1st January 2020
ANGLO AFRICAN OIL & GAS – THE WAY FORWARD THROUGH 2020
Following the various RNS announcements from both Zenith Energy Ltd and Anglo African Oil and Gas Plc in recent days as well as various messages through shareholder forums, I outline here, for the purposes of clarification, my thoughts on this as well as attempt to present a possible route forward in AAOG shareholders best interests.
I am not interested in recriminations from past events and have no agenda in that regard. My objective is to do what I can to restore AAOG to good health. This can only come through stabilising the situation in the Congo in conjunction with raising sufficient funds both at the corporate level and at the asset level to complete and produce from the Mengo. This will ensure that we can move AAOG forward in a manner which is well managed, and look at growth, rather than “fire fighting”.
I am not surprised at the Ministry insisting on stabilisation as part of the new licence issuance. At the end of the day they want the same thing – to see production. The Ministry have made it clear that if AAOG proceed to drill the Djeno then there will be no cost recovery allowance for this. I have a plan for the longer term FDP for the Djeno, which is not for this note, as it will have to be negotiated with SNPC and to get their support and approval before approaching the Ministry. I can however confirm that I have undertaken early technical discussions on these plans & the responses are encouraging.
Many have posed the question to me – why I am doing this? With Oleg Schkoda we were the founders of what became AAOG, therefore there is unfinished business in an asset that I continue to believe in. I also have a moral sense of duty and responsibility to shareholders of which there are many smaller ones who stand to lose so much and in some cases, very sadly, their life savings. Fundamentally is the very strong belief, shared by the team, that there are producible hydrocarbons in commercial quantities in Tilapia.
How will I and the new team do it?
- I have received encouraging comments and support from various parties and shareholders, both in the UK and Congo, which leads me to believe that AAOG can be rescued. However, I do not underestimate the task.
- We have already achieved a committed fundraise of approx £1million and a structure that protects the extant shareholders – something that is not the case with the Zenith proposal.
- Matt Thompson (a seasoned oil and gas executive and qualified lawyer) and I are both appointed to the board.
- Rebuild the relationship with SNPC and the Ministry. Bringing them back on side. The last two years has been a blip. I am confident that I can get them comfortable that we can be trusted to rebuild a respectful relationship with our partners. This will be achieved by building upon those long standing relationships held by both I and others on the team. Some are in senior positions within the Ministry of Hydrocarbons, SNPC and Government.
- Working with my colleague Matt Thompson, we will raise the initial funds which are required to complete and produce from the Mengo.
- We will re-establish a strong technical and operational team, with some members who previously worked with me. I am confident we will get the job done and I can confirm that our proposed operational team personnel have all confirmed their willingness to get on board with us.
- In the first few months of appointment we will immediately address the following:
- Stabilise the company;
- Execute the new licence which we understand is in final form;
- Unlock the $5.3million held by SNPC;
- Agree a forward work programme with SNPC.
Following the RNS announcing Berwick’s departure, various parties asked me what were the chances of my returning to the board? My response was that if someone were to ask me then I would consider the possibility. There were also other approaches, with parties in Congo asking the same question. I was also briefed on the difficulties in the relationships between AAOG, The Ministry and SNPC and how these had been created.
My understanding is that relationships have broken down with both SNPC and the Ministry due to the unhelpful attitudes from the Company towards senior people at SNPC and the Ministry. These areas of friction cannot be allowed to continue any longer, if AAOG is to have a future.
In addition, there have also been issues with the quality of the well. There have also been claims that SNPC were not as involved in the well design and execution -as a significant partner would reasonably expect to be. Again, this is a situation, which is required to be addressed as soon as possible.
There is a belief in the Congo that AAOG is unable to raise any additional capital and that its reputation is seriously damaged in the London market. Put all this together and I understand that this is what is now holding up the release of funds from SNPC. The IMF will be aware of this as being a legitimate and contracted payment and would be very unlikely to support the non-payment, as has been suggested. With careful management we can reverse this perception and recommence payment of the back costs. As with many things in life, it comes back to confidence and trust.
Prior listing on AIM in March 2107 and up to December 2017, the founders Oleg Schkoda and I had a clear operational and technical plan, one which we had been planning for a year beforehand to drill and produce from the Mengo horizon, and which is a proven reservoir. In the same well the exploration part was to drill the Djeno. We would then side track the Mengo and complete and produce using fishbones technology https://www.fishbones.as as opposed to fracking.
By the end of March 2017 we had assembled a small but highly qualified internationally recognised technical team, for the most part they were located in Pointe Noir, to design, plan and execute the drilling of TLP 103, including TLP 103ST. This was from a standing start as no prior planning had been undertaken by the then operator of Tilapia – Petro Kouilou. By August we had completed the tendering process, which included about 200 line items including the rig. For the record we rejected the SMP rig, eventually used by the new team under Berwick, as being unfit for purpose, and which had been “cold stacked” for over two years, preferring to wait for the SFP rig owned and operated by SFP an SNPC subsidiary. That rig was undergoing acceptance approvals for ENI which would have saved us considerable time effort and cost if we had taken it. In terms of time and planning this would have worked well for us in ordering the long lead items such as the wellhead.
There are many other examples of why AAOG has failed. One that is important to understand is simply that there was clearly a systemic failure by the team which resulted in the failure of TLP 103c to produce any oil. I put on record that all offers of help and assistance and a handover from my team and me were rejected as being unnecessary by AAOG’s current and historic Board.
To conclude, if we complete the initial capital raise of approx £1 million (and that both Matt Thompson and I are participating in – illustrating our confidence in ourselves and the plan) then I believe that stabilises the company for a good portion of 2020. We are confident that we can get the share price to a point where this will trigger the proposed warrant attachments, providing a further £1.8million of additional equity capital. This gives us the platform to cement our proposed processes to resolve matters with the Ministry and SNPC. There is significant upside for all shareholders here which, in our plan, will go 100% to them as opposed to the crumbs at the table with Zenith whom we believe are not a credible partner in the eyes of the Ministry and SNPC in any event.