On 5 May 2020, Zenith Energy Ltd (Zenith) announced that it had completed the acquisition of Anglo African Oil & Gas Congo S.A.U (AAOGC) a wholly owned subsidiary of Anglo African Oil & Gas plc (AAOG). The imediat result is that Zenith via AAOGC operates the onshore/offshore Tilapia permit with a 56% interest, SociÃ©tÃ© Nationale des PÃ©troles du Congo (SNPC) holds the remaining 44% interest.  On 17 April 2020, AAOG announced that it is facing the very real prospect of falling into some form of insolvency which would mean the disposal of an 80% interest in its wholly owned subsidiary AAOGC to Zenith would fall through.   In response AAOG and Zenith entered a further conditional Deed of Variation, which expediated Zenith assuming the running costs and liabilities of AAOGC.   Pursuant to the terms of the share price agreement for the acquisition, AAOG has novated 100% of the intercompany loans with AAOGC to Zenith as of the date of Completion, equivalent to approx. USD 15.5 million (GBP 12.5 million). AAOGC has approximately USD 5.3 million in receivables.  The updated Deed of Variation provided for the disposal of 100% of AAOG's interest in AAOGC rather than the 80% original envisaged. The Consideration was amended to USD 250,000 (GBP 200,000) which was to be paid in cash only upon receipt of consent of the shareholders of AAOG to the revised terms of the Disposal pursuant to the Further Deed of Variation.   It's worth noting that the Further Deed of Variation was entered into in response to possible insolvency which is intern the result of delays in receiving ministerial approval for the completion of the agreement which Zenith announced on 27 December 2019.   Background information  On 27 December 2019, AAOG announced that it had entered into a conditional sale and purchase agreement with Zenith Energy Ltd (Zenith) for the disposal of 80% of AAOGâs wholly owned subsidiary Anglo African Oil & Gas Congo S.A.U. The consideration of USD 1.2 million (GBP 1 million) is payable in cash and shares (amended as of 24 March 2020).   On 6 January 2020, AAOG announced that timing of the payments of the consideration under the Disposal means that the Company will not have sufficient cash to allow it to continue as a going concern beyond the beginning of February. In order to address this:    AAOG was progressing the terms of a loan note with RiverFort to provide financing conditional on shareholder approval for the Disposal at the General Meeting to be held on 13 January.       AAOG entered into an agreement with Zenith who will advance a loan of USD 330,000 (GBP 250,000) to the Company, which is essentially an advance on the consideration due pursuant to the Disposal, to assist AAOG with its cashflow position. The Zenith Loan will be available, subject to shareholder approval of the Disposal, on 25 January 2020 regardless of whether Completion of the Disposal has taken place. The loan is intended to be secured on AAOGâs remaining 20 per cent interest in AAOG Congo.       Assuming receipt of the Loan Note and pursuant to the Zenith Loan by the end of this month, AAOG would have sufficient working capital for the next three months.     On 13 January 2020, AAOG announced that it had entered into a term sheet for a put and call option agreement with Zenith over the residual holding of 20 % in Anglo African Oil & Gas Congo SAU that AAOG will retain following the disposal of 80 % of its interest in AAOG Congo to Zenith (Residual Shares).  The Call Option:    Requires AAOG, at Zenith's request, to sell the Residual Shares to Zenith       It may only be exercised by Zenith on 16 January 2021 and can only be exercised if, as at 15 January 2021, the total production at the Tilapia oil field has never exceeded an average of at least 2,000 boe/d for any consecutive 30-day period prior to 15 January 2021.       If call option is exercised the consideration payable by Zenith for the Residual Shares shall be an amount of USD 1,200,000 (GBP 1,000,000).     The Put Option    Requires Zenith, at AAOG's request, to acquire the Residual Shares from AAOG       It may only be exercised by the Company on 16 January 2021 and can only be exercised if, as at 15 January 2021, the total production at the Tilapia oil field has been an average of at least 4,000 boe/d for any 30 consecutive day period prior to 15 January 2021.       If the Put Option is exercised, the consideration payable by Zenith for the Residual Shares shall be an amount of USD 3,000,000 (GBP 2,500,000)     On 24 March 2020, AAOG provided an update on the disposal of an 80% interest in its wholly owned subsidiary AAOGC to Zenith. The Deed of Variation provides that the Consideration shall be amended to USD 960,000 (GBP 800,000) which is to be paid in cash in ten equal monthly instalments with the first payment to be paid on completion of the Disposal. As a result of this amendment, AAOG will no longer receive any Consideration in the form of shares in Zenith.  The variation applies to the 27 December 2019, sale and purchase agreement with Zenith.     Under the original terms of the Disposal, Zenith was to pay roughly USD 1,200,000 (GBP 1,000,000) to AAOG of which USD 600,000 (GBP 500,000) was to be paid in cash in six equal monthly instalments and the balance of USD 600,000 (GBP 500,000) was to be settled by the issue of shares in Zenith to AAOG.
AAOG (Anglo Africa Oil & Gas) entered into a conditional SPA with Zenith Energy for the sale of an 80% stake in its subsidiary AAOG Congo, which holds a 56% interest in the Tilapia licence.