Meren reported higher second-quarter cash generation, raised its full-year financial outlook and outlined a return to drilling and well-intervention activity across its Nigerian producing assets later this year.
The company, Africa Oil (TSE:AOI), which presented its results under the Meren name, said its strategy remains centered on low-cost production, financial discipline, organic investment and shareholder distributions.
“The quarter shows our strategy working exactly as designed,” Quinn said, citing high-quality, low-cost production and capital allocation designed to balance growth investment, financial strength and shareholder returns.
Financial Results and Revised Guidance
Chief Financial Officer Aldo Perracini said Meren lifted two cargoes during the second quarter at an average all-in sales price of $92.80 per barrel, compared with average dated Brent of $103.80 per barrel during the period.
The first cargo, which used the company’s legacy trigger-price mechanism, realized $63.60 per barrel. The second spot cargo achieved $121.90 per barrel, representing a premium to dated Brent, according to Perracini. The company has now completed its final cargo under the trigger-price structure and will manage commodity exposure through financial derivatives going forward.
Meren said it generally hedges approximately 30% to 50% of entitlement production on a rolling 12-month basis. Perracini said the company has no minimum hedging requirement under its reserve-based lending facility.
- Second-quarter EBITDAX was $108 million, bringing first-half EBITDAX to $220 million.
- Cash flow from operations before working capital was $60 million in the quarter and $139 million in the first half.
- Capital expenditures were $50 million in the second quarter and $24 million during the first half, with spending set to be weighted toward the second half.
- Free cash flow totaled $53 million in the second quarter and $18 million in the first half.
The company raised its 2026 EBITDAX guidance to $390 million to $430 million from a prior range of $270 million to $360 million. It also increased cash-flow-from-operations guidance to $235 million to $260 million. The updated outlook assumes Brent crude of about $85 per barrel for the year.
Meren narrowed working-interest production guidance to 24,000 to 27,000 BOE per day and entitlement production guidance to 28,500 to 32,500 BOE per day.
Balance Sheet, Dividends and Capital Spending
Meren ended June with net debt of $212 million and a net debt-to-EBITDAX ratio of 0.5 times. The company reported $241 million of available headroom under its reserve-based lending facility, $78 million of cash and total liquidity of $319 million.
During the quarter, Meren repaid $80 million under the lending facility, reducing outstanding debt to $290 million at quarter-end. It also paid $50 million in dividends, covering its first two shareholder distributions of 2026, and declared a third dividend. Quinn said year-to-date distributions total $75 million, while dividends since the Prime amalgamation closed last year total $175 million.
Management said balance-sheet protection and high-return organic growth opportunities will continue to take priority in capital allocation. Perracini said distributions remain subject to quarterly review and board approval, taking into account market conditions and investment needs.
Meren reduced its 2026 capital-investment guidance after deferring some drilling work into 2027, though this is partly offset by planned intervention activity at Egina and Akpo later this year. Quinn said 2027 capital spending could be similar to, or lower than, 2026 levels, although budgets have not yet been finalized.
Nigerian Activity Set to Increase
The company expects a significant return to activity in the fourth quarter, with two rigs and a dedicated intervention vessel planned across Agbami, Akpo and Egina.
At Agbami, Meren expects a rig to arrive in the third quarter for a campaign of up to six infill wells following an appraisal well at the Ikija discovery. Quinn said a successful Ikija appraisal could advance a subsea tieback development to the Agbami FPSO.
A second rig is expected to drill the Akpo Far East exploration well before beginning infill drilling at Akpo and Egina. Quinn said Akpo Far East is less than 5 kilometers from existing Akpo infrastructure and, if commercially successful, could potentially reach first production in late 2027.
The company said the well interventions and infill activity are intended primarily to arrest natural production declines and support stable output through 2027. Quinn said there could be incremental production above that base level depending on drilling results.
Meren also expects to resume front-end engineering and design studies for the Preowei field after interpreting new seismic data that management said points to a potentially larger resource base and lower-cost development. Quinn said Preowei is expected to have gross peak production potential of 65,000 barrels per day as a tieback to the Egina FPSO.
Namibia and Broader Portfolio
In Namibia, Quinn said Meren is encouraged by public comments from Venus operator TotalEnergies regarding negotiations with the Namibian government. The company continues to anticipate a final investment decision in 2026 and targets first oil by the end of 2030.
Meren said Venus would provide a long-term, low-cost production stream and diversify its production base. The company retains its interest in the Venus development and adjacent exploration acreage, as well as an 18% carried interest in South Africa’s Orange Basin Block 3B/4B following the restructuring of Impact Oil & Gas.
In Equatorial Guinea, Meren said it continues discussions with potential partners following two-year extensions for both of its licenses. The company said drilling could occur within the next couple of years once it has secured an appropriate partnership and capital structure.
About Africa Oil (TSE:AOI)
Africa Oil Corp is an international oil and gas exploration company. It is an exploration stage enterprise that participates in oil and gas projects located in emerging markets, in sub-Saharan Africa. The company operates in the business segment of international oil and gas exploration, and geographically, it operates in Kenya and Ethiopia.
