AAOG.L Regulatory News (AAOG)

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ANGLO AFRICAN OIL & GAS PLC

('AAOG', the 'Company', or the 'Group')

ADMISSION TO AIM AND FIRST DAY OF DEALINGS

Anglo African Oil & Gas Plc is pleased to announce the admission today of its ordinary shares to trading on the AIM Market of the London Stock Exchange ('Admission'). This follows the oversubscribed placing of 50,000,000 Ordinary Shares at a price of 20 pence per share, giving the Company a market capitalisation of approximately £10.6 million on Admission. The funds raised will be used to finance the acquisition of a 56% stake in the producing Tilapia oil field ('Tilapia') in the Republic of Congo and a multi-well, near term drilling programme targeting a major increase in production. Dealings in the ordinary shares will commence at 8.00a.m. under the ticker "AAOG.L" (ISIN: GB00BD0Q3L08). finnCap is acting as Nominated Adviser and Joint Broker to the Company alongside Throgmorton Street Capital. 

Highlights

· Tilapia is a producing field with near-term development and exploration potential:

o Current production of 38 bopd from one near surface interval;

o Undeveloped discovery in the lower Mengo sands with gross contingent resources of 8.1m barrels

o Deeper exploration prospect with gross prospective resources of 58.4m barrels in the productive Djeno interval from which the adjacent Minsala field produces

· Development/workover programme to commence in March 2017 with the following initiatives to be conducted over just 12 months:

o Workover of two existing wells intended to rapidly increase production to c. 185 - 250 bopd which would see AAOG achieve operating breakeven at $48

o A new multi-horizon well, targeting production from the R1, R2 sands and the Mengo discovery, which is expected to see production increase to 750 bopd - the well will also test the Djeno sands, which if successful would be transformational for AAOG

o A fourth well in H2 2017 targeting Djeno could see net daily production increase to around 5,300 bopd

· Excluding Djeno, AAOG would still be highly profitable producing around 750 bopd from the R1, R2 and Mengo

· Tilapia is located close to multiple 1 billion barrel fields including the ENI operated Litchendjili field; and the 5,000 bopd Minsala Marine field

· Management's remuneration aligned with the success of the drilling programme:

o An option package is in place based on ambitious production targets measured over a consecutive 30 day period: one third at 1,000 bopd; one third at 2,500 bopd; one third at 5,000 bopd

o 75% of accrued executive pay totalling £120,000 has been deferred against increased production: 25% to be paid on Admission with the remaining 75% to be paid in three equal tranches contingent on production increasing to 250 bopd; 500 bopd; 750 bopd.

David Sefton, Executive Chairman of AAOG commented, "AAOG sits on both sides of the risk spectrum: a development and production play yet at the same time with access to potentially highly rewarding exploration that could see output substantially increase from 38 bopd today to 5,300 bopd this year. We have put in place a development plan targeting a rapid increase in production at Tilapia by exploiting existing reserves and a proven discovery, before we target the high impact opportunity in the Djeno, a sand which has been found to be highly productive in neighbouring fields. Regardless of the initial outcome of drilling into the Djeno, over the next few months AAOG intends to become a profitable, cash generative producer, which will be able to internally fund additional development work, as well as distribute dividends to its shareholders.

 "Management's confidence in the asset and the roll-out of the work programme is reflected in a remuneration package which is based on ambitious production targets being hit. This, along with the combination of exploration potential with downside protection, has resonated with the institutional investors who have joined our register in the placing. With all the necessary permits in place, funds secured, and a proven management team which marries oil and gas experience with the capital discipline of private equity, AAOG intends to hit the ground running to rapidly achieve profitability before taking advantage of the exciting exploration play. The next few months will not be short of news flow and I look forward to providing further updates on our progress in the near term."

The Company's Admission Document and details of significant shareholders can be found at www.aaog.co

For further information please contact:

1. INTRODUCTION

On 21 December 2015, the Company announced that on 20 December 2015 it had entered into a conditional agreement to acquire PK, a company incorporated in the Republic of the Congo and whose core asset is a 56 per cent. interest in Tilapia. Tilapia currently produces approximately 38 bopd, is located in the Republic of the Congo and covers an area of 50km2, mostly near offshore, in water depths of less than 10 metres. As the field is near offshore, the production and storage facilities are located onshore and all drilling takes place through deviated wells drilled onshore, with significantly reduced costs compared to offshore drilling. The state oil company, SNPC, holds the remaining 44 per cent. of the Tilapia Licence. PK is operator and has a production-sharing agreement and joint operating agreement with SNPC.

The acquisition is being made from Sister for a cash consideration of US$2.5 million and the issue of Ordinary Shares valued at issue at US$2.5 million and representing at least 20 per cent. of the Fully Diluted Enlarged Share Capital.

The work programme, which is set out in paragraph 4 of this Part I, comprises workovers of two existing wells and the drilling of a development/appraisal/exploration well(s) into deeper levels.

2. GROUP STRUCTURE AND HISTORY

The Company was incorporated in England and Wales on 12 January 2001 with the purpose of acquiring Sonnberg, a company incorporated and operating in the Republic of Namibia, which held a contract with NAMDEB, a joint venture between the Namibian Government and De Beers Consolidated Mines Ltd. for the prospecting and mining of diamonds within the Pomona concession in the Luderitz District of Namibia. Production at the Sonnberg Mine was disappointing and was suspended indefinitely without the Company ever reaching profitability. In May 2013, the Company signed a management agreement with Southern Goshawk Resources (Pty) Limited (Goshawk) to manage the Sonnberg Mine and to seek new opportunities for expanding into other geographical areas, particularly South Africa, and other resource materials. It was reported in August 2014 that progress on acquiring new assets and developing new opportunities was slow and the management agreement with Goshawk was cancelled. As a result, the Company currently has no trading activity. The Company owns certain residual assets in Namibia in relation to the Sonnberg Mine, consisting of plant and equipment and premises, which are in the process of being realised. On 29 July 2015, the Company entered into a contract with Kalahari Civils CC ("Kalahari"), to sell its mobile plant and certain other small items to Kalahari. A revised contract was entered into between the Company on 23 September 2015, pursuant to which the parties agreed to reduce the consideration payable. Delivery of the assets was made to Kalahari however no payments were ever received. The Company is therefore currently in the process of recovering the plant and equipment from Kalahari instead. There is no certainty as to the value (if any) that can or will be achieved from such realisation process. The Company ascribes no value to these assets in its accounts.

The strategy of the Company in seeking opportunities in the mining industry in Namibia and, more recently, in South Africa, has not been as successful as had been hoped. Accordingly, the Company has sought other potential opportunities in related sectors within sub-Saharan Africa. In June 2015, the Company was approached by the Executive Directors, who were themselves in discussions with London-based institutional investors to raise capital to acquire PK from Sister and to fund PK's development of Tilapia.

3. TILAPIA

The Tilapia Licence

Tilapia is 1.8 kilometres offshore of the Republic of the Congo, located in the Lower Republic of the Congo Basin. It is drilled from onshore, and has its production and storage facilities onshore. It is a 45-minute drive from Pointe Noire and 17 kilometres from the nearest refinery. Production can be trucked to the refinery throughout the year.

As set out in paragraph 2 of the CPR, the sedimentary sequence of Tilapia reflects the break-up of the Pangea supercontinent, with Jurassic pre-rift continental deposits, Lower Cretaceous (Neocomian to Barremian) syn-rift and sag phase fluvio-lacustrine deposits, and the Middle-Late Aptian post-rift salt accumulation, covered by the thick Albian to recent marine and continental (onshore) successions. The main reservoir and exploration targets in the Tilapia Licence are all pre-salt Lower Cretaceous in age and the three formations of principal interest to the Company are the Pointe Indienne R1 and R2 Sands, the Mengo Sands and Djeno Sands.

The main licence terms are summarised below:

Licence Licence area

Asset Operator Interest (%) Status expiry (km2) Comment

Tilapia PK 56% Producing 18/07/2020 50.51 Tilapia Licence includes a coastal strip and shallow water area, offshore 

Republic of the Congo

Source: CPR (as set out on page 2 of the CPR in Part III of this Document)

As described in paragraph 1.2 of the CPR, the Tilapia Licence was awarded to SNPC in 2006 and ratified, and SNPC took Prestoil Kouilou as a partner and operator. The Tilapia Licence was subsequently transferred to PK in December 2011 and thereafter renewed for a further period of five years in January 2015. There is no commitment programme, but every development plan needs to be voted for and approved by the partner (SNPC) according to the budget.

With regard to HSE, PK has not encountered any LTIs since its operation began in 2012. Additionally, there were no LTIs during the period from 2007 to 2011. The Tilapia Licence is in compliance with all environmental permits and regular audits from national and local agencies are performed.

A detailed explanation and analysis of the Tilapia resources and contingent resources can be found in the Competent Person's Report in Part III of this Document

Production and Reserves

The TLP-101ST well, drilled in May 2007, has been the only oil producer in Tilapia to date. It was initially put into production in 2007 with a flow rate of 942 bopd and produced over 340,000 barrels of oil to September 2016 from the Lower Cretaceous, Pointe Indienne R2 reservoir interval. At the end of June 2016, Tilapia was producing approximately 38 bopd of 39-41 degree API light sweet crude.

Well TLP-102 identified potentially moveable hydrocarbons from log analysis at both the Pointe Indienne R1 and R2 levels, but failed to flow on test probably because appropriate stimulation techniques were not used. Reserves are assessed, and reported in the CPR, for the current producing well TLP-101ST and the incremental production anticipated from two well work-overs in TLP-101ST and TLP-102.

The reserves, gross and net (being the net entitlement under the terms of the PSC, of which a detailed summary is provided in paragraph 14 of Part VIII of this Document), are summarised in the table below:

Reserves: In Production & Justified for Development

Gross on Licence Net Attributable Operator

Source: LR Senergy CPR (as set out on page 7 of the CPR)

Contingent and Prospective Resources in Tilapia

The Lower Cretaceous Mengo and Djeno sandstones underlie the Pointe Indienne R1/R2 sandstones in the Tilapia structure and there is confidence in the presence of a structural trap at these deeper levels, despite the challenges of imaging below the overlying salt layer.

The Mengo sandstones have potentially high volumes of contingent resources and the presence of hydrocarbons in the PK block is confirmed by log analyses in the discovery well TLP-101V which flowed oil, albeit at a low rate of 11 bbl/d but failed to flow oil to surface. This discovery well was drilled in 2006 but was not brought into production after original testing as the necessary production- enhancement techniques were not available in the area. Since this date, improved well-frack stimulation techniques have become available and, in the last two years, the operators, such as ENI and SOCO, of neighbouring fields have successfully targeted the Mengo and Djeno reservoirs with them.

The contingent resources, gross and net (being the net attributable on a working interest basis after royalty), are summarised in the table below:

Contingent Resources: Discovery

Source: LR Senergy CPR (as set out on page 16 of the CPR)

The Lower Cretaceous Djeno reservoir exploration objective is anticipated to be beneath the Mengo reservoir discovery and was not penetrated by the TLP-101V well. The prospective resources, gross and net (being the net attributable on a working interest basis after royalty), are summarised in the table below:

Prospective Resources

Gross on Licence Net Attributable Risk Factor Operator

Source: LR Senergy CPR (as set out on page 21 of the CPR)

The Nene, Litchendjili, Nkala and Mengo-Kundji-Bindi ("MKB") fields have all encountered significant quantities of producible oil and gas from their respective reservoirs and are all within 10 to 30 kilometres of Tilapia. A major re-development programme for the Kundji field including up to 42 vertical stimulated wells has been proposed.

While the initial priority of the Enlarged Group is to develop the oil reserves, it is the Directors' opinion that the Djeno sandstones may hold very significant quantities of gas above the oil rim. In due course, and as part of the wider field-development plan in any new licence to 2030, the Company will consider commercialising gas prospective resources, with the most likely routes being either local/regional markets for gas or local gas to power development (which is favoured by the Government and SNPC).

4. STRATEGY OF THE ENLARGED GROUP AND RATIONALE FOR THE ACQUISITION

Strategy of the Enlarged Group

As set out in paragraph 2 above, the Company has been seeking potential opportunities in sub- Saharan Africa. The Directors consider the proposed Acquisition to be beneficial to Shareholders and aim to secure PK's financial stability in the short term from existing operations and then to generate significant upside in the medium term through the targeting of deeper horizons within the licence area.

The Company's planned production development programme is set out below:

Stage One - increasing production up to 250 bopd, securing financial stability in the short term

At current production levels, PK does not cover its costs, although overheads could be reduced to minimise any cash flow shortfall. Existing production can, in the opinion of the Directors, be economically and simply increased: with this in mind, the development plans for Tilapia include two workovers, the first of which is scheduled to take place in the second quarter of 2017, immediately following Admission, and involves the reperforation and acidisation of the R1 and R2 reservoirs in well TLP-102, which will be drilled and then connected to the manifold. The second, which will occur when the drilling rig to be used for Stage Two, below is in place (which is expected to be in the first quarter of 2017), involves the setting of a progressive cavity pump over the R2 reservoir in well TLP-101ST.

The Directors believe that such interventions, for which the Company's share of the cost is anticipated to be US$250,000 (which will be financed from the proceeds of the Placing), may increase production from approximately 38 bopd to as much as 250 bopd. With EOR techniques, the Directors believe that 30 per cent. recovery could be achievable and that both the rate and overall production from this layer could remain increased for many years.

The two planned workovers are an essential part of ensuring that the Company is cashflow positive and of enhancing the net asset value to a level that, in the opinion of the Directors, could equal or exceed the amount of the invested capital.

Stage Two - development of Tilapia to increase production

The more significant increase in the value of Tilapia is expected to be achieved by a new drilling programme into deeper geological structures, the Mengo and Djeno Sands, which Tilapia shares with surrounding fields. The development plan for this drilling programme, which is expected to cost approximately US$6.0 million, is set out below:

i) The first well, TLP-103, which is expected to be drilled in the first half of 2017 and will be financed by the proceeds of the Placing, is designed to penetrate the R1, R2, Mengo Formation and then be drilled further down to test the deeper Djeno Sands. If hydrocarbons of a commercial volume are encountered, the Mengo Formation will be tested and stimulated before being put into production. A similar process will then take place in the Djeno Formation. The Directors believe that production could, if from the Djeno, be increased by approximately 2,500 bopd (on top of that achieved by Stage One).

The Directors believe that there is little exploration risk in drilling the Mengo Formation as the data from earlier drilling show that producible hydrocarbons are present and the reservoirs are charged.

ii) If the plan for TLP-103 is successful, as set out above, the second well, TLP-104 will be drilled in the second half of 2017. TLP-104 is expected to be financed by free cash flow generated from production and, if required, a future equity financing by the Company.

If commercial volumes of hydrocarbons are encountered, EOR techniques, including fracking, steam injection, Simultaneously Water-Alternating Gas (SWAG), acidisation, gas injection, pumping and gas lift, are expected to be used in each of the Mengo and Djeno layers .

The Directors believe that, once both TLP-103 and TLP-104 have been drilled successfully, Stage Two could increase production by up to approximately 5,300 bopd and transform the Tilapia reserves estimate. The increase of 5,050 bopd (in addition to that achieved by Stage One) is based on reaching only half the level of production from each well that has been achieved by nearby operators of the Djeno Sands.

An illustration of the potential upside to the Company and its Shareholders is below:

Directors' assumptions

The base case is further illustrated in these indicative revenue summaries:

Assumed oil price of US$40/bbl Assumed oil price of US$50/bbl

If PK is successful in obtaining significant production from the Mengo and/or Djeno Sands, the Directors will take technical advice in conjunction with SNPC on field optimisation. This could include up to ten additional wells alongside expanded surface facilities. As a field-optimisation plan could take several years to implement, the Company would likely seek to agree the plan with SNPC in conjunction with securing a new licence.

Gas

Gas is currently flared in the Republic of the Congo. However the Directors believe that there is a commercial opportunity for electricity generation using gas from Tilapia in the long term.

Legacy assets in Namibia

The Directors do not expect that the assets will realise any material value. It is intended that Sonnberg will be dissolved in the near future.

Rationale for the Acquisition

The Directors believe the Acquisition and development programme is commercially attractive because:

1. Low cost: PK's budgeted break-even cost of production at 5,300 bopd is less than US$5 per barrel and, at an oil price of US$35 per barrel, it can be profitable at approximately 500 bopd. The business and working capital models produced by the Directors, and in particular the low and flexible cost base that allow the Company to be break even at production levels lower than

500 bopd, provide evidence that the Company can withstand low oil prices even at modest rates of production;

2. Upside: The drilling programme into the Mengo Sands and the Djeno Sands provides qualified potential upside to the existing production;

3. Existing production and storage facilities in place: PK has in place existing facilities that have been constructed to international standards, have been regularly maintained and are fully amortised. They currently have the capacity to achieve production of up to 4,000 bopd, with scope for expansion;

4. Already in production: PK is an existing producer: all relevant permits are in place and PK has agreed the workovers and drilling programme, well design and authorisation for expenditure with SNPC. This means that work can commence soon after Admission;

5. Ability to drill from on-shore: Tilapia is near offshore, being only 1.8 kilometres from the coastline. This gives PK the considerable advantage of being able to drill from onshore using deviated wells, at a considerably reduced cost compared to offshore drilling;

6. Light oil: The Directors believe the oil currently produced from Tilapia is high quality, light, sweet crude (39 - 41 API) with a market value that currently tracks Brent crude oil; and

7. Availability of equipment:  Drilling equipment and ancillary services to carry out the development programme are readily available due to recent oil price instability.

In the event that drilling into the Djeno Sands proves unsuccessful, PK nevertheless intends to perforate the well at the Mengo Sands and/or Pointe Indienne R1/R2 Reservoir and thereby increase daily production, with a positive effect on cash flows and asset value.

For these reasons, the Directors consider that the rationale for the Acquisition is compelling, marrying significant upside potential with downside protection.

5. DETAILS OF THE ENLARGED GROUP'S PROSPECTS

If the conditions precedent to Initial Completion (as set out in the Acquisition Agreement) are met and Initial Completion takes effect, the Company will no longer operate or seek to operate in the mining industry and will, in substitution, focus solely on activities as a producer of oil & gas in the Republic of the Congo.

At present, PK's entire production from Tilapia is sold, pursuant to the Offtake Agreement, to a refinery operated by CORAF, where the oil is refined into products for the local market. The refinery is located 17 kilometres from the wellhead with access by paved roads that are useable all year round. A summary of the terms of the Offtake Agreement is contained in paragraph 14 of Part VIII of this Document.

The refinery has the capacity to meet the intended increase in production from Tilapia. It is the Directors' belief that, in the event of production significantly exceeding that amount, an alternative means of distribution exists. In the event of substantial production increases, it may become economic to build a spur to an export terminal located seven kilometres from the wellhead and flow the oil direct to it from PK's storage facility.

6. INFORMATION ON PK

PK is a company established in the Republic of the Congo and is currently a wholly owned subsidiary of Sister, a French company. PK is party to the PSC and the JOA with SNPC.

These agreements provide for Cost Oil and Profit Oil calculations that are within normal industry parameters, and thereafter profits from the operation of Tilapia are allocated 56 per cent. to PK and 44 per cent. to SNPC. The same percentages apply to the allocation of costs for agreed work programmes. SNPC is responsible for its own share of the costs and is not carried by PK.

The Tilapia Licence is valid until 18 July 2020. Past practice with Tilapia and fields jointly operated with SNPC by other producers in the Republic of the Congo has been for new licences to be granted for five- or ten-year periods following the agreement with the relevant governmental authorities and with SNPC of development and operational plans. The Directors believe that the Government and SNPC will wish to ensure that Tilapia is developed in a manner that maximises production and therefore revenues to the country and SNPC. The Directors further believe that, as a general matter, current depressed oil prices make extensions/renewals of operating agreements more easily achievable as there is less capital generally available for field developments.

A detailed summary of the JOA can be found in paragraph 14 of Part VIII of this Document.

7. INFORMATION ON THE REPUBLIC OF THE CONGO

Geography and population

The Republic of the Congo, also known as Congo Brazzaville, is located in West Africa, about 70 miles south of the Equator and has a population of around 4.8 million. The official language of the country is French. The country shares borders with the Democratic Republic of the Congo, Gabon, Cameroon, Angola (Cabinda Province exclave) and the Central African Republic, and has a coastline

of 169 kilometres with the South Atlantic Ocean on its western border. The country has a land mass of 341,500 square kilometres. The state capital is Brazzaville; Pointe Noire is the economic capital and is the headquarters of the country's oil & gas industry.

Political

The country gained independence from France in 1960 when the former French region of Middle Congo became the Republic of the Congo. The current President is Denis Sassou-Nguesso, a former military leader, who first served as President from 1979 to 1992. He has subsequently served from 1997 to the present day, having won re-election on 20 March 2016 and assumed office for a new five-year term on 16 April 2016.

Economic

The Republic of the Congo has a mixed economy, of which the oil & gas industry contributes around 65 per cent. of GDP.

The country faces difficult economic challenges of stimulating recovery and reducing poverty. The recent drop in oil prices has constrained government spending; lower oil prices forced the Government to cut more than US$1 billion in planned spending. The country became a net external creditor in 2011, with external debt representing only about 16 per cent. of GDP and debt servicing absorbing less than 3 per cent. of government revenue.

In January 2013, the Government created an Agency for the Promotion of Investments ("API") to promote economic diversification through expanding the pool of external investors. Since 2013, the Government continued to put in place regulatory reforms with the stated goal of improving the business environment.

The Republic of the Congo has the potential for further economic diversification, with some of the largest iron ore and potash deposits in the world, a heavily-forested land mass, a deep-water International Ship and Port Facility Security (ISPS) Code-certified port, fertile land and a heavily urbanised population. The Republic of the Congo has been African Growth Opportunity Act (AGOA)- eligible since October 2000, providing an additional enticement for export-related investment.

The Republic of the Congo is part of the Euro-CFA Zone Agreements, and deposits reserves with the Bank of Central African States (BEAC), a regional central bank that serves six Central African countries. BEAC conducts the Economic Intervention Service, which harmonises the regulation of currency exchanges in the member states of the Central African Economic and Monetary Community ("CEMAC"). The BEAC also supervises the country's banking system.

8. OIL & GAS INDUSTRY IN THE REPUBLIC OF THE CONGO

The Republic of the Congo has a long-standing oil & gas sector supported by established technical, operational, commercial and legal infrastructures. It is among the largest crude oil producers in Africa, with an estimated production in excess of 270,000 bopd. Its petroleum industry is vital to the country's economic development and accounts for approximately 80 per cent. of Government revenue and 90 per cent. of the country's exports, according to the US Department of State and the World Bank. Accordingly, the Directors expect the oil & gas sector to continue to be actively supported by the Government. Nearly all of the Republic of the Congo's hydrocarbons are produced offshore. The Republic of the Congo also holds the fifth-largest proven natural gas reserves in sub- Saharan Africa but only a small portion is marketed, as the vast majority is reinjected or flared.

Oil

The Republic of the Congo first started producing oil in 1960 and, by the late 1970s, it had emerged as a significant oil producer. As a result, major service companies such as Schlumberger and 

Halliburton have long operated in the country and there are also a number of well-established local companies providing competitive support services to the sector.

Production continued to expand considerably during the 1990s and received a further boost in the early-2000s through Total's N'Kossa and N'Soko shallow-water developments. However, since 2010, production has declined each year as oil fields have reached maturity. The decline is attributed to maturing fields and a slowdown in field development. As a result, the Government is keen to develop offshore fields to supplement declining production from mature fields and is expected to hold a deepwater licensing round in the future.

At the end of 2011, the Republic of the Congo had proven oil reserves of 1.6 billion boe. The country's total output is currently approximately 270,000 bopd.

Despite this decline in production, the Republic of the Congo remains one of Africa's largest petroleum producers and, furthermore, there has been a revival of exploration and development activity in recent years. For example, the Ikalou (6,700 bopd), Azurite (19,000 bopd) and Libondo (12,000 bopd) fields have all come on-stream since 2008. Recent discoveries are expected to sustain its oil production over the long term. Such prospects include:

Moho-Bilondo field: Moho-Bilondo was the Republic of the Congo's first deepwater project and marks the largest successful project to tap into the country's deepwater reserves. It came onstream in April 2008 and reached output of 90,000 bopd in June 2010. Total holds the majority operating interest of 53.5 per cent., with Chevron holding 31.5 per cent. and SNPC 15 per cent. According to Total, two positive appraisal wells, Bilondo Marine 2 and 3, which are located in the southwest end of the Moho-Bilondo field, have additional growth potential and studies are underway to develop the reserves. Additionally, wells drilled in the northern end of the field, the Moho Nord project, also showed potential. Total recently estimated that it will require US$10 billion to further develop Moho- Bilondo and expects new production to begin before 2017. According to Business Monitor International, the managing director of Total E&P Congo announced that the two new projects may produce up to 120,000 bopd.

Lianzi field: In early 2012, the Republic of the Congo and Angola agreed to jointly develop and share profits from the Lianzi field, a deepwater field located on the two countries' maritime border in the Lower Congo Basin. Chevron is the field's operator (31.25 per cent.), with other interests held by Total (36.75 per cent.), ENI (10 per cent.), Sonangol (10 per cent.), SNPC (7.5 per cent.) and Galp Energia (4.5 per cent.). Chevron announced that production had commenced from the Lianzi field in 2015 and was expected to achieve an peak of 40,000 bopd.

There are a number of significant operators in the region. ENI holds interests in Litchendjili (already producing from the Djeno Sands (1bn/boe in place); Minsala Marine (5,000/bopd with 1bn/bbl reserves in the Djeno Sands); and the recently discovered Nene field (1.2bn/boe in place in the Djeno Sands, only 20km from Tilapia and in the same structure); SOCO is currently testing the Marine XI Block, achieving 5,174 bopd and is analysing results to determine the continuity of the well with nearby discovery Marine XII Block; Oryx has two recent discoveries in the Djeno Sands (Haute Mer A; best estimate (gross) of 168m/bbl and Haute Mer B; best estimate (gross) of 535m/bbl); and New Age has recently commenced operations and is the operator and majority owner of Marine III, from which Tilapia was carved out.

Gas

The vast majority of gas produced in the Republic of the Congo is either flared or used for field operations. As part of a joint initiative with the Government, ENI aims to expand gas output at M'Boundi to over 100 mmcfd in order to supply a proposed new power plant.

Government and Regulation

The Ministry of Mines, Energy, and Water Resources manages the country's oil & gas resources, while exploration and production operations are governed by production-sharing contracts. SNPC manages Government-owned shares in hydrocarbon operations. SNPC has an operating interest alongside international oil companies through production-sharing contracts, which also set out tax breaks and a royalty system.

9. DETAILS OF THE PLACING AND USE OF PROCEEDS

The Placing of up to 50,000,000 New Ordinary Shares at a Placing Price of 20 pence per New Ordinary Share is expected to raise up to approximately £8.8 million (net of expenses) for the Company.

The New Ordinary Shares will represent approximately 94.1 per cent. of the Enlarged Share Capital immediately following Admission and will rank pari passu with the Ordinary Shares.

The VCT Placing Shares and the EIS Placing Shares will be issued to investors seeking to benefit from the tax advantages available pursuant to the VCT and/or EIS legislation. The Company has obtained advance assurance from HMRC that the VCT Placing Shares will constitute a qualifying holding for VCTs and that the EIS Placing Shares will satisfy the requirements for tax relief under EIS.

The Directors believe that the Placing will provide a solid platform for growth. In particular, the net proceeds of the Placing will be utilised to fund (potentially in combination with new bank debt which may be sought following Admission, if the Directors believe it is necessary), the following:

• the US$2.5 million cash consideration payable upon Initial Completion, which shall be settled from the net proceeds of the Placing without the need for any other debt or equity;

• the development programme of Tilapia as described above (US$250,000 for the workover and a total of up to US$5 million for the additional production wells, of which some US$1.6 million will be funded from cash flow generated from production);

• the repayment of £42,987.80 owing to persons connected to Mr. Moritz as more particularly described below;

• the payment of consultancy fees to the Executive Directors, as more particularly described in paragraph 14 of this Part I of this Document;

• the payment of £30,000 to Hogan Lovells, which relates to the fees incurred by a potential investor in the Company for the preparation of investment documentation;

• the payment of professional advisers' fees in connection with the Acquisition; and

• working capital for the Enlarged Group in order to pursue its investment strategy.

The Placing Agreement contains certain provisions (including customary market-related provisions) entitling finnCap and Throgmorton to terminate the Placing Agreement in certain limited circumstances at any time prior to Admission.

Capitalisation and repayment of Brian Moritz's (and his connected persons') loans to the Company

As announced on 20 January 2016, Brian Moritz and persons connected to him have provided financial support to the Company by way of unsecured, interest-free loans. As at the date of this Document, the balance of such loans is £83,995.60 owed to Mr Moritz and £42,987.80 to persons connected to Mr Moritz. Mr Moritz has agreed to convert his loan into Ordinary Shares at the Placing Price. Accordingly, on Admission, Mr Moritz will be issued with 419,978 Ordinary Shares ("BM Capitalisation Shares") and his loan will be repaid in full. It has been further agreed that the loans due to Mr Moritz's connected persons will be repaid in full by the Company immediately following Admission.

Capitalisation of Throgmorton's fees owed by the Company

Pursuant to the terms of the engagement letter between the Company and Throgmorton dated 14 April

2015, Throgmorton has the right to convert into Ordinary Shares an amount of up to £150,000 in respect of the professional fees incurred in connection with Admission due to it by the Company. Throgmorton has elected to take up this right and, conditional on Admission taking place, shall be issued 750,000 Ordinary Shares at the Placing Price in satisfaction of the amounts it will be owed by the Company.

10. PRINCIPAL TERMS OF THE ACQUISITION

The Company has agreed, subject to a number of conditions, including, but not limited to, Admission, to acquire 49 per cent. of the entire issued share capital of PK and to have the right to acquire the balance of the shares in PK. In order to acquire the balance of the shares in PK, a number of further conditions need to be satisfied or waived, which are specifically set out below.

The consideration for the Initial Shares is US$2.5 million payable in cash, following Admission upon Initial Completion taking place. The consideration for the Secondary Shares is the issue by the Company of the Warrants to Sister to subscribe for Ordinary Shares, which subscription can only occur upon Secondary Completion taking place. It is agreed that the Warrants are to be issued to Sister on Initial Completion, although they cannot be exercised until Secondary Completion takes place. The Warrants are described in paragraph 11.16 of Part VIII of this Document.

The Acquisition is conditional on Admission, the Company successfully completing the Placing and having filed a notice of intended investment in accordance with the CEMAC foreign exchange regulations. Upon satisfaction of all of the conditions required for Initial Completion (as specifically set out in paragraph 11.12 of Part VIII of this Document) before a longstop date (being initially 15

March 2016 but which was extended by the parties to the Acquisition Agreement such that the Acquisition Agreement was to continue in force unless terminated within 14 days of written notice by either party and which has subsequently been confirmed to be 10 March 2017), Initial Completion shall take place.

The Company, Sister and Gérard Bourgoin have agreed that the amounts owed by PK to Sister and Gérard Bourgoin, which have historically been lent to PK for its working capital purposes, are to be held as long-term loans following Initial Completion, to be repaid (in such amounts as agreed between the parties) once the Enlarged Group is cash flow positive. This arrangement is described in further detail in paragraph 11.17 of Part VIII of this Document.

Secondary Completion is conditional on (i) Initial Completion having first taken place; (ii) the expiry or irrevocable waiver by SNPC of the pre-emption right it may have over the shares in PK that is contained in the JOA; (iii) the Minster of Hydrocarbons in the Republic of the Congo approving the acquisition of the Secondary Shares in PK by the Company and issuing such approval documentation as is required by applicable law; and (iv) the Company delivering to Sister a summary of the material terms of the transfer of the Secondary Shares which is to be delivered to the Congolese authorities.

The Directors are confident that they have the requisite skills and, following the Placing, capital, to satisfy the Minister of Hydrocarbons and SNPC. Further, PK has a long standing relationship with both SNPC and the Ministry of Hydrocarbons and the key members of the existing PK operating team will remain in place providing further comfort to the Minister of Hydrocarbons and SNPC. So far as the Directors are aware, SNPC has a very good track record of working with suitably qualified foreign operating companies.

However, notwithstanding the above, there can be no guarantee that the consent, waivers and approvals will be obtained and the decision to grant consent and approval or waive pre-emption rights remains within the sole discretion of the Minister of Hydrocarbons and SNPC respectively.

The Acquisition Agreement includes title and capacity warranties from Sister, together with limited commercial warranties relating to PK and commitments from Sister to conduct the business of PK in such a manner as to preserve its value in the period from signing to Initial Completion. In consideration for the Company funding the entirety of PK's share of the workover and drilling programme, Sister has undertaken to pay across to the Company all income received from PK, net of Sister's entitlement as a shareholder of the Company and of any French taxes payable. Sister has also entered into certain other undertakings in respect of the shares in PK still held by it during the interim period. Details of this arrangement are set out in the Acquisition Agreement as more particularly described in paragraph 11 of Part VIII of this Document.

Fuller details of the terms and structure of the Acquisition are set out in the section "The Acquisition Agreement and structure of the Acquisition", which can be found in paragraph 11 of Part VIII of this Document.

11. CURRENT TRADING AND FUTURE PROSPECTS

As described above, the Company does not currently trade and only owns certain residual plant, equipment and premises situated in Namibia, which are in the process of being realised. The Directors do not expect the net proceeds from any such realisation to be material.

The Company's future prospects are subject, amongst other things, to the Acquisition completing and failure to complete the Acquisition will resulting in the winding up of the Company.

On any such liquidation of the Company, it is anticipated that, once the residual assets have been realised and the remaining liabilities of the Company satisfied, there would be no meaningful surplus available for distribution to Shareholders. Conversely, the Directors expect that the Acquisition will have a positive financial impact on the Company. PK currently produces circa 38 bopd and, with the planned workover and future drilling programme, both the immediate and potential revenues that could accrue to the Company represent a significant step in delivering value to Shareholders.

If the Placing is successfully completed and Initial Completion can take place, the existing Shareholders will have an interest in an active oil business that the Directors consider has good prospects for expanding its existing production and bringing currently untapped reservoirs into production. The Directors are of the opinion that this course of action is clearly preferable to liquidation of the Company, even taking into account the risk factors described in Part II of this Document and the substantial dilution for existing Shareholders, which is a necessary consequence of the Placing, the Management Incentive Scheme and the exercise of the Warrants as part of the Acquisition. Full details of the dilutive impact of the Placing, the Management Incentive Scheme and the Acquisition are as follows:

Following the Placing and the Acquisition, the percentage of shares held by Shareholders in the

Company will be as follows:

* Further details of the Management Incentive Scheme which, if exercised in full, entitle the holders to subscribe for shares equal to 15.0 per cent. of the Fully Diluted Enlarged Share Capital of the Company, are set out in paragraph 6 of Part VIII.

It should be noted that, following Initial Completion, it is the intention of the Directors to alter the accounting reference date of the Company to 31 December, with the next accounting reference

period being for the 10 month period to 31 December 2016. This will align the Company's accounting reference period with that of PK and make Group reporting easier.

12. DIVIDEND POLICY

Following Admission and Initial Completion, the Company's dividend policy will be to distribute free cash to Shareholders through regular dividends once production reaches a sustained level of 1,000 bopd and provided that oil prices are not less than US$30. In such circumstances, the level of the dividend will be at least 50 per cent. of net profits (subject to the availability of distributable reserves).

If production reaches 5,000 bopd and also provided that oil prices are not less than US$30, the level of the dividend will be at least 75 per cent. of net profits (subject to the availability of distributable reserves).

Should the workovers and drilling programme not be successful, there can be no guarantee that a dividend will ever be paid.

13. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

The details of the Board and the operational team are set out below.

A. The Board

The Board of Directors of the Company comprises four Executive Directors and two non- executive Directors whose biographical details are as follows:

David Graeme Fenneck Sefton, 45 - Executive Chairman

David has extensive experience of making, managing and exiting investments and has significant public and private board experience. He is a specialist in the oil & gas industry across Europe, Russia, the Middle East and North America. He has worked with many of the world's leading international and national oil companies and is a private equity manager and executive. David completed undergraduate and postgraduate studies at the University of Oxford and qualified as a barrister. He then worked at Cleary, Gottlieb, Steen & Hamilton before becoming Chief Legal Officer for the international acquisition arm of LukOil.

Alexander MacDonald, 69 - Chief Executive

Alex has more than 30 years of City and business experience in corporate finance (engineering and oil & gas sectors). He was formerly head of Whitman-Howard's oil & gas team and held a similar position at Libertas Capital Corporate Finance LLP, when he was mainly involved in fund raising and M&A activities. He has both public and private company experience. Alex's early career was in upstream exploration, mainly in Africa, the Middle East and the North Sea. He gained operational experience with Conoco, Chevron, Atlantic Drilling, Otis Wireline and Ocean Inchcape.

Oleg-Serguei Schkoda, 46 - Operations Director

Oleg has worked for several oil services companies (during expatriate postings in Asia, Europe and America). He spent almost 10 years with Schlumberger, Baker Hughes and GE Energy. Oleg started his career in 1996 with the Belgian oil & gas E&P company, Petrofina (now part of the TOTAL group), as a reservoir engineer. He then worked with the Shell Technology Ventures Fund (STV Group) as an executive with two of their companies between 2008 and

2011, based in Houston, Texas.

In the past five years, Oleg has mainly worked on projects in West Africa, with a focus on the Republic of the Congo. He has drilled, fracked, completed and operated wells in the Mengo Sands (MKB field), in association with the Société Nationale des Pétroles du Congo. Oleg is a Civil engineer, and has a degree in Mining Exploitation from the Université Libre de Bruxelles

(ULB), has a master degree in Petroleum Geology from Ecole Nationale Supérieure de Géologie (ENSG Nancy - France) and a master degree in Petroleum Engineering from the French Petroleum Institute (IFP - Paris).

James Andrew Cane, 64 - Finance Director

James has been a chief executive and finance director of both listed and private equity-backed businesses, including at Ashley House plc, a quoted developer of doctors' surgeries and health centres. He was a non-executive director of the Lambeth Building Society until its sale to the Nationwide in 2006. He was the chief financial officer of 8 Miles LLP, a private equity firm managing a fund to invest in buyouts across Africa. James is the chief financial officer of Linton Capital, an investment manager in the oil & gas services sector, and finance director of K&C REIT plc.

James has operated a financial and management consultancy business for over thirty years. He has advised a number of national and international private-equity firms on strategy, fundraising, marketing and business development.

James has been a trustee of the UK's longest-established drama school, LAMDA (the London Academy of Music and Dramatic Art) since 2008 and chairs its finance committee. He is also an affiliate governor of the Conservatoire for Dance and Drama, an umbrella organisation for eight leading UK dance, circus and drama schools, and sits on its finance committee. James is a director of The Queen's Club, a leading UK racquet sports club, and sits on its finance committee. He is a fellow of the Institute of Chartered Accountants in England and Wales.

Brian Moritz, 80 - Non-Executive Director

Brian is former senior partner of Grant Thornton, London. He formed Grant Thornton's Capital Markets Team, which floated over 100 companies on AIM under his chairmanship. In 2004, he retired to concentrate on bringing new companies to the market as a director. He focuses on natural resources companies, primarily in Africa, and was formerly Chairman of African Platinum PLC and Metal Bulletin PLC as well as currently being chairman of several junior mining companies. Brian is chairman of AIM quoted Keras Resources plc, where he has responsibility for corporate governance issues and compliance with the AIM Rules. He is a fellow of the Institute of Chartered Accountants in England and Wales.

PJ Davies, 55 - Non-Executive Director

PJ has worked in a wide variety of roles in equity broking and fund management over a 30 year career. At Pioneer Investments he was Head of European Equity Research and a Senior Fund Manager running a €2 billion high risk European Fund. At Irish Life Investment Managers he was senior fund manager responsible for Far Eastern investments. Most recently he was Managing Director at Canaccord Genuity managing the team which rebuilt Quest, a highly acclaimed software programme which analyses and values 9,000 listed companies globally. PJ has a degree from Oxford University and an MBA in Finance from Cass Business School. He speaks fluent French and German.

B. Operational Team

Gérard Bourgoin - General Manager

Gérard is a French entrepreneur with many years' experience in West Africa and specifically in the Republic of the Congo. He was General Manager of Prestoil Kouilou (which started the production from Tilapia). He is General Manager of PK, which took over from Prestoil Kouilou in 2012, and will continue in this role after Admission. He represents PK on the industry price- setting committee at SNPC. He has significant interests in the agricultural and food industries, owned an oil company with producing assets in Cuba and was for many years the president of Auxerre Football Club and mayor of Chailley in Burgundy.

Aldo Sitbon - Principal reservoir engineer

Aldo has over 40 years' experience as a reservoir engineer with Shell and Elf Aquitaine and has considerable knowledge and experience of Tilapia. He worked in the North Sea and the Republic of the Congo and was in charge of the executive professional training of the French Petroleum Institute (Pau, France). He has an extensive network of oil & gas professionals in Europe and Africa.

René Vernet - Principal geologist

René was exploration manager with Elf Aquitaine and the manager of the original team that discovered Tilapia between 1990 and 1995. He is consulting geologist for Pacifpetrol (Equator) and is well connected and respected in the oil & gas community in West Africa.

Axelle Bourgoin - Assistant General Manager, Petro Kouilou

Axelle has been involved from the start of production on the Tilapia Field in Republic of the Congo. She supervises the operations on TLP-101 and TLP-102 and is in charge of the administration, accounting and the running of the operations on a daily basis. Axelle trained as an accountant.

21. EIS AND VCT STATUS

21.1. VCT

The Company has obtained advance assurance from HMRC that the New Ordinary Shares in the Company should represent a "qualifying holding" for the purposes of investment by VCTs. The continuing status of such New Ordinary Shares as a qualifying holding for VCT purposes will be conditional, inter alia, on the New Ordinary Shares being held as a "qualifying holding" for VCT purposes throughout the period of ownership. Neither the Company nor the Directors nor the Company's advisers give any warranty, representation or undertaking that any VCT investment in the Company will remain a qualifying holding.

21.2. EIS

The Company has obtained advance assurance from HMRC to confirm that they would be able to authorise the Company to issue certificates under section 204 of the Income Tax Act 2007 in respect of New Ordinary Shares issued to individuals, following receipt from the Company of a properly completed compliance statement (EIS 1 form) within the prescribed time limit stipulated in section 205(4) of the Income Tax Act 2007. The continuing status of such New Ordinary Shares as qualifying for EIS purposes will be conditional on the qualifying conditions being satisfied throughout the relevant period of ownership. Neither the Company nor the Directors nor the Company's advisers give any warranty, representation or undertaking that any investment in the Company by way of such shares will remain a qualifying investment for EIS purposes. EIS eligibility is also dependent on a Shareholder's own position and not just that of the Company. Accordingly, prospective investors should take their own advice in this regard.