Zenith Energy renegotiates Tilapia oilfield acquisition terms

Canadian oil and gas company Zenith Energy has entered into a conditional deed of variation to amend the terms of the acquisition of an 80 percent interest in AAOG’s subsidiary, which is the operator of the Tilapia oilfield in the Republic of the Congo.

Aerial view of AAOG Congo site / Image AAOG

AAOG’s fully-owned subsidiary in question is Anglo African Oil & Gas Congo S.A.U (AAOG Congo) which has a 56 percent majority interest in the Tilapia oilfield.

Under the original terms of the acquisition, Zenith was to pay a consideration of £1 million ($1.17M) to AAOG, of which £500,000 was to be satisfied in cash to be paid in six equal monthly installments with the first installment due on completion and the last being six months later, and £500,000 was to be satisfied by the issue of ordinary shares in the share capital of Zenith to be issued at the volume-weighted average price of a Zenith common share for a period of 14 trading days before completion.

Zenith said that, under the deed of variation, the consideration will be decreased by 20 percent to £800,000 to be paid in cash only and ten equal monthly installments with the first payment due on completion of the acquisition.

As a result of this amendment, Zenith will no longer issue any equity as part of the consideration for the acquisition. Apart from this, the terms of the acquisition remain unchanged.

Completion of the buy remains conditional on certain regulatory approvals being obtained in the Republic of the Congo including consent of the Minister of Hydrocarbons which Zenith is expecting to achieve in due course.

If the change is not passed at AAOG’s general meeting, the deed of variation will not come into effect. As a result, the acquisition will proceed under the original terms agreed upon in December 2019.

AAOG has informed Zenith that its largest shareholder, Forum Energy Services, has given an irrevocable undertaking to vote in favor of the sale under the renegotiated amount at the GM. Forum Energy Services holds 21.87 percent of AAOG’s ordinary shares.

It is worth adding that Zenith terminated the put and call option agreement entered into with AAOG in January this year.

The company also stated that the agreement to provide a secured loan facility to AAOG for a total amount of £250,000 had been terminated.

Andrea Cattaneo, CEO of Zenith, said: “We are pleased to have successfully renegotiated the terms of the acquisition with the achievement of a 20 percent reduction and the avoidance of any Zenith equity issuance as part of the consideration.

“Recent world events, specifically the COVID-19 pandemic, have severely impacted international financial markets, and, by consequence, also negatively affected the valuation of our share price.

“In view of the above developments, we have decreased the consideration to reflect an adjusted asset valuation commensurate with the decline in oil prices and to include cash-only consideration which shall be funded by means of our publicly announced EUR 25 million ($27M) EMTN program.”

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