Aminex’s Q1 2015 report stresses first gas production from Tanzania and debt repayment plan

By Stewart Dalby

Aminex’s recently released Interim Management Statement inevitably has a backward looking aspect to it since it reports on events in first quarter 2015 which have already been extensively reported. But there is some new detail in the statement and the question that obviously arises — and the release attempts to answer– is where does the London main board company go from here.

Equally inevitably the report focuses primarily on the Kilwani North -1 gas well in Tanzania which puts Aminex on schedule to be a new East African producer. This is significant to Aminex because the company has had to borrow money to keep going without any revenue from production to help out with costs. This overhanging debt put a lot of downward pressure on the share price.

The KN-1 gas well, which tested at 40 million standard cubic feet of gas (mmscfd), has been completed and is ready to produce, Aminex says. Initial gas production will enable the pipeline operator to pressure test the pipeline and gas plant mid- 2015 with revenue gas flowing shortly thereafter. Following an engineering review, it is now anticipated that a sustained production rate of between 20 to 30 mmscfd , higher than previously planned or reported would optimise the maximum life of the reservoir.

Regular readers of Oilbarrel will know the question of a gas sales agreement with the Tanzanian authorities has been a long-running saga. For at least a year the signing of a deal has been reported as being likely to arrive “soon” or “shortly” or as “imminent”. An agreement has still to be closed. But, the company says a Gas Sales Agreement (GSA) is effectively complete but awaiting the finalisation of payment protection clauses and guarantees prior to final signature by all the joint venture partners.

The signing of the GSA is important since it should unlock the second part of one partner Solo Oil’s farm-in to the project. In February 2015 Aminex completed the sale of a 6.5 per cent interest in the KN Development Licence to Solo Oil for a consideration of US$3.5 million. This reduces Aminex’s interest in the licence to 58.5 per cent.

Under the terms of the asset sale agreement , Solo has the option to acquire a further 6.5 per cent interest in the field for US$6.5 million within 30 days of the gas GSA being signed. Once this deal is done the KN equity split will be Aminex will 52 per cent RAK Gas with 25 per cent, Solo with 13 per cent and Bounty Oil with 10 per cent.

Kiliwani North is, of course, not Aminex’s only asset in Tanzania In 2012, the Ntorya-1 discovery well in the Ruvuma PSA tested 20 mmscfd together with 139 barrels of associated condensate. The company has now completed an infill seismic programme designed to high grade leads into drill ready prospects across the Likonde and Ntorya channel fairway. The recently completed CPR by LR Senergy attributed 4.17 Pmean GIIP (gross) for the discovered and undiscovered resources on the PSA. Ntorya-1 was attributed 70 bcf (gross) as Contingent Resources (Best Estimate).

Then there is the Nyuni Area PSA also in Tanzania. After further detailed technical review, Aminex and its partners have decided to expand their exploratory efforts towards the highly prospective deep water portion of the Nyuni Area PSA acreage. The discovery success rate targeting the prolific Tertiary reservoir in neighbouring licences based on 3D seismic is over 90 per cent.

There is also the asset in Egypt. In February 2015, the South Malak 2 well was declared a discovery well by the Ministry of Petroleum in Egypt in Egypt. Aminex is currently assessing the economic benefit of this discovery to the company an d will act accordingly.

So what does this all mean for Aminex going forward? The company says it has four primary goals for the remainder of 2015. Firstly to complete the repayment programme of its US$8 million corporate loan facility, final repayment date of which is in July. Some US$3.3 million has already been repaid since the beginning of the year and the company is constructive discussions with the lender to extend the final repayment date if need be.

Should Solo exercise its option to acquire the further 6.5 per cent for US$3.5 million proceeds of this sale will be applied to further debt retirement. With or without the exercise of this option, however, Aminex has a reasonable expectation of being able to repay or re-finance the remainder of the loan or extend the repayment period, particularly with the benefit of the expected revenues from Kiliwani North.

Secondly, the company’s main operational priority is to bring gas from the Kiliwani North Field on to production ,which should now be complete and pressure-tested pipeline, the near term completion of the gas processing plant infrastructure , and the signing of the Kiliwani North GSA.

Thirdly, on the Ruvuma PSA, the company’s priority is to appraise the Ntorya-1 discovery by drilling the Ntorya -2 well and gain a better understanding of it and its neighbouring leads and prospects in the two exploration licences. Any potentially commercial gas field in the Rumuva PSA would find a ready market in Dar es Salaam.

Fourthly, on the Nyuni PSA, the company’s priority is to appraise with 3D seismic a lead identified in the deep water portion, which the board views as a compelling opportunity for a potential future high impact discovery.
Shares in the £38.71 million market cap Aminex have had a rough time in the past year, sinking as low as 0.76p because of the concerns over debt. They are looking a bit healthier now at 2.20p not too really distant from the 52 week high of 2.95p.