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Anglo African Oil & Gas agrees divestments to become cash shell


  • Congo project stalled amidst funds squeeze
  • Divestment to Zenith Energy
  • AAOG to become a cash shell for RTO

Quick facts: Anglo African Oil & Gas PLC

Price: 0.325 GBX

Market: AIM
Market Cap: £1.52 m

What is happening

In late December, Anglo African Oil & Gas PLC (LON:AAOG) reached an agreement to divest an 80% interest in its Congo subsidiary to Zenith Energy Ltd (LON:ZEN) in a deal worth £1mln.

AAOG previously flagged that it was owed state energy firm Société Nationale des Pétroles du Congo (SNPC) and told investors that it would not be able to afford to drill the proposed TLP-103C-ST well at the Tilapia field.

The transaction consideration comprised 50% cash and 50% new Zenith shares.

Zenith, holding 80% of the subsidiary, agreed to fund the costs associated with the unit’s 56% in Tilapia – a US$5.5mln programme is envisaged – and it also committed to covering upfront cash signature payment.

A subsequent option deal was entered into in January setting out conditional terms for Zenith to acquire AAOG’s residual 20% interest – for £1mln if Tilapia produces no more than 2,000 barrels of oil per day (over 30 consecutive days) before 15 January 2021 or £2.5mln if it produces over 4,000 bopd for 30 straight days in the same timeframe.

AAOG is to use the cash proceeds from the initial divestment to cover its day-to-day operations and to conduct due diligence over reverse takeover transactions that present themselves once the company is a cash shell.

Previously, in mid-December, James Berwick resigned from his position as chief executive with immediate effect. Berwick left to become the full-time chief executive of Anglo Tunisian Oil & Gas Limited (ATOG), a group in which he is a significant shareholder.

It followed an earlier departure of David Sefton from both AAOG and ATOG, and, it was said that the burden on Berwick’s time would have been unsustainable, as the ATOG business would take a disproportionate amount of his time.

Sefton left his role as AAOG executive chair back in September 2019 to focus on other projects.

Forum Energy investment & funding position

On 20 January, AAOG announced that it had given consent to the sale of shares held by Riverfort and YA in transactions worth £420,205. The transactions will result in the company receiving £361,376 from the pair of investment groups.

AAOG told investors that the proceeds will be applied to its creditors, and, alongside separate £250,000 proceeds received from Zenith Energy the company now expects it will have sufficient working capital for the next six months “absent of any unforeseen legitimate claims”.

In a stock market statement, AAOG noted that the shares are being acquired by Forum Energy Services Limited which has no current intention to dispose of its strategic stake in the company, and, has committed to certain lock-up agreements covering three quarters of the acquired shares.

Forum has agreed with AAOG that it will have the right to appoint up to three directors to the AAOG board. Phil Beck has agreed to resign his position as non-executive director.

"The board has considered several offers to purchase the ISA Shares and has, in consenting to the purchase by Forum, given consideration to the long-term interests of the company rather than purely immediate financial gain,” said Sarah Cope, AAOG chair.

“The board is confident that, of all the potential partners considered, Forum has the clearest vision and best contacts that will enable it to deliver value for shareholders in the long term."

Forum chief executive Paul Forrest, meanwhile, added: “Forum is pleased to have taken a strategic stake in the company and we are looking forward to working with the board to create shareholder value.

“Forum has, through its investors and network, access to sources of funding as well as exciting and viable projects in the natural resources sector that could be suitable as acquisition targets for AAOG."

Inflexion points

  • Progress towards Tilapia programme
  • Production performance in relation to Zenith option
  • Any reverse takeover transaction will transform business
  • Potential new management appointments

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