Anglo African Oil & Gas plc, an independent oil and gas developer, is pleased to provide an operational update on well TLP-103C currently being drilled on the Tilapia field in the Republic of the Congo and to announce that it has entered into a conditional £5 million Convertible Loan Note Financing Facility with Sandabel Capital L.P. (“Sandabel”) (“the Financing Facility”), the principal terms of which are set out below.
The issue by the Company of all the loan notes pursuant to the Financing Facility, and the potential future issue and allotment of ordinary shares upon conversion of such loan notes in accordance with the terms of the Financing Facility, will require shareholder approval, which will be sought at a General Meeting of the shareholders ("GM"), to be held at the offices of finnCap Ltd, 60 New Broad Street, London, EC2M 1JJ on 13 November 2018 at 11:00am. The formal notice of the GM, including details of the proposed resolutions, have been posted to shareholders today and is available on the Company's website.
As previously reported, well TLP-103C spudded on 8 October at a newly constructed pad approximately 95 metres north-west of TLP-103. The first section of TLP-103C has been drilled successfully and the casing set and cemented. Drilling of the second section of TLP-103C has commenced. This well did not encounter any of the shallow unconsolidated formations intersected in the TLP-103 well. Nevertheless, the additional mitigation procedures and measures put in by the Company remain in place.
Drilling of TLP-103C is currently performing in line with the schedule previously announced, with the Company expecting to have reached all three principal target horizons (R1/R2, Mengo and Djeno) before the end of November, and, at this stage, the formations encountered are consistent with the Company's geological model.
The Company has also completed an assessment of the current rig market and, as a result, has had discussions with the current drilling contractor, Société de Maintenance Pétrolière (“SMP”), in order to secure an option to keep the current rig, SMP-102, on site at Tilapia in order to drill a potential further well, TLP-104, which would be the second well in the anticipated six-well development plan. This plan will be reviewed following the completion of TLP-103C and informed by the results of that well. SMP has agreed in principle for SMP-102 to remain on site, which would result in significant mobilisation/demobilisation cost savings for the Company.
The Company will continue to inform the market of drilling progress.
The Convertible Loan Note Financing Facility
The Company announced on 7 September 2018 that it had received several offers of debt facilities to provide future funding flexibility where needed for the TLP-103C well and for working capital.
The Financing Facility provides AAOG with an unsecured facility of up to £5 million which (subject to certain limited restrictions) can be drawn down at any time over the next 12 months. The timing and value of any draw-down is at the agreement of the Company and Sandabel. The principal amount of each draw-down must be £50,000 or a multiple thereof.
AAOG is under no obligation to make a draw-down and may make draw-downs with the agreement of Sandabel up to the total value of the Financing Facility by way of issuing convertible unsecured loan notes to Sandabel. Loan notes will be issued at 90 per cent of their par value and are to be redeemed in full by the anniversary of the issue date of each of the loan notes (the “Maturity Date”). Repayment of each loan note is to be spread equally over a six-month period from the date six months after the initial draw-down (the “Issue Date”) unless otherwise agreed by the parties. Should AAOG elect not to redeem any loan notes in accordance with their respective repayment schedule, which it can do by notice to Sandabel, Sandabel will receive conversion rights over those loan notes, which it can exercise in whole or in part by delivering a conversion notice. Following delivery of a conversion notice, Sandabel will subscribe for, and the Company will allot to Sandabel new ordinary shares of £0.05 each in AAOG ("Ordinary Shares") subject to the terms of the conversion notice.
Should conversion occur, the conversion price for any Ordinary Shares to be issued to Sandabel under a conversion notice will be the lesser of (i) 125 per cent of the Initial Spot Price (“ISP”) or (ii) the Market Share Price (“MSP”) and the principal amount of the facility remaining undrawn shall be increased by the pre-conversion value of the loan notes that have been converted. ISP is defined as the closing mid-price of one trading day before the Issue Date and MSP is defined as the lowest closing bid price as for the three consecutive trading days ending on the day prior to the Issue Date.
The obligations of Sandabel under any subscription notice for loan notes are conditional upon the satisfaction of certain conditions which have been agreed between Sandabel and the Company. Any subscription notice for the issue of loan notes will require the Company to have the requisite shareholder authority to issue the loan notes and potentially convert the loan notes into Ordinary Shares.
AAOG was advised by Firmitas Energy Advisers Limited on this transaction.
David Sefton, Executive Chairman, commented, “I am very pleased that the drilling of TLP-103C continues to proceed well, and in particular that the geological conditions are as expected in the geological model and drilling plan. The team are making excellent progress and it will not be long before the initial results will be known.
“I am also pleased that SMP has agreed in principle to keep its rig on site and work with us on TLP-104. The team has worked tirelessly in order to break in a new crew and iron out the technical issues encountered as a result of the rig being cold stacked.
“It is also positive that we have been able to finalise a financing facility in line with the terms previously disclosed and, in particular, that the Company has been able to secure debt finance without the need to issue warrants and, furthermore, with the flexibility that will likely allow some of this facility to be repaid as conventional debt.”