Member Info for HighYield

Roger Jolly, sorry if I sound to negative, but as a longterm holder of WEN, I have been used to a lot of delays and dissapointments. Even now, I am waiting for pay-out from the bid from MP, as it needs approval from TZ. I can assure you that I whish all AEX holders success, as many of you have have waited a long time for gas production and revenue. However, I think many of you are still too optimistic about time line, revenue, funding needs and share price potential. Based on my estimate for revenue going forward, the company is more or less fully priced (at least compared WEN and Orca). The big possible trigger, however, could be new estimates of reserves and resources based on new 3D seismic. Although, I fear many of you are too optimistic regarding this comming report as well. I whish all long time holders of AEX the best of luck.

" On what facts are you basing your theory on?
As you noticed, I wrote "expect" and that is of course some sort of speculation. My speculation is based on my experience that thing normally takes longer time than what is stated in Tanzania. Furtermore, I don not expect that Tanzania will start building the pipe until well tests have been made and NT 1 and NT2 can produce sufficient amounts of gas. Mabee they will also wait for the result of CH1.

RogerJolly, I do not expect that gas will start flowing in the pipe by October 2023. I expect a delay of at least 6 months as I do not think the pipeline will be ready as soon as predicted. This will put additional pressure on liquidity that will require some sort of funding, equity or loan. Furtermore, there were some additional claims from TZ compared to last year.

Tanzania, you asked Proscuitto if he still thinks ARX is going bust. I am not Proscuitto, but I will make a comment anyhow. I do not think AEX will go bust, but there is a big risk, that the company will need additional funding during the year, as working capital is negative. Short term liabilities are larger than short term assets. Both the Auditor and the Directors have made commets regarding "going concern" and that additional funding may not be possible. These are not standard comments, but specifically related to working commitments for the Nyui license, provisioning for decommissioning and disputed tax claims. Please read note 1 and note 25 in the annual report for additional information.

"The Company is currently carrying out a 3D seismic acquisition program, budgeted at $23.2 million in order to further evaluate the current reserves and contingent resources as well as the potential of prospective resources. This will be used to de-risk future development drilling opportunities and to evaluate the potential for future exploration drilling. The Company awarded and signed a contract with African Geophysical Services LLP on July 7, 2022, to acquire approximately 181 square kilometers of 3D shallow marine, transition zone and land based seismic over the Songo Songo license area. We anticipate that the acquisition of data will be completed by Q3 2023 and fast track data processing will be completed by Q4 2023."

According to M&P, production at Mnazi Bay was 97.3 mmscf/d in q1 2023.

"M&P’s working interest gas production (48.06%) on the Mnazi Bay permit in Tanzania was 46.7 mmcfd
(gross production: 97.3 mmcfd) for Q1 2023, an increase of 9% compared to Q4 2022."

I think most AEX holders are far too optimistic of the future valuation of the company. I will illustrate this by the following comparison between WEN and AEX. WEN is currently valued at 54 MGBP and have a net cash holding of about 30 MUSD. Their EV is about 30 MGBP, when reducing the market cap by net cash. AEX estimated revenue will be slightly higher compared to WEN's, assuming a production level of 140 mmscf/d. Look at my previous post for this calculation. We can of course assume that AEX will have lower admin expenses compared to WEN, but both companies are non operators and should have about the same cost base. AEX current market cap is 47 MGBP with a small net cash position, so the EV is about the same as market cap. So, based on this comparative valuation (purely based on estimated production), AEX has a higher valuation already today. You will probably be able to buy AEX shares at today's prices also when production is up and running at full capacity. I know, that the bid on WEN has been approved by their shareholders, so WEN is no alternative investment, but Orca Energy is still available.

Ufufuo, when trying to estimate revenue based on production volume, I wrote a comment some time ago. This assumes that AEX have a similar PSA as Wentworth, where gross gas revenue is split between cost gas and profit gas. Based on my assumptions, a production volume of 140 mmscf/d would lead to revenue net to AEX of about 35 MUSD. The assumption assumes full use of cost gas.
"If we assume that the PSA for Ruvuma will be similar to KN and Mnazi Bay license, we could estimate revenue by looking at reported revenue from WEN. In 1H 2022 WEN reported revenue of 15.4 MUSD when production at the Mnazi Bay field was 92.3 mmscf/d. WEN's share of the license was 32%, so their share of gas production was 29.5 mmscf/d. If we assume the same numbers for the second half of the year. Annual revenue would be 30.8 MUSD when their share of production was 29.5 mmscf/d. That is about 1 MUSD in revenue per mmscf/d during a year. During this period WEN full recovery from the cost gas pool (60% of gross gas revenue) was made. Assuming the same situation for AEX would mean an annual revenue of about 10 MUSD if the license produce 40 mmscf/d. Assuming that AEX holds 25% of the license. Any comments?"

If we assume that the PSA for Ruvuma will be similar to KN and Mnazi Bay license, we could estimate revenue by looking at reported revenue from WEN. In 1H 2022 WEN reported revenue of 15.4 MUSD when production at the Mnazi Bay field was 92.3 mmscf/d. WEN's share of the license was 32%, so their share of gas production was 29.5 mmscf/d. If we assume the same numbers for the second half of the year. Annual revenue would be 30.8 MUSD when their share of production was 29.5 mmscf/d. That is about 1 MUSD in revenue per mmscf/d during a year. During this period WEN full recovery from the cost gas pool (60% of gross gas revenue) was made. Assuming the same situation for AEX would mean an annual revenue of about 10 MUSD if the license produce 40 mmscf/d. Assuming that AEX holds 25% of the license. Any comments?

I also found information regardiing assumptions for the fiscal terms for the license. As there is no information regarding the Ruvuma PSA, it is based on the assumption that it will be similar to the KN1 license. The terms seems to be very similar to the terms that WEN have for Mnazi Bay. Gross gas revenue is split between cost gas (60%) and profit gas (40%). Profit gas i divided between TPDC and the license holders on a sliding scale based on production. TPDC gets between 30-70% of profit gas depending on production volume.
"5.9.2 Commercial Terms and Economic Assumptions
Ndovu has a 75% working interest in the Ntorya Licence, which is subject to the Ruvuma PSA.
The Development Licence is at present under negotiation. Aminex suggested that there are many
reasons to expect similar Fiscal Terms as the Kiliwani North development licence. Given the lack of
approved fiscal terms and considering the status of Contingent Resources, it has been assumed fiscal
and commercial terms similar as suggested:
• Grant of a development licence for 25 years
• Royalty is payable at 12.5% by the Tanzania Petroleum Development Corporation (TPDC)
61
171892 Proof 4 Thursday, December 6, 2018 18:00
RPS Energy Ndovu Resources Ltd.
ECV2252 November 2018
• Local Levy of 0.3% applicable on revenues.
• Cost Recovery: all costs considered as Recoverable Contract Expenses may be recovered from
petroleum revenue limited to an amount not exceeding 40% to 60% for Oil and 60% for Gas.
Any unrecovered cost is allowed to be carried forward into subsequent years without restriction.
Recovered costs include Opex, Capex (depreciation) and Abandonment costs. Any excess of
Cost petroleum after having recovered all costs is automatically considered as part of the profit
petroleum and distributed according to the profit sharing terms.
• Profit Sharing: the method applicable for establishing the profit sharing between the government
and the contractor is calculated as shown in Table 5-7 and Table 5-8."

Haggis and Roger, I had a quick look at the Farm Out document that you gave the link to Haggis. I could not find any comments regarding TPDC's option to farm in to the license either. However, I found the answer I was looking for regarding if AEX were to be given benefit for cost recovery for the amount that they are being carried for, and it was good news.
"The parties have also agreed that any cost recoveries made under the Ruvuma PSA shall be shared
between them in accordance with their Participating Interests under the JOA (irrespective of when the
relevant costs were incurred and irrespective of whether those costs were the subject of the Carry)."

RogerJolly, when looking at news from AEX, I cannot see any comments from the company regarding the PSA. So, if all has been covered on this board a while back, then somebody must have contacted the company for more information. If anyone has, please state what has been said. Regarding your conclusion that TPDC did not buy SCIR's share of the license, hence they will not opt for a share of the license in the future, I do not agree. Why pay for SCIR's share, when they can pay just their share of the development cost at a later stage. It is better for them to wait and see until the field is about to start production and then decide if they want a piece of it or not. If not, you should really ask why. Do TPDC not think it will yield a reasonable rate of return?

In the case of WEN, TPDC bought in and paid by their share of gas sales. WEN had a long-term receivable of about 30 MUSD. The receivable was finally paid back in 2019.
"On June 30, 2009, the Tanzania Petroleum Development Corporation (“TPDC”) and the Company entered into a Joint Operating Agreement (“JOA”) related to the gas concession in Tanzania. Under the terms of the agreement, TPDC will participate in a 20% share in the Mnazi Bay Development Area production, and will pay the Company for the past costs incurred, from its share of future production. The undiscounted amount receivable from TPDC is $31.5 million. "

The gas sales price for the Mnazi Bay gas for 2023 is 3.71 USD. Im am not sure if it was per BTU or mscf. There is an inflation adjustment to the price for each year based on US CPI. I would expect that sale of Ruvuma gas will be on the same terms. However, what is more important than the terms of the GSA is the terms of the PSA. Normally, there is a split of gross gas revenue between profit gas and cost gas. The producing companies gets their opex and Capex (investment in the field development) recovered through cost gas, while profit gas is split between the Government (TPDC) and the gas producers. Will AEX get part of the cost gas or will ARA get all of it, as they are paying for the development. AEX is carried up to 35 MUSD. Will TPDC opt to take a share of the license? I think shareholders in AEX should try to get some more information regarding the terms of the PSA, and I am surpised that this has not been discussed here.

"On 25 November 2022, at the Tanzania Petroleum Development Corporation ("TPDC") headquarters in Dar es Salaam, the parties to the Ruvuma PSA signed an addendum to the PSA ("PSA Addendum"). The Ruvuma PSA, as with all other PSAs in Tanzania, contained profit share, royalty, and taxation rates only for oil production. The PSA Addendum sets out the relevant terms for gas production. "

Demand for gas seems very strong. Current production seems to be above 100 mmscf/d.
https://www.lse.co.uk/rns/WEN/operational-and-corporate-update-64uepk295ix4o8s.html
"Operational Highlights and Outlook

· As of 12 March 2023, the Mnazi Bay operation has reported zero lost time incidents for a period of 2,413 days (six years and 222 days)

· In 2022, the Mnazi Bay gas field attained record production levels, reaching an average gross daily rate of 90 MMscf/d, the highest annualised average daily production rate in the licence's history

· Current year to date daily average production is c.95.0 MMscf/day (gross), compared with 98.1 MMscf/day (gross) for the same period in 2022

· Q1 2023 average daily production is projected to reach approximately 98.0 MMscf/day (Q1 2022: 98.5 MMscf/d)

· Production guidance for 2023 is in the range of 85-95 MMscf/d, to take account of conditions at the Madimba gas facility and national rainfall levels which affect hydroelectric generation

· Based on the recent perforation programme, there are indications of additional gas production volumes; the results will be reported upon testing completion and analysis of the results

· The Mnazi Bay Joint Venture Partners have identified a number of leads on the Mnazi Bay licence and are evaluating the prospects as potential drilling targets

· The Company anticipates ongoing growth and development in the Tanzanian market supported by Mnazi Bay gas production

Financial

· Debt free with cash on hand of $32.3 million

· TPDC receivable of $4.9 million representing two months of gas sales

· Tanzania Electric Supply Company ("TANESCO") receivable of $764k representing five months of gas sales"

OK, you are refering to Mick 2020. He was posting as well at the same time. He has more knowledge than me both about WEN and AEX.

Rolly Roger, it might have been me you are refering to. I tried to convince AEX shareholders to diversify into WEN instead off "all in " AEX. However, the comparison was before 2020. This post id from October 2017.
"RE: Re Careful26 Oct 2017 13:56
No net income yet, but I guess you know that. Although, I expect that WRL will report a positive quarterly result in Q3, due on 1 november, I think.

Here are some comparative multiples for WRL and AEX if you are interested.

USD m 6m 2017 6m 2017
WRL Aminex
Revenue 5,10 4,59
EBITDA 1,27 2,75
Net result -1,66 1,01

Cash flow from operations 1,27 2,50
Change in WC -1,85 -4,91
Capex 1,06 -7,49
Financing 2,38 -2,77
Total Cash flow 2,85 -12,65

Balance sheet
Cash 3,83 6,91
Net debt 15,18 -6,91
Working capital 9,08 7,46

Valuation
Market cap 69,20 170,17
Net debt 15,18 -6,91
Enterprise value 84,38 163,26

Production, mmscf/d 36,90 15,00
Share of production 32 % 57 %
Net production, mmscf/d 11,81 8,62"

EveryPenny 1, what input have you used to come up with such numbers. £100m in revenue, seems extremely unrealistic?

"If you use £100m as turnover (which is Projected is £140m for 2024, so very conservative).
Overheads/cost at £50m. Costs will be no where near £50m for the year.
Which equals £50m in earnings."

Regarding his agenda, he just stated his agenda didn't he.

"You have a moral and ethical obligation to protect the weak, the naive, the gullible, the mentally handicapped, the young, the brainwashed and the elderly."

Orca should be in a good position to get a renewal of their license.

"However, with the emergence of longer term high levels of gas demand and discussions with our Tanzanian partners, we are currently revisiting the 2023 capital program to align with a potential longer term investment program including near term discussions on a development licence renewal."

Gas demand is higher than what the JW partner can deliver, and they now consider drilling two new wells.
"With sustained strong demand during the year, the Company expects to achieve an average gross daily production rate of approximately 90 MMscf/day for 2022 (previous guidance 75-85MMscf/d). Current production levels are steady at a supply-constrained 90MMscf/d (as at 19 December 2022), below current demand nominations of 95MMscf/d from the key offtaker, Tanzania Petroleum Development Corporation ("TPDC")."
"The Joint Venture has also identified a further contingent capital expenditure programme indicatively costed at $42 million. Of this, $35 million relates to exploration drilling on the Mnazi Bay licence, the programme and extent of which remains contingent upon further commercial viability studies. "

https://www.londonstockexchange.com/news-article/WEN/operational-update-and-cost-recovery-audit/15771741