Member Info for Ufufuo

Afternoon Tanzania. I wouldn't worry so much about whether people are LTH or short-term traders.

Traders provide liquidity to the market. So, may be helpful in increasing the SP and may provide buyers when LTH eventually want to take some profit.

To me, someone being a short-term trader isn't bothersome. Just a different strategy and timeline to me. It is the tactics of any traders who are dishonest and deliberately misleading in order to try to influence sentiment that is a bit of a pity (could be short-term traders or LTH building their stake).

Regardless, not worth worrying about. The fundamentals are so strong here that the games played won't change the end game ;-)

It is Haggis. An unusual and very favourable situation.

Agreed. However, those quoted average prices paid of $3.41 mcf to $4.34/mcf were from 2020.

Two years ago. Before the recent surge in global gas prices. The article I provided said that the Tanzanian authorities are looking at the terms of the PSAs and that this will include changes to reflect changes in gas prices.

The Omanis have a great deal of influence as they are making a lot of investment in Tanzania. I expect they will be able to negotiate a good price ;-)

Indeed Haggis.

Also, remember that, as I posted previously...

I’ve been checking on something with an accountant friend of mine. Various sources state that the estimated revenues to Aminex will be $40m per annum (based on Kiliwani gas sales terms - see my previous post on why we should get a higher price now...more like $60m). If you look at slide 14 of the 26th May 2022 presentation, it says “$40 MM per annum net to Aminex (during the cost recovery period)”

We believe that relates to this - on page 56 of the 2021 Annual Report & Accounts it says:

“Included in current assets are loans provided to subsidiary undertakings which are interest free and repayable on demand. Included in non-current assets is US$88.28 million (2020: US$89.03 million) which represents loans provided to subsidiary undertakings which are interest free and repayable on demand. The Directors do not expect to call for repayment of these loans in the foreseeable future. The loans are expected to be repaid by future revenues generated from the Group’s assets in Tanzania.”

So…
- ARA Petroleum Tanzania as operator will pay Ndovu (Aminex wholly owned subsidiary) our 25% share net of Tanzanian taxes. This is what Aminex did for the JV partners when we were operator.
- Aminex will receive that money from Ndovu as repayment of the $88m loan.
- Receiving monies for repayment of a loan is non taxable in the UK (whereas receipt of interest payments would be).
- Hence the statement that the ~$40m to Aminex is *net* during the cost recovery period.

So, the first $88.3m is net of all taxes.

In addition, Aminex can carry forward losses from previous years (indefinitely, provided that the losses are from the same type of business). I can only find data going back to 2006 right now but I can see a total of $141.97m of losses over consecutive years. Plus the $88.3m loan to be repaid, and that makes $230.3m before Aminex should need to pay a penny in UK tax on the monies paid to it (plus any pre 2006 losses).

All costs are covered for full field development (the 3D seismic, the well in Nov, another ~5 wells to be drilled, infrastructure to get gas to the processing plant, etc).

So, unless they find something to spend it on, the cash will accumulate very quickly.

Consider the PE ratio for our most comparable peer (Wentworth - UK listed. Operations in Tanzania. Non operator. So v similar. PE should reflect same risk profile as Aminex). WEN PE about 10 x earnings. 10 x $60m = $600m. We should expect higher as our profit should be much higher as we'll have little or no tax to pay on the first $230m or more.

Thanks GL.

Regarding potential price at wellhead, there are some numbers out there to guide us...

the last AGM presentation says that 2020 average gas price ranged from $3.41/mcf -$4.34/mcf.

That’s the 2020 average – before the recent surge in global gas prices! Since then, we have had this article: https://www.thecitizen.co.tz/tanzania/news/national/tanzania-in-a-new-initiative-to-attract-oil-gas-investors-3859686?view=htmlamp

That article says:

“Dar es Salaam. The government of Tanzania is readying to amend the Model Production Sharing Agreements (MPSAs) of 2013 to loosen conditions in the oil and gas sector…The changes will take into consideration the global trends in trade, fuel prices over the past decade and estimates for the next decade, the institutional changes in Tanzania and current legal system, including the Petroleum Act of 2015, which is said to be unfavourable to investors.”

So, I now think we should be expecting to achieve at least the top end of the average price paid in 2020. Probably more. If we get $4.5 then that would equate to $60m per annum net to Aminex when at 140MMcf/d.

Hope that helps

Thank you BG. Is very pleasing to see that Aminex profits should be very, very strong from the start despite the need for production ramp-up

Yes Chris...

BALANCE OF FREE CARRY AND BENEFICIAL IMPLICATIONS FOR AMINEX REVENUES

The farmout deal includes the following:

“In the event that the minimum production target of 40 MMcf/d is achieved prior to Aminex's 25% interest having been carried for the full $35 million, APT will assign one quarter of its share of profit gas to pay the unspent Carry amount until the full $35 million is realised by Aminex”

• Illustrations of how the free carry may be spent showed that they expected:
• CH1 to cost $20m gross
• 3D seismic to cost $7.5m gross for 200km/sq
• Total $27.5m gross
• Aminex 25% share $6.875m. Balance of $35m free carry remaining = $28.125m

Subsequently, news sources (including this one: PURA | APT, TPDC commended for implementation of upstream petroleum projects) state the costs will be lower:
• CH1 to cost $7m
• 3D seismic to cost $15m for 338km/sq
• Total $22m gross

Aminex 25% share of that would be $5.5m. Balance of $35m free carry remaining would be = $29.5m.

The Half Yearly report stated that “The Carry balance as at 30 June 2022 was US$33.6 million”. So, that looks about right.

Recently, the TPDC has indicated that they will be building the pipeline to Madimba. The Aminex illustrations suggest that under this scenario, the JV partners pay $4m (as opposed to $30.625m if we’d built it).

Aminex 25% share $1m. Balance of free carry remaining = $28.5m

We’re told that APT plan at least another 2 drills after CH1 and before production starts (based on recent sources, this may be as early as Feb 2024).

If those two drills cost a similar amount to CH1, the net cost to Aminex would be a total of around $3.5m. Leaving $25m of free carry.

NT1 and NT2 flowed at a combined rate of 37MMcf/d (note that, as per official statements “Flow rates were restricted for technical reasons”). So, with CH1, the minimum production target of 40MMcf/d should be absolutely nailed on and Aminex should be receiving their share of profits, plus 25% of APTs profits until any unspent amounts of the free carry are paid up.

140MMcf/d= circa $60m net to Aminex

1MMcf/d = 60/140

60MMcf/d initial production rate =60/140 x 60 = $25.71m net to Aminex

ARA profit (3 x $25.71) = $77.13m. 25% of that is $19.3m. So, even though there will be a ramp-up from about 60MMcf/d to about 140MMcfd, it looks as though proceeds to Aminex in that early period may be nearly doubled to around $45m. Still leaving around $6m contribution from ARA profit to the following period.

Then ramp-up to around $60m net to Aminex (after costs and taxes - see my earlier posts) soon afterwards.

2 to 3p pre results is very conservative in my view but agree it will be considerably north of here ;-)

My favourite post in years gaslady! Thank you for making me laugh out loud! :-)

Good point regarding shares in issue. Well, it sounds like we all broadly agree on where this is heading. Let's hope they give a good update in the next week or so and confirm the drill for Nov (or I could live with Dec!). Then we can get the show on the road :-)

I'd be disappointed with 3 to 4p by drill results.

Aminex managed around 7.5p on the last drill. We own 25% of Ruvuma now as opposed to 75% back then, but the asset is now estimated to be about 12 times larger. The nationalistic regime in Tanzania has been replaced with a pro international investor regime. This time, the back-to-back drill is effectively rolled into one with the deeper target. Plus the potential for liquids in that target. Last time around, we had no clear plan beyond the drill. Now we have a plan and we are fully funded for that. Global gas prices are soaring. Domestic demand is increasing all the time. Potential for pipelines to Uganda, Kenya and beyond.

I think back in 2017 there was still hope that Kiliwani would be remediated. So, that is a relative negative point.

On balance though, I think we are in a better place. I think excitement to do with that deeper target could propel the SP to that 7.5p mark or beyond.

Time will tell

Could be a good day today with an RNS likely next week

Yes, I do agree that there are things to firm-up on the demand side. I am sure the demand pipeline is there but I think that for new demand that would be dependent on Ruvuma, it is a bit chicken and egg. What's the point in building more power stations, fertilizer plants or starting construction on a gas pipeline until CH1 and the seismic proves exactly what we have?

I do also think that some of the agreements we see (like the gas pipeline to Kenya) are partly symbolic gestures when two leaders want to make a statement about improving relations and want to a headline grabbing symbol to embody that. Tangible progress after the big headlines can be very very slow! I think they will happen but am not expecting all of these to fall in to place as quickly as I would like.

So, I am sure it is not all about export for us. I think that once we prove that Ruvuma is as massive as we think it is and when it is clear that development of the field is progressing, we will then see a response on the demand side with power stations, fertiliser plants and yes, hopefully those export pipelines.

An interesting discussion. Obviously true that back in 2017 Aminex owned 75% of Ruvuma and now only 25% but, as I posted yesterday, back then Ntorya was estimated to have about 153 BCF. Now, at least 1.9 TCF.

Also since then, the 'anti foreign investor' president Magafuli has been replaced by a new regime that actually wants to work with investors and get things done. Also, improvements in macro picture with increased gas prices, planned export pipelines, etc. Plus we have the free carry to production and - for the first time I can remember - a proper plan to get us there. In 2017 investors were excited about the prospect of the "back-to-back" drill...but there was no plan beyond that. This time we will have the CH1 drill, full seismic results, about 5 more drills, infrastructure build to Madimba and first production. All before the end of 2024.

So, yes, a smaller percentage ownership but there is more to it than that.

We all agree that the share price should be many multiples of what it is now. Just some disparity on exactly how much. Not the worst debate to be having! :-)

Yes ICB888 and we should hear some positive noises and snippets about developments in the oil and gas sector in Tanzania, as the Tanzania Energy Congress starts tomorrow.

"Tanzania is quickly establishing itself as East Africa’s Energy Hub with business opportunities spanning the EACOP pipeline, upstream offshore gas developments, regional Gas pipeline projects, LNG, Gas to Power, Energy infrastructure and a number of renewable energy projects".

"These and other such strategic energy projects will be showcased by the Minister of Energy January Makamba and his technical team from TPDC, PURA and TANESCO at the international Tanzania Energy Congress meeting taking place 3 – 4 August 2022 in Dar Es Salaam"

"The Tanzania Energy Congress is now firmly established as the preeminent oil, gas, LNG and energy convening platform in country and the region for the entire global private sector value chain and investors to engage and foster relations with key in-country government, ministerial, regulatory and NOC stakeholders with a view to developing Tanzania’s energy industry".

"The fourth edition of this prestigious Congress will take place 3 – 4 August 2022 and is being organised by DMG Events in partnership with Ocean Business Partners Tanzania, where more than 1,000 energy industry participants are expected, in addition to 100 exhibitors and over 60 speakers from around the globe to discuss the exciting opportunities in Tanzania’s burgeoning energy industry".

"Endorsed by the Ministry of Energy and supported by TPDC, PURA, TANESCO, EWURA, ZPDC, ZPRA, NEEC, OSHA and ATOGS, the key theme for 2022 will be: The Next Phase In Tanzania’s Energy Sector: Promoting Investment & Growth"

http://www.energyglobalnews.com/new-dawn-for-tanzanian-energy-future-as-lng-hga-mega-project-signed/

I wonder how soon we will hear news regarding progress with 3D seismic over Kiliwani. In an RNS on 08th April Aminex said Pan African Energy were “TARGETING A MID-YEAR START” for that. Is confirmation that has started the next news - before this later in the month...

“We are approaching exciting times for Aminex. The seismic acquisition programme IS CLOSE TO PRODUCING RESULTS OVER THE CORE AREA OF THE NTORYA GAS-FIELD with the delineation of the final location for the CH-1 well. We are pleased that the target spud date for the well remains on track for November 2022”

We were having a bit of a chat on one of the Telegram sites about the dangers of looking back when investing and having that unduly affect our expectations for the future. Then, it occurred to me that the history is interesting as a way of reminding us why the share price is currently so cheap, what has changed and how little those changes seem to be reflected in the share price. Thought those thoughts might be of interest to some folks on here...

In Q1 2017 Aminex did the last drill. The share price rose to 7.5p

14 months earlier, Magafuli came to power. That drill was the last meaningful operational activity until this year. The Magafuli government blocked any progress.

Aminex had no revenue. Our exploration licences expired. The Tanzanian government was reviewing license agreements to increase their share of profits and to take away international court arbitration, etc. Very bleak times.

Aminex and the Omanis proposed the farmout deal. This was announced on 11 July 2018.

By 30 Sept 2020 about 10 deadlines for government approval of the deal had passed. The Omanis gave one last deadline and threatened to walk away. The end of Aminex was looking like a very real possibility. No money, no income, no license, no plan and a hostile regime in the way. Share price around 0.45 to 0.5p

The farmout was finally completed on 23 Oct 2020. The SP rose to 1.4p but there was no other progress due to the TZ authorities.

Magafuli died 17 Mar 2021. The SP had slipped back to around 0.45p

Since then:
1. New President - pro foreign investment. She replaced Energy Minister. Told revenue authority to behave. Total change of rhetoric
2. License awarded
3. Tax dispute resolved
4. A clear plan to production by late 2024, with Aminex fully carried for its share of the $140m costs
5. Aminex has done a placing to ensure it has enough cash for G&A etc to get to production revenues
6. The 3D seismic over 338km/sq is in progress. The first operational activity in 5 years!
7. The next drill…and it’s the big one is only 3 to 4 months away.

For balance, I should point out that at the time of the last drill back in 2017, Aminex owned 75% of Ruvuma. We now have 25%. We do now have the free carry to production and the might of ARA to take care of negotiations (so very likely better outcomes for things such as price we get for gas, etc) and to deliver the project more quickly than Aminex would have been able to. Also, back then, Ntorya was estimated to have about 153 BCF. Now, at least 1.9 TCF!.

So, long story short. The SP is less than 2x the price it was when it looked like it could have been ‘game over’.

After the new President came to power everything started to change for the better. It’s surprising it is not up a lot more than that. The market will wake up in due course

I’ve said it before, but I think it is sensible to base share price forecast on valuation of assets or multiples of likely revenues.

We know that the farmout deal is to get us to “a minimum gross rate of 40MMcf/d” and that was estimated to equal $40million per annum net to Aminex.

The $40m is based on Kiliwani gas sales terms ($3/mcf) whereas the last AGM presentation says that 2020 average gas price ranged from $3.41/mcf -$4.34/mcf.

That’s the 2020 average – before the recent surge in global gas prices! Since then, we have had this article: https://www.thecitizen.co.tz/tanzania/news/national/tanzania-in-a-new-initiative-to-attract-oil-gas-investors-3859686?view=htmlamp

That article says:

“Dar es Salaam. The government of Tanzania is readying to amend the Model Production Sharing Agreements (MPSAs) of 2013 to loosen conditions in the oil and gas sector…The changes will take into consideration the global trends in trade, fuel prices over the past decade and estimates for the next decade, the institutional changes in Tanzania and current legal system, including the Petroleum Act of 2015, which is said to be unfavourable to investors.”

So, I now think we should be expecting to achieve at least the top end of the average price paid in 2020. Probably more. If we get $4.5 then that would equate to $60m per annum net to Aminex

Wentworth trade on a PE of about 12 at the moment (when Ruvuma is proven up an in production, we should expect more as the larger resource base will mean production for many more years). 12 x $60m is $720m (USD) or about £592m (GBP). There are currently 4,211,167,024 shares in circulation.

That would equate to a SP of about 14.1p

Obviously that's when in production. So, not realistic just yet but that should be the direction of travel and exceeding 7p at the time of the drill is not at all farfetched. That’s based on the MINIMUM gross production rate. If we get to that production rate before the £35m free carry is spent then we also get a share of ARA’s profit until the $35 is achieved. That doesn’t take account of potential for commercial quantities of liquids. All to play for

The next Operational Update is overdue based on the gaps between the last few...

22 Oct 2021...then about 6 weeks later...

02 Dec 2021...then about 9 weeks later...

02 Feb 2022...then about 9 weeks later...

08 Apr 2022...nothing since...

That's 15 weeks and counting! Surely can't be long to the next update

Really fantastic to see evidence of yet more progress. It's also really good to see our Ruvuma project getting some press coverage; it's usually the LNG plant that takes all the limelight.

On the matter of who builds the pipeline, looking at the corporate presentation from Oct 2018, it looks as though they estimated the cost of the pipeline at around $8.5m.

If TPDCS builds the pipeline and that results in a corresponding underspend against the free carry by the time 40MMcf/d is reached, APT will give 1/4 of its profit to Aminex until the $35m free carry amount is fully paid up to Aminex.

I'd also prefer for the JV build the pipeline for the reasons that Crusty states, but there may be some positives if they don't and TPDC build it instead.