Jub Capital wants to scupper the sale of the Congo oil and gas interests of AIM-quoted Anglo African Oil and Gas (LON: AAOG) to Zenith Energy (LON: ZEN).
Jub does not want Anglo African to sell its interest in the Tilapia oilfield in the Republic of Congo to Zenith and agree a £500,000 facility from RiverFort. Instead it offers to provide additional funding for the company.
Jub was a major shareholder in Anglo African when it floated but it no longer has a declarable interest. Align Research, which has written research on the company is also behind the proposals.
Zenith agreed to acquire 80% of the Congo subsidiary of AIM-quoted Anglo African Oil and Gas for an initial £1m in cash and shares. This subsidiary owns 56% of the operator of the Tilapia oilfield. Production is 30 barrels of oil per day. Multiple potential productive reservoirs have been identified but Anglo African has lacked financial resources.
The plan was for Zenith to fund its share of up to $5.5m of a work programme, plus a licence renewal payment of up to $2m. The Congo subsidiary owes Anglo African £12.5m and it will retain 20% of the debt and novate the rest to Zenith.
The problems of Anglo African are also hitting ex-directors. David Sefton has stepped down as chairman of social media company Iconic Labs (LON: ICON) because of market speculation about his involvement with Anglo African where he was executive chairman until 13 September 2019. He has not been involved since then.
Last July, Miton paid £2.56m for shares at 5.2p each – a 27% premium to the then market price. RiverFort committed to invest £5.69m at the same time – after competing offers were received.
The RiverFort investor sharing agreement was nominally at 5.2p a share and the money will be received in 12 monthly instalments. If the share price is below 5.93p then the amount received is adjusted for the percentage shortfall. The amount received would be higher if the share price were above 5.93p.
The Anglo African share price has slumped, so the proceeds have not been as much as hoped. It rose by two-thirds to 0.75p after the Jub proposal was announced.
Jub wants deal with Zenith and the financing arrangement with RiverFort withdrawn and it would acquire the remaining shares owned by RiverFort due to the investor sharing agreement for 1p each. A substantial part of the proceeds would go to Anglo African in line with investor sharing agreement. That could possibly be around £500,000.
Jub would also subscribe £300,000 for new shares at 1p each. There would also be warrants issued that would be exercisable at 1.5p each.
Phil Beck, James Cane and Nick Butler would be expected to resign from the Anglo African board. Alex MacDonald and Matt Thompson and would join Sarah Cope and Brian Moritz on the board.
Matt Thompson controls Oxford Energy, which would provide a $5m loan to Anglo African. This would be secured over the shares in the Congo subsidiary.
Anglo African queries
Anglo African wants to know more about the terms of the loan and the strategy to commercialise the Tilapia oilfield.
The company also points out that it cannot tell RiverFort to sell its shares.
There is the potential that any further cash problems at Anglo African could mean that Oxford Energy takes control of the Congo assets.
Finding a way of funding the development of Tilapia is the most important thing. The success of the Jub proposal is likely to hinge on whether it can convince shareholders that they will be better off under the new proposals rather than having a small minority interest in Tilapia.