Anglo African Oil & Gas (LSE:AAOG) rose to 9.5p today following the news yesterday that its recent £7.4m fundraise had received unanimous approval from shareholders. With shares now at a healthy premium to their 8p placing price, further significant gains could be on the way as the company is free to drill its highly prospective Tilapia field in the Republic of the Congo.
At a shareholder meeting on Monday, more than 99pc of votes cast were in favour of the fundraise, which will fund the cost of drilling the multi-horizon TLP-103 well at Tilapia, where Anglo African owns a 56pc stake. Anglo African, formerly Namibian Resources, has argued that completing a drilling programme on the TLP-103 well will be transformational. The move could allow it to begin extracting oil from the Mengo Sands and the Djeno Sands, two deeper horizons that are both prolific producers on nearby fields.
Surprisingly, the company even received support from its largest shareholder Sister Holding (23.5pc) despite the business previously making it clear that it did not support the placing. Sister was the firm that Anglo African bought Tilapia off back in 2015, leading many punters to speculate that it was trying to get the asset back now that it looks more attractive in the higher oil price environment.
David Sefton, executive chairman at Anglo African, said: ‘I would like to thank all of those who supported the Placing. AAOG can now move forward to drill TLP-103. I also want to express thanks to Sister, who today voted in favour of the resolution and conveyed their support of the management team.’
Many investors were likely holding off on investing in Anglo African until learning the outcome of the meeting, as a vote against the placing would have put it at risk of going private. But now that these difficulties are behind it, and Anglo African is free to move on, support from these punters could lead to significant share price gains.
Things now look extremely promising, as the business develops Tilapia under its new chief executive James Berwick who joined in January. Berwick told us in March that he is ‘fully focused’ on drilling TLP-103- although this is hardly surprising given that a large chunk of Anglo African’s future potential lies in the well.
TLP-103 will target producing reservoirs containing 2m barrels and an 8.1m barrel gross contingent resource discovery. Anglo African will also test a deeper prospect with a 58.4m barrel resource. In a previous interview with ValueTheMarkets, Sefton said that if TLP-103 is a success, the company plans to roll out a full-field development plan for Tilapia. It will then look at nearby assets that are complementary and can produce in the near-term.
The plan is for this to ultimately take the business to its >1,000bopd production target. If this occurs, drilling on the Mengo and Djeno sands on Tilapia is successful, and oil prices are higher than $30/bbl then the firm plans to distribute free cash to shareholders through regular dividends of at least 50pc of net profits. If production reaches 5,000bopd and oil prices are above $30/bbl, then the bonus will be at least 75pc of net profits.