(Alliance News) - Anglo African Oil & Gas PLC on Friday said it has agreed to sell an 80% stake in its wholly-owned Congo subsidiary to oil & gas producer Zenith Energy Ltd for GBP1 million.
Anglo African Oil & Gas Congo SAU holds a 56% interest in the Tilapia field in the Republic of the Congo. The remaining 44% interest is held by Societe Nationale des Petroles du Congo, the Congolese national oil company.
Zenith noted that recent drilling undertaken during 2018 and 2019 has identified multiple potential productive reservoirs within the license across a number of formations. Anglo African Oil & Gas Congo currently produces 30 barrels of oil per day.
Societe Nationale des Petroles du Congo owes Anglo African Oil & Gas Congo USD5.3 million as a result of the work conducted to date on the license. Zenith said it has met with Societe Nationale des Petroles du Congo and expects to obtain the full payment.
Anglo American Oil & Gas said GBP500,000 will be paid in cash in six equal monthly instalments from the date of completion, and the reminder will be paid in Zenith shares. Anglo American Oil & Gas said it has agreed not to sell the Zenith shares for a period of six months from completion and thereafter in an orderly manner.
In addition, Zenith said it has agreed to fund Anglo American Oil & Gas's share of a USD5.5 million work programme on Tilapia and will fund the upfront cash element of any signature bonus payable for the new licence negotiated with Congolese Ministry of Hydrocarbons.
Upon completion of the transaction, Anglo African Oil & Gas will become a cash shell on AIM. The company said it intends to use the proceeds from the disposal to finance its day-to-day operations and consider potential reverse takeover options.
As well, Anglo African Oil & Gas said it has entered into a new facility agreement with RiverFort for up to GBP500,000 over six months for the company, which is expected to be finalised by the end of 2019.
The decision to sell its Congo subsidiary comes amid Anglo African's failure to raise finance for the planned work programme on well TLP-103C-ST amid limited cash resources. Anglo African Oil & Gas said it had mulled raising equity capital in the public markets in order to secure sufficient funds, but was advised that it is highly unlikely to generate the support necessary to raise the required amount.
The disposal requires an approval from more than 50% of Anglo African Oil & Gas shareholders. Upon completion, the company said non-executive directors Brian Moritz and Nick Butler will resign from the board.
"Whilst regrettable that Anglo African Oil & Gas has been unable to fund the work programme as planned, the board believes that the disposal is in the best interests of the company and its shareholders as we retain an interest in any upside at Tilapia," said Anglo African Non-Executive Chair Sarah Cope.
She added: "We are also grateful to RiverFort and its associates for their continued support and indeed the support of all our shareholders through what has been a very difficult time."
Looking ahead for its part, Zenith said it intends to begin preparations for drilling activities in well TLP-103C as soon as it assumes operational control of the license.
"Upon assumption of operational control, we shall look to begin preparations for deepening activities in well TLP-103C, obtain full repayment of the funds owed by Societe Nationale des Petroles du Congo, as well as successfully complete negotiations for a new 25-year license," said Zenith Chief Executive Andrea Cattaneo.
Anglo African Oil & Gas shares were trading 3.1% higher in London on Friday morning at 0.52 pence each, while Zenith shares were up 7.9% at 1.84 each.
By Evelina Grecenko; evelinagrecenko@alliancenews.com
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