Anglo African Oil & Gas - Initiation of Coverage

Highly profitable small cap O&G play with present stock price underpinned by current activities and exploration potential offering further upside

Anglo African Oil & Gas (AAOG) joined AIM in March 2017 and subsequently acquired a 56% stake in the Tilapia Field in the Republic of the Congo for US$5 million. This was a cracking deal as Tilapia is a proven producing asset with substantial upside potential in the Lower Congo Basin, an established and prolific location for hydrocarbons. Multiple discoveries have been confirmed from the TLP-103C well in the R2 and Mengo reservoirs and now the well is being drilled deeper.

  • Mengo discovery and R1/R2 look set to boost production to 750 bopd

    A 44m oil column in the Mengo has been confirmed - nearby fields produce 500 bopd per well with stimulation. Experts believe that 400 bopd is achievable with water flooding from the TLP-101. Added together, this suggests a minimum of 750 bopd, making AAOG nicely cash flow positive.

  • Djeno is the big prize and success here could be transformational

    TLP-103C is now targeting the Djeno, a reservoir where Eni, TOTAL, CNOOC & SOCO are all producing nearby at a naturally pressurised 5,000 bopd per well. Even if AAOG miss it this time round, lessons learnt will be invaluable in drilling TLP-104, planned to be drilled back to back with TLP-103C.

  • Existing infrastructure allows discoveries to go into production rapidly

    AAOG is shaping up to be a profitable company, even ahead of any success in Djeno. The company benefits from having existing topside infrastructure which allows the team to quickly turn confirmed resources into production.

  • Risked NPV suggests upside of more than 170%

    Our conservative valuation shows the potential. We initiate coverage of AAOG with a first target price of 28.23p and a Conviction buy stance.

  • RISK WARNING & DISCLAIMER

    Anglo African Oil & Gas is a research client of Align Research. Align Research & a Director of Align hold interests in the shares of AAOG. For full disclaimer information please refer to the last page of the full document. This investment may not be suitable for your personal circumstances. If you are in any doubt as to its suitability you should seek professional advice. This note does not constitute advice and your capital is at risk. This is a marketing communication and cannot be considered independent research.

Table: financial overview
Year to Dec 2016A 2017A 2018E 2019E
Revenue (£'000) - 227 200 6,900
Pre-tax (£'000) (937) (3,141) (3,664) 1,600
EPS (p) (2.21) (5.75) (3.01) 0.69
Source: Company accounts & Align Research

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