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Aminex AGM - 9 June 2010

Thursday, Jun 03 2010 by
13

A thread intended to gather together questions for the Aminex (LON:AEX) AGM, as well as reports and reflections afterwards.

Resources:

  1. Interim Management Statement – First Quarter 2010 [PDF]
  2. Annual Report and Notice of AGM [PDF]
  3. 2009 AGM presentation [PDF]
  4. Aminex presentation archive
  5. Aminex RNS archive
  6. and, not least, the Aminex catwalk of beauty.

Filed Under: AGM,

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As per our Terms of Use, Stockopedia is a financial news & data site, discussion forum and content aggregator. Our site should be used for educational & informational purposes only. We do not provide investment advice, recommendations or views as to whether an investment or strategy is suited to the investment needs of a specific individual. You should make your own decisions and seek independent professional advice before doing so. The author may own shares in any companies discussed, all opinions are his/her own & are general/impersonal. Remember: Shares can go down as well as up. Past performance is not a guide to future performance & investors may not get back the amount invested.


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Aminex PLC is engaged in the exploration for, and the development and production of oil and gas reserves. Its principal area of activities includes the United States, East Africa, North Africa and North Korea. Its segments include Producing Oil and Gas Properties, Exploration Activities and Oilfield Services and Supplies. The Company's licenses in Tanzania include Nyuni PSA, Kiliwani North and Ruvuma PSA. During the year ended December 31, 2010, it drilled three wells, one in Tanzania and two in the United States. As of December 31, 2010, the Company held leases at Shoats Creek covering approximately 2,100 acres. Aminex Oilfield Services & Supply Company (AMOSSCO), its wholly owned subsidiary, provides logistics services to oil industry and sources oilfield equipment and consumables to international oil companies. In October 2013, Aminex Plc announced the sale of its producing gas wells at the South Weslaco Field, Hidalgo County, Texas to Northcote Energy PLC. more »

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7.9



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15 Posts on this Thread show/hide all

emptyend 3rd Jun '10 1 of 15

.....mmmmm....the only question I have is about your judgement re the terminology for item 6  ;-)

rgds

ee

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djpreston 3rd Jun '10 2 of 15
1

Indeed. I thought it was like something out of Crimewatch... ;-)

Yours Mona
Fund Management: European Wealth
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dbfromgb 6th Jun '10 3 of 15
27

Thanks SW10 for creating this thread - I am unfortunately unable to attend the AGM. Given that at least one Director may be monitoring the BB's lets hope that the questions raised are picked up in the presentation, even if the world and everyone appears to be attending the SIA AGM instead of AEX ;-).

I posted elsewhere of downside protection in the event of a disappointing result at Likonde, and for a brief while I thought I was not too far off the mark. But more recently the market (or perhaps one or two larger persistent sellers) clearly thinks otherwise, as reflected in the current sp. So who is right? Time to give the tyres a kicking......

Kiliwani

Orca has consistently made public statements that indicate they have some form of exclusive rights both to the Songas pipeline and to the onshore markets. They have announced a well development programme linked to this, and a 'slow track' upgrade to the pipeline that appears to fit this development (out to end 2012 iirc). There has also been a sniff of collusion between ORCA and 'others'. More recently ORCA appear to have adopted a softening of their position, following a change at Board, and for the first time that I can remember are talking about third party and stakeholder rights, although the development plans still indicate no urgency for pipeline development. At the same time KEY are clearly frustrated at the delays in monetisation, and following a breakdown in their proposed deal with RAK have put their Tanzanian interests up for sale. AEX has consistently held to their belief in their rights to pipeline and market access, and that monetisation will follow. So questions for the AGM...

1) Could AEX comment on their current understanding of pipeline access rights, access to markets in the event of pipeline access being granted, and timescales for the Songas upgrade?
2) Could AEX comment on the significance (or otherwise) of ORCA.'s public statements as they affect AEX?
3) With KEY apparently seeking to sell their interests, could AEX comment on the significance of this move, and how it might affect their own plans both for development and monetisation?
4) A media article a few months back talked of a pipeline between Tanzania and Kenya - beyond the short term are AEX aware of larger scale plans to develop and market what appears to be a high level of gas reserves across the region?
5) In view of the recent interest in East Africa (BG for example) have AEX received any strategic approaches for their interests - farm in or otherwise?
6) Is Kiliwani (and Songo west) now all about gas alone, or is there still a possibility of finding oil?

Likonde

The market appears to have written off any potential for oil, inclining perhaps to another posters view that the cash requirements for the next well could be the company's downfall. Yet AEX remain very upbeat that the well wasn't a failure, and has greatly enhanced the probability of finding oil next time around. PLEASE could the company describe in more detail the significance of the findings at Likonde 1 (albeit on a 'what if' basis given that much data has yet to be processed)?

DPRK

After an initial increase in the sp, and possibly reflecting current political tensions, the market appears to have completely discounted the new agreement. Could the company comment on the prospectivity of the East Sea, the reasons for the drop of the original agreements area in the west sea, and the significance of the new agreement for the company? Given that the market clearly believes the agreement to be worthless, could AEX provide some explanation as to why they believe this is worth pursuing?

Shoats Creek

I know these things take time, but the market appears to be assuming that the delays are because of difficulties in getting the oil to flow, and therefore problems. Can AEX offer an explanation as to the nature of the delays, even if a full announcement cannot be made yet?

Where are we on the farm out agreement - is the option still alive and well?

Are there any plans for a formal reserves upgrade based on the newly processed seismic and the recent well findings? If so, when?

Other

Cash position, and ability to fund ongoing programme?

Any comments on the current share price weakness?

Are the warrants to be reviewed, or will they lapse now?

Finally

The comments above are deliberately challenging, as it as important to test what might be wrong as well as what might be right, and ultimately potentially transformational. Given the current weakness in the sp I hope that the company will seek to move to reassure long term holders as to the value of their investments, as silence is being interpreted as bad news. I remain a long term holder. Can PI's reading this please DYOR.

Regards

dbfromgb

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repobear 9th Jun '10 4 of 15
2



AEX has just done a deal in Louisana. I honestly haven't got a clue how diluting shareholders on all the other potentially 'transformational' prospects helps shareholders. The amount of money raised is small. The current share price is on its arse. Why bother I ask myself?

I came to the conclusion sometime ago that the lack of focus on trying to out the value of the company's assets is deliberate. I did have quite a lot of AEX and EO. shares but sold all the AEX, because unlike Encore the management didn't seem in any hurry to test the value of the prospects with the drillbit and then realise the value for shareholders.

It looks like one of my better decisons and this deal today makes me wonder if management really believe there is significant value in the other parts of the portfolio. The deal will no doubt keep Mr Hall et al in employment for a bit longer. Will it help shareholders?

See http://boards.fool.co.uk/Message.asp?mid=11945794

TK has got some bloody neck,even for a Yank. However I suspect that GKP holders will do a whole lot better than holders of some popular bulletin boards E&Ps, who are much more British in their 'bleeding the shareholders dry' techniques and less good at finding oil too.

I very much doubt it. Cynical as ever.

Well where are you Isaac? On the train?

http://boards.fool.co.uk/Message.asp?mid=11946674

repobear

 

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Isaac 9th Jun '10 5 of 15

repobear

I told you there will be another placing.

The only people that are bullish are the ones stuck holding these shares and don't want to sell at a loss.

I was very clear and vocal to people about selling up around 15p. Some listened and others thought I was a nutcase and ignored me to their own peril.

One seriously can't continue running a business by consistently diluting holders with ever more shares. This certainly won't be the last placing IMO.

North Korea will NEVER work, Tanzania/USA is no subtitute.

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moniclub 9th Jun '10 6 of 15
19

Herewith some notes from this morning's AGM, which was, in sum, a tale of continuing, um, frustration

(see slides at http://www.aminex-plc.com/investors/presentations)

Ruvuma: high gas readings at Likonde-1 are seen as a good indication of the presence of oil; there appear to be two distinct play fairways present with two petroleum systems; a meeting with Tullow shortly will decide whether or not to shoot more seismic prior to identification of drill site for Likonde-2, which is planned for late Q4 or more likely Q1/11 (Note: not clear from Q&A whether there's enough cash for this so looks to me as if there will be a fund raising as Likonde-1 was 'expensive' (for various reasons eg Tullow's decision to remove a 'hill') ; it is hoped the second well will be cheaper

Kiliwani/Nyuni: seen only as a gas play but recent ISIS report had upgraded resources; good recovery rates expected c.75%; management had read reports of Key's intended sale on the web with interest and would ask them shortly whether this was true or not: 'very frustrated' over now two-year delay on pipeline access – latest hold up seemed to about venue for arbitration hearing in the dispute– but 100% sure a resolution would be forthcoming at some point (100% unclear when this would be)

Shoats Creek: still testing – unclear why this is taking so long; characterised as “pretty interesting” though OM-1 not likely to be a “barn stormer” even with commingled production from higher levels: real interest is the deeper Wilcox Sands (which are of close interest to BP at the moment...); Ninox keen and doing due diligence on farm in after a delay.

Louisiana acreage (as per today's RNS): nothing to add at the moment but more details as available: opportunity only came up very recently

North Korea: East Sea was surveyed by Russians 86-89; they drilled two wells in shallow water “but in the wrong place”; licence then went to Beach Petroleum; Aminex plan would be to try to firm up prospects and then farm out.

Egypt: small carried interest in complex well; not much happening but another well could be drilled in due course

Warrants: to lapse

Venue etc: cute boutique hotel near Covent Garden serving tasty biscuits; raked basement meeting room with very comfortable red leather chairs - a definite cut above your normal bog standard bum supporters

M.

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Isaac 9th Jun '10 7 of 15
7


Venue etc: cute boutique hotel near Covent Garden serving tasty biscuits; raked basement meeting room with very comfortable red leather chairs - a definite cut above your normal bog standard bum supporters

Sounds like a pile of cash that has been wasted. I just find it incredibly rude to expect people to put up their life savings via share placings to fund such an event.

There really is nothing wrong with choosing a standard central london location, afterall this is an AGM. Not a dinner party.

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davjo 9th Jun '10 8 of 15
15

In reply to Isaac, post #7

Sounds like a pile of cash that has been wasted. I just find it incredibly rude to expect people to put up their life savings via share placings to fund such an event.

Utter cokc of course! Had they chosen a flea pit, you'd have said the end is nigh!

 

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bankerbasher 9th Jun '10 9 of 15
3

In reply to moniclub, post #6

So more dilution for existing shareholders to buy more acreage in US
No firm plans to monetise any assets.
Warrants to lapse and a likely further need to raise cash to drill second well at Likonde.
Don't think the share price will be going anywhere from here.

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emptyend 10th Jun '10 10 of 15
3

Presentation here: http://www.aminex-plc.com/files/100607_AGM_Presentation.pdf

One hopes some of the other 25 or so investors who attended will be along with comments to round out the picture (eg re the updated Nyuni numbers etc). Mark is probably still buried under his pile of notes ;-)

Just on the venue, it is very close to the office and is, effectively, a small cinema in the hotel basement. This was the first AGM in London; if any shareholders would prefer a different venue in the same general area in future (if it is held in London) then they are of course at liberty to offer suggestions to the company in due course. Seating for the directors was very cramped - but it was good to see that, despite the fact that shareholders were apparently comfortable, nobody actually nodded off  ;-)

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dbfromgb 10th Jun '10 11 of 15
6

In reply to moniclub, post #6

Thanks M

Pretty much as one might have thought from reading between the lines, and a little disappointing.

With Likonde 2 likely to be early 2011, and Kiliwani likely to take some time to develop (assuming pipeline access is granted), the immediate value appears to be in the USA.

Shoats, if the seismic interpretation is correct (and this is not frontier exploration), is worth several times the current share price, and is the most likely short term catalyst to the share price. It may not be 'transformational', particularly as the cash requirements hang heavy, but the current sp is well below even a conservative valuation of the USA assets imho.

Ref venue - if I had been able to make the journey to London I would have appreciated somewhere half decent for the meeting!

dvfromgb

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daramuda 10th Jun '10 12 of 15
25

I do not normally post but a few extra points beyond what already posted and the presentaion report by Stockopedia.

The venue was perfectly adequate. In effect a smallish screening room for films with about six banks of seats 15 wide and a decent screen for presentations. EEs comments about it being cramped for directors deserves two comments - perhaps too many neds (no offence too ee who I am pleased is one) - but a counter-plus point is that after the formal business the directors, save basically for BH and MR scattered amongst the audience seating which proved useful (see later).

Likonde 1 shows great promise for a future further drill and if I understood correctly there is a meeting Friday with Tullow concerning any updates re analyses of the data gained which is still in the labs and ongoing and to discuss the possibility of further seismic or lack of necessity for further seismic. The second drill should cost less than the first because Tullow prepared two sites for drilling the one of which included the removal of a hill and that site was not used. Whilst Tullow spend more per drill than say Aminex would that is because they run a more expensive outfit and come tooled for every possible eventuality. Given the locality (no for instance USA) in hindsight BH felt that it was better to come fully tooled than to find that something was needed and then the cost and time (expensive) in sending for it.

The commingle for SC (OM) comes out of the Cockfield sands. It is not the "big one" - that BH/MR feel will come from a Wilcox drill - there the prospective oil is similar to that spewing out of the gulf. I interpreted BH comments that BH felt that Ninox had a good chance of happening. But he could say little other than the relevant technical director of Ninox had not been availble but shortly would be.

Nyuni - much talk about the reserves, contingent and prospective - see slides - KN1 is the intended hub and locality (2 - 2.5 kms from the plant and thus pipeline) very useful - a decent map of the island was shown including the airstrip. SW10 raised a potential query which was the right by Aminex to use the pipeline. There proved the benefit of the directors intermingling with analysts and shareholders for Didier Murcia was seated near me which meant that as the meeting closed I was able to get confirmation that the AEX rights are contractually safe and not only that "government guaranteed" Also whilst there had been the comment by BH that with regard the planning permission impasse, that had arisen because a regulator had been appointed who was doing a particularly thorough job, out of say 100 highlighted initial problems that needed to be resolved, it was now down to one and that revolved around an arbitration clause and venue (Switz, USA etc).

There again Didier M was useful in that he is a former lawyer and he advised me that the point was an" in case point should say an arbitration be needed 20 years down the road". DM said that the board had indeed hoped as late as the day before the AGM that they might have positive news on the point for shareholders at the agm but alas that was not to be. BH had said in forum that the news could come next week, the week after etc. and he could not put a time on t but that the matter would be resolved in the interests of all parties. Indeed it is difficult to know when luch might be n Tanzania. DM also made the point to me that AEX was being protected by the regulator but that was not said as if AEX were getting special treatment - just that the company is not being forgotten.

NK something in the far distant and aex would need a strong partner with expertise in deep water driiling - aex do not have the resources. However there is early work to be done before that can be contemplated.

I leave Egypt to others.

BH well aware that the company needs cash.

He could say nothing about the "prospective deal" next door to SC - commercially sensitive. My view is that if it does not happen then at least it helps the company keep going and pay the directors' salaries!!! Seriously BH is conscious that the company will need cash and ways will have to be found to achieve that. Obviously the planning impasse at Nyuni being resolved will help but revenues will not flow for well over a year. Also SC will help if oil flow is good from the commingle.

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emptyend 10th Jun '10 13 of 15
1

In reply to daramuda, post #12

NK something in the far distant and aex would need a strong partner with expertise in deep water driiling

This comment isn't quite right. The PSA has two parts - one deep water and one shallow water (see slide 24). Deep water expertise isn't necessary for all of it.

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marben100 11th Jun '10 14 of 15
28

In reply to emptyend, post #10

Mark is probably still buried under his pile of notes ;-)

LOL.. guess I'd better pull my finger out. ;0)

First things first... THIS shareholder was very satisied with the venue. I would imagine the cost was significantly less than that of making a presentation at Oilbarrel and offered a better opportunity for investors to inform themselves about developments, as more Q&A & director "face time" was available than at an Oilbarrel event.

The size of the venue was ideal and the auditorium was remarkably full, considering the clash with the Soco AGM.

 

Placing

Whilst one is never happy being diluted, some people seem to have overlooked the fact that the placing represents a dilution of just 4.2% - utterly insignificant. To understand the rationale behind the deal, one needs to understand the situation at Shoats Creek - more on that later. However, in response to questioning, Brian said that a) the opportunity for this deal had only arisen in the last few weeks; b) to be in a good negotiating position, Aminex needed to be able to demonstrate that it had cash available. Whilst under negotiation, obviously the deal remains commercially confidential and Brian stressed that there is no certainty of a deal being concluded.

We will have to wait until a deal is conluded (if it is) and details are announced before we can judge whether it is a good & sensible one. Just as with other oil companies, investors have to decide whether they trust the company's management to do sensible, value additive deals. Personally, I do as I have seen no evidence of the management making stupid judgements, irrespective of what some commentators may think. If you don't, then this is not the company for you!

Working through the presentation...

 

Focus

Brian began by emphasising that Aminex was now primarily focussed on Tanzania & the USA. Egypt and the DPRK are peripheral to this and do not consume significant company resources. Obviously, DPRK is effectively a "call option" on an improvement in that country's ability to do do business internationally. [my interpretation]

 

Likonde-1

Some time was spent discussing the Likonde well & Ruvuma basin licences, which are clearly a prime focus for Aminex investors. Here are some main points that I noted:

  • The depth of the structures encountered was some 400m greater than expected. That means that extensive re-interpretation of existing seismic data is needed.
  • Whilst most of the prospective acreage in the licences (the eastern portion) has been seismically mapped, some of the data goes back to the 1980s. Seismic techniques have improved massively since then (Brian drew the analogy between an old CRT tube TV vs modern plasma displays), so consideration is being given to shooting some fresh seismic before drilling another well.
  • High gas pressure was encountered at depth (but not unusually high temperatures), and high C5 readings indicative of oil were seen in well logs, as mentioned and explained in other AGM reports.
  • It is currently believed that the seal had been breached at Likonde, which is why that well was not a commercial success but the data recovered is encouraging for future wells.
  • A second well is expected in 2011.

 

Nyuni

I shall deal with Kiliwane N first and then the licence overall.

Kiliwane North

KN-1 has been tremendously frustrating for investors in Aminex. Expectations were that some limited trial production, at least, could be brought on-stream within a few months of the discovery, now two years ago. The result has been that the market appears to me to have almost totally discounted the discovery. I do not accept that view and the answers from the AGM justify my view, IMO.

Just to put this in context, for those that may not be fully up to speed, bringing KN-1 on-stream requires the following:

  • An upgrade to the Songo-Songo gas processing plant to accept flows from the well. Brian maintains that with the upgrade, there will be sufficient capacity for gas from Aminex's licences, despite Orca possibly trying to suggest otherwise. Orca are simply a customer of the pipeline company and Aminex also has rights of access under its PSA. Bear in mind that Orca (who are also awaiting additional capacity for their more recent discoveries) may have a vested interest in suggesting that they are "more equal" than Aminex in their access rights.
  • A short pipeline (2.5km) from the well to the plant
  • Definitive agreement of fiscal terms for gas sales
  • Marketing of the gas

Brian was asked to put his confidence in the plant upgrade occurring on a scale of 0 to 10. His immediate response was "10". The delays have been immensely frustrating but they WILL be overcome, as all key parties are keen to proceed and Tanzania has a pressing need for indigenously produced energy. Brian explained that the delay was due to the time take for negotiation of an agreement between Songas and EWURA (Energy and Water Utilities Regulatory Authority of Tanzania). I had not previously realised that Songas was a UK controlled entity, established with finance from CDC (and World Bank). When negotiations between Songas and EWURA began, there were over 100 points of disagreement. This is now down to a single issue: which country will host any necessary dispute resolution between Songas and EWURA. Songas has access to the necessary finance (around $120m) to proceed with the upgrade.

ISTM that agreement could be reached at any time.

Some investors are also sceptical about the market for Aminex's gas. Brian indicated that there was strong demand for gas from industrial users, to substitute for expensive imported fuel. Prices agreed with such users are significantly ABOVE the Henry Hub price. There is significant industry around Dar-Es-Salaam and talk about a possible pipeline to Mombassa continues.

It is also important to realise that Aminex has significant accrued costs, which are recoverable before the Tanzanian government becomes entitled to a profit share  Hence my conservative calculation of Aminex's NET revenues from initial production is: 50% x 10,000mscf/d x $2 (net of Songas tariff) = $10,000/d = $3m p.a. That's significant against Aminex's current market cap of £31m and annual GROSS revenues of $7.8m.

 

Rest of Nyuni Licence

When Aminex contracted ISIS to perform an independent assessment of the Nyuni resources, Brian had expected that only the KN-1 discovery would be taken into account. On considering the quality of data from the suspended Nyuni-1 well, however, ISIS concluded that they could also assign contingent and prospective resources to other structues within the Nyuni licence.

Brain explained that ISIS hadn't completed their work at the time Aminex's results were announced. That work has now been completed and slightly larger figures have been assigned, which can be seen in slide 12. In total, there are over 2tcf of prospective GIIP resources. I asked Brian about realistic recovery factors and, given the reservoir quality, Aminex consider 75% recovery to be conservative. In response to the query raised by dbfromgb, Nyuni is now regarded as a gas play and oil is not considered likely to be found in that licence.

This leads to a development concept for the Nyuni licence as a nice gas business, beginning with KN-1 well. The expanded Songo-Songo treatment plant would act as a hub for gas collection. Aminex is hoping to drill a further well on the licence this year and, potentially, could be supplying increasing volumes of gas to Songo-Songo as time and drilling proceed, leading to growing supplies to the Dar-Es-Salaam market and to growing revenues.

It is to be noted that all the Nyuni prospects are drillable using land rigs from small islands or shallow reefs close to those prospects.

The market doesn't believe it. You, the investor, will have to decide for yourself whether you do.

 

Finally, before completed my writeup relating to Tanz, Brian was asked about Key's intention to dispose of their Tanzanian interests. Brian was somewhat surprised when Key published their intention to divest their interests as they had not informed Aminex of this! A meeting was scheduled for the following day, where this was to be discussed.

 

Well, that's all I've got time to post, for now. I intend to add a further instalment relating to the USA, focussing on Shoats Creek.

Regards,

Mark

 

 

 

 

 

 

 

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safetyfirst 11th Jun '10 15 of 15

Thanks Mark and the rest of you for your AGM notes

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