Anglo African Oil & Gas (LSE:AAOG) hit the roof today following the release of a bumper update containing a series of developments that the firm said will ‘dramatically improve its value’. Chiefly, the business said it has been awarded a 20-year licence for its Talapia oil field in the Republic of the Congo, marking a critical first step towards beginning its new drilling programme at the site.
Shares had risen 29pc, or 3.4p, to 15p at the time of writing, marking a fresh change of pace for investors in Anglo African, which has been plagued by missed targets and delays since its IPO last summer. The oiler said the Congolese state oil company Société Nationale des Pétroles du Congo (SNPC) has unconditionally recommended the award of a new licence covering the 50km2 Tilapia licence area.
Under the terms of the new licence, Anglo African will retain its 56pc interest in the field, where SNPC currently holds the remaining 44pc stake. It is not proposed that a signing bonus will be paid, but Tilapia has committed to drilling a new multi-horizon well called TLP-103 at the site. At this well, it will target 2m barrels of proven reserves in the R1/R2 producing reservoirs, an 8.1m-barrel gross contingent resource discovery in the Mengo interval, and a deeper prospect that could contain 58.4m barrels.
Anglo African also announced that it has secured a drilling rig for TLP-103 with a French drilling firm and has now extensively renovated Tilapia in preparation for drilling operations. This involved resurfacing relevant parts of the drill site, installing a storage hangar and completely refurbishing the site’s storage tank and upgrading its safety equipment.
Aside from its progress at TLP-103, the company said it has entered into a turnkey contract with Schlumberger to remove any obstructions or clogging to the perforations at the TLP-102 well at Tilapia. This work will occur throughout April and May with a view to subsequently bringing TLP-102 intro production. The business will also start the dismantling and cleaning of flow lines on another well – TLP-101 – during the week beginning March 5 before carrying out tests and adjustments to ensure it is at maximum production.
David Sefton, executive chairman of Anglo African, said:
‘The recommendation by SNPC that the 20-year licence over Tilapia be awarded represents a major milestone for AAOG. As previously announced, this is a critical first step before starting the drilling programme at Tilapia that will scale up production and test the Djeno Sands, which have proved to be highly productive on adjacent fields. Thanks to existing production and an excellent address in a proven and prolific basin, we have long held the view that Tilapia is a world-class development and exploration opportunity.’
‘In parallel, it is positive news that we have secured a rig to drill TLP-103, that ancillary works to prepare for drilling are now complete and that progress is now being made on the workovers of both TLP-101 and TLP-102, either of which could materially increase production from the current 38 bopd.’
‘I hope that the extent of the progress made in recent months is clear. It is a testament to our new CEO, James Berwick, and the entire team at Petro Kouilou, led most capably by its Directeur-General, that so much has been achieved since the change in the company’s management. I know that everyone is keen to keep up the pace and move through to the drilling of TLP-103.
‘As a final comment, I think it is worth noting that, notwithstanding the delays of last year, the company has now made significant progress, having moved to secure a 20-year extension of the licence period, developed a robust plan to drill TLP-103 and put the right team in place to execute this plan. In my view, the position and prospects of the company are better than was the case at the IPO.’
Moving on up
Today’s news marks Anglo African’s first major update following a surprise boardroom shake-up in January. This saw the firm appoint Impact Oil & Gas and Ophir Energy (LSE:OPHR) veteran James Berwick as chief executive. It also added three new non-executive directors. Although it is still early days, the company’s swift update on the long-awaited TLP-103 drill under Berwick can only be encouraging if the business continues on this trajectory.
In a frank interview with ValueTheMarkets.com last December, Sefton said Anglo African had disappointed since its IPO by missing various operational targets. However, he added that ‘We have taken significant steps in fixing what needed to be fixed and I am confident we can move into 2018 as a much better business.’
With Berwick’s appointment and today’s announcement are anything to go by, then it will be interesting to see what else the organisation has in store going forward.
The firm’s current share price gives it a market value of just over £8m. Obvious risks associated with drilling for oil aside, there is still much further potential upside if everything goes to plan.
Author: Daniel Flynn
Disclosure: The author of this piece does not hold shares in the company mentioned