Unaudited Interim Accounts for the six months ended 30 June 2020

08 September 2020

Chair's Statement

This interim accounts covers the six-months period to 30 June 2020, during this period the Company completed the sale of Anglo African Oil & Gas Congo S.A.U ("AAOG Congo") the Company's Congolese subsidiary which held the working interest in the Tilapia Asset.

Faced with very limited cash resources and unable to fund the ongoing operational costs and liabilities of AAOG and AAOG Congo, and having considered the alternatives in detail with its advisers, the Board took the decision that the best option for Ordinary Shareholders was to find a buyer for AAOG Congo.     

The Company announced on 27 December 2019, that it had entered into a conditional sale and purchase agreement ("SPA") with Zenith Energy Ltd for the sale of an 80% interest in AAOG Congo which holds a 56% interest in Tilapia in the Republic of the Congo ("Disposal"). 

The consideration for the Disposal was £1 million, of which £500,000 was in six equal monthly cash instalments from the date of completion and £500,000 of Zenith Ordinary Shares. In addition, Zenith was to fund AAOG's share of a US$5.5 million work programme on Tilapia and fund the upfront cash element of any signature bonus payable for the new licence negotiated with Congolese Ministry of Hydrocarbons. 

The Disposal would have resulted in AAOG retaining a carried interest in AAOG Congo without the requirement to raise additional funds for the future work programme.

The Company had anticipated that completion of the Disposal would take place swiftly following the shareholders' meeting in January 2020.  Indeed, AAOG's cash position did not at the time allow for the completion of the Disposal to be delayed much beyond that.  Disappointingly, Ministerial consent in the Republic of Congo to the change of control of AAOGC, a condition to the Disposal, was not forthcoming.  Neither AAOG nor Zenith could say with any certainty when such consent would be forthcoming, particularly in light of the COVID-19 pandemic which restricted the ability to meet with officials and progress matters.

AAOGC's creditor position in December 2019 was circa $3 million and the team in country was continuing operations and managing the creditors carefully with the cash that AAOG had been able to contribute as well as receipts from the sale of oil production from the Tilapia field.  Since 20 January 2020, AAOG's primary cash source has been its strategic investor, Forum Energy Services Limited ("Forum"). Forum has indicated to the Board of AAOG that it was not prepared to fund any further cash calls from AAOGC given the uncertainty outlined above. This coupled with the collapse in the oil price in March 2020 and the impact of the COVID-19 pandemic meant a worsening financial position for AAOGC.

The Board of AAOG faced the very real prospect of AAOGC falling into some form of insolvency procedure which would obviously mean the Disposal would not complete and the Company would receive none of the consideration from Zenith.

Given the uncertainty as to the timing of completion of the Disposal, as well as no certainty on when AAOG could expect to receive funds from Zenith and when Zenith would assume AAOGC's liabilities and running costs pursuant to the Disposal, the Company and Zenith therefore entered into an agreement in April 2020 to accelerate the assumption by Zenith of the running costs and liabilities of AAOGC, as well as amend the terms of the consideration payable pursuant to the Disposal (the "Consideration") and the terms of Completion.

The Company agreed to Dispose of 100% of AAOG's interest in AAOGC rather than the 80% originally envisaged. The Consideration was amended to £200,000 which was paid in cash.  The payment of the Consideration was not conditional on Ministerial consent. Zenith therefore acquired 100% of AAOGC on 3 May 2020 and assumed responsibility for all liabilities within and ongoing costs associated with AAOGC from that Date.  As a result, shareholders in AAOG no longer have any exposure to the Tilapia asset or its liabilities or receivables.

The Disposal constituted a fundamental change of business of the Company as the Company ceased to own, control or conduct all or substantially all, of its existing trading business, activities or assets. The Company is now therefore an AIM Rule 15 cash shell and as such will be required to make an acquisition or acquisitions which constitutes a reverse takeover under AIM Rule 14 (including seeking re-admission as an investing company (as defined under the AIM Rules)) on or before the date falling six months from 5 May 2020 or be re-admitted to trading on AIM as an investing company under the AIM Rules (which requires the raising of at least £6 million) failing which, the Company's Ordinary Shares will then be suspended from trading on AIM pursuant to AIM Rule 40. Admission to trading on AIM will be cancelled six months from the date of suspension should the reason for the suspension not have been rectified.

The Company is now actively seeking an acquisition of an asset or a company with the ability to increase value for shareholders and the Board is actively reviewing opportunities.

Results for the year

Group's Loss for the period from continuing operations £462,000 (2019 - £2,212,000), the reduced loss is due to lower staffing costs and overhead's since the marketing and sale of AAOG.

With the sale of AAOGC the Company continues to review and reduce overhead costs, as it seeks new opportunities.

Finance

To protect the interests of its members the Company has entered into an unsecured convertible loan note in June 2020 amounting to £1,500,000 the first drawdown of £160,000 was completes on 12 June 2020. All drawdowns and associated fees are convertible into ordinary shares.

The Company continues to discuss finance options with external investors and its major shareholder.

Overall strategy

With the sale of its only asset in May 2020, the Company is currently an AIM Rule 15 cash shell and is currently looking at opportunities for acquisitions that will establish a near term cash generating business in the natural resources sector.

The board will keep shareholders informed of its progress on a regular basis.

 

Sarah Cope
Non-Executive Chair


Enquiries:

Anglo African Oil & Gas plc

[email protected]

Sarah Cope, Non-Executive Chair

 

 

 

finnCap Ltd (Nominated Adviser)

Tel: +44 20 7220 0500

Christopher Raggett, Giles Rolls, Teddy Whiley (Corporate Finance)