Key points on debt facility

29 October 2018

  • As announced in earlier regulatory releases and discussed in interviews, having a debt facility was always part of AAOG's contingency arrangement. Following the need to re-spud and the consequent enhanced engineering upgrades to well TLP-103C, AAOG needs to access some of that contingency to ensure the well is drilled to our specifications.
  • We have not rushed this but, in discussions and advice from our nomad and a financial adviser, we have put in place a facility which meets AAOG's needs while minimising any cost or effect to shareholders:
    • We have not taken a large tranche of capital in one lump where we might not need all of it;
    • We have avoided warrants, which would take away much upside from shareholders;
    • We have minimised conversion rights, such that at least some of the debt will be repaid as conventional debt with no conversion;
    • We have agreed conversion rights and subsequent trading of shares that avoids the risk of a 'toxic debt spiral'; and
    • We have minimised the cost of capital.
  • While we are going to draw down several tranches over the coming two months, we will keep the capital required to a minimum. A likely outcome is that approximately half of the facility will be converted and half will be repaid as debt.
  • We are now within a month or so of knowing exactly where we are on TLP-103C, at which point, if there is an oil show, AAOG should be able to price and raise sufficient equity for the field-development plan, which means that the debt facility would be taken out.
  • What will not happen is that this debt facility remains in place over the long term as a convertible drag on the share price.
  • Although the lending vehicle is Sandabel Capital LP, the underlying lender controls the debt facility, any conversion and all trading relating to any shares converted from the loan. The loan is not assignable. The underlying lender has always been a subscriber on placings and is very supportive of AAOG. This is the first loan that the lender has flowed through Sandabel. The lender has committed to AAOG that it will not act in any way that could cause undue adverse movement in the share price.