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.
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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.
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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.
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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.
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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.
Anglo African Oil & Gas is primarily engaged in the extraction of and exploration for natural resources in Africa.
Align Research is a commissioned research company founded in November 2015 in order to provide the under-served smaller company space with high quality analysis. We have an initial focus on the natural resources sector, in which we see significant opportunities given the current once in a generation bear market, however all undervalued small caps (sub £100m) are considered by our team. Align was founded by industry professionals with decades of experience in the stock markets, headed up by highly qualified individuals from both fund management and analytical backgrounds.
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