Anglo African Oil & Gas (LSE:AAOG) rose to 10.5p on Wednesday after laying out its production goals for a critical well in the Republic of the Congo. The company hopes to start producing from the TLP-103C in April 2019 and has highlighted the cashflow potential to investors.
Although actual flow rates are not yet known, the company expects initial flow rates to be in excess of 1,500 barrels of oil per day (bopd) for the first 14-18 months of operation. Over the longer term, however, it expects the well to settle down and produce at around 400 bopd. Anglo has calculated these estimates from the combined analysis of TLP-103C, another well called TLP-101, and an older well called TLPM-1.
The company believes it could generate around $1m per month in free cashflow at flow rates of 1,500bopd. Encouragingly, Anglo’s breakeven oil price will fall below $20/bbl in these circumstances.
Such optimism could allay any fears investors have around near-term funding. Although the company raised £6m in a placing last month, its funds largely replaced the unpopular loan notes agreement with Sandabel. Once production is in full swing, Anglo will also be in a position to claw back some of the monies owed to it by the SNPC from oil receipts.
Anglo plans to bring TLP-103C into production through a double completion, tapping into both the R2 and Mengo reservoirs. The Mengo horizon will require a one-off frack using Schlumberger equipment. This is due to arrive in the Congo at the beginning of April. Once fracking is completed, the well can be brought into production. The business expects this to occur towards the end of April.
Reassuringly, Anglo has also stated that this production strategy can be achieved through its existing cash resources. Production from the Djeno is on standby, since it would cost more as a result of required improvements to the topside infrastructure at Tilapia.
Commenting on the strategy, David Sefton, executive chairman at Anglo, said: “We are excited by this funded plan for TLP-103C and are working hard to bring the Well into production as soon as possible. The development schedule is predicated on the availability of Schlumberger’s fracking equipment which we have been informed will be available in the beginning of April.”
Anglo is still negotiating the renewal of the Tilapia license, which it hopes to extend to 2040. In its update today, the company announced it has received a letter of intent from the government to re-award the license.