AEX AGM notes

11th Jun '09 by D1G3Y

16 comments 4327 reads

Notes copied over from Fool:

http://boards.fool.co.uk/Message.asp?mid=11579503

Hi all thought I would share my experience regarding my first AGM.

After a quick trot down a very sunny O’Connell St and on to Grafton St I made it to the Westbury hotel only a couple of minutes late (which for me is pretty good) BH went through the resolutions then started the presentation which he did point out all the contained info was bang up to date.

Below are the few notes I managed to take if DJ or any others spot any error please feel free to correct as multitasking is not my forte!
• The seismic on KN-1 is just about to start.
• The presentation uses an oil price very similar to the current one but a slightly higher gas price.

Alta Loma

• AEX would like to get the S sand formation tested/online ASAP but there is a slight risk to current production. DJ asked about AEX intention to push ahead with this project in relation to falling/low US gas prices but BH said they were still keen to go ahead with it but the operator has to be careful as if anything were to go wrong with the current production the smaller partners would look to sue.

• BH did mention that possibility to get both SE1 & SE2 fully running could see up to 20mmscfd, from my notes I can’t see if SE3 was included in that figure. DJ?

Shoats Creek
• Near infrastructure & currently involved in some really keen negotiating regarding this site. AEX can see a great deal of upside from Shoats Creek.

South Weslaco
• May look to sell this field due to high obligation of wells and high royaltys.

That was really it regarding the notes I managed to take through the presentation however I did get the chance to talk with both Didier & BH both of who were very friendly seemed keen to chat.

1. The first question I asked was regarding the warrants, they have already looked into reducing the price but unfortunately this was not feasible but they have been advised that they can extend the term and are looking to do so.

2. We also discussed KN-1 & the Songas plant I was advised the pipeline was accessible to AEX ‘like a motorway’…

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Betasurfer

11th Jun '09

Very interesting writeup - here's the presentation for those that haven't seen it - http://www.aminex-plc.com/files/090610_AGM_Presentation_June_2009.pdf

djpreston

D1G3Y

Err you seem to have two indentical threads...

Ah, so was that you who came up and asked me for clarification on the sales by the insto?

Sorry if I was locked in discussions - that was the two guys from Davy and we were just chewing the fat on some ideas. You should have introduced yourself and stuck around. Brian and the other directors stuck around for a while till their transport to the airport arrived and we had a pint or two in the bar.... something that continued very much throughout the afternoon and into the evening ;-)) Just one of those days.

As to the notes: - A good write up.

SE - no, SE3 was not included in that figure. The well is being viewed as development.

Id clarify the S sand as being likely to be brought on line when we see production start to decline from the existing producing reservoir. As it happens, this has been a very steady producer, which is kind of nice. Sure it woudl be good to have the extra income but Id imagine that by the time we see S brought in and SE 3, we will have much higher Gas prices.

Diverting for a minute, Id back that view by saying that we have seen an incredible fall off in activity in the US markets (look at the rig providers and their updates). That means less new capacity to come on line. Also, speaing to Tony Prado afterwards, he backed my thoughts that a lot fo the new production of late is of the J curve production profile - massive tail off in production in the first year. The production form last year is now declining. Another interesting point is something else that I was discussing with Tony re the US Clean Water Act. There is new legislation on the books regarding the control of fracing given the potential for contamination of groundwater. The article I saw said that the rules would impose much higher costs on fracing that could/would affect project economics.

As for the rest of your notes, they are pretty much spot on.

The farm out talks are on going re both Ruvuma and Shoats. Shoats isnt a major pressure as if they dont farm out on terms tthey like then they still have the licence. There is more time pressure on Ruvuma and Nyuni though. I dont expect that to be a problem since the asset is very attractive.

The main thing re the SP is exactly what youve said. Till the market beleives we have the funding via a farm out etc then it will be stuck in the doldrums - you only have to look at the re rating of other companies that have either done a farmout or funding to allow progress to see what is the potential. Overall I remain incredibly relaxed (but frustrated) at these prices.

lowersharpnose

Thanks for the write ups D1G3Y and djp.

I have a question about Ruvuma and Aminex's obligations to drill. I'm wondering what the worst case is, if AEX cannot fund its 50% of the well and no farm-down agreement is reached with any of the interested parties. Do AEX just lose the 50% interest or are AEX still liable for costs?

lsn

marben100

Hi Aminexers!

I attended the resprise of the presentation in London today.

So, having attended today’s presentation, is Aminex a buy, hold or sell? What is the risk/reward? These are the questions I’ll attempt to answer in this post.

ISTM that the primary short term issue is Aminex’s cash position, which I asked Brian about. From his responses, it appears that, having laid off some staff, current income from US operations is substantially, but not totally, funding the company’s day-to-day operations. Brian also confirmed that the company has sufficient cash to fund the KN-1 seismic work which is about to start (BGP is deployed on Songo-Songo Island). Aminex is not funded for exploration or development activities beyond that. Whilst the company is not under immediate cash pressure (i.e. no debt), this clearly raises the prospect that Aminex is not able to progress its projects and hence add shareholder value.

So, what is the worst case? If Aminex found itself in the position described above (and I say “if” for reasons that will become apparent shortly), it seems likely that the company could sell itself for at least its current market cap. This would not be a “fire sale” because there is no immediate financial pressure from creditors – but this situation could take a turn for the worse, if there was a second collapse to oil and gas prices, thus slashing Aminex’s income. Aminex could also raise fresh funds from investors but that poses a risk of substantial dilution.

That’s the worst case I can foresee. However, there are a number of events that could change this scenario for the better:

- Per p9 of the presentation, South Weslaco is a “possible candidate for disposal”. Work is actively underway to do so. Such a disposal could address a large part of the short-term funding concerns. NB, per the OPR report, based on $60 oil, the 1P NPV for it is ~$7m, net to Aminex (and we know that US sales are generally based on 1P reserves).

- Equally, talks are well underway concerning farm-out of Aminex’s interest in Ruvuma. Brian is confident of success and that Aminex will be able to fund drilling in Q3. The site has been prepared and a rig contract should be announced soon. IF (and it’s a huge “if”) oil is found there, it could be the company maker, as I’m sure we all know.

- Talks are also well underway re farmout of Shoats Creek. Mike Rego likes what he sees in the 3D seismic, which helps enormously to pinpoint locations for drilling. There are currently 18 shut-in wells on the property. If and when farmout is completed, decisions can be taken to workover, redrill or drill new locations. Production from the two existing Shoat’s Creek wells is relatively small. Success here could produce an income stream that would fund Aminex’s explo & development activities elsewhere for the foreseeable future and convert Aminex from primarily an explo focussed company to a profitable producer with explo upside. That could (rightly) transform the market’s view of the company.

- Positive results from the Nyuni-1 seismic would allow progress to be made on commercialisation of that discovery (subject to funding). Specifically, it could allow contracts to be signed with industrial energy consumers at decent prices. A realistic prospect of commercialisation should again transform the market’s view of the company. Personally, I find it unlikely that a flow rate of 40mmscf/day would be obtained from a small reservoir, so the risking on this looks pretty good to me. Judging by the chart on p20 of the presentation, ISTM that an initial reserve assessment may be possible around the end of 2009. I will ask Brian about this.

These are the key events IMO that could lead to significant share price movements.

My conclusions? Risks remain, particularly of dilution, however considerable “derisking” could occur in the near term, with possible asset sale and/or farmout announcements. The downside risk is limited IMV, due to meaningful US assets whereas the possible upside is considerable. I am happy to continue holding but would not be inclined to add until some further “derisking” has occurred.

Regards,

Mark

REO100

Volume is picking up this afternoon, I see a note elsewhere from the London meeting indicating a major is potentially interested in the Ruvuma farm in and the FD was not present due to another meeting. Knowing my luck the FD was brushing up on his accounting standards - but I live in hope and let the rerating commence !!

Opps, don’t know how I managed the dual thread thing, I will see if I can remove the extra one.

Hi DJ

That was not me I was up the back staying quiet. I was going to say hi but you looked busy.

Are the guys from Davy going to release an assessment of Aminex? It would be good to get the word out that AEX have these interesting projects as the news flow has been rather sparse.

Murakami

Hi, apologies - the dual thread thing is a glitch. It's because the thread hangs a bit sometimes when posting, so there's a temptation to hit the button twice. We have fixed this on the development site and will roll it out next week. We will also delete the other redundant thread.

tauroctinus

Hi,

As another attendee at the AGM, I dont have much to add to what DIG3Y and Darron had to say. I also asked Brian about the warrents, and

had the same response. I understood that they were going to activly look at the possibility of extending the expiry date. There was a question

from the floor about the SP and the reply was that one insto was selling 50k per day

for the past four months, and that plus a relative lack of recent news had probably affected SP. Brian felt that AEX had had a very good year,

in fact the best year ever and that funding concerns re Ruvuma may be a hold on SP. He said that talks re SC and Ruvuma were making

good headway and that he would like to prove the market skeptics wrong.

As regards SE 2, he said that operating costs unlike Somerset were very low, and described it as a big success. He rated El Paso highly

as operator and said they also liked Alta Loma. He said that production from Upr Andrau was very steady, and that it was tricky to comingle

with other levels with a fear of thus damaging current production. However should production show signs of falling off, they were in a

position to quickley be ready for the S sands. He also felt that Shoats Creek would be a big success and said that they had seismic 3D

in satisfactory shape and that Wilcox is quite exciting. A big US company was keen to farm in, but that negotiations are tough.We are

spending a great deal of time on this and are working towrds a very nice project indeed. It was also mentioned that they are looking

at other opportunities especially in the range that they operate in in Texas. South Westlaco was described as having high royalty costs

and it was thought it might be sold and that they would buy elsewhere in the US.

I dont have much to add on Tanz, other than he said he wished Anadarko would drill before us.

There was mention of DPRK including the fact they they had been asked to meet their contacts there within the past three weeks, and

there was the usual talk of the East Sea being more interesting-large structures-lots of industry interest etc.

Brian started presentation by saying that company was in good shape-under control and moving forward with a good balance

of exploration and production, and that really was the overall impression I took away from the AGM

12th Jun '09

In reply to D1G3Y (post #6)

Nah, I was just shooting the breeze with the Davy guys. You should have interrupted (I dont bite).

Mark - nice write up.

Tauroctinus - how was your head in the morning? Thanks for the pints.

Hi DJ,

Dreadful head yesterday, which was why I was so slow to write my AGM impressions.

Pints were so creamy though, and sometimes you must suffer for art.

Thanks again,

fuiseog

Bitterly dissappointed that I had to work and duck out of the Dublin AGM, throwing away a £10 Ryanair ticket and the opportunity for a sore head!

Many thanks to Dig3y, Darron, Mark and Tauroctinus for the write ups. The next 3/4 months could bring a lot of excitement, not a year for selling in May.

With the mention of 2 Davy people present i've emailed Davy asking if they would do a research note. I've asked before without success. I don't know what they could add to the excellent write ups above but I'll post here if it happens.

devil20

13th Jun '09

Morning all. Just joined stockopedia and bought into AEX. I cant find a list of major shareholders on their website. Have I missed it somewhere? Interesting read from those that attended the AGM. tia.

Hi Devil Can't remember for sure but fwiw, AFAICR, the top four are; Schroders Firebird Principal Rickerbys Nominees(us essentially). Darron

Thanks Darron.

Friendzarin

Chatted to David Warwick for a little while prior to the London presentation.He had been with BH in South Africa at the last operations meeting with Tullow re the Mikindani-1 drill.It would appear that the rig to be used is...step forward our old friend the Caroil 6 rig.However he quickly pointed out that Tullow had commissioned an independent audit of the rig and had identified and had rectified by the owner some 250 defects so we hopefully won't be plagued by the delays experienced on Kiliwane-1.BH in his presentation also when mentioning the drill also commented onTullow's approach as being very positive to move forward on the drill.

I mentioned to DW that the picture of the well site in the presentation pack looked ideal for a football pitch and he better look sharp or the locals might beat them to it and have some goal posts up and a pitch marked out to which DW replied that they had already been approached by the local communty to see if the cleared area could be used as a football ptch once drilling had been completed and the rig demobilised !!!

DearLeader

Caroil 6 eh? Wonder if M&P, seen as it's their rig, are one of those interested in the Farm-in?

cheers

AEX AGM notes

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D1G3Y

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