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
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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
In reply to unlikely2, post #70
Another thread full of bile and half-truths (or less), apart from a few sensible contributions from a gardener - and the above quote.
I made the point that Isaac initially raised many months ago now - and haven't prioritised it because, like unlikely2, I have prior experience of mission statements being used to dress up Annual Reports and featherbed various consultants.
I prefer that management primarily spend their time on matters of substance. There will be an "at a glance" summary in the upcoming AR for those who have a limited attention span and I expect there will be a couple of new items of interest in the AR for those who wish to read further.
ee
ee & unlikely
To me and others on this board I agree mission statements on the whole are pointless but you see a mission statement and the rest of the nonsense that comes with it is directed at stakeholders. Shareholders are one of many stakeholders.
But I'd rather see one as it demonstrates a clear strategy and a company that has clear goals and objectives. And then you have the corporate strategy which support the mission statement, business strategy that supports the corporate strategy and operational strategy support the business strategy etc There are other stakeholders to whom it is useful for imho.
Mission statement is like a pyramid, the goals and strategies are based on the mission statement. And it focuses the minds of employees whether that be contractors or company personnel, governments the said company operates in, banks, local people etc etc
It helps perception and makes the company look more professional.
Is there any correlation between the companies above I mentioned earlier who have had some degree of success who have clear defined strategies / mission statements ? I would say yes.
And no I don't think it is an expensive PR excercise, I would hope there are a handful of intelligent people working at Aminex that can come up with a few lines.
Surely Aminex have a strategy and all they are doing is summarising it in a few lines ? How difficult is that?
Facts, Isaac, Facts?!
You mean the facts that you posted that were not correct you mean?
Damned right I get personal when someone starts spouting nonsense about my position and trying to give the wrong impression. Someone who keeps on trying to irritate, rehashing the same old story...
Contribute something of worth that hasn't been discussed Ad nauseum else keep your own council for fear of putting your foot in it again.
Darron
I think one of the biggest factors people are overlooking with Investing in Oil is if prices continue to go higher I think there will be more tax squeezes from governments around the world similar to the recent North Sea tax. More taxes on Oil companies making hefty profits so higher oil prices won't necessarily translate into higher profits.
I don't think the market has discounted this from some of the share prices of companies.
In reply to nigelpm, post #75
Hi Nigel,
There are lots of ways shareholders can be diluted.
Have you ever heard of :
share options?
for example.
Are there any that are even close to being in the money with AEX?
I would be more interested in this thread if Isaac said he had bought back in for this and that reason, because that might stimulate me to look more carefully at AEX because I have a sneaking suspicion that it might yet come good.
Rehashing all this shite doesn't really help anyone make money, or even stop them from losing it, and these personal attacks don't help anyone really.
repo
hey Darron,
I didn't realise that you couldn't take up a placing in an ISA, so thanks, I am now better informed!
db
PS hope the gardening is going well - it's a bit boring having to do so much watering in April :)
Repo
I think there are better opportunities elsewhere for me to come back with fresh money into Aminex. If I was holding Aminex I would'nt sell here though, I would look to see what the outcome of the drilling campaign is.
Problem for me is it comes across as an all or nothing type bet. I don't like taking these kind of Investments.
If some of the drilling in Tanzania comes good perhaps holders will get a doubler.
But I am much more confident with AFF which I suspect will double this year, they have a huge tonne of Iron in Liberia and Cameroon. On the Putu prospect they are partnered with Severstals a $20bn russian giant with big pockets to fund the development. who own 70% of the licence Putu is Severstal only Iron asset. Affero own 100% of the Nkout licence in Cameroon
Then you got giants like BHP, Rio & Arcellor Mittal operating in the area who will probably look to takeover Affero at somepoint.
Panmure Gordon have an unrisked upside of £20.47 & an risked target of £4.91 multiples of the current market cap.
Then you have the likes of Guy Pass who bought 100k shares at 187.5p 2 weeks ago but the shares have dropped to 143p. I think it is fair to say Guy knows the value of the company better then the markets, He holds 5.9m shares, worth over £10m, representing nearly 7% of the company.
That is some serious money in a share. How many Aminex directors have this kind of cash Invested in Aminex?
Worth reading the broker notes from Evo & PG on my thread : http://www.stockopedia.co.uk/content/affero-an-iron-investment-for-2011-55938/?comment=1#1
I reckon I can double my money in Affero with much less risk compared to Aminex as Affero is not a win or bust type bet. I also think the same about Arian Silver where I expect significant resource upgrade later this year.
I have no reason to take the kind of risk present in Aminex for less reward compared to the likes of Affero and Arian. I believe both stocks will multi bag with little downside risk, with Aminex it is very difficult to say that with confidence.
imho dyor.
Glad to be of help db.
Yep, tis a pain. No rain here (of any consequence) for almost two months. The farmers are tearing their hair out.
Good to actually do some proper work today - Friday and Sat were just too hot to work and the kids' pool looked too tempting. Today its been demolishing the Acquilegia that seems to have spread like wildfire this year. Shame to rip em out but you can have too much of a good thing!
I would observe that (at least in one case) investors plainly pay no attention at all to mission statements - or even to clearly reiterated statements of strategy. If they did then the shares of at least one of the companies you refer to wouldn't be trading where they are.
Yes - me, as it happens. Not that this is much to write home about as things stand, of course.
In reply to repobear, post #86
Are there any that are even close to being in the money with AEX?
I would be more interested in this thread if Isaac said he had bought back in for this and that reason, because that might stimulate me to look more carefully at AEX because I have a sneaking suspicion that it might yet come good.
Rehashing all this shite doesn't really help anyone make money, or even stop them from losing it, and these personal attacks don't help anyone really.
This is nothing to do with personal attacks. I hate seeing things posted that are clearly WRONG.
My point to Isaac was merely that there are various ways that a shareholder could reduce their % holding without them doing anything. This is very basic stuff that you or I would know but that Isaac clearly doesn't.
I think it's important to educate people.
Stoke City 0 Preston E End 10
As usual, not worth the entrance fee for home supporters ;-)
Hi davjo
Just a shame that Isaac isn't man enough to apologise for his inaccuracies.
In reply to repobear, post #86
Hi repo,
It is entirely possible that it might. But the fact is that it's impossible to know. Some factors that would make a significant difference are:
All of these are unknowable by us. In the case of 1. and 3. most investors had expected better results some time ago. Maybe they are about to materialise, maybe not. A key factor there is timing. Will they materialise and generate cashflow or other monetisation opportunities before Aminex runs low on cash again?
Of course, another possibility is that a third party finally decides that the complete package looks sufficiently attractive to make an offer for the company that is acceptable to its major investors. Also possible but unknowable.
So, the decision for investors/potential investors is... is it cheap enough? Not yet, for me.
Cheers,
Mark
In reply to djpreston, post #93
Just a shame that Isaac isn't man enough to apologise for his inaccuracies.
As you well know Darron, reputations in the world of investment mean absolutely everything to readers of BB's like this. Some people are held in high esteem and some are not. It isn't at all difficult to tell the difference ;-)
I hope Issac is not in misconception that we will mistake him for isaac newton...lolz
Why don't you explain to all the posters on these boards as to why you notify a company of the change in shareholdings on a Thursday afternoon just before a long holiday?
Why is it Aegon can notify the markets 5 weeks ago about a change in their position in shareholding but Rickerby's take 5 weeks to do so and how conveniently they do it on a Thursday afternoon before a long holiday?
Dodgy?
And I don't accept this either :
You & your mates can belittle me as much as you like. You can call me a moron and get very personal. But one thing you won't do is insult my intelligence, I am am no fool and you won't pull the wool over my eyes. You will get away with it with most readers on these boards but not me.
It is no bad thing cutting ones losses on a company that has not performed. But to release change of shareholding 5 weeks later and when quesitoned to have the cheek to insult the poster to brush the comments aside is a different matter.
As I said I don't accept your reasoning, it would be more genuine if you notified the markets 5 weeks earlier and not before a long bank holiday weekend.
In reply to davjo, post #95
Hi davjo,
As you well know Darron, reputations in the world of investment mean absolutely everything to readers of BB's like this. Some people are held in high esteem and some are not. It isn't at all difficult to tell the difference ;-)
I think Isaac raised a couple of fair points in his original post
In 2009 they held about 5% of the company :
http://www.investegate.co.uk/Article.aspx?id=200908141027544586X
But from the Thursday afternoon announcement they now hold 3.4% of the company : http://www.investegate.co.uk/Article.aspx?id=201104211505333829F
I wonder why it has taken so long to publish this information as Global AEGON Asset Management Group which also did not subscribe notified the markets on 16th March.
However the response has been much quite predictable and in my view it is getting increasingly difficult to tell the difference in quality between posters here, where 'in the land of the blind the one eyed man is king' . There are far too many people here who rec their leaders and give the thumbs down to anyone who dares to disagree with them. This thread being a classic example.
If all of the leaders here were making plenty of money I could understand it. Sadly over the last few years a lot of their calls have been poor at best.
repo
In reply to Isaac, post #97
You & your mates can belittle me as much as you like. You can call me a moron and get very personal. But one thing you won't do is insult my intelligence, I am am no fool and you won't pull the wool over my eyes. You will get away with it with most readers on these boards but not me.
What on earth is Darron doing to pull the wool over your eyes?
Davjo,
You have a cheek to come out with reputations. I refer you to TMF Oil & Gas Board. Go and take a look and see who was buying Buying the likes of Tullow and Dana late 2008/ early 2009 and who was telling all the readers to be careful.
Infact buying Tullow at £4 was a Brilliant Investment as was buying Dana at £6, & £7 & £8. Go and read the boards. Go and see who has a reputation for making money. I acted when everyone else was losing their head.
Infact I found a post for you, there are several so you can look for the rest. It was titled
"Dana Petroleum - DNX - Why i am buying Dana" dated 20/November/2008
To quote two lines from your response which received 55 recs....
Too soon to commit? If anything that was one of the best buying opportunities for Dana.
http://boards.fool.co.uk/dana-petroleum-dnx-why-i-am-buying-dana-11326128.aspx?sort=whole
Readers as I said don't be fooled by the rec system, 55 recs for talking nonsense. Although having said that I did manage to get 4897 recs during my time on TMF so I must have said a few sensible things......
You see readers, there are certain posters who talk a good line and the likes of Davjo is very good at looking at detail and information like a fine tooth comb but there are limitations as to what certain posters can do. The person who comes out on top of all this is the one who can recognise each persons limitations and use it to their advantage.
There are no experts in this game, your only as good as your last trade. Think for yourself, the only person that knows how best to manage your money is YOU.
In reply to repobear, post #98
However the response has been much quite predictable and in my view it is getting increasingly difficult to tell the difference in quality between posters here, where 'in the land of the blind the one eyed man is king' . There are far too many people here who rec their leaders and give the thumbs down to anyone who dares to disagree with them. This thread being a classic example.
Come on repo. darron has posted chapter and verse on this - which I'd add he was under no obligation to do(!).
We are all here to make money but a bit of common sense and logic goes a long way and seeing mindless drivel being posted on a fairly regular basis is just painstaking. I agree Isaac does post the odd useful challenge/question but there is a point when knowing where to stop should be obvious.
Overall the thumbs work very well.
As an example of what not to write:
http://www.stockopedia.co.uk/content/pe-of-under-2-55979/