Aminex PLC - Part Two




Prior to reading this follow on you should read Part 1 posted in early August:
http://theel1tetrader.blogspot.co.uk/2012/08/aminex-plc-first-post.html

For more information regarding The Ruvuma Basin where Aminex operates visit my post below:
http://theel1tetrader.blogspot.co.uk/2012/08/rovuma-basin-basic-factfile.html

Since part 1 Aminex's share price is down just short of 5% - not significant movement, however the updates that have been issued are certainly interesting and strengthen Aminex's focus. I will also cover some details missed in Part 1.


The first point I eluded to is Stuard Detmer - Aminex's CEO as of late 2011. Whilst he has already made a number of milestones such as securing the funding from the Chinese investors at a hefty premium to the share price and deepening the Ntorya well which eventually landed a discovery, its always good to know what he achieved prior to being at Aminex.

Stuard gained a BA in Economics from Vanderbilt as well as an MBA from the Darden Graduate School of Business Administration at the University of Virginia. Stuard has worked in the oil industry for over twenty years, building up a wealth of experience starting his career working at industry giant Mobil Oil in three continents (USA, South America & Europe). He is fluent in Russian and English and can also speak Spanish and French.

Stuard was admitted to Sibir Energy's board of directors in early 2004. Initially he was appointed as Manager of Downstream Operations primarily managing the 'Moscow Oil and Gas Company'.

Stuard was made CEO of Sibir in April 2009 when the company was amid a deep financial crisis - transactions totalling $400million had been 'diverted from the company' through proposed shady transactions to third parties owned by another director and cooperation by the former CEO. These transactions took the form of a deal to save property of Russian shareholder Chalva Tchigirinski who was in the top 50 on the Forbes richest list. These were announced to shareholders but met with anger thus the transactions did not take place.... except Sibir then said it had already advanced $115m to Tchigirinski for the project. Then in February 2009 the scandal went further with the actual advance being $325 million. CEO Henry Cameron was swiftly suspended and Stuard Detmer was appointed. Stuard's first task was to launch legal proceedings, he said:

The launch of the legal proceedings underlines our determination to recover on behalf of our shareholders the funds that were taken from the company." He said the investigation was ongoing and that outcomes would be reported as soon as practicably possible.

Sibir was then granted an injunction which prevented Tchigirinski from selling his assets. Along with the court issues, Sibir also said its share price had been manipulated: "a significant number of the transactions in its shares between those dates (Oct 16-Oct 31st 2008) was conducted using money that had been taken from the company." Supposedly the Russian tycoon used the money to pay off margin calls on loans to US banks.

Along with pursuing the high court hearings, Stuard successfully navigated Sibir to a ~500p/share takeover by Gazprom Neft - well over its current share price (and remember that this occurred in the midst of the financial crisis). The premium to the current price in 2009 was over 100%.

Stuard was also appointed Senior Independent Non-Executive Director of Exillon Energy in November 2009 prior to its listing - Stuard has a strong role on Exillon's board as well as a place on Exillon's remuneration committee.

Considering Sibir was among the largest AIM listed names prior to the takeover and crash, Aminex has done well to attract Stuard and as noted in my first post on Aminex he has set a clear pathway to developing the company.

On August 31st Aminex released its Half-Yearly report. Although there was not much new information it was announced that a loan worth $15m was being drawn up and was in 'advanced negotiations'. This is positive as it reveals that the next stage of fundraising will not require equity dilution which has plagued the company in the past. Even more encouragingly is that the loan will be immediately paid with the US asset sale that should be completed in Q4 2012. This also suggests that the US asset sale will bring in at least $15m, if not more. Another plus point is that the condensate quality of the Ntorya discovery was changed from 48API to 53API. Condensate itself sells at a small premium to crude oil (which is often not understood). The higher API also sells at a very slight extra premium to the lower API. Another point of emphasis was that the Tanzanian Gas Pipeline had now been inaugurated - a major milestone with a path for monetising Aminex's assets set. Financially the results weren't great but this should not be of significance considering the US assets will be sold. Hydrocarbon production increased 16%, the loss before tax had widened to $3.26m. Positively, the company had cash and cash equivalents of ~$5.5m as of the end of June.

Another positive was released today from Ophir Energy, owner of surrounding offshore blocks. The main disadvantage of the gas finds in Tanzania compared to Mozambique beforehand was that they were greatly larger in Mozambique. It noted that:

1. One of their discoveries (Mzia) had a 100% increase in bottom range estimates to 4TCF and a 50% increase in top range estimates to 9TCF
2. Tertiary-age sands have been interpreted in a basin floor setting in Block 1, that are apparently analogous to those seen on the adjacent Rovuma Delta, Mozambique.
3. Ophir Management estimates that gross discovered in-place resources for Blocks 1, 3 and 4 are currently 13.5- 21 TCF (2.3—3.5 bboe); meeting the threshold for a two-train LNG development



4. Interpretation of existing datasets has thus far identified multiple plays and a significant un-risked prospect inventory of 36 TCF (7 bboe) of gas and possibly liquids targets across these four operated blocks

As mentioned in the last post, Aminex is having wells in the US converted to salt water disposal wells to boost production rates - these should be completed soon and should they be successful could improve terms for the sale of the US assets.

Elsewhere Aminex is in discussions with investors in Asia and the Middle East in terms of strategic partnerships, and Stuard hopes that this can be concluded prior to the end of 2012. Aminex is also looking at two acquisitions that can take it towards having a market cap between 200 and 250 million, one of which is hoped to be completed prior to the end of 2012. Interestingly in the Oilbarrel conference Stuard noted these opportunities being in East Africa in Mozambique, Tanzania, Kenya and further North as well as being more inland. This opens up the potential for Uganda, Ethiopia and Somalia as well.

Throughout the rest of 2012 whilst there is not much drilling there is lots of positive newsflow potential. The question is whether Aminex can execute its plan. Cove and Dominion have already been taken over in the region and Ophir is a target - a medium-high price of ~12p would be hard for shareholders to resist especially considering the disappointment of the past. Nonetheless, if the plan can be executed Aminex looks very good and early signs are saying that it can. Aminex is currently a small fish in a big pond. It has to either build up or ship out; both situations look favourable for potential investors.

'We are right in the heart of the most exciting gas province on the planet' (Stuard Detmer).
'Our position in East Africa has never been stronger and yet the greatest opportunities still lie ahead.'
 

5 comments:

  1. Keep up the good work- some great facts in here

    kr27

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  2. Excellent .Keep up the good work. Man Who Can

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  3. Extremely well researched, and very informative. Makes me wonder what you would make of VOG, as they are a baffling share I've had for a while.

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    Replies
    1. Great read, all the good and bad history in one place -Keep up the good work I liked the fact that you mention in most articles whether the stock is alledgible for ISA and may inccurr duty...

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