Placing and extension of the warrants

30th Jun '09 by doverbeach

145 comments 16120 reads

http://www.investegate.co.uk/Article.aspx?id=200906300700147342U

Intention to place 116,330,998 new Ordinary Shares at Stg6p per share to raise Stg£6.98 million (approximately US$11.45 million) before expenses (the 'Placing');

Intention to conduct a non-underwritten Open Offer to qualifying shareholders of up to 30,266,841 Ordinary Shares on the basis of 1 new Ordinary Share for every 8 existing Ordinary Shares held on a record date (to be determined) at Stg6p per share to raise up to Stg£1.82 million (approximately US$3 million) before expenses (the 'Open Offer')

2007 warrants to be extended for 12 months to August 2010

6p, ouch , but that's the $14m for Ruvuma sorted. It had to be done...

manzanilla

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About the Author

Doverbeach

Premium Member

145 comments

thebuffoon

3rd Jul '09

FWIW at face value I also believe Aminex have got it wrong. In my view they should have quit Ruvuma..

I can appreciate this view, but we must allow for the unprecedented contraction in the finance markets, which nobody saw coming.

Buffy

muckshifter

3rd Jul '09

Agree completely with your points davjo.

As someone involved in major excavations in perhaps the top 50 metres of the earth’s crust all my working life, most of which differed substantially from indications given by boreholes at 100m centres or less, I am astonished at how easily Aminex’s success in finding hydrocarbons thousands of feet below the surace is dismissed as failure by some.

The first well in Nyuni several years ago, drilled by a crappy and cheap Romanian drill crew, IIRC (just about the first well offshore Tanzania IIRC!) found oil & gas but the rig had been farting about for roughly a year, I believe, and wasn’t up to testing, from memory. This was followed by great success more recently in the same license but close to Songo Songo facilities, at kiliwani, considerable success in the US, award of further licenses, etc.

And the ease with which some here “run” companies better than existing management, completely unaided, just using hindsight, amazes me.

I’ll be taking up my rights, and more besides, as I believe this is a fantastically well run company in the most difficult of financial climates, and it will eventually hit jackpot.

This site grows on me. Today, I didn’t log in at first, and found myself reading the contributions of a poster who’s posts on TMF caused me to come here. Needless to say, when I read the same ill informed highly irritating stuff here, by the same poster, I filtered him for the sake of my blood pressure. So this morning’s reading meant that I HAD to log in to express my disapproval of certain posts, which you couldn’t do on TMF. Well designed this site so far.

And thank you very much doverbeach for your tolerant but firm moderation.

Regards.

Isaac

3rd Jul '09

This comment has been moderated

davjo

3rd Jul '09

In reply to jonnyt (post #64)

In my view they should have quit Ruvuma

See above. Once AEX or any oilco commits to exploring for hydrocarbons by signing a PSC, they cannot walk away from their contractural obligations...at least not without penalty being payable equal to the cost of meeting those obligations, in this case drilling a well or two. To quit drilling Ruvuma is/was not an option.

jonnyt

4th Jul '09

In reply to davjo (post #69)

I didn't mean walk away, I meant sell the stake, give it away even in return for royalties on any production.

If you look back on the old site in the past six months you will see that I made the exact same point as you.

JonnyT

marben100

4th Jul '09

In reply to jonnyt (post #64)

Hi JT,

In my view they should have quit Ruvuma, sold out for the US and concentrated on 'outing value' in the Tanz acreage

Concerning the "sold out of the US" bit, it is important that understand a point that Brian has been emphasising for over a year now in his presentations, which is that valuation figures placed on the US acreage by OPC are not representative of realistic sale values right now. The key point being that buyers of US assets place a great deal of emphasis on "proven, producing" assets and place little value on the "probable" part of the portfolio. By far the largest part of the potential value of the US assets lies in Shoat's Creek (US$95m out of a total of US$143m per p3 of Aminex's annual report) - but this asset is largely undeveloped. The recently acquired 3D seismic should significantly reduce the cost of doing that (by allowing the company to target its drilling/workovers more accurately).

As you know from the recent presentation, farming out and developing this asset is now a key prioity for Aminex. Maybe Aminex should have acted on this sooner - but you must remember how rapidly the marketplace has changed over the last year (and also note the point about the 3D seismic - acquired free in difficult terrain). It is easy to reach such conclusions with the benefit of hindsight.

One could also argue that selling the Alta Loma interest (US$40m valuation) would also generate useful funds - but again there's an issue about achievable sale prices before more development is done. I also understand that this field is now Aminex's largest source of income and I personally am keen for Aminex to retain an income stream. I'd rather they did this (at least until KN-1 is developed) and proceeded with the 37% proposed dilution, than didn't dilute but maybe destroyed shareholder value by selling at a sub-optimal time and were totally reliant on future success to survive.

IMO Brian is keen to sell US assets - but only when they are sufficiently developed to attract good offers. It would be highly destructive of shareholder value to do otherwise. The marketplace is still in turmoil. I would not want Brian to sell valuable assets at "distressed" prices.

Regards,

Mark

jonnyt

4th Jul '09

Shoats Creek on the cards to be farmed out to San Severina of HAWK Jolly Ranch fame with Ascent taking a 20% free carry of SS's holding.

However I don't expect this to be a stake over 25%.

JonnyT

djpreston

4th Jul '09

That would be a hell of a surprise Jonny. My guess would be the most obvious candidate to be the big one on the doorstep, the ones who shot the 3D in the first place. More logical surely?

Isaac

4th Jul '09

This comment has been moderated

richpickings

6th Jul '09

Although Isaac has a style of writing that invites being Moderated, on this subject I do tend to agree with his disillusionment of management at this company. I was a shareholder until early this year. But having arrived at the conclusions derided to by Isaac, sold out my shares at a stonking loss! So my message to Isaac is if you dont like the management, DONT INVEST IN THEM! My message to everyone else invested is to be careful. So come on Isaac just state the facts as you se them, and leave the lambasting of management to shareholders at a shareholders meeting.

oilretire

27th Jul '09

Just had the Corporate Action notifications (normal & ISA) advising me that my warrants are about to expire if I do not take them up by end Aug 2009.

Called HBOS and they advise that they have had all notifictions regarding the current open offer etc but have heard nothing about warrants being extended by one year.

The results RNS on the EGM made no specific mention of the warrants extension - I take it the extension was passed?

As there was no specific mention in the RNS, is HBOS the only one to miss this?

I am not convinced they will resolve this issue either - any advice on who to take this up with?

fullbreakfast

27th Jul '09

In reply to oilretire (post #76)

Sippdeal also have not picked up on the extension - your post reminded me I needed to contact them about that (now done), so thanks!

marben100

27th Jul '09

Hi oilretire,

The EGM notice states:

The extension of the exercise period requires the approval of a special resolution of the warrant holders which will be proposed in due course but in any event prior to 31 August 2009.

So, it appears that a separate meeting will be required.

HTH,

Mark

oilretire

27th Jul '09

In reply to marben100 (post #78)

Thanks Mark, missed that in the EGM RNS.

emptyend

27th Jul '09

I've just had a look through some of the older posts in this thread (well, those that remain anyway).

I'd observe that a number of people seem to be confused over what a company's management CAN be expected to do. What I expect management to do is to run the controllable aspects of the business in a way that builds shareholder value. I do NOT seek to hold them accountable for what happens to the share price. It strikes me that many of the moans in this thread are purely and simply because the shares are trading at 6-7p and not 18-20p.....and that is the result of an external environment over the last year that (AFAIAA) NOT ONE management team in the sector came close to predicting. As has been pointed out, underfunded minnows were hit hardest in this move down.....but there is nothing unique about the market's treatment of Aminex in that regard!

I also would hope that, most of the time, management would be able to spot major changes in the external environment. The last year has been exceptional by every measure and so its no surprise that management didn't spot the consequences in time to do anything much to affect the outcome (other than paring back expenses and activity to conserve cash). Of course that person you look at in the mirror every morning didn't spot them either - otherwise you'd have sold your shares, wouldn't you? :-)

So.....none of us have a crystal ball when it comes to the external environment. But if one looks at what management have actually done over the last year or so they've:

a) kept the show on the road, when it would have been all too easy to "do an Oilexco", "do a Dominion" etc etc

b) made some significant/worthwhile additions to reserves and resources via discoveries in the US and at KN (with a success rate of 50% for the 6 wells drilled....and remember that Sunny Ernst 2 was the most successful well in the company's history!)

c) obtained "free" seismic over Shoats Creek, gving the basis for moving forward on a farm-out there

d) added the West Songo Songo licence and revised their assessment of the Nyuni block's potential

e) put the company in a position to drill Ruvuma without the risk of bankrupting the company

f) shot new seismic over Songo Songo island and in offshore Kenya

g) continued to participate in free-carried wells in Egypt

h) mothballed work on DPRK pending political developments

Now I grant you that we'd all wish that things had turned out even MORE positively and, more particularly, the market had given management credit for their efforts (and for the additions of reserves than have been achieved). But, without blowing anyone's socks off (yet) I would contend that management have done OK, in what has been a difficult market.

If I didn't think that then, of course, I would have sold my shares - and I wouldn't just have subscribed for more!

Its a risk business - thats the reason that expected returns are high and it is also why, if expectations become unreasonably high, the investment outcome can sometimes disappoint. You don't get the chance of "multibagging" without risk, whether one is investing in E&Ps .....or in banks ;-)

repobear

28th Jul '09

Hi ee,

Thanks for giving your views about the question that I raised about BH and Aminex. I understand risk and reward, to a degree, and that's why Aminex won't be getting any more of my money in the foreseeable, and I fear that will never happen. To do that I would have to sell shares in what I regard as safer investments, which managed to enter this downturn with plenty of cash and with managements who I think are better than Aminex and cheaper as regards annual cost/company value.

Against a backround of drilling success BH still managed to have to raise money at what is a very low point in AEX share price history when there were opportunities to raise money much earlier. The costs of drilling Ruvuma were known, and for whatever reason BH has messed up badly. The share price doesn't please me, but getting diluted at this price because BH was slow getting to grips with the every day realities of his business is my main gripe. I am not selling at the moment though.

The other question is what happens if Ruvuma isn't a success. I fear a share price of 2-3p and a further round of funding. If this happens BH will still be drawing his salary, and still not buying any shares in the company. All in all, the E&P business is indeed a risky business, but I prefer that the majority of my money stays with companies where my interests as a shareholder are much more aligned with management's.

The list of successes is nice but looked at from the other end of the telescope just shows me how badly BH has done on the deal making/ funding side.

repobear

lowersharpnose

28th Jul '09

JPM Morgan have taken a stake.

Well that's what I think the RNS states.

http://www.investegate.co.uk/article.aspx?id=200907280908133811W&fe=1

8.5% from nowhere.

Is this something to do with the placing?

lsn

emptyend

28th Jul '09

In reply to repobear (post #81)

hi repo,

BH still managed to have to raise money at what is a very low point in AEX share price history when there were opportunities to raise money much earlier.

Very easy to say of course, but do you have any evidence for that assertion? There are always constraints on when cash can be raised. I'd suggest to you that there were NO such opportunities, once the oil price had started its slide. Obviously a small number of smart and/or lucky managements managed to raise cash in the first half of 2008 - but I can't recall anyone having the chance to do so in the second half .....everyone was more worried about Armageddon. And, in addition in AEX's case, the shares were being managed lower thanks to the deliberate action (or ineptitude) of one or more institutional sellers who continued to dribble stock out. No doubt Darron can expand on these points.

There are also unanticipated events. 2-3 years ago now, AEX sought to do a big fund-raising in the 30-35p area ....only to find that plan kiboshed by someone (in the market) leaking the information - and having to settle for a smaller placing some time later at a worse price. Was that the fault of management? Hardly.

The other question is what happens if Ruvuma isn't a success. I fear a share price of 2-3p and a further round of funding. If this happens BH will still be drawing his salary, and still not buying any shares in the company.

Yes managements draw their salary. That is the way companies work. Shareholders provide the capital and management provide the labour. Both expect to get paid - but sometimes they don't. If the Chinese were to bid for Aminex tomorrow, then it would be management who would be out of a job and the shareholders who would see a bigger return. I should, however, remind you that BH and another director bought around half a million shares between them at about 12p on the way down last October....... so one shouldn't pretend that they are unaffected by the fall in the share price either!

Incidentally, JPMorgan Chase have just taken their stake from 3% odd to 8.5% - so I guess they have a bit more confidence than you:

http://www.investegate.co.uk/Article.aspx?id=200907280908133811W

emptyend

28th Jul '09

In reply to lowersharpnose (post #82)

8.5% from nowhere.

They had 3.98% at the end of last year.....9.644mn shares.

Yup - will mainly have been bought in the placing.....maybe 20mn taken that way?

repobear

28th Jul '09

ee,

AEX is cheap, and as a small bet for JPMorgan Chase it is worth doing. Adding for me doesn't seem sensible giving the misgivings I have about the way the company has been run and the structure of my portfolio. Selling doesn't seem at all attractive given that the main doubt about the company has been resolved, for now.

My main hope of getting a decent return from my investment is a bid for the company as I have said before I think. It is very much small fry for the Chinese though.

Companies that have leaks in the market tend to be amongst the weaker ones in my experience. My main investments don't seem to have that problem and when I have noticed that with any of my investments i have tended to unload them quite quickly.

FWIW I can see a rerating of the shares but AEX is, as much as ever, a high risk/ high reward stock for shareholders and has been a high reward business for management for some time now.

What do you think will happen if Ruvuma is drilled and the results are not an outstanding success? If market conditions remain difficult and Ruvuma does get a good result what are the chances of AEX holders getting the value out of that discovery?

repobear

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Placing and extension of the warrants

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Doverbeach

145 comments

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