Member Info for Ufufuo

I’ve been thinking about the statements from Aminex and ARA regarding timings and sequence of events and how that marries up with the article of 7th July quoting the TPDC Ntorya Project Manager about timelines etc.

ARA has consistently said that NT2 is ready to go into production. They have also said that CH1 will be drilled and then the rig will move on to do a workover on NT1. This was still the position at the AGM. They also said that the workover of NT1 would be a fairly simple undertaking.

Referring to NT1 and NT2, the TPDC Ntorya Project Manager said, “Production activities for these two gas wells are expected to start in April 2025”. It’s not 100% clear but seems to imply that NT1 and NT2 will be ready to go at that time. Would that then imply that CH1 will have been drilled in the Dec ’24 – Jan ’25 timeframe? Then workover NT1 Feb/Mar, ready for production in Apr? With CH1 to then be hooked up once tests have been fully analysed, and in field infrastructure is put in place.

The rationale there would be that NT1 is already confirmed as a commercial well and so they would put in field infrastructure in place proactively so it can produce as soon as the workover is done. Based on what the Board has repeatedly said about the order of things, CH1 would have been drilled by that time. It may follow NT1 into production shortly afterwards as they would want to confirm the well was successful, analyse the tests fully and put in place the in field infrastructure.

That logic would tie recent statements from ARA and TPDC together and point to a potential plan.

Either way, with ARA and TPDC singing from the same hymn sheet, GSA and Development Licence in the bag, pipeline route agreed, land owners compensated, money for the pipeline budgeted, detailed engineering design completed, pipeline construction due to go out to tender this month, rig selected and contractual negotiations being finalised…we can be more confident than ever that we will be in production by around April next year and drilling of CH1 might be well before then too.

Thoughts?

Hi cperkin, I share your disappointment that we weren’t given a clearer plan - though they explained that this was because they were still negotiating with parties regarding the rig share. The Tanzanians also then need to give the ok before the schedule is published apparently.

The CPR wasn’t mentioned during the main presentation or public Q&A. I think Crusty has explained that was in a conversation with him and a board member over coffee at the end. I notice CPR was not mentioned in the AGM deck where they listed upcoming share catalysts.

If so, it’s a pity but we do have ARA’s analysis. So, it’s not as though we are in the dark regarding the 3D seismic results.

CPR would have been very good for confirmation of reserves though.

Yes mate, they did..

There was a lot said though - impossible to take it all in. I had the advantage of my notes plus those of Mrs Uff who as you know was also in attendance.

Hi Crusty, what I’ve outlined there is what they said in front of the whole AGM audience.

Anyway, in my view, it was unfortunate that the slides issued for the AGM didn’t include many of the positive comments given as part of the voice over and answers to questions.

Hopefully, info shared by those that did attend helps to fill that gap.

RE-ITERATED THAT THE LICENSE HAS SECURED THE ASSET - with the Development Licence granted, the asset is secured for the next 25 years. It allows all development costs to be recovered and gives a clear path to first gas.

Production might be earlier than end of H1 2025 - the pipeline is expected to be completed and first gas produced, possibly as early as the end of 1st quarter 2025, or early Q2.

IMPLIED ARE TARGETING CH1 DRILL DATE LATE 2024 OR EARLY Q1 2025 - as a minimum, production will start with NT2. The aim is for CH1 to also be ready for when the pipeline is completed. Otherwise, CH1 will be added soon after, and NT1 soon after that (the workover is “quite a simple undertaking”). All 3 wells will be in production by Q3 2025 (producing min. 60MMscf/d).

Tom Mackay “it would be timely to have that well [CH1] drilled in time for when the pipeline is ready”…”it is a matter of making sure it flanges up pretty well with the availability of the pipeline to take gas”

FINALISING RIG SHARE CONTRACTOR - Aminex cannot currently confirm exact dates as we have identified an opportunity to share a rig with another operator in country that needs to drill some wells. Crucially, according to The Board, this arrangement:

1. Seems very likely to allow us to meet the timelines stated above

2. Will allow us to save considerable costs, preserving more of the free carry

3. Means that we will have use of a rig that is due to be in Tanzania within the next month

SCHEDULE WITH DATES WILL BE SHARED SHORTLY – once all plans and contracts have been signed-off. There are some negotiations ongoing.

NO ADDITIONAL FUNDING REQUIREMENTS TO GET TO FIRST GAS - Aminex is keen to re-iterate that existing funds are expected to meet all running costs to at least the end of 2024 (standard caveat – subject to any exceptional items) and the funding facility of $3m ensures the company will have sufficient working capital until the receipt of first gas revenues in 2025. This protects shareholders from the possibility of dilution. Related to this:

NO OBLIGATIONS OUTSIDE RUVUMA BEFORE GAS REVENUES - the Tanzanians and Aminex are keen to work on Kiliwani. However, it has been agreed with the Tanzanians that no work is required until after revenues are being received from Ruvuma. That work will probably start with 3D seismic. There are also no obligations required for Nyuni as we continue to look for a partner for that.

VERY POSITIVE DEVELOPMENTS REGARDING DISPUTED TAX CLAIMS - Aminex have had ‘very successful negotiations with the TRA’ (Charles Santos). It was also mentioned that the TRA has been taken to court by companies in relation to withholding tax claims. The TRA lost in the first and second courts and is now with the Supreme Court. Withholding tax claims has been a key way of the TRA coming after companies. If they lose this case (which seems likely), this option will be taken away from them.

VERY VALUABLE CONDENSATE IS OURS TO SELL - Aminex re-iterated that ARA and Aminex own the condensate and stated that they can sell it at prevailing market rate under the terms of the existing petroleum licence (liquids, including gas liquids are covered). Tom Mackay “there is certainly condensate associated which is very valuable”…“we don’t tend to pay enough attention to the potential condensate volumes associated here”…”we do the calculations on gas value but it [the condensate] is a very valuable stream” (22.1 million barrels for Ntorya (more in wider Ruvuma). Currently $73.27/barrel = $1.619billion USD. Roughly £1.28billion GBP. Aminex’s 25% share = £320million)

CONFIRMED THAT THEY DO BELIEVE THERE MAY BE OIL – Tom Mackay confirmed that “oil has always been a theme” and that it is thought that “there may be an oil rim”. Tom also confirmed that the theory the oil could be “west and up dip” is still in play.

GAS SALES PRICES & OPPORTUNITIES: THINK BEYOND TPDC AND THE GSA! The Board explained that:

1. GSA PRICE IS IN LINE WITH EXPECTATIONS - the price for gas negotiated as part of our GSA has not been made public as they see that information as commercially sensitive. However, they confirmed that the GSA is fully comprehensive, and the price negotiated is “not far away from” the $3.9 assumed in the Shard Capital report.

2. THE ASSET IS VAST, WE WILL SELL TO MORE THAN JUST TPDC - Sulan Al Ghaithi said to remember that the GSA is for direct sales to the government and when you look at the size of the reserves, then look at the rate of production, we will need alternative sales routes. Tom Mackay then said that if Ntorya has 2.5 TCF recoverable then you are going to want to be taking off more than 140MMscf/d and so other offtake routes such as mini-LNG may come into play.

3. ENORMOUS LOCAL AND REGIONAL DEMAND (TANZANIA AS ENERGY HUB) - The board mentioned local and regional demand. Including 2 new gas fired power plants currently under construction in Tanzania. Also, LNG and regional pipelines.

4. SIGNIFICANT SALES TO PARTIES OTHER THAN TPDC AND AT HIGHER PRICES - the message from the Board was that Ruvuma is so vast that we will want to sell to parties in addition to the government, and that the price for those sales will be higher than those to the government. So, the GSA is the foundations. The opportunity is much bigger than that.

TPDC BACK-IN RIGHTS MAXIMUM 15% – re-confirmed that this has been negotiated to a maximum of 15%. They believe that TPDC will exercise this right. There is no time limit by which they must do this. TPDC would have to cover development costs (not exploration costs).

NT2 TESTS ARE TO DETERMINE PROCESSING REQUIREMENTS - the tests are to establish the CO2 content of the gas. That will determine what we require for longer term production from the field in terms of CO2 handling or dehydration equipment. Tom said we can bring NT2 into production with the processing equipment we will put in place for, or immediately after, testing. The results will be used to determine the processing requirements for all gas in the Ntorya field.

Full ask

RoJo still trying to convince you that there is a meaningful risk of dilution. Same old nonsense that he has been peddling for ages now.

As mentioned previously, Aminex has the free carry, covering all development costs through to production.

According to the Annual Report issued in April, Aminex’s base running costs currently stand at $1.58m. Aminex also has sufficient cash to cover these running costs through to the end of this year.

They then have a $3m funding facility in place with ARA on remarkably favourable terms, which should cover those Aminex base running costs from end of 2024 through to first revenues which are expected by mid 2025. Plus, about a year and a half of financial cover as a contingency in case of any delays to first revenues.

More than covered then! Risk of dilution here to cover running costs or development is close to zero.

Excellent post gaslady

RoJo says: “As for your assumption that large revenues will be produced - we simply don't know how much”

Actually, we do have a good guide. According to our company stockbrokers:

"Therefore, as a point of reference, we note two potential value points that we believe the market may consider when deciding how much value to recognise should the 2Tcf be confirmed:

1) Extending the plateau of 140mmscf/s for 20 years, would result in an increased average annual FCF of c$25mm/year, and an approximated asset value of £175mm (~4x the current market cap), using a simplified 12% discount on FCF in perpetuity model. We note that in this case only 1Tcf of resources will be utilised in the 20-year period.

2) Theoretically, increasing the plateau to 250mmscf/s for 20 years would effectively exploit almost all of the 2Tcf of gas in this 20-year period. This hypothetical case, in our estimate, would generate an average annual FCF of about $40mm, representing an approximated asset value of ~£275mm net to AEX (~6x the current market cap)"

So, Free Cash Flow for Aminex of somewhere between $25m and $40m if the 3D seismic results were 2tcf. Obviously, they were higher than that.

Finally, Free Cash Flow is the money that remains after paying for items such as payroll, rent, and taxes, and a company can use it as it pleases. So our revenues should be considerably higher than the figures quoted.

I’ve already explained why the chances of a placing before production next year are close to zero. Then, when in production, they will be generating tonnes of cash and so there should no need for any placing.

The cash will be piling up!!!

Having Aminex as a listed entity gives ARA various options to monetise the asset.

With Aminex increasing in value, the profit on their ~30% share of Aminex looks likely to cover all of ARA’s development costs and give them a big fat profit on top.

.

…and 2.02p paid 🙂

Exactly Crusty - the assumption being that any such Ops Update would include details of rig contract issued.

After all, Erhan Saygi, General Manager of ARA Petroleum Tanzania has said in the last week that “We are ready to launch work immediately to bring this onshore development project into production”

Iinteresting you mention Friday FOMO Crusty. The last Ops Update the company issued was last day of a month and it came at 5pm.

Before that, they had a stray one on 12th of the month, but the ones before that…

2nd of the month

1st of the month

1st of the month

So, 3 of the last 5 Ops Updates were on the 1st or 2nd of the month. 1 on the last day of the month at 5pm.

So, a good chance of news today or Monday. Or, are they building to a whopper of an update a bit nearer next month’s AGM?

Not long now regardless

That is a blatant attempt at scaremongering by RoJo.

Aminex has the free carry, covering all development costs through to production.

According to the Annual Report issued last month, Aminex’s base running costs currently stand at $1.58m.

Aminex has sufficient cash to cover its own running costs through to the end of this year.

They then have a $3m funding facility in place with ARA on remarkably favourable terms, which should cover those Aminex base running costs from end of 2024, through to first revenues (which are expected by mid 2025).

That leaves about a year and a half of financial cover as a contingency in case of any delays to first revenues.

Risk of dilution then is close to zero then.

Up she goes 🙂

Moving up 🙂