INTERVIEW: Afentra CEO eyes 'conveyor belt of deals' as majors retreat from mature African basins

Afentra, the West Africa-focused independent, is looking to sign a "conveyor belt of deals" in multiple countries to ensure a "responsible" African energy transition, CEO Paul McDade told S&P Global Commodity Insights after penning a complex multi-party agreement to establish a foothold in Angola.

McDade, who previously ran Tullow Oil, led a takeover of Sterling Energy in 2021 and rebranded it Afentra -- short for Africa Energy Transition -- to support the exit strategies of majors like ExxonMobil and TotalEnergies and guide African countries through the transition.

Recent trends in Angola, Equatorial Guinea and Nigeria mirror activity in the North Sea two decades ago, when smaller companies bought assets from retreating majors, McDade argues. As majors look to scale back carbon emissions, the social and governance aspects of ESG risk being overlooked, he claims.

"We're chasing production assets in West Africa, really the mantra being operated [and] non-operated mature assets, and us bringing our African experience, combined with having been through this industrial phase in the North Sea," he said in a wide-ranging interview. "We're really very cognizant of the energy transition. Africa needs to produce this oil and gas, in my view, therefore they need to produce it cleanly."

Afentra finds itself in a strong position in the aftermath of the Ukraine war, with discussions around the energy transition now "more pragmatic and sensible," McDade said.

"I was trying to convince investors in May 2021, oil and gas is around to stay for a long time, this transition is going to take a long time. And if it's going to take a long time then better get responsible at producing oil and gas," he said. "Post Ukraine those principles became normal."

Conveyor belt

To that end, Afentra's core missions include rapidly building a portfolio of producing assets and proven resources, building on a strong track record in Africa, and facilitating a responsible energy transition.

"This is a medium-term game, it's not one deal and that's it. It's about a conveyor belt of deals -- and we've got to be selective," McDade said. "We're looking at lots of things... We might miss some things, we might choose not to do them because the value is not right, but there will be plenty."

The company's "selling point" is merging technical and operating experience acquired over decades at Tullow and in the North Sea, and the ability "to navigate the above-ground and the ministries and the national companies and build relationships and leverage those," he said.

In addition to Angola, the company has a stake in a wildcat play in Somaliland, the breakaway region of Somalia, which is operated by Genel. Drilling is ongoing in a nearby block and that will dictate whether Afentra retains its position or decides "at some point [to] farm down our interest," since the company is not interested in spending exploration dollars, McDade said.

Afentra is also keen to stop flaring, including in Angola by potentially exporting LNG from its gassy Punja discovery. "If we can stop flaring... then actually we're having a positive incremental benefit from an emissions and energy transition point of view," McDade said, summarizing his pitch to shareholders.

Accretive deal

Blocks 3/05 and 3/05A in the Lower Congo Basin offshore Angola, the company's first major acquisitions, "fitted in really well" to the strategy, McDade said. "Big fields, 2 billion barrels in place, mature. Production has declined but there's a lot of untapped potential." State-owned Sonangol took over 3/05 from TotalEnergies a decade ago but has not developed the asset. 3/05A meanwhile has production potential close to infrastructure.

Following completion, expected in Q4 2023, Afentra's interest acquisitions from Croatia's INA, BP-Eni venture Azule and Sonangol will give it a non-operated interest of 30% in 3/05 and 21.33% in 3/05A, equivalent to roughly 6,000 b/d of production, with the blocks producing 19,100 b/d and 1,200 b/d respectively at the moment.

The deals were "a bit tricky to coordinate," McDade said, but offer a "balanced equity position for all parties", are very accretive, did not require raising any equity, come with over a year of cashflow from the assets, and have contingencies, with Afentra protected in case of low oil prices -- although McDade said he is "quite bullish" on prices in the medium term.

"We see opportunities for ESPs [electric submersible pumps], infill drilling, water injections really improving. Just all the classic things you'd be doing with an old mature field to offset decline and boost production," he said. "We think this asset with the fullness of time, between 3/05 and 3/05A has got the potential to go up to even as high as 30,000 b/d."

Angola's government, he added, is "using Afentra as an example [that] you can be a small, medium-sized company and you're now very welcome." The West African country, which is struggling to reverse a sharp production decline in recent years due partly to underinvestment, accepts that it needs to be open to smaller companies and make its blocks commercially attractive, McDade said. "My view is that they are doing both."

According to estimates, some 15 billion barrels of Angola's reserves are still to be produced, while majors like ExxonMobil and TotalEnergies are shifting towards wildcat plays in Namibia and Guyana, and less carbon intensive projects.

Afentra is keen to rapidly build its portfolio, although McDade concedes it is starting from a modest base. "I'm impatient, I want to push on," he said. "People tell me you're only two years in and that's not a bad start, but we will grow."