Gulf Oil and Gas accountACCOUNT

Completion of Financing

Source: www.gulfoilandgas.com 7/17/2019, Location: Africa

Anglo African Oil & Gas plc, an independent oil and gas developer, is pleased to announce that it has completed a fundraising (the "Fundraising") for up to £8.25m. The fundraising comprises:

- a placing (the "Placing") of 49,288,347 ordinary shares of 5p each in the capital of the Company ("Ordinary Shares") to Miton Asset Management ("Miton") (the "Placing Shares") at a price of 5.2p per Ordinary Share (the "Issue Price"), a premium of 26.83 % to the prevailing share price on 16 July 2019, raising a total of £2,562,994.04 (the "Placing Proceeds"); and
- the entry into an Investor Sharing Agreement (the "ISA") between AAOG, YA II PN, Ltd ("YA II") and Riverfort Global Opportunities PCC Limited ("Riverfort" and, together with YA II, the "Investors") for a subscription of 109,331,011 Ordinary Shares (the "ISA Shares") at the Issue Price for a total commitment of £5,685,212.57 (the "ISA Proceeds").

The Company has applied for admission of the Placing Shares and the ISA Shares to trading on AIM ("Admission"). The Fundraising is conditional on Admission which is expected to become effective on 22 July 2019.

As set out below, there can be no guarantee that the Company will receive all of the ISA Proceeds and accordingly, the Company may not be able to execute all of its plans as set out in the Annual Report released on 28 June 2019.

Receipt of the monies from the Fundraising alongside continued anticipated receipts from SNPC are expected to enable the Company to re-enter the TLP-103C well at its Tilapia field in the Republic of the Congo with a view to producing oil from the Djeno horizon.

Investors should read the section of this announcement titled "Structure of the ISA" to gain an understanding of how this contract operates.

The Placing
The Company has issued the Placing Shares at the Issue Price to Miton, an existing substantial shareholder in the Company, to raise in aggregate £2,562,994.04. The Placing Shares have been issued out of the authorities granted to the directors at the Company's annual general meeting on 28 June 2019.

The Fundraising Process
In order to have certainty that it could access capital to re-enter well TLP-103C before seeking straight equity investment from its existing and other shareholders, the Company entered into discussions during May and June 2019 with various potential providers of finance.

The Company was determined to avoid the issuance of convertible loan notes as part or all of the proposed funding, as certain significant shareholders had expressed their dislike of such instruments, which had the effect of creating uncertainty around the potential dilutive effects to existing shareholders.

As set out in previous announcements , the Company entered into a non-binding term sheet that envisaged the possible entry into an Investor Sharing Agreement. The terms contained in this term sheet were presented to existing shareholders and potential new investors as part of a proposed fundraising process in late June, following which Miton agreed to commit to the Placing as set out above.

Having announced those terms on 3 July 2019, the Company received competing offers for structured equity finance and accordingly entered into a competitive process overseen by the Non-Executive Directors of the Company. Following receipt of best and final offers from these potential providers, the Non-Executive Directors recommended, and the board unanimously accepted, the proposal of Riverfort and YA II. This process has resulted in the Company now completing the Fundraising and entering into the ISA with the Investors, on terms that the Non-Executive Directors consider to be the most advantageous available.

The structure of the ISA is explained further below, but the following summarises certain key elements:

- The ISA Shares are immediately issued to the Investors and these are the only Ordinary Shares that are issued pursuant to the ISA. In this way, there is certainty as to the dilutive impact of this financing structure. The ISA Shares have been issued out of the authorities granted to the directors at the Company's annual general meeting on 28 June 2019.
- The Investors receive their subscriptions monies back from the Company then repay that £5,685,212.57 to the Company in 12 monthly instalments subject to adjustments based both on the Company's share price performance and the ability of the Investors to trade in the Ordinary Shares as set out below.
- The structure itself is designed to remove any incentive on the Investors to lower the price per Ordinary Share. Essentially, the Investors are "long" of the Ordinary Shares and sell them in order to return the proceeds to the Company while making a return through the fact that the benchmark price is above the Issue Price.

The Non-Executive Directors consider that the major benefits of the ISA (as opposed to other structured finance instruments such as convertible loan notes) are twofold. Firstly, the ISA offers certainty as to the dilutive effect of the instrument since the number of Ordinary Shares to be issued to the Investors is established upon execution of the instrument. Secondly, the ISA allows the Company to benefit from any increase in the price per Ordinary Share above a set target price (see detailed explanation below). The Non-Executive Directors believe that these benefits outweigh the uncertainty over the potential monthly sums to be returned to the Company, particularly since the Non-Executive Directors believe that the current market price per Ordinary Share significantly undervalues the Company particularly in light of the successful drilling of the TLP-103C well.

Structure of the ISA
The Company has today entered into the ISA with the Investors. The undertakings set out in the ISA are subject Admission.

The Investors have agreed to subscribe for 109,331,011 Ordinary Shares (the "ISA Shares") at the Issue Price to raise in aggregate £5,685,212.57 (the "ISA Proceeds"). The Company has agreed to return the ISA Proceeds to the Investors, which are then to be distributed to the Company in accordance with the terms of the ISA as detailed below.

The ISA Proceeds are to be distributed to the Company in equal monthly instalments of £473,767.71 over a period of 12 months starting from 1 September 2019 and which shall be subject to the adjustments and the terms as set out below (the "Monthly Settlement").

Adjustments to the Monthly Settlements
Within five business days of the end of every month for which the ISA operates, the Company will notify the Investors of its calculation of the adjustments to be made to the Monthly Settlement based on the volume weighted average price ("VWAP") of the Ordinary Shares on the trading days in the preceding calendar month.

For the purpose of these adjustments, the ISA sets the benchmark price of the VWAP (the "Benchmark Price") as 5.93p per Ordinary Share, being 114% of the Issue Price.

The Monthly Settlement is then calculated as follows:
- If the One Month VWAP of the Ordinary Shares is equal to the Benchmark Price, the amount to be transferred shall be 100% of the Monthly Settlement;
- If the One Month VWAP of the Ordinary Shares is below the Benchmark Price, then the amount to be transferred shall be reduced by the percentage by which the One Month VWAP of the Ordinary Shares is below the Benchmark Price; or
- If the One Month VWAP of the Ordinary Shares is above the Benchmark Price, the amount to be transferred shall be increased by the percentage by which the One Month VWAP of the Ordinary Shares is above the Benchmark Price.
- In this context, the One Month VWAP is calculated as being the arithmetic average of the VWAP on each trading day during a relevant calendar month.

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Related Categories: Accounting, Statistics  Acquisitions and Divestitures  Asset Portfolio Management  Economics/Financial Analysis  General  Industrial Development  Insurance  Investment  Mergers and Acquisitions  Risk Management 

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