Investor Presentation • Feb 9, 2015
Investor Presentation
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THIS DOCUMENT MAY ONLY BE PROVIDED TO PERSONS IN THE UNITED STATES WHO ARE EITHER: (1) A "QUALIFIED INSTITUTIONAL BUYER" ("QIB"), AS THAT TERM IS DEFINED IN RULE 144A UNDER THE U.S. SECURITIES ACT OF 1933; OR (2) A DEALER OR OTHER PROFESSIONAL FIDUCIARY ORGANISED, INCORPORATED OR (IF AN INDIVIDUAL) RESIDENT IN THE UNITED STATES HOLDING A DISCRETIONARY ACCOUNT OR SIMILAR ACCOUNT (OTHER THAN AN ESTATE OR TRUST) FOR THE BENEFIT OR ACCOUNT OF A NON-U.S. PERSON (AS CONTEMPLATED IN RULE 903(A)(1) OF REGULATION S UNDER THE U.S. SECURITIES ACT).
This confidential presentation has been produced by African Petroleum Corporation Limited (the "Company") in connection with a contemplated private placement of shares directed towards selected existing and new investors in the Company, and may not be reproduced or redistributed, in whole or in part. Neither this presentation nor any copy of it may, absent any applicable exemptions from registration and filing requirements, be distributed in the United States, Canada, Australia or Japan. The distribution of this presentation in other jurisdictions may also be restricted by law and persons into whose possession this presentation comes are required to inform themselves about and observe any such restrictions. This presentation is strictly confidential and has not been reviewed or registered with any public authority or stock exchange. No representation or warranty (express or implied) is made as to, and no reliance should be placed on, any information included herein, including projections, estimates, targets and opinions, contained herein, and no liability whatsoever is accepted as to any errors, omissions or misstatements contained herein, and, accordingly, neither the Company nor FirstEnergy Capital LLP (the "Lead Manager") nor any of their group companies or any of their or such entities' board members or employees accepts any liability whatsoever arising directly or indirectly from the use of this presentation.
Investing in the Company involves inherent risks. Prospective investors should consider, among other things, the selected risk factors set out on pages 3, 45 and 46 of this presentation before making an investment decision, and should consult his or her own expert advisors as to the suitability of an investment in the shares.
In particular, the securities referenced herein have not been, and will not be, registered under the U.S. Securities Act of 1933, as amended (the "Securities Act"), and may not be offered or sold in the United States absent registration or in transactions exempt from, or not subject to, the registration requirements of the Securities Act and applicable U.S. state securities laws. The Company does not intend to register any part of the offering in the United States or to conduct a public offering of securities in the United States. The offer will be made outside the U.S. in compliance with Regulation S under the US Securities Act of 1933.
This presentation is only being distributed to and is only directed at persons who are outside the United Kingdom or only to persons in the United Kingdom to whom it may be delivered without contravening the financial promotion prohibition in Section 21 of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (the "Order"). Therefore, the presentation is only directed at: (i) persons whose ordinary activities involve them in acquiring, holding, managing and disposing of investments (as principal or agent) for the purposes of their business and who have professional experience in matters relating to investments or otherwise are "investment professionals" for the purposes of Article 19(5) of the Order; (ii) are persons who are "high net worth companies, unincorporated associations etc" who fall within Article 49(2)(a) to (d) of the Order; (iii) persons who are "self-certified sophisticated investors" who fall within Article 50A of the Order; or (iv) otherwise fall within an applicable exemption within the Order (or such persons together being referred to as "relevant persons").
This presentation is not an offer to sell, or the solicitation of an offer to buy, any of the Company's securities to or from investors in Australia. This presentation is not a prospectus, product disclosure statement or other offer document under Australian law. As noted below, a prospectus will be prepared by the Company in compliance with the laws of Norway but this will not be a prospectus or an offer document under Australian law. Any offers relating to Company securities in Australia will be made only to persons who are professional investors or sophisticated investors (as those terms are used in s708(11) and s708(8) respectively of the Australian Corporations Act 2001 ("Corporations Act")) or other persons specified in s708 of the Corporations Act who do not require or need to be given a prospectus or other disclosure document under Chapter 6D of the Corporations Act to lawfully receive an offer to subscribe for or acquire securities in the Company.
This document is not a prospectus for the purposes of Directive 2003/71/EC (together with any applicable implementing measures in any Member State, the "Prospectus Directive"). In any EEA Member State other than Norway that has implemented the Prospectus Directive, this communication is only addressed to and is only directed at qualified investors in that Member State within the meaning of the Prospectus Directive, i.e., only to investors who can receive the offer without an approved prospectus in such EEA Member State. Law in other jurisdictions may also restrict the distribution of this presentation. Accordingly, this presentation may not be distributed in any jurisdiction except under circumstances that will result in compliance with applicable laws and regulations. The Company require persons in possession of this presentation to inform themselves about, and to observe, any such restrictions.
This presentation includes forward-looking statements that reflect the Company's current views with respect to future events and financial and operational performance; including, but not limited to, statements relating to the Company's business and the implementation of strategic initiatives as well as other statements relating to the Company's future business development and economic performance. These forward-looking statements can, but will not necessarily, be identified by the use of forward-looking terminology; including the terms "assumes", "projects", "forecasts", "estimates", "expects", "anticipates", "believes", "plans", "intends", "may", "might", "will", "would", "can", "could", "should" or, in each case, their negative, or other variations or comparable terminology. These forward-looking statements are not historic facts. They appear in a number of places throughout this presentation and include statements regarding the Company's intentions, beliefs or current expectations concerning, among other things, goals, objectives, financial condition and results of operations, liquidity, outlook and prospects, growth, strategies, capital resources and capital expenditure and dividend targets, and the industry trends and developments in the markets in which the Company operates. Recipients of this presentation are cautioned that forward-looking statements are not guarantees of future performance and that the Company's actual financial position, operating results and liquidity, and the development of the industry in which the Company operates may differ materially from those contained in or suggested by the forward-looking statements contained in this presentation. The Company cannot guarantee that the intentions, beliefs or current expectations upon which its forward-looking statements are based will occur. It should be understood that subsequent developments may affect the information contained in this presentation, which neither the Company nor its advisors are under an obligation to update, revise or affirm.
The information in this presentation relating to hydrocarbon resource estimates 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 Company's advisors 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 advisors. To the maximum extent permitted by law, the Company, the Lead Manager, their 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.
The contents of this presentation are not to be construed as financial, legal, business, investment, tax or other professional advice. Each recipient should consult with its own professional advisors for any such matter and advice. By attending this presentation you acknowledge that you will be solely responsible for your own assessment of the market and the market position of the Company and that you will conduct your own analysis and be solely responsible for forming your own view of the potential future performance of the businesses of the Company. This presentation is not a prospectus, disclosure document or offering document and 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.
This presentation speaks as of 6 February 2015. Neither the delivery of this presentation nor any further discussions of the Company or the Lead Manager with any of the recipients shall, under any circumstances, create any implication that there has been no change in the affairs of the Company since such date. The Company does not assume any obligation to, update this presentation or any of the information included herein.
The Lead Manager is acting exclusively for the Company and no one else and will not be responsible to anyone other than the Company for providing the protections afforded to their respective clients, or for advice in relation to the contemplated transactions discussed herein, the contents of this presentation or any of the matters referred to herein.
This presentation is subject to Norwegian law, and any dispute arising in respect of this presentation is subject to the exclusive jurisdiction of Norwegian courts.
All estimated net unrisked mean prospective resources quoted in this presentation have been taken from ERC Equipoise Competent Person's Report 2014.
Investing in the Company involves a high degree of risk. The Group's operations are to explore, develop and ultimately produce oil and gas resources in developing countries. Such operations are by their nature highly speculative, may be unprofitable and may result in a total loss of the investments made by the Group
Certain selected risk factors related to an investment in the Company are described in the Appendix included on pages 45-46 hereto
Other risks not presently known to the Company or that the Company currently deems immaterial may also impair the Company's business operations materially and materially adversely affect the price of the Company's shares. If any of the risk factors actually occur, the Company's business, financial position and/or operating results could be materially adversely affected
A prospective investor should carefully consider each of the risks and all of the information in the Appendix and elsewhere in this Presentation, and should consult his or her own expert advisors before deciding to invest in the shares of the Company
An investment in the Company is suitable only for investors who understand the risk factors associated with this type of investment and who can afford a loss of all or parts of the investment. Information on risk factors is presented as of the date hereof and is subject to change, completion or amendment without notice
| Issuer: | African Petroleum Corporation Limited |
|---|---|
| Trading Platform: | Oslo Axess (OAX) |
| Issuer Code: | APCL |
| Offer Size: | Up to NOK 115 million (US\$15 million) Up to 329,000,000 new ordinary shares |
| Terms: | Priced at NOK 0.35 1-for-2 free two year NOK 0.75 share option |
| Use of Proceeds: |
To fund the Company's licence obligations including ongoing licence fees, 3D seismic, and working capital |
| Offering Close: |
8am (CET) 10 February 2015 |
| Conditions: | Subject to shareholder approval at a shareholder meeting due to be held within 30 days of the offer closing |
| Joint Lead Managers: |
FirstEnergy Capital and Mirabaud Securities |
| Co-Managers: | EAS Advisers and Dundee Securities |
Large acreage position in West Africa Margin: 5 countries, 10 licences
7.3bn+ barrels unrisked prospective oil resources*
Strong relationships with host governments
3 significant "billion barrel in-place" oil discoveries made in adjacent acreage by Total in Côte d'Ivoire and Cairn Energy in Senegal during 2014**
Early mover advantage with excellent fiscal terms
Low cost drilling opportunities <US\$50m/well
Benign operating environment ideally suited to leased FPSO's
Proven deep-water operator and deep expertise on West Africa margin
Bringing in partners to share risk and reward and to participate in future growth
Recommence drilling H2 2015 with 3 wells planned in next 18 months#
Prospects on trend and adjacent to recent significant discoveries
5
* Prospective resource volumes taken from ERC Equipoise, CPR ** Based on external data and internal figures #Subject to financing through farm-out agreements
| Listing | OAX (APCL) NSX (AOQ) |
|---|---|
| Shares on Issue |
685,857,456 |
| Market Cap | NOK 438.95m |
| Share Price | NOK 0.64 |
| Debt | Nil |
| Broker Sentiment | Buy |
| Avg Broker Target |
NOK 4.98 |
28+ years of experience in Hess Corp., Apache Corp. & Shell
Proven oil finder, drilled 300+ wells in 11 countries with 85% geological success
Oversaw Hess exploration campaign in Ghana that led to 7 consecutive discoveries and West African New Ventures
Directed more than 30 discoveries in Russia at Hess as VP Exploration
Non-Exec Director at Tamboran Resources and Board Member of the Energy & Geoscience Institute at University of Utah
Held senior positions at Tethys Petroleum, Pinsent Masons LLP, Emirates National Oil Co. Ltd, Dragon Oil
Notes: Only including listed companies
Data taken from Wood Mackenzie Feb 2014 & company websites Jan 2015
* Ophir holds 79.2% interest in Profond Licence which is joint development zone offshore Senegal and Guinea Bissau
| Achieved in 2014 | Targeted in 2015 |
|---|---|
| New Management & Governance |
Fundraising |
| Revised strategy and plan |
Upgrade Prospective Resource numbers – new CPR to be published end Q1 2015 |
| Private Placement with supportive institutional shareholders |
Complete farm-in transactions H1 2015 to fund forward well drilling programme for next 18 – 24 months |
| Licence extensions Liberia, Sierra Leone, Côte d'Ivoire and Senegal |
Drill exploration well(s)* |
| Successful listing on Oslo Axess |
Prepare for drilling of exploration wells in 2016 – order long lead items and complete relevant EIA's |
| Acquire additional 3D seismic data |
Advance and integrate latest technologies |
| Secure farm-in from Buried Hill on 2 for 1 promote in CI-509 |
Upgrade 3D seismic database & regional knowledge predrill |
| Reinstatement of Gambian licences |
Seismic depth migration in core assets predrill |
| Updated CSR plans and social investment programmes |
Execute CSR programmes |
| Signed non-binding term sheet with third party for 50% equity in LB-08 licence |
Develop success case plans for appraisal wells |
| Order long lead items for 2015 drilling campaign |
Additional acreage capture for future growth |
APCL is benefitting from a decrease in prices for drill-rigs and seismic work
Focus on the longer-term market stability, long term strategy to realise potential and value of 7.3bnbbls+ assets
Activity in the West African Transform Margin accelerated in 2014 with excellent results: 3 "billion barrel-in place" oil discoveries made in adjacent acreage
One operational commitment in Q4 2015 allows APCL to ride out current instability in the market
Excellent fiscal terms
Benefit from low cost exploration and appraisal cost environment in 2015/16
Liquids focused drilling
Attractive PSC/Licence terms
Time
Value of 500MMbbl discovery#
\$1.13 - \$2.07
per share#
2,835% to 5,187%
Potential Value Increase#
US\$55m \$0.08 /share
Value
#NPV10 value based on internal calculations and assumptions including 90% APCL equity interest, \$80/bbl oil price, first oil 2021, post \$15m fundraise at 4 cents/share
The indications set out in the illustrations above are not to be relied upon as any guarantee for the return at the levels indicated or not at all. Several factors could cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements of the Company to be materially different from any future results, performance or achievement that may be expressed or implied by the information set out above.
Decreasing Risk
Pure play deep-water exploration
2014 Exploration was transformational in Senegal and Côte d'Ivoire
CPR Inventory is diverse and material
Our large equity position provides room for partners in the transformation
* Resource volumes from 2013/2014 CPR and ERCE Audit January 2015 – Independently assessed by ERC Equipoise. Bubble size proportional to net risked mean prospective resources 15
Farm-out term sheet signed for LB-08 (Dec 2014)*
Attractive early mover fiscal terms
4 discoveries in the Liberia Sierra Leone basin by others
Narina-1 oil discovery in LB-09 by African Petroleum Corporation (Feb 2012)
Narina-1 found 31 metres net pay Turonian and underlying Albian reservoirs (38°-40° API)
Mean prospective un-risked resources: 184 MMstb*
Lateral limit defined by stratigraphic pinch-out
Down-dip limit uncertainty defined by projected OWC from pressure data (predicted in range 3,860–3,930m)
Amplitudes help define target reservoir sweet-spots, however better quality seismic required
High quality proprietary 3D seismic. New PSDM delivered in March 2014
April 2014 Total oil discovery at Saphir-1XB (Block CI-514) 40m net oil pay 34º API
Developed a deeper & expanded inventory post April 2014 CPR with multiple commercial size prospects
Buried Hill farm-in to CI-509 (2:1 promote) announced July 2014
*Image postdates ERC Equipoise CPR 2014, CI 514 interpretation based on 2D seismic data
Ayame Upper Fan Opacity Rendering showing Reservoir Architecture
Ayame Upper Fan AVO Rendering Showing Class I, II, & III Anomolies
| Prospect | Ayamé West |
|---|---|
| Water Depth | 2800-2900m |
| Play Fairway | Turonian and Cenomanian |
| Mean Prospective Net Unrisked Resources |
*800 MMstb (Combined Segments) |
*Resource volumes taken from ERC Equipoise CPR, 2014
High potential frontier exploration area
Multiple plays Cretaceous deep-water fan systems and platform margin clastics/carbonates
Extensive 3D seismic acquired over SOSP, A1 & A4
81% working interest in Senegal
Multiple prospects analogous to Cairn Energy operated discoveries (with 3.5 bnbbls follow up potential*) in Sangomar Deep
High level of industry interest in Senegal/Gambia
*FAR, Investor Presentation November 2014
Cairn Energy SNE-1 discovery:
95m gross oil bearing column with a gas cap
Excellent net oil pay of 36m
Oil of 32 degrees API
Preliminary P50, 330mmbbls commercial discovery (FAN-1 & SNE-1), size of total prize pool 3.5 bnbbls**
*Conoco Investor Presentation BoA Conference 13 Nov 2014 **FAR internal prospective resources 27 Feb 2013
Gambian Licences re-instated 1 December 2014 with 100% working interest
2,500km2 3D seismic acquired over licences
Discoveries by Cairn Energy in Senegal confirm our regional model of the hydrocarbon system
Gambian updated resource potential will be included in the CPR in Q1 2015
Block SL-03 covered by 3D seismic, SL-4A-10 3D seismic acquired Q3 2014
Prospective at multiple levels within the Cretaceous, on trend with oil discoveries
3 discoveries by Anadarko/Tullow/Repsol partnership
Amplitude support for stacked hydrocarbon pays at multiple Upper Cretaceous levels in dip closures
| Prospect N |
Vega |
|---|---|
| Water Depth | 3400-3640m |
| Play Fairway TGS 2012 3D |
Campanian TGS 2014 3D Brute Stack |
| Mean Prospective Net Unrisked Resources |
Under assessment |
Strong AVO response and underlying charge focus set-up the potential for a low risk prospect in ultra-deep water
Ultra-deep water, underexplored
Offset wells by third parties to derisk prospects
Further technical maturation of portfolio
Reduce capital exposure through risk sharing
Open to assuming position of non-operator
Potential promote on well programme
Assuming fully funded drilling programme
Share technical expertise with partner(s)
Potential value growth of Expected Value (EV) ~500MMBO in 3 years for 6 wells
Note: Risked Volumes based on 100% APCL from April 2014 CPR (numbers rounded) *APCL estimate
Stratton House 5 Stratton Street London, W1J 8LA
Corporate Communications Harriet de Beaufort-Suchlick [email protected]
EAS Advisors LLC (New York) First Energy/Mirabaud Securities Limited (UK) Pareto Securities (Norway) Dundee Securities Corporation (Canada)
Ernst & Young
ERC Equipoise Limited
Finding and exploiting commercial hydrocarbon deposits, whilst generating sustainable benefits for local communities and minimising our environmental footprint
To create shared and enduring value for all stakeholders
10+ years experience in Chairman & Director positions
Held senior management positions at Cosworth Group, Rolls Royce and Bentley Motor Cars, and has served as a Member of the Vickers Group Executive Board.
Currently Chairman of LSE listed Porvair Plc, a specialist filtration technologies business in the aerospace and general engineering sectors
Over 28 years of experience in Hess Corp., Apache Corp. & Shell
Demonstrated proven oil finder drilling over 300 wells in 11 countries. 85% geological success (270 discoveries)
Led Hess exploration campaign in Ghana that had 7 consecutive discoveries and Global New Ventures
30+ discoveries in Russia at Hess as VP Exploration
Non-Exec Director at Tamboran Resources & advisory board member of the Energy & Geoscience Insitute, University of Utah
Over 20 years experience, previously employed as a senior investment banker with a broad range of corporate finance and broking skills
Worked for institutions including BZW, Hoare Govett, Canaccord Adams
Significant experience in IPO's, fund raising and mergers and acquisitions
Executive Director of London listed African Minerals Limited and General Manager of all African Minerals Limited's Sierra Leone subsidiaries
Former Financial Controller of Regent Star International, and Deputy General Manager and Director of Bond Tak Mining Company
Over 30 years experience in natural resources
Co-founded and held executive and nonexecutive board positions in a number of successful ASX listed companies
Currently holds Non-Executive Chairman and Non-Executive Director of a number of ASX listed companies
Long career in a number of senior financial positions
Chartered Accountant & initially became a partner in general practice before moving into the investment banking sector with Wedd Durlacher Mordaunt & Co, and BZW
Held various senior management roles as a director for DAKS Simpson Group Plc and Panceltica Holdings
35+ years experience in the oil and gas industry
Former Director General of the Oil and Gas Department of the Ministry of Petroleum, Norway
Since 2011, Mr Moe has been an advisor to the oil and gas industry and has several large international companies as clients
Senior Partner at Australian accounting firm Hewitt Turner & Gelevitis
Specialises in domestic business structuring, corporate tax planning and issuing of audit opinions
21+ years experience in new ventures, capital raisings and general business consultancy
Currently, Non-Executive Director of ASX listed Cape Lambert Resources Ltd and Legacy Iron Limited
Managing Director and Head of Investment & Corporate Banking Europe for BMO Capital Markets
Worked for Kleinwort Benson, Citigroup and Credit Suisse, he was Head of Business Development and M&A at Eurasian Natural Resources Plc
Over 15 years investment banking and capital markets experience
| Board of Directors | ||||
|---|---|---|---|---|
| Charles Matthews Independent Non-Executive Chairman |
||||
| Nomination Committee | Audit Committee | Remuneration Committee | Continuous Disclosure Committee | |
| Members: • Charles Matthews (Chair) • Jeffrey Couch • Anthony Wilson |
Members: • Anthony Wilson (Chair) • Jeffrey Couch • Charles Matthews |
Members: • Mark Ashurst (Chair) • Jeffrey Couch • Anthony Wilson • Dr. David King |
Members: • Dr. David King (Chair) • Charles Mathews • Bjarne Moe |
|
| Purpose: • Support & advise, to maintain a Board that has an appropriate mix of skills & experience to be an effective decision making body • Ensure the Board is comprised of directors who contribute to the successful management of the Company and discharge their duties having regard to the law and the highest standards of corporate governance |
Purpose: Assist the Board in fulfilling its statutory and fiduciary responsibilities relating to: • Quality, integrity of financial statements, accounting policies, financial reporting and disclosure practices; • compliance with all applicable laws, regulations and company policy; • the effectiveness and adequacy of internal control processes; • the performance of the Company's external auditors and their appointment and removal; • the independence of the external auditor and the rotation of the lead engagement partner; and • the identification and management of business risks |
Purpose: • Review and approve the executive remuneration policy • Recommend to the Board the remuneration of executive directors • Rewarding executives • Review the Company's recruitment, retention and termination policies and procedures for senior management • Review and approve the remuneration of the CEO, and as appropriate other senior executives • Review and approve any equity based plans and other incentive schemes. |
Purpose: • Responsible for development and oversight of the policy and procedures applicable to the Company's continuous disclosure obligations. • In particular, the responsibility of ensuring that any exchange announcement concerning operational or geological activities, updates, results or statements of similar nature are reviewed and signed by an appropriately qualified person from the senior management of the Company who is independent from the Company's larger shareholders, or an appointed independent adviser |
Net Acreage Comparison Gulf of Mexico and North Sea
GDP Projected Growth ('14): 5.1%
Population ('12): 13.2m
Population Growth Rate: 2.6%
Language: French
Main Exports: fish, petroleum products, phosphates, cotton
APC Net Acreage: 14,804km2
Existing Operators (not limited to): Atlas Petroleum, Cairn Energy, FAR, Kosmos Energy
Contract Type: Production Sharing Contract
GDP Projected Growth ('11): 5.5% Population ('12): 1.8m Population Growth Rate: 2.7% Language: English Main Exports: Peanuts, fish, cotton APC Net Acreage: 2,672km2 Existing Operators: CAMAC Energy Contract Type: Royalty/Tax
GDP Projected Growth ('14): 12.1%
Population ('12): 6.1m
Population Growth Rate: 2.1%
Language: English
Main Exports: Diamonds, rutile, cocoa, coffee
APC Net Acreage: 5,855km2
Existing Operators (not limited to): LUKOIL, Chevron, Anadarko
Contract Type: Royalty/Tax
GDP Projected Growth ('14): 9.8%
Population ('12): 20.6m
Population Growth Rate: 2.2%
Language: French
Main Exports: Cocoa, coffee, petroleum, palm oil
APC Net Acreage: 2,284km2
Existing Operators (not limited to): Total, Tullow, LUKOIL, Anadarko, Vitol
Contract Type: Production Sharing Contract
GDP Projected Growth ('14): 5.4%
Population ('12): 4.2m
Population Growth Rate: 2.6%
Language: English
Main Exports: Diamonds, iron ore, rubber, timber, coffee, cocoa
APC Net Acreage: 5,352km2
Existing Operators (not limited to): Anadarko, Chevron, Repsol, Eni, Exxon
Contract Type: Production Sharing Contract
| Country | Blocks | Net Acreage km2 | Activities to Date |
|---|---|---|---|
| Senegal | Rufisque Offshore Profond & Senegal Offshore Sud Profond |
14,804 | • Awarded both blocks November 2011 May 2012 APCL acquired 3,600km2 3D seismic data • • Currently interpreting data • Significant discoveries made by Cairn Energy (op.) in 2014 in adjacent acreage |
| The Gambia | A1 & A4 | 2,672 | • November 2014, Gambia licences reinstated • Revised initial exploration period, expires September 2016 covered by 2,500km2 3D seismic data Licences • • Significant discoveries made in analogous acreage in Senegal |
| Sierra Leone |
SL-03 & SL-4A-10 |
5,855 | • SL-03 ratified in February 2011 and SL-4A-10 ratified in September 2012 September 2012 acquired 2,500km2 3D seismic over SL-03 • Q3 2014 acquired >1,000km2 3D seismic over SL-04A-10 • |
| Liberia | LB-08 & LB-09 | 5,352 | • Both blocks ratified in 2008 Acquired 5,351km2 of 3D seismic data over both blocks • • Drilled Apalis-1, Narina-1 and Bee Eater-1 wells on LB-09 • Significant discovery made at Narina-1 by APCL December 2014, term sheet signed on LB-08 • |
| Côte d'Ivoire |
CI-509 & CI-513 | 2,284 | • Awarded CI-509 in March 2012 and CI-513 in December 2011 Acquired 4,200km2 3D seismic data, delivered June 2013 • • April 2014, significant discovery made by Total in adjacent block • July 2014, Buried Hill farms in for 10% equity in CI-509 |
FAN-1 Cairn Operated Sangomar Licence Reprocessed 3D delivered
P50 950 Mmbbl Oil-in-place
Stacked Cretaceous turbidite reservoirs
Proven hydrocarbon system with multiple source rocks – oil mature
Stacked clastic systems feeding in from the SE corner of ROP licence
Apparent amplitude support to be evaluated on reprocessed 3D
Long-lived sediment fairways mapped in SOSP – prospect areas >100km2
Less than 50mm USD cost/well
Simple design and fast drilling
Potential rig time savings (2-3 days)
Reduced casing requirements (both 20" & 13 3/8")
Reduced cement requirements Simplified logistics
8 ½" hole / 9 5/8" casing contingency available
Get through potential loss zone (circa >800/850m BML) by deepening the top hole and drilling with sea water and sweeps
Utilised design successfully. Hess Ghana are drilling a 2 string design
APCL's 14% shareholder in International Petroleum
ARKEx (Blues: Basins, Reds Highs)
Sightsavers
APCL sponsored trainees will deliver preventative eye care to a population of over 1.6 million
Providing funding and equipment to rural eye-care clinics
Gbowee Peace Foundation
Worked with Nobel laureate to design after school program and support Ebola awareness
Teaching leadership skills and reproductive health to school girls
University of Liberia Computer Lab
Increased capacity for G&G related educational training
Provided software licenses and equipment for geo- sciences program
Student Sponsorship
G&G scholarship, opportunity to study at top universities in the UK
Commitment to build capacity, transfer knowledge and encourage local commercial participation across areas of operation
The Group operates in developing countries facing political, economic and social uncertainties. The Group participates or expect to participate in oil and gas projects in West Africa with emerging economies and the Group's operations are subject to significant political, economic and social uncertainties that may have a material adverse effect on the Group. Uncertainties include, but are not limited to, the risk of war, terrorism, expropriation, nationalisation, renegotiation or nullification of existing or future concessions and contracts, changes in crude oil or natural gas pricing policies, changes in taxation policies, and the imposition of currency controls. Further, investments in developing countries is generally only suitable for sophisticated investors who fully appreciate the significance of the risks involved in, and are familiar with, investing in developing countries. In addition there may also be uncertainties related to existing and future imposition of international sanctions in the countries in which the Group operates.
The Group operates in countries with a high risk of corrupt practices. Certain jurisdictions in which the Group operates have a low score on Transparency International's Corruption Perception Index, implying a higher perceived risk of corruption. The Group has established internal regulations and contractual commitments to remain compliant with all applicable corruption compliance regulations. However, corrupt practices of third parties or anyone working for the Group, or allegations of such practices, may have a material adverse effect on the reputation, performance, financial condition, cash flow, prospects and/or results of the Group.
The Group's operations are capital intensive and involve a high degree of risk. Oil and gas exploration and production activities are capital intensive and involve a high degree of risk. The Group is required to make substantial capital expenditure for the acquisition, exploration, development and production of oil and gas reserves in the future. A significant portion of the Group's activity is conducted offshore, which involves an increased degree of risk relative to onshore activity, and may result in additional costs relating to the technical difficulties of operating offshore.
Availability of drilling equipment, coordination of exploration and production activities and access restrictions. All of the Group's licenses are offshore exploration projects. These projects require the co-ordination of a number of activities including obtaining seismic and electromagnetic data, carrying out subsea surveys, and where relevant; obtaining partner approvals and securing rig capacity for the necessary drilling activities. In the current high demand market environment, there are long lead times to arrange these activities. Although the Company currently considers the deep-water rig availability to be generally favourable for the Company and the Group, no assurance can be given that the Company or the Group will be able to secure drilling rig capacity to perform the well commitments as by the relevant due dates and/or on acceptable terms. If the Company fails to successfully co-ordinate the timely delivery or completion of the above-mentioned activities, it may miss out on exploration opportunities and/or it may be required to make additional expenditure. Furthermore, contracting drilling rigs requires significant financial commitment by the Group and its partners.
Offshore exploration is by its nature highly speculative. Drilling oil and gas wells is by its nature highly speculative, may be unprofitable and may result in a total loss of the investments made by the Group. Completed wells may never produce oil or gas or may not produce sufficient quantities or qualities of oil and gas to be profitable or commercially viable. Moreover, drilling hazards or environmental damage could greatly increase the cost of operations, and various field operating conditions may adversely affect the production from successful wells.
Risks associated with legal disputes, different legal systems and litigation. The Group is, and may from time to time be, involved in legal disputes and legal proceedings related to the Group's operations or otherwise. Given that almost all material exploration rights and related contracts of the Group are subject to the national or local laws and jurisdiction of the respective countries in which the licences are held, the Group's legal protection and ability to exercise or enforce its rights and obligations may differ between different countries and also from what would have been the case if such rights and obligations were subject to Australian or Norwegian law and jurisdiction. To the extent the Group becomes involved in legal disputes in order to defend or enforce any of its rights or obligations under its licences, agreements or otherwise, such disputes or related litigation may be costly, time consuming and the outcome may be highly uncertain. Furthermore, legal proceedings could be ruled against the Group and the Group could be required to, inter alia, pay damages, halt its operations, stop its expansion projects, etc. It is further a risk that the Group could become involved in legal disputes with uninsured third parties.
Reinstatement of the licences from the purported termination of the Gambian Licences. On 3 January 2014 the Government of the Republic of the Gambia (the "Gambian Government") purported to terminate licences A1 and A4 in the Gambia (the "Gambian Licences") in which the Group held a 60 per cent working interest through a farm-in agreement with Buried Hill Gambia B.V ("Buried Hill"). African Petroleum Gambia disputed the purported termination and a claim under arbitration was registered by ICSID on 21 March 2014. African Petroleum and the Gambian Government subsequently settled the arbitration by way of a settlement agreement dated 27 November 2014 and the Gambian Government revoked and cancelled its termination of the Gambian Licences and by way of a reinstatement and amendment agreement, reinstated both Gambian Licences with effect from 27 November 2014. The disputes under the Gambian Licences and the settlement and reinstatement and amendment agreement are subject to confidentiality obligations. There can be no assurance that further disputes in connection with the Gambian Licences will not reoccur, and if so, such a dispute may have a material adverse effect on the Group.
Risk of joint and several liabilities with its licence partners. As a consequence of joint and several liabilities, any failure by any of the Group's licence partners to satisfy any significant obligations in connection with the licences may have a material adverse effect on the Group's business, financial condition, operating results and/or cash flow.
Risk regarding Prospective Resources. The Group's Prospective Resources estimates included in the Prospectus and the CPR are estimates only and the actual results may be greater than or less than the estimates provided herein. There is no certainty that it will be commercially viable or technically feasible to produce any portion of the Group's resources.
Risk regarding Prospective Resources. The value of the Group's assets and the profitability of the Group's operations will depend on the market price of oil and gas, which fluctuates.
The Group is dependent on senior executives, key personnel and local content. The inability of the Group to recruit and/or retain key personnel and/or local manpower could have a material adverse effect on the Group's financial condition, business, cash flow, prospects and/or results.
Health, safety and environmental risks. The Group's failure to comply with applicable health, safety and environmental laws and regulations may result in regulatory action, the imposition of fines or the payment of compensation to third parties, which in turn could have a material adverse effect on the Group's financial condition, business, cash flow, prospects and/or results.
Operating risks. The Group faces significant operating risk factors, including failure to locate or identify oil reserves, failure to achieve predicted well production flow rates, operational and technical difficulties encountered in exploration or production, difficulties in commissioning and operating plant and equipment, mechanical failure or plant breakdown, unanticipated reservoir problems which may affect field production performance, adverse weather conditions, industrial and environmental accidents, industrial disputes and unexpected shortages or increases in the costs of consumables, spare parts, plant and equipment.
Risks related to potential acquisitions. The Company may in the future make acquisitions of, or significant investments in, complementary companies or prospects and additional licence blocks. Any such acquisitions and/or other investments will be accompanied by risks commonly encountered in making such acquisitions.
The Group may not be able to discover or acquire commercially exploitable reserves. There can be no assurance that the Group's future exploration and development efforts will result in the discovery and development of commercial accumulations of oil and gas. If the Group does not succeed in making discoveries, it may not generate revenues.
Third party contractors. The Group is highly dependent on third party contractors. The Group may not be able to predict or avoid the risk of financial failure or default by a participant in any joint venture to which the Group may become a party, insolvency or other managerial failure by any of the operators and contractors used by the Group, and/or insolvency or other managerial failure by any of the other service providers used by the Group for any activity.
Risks related to approvals, permits and licences. If any of the Group's exploration licences are not renewed or granted or if exclusive exploitation authorisations are not obtained, the Group would be required to cease operations of the affected well or production facility. The loss of some or all of the Group's licences may have a material adverse effect on the Group's financial condition, business, cash flow, prospects and/or results.
Risks related to insurance. The Group may incur material uninsured losses or damages that may have a material adverse effect on the Group's financial condition, business, cash flow, prospects and/or results.
The oil and gas industry is highly competitive. Competitors may have greater financial resources, staff and facilities than those of the Group. Due to this competitive environment, the Group may be unable to acquire attractive suitable properties or prospects on terms that it considers acceptable.
Regulation of the oil industry. The Group's operations are or will be subject to laws and regulations of general application governing exploration and production and processing of hydrocarbons, land tenure and use, environmental matters, including but not limited to site-specific environmental licences, permits and statutory authorisations, and laws and regulations regarding industry relations, work place health and safety, trade and export, competition, access to infrastructure and taxation. These regulations are implemented by various governments and authorities and could be costly or difficult to comply with and could hence have a material adverse effect on the Group's financial condition, business, cash flow, prospects and/or results.
Production sharing contracts (PSCs). The Group has entered into a number of production sharing contracts with the respective governments in the different countries where the Group operates. The sharing of the production will naturally affect the profitability of the Group and/or the amount of profits from the project that will flow to the Company and its shareholders. This could be affected further if governments utilise options they may have to increase their participation in the licences.
Commercialisation risks. Even if commercial quantities of oil are discovered, there is a risk that the Group will not be able to produce and/or transport the oil at a reasonable cost or may not be able to sell the oil to customers at a rate which would cover its operating and capital costs. Moreover, the Group may not receive the regulatory and environmental approvals necessary to convert its exploration permits into production concessions.
Liquidity risk. There can be no assurance that the Group will have, or be able to secure, sufficient funding to meet its financial obligations as they fall due and such failure could have a material adverse effect on the Group's financial condition, business, cash flow, prospects and/or results and may entail that the Group would not be able to continue as a going concern. In the event the Group is not able to continue as a going concern, there can be no assurance that the Group will be able realise its assets and extinguish its liabilities in the normal course of business and at the amounts stated in the financial report.
Risk of not meeting work commitments. Based on the Group's current cash balances, expected proceeds from the Offering and budgeted spending in 2014 and 2015, the Group will not be in a position to finance its participation in a material portion of the minimum investment requirements without completing one or more farm out transactions during 2014 and/or 2015. Should the Group not be able to meet the minimum investment work program requirements or be unable to renegotiate such requirements, the Group faces a risk of termination or non-extension of its existing licence. Inability to meet work commitments may further give rise to liability towards governments and licence partners and the Group may lose escrow and guarantee amounts.
Dependency on farm-outs. Going forward, the Group seeks to fund a material portion of its operations through farmouts of parts of its licences to industry partners. The Group is depending on farm-outs of one or more of its licences and/or raising additional equity, in order to be able to meet its outstanding work commitments in the current exploration periods in certain of its licences.
Additional requirements for capital. The Company's capital requirements depend on numerous factors. Depending on the Group's exploration success, the Company may require further financing in the future. Any additional equity financing will dilute shareholdings, and debt financing, if available, may involve restrictions on financing and operating activities. Any required additional financing may not be available for the Group at all or may not be available on acceptable terms.
Interest rate risk. The Group currently does not have any interest bearing debt arrangements. However, should the Group enter into any future debt arrangements, the Group might be exposed to interest rate risk, which is the risk that a financial instrument's value will fluctuate as a result of changes in the market interest rates on interest bearing financial instruments. Currently, the Group has no arrangements in place to mitigate such exposure, and there can be no assurance that the Group will be able to establish such arrangements in the future.
Foreign currency risk. The Group is exposed to currency risk on contracts that are denominated in a currency other than the respective functional currencies of the entities making up the Group, which is primarily the United States Dollar (USD). The Group has not entered into any derivative financial instrument to hedge such transactions and may as a result incur material losses.
Credit risk. There can be no assurance that the Group will not incur significant losses due to its counterparties' inability or unwillingness to honour its obligations and this could have a material adverse effect on the Group's financial condition, business, cash flow, prospects and/or results.
No profit to date. The Group has incurred losses since its inception and it is therefore not possible to evaluate its prospects based on past performance. Since the Group intends to continue investing in its exploration program, the Group anticipates making further losses in the foreseeable future.
Risk of change in legislation and tax laws. The Company has no control of potential future changes to applicable legislation and tax laws under which the Group operates. Future changes to such legislation and tax laws may have a
material adverse effect on the Group's financial condition, business, cash flow, prospects and/or results.
Risks related to the majority shareholder of the Company. The commercial goals and interests of the Company's largest shareholder and the commercial goals and interests of the Company and the other shareholders may not always be aligned. The Company's largest shareholder, Sarella Investments Limited, is controlled by the Timis Trust of which Mr. Frank Timis is the principle beneficiary. Mr. Frank Timis, who was the founder of the Company, stepped down from the Board of Directors in October 2013. Due to historical events related to other listed companies where he has been involved as described below, Mr. Timis will not be employed by the Company, hold Board positions or play any governance role going forward. Mr. Frank Timis has received a number of penalties and sanctions in Australia relating to various minor and largely driving related offences and two narcotic related offences, and a charge for failing to store explosives correctly. He has also been Executive Chairman and/or a director of two AIM listed companies which, during his term as Executive Chairman and/or director were sanctioned by the London Stock Exchange. The Toronto Stock Exchange (the "TSX") has also on two occasions determined Mr. Timis to be unsuitable to act as a director, officer or major or controlling shareholder of a TSX listed issuer. These determinations by TSX do not constitute a ban on Mr. Timis being a director of an unlisted company in this jurisdiction. Today, Mr. Timis serves as director of International Petroleum Limited, a company which is currently suspended from trading on the NSX.
The price of the Shares may fluctuate significantly.
Future issuances of Shares or other securities may dilute the holdings of shareholders and could materially affect the price of the Shares.
Beneficial owners of the Shares that are registered in a nominee account may not be able to vote for such Shares.
The transfer of Shares is subject to restrictions under the securities laws of the United States and other jurisdictions.
Investors in the United States may have difficulty enforcing any judgment obtained in the United States against the Company or its directors or executive officers in Australia and Norway.
Foreign ownership restrictions apply under Australian law. According to statutory Australian law, foreign ownership of substantial interests in Australian companies is subject to prior approval by the Australian Foreign Investment Review Board. The regulation applies to all Australian incorporated companies valued in excess of AUD 248 million by either (i) market capitalisation and/or (ii) by consolidated total assets on the balance sheet. The Company currently satisfy criteria (ii) which implies that prior approval by FIRB apply to certain foreign shareholdings in the Company. Prior approval is, inter alia, required for any foreign person acquiring 15 per cent or more of the shares or several foreign persons holding 40 per cent or more as well as all foreign government investors acquiring 10 per cent or more of the share capital (including investments which are purely commercial).
Shareholders outside of Australia are subject to exchange rate risk. The Offer Shares are priced in NOK, and the Shares are priced in NOK on Oslo Axess and in AUD on NSX. The Company's accounting and cash balances will be kept in USD. Any future payments of dividends on the Shares may be declared by the Company in USD or AUD; however such dividends distributed by the Norwegian Registrar through the VPS to shareholders with an address in Norway or shareholders holding NOK bank accounts will be distributed in NOK. Shareholders registered in the VPS and whose address is outside Norway and who have not supplied the VPS with details of any NOK account, will receive dividends by cheque in a local currency or in USD. Accordingly, the investors are subject to adverse movements in AUD, NOK and/or USD against their local currency (following first conversion to NOK).
Risks related to depository receipts and the registrar agreement. Risks related to Depository Receipts and the Registrar Agreement include, but are not limited to, the shareholders having limited power to exercise their shareholder rights as a result of the registration of the beneficial interest representing the Shares in the Company in the VPS in the form of Depository Receipts, the risk that the VPS Registrar will not be fulfilling its obligations under the Registrar Agreement and the risk of having the Registrar Agreement terminated.
The Company is incorporated in Australia and governed by Australian law. The rights of any person holding Shares will be governed by the laws of Australia and the Constitution of the Company. The laws of Australia differ from those of other jurisdictions. Such differences may result in the Company's minority shareholders
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