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Anglo African O&G (AAOG)

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Tuesday 26 September, 2017

Anglo African O&G

Half Year Report

RNS Number : 7712R
Anglo African Oil & Gas PLC
26 September 2017
 

Anglo African Oil & Gas / Index: AIM / Epic: AAOG / Sector: Oil & Gas

26 September 2017

Anglo African Oil & Gas plc

('AAOG' or the 'Company')

Half Year Report

 

Anglo African Oil & Gas plc, an independent oil and gas developer, is pleased to announce its results for the six months ended 30 June 2017.

 

Highlights

·     Admission to AIM and £10 million equity capital raise to fund multi-well work programme to scale up production at the producing Tilapia oil field, Republic of the Congo

 

·     Acquired 49% of the shares in Petro Kouilou SA, which owns a 56% interest in Tilapia, with the 44% balance held by the SNPC, the Congolese NOC

 

·     Completed the acquisition of the outstanding shares in Petro Kouilou to secure AAOG's 56% interest in Tilapia post-period end

 

·     Tilapia represents a low-risk development play (R1, R2 and Mengo Sands Horizons) with exploration potential (Djeno Sands Horizon)

R1/R2 Sands - currently producing at Tilapia

Mengo Sands Horizon - an undeveloped reservoir from which wells on neighbouring fields are producing at rates of 200 - 800 bopd

Djeno Sands Horizon - a deeper exploration prospect from which adjacent wells are producing approximately 5,000 bopd

 

·     Cash in hand at 25 September stands in excess of $4.1m

 

·     Drilling of the TLP-103 well fully funded in accordance with current licence terms - AAOG share of remaining budgeted cost is approximately $2m

 

·     Appointment of Alain Guiraud, experienced drilling manager, to lead the drilling of TLP-103, post-period end

 

 

Executive Chairman's letter

At the time of our IPO in March 2017, we stated that AAOG was bringing private-equity capital discipline to the AIM oil and gas sector.  By this we meant a tight control over costs to ensure as much of the £10 million we raised at the time of our Admission from blue-chip institutions and other valued investors was invested in a defined work programme at the Tilapia oil field in the Republic of the Congo.  This is focused on scaling up production from proven horizons and an existing discovery, as well as testing a potential payzone that is known to be prolific on neighbouring fields.  In keeping with the private-equity template, management's remuneration, which is based on ambitious production hurdles being cleared, is tied to success out in the field.

 

Management's willingness to sign-up to production targets is testament to our confidence in the Company's core asset.  Following the two-stage acquisition of a 100% interest in Petro Kouilou SA during H1 and post period end, AAOG owns 56% of Tilapia with the remaining 44% held by SNPC.  Tilapia, which is located in the prolific Lower Congo Basin, offers the attractive combination of low-cost development potential with high-impact exploration.  Aside from the currently producing R1/R2 sands, there is an undeveloped discovery in the lower Mengo sands which has been assigned gross contingent resources of 8.1m barrels, and a deeper exploration prospect with gross prospective resources of 58.4m barrels in the Djeno interval from which the adjacent Minsala field produces 5,000 bopd.

 

Given the presence of multiple horizons at various stages of development, together with being located close to billion-barrel fields including the ENI-operated Litchendjili, we rate Tilapia a low-risk opportunity to generate material cash flows.  In our view, realising the full potential of the producing R1/R2 reservoirs and monetising the discovery in the Mengo Sands discovery from which neighbouring fields are producing at rates of hundreds of barrels of oil a day per well, will generate significant value for shareholders.

 

At the time of our Admission, we detailed a 12-month development programme initially targeting the existing producing payzones.  During the period, we commenced the workover of two existing wells, TLP-101 and TLP-102.  Initial results at TLP-101 saw production increase 50% to 48 bopd from 32 bopd. We believe there is further upside as significant quantities of detritus material were discovered in the well which could be inhibiting production.  The entire flow lines between the wellhead and the separator are due to be replaced shortly to remove this material ahead of the installation of a pump.  Once completed, we expect to see a further increase in TLP-101's production.  Meanwhile, testing of the R2 reservoir in TLP-102 confirmed the presence of recoverable hydrocarbons, though the well did not flow after reperforation.  A mechanical intervention is planned to bring TLP-102 into production using the rig that will drill TLP-103, a new multi-horizon well, which will target production from the R1, R2 sands and test the Mengo discovery and the Djeno Sands. 

 

While TLP 101 and 102 alone have the potential to increase production to between 185 and 250 bopd and see AAOG achieve operating breakeven at low oil prices, success at TLP-103 would be transformational.  Not only would we expect to see the R1, R2 sands and the Mengo discovery drive company production to ~750 bopd, it would also open up the Djeno as a new play on the licence.  With such a huge prize on offer, we are keen to have the best equipment to do the job.  As previously announced, our favoured rig is currently under contract with a major international oil company operating nearby.  After a full inspection, a number of technical adjustments are being made to the rig, which will not be completed until mid-October.  The rig will likely not be operational at its current site before November 2017 and, as a result, it will not be available to AAOG before mid-December at the earliest.  Having originally scheduled drilling TLP-103 in August/September 2017, the delay is frustrating.  It does mean, however, that we will drill what we believe has the potential to be a company-making well using a rig that will have passed the standards of a blue-chip operator, and importantly will have been tried and tested in the field.   

 

I want to be clear that we are fully funded to drill the new TLP-103 well in accordance with current licence terms, under which 56% of the cost is met by AAOG and 44% by SNPC. Our cash position was £5.09m at period end.  Our expenditure since IPO reflects the acquisition of the shares in Petro Kouilou SA, the gross cost of the workovers undertaken at TLP-101 and TLP-102, the general and administrative costs and listing costs.

 

We currently hold in excess of $4.1m (£3.25m) cash in hand, which partly reflects the gross acquisition cost of certain long lead items for the drilling of TLP-103, a share of which is recoverable from our partner, SNPC.

 

As shareholders will be aware, we have recently made some changes to the operations team.  This was based on a careful analysis of operational performance to date at TLP-101 and TLP-102.  Equally, we are aware that we need to ensure that the team in place to drill TLP-103 has the requisite skill set and in close co-operation with Gerard Bourgoin, Directeur General of Petro Kouilou, we have appointed, at the Petro Kouilou level, an experienced drilling manager, Alain Guiraud, to lead the campaign. M Guiraud is a very experienced drilling manager with global experience.  He has worked as Republic of Congo Country Manager for Caroil and then from 2011 to 2014 for SFP, the drilling subsidiary of SNPC, as first Operations Manager and then General Manager.  He also worked in the country earlier in his career for both SPIE and Maurel et Prom.  He brings a wealth of experience from which the company can benefit.  Ultimately, the current purpose of the Company is to drill TLP 103 and demonstrate the full value of the Tilapia asset.  We are committed to achieving this as soon as possible.

 

Outlook

Much has been achieved since our Admission to AIM in March.  We have completed the acquisition of a 56% interest in Tilapia, commenced the workover of existing wells to increase production, and we have advanced plans to drill a potentially transformational well.  Given that we have selected a rig which will be "bedded down" by a world-class operator prior to delivery, timings have slipped.  Despite this, the value inherent in Tilapia has not changed.  Tilapia continues to be the low cost / low risk development opportunity and high-impact exploration play that we detailed in the Admission Document.  It is located in a prolific hydrocarbon region close to excellent infrastructure and markets. 

 

AAOG continues to have a strong balance sheet and sufficient capital to fund the TLP 103 well in accordance with the terms of the licence agreement. As of today, we have in excess of $4.1 million cash in hand, having pre-paid approximately $700,000 of drilling costs.  AAOG's share of the remaining budgeted cost for drilling TLP 103 is approximately $2 million, with a contingency of a further $700,000 needed only if the Djeno is unproven and we therefore complete the well for production from the Mengo.  We are also owed approximately $300,000 from SNPC for its share of the pre-paid costs.  The company continues to tightly manage other costs, and management remain incentivised to significantly grow production.  With this in mind, we are keen for drilling operations to commence at the TLP 103 well as soon as it is practicable to do so, as we look to build a highly cash generative producer and I look forward to updating you on the results of the drilling. 

 

 

David Sefton

Executive Chairman

25 September 2017

**ENDS** 

 

For further information please visit www.aaog.co or contact:

Anglo African Oil & Gas plc

Tel: c/o St Brides Partners +44 20 7236 1177

David Sefton, Executive Chairman


Alex MacDonald, Chief Executive




finnCap Ltd (Nominated Adviser and Broker)

Tel: +44 20 7220 0500

Christopher Raggett, Giles Rolls, Anthony Adams (Corporate Finance)


Emily Morris (Corporate Broking)




St Brides Partners (Financial PR)

Tel: +44 20 7236 1177

Frank Buhagiar, Olivia Vita

 


The information communicated in this announcement is inside information for the purposes of Article 7 of Regulation 596/2014.

Notes to Editors

Anglo African Oil & Gas (AAOG) is an AIM-listed independent oil and gas company acquiring 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 45 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.

 

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE SIX MONTHS ENDED 30 JUNE 2017 (unaudited)

 


                                                                                                         



SIX

MONTHS

FOUR MONTHS

 

PERIOD



ENDED

ENDED

ENDED



30.06.17

30.06.16

31.12.16





(audited)


Notes

£

£

£






CONTINUING OPERATIONS

 





Revenue


65,661

-

-

Cost of sales


(285,500)

-

-






GROSS (LOSS)/PROFIT


(219,839)

-

-






Administrative expenses


(587,186)

(317,192)

(931,829)






OPERATING LOSS BEFORE EXCEPTIONAL ITEMS


(807,025)

(317,192)

(931,829)






AIM admission costs


(287,615)

-

-

Costs of acquisition of subsidiaries                                             


-

-

-

Costs associated with third party fundraising


-

-

-






OPERATING LOSS


(1,094,640)

(317,192)

(931,829)






Finance costs


(61,941)

-

(5,484)

Finance income


-

-

-






LOSS BEFORE TAXATION


(1,156,581)

(317,192)

(937,313)






Taxation


(3,196)

-

-






LOSS FOR THE PERIOD


(1,159,777)

(317,192)

(937,313)











Total comprehensive expense for the period


(1,159,777)

(317,192)

(937,313)






Attributable to:





Owners of the company


(1,191,282)

(317,192)

(937,313)

Non-controlling interests


31,505

-

-






Basic and diluted loss per ordinary share (pence)     

6

(3.41)

(0.36)

(2.21)







 

 

                                   CONSOLIDATED STATEMENT OF FINANCIAL POSITION

                                                        AT 30 JUNE 2017 (unaudited)

 


 

 



30 June

30 June

31 December



2017

2016

2016





(audited)


Notes

£

£

£






NON-CURRENT ASSETS





Intangible assets

7

3,208,148

-

-

Property, plant and equipment

8

227,138

100,000

-








3,435,286

100,000

-






CURRENT ASSETS





Trade and other receivables


1,114,740 

36,569

84,346

Cash and cash equivalents


5,040,661 

1,830

2,078








6,155,401

38,399

86,424






TOTAL ASSETS


9,590,687

86,424






EQUITY

SHAREHOLDERS' EQUITY





Share capital

9

7,033,537

4,463,008

4,463,008

Share premium


8,091,064

1,555,144

1,555,144

Currency translation reserve


205,444

156,557

156,557

Retained deficit


(8,482,182)

(6,670,779)

(7,290,900)

EQUITY ATTRIBUTABLE TO OWNERS OF THE COMPANY


6,847,863

(496,070)

(1,116,191)






Non-controlling interests


(1,164,227)

-

-






TOTAL EQUITY


5,683,636

(496,070)

(1,116,191)






NON-CURRENT LIABILITIES





Provisions


2,712,346

123,524

123,524






CURRENT LIABILITIES





Trade and other payables


1,194,705

510,945

1,029,091

Loans and borrowings


-

-

50,000











TOTAL LIABILITIES


3,907,051

634,469

1,202,615






TOTAL EQUITY AND LIABILITIES


9,590,687

86,424






 

                                                                                                                

 

 

 


                                                                             

 

                                     CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

                                  FOR THE SIX MONTHS ENDED 30 JUNE 2017 (unaudited)

 


 

 


Share capital


Share premium


Currency revaluation reserve


Retained deficit


Non- controlling interest


Total equity


£


£


£


£


£


£













Balance at 28 February 2016

4,463,008


1,555,144


156,557


(6,353,587)


-


(178,878)













Total comprehensive expense

-


-


-


(317,192)


-


(317,192)













Balance at 30 June 2016

4,463,008


1,555,144


156,557


(6,670,779)


-


(496,070)













Changes in equity









-



Total comprehensive income

-


-


-


(620,121)


-


(620,121)













Balance at 31 December 2016           

4,463,008


1,555,144


156,557


(7,290,900)


-


(1,116,191)













Changes in equity












Acquisition of subsidiary

-


-


-


-


(1,195,732)


(1,195,732)

Issue of share capital

2,570,529


7,630,065


-


-


-


10,200,594

Costs of issuing equity instruments

-


(1,094,145)








(1,094,145)

Currency translation

-


-


48,887


-


-


48,887

Total comprehensive expense

-


-


-


(1,191,282)


31,505


(1,159,777)













Balance at 30 June 2017

7,033,537


8,091,064


205,444


(8,482,182)



5,683,636

























 


                                                                             

 

                                         CONSOLIDATED STATEMENT OF CASH FLOWS

                                  FOR THE SIX MONTHS ENDED 30 JUNE 2017 (unaudited)

 


 



SIX

MONTHS

FOUR MONTHS

 

PERIOD



ENDED

ENDED

ENDED



30.06.17

30.06.16

31.12.16





(audited)



£

£

£






Cash flows from operating activities





Loss for the period


(1,156,581)

(317,192)

(937,313)

Adjustments for:





Taxation


(3,196)

-

-

Depreciation charges


38,167

-

-

Movement in provisions


16,560

-

-

Currency exchange movement


48,887

-

-

Property, plant and equipment impairment


-

-

100,000



(1,056,163)

(317,192)

(837,313)






Changes in:





Stock


-

-

-

Trade and other receivables


(493,759)

21,636

(26,141)

Prepayments


-

71,998

71,998

Trade and other payables


(587,929)

224,157

742,303






Net cash used in operating activities


(2,137,851)

599

(49,153)











Cash flows from investing activities





Purchase of tangible fixed assets


(73,202)

-

-

Acquisition of subsidiaries


(2,059,308)

-

-

Cash acquired upon acquisition of subsidiary


252,495








Net cash from investing activities


(1,880,015)

-

-











Cash flows from financing activities





Loan received in period


-

-

50,000

Loan repayment


(50,000)

-

-

Issue of share capital


10,200,594

-   

-

Costs of issuing equity instruments


(1,094,145)

-

-






Net cash from financing activities


9,056,449

-

50,000
















Increase/(decrease) in cash and cash equivalents


5,038,583

599 

847

Cash and cash equivalents at beginning of period


2,078

1,231

1,231











Cash and cash equivalents at end of period


5,040,661

1,830      

2,078







                                                                             

 

                                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

                                  FOR THE SIX MONTHS ENDED 30 JUNE 2017 (unaudited)

 


1.       REPORTING ENTITY

 

The Company is incorporated and domiciled in England and Wales. The address can be found on the Company information page. The consolidated interim financial statements for the six months ended 30 June 2017 comprise of the Company and subsidiaries. The Group will continue to be primarily involved in the extraction of and exploration of natural resources in Africa.

 

2.       ACCOUNTING POLICIES

 

          Statement of compliance

 

This consolidated interim financial report does not include all the information required for full annual financial statements prepared in accordance with International Financial Reporting Standards. The financial statements are unaudited and do not constitute statutory accounts as defined in section 434(3) of the Companies Act 2006. Selected explanatory notes are included to explain events and transactions that are significant to an understanding of the changes in financial performance and position of the Group since the last annual consolidated financial statements for the period ended 31 December 2016.

 

A copy of the audited annual report for the period ended 31 December 2016 has been delivered to the Registrar of Companies. The auditor's report on these accounts was unqualified and did not contain statements under s498(2) or s498(3) of the Companies Act 2006.

 

This consolidated interim financial report was approved by the Board of Directors on 25 September 2017.

 

3.       Significant accounting policies

 

The accounting policies applied by the Group in this consolidated interim financial report are the same as those applied by the Group in its consolidated financial statements for the period ended 31 December 2016, with the exception of the policy relating to Revenue which was not included in the 2016 financial statements. The Revenue accounting policy is as follows:

 

Revenue

Revenue from the production of oil is recognised at the point at which oil is delivered to the customer.

 

The total revenue for the Group for the period was derived from its principal activity, being the production of oil.

 

           Intangible Assets

Intangible assets relate to exploration licences which the group acquired upon the acquisition of Petro Kouilou S.A. during the period.

 

The intangible assets are measured at cost less accumulated amortisation and any accumulated impairment losses. The directors review the intangible assets at each year end and assess whether a provision for impairment is required.

 

Property, Plant and Equipment

Included within property, plant and equipment are oil and gas assets which were acquired upon the acquisition of Petro Kouilou S.A. These assets are stated at cost less accumulated depreciation and accumulated impairment losses. The oil and gas assets are being depreciated on a straight-line basis over the life of the licence.

 

4.       OPERATING SEGMENTS

 

The Company manages a group involved in mineral resources exploration and exploitation in Africa and is, therefore, considered to operate in a single geographical and business segment.

 


                                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

                                  FOR THE SIX MONTHS ENDED 30 JUNE 2017 (unaudited)

 


 

5.       LOSS FROM OPERATING ACTIVITIES

 

          The loss before taxation is stated after charging:

 


SIX

MONTHS

FOUR MONTHS

 

PERIOD


ENDED

ENDED

ENDED


30.06.17

30.06.16

31.12.16


£

£

£

Costs associated with admission to AIM 

287,615

-

-

Directors' remuneration

245,860

-

-





 

           The directors are considered to be key management personnel.

 

 

6.    BASIC AND DILUTED LOSS PER SHARE

Basic

The calculation of loss per share for the six months to 30 June 2017 is based on the loss for the period attributable to ordinary shareholders of £1,191,282 divided by a weighted average number of ordinary shares in issue of 34,972,224 (December 2016 - £937,313/42,418,932).

The weighted average number of ordinary shares has been impacted by the share sub division which took place on 25 July 2016.

At 1 March 2016, the issued share capital of the company consisted of 86,998,615 Ordinary shares of 0.1pence each, 39,922,460 Deferred shares of 9pence each and 86,998,615 B Deferred shares of 0.9pence each. On 25 July 2016, the Ordinary shares were sub divided into 1,739,972 shares of 5pence each.

In the opinion of the directors, all of the outstanding share options and warrants are anti-dilutive and, hence, basic and fully diluted loss per share are the same.

 

7.       INTANGIBLE ASSETS

 


SIX

 MONTHS

FOUR MONTHS

 

PERIOD


ENDED

ENDED

ENDED


30.06.17

30.06.16

31.12.16


£

£

£

At start of period    

-

-

-

Additions

3,208,148

-

-





At end of period

3,208,148

-

-





 

           Additions relate to exploration licences acquired upon the acquisition of the subsidiary, Petro            Kouilou S.A, during the period.

 

 

 

 

 


                                                                             

 

                                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

                                  FOR THE SIX MONTHS ENDED 30 JUNE 2017 (unaudited)

 


 

8.       PROPERTY, PLANT AND EQUIPMENT

 

         


SIX MONTHS

FOUR MONTHS

 

PERIOD


ENDED

ENDED

ENDED


30.06.17

30.06.16

31.12.16


£

£

£

Cost




At start of period                                           

1,150,239

1,150,239

1,150,239

Assets acquired as part of a business combination

 

192,103

 

-

 

-

Additions 

128,425

-

-

Disposals

(55,223)

-

-





At end of period

1,415,544

1,150,239

1,150,239





Depreciation




At start of period                                           

1,150,239

1,050,239

1,050,239

Depreciation

38,167

-

-

Impairment

-

-

100,000


1,188,406

1,050,239

1,150,239





Carrying amounts




At end of period                                            

227,138

100,000

-





                               

           

9.       SHARE CAPITAL

 

          Allotted, issued and fully paid: 

 

Number:

Class:                     

Nominal value:

30 June

30 June

31 December




2017

2016

2016




£

£

£

53,150,550

Ordinary

£0.05            

2,657,528 

869,987

86,999

39,922,460

Deferred

£0.09         

3,593,021

3,593,021

3,593,021

3,593,021

B Deferred

£0.09          

782,988

-

782,988







 

 

The holders of deferred shares are not entitled to receive dividends or to vote at meetings of the Company and have not material interest in the Company's residual assets.

 

At 1 January 2017, the issued share capital of the company consisted of 1,739,972 Ordinary shares of 5pence each, 39,922,460 Deferred shares of 9pence each and 86,998,615 B Deferred shares of 0.9pence each.

 

On 6 March 2017, the company issued a further 51,410,578 Ordinary shares of 5pence each, at a premium of 15pence per share.

 

 

                                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

                                  FOR THE SIX MONTHS ENDED 30 JUNE 2017 (unaudited)

 


 

10.      PROVISIONS

 


SIX

MONTHS

FOUR MONTHS

 

PERIOD


ENDED

ENDED

ENDED


30.06.17

30.06.16

31.12.16


£

£

£

Provision for rehabilitation of drilling sites  

2,637,709

-

-

Provision for rehabilitation of mining sites

123,524

123,524

123,524





At end of period       

2,761,233

123,524

123,524





 

 

11.      ACQUISITION OF PETRO KOUILOU S.A

 

On 15 March 2017, the Group acquired 49% of the issued share capital of Petro Kouilou S.A for £2,059,308 ($2,500,000), satisfied by cash.

 

Details of the acquisition are set out below:

 


£

Fair value of consideration - Cash

2,059,308



Fair value of liabilities acquired

(1,148,840)

Fair value of exploration licences acquired

3,208,148


2,059,308

 

 

12.      EVENTS AFTER THE REPORTING PERIOD

 

The Group acquired the remaining 51% shareholding of Petro Kouilou on 3 August 2017 for £3,270,803, satisfied by the issuance of 16,354,015 Ordinary shares of 5 pence each, issued at 20 pence per share.

 


This information is provided by RNS
The company news service from the London Stock Exchange
 
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