Zenith Energy (LON:ZEN) have told the market on Monday that it has agreed a 20% stake with Anglo African Oil and Gas (LON:AAOG) for their operations in Congo.
The firm said that a put-and-call option has been formally signed for the last 20% stake in AAOG’s Congolese operations.
The two parties have agreed that this option can only be exercised by Zenith on January 16, 2021.
Another clause was inserted saying that the option is only valid if total production from Tilapia has never exceeded an average of 2,000 barrels a day for any period of 30 consecutive days.
Zenith will have to pay £1 million in shares if it does decide to exercise the option.
AAOG can only exercise the option, on the same day as Zenith, if production has averaged at least 4,000 barrels a day for 30 consecutive days prior to January 15, 2021.
Andrea Cattaneo, Chief Executive Officer, commented:
“We are pleased to have agreed these terms with AAOG for its residual 20 percent holding in AAOG Congo. The Tilapia asset has, we believe, potentially transformational production potential. Indeed, our primary operational goal shall be to source a fully inspected and functional rig to begin drilling operations at the earliest opportunity in TLP-103C to test the productivity of the Mengo and Djeno horizons.
The aforementioned terms will further ensure that, in the event of future success, both Zenith and AAOG shareholders will enjoy the fruits of victory.We look forward with excitement to the challenge ahead.”
Sarah Cope, chair of AAOG, added: “We are very pleased to have agreed these terms with Zenith which protects the upside value for shareholders in AAOG in the event that Zenith succeeds in increasing production to 4,000 barrels per day.
“The board believes this will give the company’s shareholders comfort in AAOG’s ability to liquidate its holding in a successful AAOG Congo following the investment that Zenith has committed to make into Tilapia.”
Initial deal announcement
Last week, the deal between the two firms hit headlines, which saw Anglo African shares crash.
The firm said that it has agreed a deal with both Riverfort (LON:RGO) and Zenith Energy for two separate financing deals to allow the company to continue operating.
Following the lack of funds and a recent share subscription, Anglo African entered negotiations with Riverfort for a convertible note loan.
However, a deal has not be struck. Riverfort have agreed terms where Anglo will receive an initial tranche of £250,000, if shareholders approve the Zenith deal, and a further £50,000 every month until negotiations over the convertible notes concludes, which leaves shareholders will power.
Zenith has also agreed to advance a £250,000 loan to AAOG to help with its cashflow position. This loan, whilst subject to shareholder approval, is not contingent on the sale of AAOG Congo. The loan is for an initial six month period but may be extended for an additional three months.
Anglo already hold a 56% interest in the Tilapia field in the Republic of the Congo. Once the transaction is complete, Anglo African Oil & Gas will become a cash shell on AIM.
It intends to use the proceeds from the disposal to finance its day-to-day operations and consider potential reverse takeover options.
Zenith build on Italy Deal
Zenith have been quick to build on the deal with Coro Energy (LON:CORO) to sell operations in Italy.
The deal which has been formalized will value at £3.9 million, which led to the reflections in share price movements for both firms.
The initial consideration for the Italian natural gas production and exploration portfolio is £400,000, payable by Zenith to Coro in the form of 6.7 million new Zenith shares priced at 6.0 pence each.
Then, provided the portfolio achieves average daily production of 100,000 standard cubic metres per day on average for four successive months, a up to £3.5 million in Zenith shares will be due to Coro. This production figure represents approximately 590 barrels of oil equivalent per day.
The deal will make Zenith one of Italy’s largest natural gas production operations with total production at 55,000 cubic meters per day.
Zenith CEO Andrea Cattaneo said: “There are a number of opportunities to increase production from current levels in the acquired assets through targeted relatively low-risk well interventions, also present in our existing Italian portfolio. Our newly enhanced technical team and financial resources will enable Zenith to apply renewed focus on its Italian portfolio.”
Zenith seem to be expanding their operations globally, which is something that will excite shareholders.
Upon the completion of this deal, Zenith will have started 2020 in a strong manner and will hope that this can continue across the year.