As a long term buy and hold, Aminex (LON:AEX) has been a major disappointment for me , and it is time to consider whether I continue to hold on the basis that 2011 will be AEX’s year of triumph, sell out on the basis of too much dilution, lack of confidence in management, and the binary nature of some of its exploration, or somewhere in between. The love affair is over, it's time for a cold clinical appraisal.
USA Assets
The Shoats assets were valued, pre dilution, at circa 4mmboe and the USA assets collectively at an independent valuation of circa 11p per share. Management clearly indicated unverified but best guess reserves estimate of 18mmboe at Shoats (I was in the front row in February 2010 when Brian reiterated this guidance), which even discounted by 50% translated to 20p per share. Gas prices have fallen since then and show no signs of recovering for reasons we are all familiar with, but oil has for some time been trading above the $70 assumption of the original valuation. It was on this basis that we hoped for a sale of USA assets, or reserves based lending facility, to avoid dilution and provide the platform for further Tanzanian exploration.
So what has happened? Whispers are of management regretting the 18mmboe quoted, and having difficulty agreeing a fresh reserves/valuation report. The two wells drilled so far have not flowed as we had perhaps hoped, with one requiring fraccing, leaving us wondering how this changes oil in place expectations, and recovery/flow/cost factors. Importantly these are needed to feed into a DCF model to establish core value. Management have steadfastly refused to make any comment on when the much talked about reserves update and valuation report will be finalised and made available.
I think that most of us now have accepted that the report when it comes will be disappointing, and potentially worse, and have already factored this in to our new thinking and appraisal of the company. The only excuse for management not now coming clean is that to do so might be misleading (but as time goes on this reason wears thin), or that there is an underlying corporate transaction that prevents any discussion (we thought that might be the case with ref to the 140k acres – where did they go to? – but if there is any corporate activity now it is well below the radar).
The most recent broker guidance still refers to the original OPC guidance of 11p (I think) per share, around half that post dilution. If the actual value is below that then in my book that would create a major issue of trust given the repeated use of the word transformational in relation to Shoats – we are surely entitled to expect that to mean an increase, and not decrease in NAV guidance. Unless there is VERY good reason not to do so, management must surely now provide a USA reserves/valuation update if they are to retain the confidence of the market – even if the news is not good.
Nyuni et al
KN1 has now perhaps become the asset that is seen to underpin the sp, but has no value if the gas cannot be marketed within a reasonable timescale. I am not sure whether the specific word imminent has been used, but that is certainly the way in which production news has been talked about for many months, if not years. No one doubts that the pipeline access issue is complex, and made more so by what appears to be intransigence by Orca, but something here has either gone very badly wrong or the original guidance was naive and overly optimistic. 2011 became early 2012, and then late 2012, and still discussions continue. Of course access is only one issue – the other is finding markets, and resolving end of pipeline distribution.
The other assets here, and Nyuni2 in particular, have the scope to put the area on a par with exploration by BG/Ophir and Anadarko/Cove, with major gas reserves on land/shallows being potentially more valuable than deep sea. With talk of gas providing the basis for the electrification of East Coast Africa, and pipelines from Tanzania to Kenya kickstarting industrial development in the area, these assets could indeed be transformational. Talk of a BG LNG plant (news due soon on this?) would create another underpin for these assets.
But, and it is a big but, if the assets are as attractive as we have been led to believe, why has Key been unable to find a buyer after what must be a year now of trying to market them. And why did the broker note only give Nyuni 2 a 30% COS? Lots of questions, and having increased their risk by buying out Key’s share, there is a lot of risk riding on this well.
Given the major difficulties in funding (sans dilution), why have AEX increased their risk on a single 30% COS well? Or is that guidance wrong, in which case where is the updated guidance - surely we have a right to know?
Where are we with the new PSA?
LK 1 & 2
Despite all the talk of oil in the region, nothing has yet been found commercially. In the absence of any other guidance as to why we should think differently, COS for LK2 (oil) has to be a low figure, and with that well having used up the balance of AEX funds whereto from there? If LK2 is also a major gas prospect, similar to others in the area, it would be helpful to know that.
Before dilution KN1 really could have transformed AEX - a multibagger was in prospect. Post dilution, and in the light of perhaps more conservative views of the likelihood of oil (and its commerciality), the upside is more difficult to quantify.
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An oil discovery elsewhere in the region would certainly raise prospectivity.
N Korea and Egypt
These appear to be side shows for now.
Conclusion
WHERE IS THE GUIDANCE? I had put the lack of information down to AEX putting the finishing touches to information that was sensitive from either a corporate deal point of view, or politically, or both. After all this time though I am leaning to the more straightforward view that there is a lack of progress to report, that the news that is available is disappointing, and that the current fundraising was needed to put the over optimism of the past behind us and create a meaningful platform for a final and fresh approach to development of the assets.
I think that there is enough value in AEX to underpin the current SP, and the OO is likely to be oversubscribed. But in the run up to Nyuni 2 there is likely to be significant selling into strength, and again with LK2.
I have come to my senses and am no longer in love with this share. I will take up the OO but then reduce my exposure in the run up to Nyuni 2, and again to LK2. This share could be hugely successful if one is of the view that the work of many years all comes together in 2011 in an on trend region. Alternatively one can be of the view that the COS on Nyuni 2 and LK2 makes this a binary play that could easily see its SP at or below current year levels with a distressed sale of assets once the funding runs out. Or somewhere in between. This is no longer a buy and hold share for me, but one to watch closely and trade on news (or the run up to news) – what some other respected posters have been doing for some time.
My view on management is agnostic. They could be about to pull a blinder – alternatively they could have been involved in crisis management of successive bad news and fighting for survival (news management to keep funding doors open). True leadership and trust are based though on openness and transparency – whilst we can forgive short term news management/control as being a corporate/commercial necessity, the continuing lack of guidance on the PSA, pipeline access, Shoats reserves/valuation, etc is creating a lack of trust that – imho – is in desperate need of being addressed.
All IMHO and DYOR. Some of the references and figures quoted may not be correct, but anyone who has followed the share will get the gist. Musings on a wet Sunday morning.
I hope that this piece will generate some meaningful and helpful debate, and perhaps management will take note of the sentiments and use the EGM to help us beleaguered long term PI’s better understand what is actually going on here.
dbfromgb
Disclaimer:
As per our Terms of Use, Stockopedia is a financial news & data site, discussion forum and content aggregator. Our site should be used for educational & informational purposes only. We do not provide investment advice, recommendations or views as to whether an investment or strategy is suited to the investment needs of a specific individual. You should make your own decisions and seek independent professional advice before doing so. The author may own shares in any companies discussed, all opinions are his/her own & are general/impersonal. Remember: Shares can go down as well as up. Past performance is not a guide to future performance & investors may not get back the amount invested.
Aminex PLC is engaged in the exploration for, and the development and production of oil and gas reserves. Its principal area of activities includes the United States, East Africa, North Africa and North Korea. Its segments include Producing Oil and Gas Properties, Exploration Activities and Oilfield Services and Supplies. The Company's licenses in Tanzania include Nyuni PSA, Kiliwani North and Ruvuma PSA. During the year ended December 31, 2010, it drilled three wells, one in Tanzania and two in the United States. As of December 31, 2010, the Company held leases at Shoats Creek covering approximately 2,100 acres. Aminex Oilfield Services & Supply Company (AMOSSCO), its wholly owned subsidiary, provides logistics services to oil industry and sources oilfield equipment and consumables to international oil companies. In March 2012, it announced that Aminex USA, Inc. its subsidiary, completed agreements to sell leases and other assets consisting of the Somerset Field in Texas. more »
261 Posts on this Thread show/hide all
Didier purchased 350,000 SHARES! Love it!
Are the directors playing follow the leader (ee) ? :-)
http://www.investegate.co.uk/Article.aspx?id=201107010700105384J
Not just Didier either - Tony and Mike picked up some as well (albeit small beer).
As I just said elsewhere:
Didier seems to have been a bit slow off the mark!! Most impressed with Brian's purchase, taking his holding to a nice round number. In sharp contrast to a certain non-exec, who has a very untidy number of shares.
In reply to thegreatgeraldo, post #244
...tsk....after I complemented you on your hairstyle too.... ;-)
TSK indeed - you won't let it go, will you???? ;-#))))
In reply to thegreatgeraldo, post #246
LOL :-))))))
I'd forgotten that was T***K*R's ticker . Must be 10 years nearly now?
ATB
ee :-)
Just over 10 years..
http://www.investegate.co.uk/Article.aspx?id=200104061610007938B
So where to from here?
Currently it's attractive as a bombed out punt on the Ntorya well but it's likely that will fail and the price should go below 2p then.
Assuming that happens what next? Are there any drilling commitments that will require large amounts of cash?
COV and DPL are operating in the same area geologically (Rovuma). The DPL license there was valued at $100 million in the recent farmout. Nyuni-1 has 233 BCF and while Nyuni-2 was suspended it was abandoned. With lots of firm noises about a chinese pipeline the Tanzanian acreage still has potential to be worth a lot.
On the downside nobody would pay a bean for the KEY assets at Nyuni and TLW have pulled back from Ruvuma.
I am still betting that there is value in Tanzania though. The key for making money is not to be diluted to worthlessness on the road there.
So how about this for a future direction. Drill Ntorya, probably get spanked on that, then get KN-1 on line, continue sweating more out of the US assets, although possibly delay the two planned US wells if funds are tight, and then hang tight for a year without major expenditure.
Hopefully increased income from the US and new income from KN-1 will turn the $2 million loss in to a small profit in 2012 and larger one in 2013.
In the background the global economy recovers, oil share prices creep upwards from the late 2011 battering, drilling continues by others in nearby acreages and discoveries start to mount. Andarko commit to an LNG plan, the chinese pipeline is finished only six months behind schedule, hope value returns and cash is raised through either farmouts or dilution at a reasonable share price.
In reply to morality, post #249
Hi morality,
It could well turn out something like that. However clinging on in the hope that the company may get another fundraising away further down the track and existing shareholders don't get diluted out of sight is hardly what this oil and gas investing game is all about, imv.
There are other far better places for my money.
repo
Does anyone have the time or the will to reconcile this post with comments i've made in the past several times over the years with those made in this post on TMF :
http://boards.fool.co.uk/i-dont-like-this-share-anymore-12389662.aspx
"I don't like this share anymore! "
Amazing how these types of posts have got 66 recs, when back in my days on TMF they got moans and groans and complaints from vested parties who only wanted to told what they wanted to hear.
Difference is I sold all my Aminex at 15p, this chap is selling at 3p.
Being a step ahead of the consensus always pays in this game.
Moral of the story :
Don't listen to the horseshit from 'experts' on bulletin boards, analyse the facts and think for yourself.
"Don't listen to the horseshit from 'experts' on bulletin boards, analyse the facts and think for yourself"
You write as though you're an expert - should I treat your contributions as so much h*******t?
Since you appear to be concerned about numbers of "recs", why don't you pop over to TMF and answer the post to which you refer? - you might exceed that tally.
I share the TMF posters frustrations, having been invested in this dog for about 5 years or so now. have thought several times about cutting loss and running but still holding, much to my regret.
Still can't win them all. AST or AEX - Who will seek yet more funds first?
In reply to repobear, post #250
So why the comment, "Didier purchased 350,000 SHARES! Love it!"
I bought quite a few looking at the risk and was encouraged by the buying by Directors. Why did you love it?
Well Chris, we have never met in person. So in reality I could be anyone - this applies to pretty much everyone here.
So why would you take my comments with more then a pinch of salt? Afterall they are just opinions based on the research I have done, the knowledge I have and the experiences I have had from Investing in the markets and my circumstances and risk profile.
So without knowing a) the research I've done, b) my knowledge/background and c) my Investing experience d) Circumstances/risk profile - why would you use my comments or anyone elses to make decisions about buying or selling shares?
It does'nt matter one jot the kind of success some on these boards have had in all honesty, they are only as good as their last trade - Fact. There are no experts here. We all make mistakes regardless of how long we have been in this game.
We all just try to do our best to avoid them and maximise our returns.
Recently I made a bad call in waiting it out for the markets to bottom out, I felt this would happen in late Oct/Early Nov but time has shown it probably happened early Oct. Although early Oct I did think far too many people were bearish and when that happens it usually means it's time to go on the other side.
But I have no regrets about my decisions as they were made based on my circumstances (where I had a large sum already invested in the markets) and risk profile - I was much more comfortable to hold a bit of cash then Invest and hope I've caught the bottom.
As things stand I am not too happy with Soco remuneration over the last 4 years, the lack of RNS stating buybacks have occured is frustrating given the cash sitting on the balance sheet.
If the company is going to be sold for £6+ and the shares are trading at £3.40 then SURELY it makes sense to buy back and cancel the shares, it just seems the most obvious way to add value with little risk. Yet the lack of action seriously frustrates me.
I also don't care about management's shareholdings - What I know is the company is worth more then the current price so they should take action rather then build cash that is being eroded by inflation.
Past performance is NOT a guide to future remuneration - Please bear that in mind, salaries should go down as performance declines IMO. Africa...they had better find some Oil...Patience is thin..
New PSA now signed at last it would appear. Although neither HOIL or AEX have yet issued RNS to confirm.
For those of us invested, lets hope this provides AEX some flexibity in doing a deal or two to assist in loss recovery!
http://michuzijr.blogspot.com/2011/10/hotuba-ya-waziri-wa-nishati-na-madini.html
(Originally posted by Jamesbabie on ADVFN)
Confirmation of the new PSA from AEX today:
http://www.investegate.co.uk/Article.aspx?id=201110310700241079R
Let's hope the new CEO gets it right, he has started with a bold claim.
Commenting on the announcement, Aminex CEO, Stuard Detmer, said, "Signature of the Nyuni PSA extends Aminex's position as a leader in offshore Tanzania, one of the most exciting exploration provinces in the world. The Company has already made two discoveries in the Nyuni area including the Kiliwani North field, which it expects to put into commercial production next year. Aminex believes there is considerable scope for establishing a new play fairway on the continental shelf, which could share similarities to recent deep water drilling successes in the region."
Broker Note :
http://www.aminex-plc.com/files/111104_Shore_Capital_Company_Update.pdf
.,
The IMS is out and the situation appears at first glance to be possibly better that feared and with more cash in reserve than was feared by some. For my part I will be holding on for some time yet as there are seems a good reason to do so but I am not able to dally any further:
http://www.investegate.co.uk/Article.aspx?id=201111160700111581S
In reply to salty64, post #259
News from Nyuni 1 is a disappointment, but it's probably not a great surprise that the well bore appears to have deteriorated. At least we know the initial logs were not a figment of anyone's imagination, though something a little more concrete would have been a lot nicer!
Big changes at the top, with Brian Hall and Didier Murcia resigning from their executive roles into non-exec positions. This could be seen as confirmation that the Board is confident that newly appointed CEO Stuard Detmer is the right man for the executive management of the Company.
http://www.investegate.co.uk/Article.aspx?id=201112160700180953U
And of course that role doesen't come without it's potential rewards, with the granting of 3 tranches of 7,500,000 options to Stuard Detmer exercisable at a price of 5.07 pence under "certain performance conditions" up to 2021.
http://www.investegate.co.uk/Article.aspx?id=201112160700181014U
At some stage, annual report/AGM, shareholders will need the "certain performance conditions" explained to confirm that the incentive fully aligns Mr Detners interests with their own.
IMO it's good to see that what appeared to indicate a succession plan with the appointment of Mr Detner shows signs of being progressed satisfactorily within the business.
fuiseog