Anglo African Oil & Gas PLC (LON:AAOG) and Zenith Energy PLC (LON:ZEN) have agreed a ‘put and call’ option deal for Zenith to acquire a final 20% stake in the AAOG Congo subsidiary which holds a 56% interest in the Tilapia field.
In December, Zenith agreed a deal to acquire 80% of AAOG Congo from AOOG, and, via the new option deal, it can take full ownership of the subsidiary subject to Tilapia’s production performance in the next year.
Under the ‘call’ option, Zenith can buy the remaining 20% stake in AAOG for £1mln if, before 15 January 2021, the Tilapia field does not exceed a production rate of 2,000 barrels oil equivalent per day (boepd) over 30 consecutive days.
The ‘put’ option would see Zenith pay £2.5mln if in the same timeframe the Tilapia field averages at least 4,000 boepd for a period of 30 consecutive days.
Under either condition, the transaction fee would be paid in shares not cash.
In a statement, AAOG chair Sarah Cope said: "We are very pleased to have agreed these terms with Zenith which protects the upside value for shareholders in AAOG in the event that Zenith succeed in increasing production to 4000 boepd.
“The board believes that this will give the company's shareholders comfort in AAOG's ability to liquidate its holding in a successful AAOG Congo following the investment that Zenith has committed to make into Tilapia."
Zenith chief executive Andrea Cattaneo added that the option terms ensure that both Zenith and AAOG shareholders will “enjoy the fruits of victory” at Tilapia.
“The Tilapia asset has, we believe, potentially transformational production potential,” Cattaneo said.
“Indeed, our primary operational goal shall be to source a fully inspected and functional rig to begin drilling operations at the earliest opportunity in TLP-103C to test the productivity of the Mengo and Djeno horizons," he added.