AAOG.L Regulatory News (AAOG)

Anglo African Oil & Gas PLC / Index: AIM / Epic: AAOG / Sector: Oil & Gas

ANGLO AFRICAN OIL & GAS PLC ("AAOG" or the "Company")

Update regarding financing arrangements

Anglo African Oil & Gas plc (AIM: AAOG), an independent oil and gas developer, is pleased to provide the following update.

Financing Update

Further to the announcements of 3 July and 8 July the Company announces that the board has unanimously decided to progress financing discussions with co-investors Riverfort Global Capital Limited ("Riverfort") and Yorkville Advisors ("Yorkville"). This follows a competitive process in which three potential investors who had indicated interest were asked to provide their best and final offers to the Company. These offers were reviewed by a sub-committee of the board led by the Non-Executive Directors which led to the choice of Riverfort and Yorkville as preferred providers.

The Company will now look to finalise a definitive equity sharing agreement with Riverfort and Yorkville. The Company expects to be able to announce that the final terms are preferable for the Company compared to those previously announced.

In the meantime, the Company confirms that the major investor in the Placing (subscribing for 49,288,347 shares (£2,562,994 at a price of 5.2p per share)), as announced on 3 July 2019, has reconfirmed its commitment to that investment.

Update on potential acquisitions pursued earlier in the year

The Company provides further information regarding potential acquisitions that it pursued towards the end of 2018 and earlier this year.

The Company confirms that, in October 2018, the board identified opportunities to acquire certain oil and gas assets across Africa one of which involved the potential acquisition of several producing fields in North Africa (the "Proposed Acquisition"). This Proposed Acquisition, if completed, would have constituted a reverse takeover for the Company for the purposes of the AIM Rules for Companies. Accordingly, the board approved the performance of due diligence over those assets alongside the preparation of the documentation necessary to satisfy the requirements of the AIM Rules for Companies.

As set out in the Company's Annual Report, which was published on 28 June 2019, costs of £0.3m had been incurred in the year to 31 December 2018 (disclosed as "Costs relating to a potential acquisition"). Furthermore, in the announcement of 9 January 2019, the Company estimated that it would spend £0.35m on "due diligence over potential acquisition opportunities".

The board of AAOG considered various financing solutions for the Proposed Acquisition, including a straight equity raise. If it transpired that a straight equity raise was not possible or beneficial for the Company, one financing solution was a subscription by European High Growth Opportunities Securitization Fund ("EHGOS") for interest-free mandatorily convertible bonds, with stock warrants attached, to be issued by the Company. As a backstop, the Company therefore entered into a term sheet with Alpha Blue Ocean Inc. ("ABO"), manager of EHGOS, in relation to this possible financing in October 2018.

At the beginning of March 2019, the board decided not to pursue the Proposed Acquisition. Following consultation with the Company's major shareholders, it was agreed that the best strategy for the Company was to focus on its existing asset. However, it was recognised that, although not the right option for the Company at this time, the Proposed Acquisition did have merit. The Company has spent approximately £580,000 on the Proposed Acquisition, of which a majority is estimated to relate to the process of a reverse takeover, which would have been required as set out above. These costs in particular would be of no use to any other party.

David Sefton and James Berwick, directors of AAOG, proposed to the board of the Company that they should incorporate a special purpose vehicle ("the SPV") to move forward with the Proposed Acquisition at their own cost. The directors recognised that it would not be appropriate for David Sefton and James Berwick to participate in the board's decision to approve this. The independent directors approved the pursuit of the Proposed Acquisition by the SPV on the basis that the board saw an opportunity to recoup some of the costs incurred in pursuing the Proposed Acquisition and to continue to monitor the asset.

It was therefore agreed at a board meeting on 5 March 2019 that any costs which the Company had incurred in relation to the Potential Acquisition prior to the beginning of March would be reimbursed by the SPV in due course if the Proposed Acquisition completed. It was also agreed that management would present to the board any opportunities for cost-sharing between AAOG and the SPV. No legally binding agreement has been entered into between AAOG and the SPV in this regard and as such there is no guarantee that the Company will be reimbursed at all by the SPV or any other party, even if the SPV completes the Proposed Acquisition, and there will be no legal remedy for AAOG.

David Sefton and James Berwick therefore incorporated Anglo Tunisian Oil & Gas Ltd ("ATOG") as the SPV for the purposes of the Proposed Acquisition on 22 March 2019. ATOG has to date been financed by a loan from EHGOS. This loan has been used to finance the initial payment for the assets relating to the Proposed Acquisition. In conjunction with the provision of the loan, EHGOS acquired a 50% equity interest in ATOG for a nominal amount and three representatives of EHGOS were appointed to the board of ATOG. David Sefton and James Berwick are also directors of ATOG. At present, the share capital of ATOG is held 50% by EHGOS and 50% by a vehicle owned and controlled by David Sefton and James Berwick. The Company will continue to review whether any transaction between ATOG and AAOG should be treated as a related party transaction pursuant to the AIM Rules for Companies.

Background to relationship between David Sefton and EHGOS

David Sefton was originally introduced to the principals of ABO and EHGOS in 2016 by a third-party broker. Mr. Sefton's first commercial dealings with ABO/EHGOS took place when he was asked by them to become Executive Chairman at WideCells Group plc, a company in which EHGOS had already invested and which was in financial difficulty.

Independently, David Sefton subsequently proposed to EHGOS that it could potentially finance the Proposed Acquisition by AAOG. When AAOG decided not to pursue the Proposed Acquisition, EHGOS agreed to provide financing to ATOG, as AAOG's successor in relation to the Proposed Acquisition. AAOG reiterates that neither David Sefton nor James Berwick has any financial interest in ABO or EHGOS.

David Sefton invited ABO/EHGOS to submit a term sheet relating to the financing needs of AAOG alongside other potential investors. As investors are aware, following a review of the financing offers available, AAOG entered into a Term Sheet with EHGOS for the provision of financing in order to enable the Company to re-enter the TLP-103C well with a view to producing from the Djeno. This followed various negotiations with potential alternative providers of financing.

As further announced, the notification of the Term Sheet revealed other providers of structured equity financing willing to provide financing to AAOG. Each of these providers entered a competitive process. As set out above, the board has now decided to pursue a financing solution with Riverfort and Yorkville.

Enquiries

For further information please visit www.aaog.com or contact:

Notes to Editors

Anglo African Oil & Gas (AAOG) is an AIM-listed independent oil and gas company that owns a 56% stake in the producing Tilapia oil field in the Republic of the Congo. The Company boasts a low-cost production story in a prolific hydrocarbon region with significant exploration upside, differentiating it substantially from its E&P peers. Additionally, management's remuneration is tied to hitting production milestones, reflecting their strong focus on cost control.

THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION FOR THE PURPOSES OF ARTICLE 7 OF REGULATION 596/2014 ("MAR").