Operational and financial update
03 May 2018
Anglo African Oil & Gas plc, an independent oil and gas developer, is pleased to provide the following operational update on its 56% owned Tilapia field ('Tilapia') in the Republic of the Congo together with a financial update:
Following the successful work to disconnect, clean through and reconnect the flowlines to TLP-101, and testing of flow through the annulus, the well was then re-directed to production through the coiled tubing. Having done so, pressure stabilised on Friday, 27 April at which time the well was re-opened. It was successfully brought back on line and the flow rate immediately surpassed the previous rate of 35 bopd. The Company is now allowing the flow rate to increase gradually until it achieves the maximum level of sustainable flow. The Company advises that it is likely to take up to two weeks before the maximum flow rate is achieved and will update the market once that flow rate has been established.
As announced on 17 April, Schlumberger conducted a successful intervention focussed on the integrity of the perforations on well TLP-102. Following the intervention, oil and gas samples were taken at the surface and were sent to Total's laboratory in Pointe Noire for testing. The gas test result has now been received and has confirmed the Company's evaluation that TLP-102 is now in contact with the reservoir. The pressure in the well has continued to increase steadily, and further than initially expected by the Company. As a result, the Company will over the next week open the annular to test whether oil will flow unassisted. However, the Company still expects that to achieve optimum flow rates from TLP-102 will, as originally planned, require mechanical assistance. The Company has on site a downhole pump that was procured for this purpose. Its insertion requires the use of equipment readily available in Pointe-Noir and does not need a drilling rig on site.
Drilling operations have commenced ahead of mobilisation of the rig:
- The team has completed construction of the wellhead cellar and a 30" Conductor case has been hammered in situ in preparation for drilling.
- Due to the size of the rig an additional access road to the site has been constructed.
- The majority of long lead items have now cleared customs and are in country.
- The Company has procured two wellheads from FMC that have been prepared and tested and they are on site at FMC's facility in Pointe-Noire.
- The well design has been completed and is undergoing final verification testing with a third party contractor using specialised software.
- HSE planning and procedures have been completed and documented following site visits by specialist consultants.
- The environmental impact assessment is nearing completion ahead of submission to the Minister of the Environment.
- Security procedures and site protection are underway with the construction of fencing to secure the drill site.
- All draft contracts from suppliers have been received and have either been signed or are in the final stages of negotiation.
- Logistics, such as personnel and catering, have all been identified or contracted.
Finally, the rig itself is awaiting a pre-embarkation inspection by a third party rig inspection team. A further inspection will take place following rigging up at Tilapia.
Following and in connection with the request for a new licence by SNPC and the Company, the Director General of Hydrocarbons for the Republic of the Congo despatched a delegation to Tilapia to confirm the factual basis of the application. The delegation completed its work on 20 April having carried out all necessary verification. The Company expects the process to conclude with the formal proclamation of the new licence in the near future. The Company will make a further announcement once the new licence has been formally proclaimed.
As the position of our partners to fund their share of the costs of TLP-103 remains unclear, the Company considers it prudent to procure additional funding in order that it can, if needed, cover 100 per cent of the anticipated well costs. This will remove any uncertainty over the drilling of TLP-103 and place the drilling campaign entirely within the control of the Company. The complete cost of drilling and testing TLP-103, notwithstanding a decision to use prime contractors such as Schlumberger, remains at US$7 million plus a US$1 million contingency. The Company has already incurred in excess of US$1 million of the drilling costs.
It should be noted that the terms of the existing licence over the Tilapia field allow for the Company to claw back any drilling costs incurred above its pro rata share from future cashflows. The draft new licence referenced in the announcement of 5 March 2018 also allows for this.
The Company has continued to manage its cash reserves with care. Following costs incurred, including and relating to the successful work on TLP-101 and TLP-102 and procurement of long lead items for TLP-103, the Company now has reserves of more than US$2 million. A portion of this includes cash from SNPC's share of oil sales which the Company's subsidiary holds subject to an offset in favour of the Company in respect of costs which SNPC has not met.
The Company is considering the funding options available to it and has received several offers in this regard. The Company will consult to determine the most appropriate solution. TLP-103 will not spud until a financing solution is in place.
Given the vast network of contacts provided by the new CEO and the new board, the Company has been screening new opportunities and has signed the exclusive right to negotiate to acquire two producing fields in a new jurisdiction. It is now completing the due diligence process on these assets.
While this potential new asset represents an exciting growth opportunity for the Company, management remains focussed on the Company's core asset in Tilapia and the drilling of the potentially transformational TLP-103 well.
David Sefton, Executive Chairman, commented: "I am pleased with the progress that the new management team continues to make and that the current work programme is on track with the work on both TLP-101 and TLP-102 being successful. The Company has now started to deliver on the operational promises made at admission. It is also very good to see work finally commence on TLP-103. The next round of funding will, critically, remove any uncertainty as to the drilling of TLP-103. This will allow the Company to move forward and establish the value of Tilapia, which I know is the key milestone for all investors. The management team understands this, is very well advanced in preparation and planning and remains completely focused on delivering the well as soon as possible."
The information communicated in this announcement is inside information for the purposes of Article 7 of Regulation 596/2014.
For further information please visit www.aaog.com or contact:
|Anglo African Oil & Gas plc||Tel: c/o St Brides Partners
+44 20 7236 1177
|David Sefton, Executive Chairman
James Berwick, Chief Executive Officer
|finnCap Ltd (Nominated Adviser and Broker)||Tel: +44 20 7220 0500|
|Christopher Raggett, Giles Rolls, Anthony Adams (Corporate Finance)|
|Emily Morris (Corporate Broking)|
|St Brides Partners (Financial PR)||Tel: +44 20 7236 1177|
|Frank Buhagiar, Hugo de Salis|
Notes to Editors
Anglo African Oil & Gas (AAOG) is an AIM-listed independent oil and gas company that owns a 56% stake in the producing Tilapia oil field in the Republic of the Congo. The Company boasts a low-cost production story in a prolific hydrocarbon region with significant exploration upside, differentiating it substantially from its E&P peers. Additionally, management's remuneration is tied to hitting production milestones, reflecting their strong focus on cost control.
Tilapia has an excellent address, being located close to multi-billion-barrel fields that include the ENI-operated Litchendjili field and the 5,000bopd Minsala Marine field. Tilapia currently produces approximately 38 bopd from two near-surface intervals. It has an undeveloped discovery in the lower Mengo sands with gross contingent resources of 8.1m barrels and a deeper exploration prospect, with gross prospective resources of 58.4m barrels, in the productive Djeno interval from which the adjacent Minsala field produces.