Cobus Loots, CEO of Pan African Resources, on delivering sector-leading returns for shareholders. Watch the video here.
Prosciutto is always banging on about negative working capital. Saying a raise will be needed and that Aminex's financial situation is precarious.
As detailed in Aminex’s 2023 Half-Yearly Financial Report (issued 29th Sept 2023) the company had:
Current assets: $6.598m
Current liabilities: $10.206m
Difference: -$3.608m
So, it is true that there was negative working capital. However, the situation is explained in the Annual Report (of 28th April 2023):
P.5 – “A number of claims have been received from Tanzanian tax authorities. Provision has been made for all amounts either ceded by Ndovu Resources Limited or where management determine the likelihood of success through the objection or appeals process is unlikely. However, until these claims are settled, it will remain unclear whether NRL’s objections will be successful and therefore the amount and timing of potential cash outflows remain uncertain. THIS HAS CAUSED CURRENT LIABILITIES TO EXCEED CURRENT ASSETS, BUT MANAGEMENT ARE CONFIDENT THIS CAN BE MANAGED OVER THE COMING YEAR”.
So, the situation is due to provision for disputed tax claims - which the Board did not expect to need to be paid in the period but could be managed if they did need to.
The proof is in the pudding...
Working capital is the difference between current assets and current liabilities – specifically cash and other assets expected to be converted to cash 12 months Vs amounts due to be paid to creditors within 12 months.
The 12-month period from the last Annual Report finishes this Sunday. Fact is, no additional funding has been needed in the period – unless they reveal a loan or something in the next annual report, which is due in the next few days. So, the Aminex Board were telling the truth.
Also worth remembering that G&A / running costs are now very, very lean. The decrease in current assets between the Annual Report of last April Vs the Half-Yearly Financial Report of last September was just $0.529m in that 6-month period.
‘Cash at bank and in hand’ last June stood at $5.036m inc. $1.023m held on behalf of partners in joint operations – so, $4.013m that could actually be used by Aminex.
Aminex has said that the CPR which is in progress will enable them to book reserves. As pointed out by gaslady, if Aminex did need additional cash a Reserve-Based Lending (RBL) loan would be possible. Or, also as pointed out by gaslady, if TPDC decides to exercise their rights to back in, that may result in a considerable injection of cash.
In conclusion, the situation was explained by the Board in the annual report and assurances given that it would not be an issue. With operational costs so lean, unless they need money for a disputed tax claim, we should still have some headroom. If Aminex does need more cash, they should have plenty of options.
It is indeed a useful report. Don't forget that the 2 - 2.5p (or 2.8p unrisked) was based on the pre 3D seismic resource estimates of 763bcf.
As I posted the other day, when you consider the results of the 3D seismic, the valuations should be a lot higher. My post from the other day:
As the company’s stockbroker, it may be helpful to use the Shard Capital’s figures to derive valuations based on different scenarios. They published this research note on 29th Feb 2024: Is there a “big-picture” change in the cards? (research-tree.com)
In the report, they give an unrisked valuation of 2.8p for a scenario where Aminex has resources of 763bcf and produces at a rate of 140mmscfd. For a scenario where we have resources of 1.7tcf and produce at 250mmscfd they give an unrisked valuation of 4.6p.
Their earlier report from May 2023 (The time has come! (research-tree.com)) had practically the same figures (2.7p and 4.5p respectively). When considering potential outcomes of the – then yet to be confirmed – 3D seismic results, on p.6 of that report, they state:
“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”.
They then outline two scenarios based on different rates of production. Long story short, they say that 3D seismic results of 2TCF would justify valuations 4 to 6 times greater than the share price at the time of the report – which was 1.03p. So, somewhere between 4.12p and 6.18p.
Obviously, the 3D seismic has confirmed a good likelihood of there being 3.45tcf associated with just the existing NT1 and NT2 wells – and 7.95tcf aggregated including CH1.
If 2TCF justifies between 4.12p and 6.18p…
3.45TCF would justify between ((4.12 / 2) x 3.45) 7.2p and ((6.18 / 2) x 3.45) 10.66p
If CH1 brings us to 7.95TCF that would justify ((4.12 / 2) x 7.95) 16.38 and ((6.18 / 2 x 7.95) 25.57p
So, in summary, the 3.45tcf for NT1 & NT2 may justify a valuation of between 7.2p and 10.66p per share. If CH1 brings us to 7.95tcf, that would increase that to between 16.38p and 25.57p per share.
There are lots of variables at play here – for one of those, you may be interested to know that the Shard figures are based on a presumed gas sales price of $3.9/mscf – probably conservative.
Just a yardstick. I hope this helps
as the company’s stockbroker, it may be helpful to use the shard capital’s figures to derive valuations based on different scenarios. they published this research note on 29th feb 2024: https://*********************/companies/uk/oil-gas-integrated/aminex-plc/research/shard-capital/is-there-a-big-picture-change-in-the-cards-/43446264-b995-4e0e-9759-571a901f1b1b
in the report, they give an unrisked valuation of 2.8p for a scenario where aminex has resources of 763bcf and produces at a rate of 140mmscfd. for a scenario where we have resources of 1.7tcf and produce at 250mmscfd they give an unrisked valuation of 4.6p.
their earlier report from may 2023 (https://*********************/companies/uk/oil-gas-integrated/aminex-plc/research/shard-capital/the-time-has-come-/b1acaafa-e70d-41c0-90dd-5827fc37dfc0) had practically the same figures (2.7p and 4.5p respectively). when considering potential outcomes of the – then yet to be confirmed – 3d seismic results, on p.6 of that report, they state:
“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”.
they then outline two scenarios based on different rates of production. long story short, they say that 3d seismic results of 2tcf would justify valuations 4 to 6 times greater than the share price at the time of the report – which was 1.03p. so, somewhere between 4.12p and 6.18p.
obviously, the 3d seismic has confirmed a good likelihood of there being 3.45tcf associated with just the existing nt1 and nt2 wells – and 7.95tcf aggregated including ch1.
if 2tcf justifies between 4.12p and 6.18p…
3.45tcf would justify between ((4.12 / 2) x 3.45) 7.2p and ((6.18 / 2) x 3.45) 10.66p
if ch1 brings us to 7.95tcf that would justify ((4.12 / 2) x 7.95) 16.38 and ((6.18 / 2 x 7.95) 25.57p
so, in summary, the 3.45tcf for nt1 & nt2 may justify a valuation of between 7.2p and 10.66p per share. if ch1 brings us to 7.95tcf, that would increase that to between 16.38p and 25.57p per share.
there are lots of variables at play here – for one of those, you may be interested to know that the shard figures are based on a presumed gas sales price of $3.9/mscf – probably conservative. other than that, i guess you can apply your own risk factor (considering what you believe the chances are of achieving one of those scenarios)
just a yardstick. i hope this helps.
1/2
Regarding differences between WEN and Orca, there is more to it than that. I’m short on time right now but let’s look at WEN in a bit more detail.
A key difference between Aminex and WEN is the size of the asset. Management estimates currently suggest about 2TCF recoverable for Aminex (500BCF net to Aminex). As at 31 Dec 2022 WEN’s share of 2P reserves was 137BCF. You can try and make the WEN figures sound better because they are reserves but the fact is, Aminex’s share of Ruvuma is much larger than WEN’s share of Mnazi Bay. Also, being a much larger asset overall it will provide revenues for many more years. It seems likely that the CPR for Ntorya will show the asset to be larger still. By contrast, take a look at WEN’s AGM presentation from June 2022. On P.14 there is a graph that shows they expect production from Mnazi Bay to plummet from 2027 onwards. Seriously, it’s ugly.
Another key difference is costs and the lack of free carry for WEN. The following text from WEN’s “Publication of Independent Asset Valuation and Update” from 11 Jan 2023 spells it out beautifully:
“Wentworth has benefitted from the Mnazi Bay production sharing contract's cost recovery mechanism and historic cost pool, having recovered approximately $300 million of historic costs to date;
o on 23 December 2022, the Mnazi Bay JV Partners ("JV Partners") received formal notice from TPDC that it proposes to discuss re-examining the historic cost pool audit for the years 2013 - 2015 relating to seismic, field infrastructure and drilling of MB-4 well expenditure. Joint Venture costs of $45 million (approximately $15 million net to Wentworth) are subject to the re-examination. The Company anticipates, given the absence of recent investment in the Mnazi Bay field, that 2023 production will include significant periods where costs have been fully recovered, leading to substantially lower revenues. Any reduction in the current expected cost pool balance as a result of the audit re-examination is likely to further impact revenue next year;
o Mnazi Bay is at, or close to, peak production and material capex is required to maintain, let alone increase, production. As such, historic revenue, profit and dividend growth cannot be used as proxy for future expectations; and
o M&P is the operator of the asset. All future capital expenditure is dependent on M&P choosing to allocate capital to this asset, in the context of its wider portfolio”.
Also:
• “The value of Wentworth is substantially impacted by the present value of its G&A costs. Historic G&A costs do include the costs of acquisitions which did not complete”.
2/2
Note that the P/E for WEN based on the M&P offer price is actually about 9.5. We should expect much higher for Aminex given the much larder asset. Also, the fact that we will have a number of years of revenues that will be exceptionally profitable due to unspent tax losses (about $105m last time looked) and the $88.3m that can be covered by repayment of a loan that Aminex has provided to Ndovu (wholly owned subsidiary).
Finally, regarding production rates of ~160mmscf/d there have been a few references but here is an example (translate from Swahili): https://mtezamedia.wordpress.com/2022/11/25/mambo-yamenoga-mradi-wa-gesi-mtwara-waziri-makamba-atoa-maagizo-haya-kwa-tpdc/
The reduction in percentage ownership was traded for $5m cash plus the $35m free carry (allowing $140m full field development). As edgar says, without it, we wouldn't have been able to fund FFD (not without massive dilution - assuming Aminex could have raised that level of funds). It has also put operations in the hands of a very experienced and well capitalised company.
Whilst Aminex's percentage ownership has decreased, the estimated size of the asset has increased massively - estimated resources have increased from 0.153 TCF to 9.587 TCF (including Jurassic) in the period. That is an increase of 6,266%
Demand has increased significantly. The political situation has gone from awful to excellent. There was no clarity on route to market - now, we have a pipeline being constructed. The price we will get for the gas will be much, much higher. The long term downward trend for GBP Vs USD works in our favour. There was the promise of back-to-back drill but now we have CH1 followed by NT1 workover, followed by ~5 further drill in 2024 (all fully funded). Plus other price catalysts such as GSA and Development Licence (in final stages of approval now) and 3D seismic results for the largest 3D seismic programme ever to have been done in East Africa - and there is a 3rd party already contracted and working on the associated CPR.
Regarding timing for the drill - with SCIR essentially out of the way and with the GSA expected this month, I expect they will have everything they needed to crack on. They have received two lots of kit on site in readiness for CH1 drill and NT1 workover. The 3rd to arrive on site in the next ~2 weeks. That suggests a late Q4 2023 or early Q1 2024 timeframe for the drill.
I am confident that Aminex is going to do very, very well from here
Nice to see more positive affirmation that Tanzania is the place to be these days...
"Tanzania Continues to Claim Top position as One of the Best Investment Destination"
"The strong success is credited to the Government's continued efforts to create a favorable business climate and Tanzania's return to international arbitration"
"ABUJA, Nigeria, April 13, 2023/APO Group/ -- The Tanzania Investment Centre (TIC) records show that Tanzania has garnered a whopping $1.2 billion in FDI in the first quarter of 2023. It further shows increased investment by 52.4% from January to March of 2023 compared to the same period in 2022, owing to an improvement in the economic climate and as a result of current mega-infrastructure projects undertaken by the Government. The investment is directed at 93 projects that is expected to create no less than16,400 jobs."
"The strong success is credited to the Government's continued efforts to create a favorable business climate and Tanzania's return to international arbitration as a result of modifications to the Tanzania Arbitration Act (R.E. 2020)."
https://www.africa-newsroom.com/press/tanzania-continues-to-claim-top-position-as-one-of-the-best-investment-destination?lang=en
Good for sentiment. Good for the economy. Good for gas and energy demand.
Thanks for that Haggis. I thought this one in particular nicely illustrates the upward trend that has been in place since March 2021: https://ibb.co/0DwQgbf
Let the trend be your friend ;-)
On the same point in my post just now, I said "All the usual caveats for resources Vs reserves."
Yes, there is a difference in terms of where the assets are in the development lifecycle. The key point is unchanged though. The figures illustrate how vast Ruvuma is estimated to be. This will result in many, many years of additional revenue when compared to competitors with smaller asset bases. It is as simple as that.
Trying to take people down a rabbit hole on definitions of assets is just obfuscation.
Anyway, really must dash
edgar, you get it. Precisely. At 8.236 TCF, Ruvuma is around 20 times larger than Mnazi Bay (0.423 TCF) - and so will provide revenues for many, many additional years (the %age interest has no bearing on that). All the usual caveats for resources Vs reserves.
Other differences such as more than $100m of losses to be offset and monies to come in as repayment of the $90m loan to Ndovu etc will also reduce the tax burden and so increase profitability.
My interest in Aminex is also because of where it is in the development lifecycle. We have all the excitement of seismic results, flow test results, about 6 wells to be drilled etc etc to look forward to. Sure, our competitors could do stuff like that too but we have it planned and paid for with the free carry (the balance of $140m of development over the next 18 months).
So, yes. The main point that sets us apart is the size of the asset - again, 20 times larger than Mnazi Bay! The number of major share price catalysts (particularly multi-well drilling programme), all covered by the free carry are also important to me as a shareholder. The factors that will reduce tax burden / increase profitability for a number of years are icing on the cake.
Got to run. Busy day today
No RoJo, his/her assessment has not been correct. They predicted the company would fold. The farmout would never happen. There would be no resumption of operational progress, etc, etc. All incorrect.
Farmout complete. Cash in the bank. Free carry and revenues coming on stream in a few months, Aminex looks in good health. The share price has started to respond (but has a long way to rise still) - so wrong (sorry I mean misleading) on that too.
The asset is enormous. The forecast net revenues are very, very significant. The future looks very bright.
Sorry about that
That made me laugh smudge! You can be sure that if you met these people, they'd be the sort that wouldn't say boo to a goose! They spend all their time online. Thinking they are brave and clever for trolling. It makes them feel better about the inadequacy of their lives in the real world. Keyboard warriors hiding behind aliases. Probably convinced themselves that they are real 'bad guys'. Pah!!
Nobody with any sense holds money in an investment they don't believe in and spends hours a day online berating that investment. It only takes half a brain to see straight through these people.
Good to see that you are on to them Tanzania. Trolls using the same old tactics they have been practicing here for years.
It has been a trolls paradise. Times they are a changin'. Hold the line.
Hi Haggis, it is quite possible that the seismics will identify further resources. However, the current estimates are so enormous, I would be pretty happy just to have them confirmed - that would be a good result. Anything in addition would be the cherry on top ;-)
PROSI-GANDA:
The fundamentals of this microcap are very weak to say the least. With their hand-to-mouth existence, KNDL will most likely be a farm out arrangement. Aminex will never have enough cash to cover the US $60 - $70 million needed for two expensive offshore development wells and no banker would dare lend them monies. The stock price would fall off the cliff if an attempt was made to tap the equity markets. The investors wouldn't appreciate further dilution. They don't have much choice but to divest their KNDL 'operator status'. This will leave Aminex in the same hapless state Wentworth found itself in ... a lame duck.
REALITY:
Aminex has confirmed that it has enough cash to survive (without revenues) to the end of 2024. See RNS of 01st April 2022. Considering:
1. Production/revenues brought forward to Oct this year
2. A free carry for the ~$140m development costs of Ruvuma
3. Very significant revenues anticipated from Ruvuma (about $60m/annum net to Aminex at full field production)
Therefore, the fundamentals look very strong! If Aminex does farmout Kiliwani or enter in to some other form of partnership, then this only adds more resilience and another stream of revenue on top of the main meal, Ruvuma.
PROSI-GANDA:
Let us assume that there is production from NT-2 in October 2023 as they so claim. What would be the financial impact of such an event?
Production at 17 MMscf/d renders ~ US $ 4.25 million /y in net revenue
Projected net EPS estimate ~ US $0.0005.
Price:Earnings ratio 6:1
Price = US $0.003 /sh
Pound Sterling = 0.0024
It should be trading around 0.24 p. Apparently; the financial impact of NT-2 production will be minimal.
Trading at 1.15 p, indicates this stock is grossly overvalued even with NT-2 in full production. Of course, NT-2 isn't in full production.
REALITY:
Aminex stated that production at 140MMsf/d would equate to $40m/annum net to Aminex. That was based on based on Kiliwani gas terms ($3.07/mcf)…way back in 2018.
Since then, in relation to prices paid in Tanzania, the 26 May 2022 AGM presentation stated that “2020 average gas price ranged from $3.41/mcf - $4.34/mcf”
Also, on 25 June 2022, an article in the Tanzanian media confirmed that: “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 GSA is due to be approved very soon, so we will then know the price we’ll get for our gas. For now though, if you assume $4.mcf, that would equate to:
140MMcfd @ $3.07/mcf = $40m
140MMcfd @$1/mcf = 40 / 3.07 = $13.03m
140 MMcfd @$4/mcf = (40 / 3.07) x 4 = $52.12m
1MMcfd = $52.12m / 140 = $0.372m
17MMcfd = $0.372m x 17 = $6.324m net to Aminex per annum. Or £5.074m GBP
Estimated EPS = 0.0012
Based on the M&P offer price, Wentworth’s P/E is 9.5. The P/E ratio is influenced by a number of factors – the size of the asset and therefore the number of years of anticipated revenues would certainly be one of them. Wentworth had net 0.14 TCF of reserves Vs Aminex’s 2 TCF! With the free carry, previous year’s losses to be offset and about $90m of revenues that will be recovered as repayment of a loan from Ndovu, Aminex will be highly profitable.
As such, a P/E of 9.5 once in production would be undervaluing Aminex relative to Wentworth. Industry average is 34.66 (across the oil and gas drilling sector - oil and gas production and exploration. So including multi-nationals as well as smallcaps). A P/E of around 15 is probably a realistic target for Aminex given the factors I’ve mentioned.
Share price forecast can be calculated as EPS x P/E. Based on info above, this would be 1.8p for NT2 alone with production at 17MMscf/d at $4/mcf.
Based on estimates of ‘AT LEAST 60MMscf/d’, the Early Production System comprising NT1, NT2 and CH1 would justify a share price of ‘AT LEAST 6.35p’. Call it 6.5p to 7p. Full field production at 160MMscf/d would justify 16.95p
With CH1 to be drilled and NT1 remediated this year, the EPS can be put into production. The share price sho
PROSI-GANDA:
"This comprises 80.6 BCF of Contingent Resources “Development Pending” from a three well development .. " 1. Feb 2018 Competent Person Report. This can't possibly provide any level of comfort”.
REALITY:
As others have pointed out, latest estimates from the company are 8.236 TCF gross (excluding the Jurassic. Also excluding Kiliwani). So, MORE THAN 2 TCF of gas net to Aminex.
Hopefully, the 3D seismic will result in further increases to those estimates. Either way, those figures are impressive and the Ruvuma PSA is a’ World Class Giant’ as defined by Encyclopaedia Britannica.
PROSI-GANDA:
“There are many reasons why this company has been on a multiyear downtrend”.
REALITY:
From Feb 2017 to Mar 2021 there was a downtrend. In a nutshell, because the Tanzanian government blocked progress by Aminex (and other companies). So, Aminex could not remediate Kiliwani or move forward with Ntorya. The share price slid from ~7.5p to around 0.45p.
In March 2021, the new President came to power and everything has changed for the better. Since then, operational progress has resumed – including the acquisition of the largest onshore 3D seismic programme in East Africa. The share price has responded. Whilst still significantly undervalued, an upward trend is in motion, with the share price having risen to a little over 1.1p.
Savvy investors will take heart due to the fact that there are clear reasons for the share having become so cheap and - with a little research - they will also be able to see that the key historical issues have been resolved and that the share price does not reflect those improved circumstances, or the very positive future prospects.