporting
Based on the responsibilities described below and our work performed during the course of the audit, we are required by the
Companies Act 2006 and ISAs (UK) to report on certain opinions and matters as described below.
Strategic report and
Directors’ report
Matters on which we
are required to report
by exception
In our opinion, based on the work undertaken in the course of the audit:
•
•
the information given in the Strategic report and the Directors’ report for the financial year for which the
Financial Statements are prepared is consistent with the Financial Statements; and
the Strategic report and the Directors’ report have been prepared in accordance with applicable legal
requirements.
In the light of the knowledge and understanding of the Group and Parent Company and its environment
obtained in the course of the audit, we have not identified material misstatements in the strategic report
or the Directors’ report.
We have nothing to report in respect of the following matters in relation to which the Companies Act
2006 requires us to report to you if, in our opinion:
• adequate accounting records have not been kept by the Parent Company, or returns adequate for our
audit have not been received from branches not visited by us; or
•
the Parent Company Financial Statements are not in agreement with the accounting records and
returns; or
• certain disclosures of Directors’ remuneration specified by law are not made; or
• we have not received all the information and explanations we require for our audit.
Responsibilities of Directors
As explained more fully in the Statement of Directors’ responsibilities, the Directors are responsible for the preparation of the Financial
Statements and for being satisfied that they give a true and fair view, and for such internal control as the Directors determine is
necessary to enable the preparation of Financial Statements that are free from material misstatement, whether due to fraud or error.
In preparing the Financial Statements, the Directors are responsible for assessing the Group’s and the Parent Company’s ability
to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of
accounting unless the Directors either intend to liquidate the Group or the Parent Company or to cease operations, or have no
realistic alternative but to do so.
85 Independent Auditor’s Report (cont.)
to the members of Afentra Plc
Auditor’s responsibilities for the audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the Financial Statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a
high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate,
they could reasonably be expected to influence the economic decisions of users taken on the basis of these Financial Statements.
Extent to which the audit was capable of detecting irregularities, including fraud
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our
responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our
procedures are capable of detecting irregularities, including fraud is detailed below:
• Discussing with management and the Audit committee to understand the laws and regulations relevant to the Group and its
components. We considered the significant laws and regulations to be the elements of the financial reporting network, the
Companies Act 2006, tax legislation and AIM listing rules.
• Reviewing minutes of meetings of those charged with governance, RNS announcements and holding discussions with
management and the audit committee regarding their knowledge of any known or suspected instances of fraud; and
• Discussing amongst the engagement team as to how and where fraud might occur in the Financial Statements.
We communicated relevant identified laws and regulations and potential fraud risks to all engagement team members and remained
alert to any indications of fraud or non-compliance with laws and regulations throughout the audit.
Based on our risk assessment, we considered the areas most susceptible to fraud to be management override of controls via
posting inappropriate journal entries and management bias with respect to significant accounting estimates and judgements.
Our procedures in respect of the above included:
• Testing appropriateness of journal entries made throughout the year which met specific risk-based criteria to supporting
documentation;
• Assessing the judgements made by management when making key accounting estimates and judgements, and challenging
management on the appropriateness of these judgements, specifically around key audit matters as noted above; and
• Performing a detailed review of the Group’s year end adjusting entries and investigating any that appear unusual as to nature or
amount to supporting documentation.
Our audit procedures were designed to respond to risks of material misstatement in the Financial Statements, recognising that the
risk of not detecting a material misstatement due to fraud is higher than the risk of not detecting one resulting from error, as fraud
may involve deliberate concealment by, for example, forgery, misrepresentations or through collusion. There are inherent limitations
in the audit procedures performed and the further removed non-compliance with laws and regulations is from the events and
transactions reflected in the Financial Statements, the less likely we are to become aware of it.
A further description of our responsibilities is available on the Financial Reporting Council’s website at: www.frc.org.uk/
auditorsresponsibilities. This description forms part of our auditor’s report.
86Afentra plcOverviewCorporate GovernanceStrategic ReportGroup AccountsAfentra plc Annual Report and Financial Statements 2022 Use of our report
This report is made solely to the Parent Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies
Act 2006. Our audit work has been undertaken so that we might state to the Parent Company’s members those matters we are
required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or
assume responsibility to anyone other than the Parent Company and the Parent Company’s members as a body, for our audit work,
for this report, or for the opinions we have formed.
Matt Crane (Senior Statutory Auditor)
For and on behalf of BDO LLP, Statutory Auditor,
55 Baker Street, Marylebone, London W1U 7EU
15 May 2023
BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127).
87 Consolidated Statement of Comprehensive Income
Year ended 31 December 2022
Note
31 December 2022
$000
31 December 2021
$000
Other administrative expenses
Pre-licence costs
Total administrative expenses
Loss from operations
Finance income
Finance expense
Loss before tax
Tax
Loss for the year attributable to the owners of the parent
Other comprehensive expense - items to be reclassified to
the income statement in subsequent periods
Currency translation adjustments
Total other comprehensive expense for the year
Total comprehensive expense for the year attributable
to the owners of the parent
Basic and diluted loss per share (US cents)
4
6
6
7
8
(5,484)
(3,491)
(8,975)
(8,975)
86
(197)
(9,086)
-
(9,086)
-
-
(9,086)
(4.1)
(2,249)
(2,734)
(4,983)
(4,983)
36
(45)
(4,992)
-
(4,992)
(5)
(5)
(4,997)
(2.3)
88Afentra plcOverviewCorporate GovernanceStrategic ReportGroup AccountsAfentra plc Annual Report and Financial Statements 2022 Consolidated Statement of Financial Position
Year ended 31 December 2022
Non-current assets
Exploration and evaluation assets
Property, plant and equipment
Current assets
Trade and other receivables
Cash and cash equivalents
Restricted Funds
Total assets
Equity
Share capital
Currency translation reserve
Retained earnings
Total equity
Current liabilities
Trade and other payables
Lease liability
Non-current liabilities
Lease liability
Provision
Total liabilities
Total equity and liabilities
Note
31 December 2022
$000
31 December 2021
$000
9
10
12
13
14
15/16
16
16
17
18
18
21,324
540
21,864
419
20,384
10,200
31,003
52,867
28,143
(202)
21,867
49,808
2,689
210
2,899
127
33
160
3,059
52,867
21,289
725
22,014
288
37,727
-
38,015
60,029
28,143
(202)
30,953
58,894
518
234
752
347
36
383
1,135
60,029
The financial statements of Afentra plc, registered number 1757721, were approved by the Board of Directors and authorised for
issue on 15 May 2023.
Signed on behalf of the Board of Directors
Paul McDade
Chief Executive Officer
15 May 2023
89 Consolidated Statement of Changes in Equity
Year ended 31 December 2022
At 1 January 2021
Loss for the year
Currency translation adjustments
Total comprehensive expense for the year attributable to
the owners of the parent
At 31 December 2021
Loss for the year
Currency translation adjustments
Total comprehensive expense for the year attributable to
the owners of the parent
Share capital
$000
28,143
-
-
-
Currency
translation
reserve
$000
(197)
-
(5)
(5)
28,143
(202)
-
-
-
-
-
-
Retained
earnings
$000
35,945
(4,992)
-
(4,992)
30,953
(9,086)
-
Total
$000
63,891
(4,992)
(5)
(4,997)
58,894
(9,086)
-
(9,086)
(9,086)
At 31 December 2022
28,143
(202)
21,867
49,808
90Afentra plcOverviewCorporate GovernanceStrategic ReportGroup AccountsAfentra plc Annual Report and Financial Statements 2022 Consolidated Statement of Cash Flows
Year ended 31 December 2022
Note
Operating activities
Loss before tax
Depreciation, depletion and amortisation
10
Finance income and gains
Finance expense and losses
Operating cash flow prior to working capital movements
Increase in trade and other receivables
Increase in trade and other payables
(Decrease)/Increase in provision
Net cash flow used in operating activities
Investing activities
Interest received
Purchase of property, plant and equipment
Exploration and evaluation costs
Increase in restricted funds
Net cash used in investing activities
Financing activities
Principal paid on lease liability
Interest paid on lease liability
6
10
9
14
Net cash used in financing activities
Net decrease in cash and cash equivalents
Cash and cash equivalents at beginning of year
Effect of foreign exchange rate changes
Cash and cash equivalents at end of year
13
2022
$000
(9,086)
244
(86)
197
(8,731)
(131)
2,170
(3)
(6,695)
86
(127)
(35)
(10,200)
(10,276)
(204)
(21)
(225)
(17,196)
37,727
(147)
20,384
2021
$000
(4,992)
241
(13)
45
(4,719)
(95)
309
2
(4,503)
13
(127)
(80)
-
(194)
(234)
(39)
(273)
(4,970)
42,674
23
37,727
91 Company Statement of Financial Position
Year ended 31 December 2022
Non-current assets
Investments
Trade and other receivables
Current assets
Trade and other receivables
Cash and cash equivalents
Restricted Funds
Total assets
Equity
Share capital
Retained earnings
Total equity
Current liabilities
Trade and other payables
Total liabilities
Total equity and liabilities
Note
31 December 2022
$000
31 December 2021
$000
11
12
12
13
14
15/16
16
17
20,140
21,177
41,317
4,426
20,380
8,000
32,806
74,123
28,143
17,951
46,094
28,029
28,029
28,029
74,123
20,140
24,829
44,969
91
37,725
-
37,816
82,785
28,143
21,580
49,723
33,062
33,062
33,062
82,785
The loss for the financial year within the Company accounts of Afentra plc was $3.6 million (2021: $2.8 million loss). As provided by s408 of
the Companies Act 2006, no individual statement of comprehensive income and expense is provided in respect of the Company.
The financial statements of Afentra plc, registered number 1757721, were approved by the Board of Directors and authorised for issue
on 15 May 2023.
Signed on behalf of the Board of Directors
Paul McDade
Chief Executive Officer
15 May 2023
92Afentra plcOverviewCorporate GovernanceStrategic ReportGroup AccountsAfentra plc Annual Report and Financial Statements 2022
Company Statement of Changes in Equity
Year ended 31 December 2022
At 1 January 2021
Total comprehensive income for the year
At 31 December 2021
Total comprehensive expense for the year
At 31 December 2022
Share capital
$000
28,143
-
28,143
-
28,143
Retained
earnings
$000
24,385
(2,805)
21,580
(3,629)
17,951
Total
$000
52,528
(2,805)
49,723
(3,629)
46,094
93 Company Statement of Cash Flows
Year ended 31 December 2022
Operating activities
Loss before tax
Finance income and gains
Finance expense
Operating cash flow prior to working capital movements
Increase in trade and other receivables
(Decrease)/increase in trade and other payables
Net cash flow used in operating activities
Investing activities
Interest received
Increase in restricted funds
Net cash generated from investing activities
Net decrease in cash and cash equivalents
Cash and cash equivalents at beginning of year
Effect of foreign exchange rate changes
Cash and cash equivalents at end of year
Note
6
14
13
2022
$000
(3,629)
(86)
179
(3,536)
(683)
(5,033)
(9,252)
86
(8,000)
(7,914)
(17,166)
37,725
(179)
20,380
2021
$000
(2,805)
(13)
-
(2,818)
(2,283)
141
(4,960)
13
-
13
(4,947)
42,672
-
37,725
94Afentra plcOverviewCorporate GovernanceStrategic ReportGroup AccountsAfentra plc Annual Report and Financial Statements 2022 Notes to the Financial Statements
Year ended 31 December 2022
1. SIGNIFICANT ACCOUNTING POLICIES
a) General information
Afentra plc is a public company limited by shares, incorporated in the United Kingdom under the UK Companies Act 2006. The
address of the registered office is High Holborn House, 52-54 High Holborn, London WC1V 6RL. The Company and the Group are
engaged in the exploration, development and production of commercial oil and gas.
These financial statements are presented in US dollars as this is the currency in which the majority of the Group’s Cash and cash
equivalents, revenues and expenditure are transacted. The functional currency of the Company is US dollars.
b) Basis of accounting and adoption of new and revised standards
The Group and Company financial statements have been prepared in accordance with UK adopted International Accountings
Standards, except that the Company financial statements do not include a Statement of Comprehensive Income as permitted
by s408 of the Companies Act 2006. They have also been prepared in accordance with those parts of the Companies Act 2006
applicable to companies reporting under UK adopted International Accountings Standards.
(i) New and amended standards adopted by the Group:
No standards adopted this year had a material effect.
(ii) Standards, amendments and interpretations, which are effective for reporting periods beginning after the date of these
financial statements which have not been adopted early:
Standard
IFRS 17
Description
Insurance Contracts
Amendments – Disclosure of Accounting Policies
Amendments – Definition of Accounting Estimates
Amendment - Deferred Tax related to Assets and Liabilities
arising from a Single Transaction
Amendment – Presentation of Financial statements
(Amendment - Non-current Liabilities with Covenants)
Amendment – Leases (Amendment -Liability in a Sale and
Leaseback)
1 January 2024
Effective date
1 January 2023
1 January 2023
1 January 2023
1 January 2023
1 January 2024
Status
TBC
TBC
TBC
TBC
TBC
TBC
IAS 1
IAS 8
IAS 12
IAS 1
IAS 16
c) Going concern
The Group business activities, together with the factors likely to affect its future development, performance and position are set
out in the Asset summary on pages 32 - 37. The financial position of the Group and Company, its cash flows and liquidity position
are described in the Financial Review on pages 54 and 55. In addition, Note 19 to the financial statements includes the Group’s
objectives, policies and processes for managing its capital financial risk: details of its financial instruments and its exposures to credit
risk and liquidity risk.
The Group has sufficient cash resources for its working capital needs and its committed capital expenditure programme at least for
the next 12 months. Consequently, the Directors believe that both the Group and Company are well placed to manage their business
risks successfully.
95 Notes to the Financial Statements (cont.)
Year ended 31 December 2022
The Directors have at the time of approving the financial statements, a reasonable expectation that the Group has adequate
resources to continue in operational existence for the foreseeable future. This assessment has been made by the Directors who
remain confident the Group has sufficient cash resources at the date of signing the annual report to meet its liabilities as they fall due
for a period of at least 12 months from the date of signing these financial statements, notwithstanding the impact of the situation in
Ukraine and the impact to commodity prices and foreign exchange rates. With respect to the completion of the INA Angolan asset
acquisition (refer to subsequent events Note 21) and the anticipated completion of the Sonangol asset acquisition (post signing of
the accounts), the Directors believe that the Group is in a strong position, due to significant liquid resources being available, resulting
from a combination of on balance sheet cash reserves, a conventional RBL arrangement, and a revolving working capital facility,
in place with Trafigura and Mauritius Commercial Bank (refer to the Financial Review). The board has also looked at scenario’s
associated with additional acquisitions and believe that liquidity is sufficient through existing and further debt funding arrangements
to pursue further opportunities and cover all financial covenants. Thus the Board believes its appropriate to continue to adopt the
going concern basis of accounting in preparation of the financial statements.
d) Basis of consolidation
(i) Subsidiaries
The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the
Company (its subsidiaries) made up to 31 December each year. Control is recognised where an investor is exposed, or has rights, to
variable returns from its investment with the investee and has the ability to affect these returns through its power over the investee.
The results of subsidiaries acquired, or disposed of, during the year are included in the Statement of Comprehensive Income from
the effective date of acquisition or up to the effective date of disposal, as appropriate.
Where necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting policies used into line
with those used by the Group.
(ii) Transactions eliminated on consolidation
Intra-group balances and any unrealised gains and losses or income and expenses arising from intra-group transactions, are
eliminated in preparing the consolidated financial statements.
A separate Statement of Comprehensive Income and expense for the Parent Company has not been published in accordance with
section 408 of the Companies Act 2006.
e) Joint arrangements
The Group is a party to a joint arrangement when there is a contractual arrangement that confers joint control over the relevant
activities of the arrangement to the Group and at least one other party. Joint control is assessed under the same principles as
control over subsidiaries. The Group classifies its interest in joint arrangements as joint operations as the Group has both the rights
to assets and obligations for the liabilities of the joint arrangement.
In assessing the classification of interests in joint arrangements, the Group considers:
•
the structure of the joint arrangement;
•
the contractual terms of the joint arrangement; and
• any other facts and circumstances.
96Afentra plcOverviewCorporate GovernanceStrategic ReportGroup AccountsAfentra plc Annual Report and Financial Statements 2022 The Group accounts for its interests in joint operations by recognising its share of assets, liabilities, revenues and expenses in
accordance with its contractually conferred rights and obligations.
The Odewayne PSA is classified as a joint arrangement within the Group (see Note 9).
f) Oil and gas interests
Exploration and evaluation (‘E&E’) assets
Capitalisation
Pre-acquisition costs on oil and gas assets are recognised in the profit or loss when incurred. Costs incurred after rights to explore
have been obtained, such as geological and geophysical surveys, drilling and commercial appraisal costs, and other directly
attributable costs of exploration and appraisal including technical and administrative costs, are capitalised as intangible E&E assets.
The assessment of what constitutes an individual E&E asset is based on technical criteria but essentially either a single licence
area or contiguous licence areas with consistent geological features are designated as individual E&E assets. Costs relating to the
exploration and evaluation of oil and gas interests are carried forward until the existence, or otherwise, of commercial reserves have
been determined.
E&E costs are not amortised prior to the conclusion of appraisal activities. Once active exploration is completed the asset is
assessed for impairment. If commercial reserves are discovered then the carrying value of the E&E asset is reclassified as a
development and production (‘D&P’) asset, following development sanction, but only after the carrying value is assessed for
impairment and where appropriate its carrying value adjusted. If it subsequently assessed that commercial reserves have not been
discovered, the E&E asset is written off to the profit or loss.
Impairment
In accordance with IFRS 6 E&E assets are reviewed for impairment when circumstances arise which indicate that the carrying value
of an E&E asset exceeds the recoverable amount. The recoverable amount of the individual asset is determined as the higher of
its fair value less costs to sell and value in use. Impairment losses resulting from an impairment review are recognised in the profit
or loss within the Statement of Comprehensive Income. Any impairment loss is separately recognised within the Statement of
Comprehensive Income.
Impaired assets are reviewed annually to determine whether any substantial change to their fair value amounts previously impaired
would require reversal.
As previously recognised, impairment loss is reversed if the recoverable amount increases as a result of a change in the estimates
used to determine the recoverable amount, but not to an amount higher than the carrying amount that would have been determined
(net of depletion or amortisation) had no impairment loss been recognised in prior periods. Reversal of impairments and impairment
charges are credited/ (charged) under total administration expenses within the Statement of Comprehensive Income.
Refer to Note 2 for detailed disclosure of the results of impairments and impairment reviews performed.
g) Property, plant and equipment assets other than oil and gas assets
Property, plant and equipment other than oil and gas assets are stated at cost, less accumulated depreciation, and any provision
for impairment. Depreciation is provided at rates estimated to write off the cost, less estimated residual value, of each asset over its
expected useful life as follows:
• Office lease, straight-line over the lease term
• Computer and office equipment depreciation, 33% straight-line
97 Notes to the Financial Statements (cont.)
Year ended 31 December 2022
h) Foreign currencies
The US dollar is the functional and reporting currency of the Company and the reporting currency of the Group. Transactions
denominated in other currencies are translated into US dollars at the rate of exchange ruling at the date of the transaction. Assets
and liabilities in other currencies are translated into US dollars at the rate of exchange ruling at the reporting date. All exchange
differences arising from such translations are dealt with in current year profit and loss.
The results of entities with a functional currency other than the US dollar are translated at the average rates of exchange during the
period and their statement of financial position at the rates ruling at the reporting date. Exchange differences arising on translation of
the opening net assets and on translation of the results of such entities are dealt with through the currency translation reserve.
i) Taxation
Current tax
Tax is payable based upon taxable profit for the year. Taxable profit differs from net profit as reported in the Statement of
Comprehensive Income because it excludes items of income or expense that are taxable or deductible on other years and it further
excludes items that are never taxable or deductible. Any Group liability for current tax is calculated using tax rates that have been
enacted or substantively enacted by the reporting date.
Deferred tax
Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities
in the financial statements and the corresponding tax bases used in the computation of taxable profit. Deferred tax liabilities are
generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that
taxable profits will be available against which deductible temporary differences can be utilised.
Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries and associates, and
interests in JV’s, except where the Group is able to control the reversal of the temporary differences and it is probable that the
temporary difference will not reverse in the foreseeable future.
The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable
that sufficient taxable profits will be available to allow all or part of the asset to be recovered.
Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled, or the asset is realised.
Deferred tax is charged or credited in the Statement of Comprehensive Income, except when it relates to items charged or credited
directly to equity, in which case the deferred tax is also dealt with in equity.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax
liabilities and when they relate to income taxes levied by the same taxation authority and the Group intends to settle its current tax
assets and liabilities on a net basis.
j) Investments (Company)
Investments in subsidiaries are carried at cost less accumulated impairment losses in the Company’s balance sheet. Investments
in subsidiaries are assessed for impairment in line with the requirements of IAS 36 and where evidence of non-recoverability is
identified an appropriate impairment is accounted for in the profit or loss.
98Afentra plcOverviewCorporate GovernanceStrategic ReportGroup AccountsAfentra plc Annual Report and Financial Statements 2022 k) Leases
In accordance with IFRS 16, at the lease commencement date, the Group recognises a right-of-use asset and a lease liability on the
balance sheet. The Group also assesses the right-of-use asset for impairment when such indicators exist. At the commencement
date, the Group measures the lease liability at the present value of the lease payments unpaid at that date, discounted using the
interest rate implicit in the lease if that rate is readily available or the Group’s incremental borrowing rate.
l) Financial instruments
There are no other categories of financial instrument other than those listed below:
Trade receivables and amounts due from subsidiaries
Trade receivables are recognised and carried at the original invoice amount less any provision for impairment. Other receivables and
amounts due from subsidiaries are recognised and measured at nominal value less any provision for impairment.
The Group and Company applies the expected credit loss model in respect of trade receivables and amounts due from subsidiaries.
The Group and Company track changes in credit risk and recognise a loss allowance based on lifetime ECLs at each reporting date.
Cash and cash equivalents
Cash and cash equivalents comprise demand deposits, and other short-term investments, with an original maturity of 3 month, are
readily convertible to a known amount of cash and are subject to an insignificant risk of change in value.
Restricted cash
Restricted cash amounts are fully cash collateralised and are only available on demand. Please see Note 14 for detailed disclosure.
The Group has the following financial liabilities; all are classified as held at amortised cost. The Group holds no other categories of
financial liability.
Trade payables
Trade payables are stated at their amortised cost.
Financial liabilities and equity
Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into.
An equity instrument is any contract that evidences a residual interest in the asset of the Group after deducting all of its liabilities.
Equity instruments issued by the Company are recorded at the proceeds received net of direct issue costs.
m) Pension costs
The Group operates a number of defined contribution pension schemes. The amount charged to the Statement of Comprehensive
Income for these schemes is the contributions payable in the year. Differences between contributions payable in the year and
contributions actually paid are shown as either accruals or prepayments in the Statement of Financial Position.
n) Segment reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision makers.
The chief operating decision makers have been identified as the Board of Directors.
The operating results of each geographical segment are regularly reviewed by the Group’s chief operating decision makers in order to
make decisions about the allocation of resources and to assess their performance. Africa has exploration activities and the United
Kingdom office is an administrative cost centre.
99 Notes to the Financial Statements (cont.)
Year ended 31 December 2022
2. CRITICAL ACCOUNTING JUDGEMENTS AND ESTIMATES
In the application of the Group’s accounting policies, which are described in Note 1, the Directors are required to make judgements,
estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources.
The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant.
Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in
the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if
the revision affects both current and future periods.
Judgements
Company – Investment
If circumstances indicate that impairment may exist, investments in subsidiary undertakings of the Company are evaluated using
market values, where available, or the discounted expected future cash flows of the investment. If these cash flows are lower than the
Company’s carrying value of the investment, an impairment charge is recorded in the Company. Where impairments have been booked
against the underlying exploration assets, the investments in subsidiaries have been written down to reflect their recoverable value.
Evaluation of impairments on such investments involves significant management judgement and may differ from actual results.
A full impairment review has not been performed in 2022 as management have not identified any indicators of impairment and thus no
impairments were recognised during the year by the Company.
As at 31 December 2022, Company investments in subsidiaries totalled $20.1 million (see Note 11), being underpinned by the Odewayne
exploration block in Somaliland. After reviewing the feasibility of the asset detailed in the Asset summary on pages 32 - 37, management
did not note any impairment indicators that would result in a full impairment review to be undertaken.
Impairment of assets
Management is required to assess oil and gas assets for indicators of impairment and has considered the economic value of
individual E&E assets. E&E assets are subject to a separate review for indicators of impairment, by reference to the impairment
indicators set out in IFRS 6, which is inherently judgmental.
After reviewing the feasibility of the asset detailed in the Asset summary on pages 32 - 37 and considering the key factors including;
the extension to the current period and further exploration work streams planned in 2023, management did not note any impairment
indicators that would result in a full impairment review to be undertaken.
The Directors judgement was that a full impairment review wasn’t required and thus no impairments were recognised during the year,
by the Group.
Estimates
Company – expected credit loss model prescribed by IFRS 9
IFRS 9 requires the Parent Company to make assumptions when implementing the forward-looking expected credit loss model.
This model is required to be used to assess the intercompany loan receivables from Afentra (UK) Limited and Afentra (East Africa)
Limited for impairment.
Arriving at the expected credit loss allowance involved considering different scenarios for the recovery of the intercompany loan
receivables, the possible credit losses that could arise and the probabilities for these scenarios. The following was considered; the
exploration project risk, country risk, the expected future oil prices, the value of the potential reserves, the ability to sell the project,
and the ability to find a new farm-out partner.
100Afentra plcOverviewCorporate GovernanceStrategic ReportGroup AccountsAfentra plc Annual Report and Financial Statements 2022 The credit loss allowance was assessed at 31 December 2022. No movement in credit loss allowances for amounts owed from
subsidiary undertakings occurred during the period.
Discount rates – IFRS 16 leases
The lease liabilities were measured at the present value of the remaining lease payments, discounted using the Group’s incremental
borrowing rate as at 31 December 2022. The Group’s incremental borrowing rate is the rate at which a similar borrowing could be
obtained from an independent creditor on the basis of external figures derived from the market.
3. OPERATING SEGMENTS
Africa operations in 2022 focused on exploration and appraisal activities in Somaliland. The UK corporate office is a technical and
administrative cost centre focused on new ventures. The operating results of each segment are regularly reviewed by the Board of
Directors in order to make decisions about the allocation of resources and to assess their performance.
The accounting policies of these segments are in line with those set out in Note 1.
The following tables present income, expense and certain asset and liability information regarding the Group’s operating segments
for the year ended 31 December 2022 and for the year ended 31 December 2021.
Corporate
Africa
Total
Other administrative expenses
Pre-licence costs
Loss from operations
Finance income
Finance expense
Note
6
6
2022
$000
(5,484)
(3,491)
(8,975)
86
(197)
2021
$000
(2,249)
(2,734)
(4,983)
36
(45)
Segment loss before tax
(9,086)
(4,992)
2022
$000
2021
$000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
2022
$000
(5,484)
(3,491)
(8,975)
86
(197)
2021
$000
(2,249)
(2,734)
(4,983)
36
(45)
(9,086)
(4,992)
244
241
244
241
540
725
21,324
21,289
21,864
31,003
38,015
-
-
31,003
22,014
38,015
31,543
38,740
21,324
21,289
52,867
60,029
(3,051)
(1,121)
(8)
(14)
(3,059)
(1,135)
Other segment information
Depreciation
Segment assets and liabilities
Non-current assets 1
Segment assets 2
Total assets
Segment liabilities 3
1 Segment non-current assets of $21.3 million in Somaliland (2021: $21.3 million).
2 Corporate segment assets include $20.4 million cash and cash equivalents (2021: $37.7 million) and $10.2 million in restricted funds. Carrying amounts of segment assets.
3 Carrying amounts of segment liabilities exclude intra-group financing.
101
Notes to the Financial Statements (cont.)
Year ended 31 December 2022
4. LOSS FROM OPERATIONS
Loss from operations is stated after charging:
Staff costs
Exceptional (one off) cost - RTO process
Depreciation of Property, plant and equipment
An analysis of auditor’s remuneration is as follows:
Fees payable to the Group's auditors for the audit
of the Group's annual accounts
Audit of the Company's subsidiaries pursuant to legislation
Total audit fees
Note
5
10
2022
$000
4,533
2,642
244
63
5
68
2021
$000
3,080
-
241
62
4
66
5. EMPLOYEE INFORMATION
The average monthly number of employees of the Group and Company was as follows:
Africa
Corporate
Non-executive
Group and Company employee costs during the year amounted to:
Wages and salaries
Social security costs
Other pension costs
Group
Company
2022
2021
2022
2021
-
9
2
11
-
6
3
9
-
-
2
2
Group
Company
2022
$000
3,780
541
212
4,533
2021
$000
2,579
316
185
3,080
2022
$000
174
15
-
189
-
-
2
2
2021
$000
283
23
-
306
Key management personnel include Directors who have been paid $2.6 million (2021: $1.7 million). See Remuneration Committee
Report (pages 65 - 72) and Note 20 for additional detail.
A portion of the Group’s staff costs and associated overheads are expensed as pre-licence expenditure ($3.1 million) or capitalised
($32k). In 2022 this amounted to $3.1 million (2021: $2.4 million).
102Afentra plcOverviewCorporate GovernanceStrategic ReportGroup AccountsAfentra plc Annual Report and Financial Statements 2022 6. FINANCE INCOME AND FINANCE EXPENSE
Finance income:
Interest revenue on short-term deposits
Exchange differences
Finance expense:
Bank charges
Interest expense for leasing arrangement
Exchange differences
7. TAXATION
The tax charge for the year is calculated by applying the applicable standard rate of tax as follows:
Loss before tax
Tax on loss on ordinary activities at standard UK corporation tax rate of 19% (2021: 19%)
Effects of:
Deferred tax movement on provision not provided
Expenses not deductible for tax purposes
Capital allowances in excess of depreciation
Adjustment for tax losses
Tax charge for the year
2022
$000
2021
$000
86
-
86
22
21
154
197
2022
$000
(9,086)
(1,726)
-
(13)
(158)
1,897
-
13
23
36
6
39
-
45
2021
$000
(4,992)
(948)
-
(36)
(174)
1,158
-
Deferred tax
At the reporting date the Group had an unrecognised deferred tax asset of $32.6 million (2021: $23.1 million) relating primarily to
unused tax losses and unutilised capital allowances. No deferred tax asset has been recognised due to the uncertainty of future
profit streams against which these losses could be utilised. At the reporting date the Company had an unrecognised deferred tax
asset of $23.5 million (2021: $17.2 million) relating primarily to unused losses and unutilised capital allowances.
103 Notes to the Financial Statements (cont.)
Year ended 31 December 2022
8. LOSS PER SHARE (BASIC AND DILUTED)
Loss for the year
2022
$000
(9,086)
2021
$000
(4,992)
Weighted average number of ordinary shares in issue during the year
220,053,520
220,053,520
Dilutive effect of share options outstanding
Fully diluted average number of ordinary shares during the year
EPS (US cents)
-
-
220,053,520
220,053,520
(4.1)
(2.3)
9. INTANGIBLE EXPLORATION AND EVALUATION ASSETS
Net book value at 1 January 2021
Additions during the year
Net book value at 31 December 2021
Additions during the year
Net book value at 31 December 2022
Group intangible assets at the year end 2022:
Group
$000
21,209
80
21,289
35
21,324
Odewayne PSA, Somaliland: A(EA)L 34%, Genel Energy Somaliland Limited 50%, Petrosoma 16%. Classified as a joint arrangement
in accordance with IFRS 11.
104Afentra plcOverviewCorporate GovernanceStrategic ReportGroup AccountsAfentra plc Annual Report and Financial Statements 2022 10. PROPERTY, PLANT AND EQUIPMENT
Group
Cost
At 1 January 2021
Modification during the year
Additions during the year
At 31 December 2021
Modification during the year
Additions during the year
Disposals during the year
At 31 December 2022
Accumulated depreciation and impairment
At 1 January 2021
Charge for the year
At 31 December 2021
Charge for the year
Disposals during the year
At 31 December 2022
Net book value at 31 December 2022
Net book value at 31 December 2021
Net book value at 31 December 2020
Office Lease
Computer
and office
equipment
$000
$000
1,208
(5)
-
1,203
(60)
-
-
1,143
(377)
(221)
(598)
(187)
-
(785)
358
605
831
152
-
127
279
(8)
127
(49)
349
(139)
(20)
(159)
(57)
49
(167)
182
120
13
Total
$000
1,360
(5)
127
1,482
(68)
127
(49)
1,492
(516)
(241)
(757)
(244)
49
(952)
540
725
844
The right of use asset (office lease) is depreciated on a straight-line basis over the lifetime of the lease contract. The current lease
term is for 8 years, ending in 2024. See Note 1 for details (Leases) and Note 18 (Leases).
105 Notes to the Financial Statements (cont.)
Year ended 31 December 2022
11. INVESTMENT IN SUBSIDIARIES
Cost
At 1 January 2021
At 31 December 2021
At 31 December 2022
Company
$000
20,140
20,140
20,140
See Note 2 (Company – Investment) for details on the impairment assessment methodology.
The subsidiary undertakings at 31 December 2022 are as follows (included on consolidation):
Country of
incorporation
Class of
shares held
Type of
ownership
Proportion of
voting rights
held 2022
Proportion of
voting rights
held 2021
Nature of
business
Afentra (UK) Limited
Afentra Overseas
Limited
Afentra (Angola) Ltd 1
Afentra Northwest
Africa Holdings Limited
Afentra Holdings
Limited 2
Afentra (East Africa)
Limited 3
United
Kingdom 4
United
Kingdom 4
United
Kingdom 4
Ordinary
Direct
Ordinary
Direct
Ordinary
Direct
Jersey, CI 5
Ordinary
Direct
Jersey, CI 5
Ordinary
Indirect
Jersey, CI 5
Ordinary
Indirect
100%
100%
100%
100%
100%
100%
100%
Exploration for oil
and gas
100% Investment holding
company
n/a
Extraction of crude
petroleum
100%
Exploration for oil
and gas
100% Investment holding
company
100%
Exploration for oil
and gas
1 Incorporated in April 2022
2 Held directly by Afentra Northwest Africa Holdings Limited
3 Held directly by Afentra Holdings Limited
4 Registered address - 52-54 High Holborn, London, WC1V 6RL
5 Registered address - 12 Castle Street, St Helier, Jersey, JE2 3RT
106Afentra plcOverviewCorporate GovernanceStrategic ReportGroup AccountsAfentra plc Annual Report and Financial Statements 2022 12. TRADE AND OTHER RECEIVABLES
Current
Trade receivables
Amounts owed from subsidiary undertakings
Other receivables
Prepayments and accrued income
Non-current
Amounts owed from subsidiary undertakings
Group
Company
2022
$000
81
-
167
171
419
2021
$000
86
-
62
140
288
2022
$000
-
4,232
145
49
4,426
Company
2022
$000
21,177
21,177
2021
$000
-
-
39
52
91
2021
$000
24,829
24,829
Trade and other receivables, not credit impaired, consist of current receivables that the Group views as recoverable in the short term.
Credit loss allowances for amounts owed from subsidiary undertakings amount to $9.1 million.
The Directors consider that the carrying amount of trade and other receivables is a reliable estimate of their fair value.
Transactions between subsidiaries are non-interest bearing and repayable on demand.
See Note 1 for details (Financial instruments - Trade receivables).
107 Notes to the Financial Statements (cont.)
Year ended 31 December 2022
13. CASH IN BANK AND SHORT-TERM DEPOSITS
Cash at bank available on demand
Cash on hand
Group
Company
2022
$000
20,380
4
20,384
2021
$000
37,725
2
37,727
2022
$000
20,380
-
20,380
2021
$000
37,725
-
37,725
14. RESTRICTED FUNDS
During 2022 the Group had the following restricted funds:
A bank guarantee issued by Nedbank Limited to Sonangol in respect of a $8.0 million cash deposit in respect of the Sonangol
Acquisitions that would otherwise have been required to be paid shortly after the signing of the Sonangol Acquisition Agreement.
This guarantee has been fully cash collateralised.
Funds placed into Escrow, held by Citibank, in respect of a $2.2 million cash deposit in respect of the INA Acquisitions. This
guarantee has been fully cash collateralised.
15. SHARE CAPITAL
Authorised, called up, allotted and fully paid
220,053,520 ordinary shares of 10p (2021: 220,053,520 ordinary shares of 10p)
28,143
28,143
2022
$000
2021
$000
16. RESERVES
Reserves within equity are as follows:
Share capital
Amounts subscribed for share capital at nominal value.
Currency translation reserve
The foreign currency translation reserve includes movements that relate to the retranslation of the subsidiaries whose functional
currencies are not designated in US dollars.
Retained earnings
Cumulative net gains and losses recognised in the Statement of Comprehensive Income less any amounts reflected directly in
other reserves.
108Afentra plcOverviewCorporate GovernanceStrategic ReportGroup AccountsAfentra plc Annual Report and Financial Statements 2022 17. TRADE AND OTHER PAYABLES
Current liabilities
Trade payables
Amounts owed to subsidiary undertakings
Accruals
Group
Company
2022
$000
478
-
2,211
2,689
2021
$000
256
-
262
518
2022
$000
287
27,541
201
28,029
2021
$000
48
32,784
230
33,062
The Directors consider that the carrying amount of trade and other payables is a reliable estimate of their fair value. Transactions
between subsidiaries are non-interest bearing and repayable on demand.
18. LEASES
The Group has a lease for the head office and classifies it as a right-of-use asset in a consistent manner to its property, plant and
equipment (see Note 10).
On adoption of IFRS 16, the Company recognised lease liabilities in relation to the head office which had previously been classified
as ‘operating leases’ under IAS 17. These liabilities were measured at the present value of the remaining lease payments, discounted
using the lessee’s incremental borrowing rate as of 1 January 2022. The incremental borrowing rate applied to the lease liabilities on 1
January 2022 was 5%.
The depreciation charge in 2022 was $187k (2021:$221k) (see Note 10) with an interest expense in 2022 of $21k (2021: $39k) (see Note 6).
Cash outflow in 2022 was $204k (2021: $234k) (see cashflow statement on page 91).
Lease liabilities are presented in the statement of financial position as follows:
Current
Non-current
2022
$000
210
127
337
2021
$000
234
347
581
Extension options are included in the lease liability when it, based on the management’s judgement, is reasonably certain that an
extension will be exercised. As at 31 December 2022, the contractual maturities of the Company’s lease liabilities are as follows:
Within one
year
Between one
to two years
$000
$000
Over two
years
$000
Total
Interest
$000
$000
Carrying
amount
$000
Group
Lease liability
210
151
-
361
(24)
337
109
Notes to the Financial Statements (cont.)
Year ended 31 December 2022
19. FINANCIAL INSTRUMENTS
Capital risk management and liquidity risk
The Group and Company is not subject to externally imposed capital requirements. The capital structure of the Group and
Company consists of cash and cash equivalents held for working capital purposes and equity attributable to the equity holders of
the parent, comprising issued capital, reserves and retained earnings as disclosed in the Statement of Changes in Equity. The Group
and Company uses cash flow models and budgets, which are regularly updated, to monitor liquidity risk.
Significant accounting policies
Details of the significant accounting policies and methods adopted, including the criteria for recognition, the basis of measurement
and the basis on which income and expenses are recognised, in respect of each material class of financial asset, financial liability
and equity instrument are disclosed in Note 1 to the financial statements. Due to the short-term nature of these assets and liabilities
such values approximate their fair values at 31 December 2022 and 31 December 2021.
Group
Financial assets at amortised cost
Cash and cash equivalents
Restricted Funds
Trade and other receivables
Total
Financial liabilities at amortised cost
Trade and other payables
Total
Company
Financial assets at amortised cost
Cash and cash equivalents
Restricted Funds
Trade and other receivables
Non-current Trade and other receivables
Total
Financial liabilities at amortised cost
Trade and other payables
Total
Carrying amount/Fair value
2022
$000
20,384
10,200
248
30,832
2,689
2,689
2021
$000
37,727
-
148
37,875
518
518
Carrying amount/Fair value
2022
$000
20,380
8,000
4,377
21,177
53,934
28,029
28,029
2021
$000
37,725
-
39
24,829
62,593
33,062
33,062
110Afentra plcOverviewCorporate GovernanceStrategic ReportGroup AccountsAfentra plc Annual Report and Financial Statements 2022 Financial risk management objectives
The Group’s and Company’s objective and policy is to use financial instruments to manage the risk profile of its underlying
operations. The Group continually monitors financial risk including oil and gas price risk, interest rate risk, equity price risk, currency
translation risk and liquidity risk and takes appropriate measures to ensure such risks are managed in a controlled manner including,
where appropriate, through the use of financial derivatives. The Group and Company does not enter into or trade financial
instruments, including derivative financial instruments, for speculative purposes.
Interest rate risk management
The Group and Company does not have any outstanding borrowings and thus, the Group and Company is only exposed to interest
rate risk on its short-term cash deposits.
Interest rate sensitivity analysis
The sensitivity analysis below has been determined based on the exposure to interest rates at the reporting date and assumes the
amount of the balances at the reporting date were outstanding for the whole year.
A 100 basis point change represents management’s estimate of a possible change in interest rates at the reporting date. If interest
rates had been 100 basis points higher/lower and all other variables were held constant the Group’s profits and equity would be
impacted as follows:
Cash and cash equivalents
Increase
Decrease
2022
$000
204
2021
$000
377
2022
$000
(204)
2021
$000
(377)
111 Notes to the Financial Statements (cont.)
Year ended 31 December 2022
Foreign currency risk
The Company’s functional currency is the US dollar, being the currency in which the majority of the Group’s expenditure is transacted.
Small elements of its management, services and treasury functions are held and transacted in Pounds Sterling. Such elements
transacted in Pounds Sterling have been exchanged at; the average rate of $1.2362/£1.00 (2021: $1.3756/£1.00) or the year end spot
rate of $1.2039/£1.00 (2021: $1.3477/£1.00), depending on its nature and timing. The Group does not enter into derivative transactions
to manage its foreign currency. Foreign currency risk is immaterial to the Group and Company – see the following table:
Financial assets
Cash and cash equivalents
Cash and cash equivalents held in US$
Cash and cash equivalents held in GBP
Trade and other receivables
Current trade and other receivables held in US$
Current trade and other receivables held in GBP
Non-current trade and other receivables held in US$
Non-current trade and other receivables held in GBP
Financial liabilities
Trade and other payables
Trade and other payables held in US$
Trade and other payables held in GBP
Group
Company
2022
$000
20,094
290
20,384
2021
$000
36,793
934
37,727
2022
$000
20,091
289
20,380
Group
Company
2022
$000
-
248
-
-
248
2021
$000
-
148
-
-
148
2022
$000
4,232
-
11,593
9,729
25,554
Group
Company
2022
$000
1,999
690
2,689
2021
$000
17
501
518
2022
$000
27,555
474
28,029
2021
$000
36,791
934
37,725
2021
$000
-
39
11,589
13,240
24,868
2021
$000
27,567
5,495
33,062
112Afentra plcOverviewCorporate GovernanceStrategic ReportGroup AccountsAfentra plc Annual Report and Financial Statements 2022 Credit risk management
The Group has to manage its currency exposures and the credit risk associated with the credit quality of the financial institutions
in which the Group maintains its cash resources. At the year end the Group held approximately 98.6% (2021: 97.5%) of its cash in
US dollars. At the year end the Group held the majority of its balances with AA-/A Standard & Poor’s or equivalent rated institutions.
The Group continues to proactively monitor its treasury management to ensure an appropriate balance of the safety of funds and
maximisation of yield.
Trade and other receivables are non-interest bearing. The Group does not hold any collateral as security and the Group does not
hold any significant allowance in the impairment account for trade and other receivables as they relate to customers with no default
history. There are no financial instruments held at fair value under the level 1, 2 and 3 hierarchy.
The Company is exposed to credit risk through amounts due from its subsidiary undertakings. Refer to Note 1 for details on the
credit loss allowance made.
Liquidity and interest rate tables
The following tables detail the remaining contractual maturity for the non-derivative financial assets and liabilities of the Group and
Company. The tables have been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on
which the Group can be required to pay. The table includes both interest and principal cash flows including rates for loan liabilities
and cash deposits on actual contractual arrangements. The weighted average interest rate used in 2022 is nil % (2021: nil %).
Less than
six months
Six
months
to one year
One to
six years
Total
Interest
Principal
$000
$000
$000
$000
$000
$000
Group
Trade and other payables (2022)
Trade and other payables (2021)
355
149
-
-
Company
Trade and other payables (2022)
Trade and other payables (2021)
283
43
27,541
32,784
-
-
-
-
355
149
27,824
32,827
-
-
-
-
-
-
-
-
113
Notes to the Financial Statements (cont.)
Year ended 31 December 2022
20. RELATED PARTY TRANSACTIONS
Details of Directors’ remuneration, which comprise key management personnel, are provided below:
Short-term employee benefits
Defined contribution pension
Group
Company
2022
$000
2,445
114
2,559
2021
$000
1,551
107
1,658
2022
$000
174
-
174
2021
$000
283
-
283
Further information on Directors’ remuneration is detailed in the Remuneration Committee Report, on pages 65 - 72.
The Company’s subsidiaries are listed in Note 11. The following table provides the balances which are outstanding with subsidiary
undertakings at the balance sheet date:
Amounts owed from subsidiary undertakings
Amounts owed to subsidiary undertakings
The Group and Company has no other disclosed related party transactions.
2022
$000
25,409
(27,541)
(2,132)
2021
$000
24,829
(32,784)
(7,955)
114Afentra plcOverviewCorporate GovernanceStrategic ReportGroup AccountsAfentra plc Annual Report and Financial Statements 2022 21. SUBSEQUENT EVENTS
Subsequent to the Balance Sheet date of December 31st, the following business deliverables occurred:
•
•
In January 2023, Afentra received approval from the Ministry of Mineral Resources, Oil and Gas for the acquisition of INA’s 4%
interests in Blocks 3/05 and 3/05A.
In March 2023, Afentra extended the long-stop date from 31 March 2023 to 30 June 2023 in order to facilitate completion of
the Sonangol transaction (completion expected in Q2 2023).
• On 14 April 2023, the Company and the other Block 3/05A contractor group members received a letter from ANPG informing
us that it had decided to terminate the interests of China Sonangol International (‘CSI’) in the Block 3/05A production sharing
agreement and it intended that CSI’s interests in the block would revert to ANPG. If this decision is implemented, the Company
will not acquire the additional 1.33% interest in Block 3/05A attributable to the CSI interests that we would otherwise have
acquired from INA. The contractor group members are currently seeking clarifications from ANPG on their decision.
• On 10 May 2023, Afentra announced completion of the INA acquisition (4% interests in Blocks 3/05 and 3/05A) to mark its
formal entry into Angola, including the following completion settlement figures:
• Net completion payment of $17.0 million with Afentra inheriting crude oil stock of 207,868 bbls1 that can be valued at $16.6
million (based on $80/bbl) on a pre-tax basis.
• $10 million set aside into an escrow deposit account held by Citibank, which will be paid to INA after the Block 3/05 licence
extension is formally completed.
• Net upfront consideration and escrow deposit to be funded by $18.9 million from the agreed RBL and working capital
facilities and $8.1 million from cash resources.
• $21.9 million in total debt drawn (RBL and working capital facilities), which includes $2.9 million in financing costs.
• The Company expects to sell its first cargo of crude oil in Q3 2023, thereby monetising the inherited crude oil stock and
subsequent production.
• Trafigura has transferred both the RBL and working capital facilities to Mauritius Commercial Bank who will now be the lender
to the Company. Trafigura retains an interest in the RBL facility and will continue as offtake provider.
• A charge placed on Afentra (Angola) Ltd shares to Mauritius Commercial Bank Limited as required by the terms of the debt facilities.
• Furthermore, in May, the Block 3/05 JV partners agreed terms to extend the licence from 1 July 2025 to 31 December 2040.
This includes improved fiscal terms that strengthen the economics of the permit. The process for formal administration of the
licence extension has commenced and the Company awaits the conclusion of this process.
Given that the INA transaction has completed in close proximity to the approval of these financial statements, Management are in
the process of evaluating both the accounting for this transaction and any required valuation of the underlying assets and liabilities
acquired. Further disclosure will be provided in the 2023 interim financial statements.
22. COMMITMENTS
The Parent Company has provided Letters of Support to its subsidiaries Afentra (UK) Limited, Afentra (Angola) Limited, and Afentra
Overseas Limited, confirming that it does not intend to recall intragroup loans should these companies not have the financial
capability to settle them. The Parent Company will continue to support these companies in meeting its liabilities as they fall due, for a
period of not less than 12 months from the date of signing of the respective companies’ financial statements.
1 Afentra share of stock-in-tank at completion
115 Definitions and Glossary of Terms
$
2D
2C
2P
AIM
AGM
ALNG
ANPG
Articles
Block 3/05
Block 3/05A
Block 23
Board
bbls
bbl/d
bwi/d
CCRA
Companies Act or Companies Act
Company
CPR
Directors
E&E
E&P
EBITDAX (Adjusted)
EITI
ERCe
Farm-in & farm-out
FID
FSO
G&A
G&G
GBP
Genel Energy
Group
HSSE
hydrocarbons
IAS
IFRS
INA
IOCs
JV
US dollars
two dimensional
Denotes best estimate of Contingent Resources
Denotes the best estimate of Reserves. The sum of Proved plus
Probable Reserves
AIM, a SME Growth market of the London Stock Exchange
Annual General Meeting
The Angola LNG project
Agência Nacional de Petróleo, Gás e Biocombustíveis (holder of the mining rights of
Exploration, Development and Production of liquid and gaseous hydrocarbons in Angola)
the Articles of Association of the Company
the contract area described in and covered by the Block 3/05 PSA
the contract area described in the Block 3/05A PSA
the contract area described in and covered by the Block 23 PSA
the Board of Directors of the Company
barrels of oil (‘k-’ / ‘mm-’ / ‘bn-’ for thousand / million / billion)
barrels of oil per day (‘k-’ / ‘mm-’ for thousand / million)
barrels water injection per day
Climate Change Risk Assessment
the Companies Act 2006, as amended 2006
Afentra plc
Competent Persons Report
the Directors of the Company
exploration and evaluation assets
exploration and production
earnings before interest, taxation, depreciation, depletion and amortisation, impairment,
share-based payments, provisions, and pre-licence expenditure
Extractive Industries Transparency Initiative
ERC Equipoise Limited (author of the Competent Person’s Report)
a transaction under which one party (farm-out party) transfers part of its interest to a contract
to another party (farm-in party) in exchange for a consideration which may comprise the
obligation to pay for some of the farm-out party costs relating to the contract and a cash sum
for past costs incurred by the farm-out party
Final investment decision
Floating storage and offloading
general and administrative
geological and geophysical
pounds sterling
Genel Energy Somaliland Limited
the Company and its subsidiary undertakings
Health, Safety, Security and Environment
organic compounds of carbon and hydrogen
International Accounting Standards
International Financial Reporting Standards
INA-Indstrija Nafte d.d
international oil company
joint venture
116Afentra plcAfentra plc Annual Report and Financial Statements 2022
JOA
k
km
km2
KPIs
lead
London Stock Exchange or LSE
LTI
LTIP
M&A
m
NFA
NOCs
OECD
Op.
Ordinary Shares
Petroleum
Petrosoma
Prospect
PSA
QCA Code
RBL
Reserves
RTO
SPA
Seismic
SOFR
Shares
Shareholders
Subsidiary
Sonangol
Sonangol EP
TCFD
Third and Fourth Period
Trafigura
TRIF
Working Interest or WI
ZRF
joint operating agreement
thousands
kilometre(s)
square kilometre(s)
key performance indicators
indication of a potential exploration prospect
London Stock Exchange Plc
Lost time Injury
Long-term incentive plan
mergers and acquisitions
metre(s)
No Further Activity - forecast without new capex invested
national oil company
Organisation for Economic Cooperation and Development
Operator
ordinary shares of 10 pence each
oil, gas, condensate and natural gas liquids
Petrosoma Limited (JV partner in Somaliland)
an area of exploration in which hydrocarbons have been predicted to exist in economic
quantity. A group of prospects of a similar nature constitutes a play.
production sharing agreement
Corporate Governance Code for Small and Mid-Size Quoted Companies 2018
Reserve-Based Lending
reserves are those quantities of petroleum anticipated to be commercially recoverable by
application of development projects to known accumulations from a given date forward under
defined conditions. Reserves must satisfy four criteria; they must be discovered, recoverable,
commercial and remaining based on the development projects applied. Reserves are further
categorised in accordance with the level of certainty associated with the estimates and may
be sub-classified based on project maturity and/or characterised by development and
production status
reverse takeover (pursuant to Rule 14 of the AIM Rules)
Sale and Purchase Agreements
data, obtained using a sound source and receiver, that is processed to provide a
representation of a vertical cross-section through the subsurface layers
Secured Overnight Financing Rate
10p ordinary shares
ordinary shareholders of 10p each in the Company
a subsidiary undertaking as defined in the 2006 Act
Sonangol Pesquisa e Producao S.A.
Sociedade Nacional de Combustíveis de Angola, Empresa Pública
Task force on Climate-related Financial Disclosure
Exploration terms: Third Period is to May 2025 with a work commitment of 500km 2D
seismic acquisition; Fourth Period is to October 2026 with a work commitment of 1,000km
2D seismic acquisition and one exploration well
Trafigura Pte
Total Recordable Incident Frequency
a Company’s equity interest in a project before reduction for royalties or production
share owed to others under the applicable fiscal terms
Zero Routine Flaring
117
Professional Advisors
Nominated Advisor and
Joint Corporate Broker
Peel Hunt LLP
100 Liverpool Street
London
EC2M 2AT
Joint Corporate Broker
Tennyson Securities
65 Petty France
London
SW1H 9EU
Financial PR
Buchanan
107 Cheapside
London
EC2V 6DN
Corporate Bankers
The Royal Bank of Scotland Plc
1 Albyn Place
Aberdeen
AB10 1BR
Auditors
BDO LLP
55 Baker Street
London
W1U 7EU
Legal
Pinsent Masons LLP
30 Crown Place
Earl Street
London
EC2A 4ES
PLMJ Advogados, SP, RL
Av. Fontes Pereira de Melo, 43
1050 119
Lisboa
Portugal
Registrars
Link Group
10th Floor Central Square
29 Wellington Street
Leeds
LS1 4DL
Registered Office
High Holborn House
52-54 High Holborn
London
WC1V 6RL
118Afentra plcAfentra plc Annual Report and Financial Statements 2022
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TitleSub Title