Update and clarification on financing process

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

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

Update and clarification on financing process

Anglo African Oil & Gas plc (AIM: AAOG), an independent oil and gas developer, is pleased to announce that since the announcement of 3 July 2019 it has received several further offers of structured equity finance and is considering these alongside the Term Sheet signed with European High Growth Opportunities Securitization Fund ("EHGOS"). Certain of these proposals would, if implemented, not include an equity sharing agreement or similar and there can be no guarantee that the Company will enter into this type of arrangement.

The Board is committed to achieving the optimal financing structure that will enable the Company to progress with its plans to re-enter TLP-103C and seek to produce from the Djeno.

To ensure the optimal financing structure, the Board is conducting a competitive process among the providers of these proposals and has also assumed drafting of the underlying definitive documentation to ensure that the Company is fully aware of the precise terms of any financing. As part of this process, the Company has also received a communication from EHGOS offering to improve its proposal.

The Company has, in addition, stipulated as a requirement that any shares issued pursuant to an equity sharing agreement cannot be pledged, assigned, mortgaged or used in any other way the effect of which is to enable any person to take a short position in the shares of the Company.

By way of background, and as announced on 28 June 2019, the Company has been in discussions with various potential providers of finance in order to secure the funds necessary to re-enter well TLP-103C with a view to producing oil from the Djeno. The Company's intention was to have certainty that it could access capital before seeking straight equity investment from its existing and other shareholders.

As part of this process the Company received proposed terms from certain providers of alternative equity structures. Each of these proposals, save for that provided by EHGOS, as part or all of the proposed funding, involved the issuance of convertible loan notes or other instruments the effect of which was that the number of shares to be issued would vary based on future share price performance. The effect of these variable share issuance proposals would have been to create uncertainty around the potential dilutive effects to existing shareholders, and to risk the benefit to the existing shareholders from any eventual increase in the share price.

The Board of the Company felt it was more appropriate to avoid this risk by having certainty over the number of shares issued, rather than the total proceeds received, and therefore entered into the Term Sheet with EHGOS. The Board also notes that the share price is at an historic low, despite the success of TLP-103C in all targeted horizons including the Djeno and the award of a new 25 year licence, subject only to negotiation of final terms of the production sharing agreement. The board further considers that this share price does not reflect the true value of the Company, and that therefore the share price is at an optimum level to enter into an ESA. Investors are reminded that under this facility if the share price increases above the Benchmark Price then the Company will receive proceeds exceeding those nominally received pursuant to the share subscription.

None of the Board of Directors has or ever has had any economic interest in EHGOS or the investment manager/adviser of EHGOS and EHGOS is not currently a related party.

All decisions relating to the financing for the development of Tilapia have at all times been and will continue to be made by the Board as a whole and solely in the best interests of the Company.

The Company also takes this opportunity to clarify certain terms of the proposed Equity Sharing Agreement ("ESA") Term Sheet with EHGOS as announced on 3 July 2019. The Term Sheet is not legally binding and there can be no guarantee that the ESA will be entered into.

As announced on 3 July 2019, the Term Sheet envisages that the Company and EHGOS will enter into the ESA and the terms of that agreement agreed to date are set out in that announcement. The Company takes this opportunity to further clarify that:

· The Term Sheet is for a sum of at least £8.5 million (at 5.2p the directors currently only have authority to raise up to £8.25 million). The Company will, in its discretion, reduce this amount by the amount of the Placing Shares issued as part of the Fundraising;

· The Term Sheet envisages that EHGOS will covenant not to participate in any more than 19.99% of the daily volume of trading in the Company's shares at any time;

· The Term Sheet does not include any obligation on EHGOS to sell any of the Company's shares in order to finance the monthly payments;

· The Company is guaranteed to receive a monthly payment adjusted in direct correlation of the Measured Price to the Benchmark Price irrespective of whether EHGOS sells any Ordinary Shares or not. However, the Company will not receive the full value of the Subscription Shares at the Issue Price if the Measured Price is below the Benchmark Price and there is therefore no guarantee to the amount, if any, that the Company will receive. For example, if on a monthly settlement date the calculated Measured Price, exceeds the Benchmark Price by 10% (i.e. Measured Price is 6.86p and the Benchmark Price is 6.24p), the settlement on that monthly settlement date will be 110% of the amount due from the Investor on that date (i.e. the monthly settlement amount will increase from £0.43m to £0.47m). If on the monthly settlement date the calculated Measured Price is below the Benchmark Price by 10% (i.e. Measured Price is 5.62p and the Benchmark Price is 6.24p), the settlement on the monthly settlement date will be 90% of the amount due on that date (i.e. the monthly settlement amount will decrease from £0.43m to £0.39m). Each settlement as so calculated will be in final settlement of the Investor's obligation on that settlement date.

· The Board believes that this adjustment is to the advantage of the Company as the current share price significantly under values the Company;

· In the event that EHGOS sells any Ordinary Shares to finance the payment or otherwise, the Company will receive not less than 80% of the value of the Ordinary Share sold by EHGOS over the previous 30-day period. In effect, this means that the Company will be able to benefit if EHGOS is able to sell the Ordinary Shares at an average of above 120% of the Measured Price. For example, if:

o The Benchmark Price is 6.24p; and

o The Measured Price is 5.62p; however

o EHGOS manages to sell Ordinary Shares over that period at an average price of 10p; then

o AAOG will receive a minimum of an amount equal to the number of Ordinary Shares sold by EHG over that period multiplied by 8p (being 80% of 10p), provided that number is above the monthly amount that would otherwise be paid. EHGOS retains the remaining 2p per share from the sale.

As noted above the Company is negotiating the final terms of the ESA and will announce this if and when the agreement has been executed. However, and as noted above, the Company is considering the options available to it and there can be no guarantee that the ESA will be entered into or whether the final agreement will reflect the terms above.

Should EHGOS subscribe for Subscription Shares in the manner described in the announcement of 3 July 2019 then they would, following the issuance of shares to them, be considered from that moment a related party solely by virtue of them being a substantial shareholder, holding a beneficial interest greater than 10% of the Company. The entry into the ESA would be treated as a related party transaction under Rule 13 of the AIM Rules for Companies.

Capitalised terms in this announcement shall have the same meaning attributed to them in the announcement of 3 July 2019 unless the context requires otherwise.

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").