The company, which is owed money by the Société Nationale des Pétroles du Congo (SNPC), said earlier this month it would not be able to afford to drill the proposed TLP-103C-ST well at the Tilapia field.
It has now entered into a conditional sale and purchase agreement with Zenith Energy Ltd (LON:ZEN, CVE:ZEE) for the sale of an 80% interest in the subsidiary that holds a 56% interest in Tilapia.
Zenith has agreed to pay £1mln for the stake, of which £500,000 is in cash payable in six equal monthly instalments from the date of completion, while £500,000 will be satisfied in Zenith shares.
Also, Zenith will fund Anglo African’s (AAOG's) share of a US$5.5mln work programme on Tilapia and will fund the upfront cash element of any signature bonus payable for the new licence negotiated with the Congolese Ministry of Hydrocarbons.
AAOG will use the funds to cover its day-to-day operations and to conduct due diligence over reverse takeover transactions that present themselves once the company is an AIM Rule 15 cash shell.
The board has looked at alternative means of funding the exploration programme but the consensus view was that the idea would not fly; the arrangements announced today will see the company retain a carried interest in the Congolese operations without the requirement to raise additional funds for the current planned work programme.
Having said that, the timing of the payments under the terms of the disposal means that AAOG will not have sufficient cash to allow it to continue as a going concern beyond the beginning of February, assuming receipt of the £150,000 owed it by Anglo Tunisian Oil & Gas Limited (of which AAOG has received £50,000 to date with the remainder due to be paid by the end of this month) and no unforeseen claims.
As such, the company is proposing to enter into a facility with corporate-financier RiverFort for a redeemable convertible loan note of up to £500,000.
The first tranche of £250,000 would be available immediately on issue of the loan note with the remaining £250,000 doled out in five equal tranches of £50,000 over the following five months.
It is also proposed that RiverFort amend the terms of the existing investor sharing agreement to rebase the reference price to more closely reflect the current share price and the proceeds due to the company from the exploration and production sharing agreement will be used to repay the loan note.
“The board emphasises that, at present, it is managing its creditor position and with the receipt of the RiverFort monies contemplated in the term sheet described above, and subject to completion of the disposal and receipt of the consideration, the company will have sufficient working capital for at least the next six months from the date the RiverFort financing becomes effective,” AAOG told shareholders.