Corporate M&A

Kinetiko Energy Acquires Remaining 51% Stake in Afro Energy

By Isha Makkar
May 07, 2021
2 minutes read

ASX-listed Kinetiko Energy Ltd. has entered into a binding term sheet with privately-held Badimo Gas (Pty) Ltd. to acquire the remaining 51% interest in its joint venture company Afro Energy (Pty) Ltd. for a total consideration of approximately A$65.5 million payable in stock. Afro Energy holds a 100% operated interest in the Amersfoort project. The transaction has unanimously been approved by the board of directors of both companies.

Under the terms of the deal, Kinetiko will acquire the remaining 51% interest in Afro Energy, for a total consideration of approximately A$65.5 million, payable via the issuance of over 595 million Kinetiko shares at an issue price of A$0.11 (based on the closing share price of May 3, 2021). The acquisition is at a discount due to the debt owed to Kinetiko, on account of the payment of exploration costs incurred by Afro Energy. Prior to the acquisition, Kinetiko held a 49% stake in Afro Energy. Following the acquisition, Kinetiko will hold a 100% stake in Afro Energy, and Badimo will own approximately 46% of the post-merger share capital in Kinetiko.

Afro Energy holds a 100% operated interest in the Amersfoort project (comprising exploration rights ER 38, ER 56, ER 270, ER 271 and ER 272) in the Karoo basin, onshore South Africa. The project contains 20 drilled exploration core holes, which have tested for large accumulations of onshore shallow gas, with strong flow rates. Situated in close proximity to existing infrastructure, including power stations, gas pipelines, high voltage transmission lines, and gas market, the project has a strong exploration upside. The gross 2C contingent resources attributable to the project are approximately 9.3 trillion cubic feet (Tcf), as of July 29, 2020.

“This union between the historic joint venture partners represents the achievement of a major milestone for the de-risking of the development of what is potentially the largest onshore gas project in South Africa. Years of significant cooperation between the Badimo and Kinetiko teams have enabled this acquisition to be realised and will result in delivering substantial shareholder value,” commented Adam Sierakowski, Executive Chairman of Kinetiko.

Based in Australia, Kinetiko is focused on the exploration and development of coal bed methane (CBM) and shallow gas assets in Sub-Saharan Africa, with a primary focus at present on the Amersfoort Project.
Johannesburg-based Badimo is focused on gas exploration, development, and production activities in South Africa.

The transaction is subject to customary closing conditions including shareholder approval, execution of a definitive share purchase agreement, and additional South African government approvals and tax advice. The execution of definitive documents is expected to occur in June 2021, and the transaction is expected to be completed on or before August 31, 2021.

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