Aminex EGM to Force a Sale of US Assets & Return Cash to Shareholders

23rd Jun '11 by Isaac

3 comments 3972 reads

I have just read the following post on ADVFN from patersdw & made me think how many more Investors feel this way about Aminex ?

patersdw - 23 Jun'11 - 11:47 - 10246 of 10264

Think the sentiment here is rightl effected by the following:

- Shoat's Creek production is disappointing and appears to be in steep decay, not withstanding the options that exist for further well optimisation, downhole pumps, water injection etc - these things are all well and good, but today's reality is month on month decline. Unless/ until production at OM-1 & OM-10-1 can be turned around its hard to get excited about popping more holes in the ground there - other than that it continues to deplete cash.

- Nyuni 2, even if a substantial inventory is found, the co's advise that commercialisation via Songo Songo isn't a feasible option leaves it stranded. As gas in the ground it could only realistically be values at cents on the mscf which leaves it practically valueless in terms of SP impact.

- Ntorya 1 is a wildcat, COS said to be 30% or so? - still leaves 70% likelyhood of a duster.

- Cash, cash, cash. After the planned works above there won't be a whole shitload of cash left in the kitty - $10m planned and maybe some $8m underspend against original plan on Ruvuma doesn't leave enough to do much of anything before the begging bowl comes out again.

My holding in AEX is very significant in terms of my portfolio, or rather I should say that its very significant in terms of cash invested. With an average of ca 19p after multiple top-ups, open offers etc, recent years have been extraordinarily painful. I have no desire to do AEX down, but realistically it's been a disasterous investment for me and right now its hard to be optimistic about the company's or my investment's prospects. Too much jam tomorrow, never delivered.

http://www.advfn.com/cmn/fbb/thread.php3?id=20855735&from=10246

My view is Aminex has done a reasonably good job in the US operationally and some aspects of East Africa. However given the history of the fund raisings etc I don't think the market is giving any appreciation for this hard work.

Therefore I…

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marben100

23rd Jun '11

Isaac,

There is one fatal flaw in your suggestion:

Would it be better to force a sale of the US assets and release the cash to shareholders? I understand the US assets are worth about 7-8p a share.

The NPV of the 2P assets, as per the latest report/presentation, is equivalent to 10.8p per share. Unfortunately, US market conditions are such that they wouldn't fetch anything like that in a sale. Moreover the bulk of that figure (9.0p) is due to Shoats, little of which is proven or producing.

I actually asked Brian in the meeting whether the company might consider selling Alta Loma. He was horrified at the idea. On further questioning, I learnt that whilst the asset now produces a very attractive cashflow and Aminex's stake wouldn't fetch an attractive price if put up for sale. On that I have to trust Brian and other Board members' judgement, as I have no experience of selling stakes in modest US oil/gas-fields.

According to the information disseminated by Aminex, Patersdw is also wrong in his judgement of Shoat's Creek. I assume he's relying on Sonris figures to arrive at the conclusion that the field (overall) is declining. However, that's not an adequate source of information (and is out of date). Production is intermittent, until the best methods of producing are established and appropriate work is done - according to the company.

As I see it, this year is "make or break" for Aminex. Two critical wells are to be drillled and Aminex need to demonstrate that they can make Shoat's work economically. Aminex also need to reach a commercialisation deal re KN-1. If none of those things happen, then there will be little value left in the company. I don't think there's much we can do about that, as shareholders. OTOH if, for once, things start going right, then the market's view of Aminex will probably change and there could be strong gains to be had from here. Ultimately, the company might be bid for. That's how value might be returned (and, of course, you can crystallise gains on the way up, if you want to).

We have to recognise that Aminex is a speculative investment - which Brian has stated before, at last year's AGM - and recognise it as such.

Cheers,

Mark

Isaac

Thanks Mark for your comprehensive reply. I very much appreciate your comments.

Do you have any idea what the realisable price the current market would be prepared to pay for these assets in their current state? I think if we can force an EGM we could get a better idea on these numbers and make an informed decision on what action to take.

Why was Brian horrified? I think it is a reasonable suggestion.

My problem with the management is, in share price terms there has'nt been much of a delivery, yet we still have the same board members taking salaries year in year out. So it makes me question is this company run for the benefit of the management? (this is a question I am thinking out a loud, I have no idea if this is actually the case)

You see it is quite easy to dilute shareholders, raise cash, drill wells, whatever wells are succesful they produce and use the cash to fund more salaries and then they repeat the cycle. At what point do shareholders get a bite of the cake?

This is why I have recently been asking what is Aminex's strategy? I want a very clear succinct answer to my question.. And I don't want to be told on the phone or at the AGM or a bulletin board. I want to be told in an official RNS and the company website so it is formal and I can hold them to account at the AGM if they don't deliver.

I looked at the director remunerations a few days ago over the last 5 years and compared them to the 5 year chart, it amazes me the remunerations seem to be approximately the same throughout that time period. There is a part of me that wishes the remuneration changed inline with the shareprice. Wishful thinking......

As I see it, this year is "make or break" for Aminex. Two critical wells are to be drillled and Aminex need to demonstrate that they can make Shoat's work economically. Aminex also need to reach a commercialisation deal re KN-1. If none of those things happen, then there will be little value left in the company. I don't think there's much we can do about that, as shareholders.

I fully agree with this. I can see how it will play out if the prospects fail, therefore I want to be proactive and force some kind of action whilst the company is still in a reasonably good shape rather then when it is incredibly weak. A lot of people will come out of the woodwork giving management heat if the share price collapses to 1-2p but I want to be one step ahead and do everything I can to protect my investment.

But if we sold the US assets now & had cash returned to us then we can wait and see how the drills in Africa play out, if they don't work we can simply walk away. I think we are likely to get more value in such a scenario rather then Aminex trying to sell assets from potentially a very weak position later in the year may not deliver much value.

I am ignoring the upside, but am thinking more about how to protect my investment and get a return.

Readers please please feel free to express your views on what action you think should be taken to realise the value from Aminex. I am very open to ideas and encourage you to share your views.

I think we all simply want a return on our Investment. Thank you.

djpreston

How has the advfn reader got a 19p average with multiple top ups, open offers etc??

Mark is right, this year (meaning 12 months from now) is critical. Getting Kn1 on stream and producing cashflow is important. SE is producing very nice cashflow (remember that its sold at a premium to HH). A further SE well is likely too. Shoats is being worked out in terms of optimisation and the waterflood idea utilising the existing wells is inspired in terms of keeping costs down. Again, remember that Shoats gas sells at a $5/mcf premium. As it stands, it isn't worth selling till more work is done.

If nyuni 2 comes in, true, there is the commercialisation problems but that's a lot of gas that's quite nearby and we'd become a much more interesting potential target for all the companies now busy drilling or shooting seismic (hoil/bg/ophir and others). Then there is Ntorya....

No point in selling up US IMO and there's no way I'd support an EGM to that end. As for value realisation, I don't see the need for a formal statement. Mark's right there (as he inevitable is always right).

Aminex EGM to Force a Sale of US Assets & Return Cash to Shareholders

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Isaac

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