Update on Financing and Resignation of Director

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

Anglo African Oil & Gas plc ("AAOG" or "the Company")

Update on Financing and Resignation of Director

Update on Financing

Further to the announcement on 27 December 2019, the Company provides the following update on its financing plans. 

As announced on 27 December, the Company has entered into a conditional sale and purchase agreement ("SPA") with Zenith Energy Ltd ("Zenith") for the disposal of 80 per cent of AAOG's wholly owned subsidiary Anglo African Oil & Gas Congo S.A.U ("AAOG Congo"), which holds a 56 per cent interest in Tilapia in the Republic of the Congo ("Disposal"). The consideration of £1 million is payable in cash and shares as described in the RNS of 27 December.

The Company further announced that timing of the payments of the consideration under the Disposal means that the Company will not have sufficient cash to allow it to continue as a going concern beyond the beginning of February and that it was in discussions with RiverFort to provide financing by way of a convertible loan note ("Loan Note") conditional on shareholder approval for the Disposal at the General Meeting to be held on 13 January. 

The Company is continuing to progress the terms of the Loan Note and has a term sheet for the provision by RiverFort of a loan note, of which an initial tranche of £250,000 will be available on conclusion of the General Meeting, assuming shareholders have voted in favour of the resolutions being proposed, and further tranches of £50,000 are available to be drawn down thereafter every month by mutual agreement between RiverFort and the Company. Further details of the Loan Note will be announced once definitive agreements have been entered into.

In addition, the Company has entered into an agreement with Zenith who will advance a loan of £250,000 to the Company, which is essentially an advance on the consideration due pursuant to the Disposal, (the "Zenith Loan") to assist AAOG with its cashflow position. The Zenith Loan will be available, subject to shareholder approval of the Disposal, on 25 January 2020 regardless of whether Completion of the Disposal has taken place. The Zenith Loan is for an initial period of six months and may be extended by a further three months if completion of the Disposal (which, following approval at the General Meeting, would be conditional only upon Ministerial consent in the Republic of the Congo) has not occurred within that initial period. The Zenith Loan will be repayable at any time by AAOG with no early repayment penalties. It is envisaged that the Zenith Loan will be repaid by deduction of six equal monthly amounts from the cash proceeds of the Disposal (totalling £500,000 payable in six equal monthly instalments from completion of the Disposal). The Zenith Loan will attract interest of 5 per cent, which will be payable on final repayment. The Zenith Loan is intended to be secured on AAOG's remaining 20 per cent interest in AAOG Congo. 

Assuming receipt of £250,000 pursuant to the Loan Note and £250,000 pursuant to the Zenith Loan by the end of this month, the Company would have sufficient working capital for the next three months.

Board Recommendation

When the board entered into the SPA on 24 December 2019, the reality facing the Company and its shareholders was that AAOG had very limited cash resources, a large debt owing from SNPC with no certainty as to when the debt would be repaid, a significant creditor position both at the plc level and at AAOG Congo, a work programme at Tilapia that was not fully funded and the likelihood of a significant signature bonus attaching to reattribution of the Tilapia Licence which expires in July 2020. 

The Company's preference had always been to unlock the sums owed by SNPC in order to finance any signature bonus on the licence, regularise the creditor position and initiate the planned work programme. This has not been possible. The Company therefore reviewed the possibility of raising equity finance to achieve these goals and finance the drilling programme at Tilapia. The Company's brokers advised that equity financing would not be available in sufficient quantity to achieve any of these goals. The board therefore sought alternatives at the asset level to secure the longer-term viability of the Company, with a view to retaining as much value as possible for its existing shareholders. 

The board conducted a broad review of the options available to it and engaged with several counterparties with a view to securing the financing necessary.

The Disposal was the only proposal that the board had received on 24 December 2019 which allowed the Company to retain a proportion of its interest in Tilapia and secure sufficient funding to allow AAOG to continue as a going concern. The board therefore entered into the SPA, which commits the Company to using its reasonable endeavours to put the proposals to shareholders at the General Meeting and to vote the shares held by RiverFort and YA II in favour of them. For the avoidance of doubt, the board does not intend to defer or amend the terms of the General Meeting since to do so would likely breach the terms of the SPA and put the Company at risk of a claim from Zenith. This would clearly not be in the best interests of shareholders.

The board remains confident that, in view of the options available to the Company at that time and in light of the Company's financial state that required financing by no later than the end of January, the signing of the SPA on 24 December 2019 on its terms was and remains in the best interests of shareholders.

Further, the Company emphasises that the Disposal provides the Company with £1 million consideration and provides a carry in relation to any signature bonus for the reattribution of the Tilapia Licence and for the capex programme (up to a gross cap of US$5.5 million). Zenith will also be assuming responsibility for the day-to-day operational costs at AAOG Congo and for the creditor position which is approximately US$2.7 million. In total therefore, the Disposal has a much greater value to AAOG and its shareholders than the £1m consideration. It also enables AAOG to retain a carried interest of 20 per cent of AAOG Congo and benefit therefore from any upside in production from the planned work programme. 

No proposal other than the Disposal has indicated a certain ability to provide finance in that quantity while allowing AAOG and its shareholders to retain such a large interest in the asset.

How to Vote at the General Meeting

The board is aware that shareholders are receiving advice as to how to vote their shares and complete their proxy forms that may not be entirely correct. The board wishes to ensure that those who wish to vote do so validly. The following sets out how a shareholder may vote their shares.

The right to vote at the meeting is determined by reference to the register of members. Only those ordinary shareholders registered in the register of members of the Company as at close of business on 9 January 2020 (or, if the meeting is adjourned, 48 hours (excluding any part of a day that is not a working day) before the time of any adjourned meeting) shall be entitled to attend and vote at the meeting in respect of the number of ordinary shares registered in their name at that time.

A shareholder who holds their shares through a nominee company or a broker has two options in order to cast their vote and/or attend.

·; Option A: The shareholder needs to instruct their Nominee/Broker to vote on their behalf by proxy. The Nominee/Broker can either vote by sending in a proxy on behalf of the underlying shareholder or the underlying shareholder can appoint the Nominee/Broker to attend and vote at the meeting on their behalf. In either case, this instruction must be received before the deadline for proxies for it be valid.

·; Option B: The shareholder is appointed by the Nominee/Broker by way of a letter of corporate representation. Again, the vote will only be included if the shareholder attends the General Meeting. A proxy form does not have to be lodged in advance and the shareholder can attend on the day, assuming they have the original letter of corporate representation and ID.

To be valid proxy forms must be received by 11.00 a.m. on 9 January 2020.

Resignation of Director

The Company announces that Brian Moritz has resigned as a non-executive director of AAOG with immediate effect. The board would like to thank Brian for his valuable contribution to the Company over many years. 

Enquiries:

Anglo African Oil & Gas plc info@aaog.com

James Cane, Interim Chief Executive and Finance Director

finnCap Ltd (Nominated Adviser) Tel: +44 20 7220 0500

Christopher Raggett, Giles Rolls, Teddy Whiley (Corporate Finance)

Camille Gochez (ECM)