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We are all wondering what the correct post-farmout Aminex valuation is. I hope this data is of some help. I have taken it all from RNSs and presentations on the Company website.
The share hit 7.688p on the 24th February 2017. That is intraday not close. The shares in issue (taken from August 2016 RNS) were 3.475bn. The market cap was £267m on that day.
At the time Aminex held 75% of the Ruvuma licence, had Killiwani production on a separate licence and were drilling Ntorya 2. The Ntorya 2 discovery announcement was the 6th February. We were awaiting flow rated but knew we had hit gas. On the 27th February 2017 it was confirmed that gas was flowing to the surface.
At the time Ara were a strategic investor but the Farmout had not been announced. They had taken almost 30% of the Company in the strategic fund raise leading up to Ntorya 2.
Aminex’ cash position at the time is difficult to ascertain but I think we can conclude that they did not have enough cash to drill Ntorya 3 (now designated CH1) although they were describing the wells as “back to back”.
To make an obvious point, the gas found at Ntorya 2 has not gone anywhere. I think it is obvious that the flow rates from N2 that were perceived as disappointing at the time were reduced for operational and safety reasons.
As at today (31st May 2020) the shares in issue are 3.771bn (rounded up). The share price is 0.85p. The mcap is £32m.
For the share to recover to the same Mcap high point it would have to multiply by 8.34 times.
But should it? How to evaluate the impact of the farmout so we can decide what the share price should be?
In September 2017 the Ntorya area resources estimate was increased nine-fold to 1,344bn (1.3trn) cubic feet. That was unrisked management estimate of original gas in place. (I know that the Company also talks of a x12 increase over previous audits).
The farmout reduces the licence holding to 25%. And has a carry on development costs of “$105m of gross expenditure for Ara’s and Aminex combined 75% working interest and $5m in cash”.
As part of the farmout Ara/Zubair will drill complete and test CH1 (formerly Ntorya 3), undertake a minimum of 200km squared of 3D seismic and establish an early production system up to 40m cf/day gross.
The October 2018 corporate presentation is the one to look at for a full explanation of the farmout. That describes the resources as 763BCF 2C Gross (2018 CPR) and 7+TCF across the portfolio. It describes the farmout as a full carry to cashflow of $40m pa net to Aminex at 140million cf/d. Aminex are carried through 6 wells to get to that production level.
After CH1 is drilled Aminex have $30m remaining on their carry. For the impact of the farmout and the carry see that October presentation on the company website. It is much better than $30m sounds!
CH1 is targeting the delineation of N2 and is testing a deeper Jurassic target (1,352 BCF P50 GIIP, see January 2019 presentation for that number).
Cont'd
CH1 is a very exciting drill and although the Company are very tight lipped about the prospect of finding the first oil in East Africa there is a chance of that. But CH1 is only the next drill of six in total. Then there is the early production system followed by full field development, all carried for Aminex. No more funds to be raised.
For me the farmout completion places Aminex in an entirely different risk category. From wildcat drilling tiddler to carried production company.
If an industry standard p/e is 20 and Aminex is receiving the $40m pa from Ruvuma production as set out in the farmout then (making all sorts of wild assumptions about profit v revenue) that is a mcap of $800m (dollars). That mcap is 21p per share. I agree that is back of fag packet and not very scientific but you see my point.
GLA. DYOR.
Sorry. Obvious mistake in the last few lines. The 21p per share is wrong as I failed to account for dollars/sterling.
That’s a very positive view but there are hurdles to get through yet which leaves uncertainty. Aminex have very little cash, as made clear by the ceo. He wants to join up with a company with income looking for a company with an asset with plenty of upside potential. When he said an asset, not assets, to me he was clearly talking about Ruvuma. So how much of the asset would that cost? We also don’t know how much of the asset the government want? There is also a 2.2m tax dispute. A way to go yet.
"When he said an asset, not assets, to me he was clearly talking about Ruvuma"
matherdj, I wouldn't be so sure he was referring to Ruvuma, the (Nyuni Area PSA) has multi TCF potential, and of course it comes with its very own 140mmcfd gas processing plant which at present has a spare capacity of 120mmcfd, so waiting for gas to be discovered and tied in. what a valuable incentive for any would-be partner.
https://www.malcysblog.com/2020/05/oil-price-aminex-dgo/
"Elsewhere the Kiliwani development still offers potential to restart production and of course the larger Nyuni exploration licence has multi TCF potential and the company is looking forward to a smaller work programme which the TPDC seem happy with. Seismic on these prospects is probably subject to partnering but with the appeal of the area should not cause any impediment."
"Robert then went on to briefly discuss the Company’s finances, highlighting that a production deal was a focus for the management to fund further progress in the short term. Indeed it makes sense for Aminex to partner up with someone as strategic partnering and consolidation is best for the company. Aminex shareholders have good reason to feel increasingly optimistic about their investment and patience should be rewarded."
The whole context of the interview was about Ruvuma. We’ll just have to wait and see but Nyuni has very little value until drilled. Have a listen back to the interview. In my mind there is little doubt.
yes matherdj, i'm not hard and fast on this, and like you say we will see, though Nyuni value/potential could increase substantially after the 2020 3D work program over the Kiliwani North development licence and Nyuni. and that any company that already has production/cash-flow might well be attracted at getting in on the ground floor, plus what ever production deal Aminex are thinking about, it is only needed for the short to medium term as they must anticipate Ntorya gas coming on stream.
slide 8
http://admin.aminex-plc.com/uploadfiles/Aminex%20AGM%202019%20as%20presented.pdf
I have already provided my views on this subject and nothing discussed here changes them one iota.
Nyuni South is estimated at 57 BCF and is not yet even connected to the Songo Songo gas plant - so such assertions as - "....so waiting for gas to be discovered and tied in..." makes it sound so simple doesn't it? That will require a lot of money and an extended lead time. So simple that NOTHING has happened on Kiliwani for years and that despite it being AEX's stated priority for the whole of that period.
matherdj is spot on.
Nyuni = 57 BCF, offshore, requiring offshore pipeline to GPP, outstanding gas invoices and operated by a company who have just transferred any and all of their technical capability to APT to work on Ntorya and who barely have enough cash to keep the lights on ( lack of credibility with TPDC)
Ntorya = 1.3 TCF, 22 km onshore pipeline, multi well development programme, operated (post Farm-Out) by cash rich, influential, capable and credible entity (providing TPDC and Govt with confidence)
I would love to see Kiliwani resurrected as JB and the previous management long promised and totally failed to deliver. We all hope that the political context may be changing positively but it will require definitive action on the Govt's part to provide the confidence the market needs to bring new investors to this market, in my view. (Paying our outstanding invoices would be the most positive indication) We all know that it is this Govt inertia over many years and the resultant lack of confidence that meant that AEX had no investment or funding options but the Zubairs when the BOD went to market previously; and the reason that we got such a derisory deal... we are in just as parlous a position now and I cannot see anyone rushing to our aid at any point soon until there is a total volte face by the govt.
Maybe it will all change in the morning :0)
Goodnight all.
Sweet dream Crusty try and think nice thoughts on AEX In your dreams ;0)
Absolutely spot on valuation eddy.
I couldn't agree more.
Have you sent that in a letter to your investment pals? Previously sent when aex was around 2-3p? Correct me if wrong of course.
Best of luck all and no investment advice intended!
There's a lot of talk about the Farm Out and Ruvuma and also about Kiliwani too but what about the other drill they carried out was it Ntorya-2 will that be something they can fairly quickly look at or at least has potential in terms of reserves? There was also a discovery at Ntorya-1 and Likonde in the past too asn't there? So, there's quite some assets there to be exploited. Is it that all these areas are in the Ruvuma basin and it's a matter of time(that again!) before these areas are developed.
I really hope someone can send the Oil Minister in Tanzania does get this Farm Out signed off soon! They really do make things hard work don't they - at least we know where the ball lies at the moment. Come on lets get things moving - including the long awaited increase in the sp!!
Atb,
Northern
I meant to say - send the Oil Minister a pen. Fingers crossed though we might hear something by the end of the week.
I mean how long does it take to sort this now!!
Atb,
Northern