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Thinking ahead to when gas starts being produced, the RNS of 10 Jan 2024 indicates agreed gas sales of 40 MMscfd. Assuming we're able to source a rig that can meet this demand then what are we estimating this equates to in terms of daily revenue?
Thanks in advance
I think this:
40 MMscfd = 40,000 Mcfd
Gas price say $3.50 per Mcf
40,000 x 3.5 = $140,000 / day
$140,000 x 365 = $51,100,000 year
25% of $51.1m = £12,775,000
Interesting to note that an annual income of circa $12.75m from the combined NT1, NT2 and CH1 wells would only roughly replace the income being generated from Kiliwani in 2016 at the time of the anticipated "back-to-back" drilling of NT2 and, then NT3 (now CH1) and at a time when AEX was the operator and owner of 75% of the license and hence the proceeds of those up and coming drills. At that time the Market Cap topped £250m.
At first glance it is difficult to see how AEX shareholders are in any better position today, 8 years later, than we were back in 2016. Not until and unless we can reinvigorate Kiliwani and, or look forward to subsequent drills of the Ntorya basin; only then will the "commercials" improve upon what we have already seen in the past.
Except that at the time, Kiliwani gave AEX a Market Cap of £250m, today it's only £64m so justifies upside of at least 290%, plus the upside of CH-1 potentially being a producer at up to 80MMscfd on top.
Plus potential from 3 shallower untested traps above Ntorya that could contain more Gas, or even Oil.
I think we’ll be just fine. As posted yesterday:
There will be plenty of profit according to the company stockbrokers:
"Therefore, as a point of reference, we note two potential value points that we believe the market may consider when deciding how much value to recognise should the 2Tcf be confirmed:
1) Extending the plateau of 140mmscf/s for 20 years, would result in an increased average annual FCF of c$25mm/year, and an approximated asset value of £175mm (~4x the current market cap), using a simplified 12% discount on FCF in perpetuity model. We note that in this case only 1Tcf of resources will be utilised in the 20-year period.
2) Theoretically, increasing the plateau to 250mmscf/s for 20 years would effectively exploit almost all of the 2Tcf of gas in this 20-year period. This hypothetical case, in our estimate, would generate an average annual FCF of about $40mm, representing an approximated asset value of ~£275mm net to AEX (~6x the current market cap)"
So, Free Cash Flow for Aminex of somewhere between $25m and $40m if the 3D seismic results were 2tcf. Obviously, they were very much higher than that.
Yes SC I would not disagree BUT that is the rationale behind my post Drill prediction of £250m MC. We are simply back where we were 8 years ago. Unlike you and others I am not making any assumptions about any significant upgrade in GIPP and absolutely NOT Oil, for reasons explained umpteen times in the past. Moreover even if there is an upgrade in GIPP it will not significantly affect the immediate share price as most of any upgrade will not be appraised, realised or, most importantly, monetised for years...
Anyway gents I am off tocatch a train now on my way to Bath for the day. May check in later - keep the pot boiling chaps!
On top of which, NT-1 only tested the upper 3.5m of a 25m interval, and NT-2 was tested with constricted gas flow due to mud influx.
NT-2 also produced 2,833 barrels of condensate per day whilst constricted.
Cancel this bit, the gas is equivalent to it, they didn't produce this on top!
"NT-2 also produced 2,833 barrels of condensate per day whilst constricted."
So what SC, we had exactly the same prospects from NT1 and NT2 (and NT3) in 2016 as we have today AND $12m per year from Kiliwani - the assets haven't changed! We could and would have reworked them then in just the same way as we are planning to do today. The "prospects" for those wells and NT3 were the same then as they are today BUT then we held 75% of the assets.
Anyway, I am off for the train.
Bye for now.
Stockcheck
""Except that at the time, Kiliwani gave AEX a Market Cap of £250m, today it's only £64m so justifies upside of at least 290%"""
so you are saying AEX should at least reach a 250m cap?
As for Kiliwani producing what NT-1 plus NT-2 produce, that's a load of rubbish.
NT-1 + NT-2 = 37MMdcfd before any work over
KN-1 in 2016 only produced 15MMscfd
Please state FACTS not FICTION.
Kiliwani was earning $1m per month - at the time of the £250m MC no-one knew it was about to run "dry". The results of NT2 weren't even known!
Email,
This is what I posted yesterday. On reviewing the revenue potential for 40+ MMscfd from NT-1 + NT-2, and up to potentially 80MMscfd from CH+1, totalling a potential max of 120MMscfd, then I'd say the below appears very conservative now. And this is before the contents of the 3 untested traps above Ntorya are known, which could be more Gas, or even Oil.
4.21bn shares in issue
10p would be a MCap of £421m
5p would be a MCap of £210.5m
My thinking on post CH-1 drill success was around £250m too. I don't think it should be lower, but I'm also not sure it will go higher in this market. If the market recovers by year end, which is now looking possible as the UK has escaped the mini recession last month, then could be £350m or more by the time the gas is flowing.
The Kiliwani Gas price was also lower.
"As far as prior production is concerned, the average 2016 production from Kiliwani North-1 well stood at 15 million standard cubic feet per day"
https://www.offshore-energy.biz/aminex-kiliwani-north-1-production-drops-below-1-mmcf-per-day/
That is what valued AEX at £250m....
NT-1 + NT-2 alone are 2.46x the production and at a higher Gas price.
NT-1 + NT-2 + CH-1 could potentially hit production of 8x that.
Go figure!
Again, Aminex’s company stockbrokers forecast Free Cash Flow for Aminex from Ntorya of somewhere between $25m and $40m at plateau production if the 3D seismic results were 2tcf.
Obviously, the 3D seismic results suggest we have more gas than that!
Full field development WAS 140MMscfd, but with a potential EIGHT TIMES the estimated resources, that production could be ramped up considerably, without affecting to original life expectancy of the resources.
StockCheque,
thanks for your very informative answer. GL
So now that I am sitting on my GWR train awaiting the 10:30 departure to Bath I will respond to some of your comments SC.
Firstly you need to look at the "facts" that applied at the time of the £250m valuation. Let's list a few.
At no point was the £250m valuation purely attributable to the production from Kiliwani as you state in your 8:46 post.
At the time of that valuation the known production from Kiliwani was 30MMscfd (see RNS of 4th July 2016) of which AEX share was 54%. It was only on preliminary results in April and then at the AGM in Dublin in May 2017 that the issues with Kiiwani were publicised and the extent of them not confirmed in Nov 2017.
The income being earned by AEX at that time was $800k - $1m per month.
In the 6 month run up to the Feb NT2 drill the market cap had stayed in a range of approximately £60 - 80m - this was based on the combined "value" of the Kiliwani production and the known flows from NT1.
The market cap rose by circa 75% between the Ntorya operational update of 9th Jan and the 27th Feb when they announced completion of the drill programme.
The price peaked at 7.8p (I remember it well, my limit price was 8.0p!) just before the well test results were announced in March.
The income is key and not the price being paid for the gas. You say that the price was lower then, than it is now - how so, do you know what the terms of the Ntorya GSA are? I am not arguing, I would expect it to be higher now BUT I was not aware that the new terms have been published?
The expectation for flows from NT2 was enormous (estimated between 50 - 80 MMscfd) so when the results were announced at only 17MMscfd per day the sp naturally took a kicking.
The market was expecting the drilling of NT3 to follow close behind NT2 and was, to a degree, expected to replace the disappointment of NT2 results. Shareholders were disabused of this belief at the Dublin AGM. the [problems encountered a NT2 totally screwed up BoD plans and expectations - and I believe though, only my belief, the support and confidence of the TPDC in AEX's ability to operate the License.
Aminex was 75% owner and operator of the Ntorya license at that time and 54% operator of the Kiliwani License.
So the validation of that £250m valuation AT THAT TIME was loosely as below:
54% x 30MMscfd (monetised) PLUS the expectation of monetisation of 75% of 17MMscfd at NT1 PLUS 75% of 50+MMscfd PLUS anticipated flows from NT3 drill. So 15MMscfd earning money and the prospect of 75% of flows of 70+MMscfd (or 50+MMscfd?) yet to be monetised (and that ignores prospective NT3 flows).
So no SC, the £250m valuation was NEVER based purely on Kiliwani incomes as you would have us believe.
Within months and after the poor outcome of NT2, awareness of the Kiliwani issues and notification that there would be no NT3 drill within months the Market Cap was back at £80m.