Member Info for Ufufuo

Personally I am just happy that stuff IS happening and the company is giving us regular updates.

You seem to be in tune with how local media are viewing things - there’s an article today titled “ Sleeping Giant: Mass potential of Tanzania energy sector”

Yet more evidence of the sea change in outlook for the oil and gas sector in Tanzania. On reflection, how remarkable is it that COVID 19, which resulted in the change of President, appears to have resulted in such a change in fortunes for Aminex? Who would have thought?

Some interesting snippets from the article…

“After major reforms that rocked its mineral and energy sectors less than a decade ago, mineral and energy-rich Tanzania is again doing an overhaul of the two sectors, this time not to short leash investors but rather, to ‘rebuild broken bridges”

“The sector minister was firm, change is coming to the sector and since charity begins at home, for starters, the board of the country’s government-owned power supply monopoly the Tanzania Electric Supply Company Limited (Tanesco) has been ‘gassed out’ and a new board brought in to breathe fresh air to the ailing entity”

“Announcing the new board mid this month, the minister said; “We just started with Tanesco but we will also reform other institutions including Tanzania Petroleum Development Corporation (TPDC)”

“However, despite the country having an estimated 57 trillion cubic feet of natural gas reserves its reliance on biomass is gravely affecting forests and damaging the environment considerably. Little of these gas reserves have been tapped into because of ‘…disagreements with oil corporations over production sharing disputes have kept them untapped,’ reports local media”

“Due to this low use of gas and other sustainable energy sources, Tanzania faces deforestation of 100,000 h per year, of which only about a quarter is reforested. In fact, 63.5% of the households in Tanzania use firewood as the main source of energy for cooking, followed by charcoal 26.2% and only 5.1% use liquefied petroleum gas and a mere 3.0% use electricity 3.0% reports the Rural Energy Agency”.

“According to sector pundits, Tanzania is now pushing to revive investor talks for the Liquefied Natural Gas (LNG). Negotiations with oil companies hit a snag in 2019 but incumbent President Samia Suluhu Hassan is pushing to get the ball rolling”

https://theexchange.africa/countries/tanzania/tanzania-natural-gas-revive-investor-talks/amp/

Agreed haggis. Also, the Nyuni license has all approvals now apart from the new Energy Minister. So 2022 could see significant activity at Kiliwani, Nyuni and Ruvuma.

I am salivating at the prospect! :-)

Interesting blackgold...I did not know that

I think they will still use Sakson for the rig blackgold. Sakson is headquartered in Dubai...about a 4 and 1/2 hour drive from ARA HQ in Ruwi, Oman (not that I imagine the Omanis would travel by such slow and peasant laden means!). They operate in the Middle East and Africa. Too good a fit.

Also, Africa Geophysical Services (AGS), the company selected to do the 3D seismic is Omani owned and based in Oman. In terms of companies providing services and where they are based, they all orbit around Oman.

Actually, it says "work can COMMENCE within three to six months"...so the potential for having production by the end of Q2 is probably more realistic. Let's see if they can get approval to proceed in the next few weeks. If they do, it would be fantastic after years of waiting.

Hi haggis, regarding Kiliwani, I too think we will get news before Christmas but I assume this will be to do with remediation and re-perforation of KN1. In the 2020 Annual Report, the company stated that:

"The Company continues to explore the opportunity through remedial work to restart production from our Kiliwani North
well. We, therefore, continue to see value in Kiliwani North through a low-cost remedial work programme. However, no work can progress on Kiliwani North until resolution is reached on the Kiliwani North receivables"

With that issue resolved, it seems that re-starting production from KN1 is the next step. We also have the following information regarding costs and timing...

HOW MUCH
(Proactiveinvestors.co.uk video interview with Aminex CEO 29 Aug 2019)

Aug 2019 – the then Aminex Chief Executive was interviewed about the remediation and reperforation of Kiliwani North. He said that the gross cost should cost less than £250k. I do wonder if the amount of time it has been sitting will mean that there may be other complications to address but even so, this gives an indication of costs. As Aminex own 63.8% of Kiliwani, the net cost would be in the region of £159.5k.

HOW LONG
(Aminex Annual Report 2019, P.8)

“Aminex has prepared and is awaiting final approval to carry out a remedial work programme intended to establish fluid levels in the wellbore, reservoir pressure and to unload fluid using foam treatment technology. If successful, this operation is expected to re establish gas production from the well. The Company has identified appropriate equipment and will begin sourcing as soon as approvals have been received. The Company has been awaiting final approvals for a significant period of time and while reassured that the unloading operation can be carried out, there is no firm timeline on when final approval will be granted. Should approval be granted immediately, and personnel permitted to travel with the ongoing Coronavirus pandemic, it is estimated that work can commence within three to six months”

So, if we get approval to proceed in the next couple of weeks, we could realistically be producing again from Kiliwani North by the end of Q1 (~ 5 months) or early Q2.

Hi OilAnalyst, you sound as though you have industry knowledge that is greater than mine. You will see that I did have a basis for the things that I was saying could be possible. However, I freely admit that I do not work in oil and gas and do not claim to have in depth knowledge.

If you do - and I have no reason to think otherwise - then we should take your comments at face value. Thank you for your input to keep the conversation balanced.

Hi OilAnalyst,

Not at all. I believe both points to be realistic and thereforetruthful.
POSSIBILITY OF SOME SEISMIC RESULTS BEFORE CHRISTMAS
I do not expect another RNS to say that the seismic has started. They said it would start early this month and I assume they would have advised if this was not the case. Also, they have stated that they are prioritising the area around CH1 to get results for that first. Furthermore, APT has contracted AGS to complete the 3D seismic. Only 2 months ago, AGS has announced that they have purchased Stryde nodes for seismic projects in the Middle East & Africa.

Based upon case study information available,it seems that seismic programmes can be completed much more quickly using this technology than in the past and with other systems. For example:
“In one project, RTS was able to shoot a city-based 3D study in just one month, versus the 6-10 months it would have once taken with cables. This is thanks to the flexibility of our nodal system but also the speed at which data can be processed once our nodes are harvested”.
https://www.strydefurther.com/resources/unlocking-geothermal-with-seismic-case-study

On your other point, please see the following extracts from the last Annual Report:

“In parallel to the 3D seismic survey, APT will commence with the contracting and procurement of the services for the Chikumbi-1 well”

And…

” APT plans to progress with securing the Long Lead Items during 2021, including the well head and rig.”

Hope that helps.

It has opened up a whole new world of possibilities hasn’t it blackgold! Back in production towards the end of spring? Quite possibly

Hi bigpat, let’s hope the market has had time to digest this latest bit of good news. So many positive implications.

Am looking forward to watching the share price in coming weeks. I think Nyuni license or agreement of commercial terms for Ruvuma will be next news.

Then news on rig mobilisation for CH1. Plan for Kiliwani and possible farmout news.

All possible this side of Christmas!

Some quotes from the article…

Energy minister January Makamba yesterday highlighted ten focus areas including making reforms and reviving negotiations with investors in the liquefied natural gas (LNG) project as part of the efforts to grow the energy sector.

He said that “management challenges…formed part of the core issues that derailed progress”

“We just started with Tanesco but we will also reform other institutions including Tanzania Petroleum Development Corporation (TPDC),”

“Last month, Mr Makamba announced leadership reforms in the power utility to address management challenges which he said formed part of the core issues that derailed progress”.

“Some members from the private sector were appointed to the management and board of the Tanesco”.

“He said they will hire anyone from any sector as long as they have the capacity, with the aim of ensuring that institutions had the right people who will help the government to attain its goals”.

“He said the discussions will be held on November 8 this year as he has already written to Shell and Equinor, adding things will be good soon”.

“Mr Makamba also named petroleum exploration and rural electrification as other areas which need to be developed properly”.

“There needs to be proper decision making. Tanzania is blessed with multiple energy resources…Tanzania can become an energy powerhouse,” Mr Makamba said.

Found an article from yesterday, outlining how the new Energy Minister plans to revive the energy sector including natural gas.

We have seen significant progress since he was appointed.

It is only his signature outstanding on the Nyuni license. I can’t see him holding that up.

He is sending a very clear message to investors and to institutions specifically including TPDC that he will not accept delays or anyone standing in the way of progress in the sector.

All bodes well for progression of Ruvuma including agreement on gas sales terms. Also for the necessary authorisations to remediate and reperforate Kiliwani North.

He’s written to Shell and Equinor to say that “things will be good soon” and clearly the message is the same for Aminex and the JV partners.

Here’s the article: https://www.thecitizen.co.tz/tanzania/news/-makamba-lines-up-10-focus-areas-in-energy-sector-3585446?view=htmlamp

Couldn't agree more haggis. We now have enough evidence to say with confidence that things HAVE changed. In the last couple of months alone, we've seen the 2yr extension of the Ruvuma licence, approval to start the 3D seismic programme and resolution of the monies owed by TPDC.

With 3D seismic presumably now in progress, mobilisation of rig and wellhead likely before the end of the year, approval of Nyuni license just one approval away...and, based on info in the accounts, that would trigger a commitment to do 3D seismic over Nyuni in 2022...which would presumably mean we'd be looking to farmout asap...and remediation work on Kiliwani and perforation of lower target very likely to happen in the same timeframe.

The next 12 months looks increasingly likely to include significant news and progress on Kiliwani, Nyuni and Ruvuma.

If all of this comes to pass we could easily be looking at 2 or 3p BEFORE CH1.

Sorry...should have said 63.8%

I seem to recall that Aminex said fairly recently that, once the amounts payable and approvals were sorted, they could potentially remediate KN1 within about 6 months. Anyone remember where they said that?

It's a relatively low cost remediation plan. Aminex would only need to fund 57.5% of those costs. I believe they've previously said that they've identified equipment in region to do this and the re-perforation.

They have said that they have a plan to do this but it was dependent upon the disputed monies being sorted. The dispute is resolved. So, I expect news before Christmas on plans for Kiliwani.

Exciting times.

I think it likely that they will remediate Kiliwani and/or farmout Nyuni in the next 12 months. The latter has been signed-off by TPDC and PURA and requires only approval from the new Minister.

"The Company continues to explore the opportunity through remedial work to restart production from our
Kiliwani North well. We, therefore, continue to see value in Kiliwani North through a low-cost remedial work
programme"

They received another $330k as post balance sheet event PoC

The accounts explain the circumstances under which additional funding would be required:

“As disclosed in Note 14, the Group received a tax assessment from the TRA of US$2.2 million in relation to an audit covering the period from 2013 to 2015 which is excluded from the cash forecast as ANY CASH OUTFLOW DURING THE GOING CONCERN PERIOD IS CONSIDERED UNLIKELY BASED ON LEGAL ADVICE AND THE TIMEFRAMES FOR TAX CASES IN TANZANIA”.

“Additionally, development of the Group's other assets in Tanzania is excluded from the cash forecast as negotiations continue with the Tanzanian authorities on the three-year extension for the Nyuni PSA, including a revised work programme, as disclosed in Note 14, AND CONSEQUENTLY ANY CAPITAL EXPENDITURE IN THE PERIOD IS UNLIKELY TO ARISE"

“However, a risk exists that the Group loses its objection to the tax assessment or is unable to renegotiate or defer commitments on its operated Licence interests during the period. Additional funding would be required to meet these potential liabilities”

So, the risk relates to
1. Losing objection to tax assessment – as mentioned in the report “considered unlikely”
2. Being unable to renegotiate or defer commitments on Aminex operated License interests - specifically Nyuni (we have no outstanding commitments for Kiliwani). However, for this to be problem it would mean that the Nyuni license had been granted and we needed money for seismic, drilling etc. The plan is to farmout so this shouldn’t be a problem. Regardless, the positive impact of the license being granted and work on the license running in parallel with Ruvuma would be a huge lift to the share price. So I’m not at all concerned.

We are not expecting to pay for any operational work on any Aminex operated licenses. We also do not expect to pay any disputed taxes. In the end that leaves you with G&A, for which the HY report states: “the Company still targets a reduction in gross G&A costs (before one-off costs and exceptional items) to less than £1 million per annum by 2022”

With cash and equivalents cash and equivalents at around $820k ($490k + $330k post balance sheet event) and a loan of $1.7m available from ARA, we have ~$2.52m available to us. That would allow Aminex to keep the lights on for another 2 ½ years…or until the start of April 2024. So, we are should be more than covered for G&A costs.

In summary then, the risk of an equity placement for additional funding in the next 12 months (or next two and a half years for that matter) should be low.

Hi blackgold and bigpat, glad you found that interesting. The assets are enormous and the prospects are equally huge.

TITM, I have absolute understanding and respect for your caution; it has been a torrid few years. 5 years of inactivity with a government that refused to authorise anything. Compounded by Majedie selling their 10% stake due to their own financial difficulties. No wonder the share price has been beaten down to such ridiculous levels.

Some thoughts that may help us to put the past to rest and to focus on the future:

"There is a danger of expecting the results of the future to be predicted from the past.” John Maynard Keynes

"At bottom the ability to buy securities -particularly common stocks - successfully is the ability to look ahead accurately. Looking backward, however carefully, will not suffice, and may do more harm than good." Benjamin Graham

"The biggest mistake investors make is looking backward at performance and thinking it’ll recur in the future." John Bogle