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Newly listed small cap targets low risk production

Anglo African Oil & Gas (AAOG:AIM) believe its newly-acquired asset in the Republic of Congo offers a combination of low risk production growth and high octane exploration.

The company raised £10m at 20p per share alongside its IPO (initial public offering) on 6 March to fund the acquisition of a 56% stake in the near shore Tilapia field.

The immediate priority is to lift output from the current 38 barrels of oil equivalent per day (boepd) to 250 boepd through a workover programme on two existing wells, expected to complete by May.

Executive chairman David Sefton tells Shares this will take the company to breakeven on a cash flow basis.

The plan is to then drill a new multi-horizon well through the already-producing R1 and R2 sands and an undeveloped discovery called Mengo which should lift production to 750 boepd.

Exploration upside

Here’s the interesting bit. The well will test the Djeno horizon from which, in a neighbouring field, French sector giant ENI is producing upwards of 5,500 boepd.

Chief executive Alex MacDonald says the funds raised at IPO cover this work programme with future costs met out of cash flow. There are plans to pay 75% of net free cash flow after capital expenditure as dividends in the future.

MacDonald dismisses fears over security. ‘This is the nice Congo,’ he says, adding that costs are low as the company can drill from onshore.

Looks interesting at 26.25p.

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