Half Year Report

Anglo African Oil & Gas plc, an independent oil and gas developer, is pleased to publish its unaudited results for the six months ended 30 June 2019.

 

LETTER FROM THE CHAIR

Dear shareholder

These interim accounts cover the six-month period to 30 June 2019, during which the standout event was the successful drilling of the TLP-103C well on the Tilapia licence in the Republic of the Congo, in which the Company has a 56 per cent interest. The well encountered 56 metres of oil columns, including 26 metres in the Mengo formation and a further 12 metres in the deeper Djeno formation. TLP-103C was the first well to target the Djeno at Tilapia, which represents an opportunity to generate significant cash flow and profitability. We plan to capitalise on this opportunity: preparations for drilling a new sidetrack, the TLP-103C-ST, are now finalised and, as we announced earlier this month, well re-entry operations have started.

Team

The drilling of TLP-103C-ST will be overseen by an experienced team, the majority of whom successfully managed operations at TLP-103 over the past twelve months. However, while the technical and operational teams remain in place, there has been a change at board level. Earlier this month, we reported David Sefton's decision to step down from his position as Executive Chairman and as a director of the Company. It goes without saying that David played a major role in getting AAOG to where it is today. In our view, one of his most important contributions has been to put in place a strong board and management structure. Led by our chief executive James Berwick, who has a proven track record in the industry, both operationally and commercially, the board and executive team comprise highly qualified professionals with the industry expertise and knowledge to take the Company into the next phase of its development. 

Outlook

After the positive TLP-103C well results at the beginning of the year, the remainder of the review period and subsequently has been centred on drawing up a comprehensive forward plan to monetise the discovery in the Djeno at the earliest opportunity. With an operational team in place and a funding package finalised, the team is now concentrating on signing a rig contract for the sidetrack into the Djeno. The Company will provide further updates at the appropriate time. 

In the meantime, I would like to thank the Board and management team for their hard work during the period and our shareholders for their continued support and patience.

 

Sarah Cope
Non-executive chair

27 September 2019

 

CHIEF EXECUTIVE'S LETTER

Dear shareholder

This report and accounts cover the six months to 30 June 2019.

Financial results

The loss for the half-year reflects the significant costs that the Company has incurred in building the team to capitalise on the opportunity presented by TLP-103C. While increased production from the existing wells has not materialised as soon as had been originally hoped, the investment that the Company has made during the period has prepared the ground for the sidetrack drilling campaign into TLP-103C-ST. We also incurred costs during the period relating to the preparation for our negotiations for the new licence, the legal dispute with SMP and the aborted reverse take-over involving assets in Tunisia. We expect the second half of the year to show a significant reduction in non-standard operational expenditure.

Operational plan

The operational plan is to re-enter the existing TLP-103C well and drill the new sidetrack just below the Mengo formation to test the Upper Djeno and explore the Middle Djeno formations. The objective is to determine whether the Djeno can be brought into production from either horizon. Depending on the flowrate, some enhancements to topside infrastructure at the Tilapia field will be required.

Of course, drilling activity is never without risk. However, we believe that the sidetrack operations have an attractive risk/reward profile. TLP-103C has already proven the geological model and confirmed the presence of the Djeno at Tilapia. The fallback plan is to produce TLP-103C from the Mengo formation. At current oil prices, a daily production rate of, say, 500/bopd from the Mengo would generate material levels of cash flow for AAOG. It is this combination of the low-risk production story provided by the shallower R1/R2/R3 and Mengo formations, and the significant exploration upside potential offered by the Djeno, that attracted us to Tilapia in the first place. Furthermore, with the licence covering an area of 50.51 sq km, the Company has already identified multiple follow-up drill locations that can be targeted, once well TLP-103C has been brought into production, to generate further cash flow.

A suitable rig and equipment to carry out the operations are currently being sourced. The production plan is ready to be executed as soon as we have a rig on site.

Operations update

TLP-103C and TLP-103C-ST

The Company has now completed the planning phase of the TLP-103C-ST re-entry into the TLP-103C well and has moved into the operations phase. As we reported earlier this month, we have contracted Wire Group to supply and install an isolation plug, which is required to ensure that there are the necessary barriers in the well and which will enable re-entry.

The well continues to flow oil when bled off and pressure in the well is stable. Negotiations are ongoing with two potential rig providers, both of which have rig units in the Republic of the Congo. The Company is also scouting for other units with minimal mobilisation charges as a fallback option.

TLP-101

The Company has planned a further workover as part of its routine maintenance of well TLP-101. This will see fluids pumped into the well through the annulus in order to remove any potential blockages in the coiled tubing due to the build-up of wax. A similar exercise was completed in 2018 on the top-side flowlines.

Licence negotiations

The Company has held two rounds of negotiations with the Ministry of Hydrocarbons during this reporting period. We have agreed a basic set of terms that will be inserted into the new 25-year production-sharing contract. A final round of negotiations is scheduled for October to ensure that the optimal position for both parties can be finalised.

Financing

During the period under review, the Company completed a placing, in January 2019, raising gross proceeds of £6.0 million through the issue of 60,000,000 ordinary shares of five pence each at a price of ten pence. The Placing provided the Company with the funds required to complete the initial drilling of well TLP-103C.

Following the period-end, the Company completed a further fundraising for up to £8.25m. This comprised a placing of 49,288,347 ordinary shares of five pence each at a price of 5.2p raising a total of £2,562,994.04 and the entry into an Investor Sharing Agreement between AAOG, YA II PN, Ltd and Riverfort Global Opportunities PCC Limited. The consortium subscribed for 109,331,011 Ordinary Shares at the Issue Price for a total commitment of up to £5,685,212.57, dependent on the AAOG share price and the trading volumes during the twelve-month period of agreement. The funds will be released to the Company over the next 12 months.

These funds, alongside continued anticipated receipts from our partner Société Nationale des Pétroles du Congo ('SNPC'), the Congolese national oil company, are expected to enable the Company to re-enter the TLP-103C well at Tilapia with a view to producing oil from the Djeno horizon. Although AAOG has historically had to finance the majority of the partnership's total expenditure, SNPC has now been making regular cash-call payments since March 2019, with nearly US$4.0 million received by the date of this report.

Summary

The Company has continued to make progress during 2019, albeit not without delays and difficulties. However, I share the enthusiasm of our experienced team for the Tilapia project and I look forward to delivering a result for shareholders that will reward their patience and their investment.

 

James Berwick
Chief Executive Officer

27 September 2019

 

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE SIX MONTHS ENDED 30 JUNE 2019 (unaudited)

  SIX
MONTHS
SIX
MONTHS
YEAR
  ENDEDENDEDENDED
  30.06.1930.06.1831.12.18
    (audited)
 Note£££
     
CONTINUING OPERATIONS    
Revenue 173,524106,378133,503
Cost of sales (259,434)(385,121)(89,039)
     
GROSS (LOSS)/PROFIT (85,910)(278,743)44,464
     
Administrative expenses (2,123,488)(1,605,175)(5,147,777)
Impairment of trade and other receivables --(1,536,918)
Impairment of oil and gas assets --(3,407,395)
Impairment of exploration and evaluation assets --(1,498,591)
Share-based payment charges (46,914)(153,633)3,540
     
OPERATING LOSS BEFORE EXCEPTIONAL ITEMS (2,256,312)(2,037,551)(11,542,677)
    -
Fundraising costs (195,398)(133,254)-
     
LOSS FROM OPERATING ACTIVITIES (2,451,710)(2,170,805)(11,542,677)
     
Finance costs (1,031)(801)(143,207)
     
LOSS BEFORE TAX (2,452,741)(2,171,606)(11,685,884)
     
Taxation --(8,550)
     
LOSS FOR THE PERIOD FROM OPERATING ACTIVITIES (2,452,741)(2,171,606)(11,694,434)
     
Exchange translation on foreign operations 60,004(41,349)(136,355)
     
TOTAL COMPREHENSIVE LOSS FOR THE PERIOD (2,392,737)(2,212,955)(11,830,789)
     
Attributable to:    
Owners of the Company (2,392,737)(2,212,955)(11,830,789)
Non-controlling interests ---
     
Basic and diluted loss per ordinary share (pence)6(1.03)(2.71)(9.26)

 

CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AT 30 JUNE 2019 (unaudited)

  30 June30 June31 December
  201920182018
    (audited)
 Notes£££
     
NON-CURRENT ASSETS    
Property, plant and equipment7137,9282,818,066110,612
Intangible assets812,709,3428,378,54010,386,085
     
  12,847,27011,196,60610,496,697
     
CURRENT ASSETS    
Stock 37,219-37,101
Trade and other receivables93,651,2631,546,9554,135,134
Prepayments 89,3158,30545,364
Cash and cash equivalents 739,0076,502,407120,983
     
  4,516,8048,057,6674,338,582
     
TOTAL ASSETS 17,364,07419,254,27314,835,279
     
EQUITY
SHAREHOLDERS' EQUITY
    
Share capital1016,272,46212,478,81113,272,462
Share premium 17,159,40714,286,05814,492,407
Currency revaluation reserve 248,945330,722188,941
Retained deficit (24,350,663)(12,311,610)(21,944,836)
     
TOTAL EQUITY 9,330,15114,783,9816,008,974
     
CURRENT LIABILITIES    
Trade and other payables 5,118,4081,858,2465,919,659
Provisions112,915,515123,5242,906,646
  8,033,9231,981,7708,826,305
LONG TERM LIABILITIES    
Provisions -2,488,522-
     
     
TOTAL EQUITY AND LIABILITIES 17,364,07419,254,27314,835,279

 

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE SIX MONTHS ENDED 30 JUNE 2019 (unaudited)

 Share
capital
Share
premium
Currency
revaluation
reserve
Retained
deficit
Total
 £££££
      
Balance at 31 December 20177,851,23812,003,418372,071(10,293,637)9,933,090
Issue of share capital4,627,5732,776,544--7,404,117
Costs of issuing equity instruments-(493,904)--(493,904)
Share-based payment charges---153,633153,633
Currency translation--(41,349)-(41,349)
Total comprehensive expense---(2,171,606)(2,171,606)
      
Balance at 30 June 201812,478,81114,286,058330,722(12,311,610)14,783,981
      
Changes in equity     
Issue of share capital793,651206,349--1,000,000
Costs of issuing equity-----
Share-based payment charges---(157,173)(157,173)
Currency translation- (46,775)46,775-
Total comprehensive expense--(95,006)(9,522,828)(9,617,834)
      
Balance at 31 December 201813,272,46214,492,407188,941(21,944,836)6,008,974
      
Changes in equity     
Issue of share capital3,000,0003,000,000--6,000,000
Costs of issuing equity instruments-(333,000)--(333,000)
Share-based payment charges---46,91446,914
Currency translation-----
Total comprehensive expense--60,004(2,452,741)(2,392,737)
      
Balance at 30 June 201916,272,46217,159,407248,945(24,350,663)9,330,151

 

CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED 30 JUNE 2019 (unaudited)

 SIX
MONTHS
SIX
MONTHS
YEAR
 ENDEDENDEDENDED
 30.06.1930.06.1831.12.18
   (audited)
 £££
Cash flows from operating activities   
Loss for the period(2,452,741)(2,171,606)(11,694,434)
Adjustments for:   
Depreciation and amortisation13,325901277,455
Provision movement8,869-294,600
Currency exchange movement60,004(41,349)(136,355)
Impairment of trade and other receivables--1,536,918
Impairment of oil and gas assets--3,407,395
Impairment of evaluation and exploration assets--1,498,591
Share-based payment charge46,914153,633(3,540)
 (2,323,629)(2,058,421)(4,819,370)
    
(Increase) in stock(118)-(37,101)
Decrease/(increase) in trade and other receivables483,871(1,301,680)(5,426,777)
(Increase) in prepayments(43,951)(4,090)(41,149)
(Decrease)/increase in trade and other payables(801,251)831,1554,892,568
    
Cash used in operating activities(2,685,078)(2,533,036)(5,431,829)
    
    
Cash flows from investing activities   
Purchase of tangible fixed assets(40,641)(108,747)(258,071)
Purchase of intangible fixed assets(2,323,257)(786,532)(4,781,241)
Disposal of tangible fixed assets-338,598-
    
Cash used in investing activities(2,363,898)(556,681)(5,039,312)
    
Cash flows from financing activities   
Loan (repayment)-(15,000)(15,000)
Issue of share capital6,000,0007,404,1178,404,117
Costs of issuing equity instruments(333,000)(493,904)(493,904)
    
Cash from financing activities5,667,0006,895,2137,895,213
    
    
    
Increase in cash and cash equivalents618,0243,805,496(2,575,928)
Cash and cash equivalents at beginning of period120,9832,696,9112,696,911
    
    
Cash and cash equivalents at end of period739,0076,502,407120,983

 

Page last updated: 27 September 2019