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(Alliance News) - Zenith Energy Ltd on Monday said a put-and-call option has been signed for the remaining 20% of Anglo African Oil & Gas PLC's operations in the Republic of Congo.
Zenith shares were 19% higher in morning trade in London at 2.87 pence, while AAOG was 2.2% lower at 0.42p.
Just after Christmas, AAOG announced it has agreed to sell 80% of its Congolese subsidiary to Zenith for GBP1 million. The business holds 56% in the producing Tilapia field, with the rest owned by the country's national oil company.
The two have now agreed the put-and-call option for the remaining 20%, the companies said on Monday.
This option can only be exercised by Zenith on January 16, 2021, and only if, as of January 15, 2021, total production from Tilapia has never exceeded an average of 2,000 barrels a day for any period of 30 consecutive days.
Zenith will pay GBP1 million in shares if it exercises the option.
AAOG can only exercise the option, on the same day as Zenith, if production has averaged at least 4,000 barrels a day for 30 consecutive days prior to January 15, 2021.
AAOG will become a cash shell once the disposal of the Congolese business has completed. It will consider takeover options in future.
Zenith Chief Executive Andrea Cattaneo said: "We are pleased to have agreed these terms with AAOG for its residual 20% holding in AAOG Congo. The Tilapia asset has, we believe, potentially transformational production potential.
"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."
"The aforementioned terms will further ensure that, in the event of future success, both Zenith and AAOG shareholders will enjoy the fruits of victory," he added.
Sarah Cope, chair of AAOG, added: "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 succeeds in increasing production to 4,000 barrels per day.
"The board believes 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."
By George Collard; georgecollard@alliancenews.com
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