Anglo African Oil & Gas (LSE:AAOG) sat at 9.7p today after announcing the mobilisation of a rig for the drilling of its much-anticipated multi-horizon well in the Congo. Shares dropped 3pc in morning trading, but with the news giving the highly prospective well a concrete deadline, Anglo African could now be open for some speculative trading.
The SMP-102 rig that it has contracted to drill TLP-103 is currently based in Gabon, where it has now been cleared by customs. Loading of the rig is expected to complete by the end of the week, following which the journey is likely to take between two-to-three days. Once it has arrived at Pointe-Noire in the Congo, Anglo African expects it to take around three-to-four weeks to transport the rig to its drill site and carry out the pre-drill setup at Tilapia.
Anglo African, formerly Namibian Resources, believes 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. 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.
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.
Today’s news follows a roller-coaster ride for Anglo African’s investors, with a £7.4m placing to fund TLP-103 receiving approval in June despite repeated threats of shareholder activism. With rig mobilisation setting in place the first concrete stage of TLP-103’s development, more newsflow should follow imminently.
Today, Sefton said: ‘With the SMP-102 rig now mobilised and funding in place, we are on course to drill a potentially transformational well for the Company. TLP-103 is not wildcat exploration. It targets reservoirs that are already producing at Tilapia, as well as an historical discovery in the deeper Mengo horizon and in doing so, offers a low-risk opportunity to increase production and move the Company into profitability.’
‘At the same time, however, TLP-103 has the potential to generate an exceptional return should the well encounter commercial hydrocarbons in the deeper Djeno horizon. In our view, TLP-103, therefore, offers a highly attractive risk/reward trade-off: low risk by targeting production from proven sands; coupled with high reward by also targeting a deeper horizon that is productive on adjacent fields. We look forward to providing further updates on our progress over the coming weeks and months.’