Deal AAOG

Anglo African Oil & Gas plc (AIM: AAOG) (“the Company”), an independent oil and gas developer, is seeking to raise total gross proceeds of approximately £7.4 million by the conditional placing of 92,551,459 New Ordinary Shares (the “Placing”) at an issue price of 8 pence per New Ordinary Share (the “Issue Price”) to new and existing institutional and other investors. As part of the Placing, Teathers has secured a £300,000 allocation, which will be made available to onboarded users of the Teathers App via a Live Market Bookbuild. The Live Market Bookbuild will be conducted through the Teathers App and will involve the issue of up to 3,750,000 new Ordinary Shares at the Issue Price of 8 pence per share. The Live Market Bookbuild will commence at 12pm on 18 May 2018 and will close at 5pm on 25 May 2018.

Settlement is dependent on the Company receiving shareholder approval for completion of the deal at the General Meeting to be held on 04 June 2018. If shareholder approval is given, settlement is expected to occur on Tuesday 05 June 2018, on which date contract notes will be issued on completion of the deal. About Anglo African Oil & Gas Anglo African Oil & Gas is an AIM-listed independent oil and gas company that owns a 56% stake in the producing Tilapia oil field in the Republic of the Congo. The Company boasts a low-cost production story in a prolific hydrocarbon region with significant exploration upside, differentiating it substantially from its E&P peers. Additionally, management’s remuneration is tied to hitting production milestones, reflecting their strong focus on cost control. Tilapia has an excellent address, being located close to multi-billion-barrel fields that include the ENI-operated Litchendjili field and the 5,000bopd Minsala Marine field.

Tilapia currently produces approximately 38 bopd from two near-surface intervals. It has an undeveloped discovery in the lower Mengo sands with gross contingent resources of 8.1m barrels and a deeper exploration prospect, with gross prospective resources of 58.4m barrels, in the productive Djeno interval from which the adjacent Minsala field produces. The Tilapia Licence is held by PK, which is a 100 per cent. owned subsidiary of the Company. Tilapia is 1.8 kilometres offshore of the Republic of the Congo, located in the Lower Republic of the Congo Basin and adjacent to one-billion-barrel fields. The Republic of the Congo is a supportive jurisdiction with established oil and gas legislation and infrastructure. Tilapia is drilled from onshore and has its production and storage facilities onshore. It is a 45-minute drive from Pointe-Noire and 17 kilometres from the nearest refinery. Production can be trucked to the refinery throughout the year. Tilapia is host to three main horizons or sands (with a fourth, the Vandji, unexplored):

  • R1/R2 Sands: The shallowest reservoir from which the Company currently produces about 25 bopd of 39-41 API light sweet crude oil. The Company considers that this horizon is a strong candidate for enhanced oil recovery to extend field life and production and that such interventions have the potential to increase production to between 185 and 250 bopd from the two existing producing wells on the Tilapia Licence.
  • Mengo sands: The second shallowest reservoir from which high volumes of resource and presence of hydrocarbons has been confirmed at conventional flow rates. The Mengo sands are in production for other operators in the Congo basin but were not brought into production on Tilapia when originally discovered because technology for one-off stimulation to commence production was not available in the area at the time. The Company expects that this can produce up to 500 bopd per well.
  • Djeno sands: The deepest reservoir currently targeted at Tilapia, which has been producing in neighbouring fields since 2013 at prolific oil flow rates driven by lower lying high-pressure gas. The Company’s technical work and analogous well control in neighbouring fields gives the Company confidence that the presence of hydrocarbons in the Djeno sands at Tilapia is probable. Highlights
  • Placing to new and existing institutional and other investors to raise gross proceeds of approximately £7.4 million;
  • The Placing has been undertaken to enable AAOG to fund the entire cost of drilling the multi-horizon TLP-103 well at its 56% owned Tilapia field (“Tilapia”) in the Republic of the Congo, including its partner SNPC’s share of drilling and workover costs – not budgeted for on listing (c.US$4 million)
  • SNPC’s unpaid costs are recoverable from production revenue
  • The Directors believe that it would be potentially transformational for AAOG if it could complete the drilling programme on the TLP-103 well, and successfully commence extracting oil from the Mengo Sands and the Djeno Sands, two deeper horizons which are both prolific producers on nearby fields;
  • The Placing is subject to the passing of an ordinary resolution, at the General Meeting;
  • Sister Holding SAS (“Sister”) has made clear that it does not support the proposed Placing. For the avoidance of doubt, the Board wishes to make clear that it has examined, and discussed in detail, numerous alternative funding options and is convinced that an equity fundraise represents the best solution for the benefit of all its Shareholders. Sister has been offered the chance to participate in any equity fundraising on several occasions. Sister has requested anti-dilution protection for its shareholding and the Company has refused to provide this. Sister has declined to participate in the proposed Placing; and
  • A circular to Shareholders in respect of the Placing (the “Circular”) is expected to be posted later today giving notice of the General Meeting to be held on 4 June 2018 at 11.00 a.m. at the offices of finnCap Ltd. A copy of the Circular will be available on the Company’s website at aaog.co

Further information can be found in the company’s RNS, released at 6pm on Thursday 17 May 2018;

https://www.investegate.co.uk/anglo-african-o-g/rns/conditional-placing-and-notice-of-gm/201805171800014940O/

Stock Specific Risks

  • The company will be subject to typical oil and gas exploration and development risks. There is no guarantee the company will be able to define economically viable resources.
  • Any delay to the development timeline would disappoint the market and sentiment towards the shares.
  • Commodity prices will fluctuate, which could affect the economic feasibility of the project.

If you are buying outside of normal market size then this may prevent you from selling the shares at market price.

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