Aminex Valuation31 May 2020 12:58
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
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