LONDON (Alliance News) - Aminex PLC and Solo Oil PLC Wednesday said the Kiliwani North-1 gas well in Tanzania will initially produce more gas than originally expected with sales still on track to begin before the end of the third quarter.
Aminex operates the Kiliwani North development project with a 58.5% stake whilst Solo has a 6.5% stake with an option to increase this to 13% in the future.
The Kiliwani North-1 well was previously tested with a flow rate of 40.0 million standard cubic feet per day and the companies were anticipating an initial sustained production rate of 20.0 million standard cubic feet per day once production began.
On Wednesday, the companies said an engineering review was carried out and the well is now expected to have a sustained production flow rate of around 30.0 million standard cubic feet per day.
That well is "ready to produce" and will pump gas into a newly constructed 36-inch regional pipeline system which was recently completed by another company. The pipeline operator has constructed a sales pipeline from Kiliwani North to the nearby processing plant at its own cost with the operator responsible for supplying and installing a gas metering unit.
However, before production can begin into that pipeline, the companies need to finalise the gas sales agreement.
"A gas sales agreement is near completion, but the operator awaits the finalisation of payment protection clauses and guarantees prior to final signature," said Aminex.
At the Ruvuma production sharing contract, another joint venture between Aminex and Solo Oil in Tanzania, the companies are currently planning the Ntorya-2 and Ntorya-3 wells, with the first well expected to be drilled in the first quarter of 2015. Both those wells are testing previously unexplored areas.
If Aminex and Solo can strike more oil at Ruvuma, it is likely that the production from the area would also be pumped via the new pipeline being used for Kiliwani North.
Aminex is the operator of the Ruvuma project with a 75% stake whilst Solo holds a 25% interest.
In a separate statement Wednesday, Aminex reported a USD606,000 pretax loss in the first half of 2015, narrowing from a USD4.0 million loss a year earlier. The loss narrowed because its administrative expenses more than halved and it booked a USD1.8 million gain from farming-down its interest in Kiliwani North to Solo Oil.
Aminex is currently trying to secure a long term financing deal to allow it to restructure its existing debt and to source capital to fund the development of Ruvuma. The two planned wells, Ntorya-2 and Ntorya-3, are already funded.
"The signing of the Kiliwani North Gas Sales Agreement, expected in the near future, should also assist the acceleration of the Company's other activities, particularly appraisal drilling at Ntorya. Your board believes that the steps we are taking will be significant for the growth of the Company and underline its strategy to focus on key assets in Tanzania, ever seeking new production and development opportunities," said Aminex Chief Executive Jay Bhattacherjee.
Once the gas sales agreement for Kiliwani has been signed, Solo has the chance to pay Aminex a much needed USD3.5 million to double its stake to 13%, which Aminex would use to "accelerate" the repayment of its debts, it said.
Aminex shares were up 5.6% to 2.08 pence per share on Wednesday whilst Solo shares were up 12% to 0.444 pence.
Solo Oil also released a separate statement Wednesday that stated the Horse Hill project in Southern England is thought to have 10.99 billion barrels of oil in place. Solo has a 10% stake in a company which holds a 65% stake in the project.
By Joshua Warner; joshuawarner@alliancenews.com; @JoshAlliance
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