Anglo African Oil & Gas (LSE:AAOG) saw its bumper run continue today after securing support services for its new well in the Republic of the Congo and completing a further workover of an existing well in the country. Shares had risen 10.9pc, or 1.5p, to 15.25p at the time of writing, cementing a fresh change of pace for the firm, that has been plagued by missed targets and delays since its IPO last summer.
Investors’ excitement today came after the company announced that its 100pc-owned subsidiary Petro Kouilou has finalised a contract with leading oils services firm Schlumberger Limited, a critical step in its latest drilling programme. Schlumberger will supply support services for the drilling of the new TLP-103 well on Anglo African’s 56pc-owned Tilapia oil field in the Lower Congo Basin. Earlier this month, the business announced that it had been awarded a 20-year licence at Tilapia, sending shares 29pc higher.
Drilling operations at TLP-103 are slated to begin in June 2018, with Schlumberger agreeing to provide services such as mud logging, wire line, casing accessories, cementing, drill bits, and completion equipment. According to Anglo African, the agreement ensures it has now secured all the auxiliary personnel and services necessary to complete the drilling of the new multi-horizon well. At TLP-103, Anglo African 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.
Earlier this month, Anglo African announced that it has secured a drilling rig for TLP-103 with a French drilling company 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.
Today also saw the firm announce that its workover of another well in Tilapia – TLP-101 – has now completed. It has removed a very large build-up of wax that had accumulated over a long time due to a lack of maintenance on the well’s flow lines since it was brought into production over a decade ago. The company has now begun a test programme to determine the optimum flow rate for the well and determine whether further intervention is needed or merited.
Finally, Anglo African announced that its workover of a further well at Tilapia – TLP-102 – by Schlumberger will take place ahead of schedule in early April 2018. Schlumberger will remove any obstructions or clogging to the perforations at the well with a view to bringing it into production.
David Sefton, executive chairman of Anglo African, said, ‘I am very pleased that the team both in the Congo and London continues to make excellent progress in executing on the development of the asset. In particular, we now have certainty on all material contractors for drilling TLP-103 and so can move with confidence into the final stages of planning for this key new well. James Berwick and I want to express our thanks in particular to Gerard Bourgoin, the Directeur-General of Petro Kouilou, and the drilling manager, Alain Guiraud, for their extraordinary efforts over recent weeks.’
Today’s update is another step forward for Anglo African 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.’
If 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. We have pointed out a couple of attractive looking entry points recently with shares trading at a major discount to IPO price and looking close to breakout. The firm’s current share price gives it a market value of just under £10m. 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