General Press & Analyst Commentary

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13th Jan '10 by marben100

24 comments 8780 reads

A thread for reporting & discussing any press, analyst or other general commentary regarding Aminex.

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Marben100

Premium Member

I am a full-time private investor... with a little trading on the side (generally small-scale arbitrage in specialist niches). Previously, I spent 24 years in the IT industry, 13 of those running my own IT services firm. I invested as a "hobby" for 20 years before turning it into a full-time occupation in 2004. I really enjoy the "research" side of investing, finding out about varied businesses and industries and learning what makes them tick. Since going "full-time" I have learnt an awful lot from some very erudite investors & professionals who are kind enough to share their expertise in electronc forums such as this. I can now count a number of them as my friends, having had the opportunity to meet them in the real world, as well as this virtual one! I try to pay back the debt I owe by sharing what I've learnt and I always value constructive criticism to correct my errors and misapprehensions! I am a Director of ShareSoc, the UK organisation for individual shareholders. See below for details. more »

24 comments

emptyend

30th Jan '10

In reply to D1G3Y (post #4)

It isn't "strange" - it is simply wrong.....as a result of them having wrongly edited the description from the AEX website!

Re the presentation - AFAIAA it hasn't yet been written......but I'd guess there are unlikely to be material differences from the presentation given to Oilbarrel in October. I'd also think it unlikely to be on the website until after the event (so Wednesday at the earliest).

oilretire

3rd Feb '10

Thanks to dbfromgb & others on the Fool for feedback on last nights ProActive presentation here

http://boards.fool.co.uk/Message.asp?mid=11824970&sort=whole

Link to the presentation RNS'd this morning

http://www.investegate.co.uk/Article.aspx?id=201002030700085816G

Also link to new OMNI report with value conclusion:

core NAV at $110m or 17p/share largely attributable to the company’s US assets. In
addition to this we calculate upside potential of $139m or 21p/share. Our
total risked NAV of $249m or 38p/share represents considerable upside over
the shares even after the recent rally to 12p.

marben100

3rd Feb '10

Here are some bullet points that I picked up from attending yesterday's presentation and speaking to Brian Hall afterwards:

The 2009 reserves report for US assets is expected shortly. Whilst I didn't ask, I would hope that this will reflect some upgrade to Shoat's Creek resources, as a result of the 3D seismic reinterpretation. To reiterate: Aminex's own estimates for SC have increased from 4.53mmboe at the last reported reserves (~66% of the US total) to 18mmboe (but the 18mmboe might be a P50 figure?). 45% of this potential is believed to lie in the Frio & Cockfield sands, with the majority of that in the Cockfield.
Brian was hoping to announce the spud of the first Shoat's Creek well that evening, but weather delays have impacted the spud by a few days. An announcement can be expected "imminently" [my choice of word :0)]. This well will target the Cockfield. A further well, due to be drilled in Q2, will target the Frio. Aminex are still looking to farm out the deeper Wilcox sands, believed to hold the remaining 55% of potential, with a view to drilling it before the end of 2010.
Aminex expect to publish a resource estimate for KN-1 within the next 3 months. Brain stated that he was committed to doing so by the end of Q1 - which i guess makes it 2 months! I asked Brian what remained to be done to be able to do this. He said that the estimate was being finalised by a consultancy in Perth. Mike Rego was due to travel there in 3 weeks time, to get the job completed. SW10's law appears to have applied to the integration of historic seismic data, the KN-1 logs and the new Songo-Songo seismic shot last year, allowing the reserve estimate to be made.
I asked Brian about export of the gas from KN-1. He was adamant that the planned upgrade to the Songo-Songo processing plant, which is awaiting government approval, would be sufficient to allow Aminex to begin production (subject to confirmation of reserves, grant of production licence and contract with customers), despite possible indications to the contrary from Orca. A pipeline upgrade was not required. Should further export capacity be required beyond that facilitated by the plant upgrade, Brian pointed out that the pipeline from Songo-Songo to shore was 16" but the onshore line to Dar-es-Salaam was 18" (IIRC - but the onshore line is certainly larger), so dualling the relatively short 25km shallow-water stretch from SS to shore would increase capacity further at relatively modest cost.
An aggressive drilling programme of 9 wells, including S.Malak testing is planned for 2010 (see slide 21 of the presentation). Brian acknowledged SW10's law again (implicitly) by saying that this was a target which was unlikely to be met in full. The drilling programme includes a Nyuni follow up well, targetted for Q4. Brian is seeking to mitigate the risk there by a further farmout of that acreage. He also acknoweldged that cash was likely to be running short by the year end. Clearly, however, we can expect lots of newsflow in the meantime. I would hope that that newsflow will be sufficient to lift the SP to a level where another fundraising can be conducted without TOO much dilution - or that another means might be found to finance Aminex's plans (e.g. asset monetisation).
Brian was remarkably optimistic about progress in N Korea, having visited Pyongyang late last year. Aminex needs to novate their Korean agreements and Brian was optimistic about Aminex's chances of doing so. We had some entertainment at the start of the Q&A, when the first questioner castigated the company for its involvement in the "Axis of Evil" N Korean regime. As Brian politely pointed out (and ee has amply explained previously on various BBs), there are two sides to every story and the killing of 3m Koreans by the US in the Korean war might give a slightly different colour to the N Korea/US relationship from that painted by the press (especially the extreme views that the questioner expressed). Brian's impression of N Korea was rather different from those press accounts.

Regards,

Mark

djpreston

3rd Feb '10

In reply to marben100 (post #7)

We had some entertainment at the start of the Q&A, when the first questioner castigated the company for its involvement in the "Axis of Evil" N Korean regime. As Brian politely pointed out (and ee has amply explained previously on various BBs), there are two sides to every story and the killing of 3m Koreans by the US in the Korean war might give a slightly different colour to the N Korea/US relationship from that painted by the press (especially the extreme views that the questioner expressed). Brian's impression of N Korea was rather different from those press accounts.

I see Isaac managed to show up then! ;-))

Thanks Mark

emptyend

3rd Feb '10

In reply to marben100 (post #7)

the first questioner castigated the company for its involvement in the "Axis of Evil" N Korean regime.

:-)

Perhaps we should get into Iraq - at least we might get a few shoes out of it ;-)

Re the point about drilling plans towards the end of the year, as you say Mark "we can expect lots of newsflow in the meantime".....so much so that there we might hope there to be many ways of skinning whatever cats we feel need to be skinned. Even the potential £8mn from the 22p options isn't to be ignored in that context, as it would potentially raise a similar sum of money as last summer's placing etc.

rgds

daramuda

3rd Feb '10

In reply to emptyend (post #9)

Now that is a laudable potential aim by the board ee

safetyfirst

3rd Feb '10

Thankyou Mark for an excellent account

SW10Chap

4th Feb '10

In reply to marben100 (post #7)

the first questioner castigated the company for its involvement in the "Axis of Evil" N Korean regime. As Brian politely pointed out (and ee has amply explained previously on various BBs), there are two sides to every story and the killing of 3m Koreans by the US in the Korean war

I wasn't at the presentation and so I don't know what the question was.

Nevertheless, if this starts to become much more significant then I think Aminex need to be careful about their self-presentation and PR. And that's going to mean relying on using data that can be quoted as coming from a specific and credible source. If not, they're going to leave themselves open to a range of charges levelled by everyone from dedicated activists all the way through to Sunday supplement readers.

Most of the references that I can find relating to North Korean casualties suggest that there were around 520,000. This includes wounded as well as killed. Civilian casualties appear to be another 1 million - - or possibly as many as 2 million. (And by the way, the Americans continue to count their casualties in the DMZ as part of their Korean War figures on the basis that no peace deal has ever been signed). I am not for one second suggesting that these are anything other than horrendous tallies, yet to quote 7 million when most credible sources put it between 1 and 2 million is simply asking for trouble.

Elsewhere I've read:

He [Brian Hall] repeated that the regime is not as bad as it has been presented - much of it was the Bush regime's propaganda, post Clinton thaw attempts.

Well OK, how bad is it? It's difficult to get a range of opinions because there are really not that many people who go there. Of course, Aminex people may do and I'm sure they would not class themselves to be experts in humanitarian matters.

The CIA Factbook says:

one of the world's most centrally directed and least open economies, faces chronic economic problems. Industrial capital stock is nearly beyond repair as a result of years of underinvestment and shortages of spare parts.

chronic food shortages caused by on-going systemic problems including a lack of arable land, collective farming practices, and persistent shortages of tractors and fuel.

the population continues to suffer from prolonged malnutrition and poor living conditions.

Firm political control remains the Communist government's overriding concern, which will likely inhibit the loosening of economic regulations.

But that's the CIA. Maybe you don't hold much truck with that, after all it was arguably their war. But it's not really significantly different from portraits painted by other publications. This is the opening paragraph from an article in the Economist (subscription needed):

AT THE heart of North-East Asia sits a failed state with the worst human-rights record on Earth. The regime maintains its grip by putting one in 20 of its population in military uniform. One in 40 has spent time in the gulag. Mobile phones and the internet are forbidden, except for the elite, and radio and television sets are made to tune only to government stations. Unauthorised travel within the country is banned, at least in principle. Food shortages are chronic, and a decade ago the regime’s malign neglect created a famine that killed between 600,000 and 1m people. The famine still casts a long shadow, and not just through malnutrition and stunted growth; recent studies of refugees have pieced together a picture of a population that, in wide swathes, remains traumatised—and there are fears that famine conditions might be returning.

I think it would unwise for anyone to fail to acknowledge that there are considerable problems and human-rights issues.

None of this means that Aminex's activities cannot be presented positively, but I believe it is fundamental that Aminex recognize and talk about the situation in the way that it is being presented elsewhere. For a company - let alone an oil company (a breed who we know to be the wickedest of capitalists!) - to say "Oh no, it's not like that at all" not only lacks credibility in front of most audiences, but is likely to lead to substantial problems.

Bad PR has killed off bigger and more media-savvy companies than Aminex. I don't want to see that happen and I believe that they need to consider this as one of their risk factors.

SW10

marben100

4th Feb '10

In reply to SW10Chap (post #12)

I wasn't at the presentation and so I don't know what the question was.

Just to be clear, the point didn't come across as a question, more as an aggressive statement that if Aminex wanted to be viewed as an ethical company it ought to immediately divest any interest in the DPRK.

For a company - let alone an oil company (a breed who we know to be the wickedest of capitalists!) - to say "Oh no, it's not like that at all" not only lacks credibility in front of most audiences, but is likely to lead to substantial problems.

Again to be clear, I put Brian's response across rather crudely. He certainly did not actually say "Oh no, it's not like that at all". Mea Culpa. He was not dismissive of the point that was raised but did point out that there WERE two sides to the story (i.e. not as black and white as the "protester" painted it) and (especially after the meeting) explained specific instances where perceptions promulgated by the media were not accurate.

Compare and contrast The Economist's account, quoted by you:

Food shortages are chronic, and a decade ago the regime’s malign neglect created a famine that killed between 600,000 and 1m people.

with this one (http://en.wikipedia.org/wiki/North_Korean_famine ):

Famine struck North Korea in the mid-1990s, set off by unprecedented floods and the collapse of the Soviet Union^[2]^[3]. This autarkic urban, industrial society had achieved food self-sufficiency in prior decades through a massive industrialization of agriculture. The economic system relied on "friendship prices" trade with the Soviet Union. The state-controlled economy continued to stagnate throughout the 1990s as a result of poor industrial and agricultural productivity, and the loss of guaranteed markets following the fall of the Soviet Union.

I doubt there are ANY participants here who are exactly happy with the policies of the DPRK but, from other artcles, it is clear that energy shortages are contributing to a crippled DPRK economy, so unleashing the DPRK's own resources could form part of a humanitarian solution, rather than proloning the problems. In any case, it is hard to see any real progress being made with Aminex's DPRK acreage without some sort of accommodation being reached between the DPRK and the West, leading to a lifting of sanctions.

In summary, I feel that Brian is all too well aware of concerns regarding the DPRK and addressed those concerns admirably. Apologies for not making that clear enough.

Best regards,

Mark

emptyend

4th Feb '10

In reply to SW10Chap (post #12)

Hi SW10,

I wasn't there either - and you make a good general point about the need to consider risk factors. In particular I don't think anyone would dispute that:

I think it would unwise for anyone to fail to acknowledge that there are considerable problems and human-rights issues.

However, we weren't there and we can't know precisely how the question was put - though I have of course asked a man who does.

There are, of course, ways of politely putting the point that many people in the West have a dim view of DPRK. I have little doubt that the question wasn't couched in especially polite terms, nor perhaps with reference to much more than the Daily Mail? Such attacks, especially when unexpected, should still be managed with reference to the facts.....and in that context (given that you yourself say "perhaps as many as 2 million" civilians, as well as 520,000 troops) I would have thought a 3mn round figure (as heard by Marben) to be a perfectly reasonable approximation [not sure where you got the reference to 7mn from!!!! ....and I'm not sure that further exaggerations help]

The serious point here is that one should be prepared to make a logical defence of involvement in parts of the world that have dubious (or indeed obviously dodgy!) reputations on the human rights front. Such questions might fairly be asked of those companies involves in Nigeria, for example, or DRC.....or the parts of Russian gulags where many had died. Depending where one draws the line (and which side of it one starts on) some would find the existence of the death penalty in Texas, or the flouting of human rights in Guantanamo, to be matters that were beyond the ethical pale!

One can, of course, have a long debate about the political rights and wrongs of any situation, but it doesn't seem to me to be morally wrong to try to assist countries with dirt poor populations (such as DRC and DPRK) to discover whether they have any oil resources at all that might improve the collective lot of the people (since matters of equitable domestic distribution of the fruits of any discoveries don't arise until there is actually something to distribute!).

Nevertheless, as one moves closer to the possibility that something may actually result from the various efforts, there is certainly a need to bear the issue of both presentation and an appropriate CSR policy in mind and, if and when things begin to actually start happening on the ground, I'm sure they will get the full attention of the Board. In the meantime, though, I'd be inclined to have the full barrel of salt close to hand when listening to western commentators on topics such as Iran and DRPK. After all, they certainly didn't get Iraq right and (as you have previously observed yourself in the context of trying to "see the geology" down a hole that is many thousands of miles away!) none of us are close enough to the situation at this point to form a properly balanced view. It isn't really good enough to merely listen to the CIA (the guys who screwed up on Iraq) or The Economist (the guys who screwed up with their prediction on oil prices) and accept their view of far-off regimes about which they may well know rather less than they claim.

rgds

ps...you quote a piece from The Economist. I have noted, thoughout the 4+ years I have held shares in Aminex, that The Economist regularly published anti-DPRK pieces. Almost without exception, these have been written by their staff in South Korea.

doverbeach

5th Feb '10

I was at the presentation and to be honest, I winced at Brian's reply.

Of course the audience was on his side - a bunch of oily investors had no interest in ethics discussions. Nevertheless I agree with SW10's point which is that Brian needs to develop a firm PR line which he will stick to. This can then be wheeled out whenever needed, whether at a conference of friendlies or when phoned up by a journo.

I would suggest that ee's line is good:

SW10Chap

5th Feb '10

In reply to emptyend (post #14)

[not sure where you got the reference to 7mn from!]

No - that's a mistake I've made and it's too late for me to edit! Apologies.

I'd be inclined to have the full barrel of salt close to hand when listening to western commentators on topics such as Iran and DRPK... I have noted, thoughout the 4+ years I have held shares in Aminex, that The Economist regularly published anti-DPRK pieces.

I think it's fine for us as individuals to choose how we interpret such commentaries - especially, perhaps, given our interests. However, we have to remember that world+dog is getting their information from such sources and it simply won't be credible for a Director from a junior oil company with interests in DPRK to do a King Canute. I think that more respect will come from substantially accepting those assessments publicly if and when challenged.

In reply to marben100 (post #13)

Thanks for your clarifications! Obviously the quote I made wasnt intended to be an accurate attribution and I hope the context and style reflected that.

especially after the meeting) explained specific instances where perceptions promulgated by the media were not accurate

Again, for similar reasons, I think he needs to keep those kinds of statements off-record as much as possible.

Beyond that, well, in reply to doverbeach (post #15)

Brian needs to develop a firm PR line which he will stick to... I would suggest that ee's line is good.

I agree. And the Board will need to keep parroting their line until well after they're sick of hearing whatever phrase they agree on.

SW10

dbfromgb

5th Feb '10

In reply to SW10Chap (post #16)

Just to add a little more context.

The questionfrom the audience was not a question but a rant. Whatever Brian said he was not going to win the argument, and it was clear that if DPRK does develop into something more tangible/substantial then Brian is going to have to learn:-

1) How to deal with someone whose sole intention is to be disruptive and peddle a particular viewpoint

2) In so far as it is possible to engage in reasoned debate what is the companies clear reasoned argument in favour of working with DPRK (something it seems we are all agreed on).

Actually I though that Brian defended his corner with dignity and with some reasoned responses. My own take was that the questioner was pretty isolated, and that the mood was with Brian, but I guess that was because of the nature of the meeting.

In my discussion afterwards with MR it was clear that they are very aware of the politics, and that their own relationship with DPRK has been discussed with both USA and UK governments.

I don't really do politics, but my own take on the discussions I had was whether you continue to demonise a regime based on its past record (and risk perpetuating the problem), or whether you seek to work with them to change the future. I was made aware of the British policy of the three e's (engage, educate and e... can't remember the third!), and a clear case can be made for Aminex being part of the solution rather than part of the problem, even if such a move will always be seen negatively by some.

Finally I was left in no doubt at all that Brian and Mike really liked the people they had met and found them genuinely warm and friendly. Some great stories, and I don't think the possibility of future developments in DPRK is as remote as some do.

From an investment/business point of view I think the thing to do is not be overly defensive, and to agree a positive straight forward argument in favour of their actions which they stick to, avoiding the dangers of getting sucked into a a more detailed political/philosophical debate.

regards

dbfromgb

Marvo38

5th Feb '10

Dbfromgb's post 17 is the most accurate reflection thus far on the DPRK discussion at the presentation. I agree with:

"Brian defended his corner with dignity and with some reasoned responses"

The protester was making a political-rant. Brian responded very politely that he realised many people held similar views, gave reasons why he felt they were extreme and offered alternative opinions.

Later in conversation Brian said that there seemed to be a genuine move away from the defensive, paranoid, "military first" policy for national expenditure priority. Now the emphasis is "economy first" and he expects (hopes?) for some sort of announcement in the not-too-distant future. I was not clear if he was referring to an AEX-specific statement or something from DPRK more generally. I hope he is right - but I am not holding my breath.

doverbeach

5th Feb '10

In reply to Marvo38 (post #18)

Dbfromgb's post 17 is the most accurate reflection thus far on the DPRK discussion at the presentation

oh I agree. But that isn't the point I was trying to make. Some of the stuff Brian said in the meeting could have been reported VERY badly for Aminex's reputation - the fact that the meeting was entirely on his side (except for the ranter) meant this didn't matter. (And some of the stuff he said afterwards was worse - but that is more difficult as he certainly knew several of the people he was speaking to then and had probably worked out that the rest were Fools too, so to some extent that could be regarded as a private conversation.)

He needs to not downplay criticism of NK's past human rights abuses. And not say anything that could be understood out of context as suggesting that deaths resulting from US action in the region are equally culpable. And not make any anti-Bush jokes. These are arguments he just has to refuse to engage in, wherever his personal sympathies lie.

emptyend

5th Feb '10

In reply to doverbeach (post #19)

Can we call time on this aspect of the discussion please, being mindful of Google and other bots? I'm clear on the issue - indeed I was clear from SW10's first post. I agree with the gist of the concerns and will address them.

rgds

patterbu

19th Feb '10

Sometimes too much comment on things in N korea is not too helpful, I was in S korea as a visitor in the 19980's and 1990's and found that there was an underswell that hoped that relations would improve between the two Koreas.

from what i suspect now , the momentum is growing and personally I would not be surprised to see VERY rapid developements, esp in bohai bay
phil

p.s not worth a lot but just an obversation.

oilretire

21st Feb '10

Thanks to Flyingswan on ADVFN, there's a new report being distributed by SADIF. Not sure of their credentials, but could be worth a read if anyone has access? And likely to lead to more coverage on news wires etc.

http://www.pr-inside.com/sadif-analytics-releases-new-summary-due-r1734426.htm

21/02/2010 – SADIF Investment Analytics, announces a new summary due diligence report covering Aminex plc (AEX)..............

.........The report has been distributed to Reuters, and forwarded to Yahoo Finance and FT.com.

emptyend

21st Apr '10

Latest Omni research note on the website here.

I'll have to leave the rest of you to pick the bones out of it.

marben100

21st Apr '10

Hmmm... quite a serious omission from the report IMO is further discussion of Shoat's Creek. This is, by far, the most significant element of the "core NAV". Even more significant if, as I do, you consider a valuation of $21.5/boe OTT for mainly gas assets at Alta Loma (in the current depressed gas-price environment).

The two key factors that are not adequately considered in the valuation of Shoat's Creek (based on 4.5mmboe) are:

Firstly, from the prelims:

Shoats Creek reserves will be re-evaluated later in the year but in the meantime the end-2008 reserves evaluation has been used.

But we know from Aminex presentations that the company's own assessment of the SC potential is 18mmboe, following interpretation of the 3D seismic, post the 2008 reseves evaluation: i.e. quadruple the reserves that the core NAV is based on.

Secondly, we now have to allow for the 50% farm-down (assuming it goes ahead). Though this obviously reduces Aminex's working interest, it should increase the $/boe value (to some extent) because the project IRR is considerably improved for Aminex, through having a third party pay a significant portion of up-front CAPEX.

Given the significance of this asset to the core NAV, it merits deeper analysis than Omni have given it. It would seem sensible to divide SC into upper (Cockfield & Frio) & lower (Wilcox) zones, as Aminex has done. The OM-1 well has to a very large extent derisked the upper zone because:

Wireline logs have identified several potential oil and gas bearing intervals in Cockfield sands between 8,200 and 9,335 feet. The sands identified closely match the prognosis obtained from interpretation and mapping of new 3D seismic over the property.

Aminex's assessment of the Cockfield & Frio is 45% x 18mmboe = 8.1mmboe (mostly oil). So, with the farm down, that's 4mmboe net to Aminex - which is core NAV (no further risking necessary or appropriate). The $/boe value for that oil will depend heavily on the results of the flow test*, but for now it seems reasonable to stick with the earlier estimate of around $20/boe (considering the oil content). So that's around $80m of core NAV for SC.

On top of that we have the Wilcox potential. This is not proven and hence should be in the risked upside. It amounts to 9.9mmboe, unrisked (4.5mmboe net to Aminex, assuming farmdown). We do know that the Wilcox sands were successfully tagged by an earlier well & combined with the accuracy of Aminex's seismic interpretation the upper zones, the odds must be pretty decent - 50% seems prudent.

Finally, I would add that the 30% risking for Nyuni seems very arbitrary. Again, I would prefer to see Nyuni broken down. KN-1 is patently a proven resource. The chief risk is that of commercialising it. Taking Aminex's 50% of the proven 40bcf and valuing it a pretty miserly $1/mcf, that's $20m alone.

Considering this, I am pretty confident that Aminex actually have $100m of core assets (equivalent to 15.7p/share at current exchange rates) - with very substantial upside potential.

I have today bought back a larger quantity of shares at a lower cost than a tranche I disposed of at 15.5p, in the speculative frenzy leading up to the Likonde-1 well. Thanks Mr Market. :0)

*That's because the discounted cashflow from an oil flow of, say, 500bopd is worth a lot more than that from 50bopd.

Regards,

Mark

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Marben100

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