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Reading today's news, I got the impression that the Ruvuma license hold huge quantaties of GIIP, far more than was expected before, and that exploration in other areas of the license could lead to significant new additions to the resource base. However, when looking into the report, my conclusion is that most of the potential GIIP relates to the area around the two wells that already have been drilled. 65% of the estimated P50 GIIP of 6.9TCF relates to the area around NT1 and NT 2. Please correct me if I am wrong, cause I am no expert in reading thse kind of seismic reports. It will be interesting to see if RPS increases their resource estimate following new 3D seismic data. I fear for an equity raise following today's news as estimated time for revenue has been put forward once again.
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I do agree, it will be very interesting to see what will happen regarding a license extention. Another aspect to follow, is what will happen with the so called "protected gas". That agreement expires on July 31 st this year, and Tanesco still have some outstanding bills that are not paid (about 20 MUSD, I think). My guess, is that there will be a license renewal, but with PSA terms that are in line with current PSAs.
Orca released its reserve report yesterday. As expected, reserves were lower as reserves can only be included for the remaing period of the license (expire oct 2026). They also wrote that TPDC had not apllied for an extention of the license. Orca's current PSA has better terms than other gas producers in Tanzania, giving them the right to sell gas to private market and a 55% share of profit gas.
"β’ In April 2023 PAET requested TPDC to apply for an extension to the Songo Songo Licence, as they are obliged to do under the terms of the Songo Songo PSA. Grant of an extension will enable ongoing investment to continue which will sustain production from existing compartments and bring additional pools in the field into production. Unfortunately, it appears as though TPDC has not made the application as at the date of the press release. Given the uncertainty associated with the extension of the Songo Songo Licence, it has been necessary to remove approximately US$55million of future development capital from the 2023 year end 1P reserve evaluation, as the associated projects are no longer economic in time remaining on the development licence (2.8 years from year end 2023). On this basis, the respective reserves associated with the removal of development capital have been reclassified as contingent resources pending receipt of a licence extension beyond October 2026 as provided for in The Petroleum Act, 2015 (the "Act").
Maurel et Prom solved the preemption problem with TPDC by giving them an option to increase their stake. Now it looks as though the bid will be approved by Tanzanian authorities.
The Agreement is structured as a 'call option' for TPDC, which provides a pathway for TPDC to increase its ownership by up to 20% in the production interest (the "Call Option"). As part of this Agreement, M&P has received the required pre-emption waiver from TPDC and Tanzanian government approval for the Acquisition, and only the final consent from Tanzania's Fair Competition Commission ("FCC") remains outstanding, which is expected to be granted before the Jersey Court sanction hearing.
Tanzania, I think you are mistaken. I believe that was my comment that he had copied into his contribution. Read it again and you can see that he referred to my signature.
As I have written before, I whish AEX shareholders success, but I think many of you are too optimistic regarding share price potential when AEX starts producing. Until then there is an increasing risk for another capital raise.
StockCheque,
I agree that the gas price is set in USD, however both Orca and Wentworth has stated that there is a lack of USD in the country , so they are getting pais in local currency instead. I guess the same problem will aplly for ARA as well.
StockCheque, thank you for interesting links. No problem at all for ARA to get USD into the country. As there is a shortage of foreign investments in Tanzania, an inflow of USD would be very welcome.
"Tanzania"wanted a positive point from my comment regarding problems to convert local curreny into USD. Sorry, I should have written, this problem does not affect AEX and its shareholders as AEX does not have any revenue to report.
Orca released the Q3 report yesterday. No major news, as the negative production outlook already was disclosed in the operational update. However, in the Q3 report the company reported a currency loss of about 3.2 MUSD . Both Wentworth and Orca have earlier said that it is becoming more difficult to convert local curreny to USD. This is negative for all companies in Tanzania, and a factor that AEX shareholders should be aware of.
"Net foreign exchange loss includes realized and unrealized revaluation gains and losses. Specifically, unrealized revaluation loss represents
changes in fair value of cash balances denominated in Tanzanian shillings."
For those of you that also follow other Tanzanian gas producers, Wentworth published an operational update today. https://www.lse.co.uk/rns/WEN/operational-and-corporate-update-mdnwtvllofg419j.html
Also worth noting, is that despite increased production in Q3, revenue fell from 18 MUSD in Q2 to 13 MUSD in Q3. The most likely reason for this fall is that cost recovery pool has been used up. WEN has informed about that in their 1H report.
According to MP operational update, gas production at Mnazi Bay increased pΓ₯ 15,.5% in Q3 compared to the first half of the year. This implies an average production of 113.5 mmscf/d in Q3 at Mnazi Bay. I thought full production was around 100mmscf/d. MP bid for WEN was indeed a smart move. Not good for WEN though. I hope the bid will not be completed before the long stop date.
According to MP operational update, gas production at Mnazi Bay increased pΓ₯ 15,.5% in Q3 compared to the first half of the year. This implies an average production of 113.5 mmscf/d in Q3 at Mnazi Bay. I thought full production was around 100mmscf/d. MP bid for WEN was indeed a smart move. Not good for WEN though. I hope the bid will not be completed before the long stop date.
Thanks for your reply, however I am not that familiar with the outcome of the 2015 Tanzanian oil/gas review. Does it relate to the fact that Orca can sell gas also directly to industrial companies at market prices and not only to TPDC or Tanesco?
Please tell me what you don't like. When I am invested in a company, I like to see both sides of the coin. So any negative input, that I might not be aware of is appreciated information.
Bullfrog, you are correct that Orca's gas reserves are decreasing at a high rate and you also include the explanation for that, as reserves can only include gas that can be expected to be produced during the license period.
"The reduction in reserves was attributed to a 21% reduction in the time remaining until the expiry of the current Songo Songo Licence (3.8 year remaining at year end 2022 versus 4.8 years at year end 2021), which was partially offset by increased Company conventional natural gas sales and forecasts (which will be classified as Additional Gas (as defined in the Songo Songo PSA) (βgas salesβ) until the expiry of the current Songo Songo Licence in October 2026)."
It will be more appropriate to compare reserves and company valuations when and if Orca gets a license extention. I think the odds are in favor of such a license extention, especially as Orca from 31st of July 2024 can stop deliver "protected gas" at cost.
I encourage all AEX holders to take a look at Orca as well. I think it offers good value at low risk.
Of course there is a risk that an extention is not approved, and these processes seems to take a very long time. I do not see any real problems with the relationship with the Tanzanian Government, instead it was Tanesco that could not pay for gas deliveries for an extended period in the past. As far as I can see, the relationship with TPDC has been working OK. In terms of risk assessment for a yes or no for a licence renewal, I would guess 80/20 in favor for a yes. But new terms also need to be negotiated. The agreement to supply gas at cost price to Songa Songa (protected gas) expires before the development licence, that expires in October 2026.
"During Q2, the Company formally requested to TPDC to initiate the process of licence extension, in accordance with the terms of the PSA. The Company awaits a formal response from TPDC on this and continues to actively engage with the GoT to progress this matter."