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Anglo African reveals multiple oil hits at TLP-103C (AAOG)

Anglo African Oil & Gas dipped 8.6pc to 15.1p today after making several oil discoveries in the Republic of the Congo. Wireline logging at the business’s TLP-103C well has confirmed oil columns totalling 44m across several identified horizons.

TLP-103C is based on Anglo African’s 56pc-owned Tilapia oil field, also home to the producing TLP-101 well. To date, drilling has targeted reservoirs called R1, R2, R3, and Mengo. While R1, R2, and R3 are already producing, the lower Mengo sands contain an undeveloped discovery. This houses an 8.1MMbbls gross contingent resource that is expected to produce around 500bopd per well.

In today’s update, Anglo African said it had identified a 26m oil column within sandstones at Mengo. It also found an aggregate 13m of oil columns across the new horizons between R3 and Mengo. Finally, it has located a 5m oil column in the R2 reservoir, in line with TLP-101.

Importantly, additional testing also found that R2 has not been depleted. According to the company, this confirms that an onshore hydrocarbon system underlies the Tilapia licence area.

Anglo African will now resume drilling operations, targeting a deeper horizon called Djeno. This is a prolific producer at nearby fields, with an adjacent location called Minsala enjoying output of 5,000bopd. Depending on its success here, Anglo African then plans to extend TLP-103C to an even deeper area called the Vanji horizon.

The business’s shares took a significant hit on Monday morning. However, before taking this move at face value, it is worth putting the news into context.

Indeed, today’s discoveries were already highly anticipated by the market. This is because Anglo African said it had encountered hydrocarbons in two targeted horizons in an update last month. It also said it had encountered hydrocarbons after intersecting the Mengo horizon.

The news triggered a brief period of extreme strength for the company’s shares. Indeed, after a steady decline throughout Q4 2018 the company surged from 6.7p to highs of c.16.5p, hit on Friday. With this mind, today’s drop suggests investors are selling on the news as a way of securely locking-in profits.

Regardless, David Sefton, executive chairman of Anglo African, called today’s news a ‘fantastic result’ for the business. He said the discoveries have ‘exceeded expectations’ and could increase production and cashflow significantly.

‘Furthermore, with the geological model proven we look forward to the resumption of drilling at TLP-103C targeting the deeper Djeno horizon, which based on the production rates achieved from this reservoir on neighbouring fields, has the potential to be truly transformational for AAOG,’ he added.

‘With operations on-going and the resumption in production at well TLP-101, which is estimated to have the ability with water injection to produce up to 400 bopd, these are exciting times for the company and the Board believes AAOG is on track to become the highly cash generative oil and gas company we set out to build.’

Finally, he said Anglo African will now look at updating its reserves estimate.

The path to today’s discoveries at TLP-103C was a rocky one, with Anglo African abandoned its original well – TLP-103 – last September. This came after its contractor experienced a ‘topside issue affecting its rig’ before reaching any of its target horizons’. The pair decided to find a new location, move the rig, and re-spud the well as TLP-103C.

Author: Daniel Flynn

The author does not own shares in the company mentioned in this article

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