Shares in Anglo African Oil & Gas (LSE:AAOG) rose 1pc to 10.1p on Tuesday morning after the business announced the renewal of its licence over a critical oil field in the Republic of the Congo. The company has been granted a new permit over the producing Tilapia oil field – where it recently found initial success at a well called TLP-103C – by the country’s government.
The licence has been awarded to the Anglo African’s wholly-owned subsidiary Petro Kouiliou for 25 years following a period of due diligence. Importantly, Anglo African will also retain its 56pc interest in the licence. The outfit is now working with the Republic of the Congo’s government to finalise the terms of a new production sharing contract (PSC) for the licence.
Anglo African’s executive chairman David Sefton called the renewal a ‘major milestone’ that represents an endorsement of the organisation’s team and work carried out to date. He added that the business expects to accelerate its development plans once the PSC has been finalised to begin generating cash flow and value for all of Tilapia’s stakeholders.
‘Renewal of the Licence has always been a critical step in enabling us to put in place plans to maximise production, cashflow, and value from Tilapia,’ Sefton added. ‘We have long believed in the potential of Tilapia. This potential was demonstrated by the excellent results of the recent TLP103C well. Notably, the well encountered oil shows in all target horizons, including the Djeno Sands, which flows at rates of up to 5,000 bopd per well on neighbouring fields. We continue advanced work on enhanced production and the full development of Tilapia.’
Following well-publicised delays, Anglo African first confirmed discoveries at Tilapia in the first weeks of 2019. Wireline logging at the well validated initial results identified during drilling the targeted R1/R2/R3 and Mengo reservoirs and confirmed oil columns amounting to an aggregate of 44m across the defined horizons.
In February, the firm rose to 10.5p when it announced that it hoped to begin producing from TLP-103C in April. At the time, it said it expected initial flow rates in excess of 1,500bopd for the first 14-18 months of operations. These are then likely to slow down to 400bopd for the remainder of the well’s life. 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.
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 due to arrive in the Congo at the beginning of April. Once fracking is completed, the well can be brought into production. In February, Anglo African also stated that the production strategy it had laid out could be achieved through its existing cash resources.
Last week, the business said the release date of a CPR for TLOP-103C has been pushed back to the second half of May. It added that the delay reflects its request for new information to be included in the report. This came after it confirmed that oil from the well had moved to surface under its own pressure, originating from Tilapia’s Djeno reservoir, in January.