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