19 March 2019
Transformation into a full-cycle E&P Combination with PetroNor
This Presentation has been prepared by African Petroleum Corporation Limited (Company) and PetroNor E&P Ltd (PetroNor), solely for the purpose of providing information about the contemplated combination (the "Transaction") between the Company and PetroNor and its subsidiaries (PetroNor Group), which subject to closing of the Transaction is referred to as the "Combined Company".
This Presentation contains summary information about the Company and its subsidiaries (Company Group), the PetroNor Group and their respective activities. The information in this Presentation does not purport to be complete or comprehensive, and does not purport to summarise all information that an investor should consider when making an investment decision. It should be read in conjunction with the Company's other periodic and continuous disclosure announcements at the Company's ticker "APCL" on www.newsweb.no. In accordance with the Continuing Obligations of the Oslo Stock Exchange, the Company will make public an Information Memorandum which will contain detailed information on the Transaction and the Combined Company, and which will also contain relevant risk factors concerning the Combined Company's assets, business and operations and the market in which it operates.
Not financial product advice
This Presentation is for information purposes only and is not a prospectus, product disclosure statement or other offer document under Norwegian law, Australian law, Cyprus law or the law of any other applicable jurisdiction. This Presentation is not financial advice, a recommendation to acquire Company shares or accounting, legal or tax advice. It has been prepared without taking into account the objectives, financial or tax situation or needs of individuals. Before making an investment decision, prospective investors should consider the appropriateness of the information having regard to their own objectives, financial and tax situation and needs and seek such legal, financial and/or taxation advice as they deem necessary or appropriate to their jurisdiction. The Company is not licensed to provide financial product advice in respect of Company shares.
This Presentation contains certain forward looking statements. The words "anticipated", "expected", "projections", "forecast", "estimates", "could", "may", "target", "consider" and "will" and other similar expressions are intended to identify forward looking statements. Forward looking statements, opinions and estimates provided in this Presentation are based on assumptions and contingencies which are subject to change without notice, as are statements about market and industry trends, which are based on interpretations of current market conditions. Forward looking statements including projections, indications or guidance on future earnings or financial position and estimates are provided as a general guide only and should not be relied on as an indication or guarantee of future performance. There can be no assurance that actual outcomes will not differ materially from these statements. This difference may be due to various factors, including, among others: general business, economic, competitive, political and social uncertainties; the actual results of current exploration activities; actual results of reclamation activities; the outcome of negotiations, conclusions of economic evaluations and studies; changes in project parameters and returns as plans continue to be refined; future price of oil and gas; drilling risks; political instability; insurrection or war; arbitrary changes in law; delays in obtaining governmental approvals or financing or in the completion of development activities. The forward looking statements in this Presentation speak only as of the date of this Presentation and are subject to change without notice. To the full extent permitted by law, the Company Group and the PetroNor Group and their respective directors, officers, employees, advisers, agents and intermediaries disclaim any obligation or undertaking to release any updates or revisions to the information to reflect any change in expectations or assumptions. Nothing in this Presentation will under any circumstances create an implication that there has been no change in the affairs of Company Group or the PetroNor Group since the date of this Presentation.
An investment in the Company shares is subject to investment and other known and unknown risks, some of which are beyond the control of the Company Group. The Company does not guarantee the performance of the Company or any particular rate of return on the performance on the Company Group, nor does it guarantee the repayment of capital from the Company or any particular tax treatment.
Not an offer
This Presentation is not and should not be considered an offer or an invitation to acquire Company shares or any other financial instruments or products and does not and will not form any part of any contract for the acquisition of the Company shares. This Presentation does not constitute an offer to sell, or the solicitation of an offer to buy, any securities in the United States. The Company shares have not been, and will not be, registered under the US Securities Act of 1933 and may not be offered or sold in the United States except in a transaction exempt from, or not subject to, the registration requirements of the US Securities Act and applicable US state securities laws.
Competent person statements
The information in this Presentation relating to hydrocarbon resource estimates for the Company Group includes information compiled by Dr Adam Law, Geoscience Director of ERC Equipoise Ltd. Dr Law, is a post-graduate in Geology, a Fellow of the Geological Society and a member of the Society of Petroleum Evaluation Engineers. He has 18 years relevant experience in the evaluation of oil and gas fields and exploration acreage, preparation of development plans and assessment of reserves and resources. Dr Law has consented to the inclusion in this Presentation of the matters based on the information in the form and context in which it appears.
The information in this Presentation relating to hydrocarbon resources for the PetroNor Group includes information compiled by AGR Petroleum Services AS ("AGR"). AGR has consented to the inclusion in this Presentation of the matters based on the information in the form and context in which it appears.
The Company Group and the PetroNor Group advisers have not authorised, permitted or caused the issue, lodgement, submission, despatch or provision of this Presentation and do not make or purport to make any statement in this Presentation and there is no statement in this Presentation which is based on any statement by the advisers. To the maximum extent permitted by law, the Company Group and the PetroNor Group, and their respective representatives, advisers and their respective officers, directors, employees, agents or controlling persons (collectively, the Representatives) expressly disclaim all liabilities in respect of, and make no representation or warranty, express or implied, as to the accuracy or completeness of the information contained in this Presentation or in any other documents furnished by the foregoing persons.
This Presentation speaks only as of the date hereof. The information in this Presentation remains subject to change without notice.
Becoming a full-cycle E&P independent
Business combination with PetroNor E&P in an all share transaction
• Combination with PetroNor E&P Ltd (Cyprus) ("PetroNor") in an all share transaction through issuance of 816m shares
• Creates a material full-cycle E&P independent, to be renamed PetroNor E&P
• Existing exploration upside largely protected for current shareholders
High margin production from Congo-Brazzaville assets
• High margin and well diversified production currently of ~2,300 bbl/d net (OPEX ~USD 13/bbl1)) generating strong cash flow
• 2P oil reserves of 8.5 mmbbl2), with significant upside in discovered resources
• Assets operated by Perenco since January 2017, who has achieved significant cost reductions and production increases with limited investments
Improved position to extract value from
• Solid financial and operational platform significantly improves APCL's position in ongoing arbitration processes
• Enables the opportunity to complete arbitration proceedings with additional upside for existing shareholders through issuance of performance warrants
• High impact exploration with gross unrisked resources of ~4.9bn bbl (The Gambia and Senegal)
Positioned for long-term growth through renewed strategic focus
• Extensive network across Africa, continuously evaluating various farm-in and acquisition opportunities
• In negotiations for a producing offshore asset Nigeria with significant upside potential from contingent resources to be developed
Summary of the transaction
• Acquisition of 100% of the shares in PetroNor E&P Ltd, a private limited liability company incorporated on Cyprus
• Indirect 10.5% ownership interest in PNGF Sud
• Right under umbrella agreement to negotiate entry into a 14.7% indirect interest in PNGF Bis1)
• In negotiation for a producing asset offshore Nigeria
• Effective date: 1.1.2019, net debt at ~USD 3.5m
• Shareholders of APCL will receive 155.5m warrants (1 warrant per existing share) exercisable at no cost in event of reinstatement of the licenses in The Gambia or Senegal and a cost-carried farm-in agreement to these licenses being signed3)
• NOR Energy AS and Petromal will receive 155.5m warrants which will vest upon (i) signed farm-in agreement for a gas asset in Nigeria, and (ii) a signed and legally binding gas offtake agreement relating to the gas from such asset
• Both sets of warrants will expire 31 December 2019
• The Board of APCL recommends the transaction, and members of the Board and executive management holding shares have agreed to vote in favour of the transaction in the company's general meeting
• According to Australian law an independent expert opinion has been commissioned
• 15,740,000 existing options will be replaced with 8,513,848 warrants under the same terms as described above for the warrants to APCL shareholders.
1) The PNGF Sud license partnership has the right to negotiate with the Republic of Congo in good faith license terms to enter into a PSC for PNGF Bis, where PetroNor, subject to successful completion of the ongoing negotiations, is expected to have a 14.7% indirect interest (i.e. its pro-rata share of participants in the license negotiations)
2) As the effective date of the transaction is 1 January 2019, the current shareholders will be entitled to the dividends declared for PetroNor for the financial year ended 2018
3) APCL in dispute on its licenses in The Gambia and Senegal
4) More details in appendix
Introduction to PetroNor
Africa focused E&P company
Founded by Hemla & Petromal
Strong operational experience and partnerships
Extensive network in Africa ensuring strong deal pipeline
Full-cycle platform with significant upside
Standalone key metrics
8.5 mmbbl of net 2P Reserves
1) Including 2C resources for PNGF Bis
7.6 mmbbl of net 2C Resources1)
~2,300 bbl/d of net oil production
History in brief
2019 reserves and resources
According to AGR independent competent person's reports per 1.1.2018 adjusted for production 2018
> Petromal & NOR partnership established
> Participated in a bid round in Congo for PNGF Sud in Congo following ENI and Total's exit from the license
> Awarded interest in PNGF Sud with duration of 20 years
> The Contractor group on the license, with Perenco as the operator, achieved significant cost reductions and production increases at PNGF Sud
> PNGF Sud production reached 21,600 bbl/d, up > 6,000 bbl/d (40%) since license acquisition
> Signed off-take agreement with ENI S.p.a. on PNGF Sud
2P totalPNGF SudPNGF BIS
2C TotalIndirect interest
2) The PNGF Sud license partnership has the right to negotiate with the Republic of Congo in good faith license terms to enter into a PSC for PNGF Bis, where PetroNor, subject to successful completion of the ongoing negotiations, is expected to have a 14.7% indirect interest (i.e. its pro-rata share of participants in the license negotiations)
2P + 2C