Finncap note3 Jan 2019 12:47
Tilapia back online at improved rate
Another fillip of good news from AAOG, which has restarted production from the
TLP-101 well at a higher rate than before it was shut in, plus is considering the
commercial viability of a water injection project to materially boost production
from the well. This will provide welcome cash flow as the company continues to
look for an alternative financing solution to the £5m Sandabel facility (£1m
drawn). Next up, likely in short order, will be the results of the wireline logging on
the various zones encountered so far with TLP-103C. The market will be looking
for confirmation of better-than-expected net pay in the Mengo as well as more
detail on the reservoir quality for that and the newly encountered zones.
?Tilapia production brought back online. AAOG has brought the TLP-101 well on
its Tilapia field in the Congo back online. This well and TLP-102 were previously shut
in for safety reasons during the drilling of TLP-103(C) due to their proximity to the
flare, which has now been relocated. Over a two-week test period TLP-101 has
produced an average 55bopd, almost double the c.30bopd pre-shut in.
?Water injector opportunity. Opportunistic reservoir engineering studies performed
on the wells while offline demonstrated that they are connected. This opens up the
potential to reconfigure TLP-102 as a water injector to boost production at TLP-101,
with the studies suggesting up to 400 bopd is possible. Cost estimates are being
sought to fully assess the commercial viability of the project.
?Welcome cash flow. On our estimates, AAOG would generate ~$0.3m of annualised
net cash flow at a 55 bopd production rate and $50/bbl. This jumps to $2.2m at 400
bopd. While not transformational, this would represent welcome cash flow given
current ongoing financing discussions.
?Next up… will be the eagerly awaited wireline logging results evaluating the potential
of all the zones encountered so far with the TLP-103C well – R1/R2/R3, Mengo and
three new potential zones. Early indications from the Mengo were that the net pay
encountered was thicker than expected – the well intersected a 104m gross Mengo
interval versus the 2006 Mengo discovery well, which encountered a 38m gross
column. This earlier well had 10-15m net pay. Once wireline logging is complete,
drilling will continue towards the deeper Djeno exploration target. The Mengo was
given a gross best contingent resource estimate of 8.1mmbbls in the CPR. We
estimate a risked NPV for this resource, assuming a 60% chance of success, of
17p/sh (29p/sh unrisked).
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