LONDON (Alliance News) - Aminex PLC Monday said it has converted its stake in the West Esh el Mellahah-2 production sharing contract in Egypt into a royalty in order to reduce its exposure to further development costs.
The oil and gas company has a 12.5% stake in Aminex Petroleum Egypt Ltd, which in turn gives the company a 10% indirect interest in the production sharing contract.
Four exploration wells have been drilled on the Egyptian concession since 2006, the first two of which were abandoned as dry holes and the third failed to find a commercial volume of hydrocarbons.
The fourth well, South Malak-2, made a discovery of oil, which has been declared commercial.
Until now, Aminex's interest was free-carried through to first production but if production could be established, Aminex would have been required to meet ongoing licence costs and repay its free-carry in full prior to receiving its share of production revenues.
Therefore, Aminex has agreed to sell its stake in the discovery to its partner, PetroSino, for a "nominal sum", and in return Aminex will receive a 1% gross overriding royalty on the sales of production, once PetroSino has recovered USD2.5 million worth of drilling costs, it said.
Aminex Petroleum Egypt will also undergo a name change to disassociate it with Aminex, which will also no longer be represented on the board of Aminex Petroleum Egypt.
"The board of Aminex is pleased with the result of today's reorganisation of its Egyptian interests which provides the best opportunity for the company to achieve revenues from the WEEM-2 concession, with no exposure to further development capital," said Chief Executive Jay Bhattacherjee.
In addition, the company said the gas sales agreement for its Tanzanian project can be concluded "in the near future", which once completed will lead to gas being sold into the pipeline system "soon afterwards".
Aminex shares were untraded on Monday morning, last trading at 2.03 pence per share.
By Joshua Warner; joshuawarner@alliancenews.com; @JoshAlliance
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Aminex (AEX)