Anglo African Oil & Gas (LON:AAOG) IPO – Interview

Share talk spoke today with Alex McDonald Chief Executive Officer and David Sefton Executive Chairman of Anglo African Oil and Gas (AAOG). We talk about today’s Initial Public Offering listing on the AIM Market.

Anglo African Oil & Gas (AAOG) has negotiated the right to acquire assets located in the Republic of Congo (RoC). The company is listed on AIM and raise £9m in order to complete the acquisition and redevelop the near offshore Tilapia field which should significantly increase production in the near term.

The company also aims to conduct exploration and appraisal of proven deeper reservoir targets to raise production to in excess of 5,000bbl/d in the medium term.

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We talk about Anglo African Oil and Gas  asset acquisition based in the Republic of Congo. Highlight the asset work over program and how they plan to become cash generative in the short time with well work overs and look forward looking drill program in the hopes of drilling in the summer into the prolific Mengo and Djengo horizions.

 

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The acquisition

 AAOG is proposing to buy Petro Kouilou (PK) – an oil and gas operator that has been active in the Congo since 2012.

 The purchase comprises: US$2.5m in cash plus 20% of the fully diluted enlarged capital.

 PK owns 56% of the Tilapia licence with the National Oil Company SNPC owning the remainder. All of the necessary licences and permits are in place for the current production and for the proposed workover and appraisal and exploration activity.

 SNPC has already agreed upon the budget for the proposed work programme and granted the authorisation for expenditure (AFE) with PK and for its share of capex.

 The Tilapia field already has surface infrastructure installed with an underutilised capacity of more than 4,000bbl/d.

 Post-acquisition, the company will undertake workover activities on existing wells in order to increase base-level production. It will then go on to drill one new multi reservoir well, development/appraisal/exploration targeting known and identified reservoirs. Following this first well a second well is planned and is expected to be funded from cash flow. The aim of these two wells is to increase the reserve base as well as increase production to in excess of 5,000bbl/d, as has been seen in wells in adjacent acreage.

www.aaog.co 

Republic of Congo – a snapshot In 2015: Domestic production in the Congo was c.277,000bbl/d, down from a peak of c.314,000bbl/d in 2010. The country is estimated to have c.1.6bn bbl of proven oil reserves and 3.2tcf of gas. Most of the gas produced is re-injected due to the lack of infrastructure with c.20% flared. The majority of oil production is exported, again mainly due to the small local market but to also support the country’s wider economy.

Given the importance of the oil industry to the Congolese economy, the government has been very supportive with good fiscal terms and low levels of interference historically. We understand that the government has been proactive in terms of its discussions and planning for the work programme and licence extension with AAOG.

Sector driven by majors Unsurprisingly, and given that the Congo was a French colony, Total is one of the key participants in the oil and gas sector. Since 1968, Total has drilled 50% of the exploration wells, which have discovered 65% of the reserves and brought 16 fields onstream. The company is active throughout the supply chain, including a 63% interest in the only oil-export terminal.

Eni is another key player, again active in the country since 1968, and produced c.103,000boe/d in 2015. Eni is more upstream-focused than Total with exploration, appraisal and production assets.

The country also benefits from a well established, highly experienced and qualified local service and support industry.

 

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