Member Info for JODO

Part 2
B A D N E W S
The position was so bad that an outside consultant, RPS Energy, had to be brought in late last year to compile an independent competent person’s report, issued in February 2018. This assigned less than two billion cubic feet of gas to the fi eld – little more than 20% of what was previously expected. Instead of the well having a fi ve-year life, it is now arguable that it has already reached the end. Accounts for the year to December 2017 refl ect this – instead of the expected depletion charge of $1.3m as in the previous year, this had to be upped to $4.5m, which hammered group profi tability and pushed Aminex from an operating profi t in 2016 of €400,000 to a loss of €1.1m. The fi eld’s residual estimated value as of January 2018 fell to a tiny $2.4m. Aminex has undertaken a stimulation study of the fi eld, saying it “intends to re-enter the well” to carry out a work over, which sounds like a desperation measure. Moreover, it has certainly not been made clear to Aminex’s long disappointed shareholders that the producing gas fi eld they thought would deliver at last has been proved a dud. In these circumstances, it is hard to understand how Jay Bhattacherjee could possibly be paid $423,000 last year compared with $371,000 the preceding year. Finance director Max Williams is also being paid what looks like a high $346,000 salary. Bhattacherjee was brought into Aminex by Brian Hall in 2014 with the former backing his company (it had licences in Moldova) in return for most of the 46 million shares the chief executive now holds in the fi rm. But these Moldovan assets seem to have had minimal value – when the oil price fell they were worth nothing.
N E G O T I A T I O N S
The former chief executive (now chairman) Hall made the best part of $20m in small fi elds in Russia when getting Aminex out 20 years ago. Max Williams, who has been with Aminex since 1994, carried out some signifi cant and sensitive negotiations when the company was exiting Russia. Although the $20m received was well under what the fi elds were actually worth, it is usually better to get out of a bad situation than struggle on in the face of adversity. This is particularly true in a country like Russia, where Lukoil controlled the pipelines and only allowed access to these on their own terms.
T A N Z A N I A
It was Hall, too, who chose to drill offshore in Tanzania 15 years ago but because of logistic diffi culties the only well drilled cost $12m and proved a dud. It did show up significant geological features that later allowed him drill again just offshore Songo Songo Island to discover the Kiliwani North gas fi eld. Aminex now plans to shoot some three-dimensional seismic over the Kiliwani South structure and management believes this could contain 67 billion cubic feet of gas. It is hard to be optimistic about this, however, given what has happened to the north fi eld. A more important action by Hall was in drilling Aminex onshore Ruvuma Basin wel

Duds and dithering at Aminex plc
GIVEN THAT Aminex went into production in Tanzania for the fi rst time in April 2016, the fi rst full year fi gures from the gas fi eld surfaced in the 2017 accounts. Shareholders must be signifi cantly disappointed that the company still lost over $2m last year, not much less than the previous year, although the expectation had been that the fi eld would boost profi ts in 2017. Chief executive Jay Bhattacherjee’s softly softly approach is clearly doing the hapless shareholders no favours.
The other disappointment is that Tanzanian state oil fi rm TPDC is claiming just on $3m from Aminex on foot of what it claims are unpaid royalties and a disputed profi t share arrangement. Aminex disputes the claim but is holding back this amount from sales of gas for which it is the monopoly buyer. More bad news concerns the follow-on from two successful onshore wells drilled in Tanzania, with the second completing fl owtesting in March last year. The third planned step-out well was expected to be drilled last autumn but this did not happen. It seems Bhattacherjee has got cold feet and will not drill this essential well until he has completed a farm-out deal to reduce the risk. But investors like real returns and evidence of revenue generation and profi tability and, in this regard, Bhattacherjee has disappointed. As a petroleum engineer, he should have had the expertise to understand the Kiliwani North gas fi eld, just off Songo Songo Island where there is an existing gas processing plant that he could pipe the gas fi eld into. In turn, this is connected to the new pipeline completed two years ago. According to Bhattacherjee: “The company benefi ted from continued average daily production at Kiliwani North of approximately 15 million cubic feet a day for the fi rst six months of the year ... but during the second half of the year production from the well started to decline faster than expected.” The real position is dramatically worse. While what the chief executive says about the fi rst half of the year is true, the outcome in the second half was disastrous. The decline in well head pressure and gas fl ow became so severe that “in November the well head pressure had reduced to a point where it was lower than the minimum inlet pressure required by the plant”. In layman terms this means the well had to be shut down so gas pressure could build up again inside the fi eld before it could be put back on production fl ow.
B A D N E W S
The position was so bad that an outside consultant, RPS Energy, had to be brought in late last year to compile an independent competent person’s report, issued in February 2018. This assigned less than two billion cubic feet of gas to the fi eld – little more than 20% of what was previously expected. Instead of the well having a fi ve-year life, it is now arguable that it has already reached the end. Accounts for the year to December 2017 refl ect this – instead of the expected depletion char

I presume it only those affected who can vote, i.e., not the Board or Orion.
Does anybody have any knowledge or experience of how to go about mobilising PIs to vote against?

Dalradian taken out during the week, but we’ll below its recent-years’ peak.
Any implications for CGNR?

It’s remarkable how few posts are on here or other boards since this takeover was announced. Does anybody else think it’s a ripoff?
I’m still a long way off my buy price of only a few years ago. And, when all the signs are that this share will multiply in the next year two.

NO DOWNSIDE With the big $100m Barryroe programme fully financed, there would appear to be no downside here, making Providence effectively a risk-free exploration bet. It is, however, not just the exploration cost that shareholders have concerns about but also the development cost. Assuming success, the project could be developed by using a fl oating production and storage offtake vessel (FPSO) to handle the oil with the gas separated out and fed into the existing Seven Heads platform. This could cost up to $2bn on the production development side, but assuming the mid-estimated 350 million barrels of oil recoverable does fl ow and the 20% wax content is successfully dealt with, and total operating costs working out at $30 a barrel, the current oil price would leave a net profi t of over $10bn, with Providence getting 40% of this. The Providence share price is still down at 12c so it is capitalised at only �70m. With �30m cash in the bank and the Barryroe prospects worth a possible attributable $2bn shareholders could be looking forward to a bonanza. Pat Plunkett bailed out of Tullow Oil six years ago when that company was about to go into freefall and agreed to become chairman of Providence last October, bringing on board Angus McCoss, former exploration manager at Tullow. Plunkett came in knowing that the total cost of the Druid/Drombeg drilling in the South Porcupine was fully covered by the Cairn Energy and Total leaving Providence. He has overseen Providence�s pulling out of several licences although the fi rm still has interesting prospects in the Atlantic Margin in the North and South Porcupine Basins, as well as further south in the Goban Spur Basin, the Kish Bank licence offshore Dalkey and some small prospects in the North Celtic Sea. If the Barryroe farm-out proves a success the principals are set to clean up with O�Reilly Jnr sitting on 12 million options, admittedly at what today looks like a crazy 45c price, while O�Sullivan has nine milion options at a similar price. It is also interesting to note that Plunkett bought one million Providence shares when he came on board. Always a good sign.

It is hard to know now why Tony O�Reilly Jnr and John O�Sullivan did not land a farm-out deal to develop Barryroe, given that the oil price at the time meant it was a hugely exciting prospect and should have attracted a range of medium and major oil fi rms as potential partners, especially given that the fi eld is only 35 miles off southwest Cork in only 300 ft of water. Happily the boys did raise $65m in a placing at �5.90 a share. Hanging around proved hugely problematic for the Barryroe drilling programme of October 2011, which should have taken little more than one month but ended up taking six, with the cost of the well jumping from the original projected $30m to $80m, for which Providence is blaming the drilling company, TransOcean. Providence did not have the money to pay for it and raised $24m in mezzanine debt from fi nance house Melody Finance. In March 2015, Providence had to raise �28m in a placing at 34c a share � a 94% discount on the April 2013 placing price. Unfortunately, this proved inadequate and the court ordered Providence to pay TransOcean the fi nal $7m. Together with the Melody debt, Providence was facing bankruptcy but impressively managed to raise a massive $77m in a placing, albeit at a tiny 15c a share, along with issuing 10 million free shares to Melody for its co-operation and 38 million free shares to Cenkos Securities, the broker that backed the share issue. BIG DISCOUNT For the hapless shareholders this represented a whopping 97.5% discount on the share placing only four years earlier. In these circumstances it was surprising that O�Reilly Jnr and O�Sullivan decided last year to go wildcatting again, in the deep-water South Porcupine Basin where they committed to drill the twin Druid Drumbeg prospect 200 miles offshore southwest Cork in 6,000 ft of water. Admittedly the well only cost $42m as against the near $200m it cost Exxon to drill the adjoining Dunquin Prospects two years ago. Dunquin was a dud but at least showed some oil system in place, while the Druid Drombeg wildcat only flowed water. But this well cost Providence nothing as it farmed it out to Cairn Energy and Total, such that at year end Providence is still sitting on �30m cash. NO DOWNSIDE With the big $100m Barryroe programme fully financed, there would appear to be no downside here, making Providence effectively a risk-free exploration bet. It is, however, not just the exploration cost that shareholders have concerns about but also the development cost. Assuming success, the project could be developed by using a fl oating production and storage offtake vessel (FPSO) to handle the oil with the gas separated out and fed into the existing Seven Heads platform. This could cost up to $2bn on the production development side, but assuming the mid-estimated 350 million barrels of oil recoverable does fl ow and the 20% wax content is successfully dealt with, and total operating costs w

Providence shareholders holding out for a bonanza AFTER 37 years of failures at Atlantic/Providence Resources, the company has signed a farm-out and fi nancing deal with the Chinese group, Apex � a consortium made up of the drilling subsidiary of the Chinese oil major, CNOOC, and JIC Capital, an offshoot of the state-owned China Investment Corp. There is a long way to go but the terms of the deal give Providence shareholders a free ride here and for the fi rst time in a long time thing are looking up. The possibility of a bonanza cannot be ruled out. Barryroe is an already identifi ed oil field with an estimated one billion barrels of oil spread over its 29 sq mile area. The big question is the commercial viability of the fi eld, with an expected 35% recovery rate. The recently signed threewell exploration and appraisal programme is designed to identify the precise location and accumulations of oil and gas and decide how to extract them at an economic cost. This is not wildcatting but a precommercial drilling to prove up Barryroe as a viable commercial discovery with an expected 350 million barrels of oil recoverable, as well as 300 billion cubic ft of gas. The deal struck is not simple and is made up of a farm-out and fi nancial loan element. The farmout part of this threewell commitment deal is that China Oil Field Services � the CNOOC drilling company � farms into a 50% working interest in Barryroe at no premium but rather in exchange for undertaking the three-well programme. This means Providence together with its 20% Irish partner, Lansdowne Oil & Gas, will be left with a 50% stake in the fi eld (40% and 10% respectively) and will have to fi nance their 50% cost of the drilling. This is where the China Investment Corp comes in, with its JIC Capital Ventures offshoot providing Providence and Lansdowne with a $50m loan to fund their share of the drilling programme. This funding is on a non-recourse basis, meaning that if the whole things fails, the loan is written off. The non-recourse loan will carry an interest rate of fi ve percentage points over Libor and will be repaid out of cashfl ow from Barryroe only. Effectively, CNOOC will be getting a straight 50% interest in the oil fi eld, paying 50% of the drilling costs, although it will be using one of its own drilling companies. Out of the oil and gas fl ow, 30% will be used to pay off the China Investment Corp loan, with 20% being retained on the basis of 16% for Providence and 4% for Lansdowne. Once the loan is fully repaid, 50% of the oil production and resulting cash fl ow will be attributable to Providence and Lansdowne split 40% and 10%. It is seven years since Providence and Lansdowne successfully drilled Barryroe but nothing was done with the discovery at the time, when the oil price was still up well over $100 a barrel.

Ormonde Mining’s low valuation. ORMONDE MINING chairman Mike Donoghue has very sensibly delayed the development of his tungsten mine in Salamanca, Western Spain. The initial plan was to have the mine up and running this autumn but looking at the underlying trend in tungsten prices – which bottomed out in January 2016 – Donoghue and his chief executive, Steve Nicol, have decided to put this back a year. It will be disappointing for many shareholders to see this key project put back a year but this is wholly and entirely in their interest, even if frustrating. Donoghue has slowed the whole project down by running the various elements involved in developing this mine consecutively rather than concurrently. This has helped with the land acquisition programme which, although 85% complete, still needed to go through complicated compulsory acquisition procedures to get the fi nal land agreement pieces in place for the so-called Barruecopardo Tungsten Mine. Alongside this land acquisition process, the big American Mining Contractor, Fairport Engineering, carried out a detailed construction engineering design for the process plan and infrastructure and completed this last year in preparation for proceeding with the whole project. Towards the end of the year, construction site clearing and levelling activities began and, most importantly, the company got a water use licence allowing it to pump and use historic pit lake waters. Tungsten is one of the most unique materials in the world and the second hardest mineral to diamonds. It has other exceptional characteristics like the highest melting point of 3,400 degrees for any mineral, as well as having one of the highest tensile strengths of any mineral. This makes it an exceptional component for use in alloys and composite hard metals. It is also an essential ingredient of drilling bits, circular saws and metal turning tools essential for mining, petroleum and the electronics industry. But 85% of tungsten production is in China – a factor which obviously affects the world market. Tungsten’s price went to an all-time peak at the top of the boom in 2011 and subsequently fell to an all-time low in January 2016 when it slumped to $160 a tonne. The largest tungsten producer in the western world, the Canadian Cantung Mine, closed down in 2015 and some older mines are struggling with reducing grades and limited reserves with no new mines opening up since 2011. B A L A N C E The supply overhang that had been in the market has gradually been reduced and the market is coming back into more fundamental supply demand balance. Prices have increased since the low of $160 in January 2016 to a current level of $223, evidence of tightening supply. Encouraged by this process, Ormonde is now moving to issue the fi nal equipment and plant construction contracts and accelerate the implementation phase to achieve an updated schedule allowing for the mine to be commissioned in the third quarter