AOI Q2 2020 - best

Why AOI Q2 2020 will be this year's best - and why not


Looking forward to the the next quarterly report, Q2 in August 2020, this is what we can expect:


SALES REVENUE

Sales revenue wise Q2 can be this year's best. The Q1 report says 5 of 6 projected cargoes were sold and the last one just slipped over to April. 23 cargoes are projected for the full year. Assuming a linear or slightly declining production (Akpo and Agbami are mature fields expected to decline) we can expect at least six cargoes to be sold Q2. In addition Keith Hill mentioned in a webinar May 14 that they are going to sell a cargo in a couple of weeks (that is within Q2) for 76 USD/barrel. Given the average hedged price in 2020 of 66 USD it means that one ore more cargoes have to be sold for less than 66 USD/barrel. Depending on how and when the price hedge is done related to each cargo one could guess that the prices of the cargoes before and after the "76 USD cargo" don't deviate significantly from that.This suggests that the cargoes in Q2 are priced above the par value of 66 USD.


PRODUCTION CUTS

Nigeria is imposing the OPEC driven production cut of 23% in May and June. Agbami and Akpo have historically been defined as condensate fields and have been excluded from oil production cuts. The Egina production can't be expected to be exempt from cuts. A production cut will to some extent offset the positive price effect mentioned above.


DIVIDENDS AND CASHFLOWS

Africa Oil has a deferred payment for the Prime deal of 24.8 MUSD due end of June. This is the major known payment with negative cashflow effect in 2020. Even if Africa Oil has cash at hand to pay it it is possible there will be a dividend payout from Prime around start of June equivalent to or higher than the last (25 MUSD).


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