Anglo African Oil & Gas (LSE:AAOG) sat at 9.2p this morning after revealing progress towards re-spudding its prospective TLP-103 well in the Congo following a delay earlier this month that damaged investor sentiment.
The firm, which is now sitting above its recent 8p placing price with a £15m market cap, said it has constructed an extended pad at the Tilapia field – where it intends to drill – ahead of schedule. A rig to drill a new well called TLP-103C will move onto the pad over the next week. The company hopes to begin drilling in the week commencing 8 October 2018.
Earlier this month, Anglo African dipped to lows of 7.6p after suspending work at TLP-103 as a result of numerous ‘topside issues’ that had affected its drilling contractor SMP’s rig. It quickly resolved to cease drilling, abandon the original location, move the rig north-west and re-spud the wells within c.25 days, ahead of an additional 64 days of well drilling.
In today’s update, the business said that both internal and external reviews confirmed that it could not have identified the geological issues it encounteredin advance. David Sefton, executive chairman, said:
‘Following the unwelcome need to pull out of TLP-103 and re-spud, the operations team, the rig contractor and our external consultants have worked tirelessly to get the drilling programme back on track as soon as practicable and to take steps to ensure that there is no repeat of the problem. The new drilling pad is now complete andrelocation has allowed for an improved deviation of the well to target the apex of the Djeno horizon.’
When first revealing plans to re-spud, Anglo African said that, alongside contingencies in its budget, potential offsets and insurance claims, it has received offers of debt finance sufficient to cover any cost over-runs. In today’s update, Sefton added that these preparations have meant that the business will not have to raise any additional cash from investors in the wake of the delay:
‘The events have underlined the importance of our careful cash management and capital planning, including the earlier negotiation of debt facilities on normal commercial terms. The result is that the Company does not require support from shareholders to absorb the additional costs of the re-spud. We will confirm the start of drilling and look forward to providing further updates as drilling progresses. We are very grateful for the patience and support of shareholders while we have overcome this hurdle.’
This point echoes Sefton’s comments at Saturday’s Momentous event in Birmingham, where he told investors that the debt finance will not affect equity or take the form of a so-called ‘death spiral’ package. He added that, although the firm plans to look at potential additional opportunities in the Congo and across West Africa, it will not do so until it has completed the current TLP-103C drill.
The well, which has previously been described as ‘potentially transformational’ by Anglo African, will be a multi-target site that is being drilled on its 56pc-owned, producing Tilapia field in the Lower Congo Basin in the Republic of the Congo. The well, picture in the diagram below, targets multiple horizons, beginning with the shallow R1/R2 sands that are already producing at Tilapia.
Beyond R1/R2, Anglo African will target the undeveloped discovery in the lower Mengo sands with an 8.1MMbbls gross contingent resource that is expected to produce c.500bopd per well. This is an appraisal well and perhaps the most attractive of the three targets. Finally, the company will drill to a deeper exploration prospect in the Djeno sands interval, where an adjacent field called Minsalaproduces at a rate of 5,000bopd. Depending on results from these three horizons, the well may also be extended down to test another area called the Vanji Horizon.