Aminex, the oil and gas company listed on the London and Irish Stock Exchanges, has announced its preliminary results for the half year ended 30 June 2006.
Highlights
• Loss before tax for period of $1.63 million (2005: loss $1.9 million)
• Placing of new shares amounting to net $5.1 million
• At Nyuni new seismic acquired and large leads and prospects identified. Now moving towards next drilling phase
• Good progress in Madagascar.
• Egyptian Production Sharing Agreement finalised
• Deep gas well drilled at South Weslaco, Texas and results anticipated in near future
Brian Hall, Aminex’s Chief Executive, commented:
“Next year will see significant levels of activity for the Aminex Group as drilling operations commence in a number of areas. Aminex has been busy putting in place the components of an ambitious exploration programme supported by steady development of producing assets in the USA. We are especially pleased with the acreage position we have built in East Africa, having established a number of concessions on attractive terms ahead of a surge in interest in this region which is becoming a new focus of interest for the oil industry.”
Overview
During the period under review the Aminex Group carried out workover operations at Shoats Creek, Louisiana, acquired new seismic in Tanzania and Kenya, reprocessed existing seismic in North Korea, carried out gravity surveys in Madagascar and, since the period end, has drilled a deep gas well in Texas. In early June, an institutional share placing successfully raised approximately $5 million to enable seismic and other pre-drilling work to be carried out with a view to an active drilling programme in 2007, plans for which are on track.
Financial review
Turnover at US$2.6 million is 105% ahead of the 2005 comparative period. The increase is due to both higher gas revenues in the USA and increased levels of trading from the Group’s oilfield services and supplies business. Oil production was similar for both periods. However, the Group achieved a higher average oil price for the current period of $59.79 per barrel when compared with the average oil price achieved for the first six months of 2005 of $46.03 per barrel. Gas production commenced in late December 2005 from the South Weslaco field and has continued throughout the period, whereas the Group only benefited from six weeks of gas production from its Alta Loma field following the re-commissioning of BP’s Texas City refinery.
Gross profit for the period amounted to $0.76 million, an 84% improvement over the $0.41 million gross profit for the first six months of 2005. After taking into account administrative expenses of $2.28 million (2005: $2.21 million) and depreciation and net finance costs of $111,000 (2005: $106,000), the resulting net loss for the period amounted to $1.63 million, an improvement of $0.27 million over the 2005 loss of $1.9 million.
The increase in fixed assets since 31st December 2005 of $1.17 million relates to expenditure on exploration activities in East Africa and North Korea as well as on the Group’s producing assets in the USA. Following a share placing which raised net proceeds of $5.12 million, the cash balance at the end of the reporting period amounted to $5.96 million (31st December 2005: $3.9 million)
Operations review
Tanzania
Aminex’s efforts in Tanzania are being directed towards a four well drilling programme which it aims to conduct during 2007. This will involve two wells on the Nyuni licence in the Rufiji Delta and two wells on the onshore/offshore Ruvuma licence which adjoins the border with Mozambique. At Nyuni a number of large leads and prospects have been either identified or better-defined through an extensive seismic programme undertaken over the last twelve months. It is likely that one of the new Nyuni wells will be a close offset to the producing Songo Songo gas field which has now been successfully delivering gas into a common user pipeline for two years. The second well will test one of several potentially large offlying prospects, developed using new seismic and currently under evaluation. Preliminary negotiations are now ongoing with rig operators for an appropriate drilling unit. At Ruvuma, where Hardman Resources Ltd. is earning a 50% interest through paying for an onshore seismic programme, well locations have yet to be defined. An initial assessment of Ruvuma concludes that this licence area contains several sizeable oil and gas prospects.
The Nyuni partners are currently Ndovu Resources Ltd. (wholly-owned by Aminex PLC) 84% and Bounty Oil & Gas NL (6%), with East Africa Exploration Ltd earning a 10% interest in the licence through financing a final $2 million seismic programme prior to drilling which is expected to be completed during the fourth quarter of this year. In 2005 Pan African Tanzania Ltd., (“PAT”), operator of the Songo Songo gas field and a subsidiary of East Coast Energy Ltd., acquired seismic over the western part of the licence with a view to earning an option to participate in a subdivision of the Nyuni licence, subject to the Tanzanian Government’s agreement. Unfortunately it was not ultimately possible to subdivide the licence as envisaged and additionally the terms for exercising the option were not completed by PAT. Negotiations are continuing with PAT for its participation in the greater Nyuni licence with a proportionally reduced interest in the larger licence area. Aminex’s exploration programme is moving ahead in an expeditious manner and is not dependent on the outcome of negotiations with PAT.
Madagascar
Aminex and its 50-50 partner Mocoh Resources Ltd., operating through a joint company known as Amicoh Resources Ltd., have completed a gravity survey over the 10,750 square kilometre onshore Manja concession, Block 3108, and are reprocessing approximately 2,000 line kilometres of 2D seismic acquired by previous licensees Chevron and Amoco some years ago. The first year work programme will be completed on schedule and plans are in hand for new seismic acquisition in year 2. Meanwhile, a recent onshore licensing round in Madagascar attracted a high level of interest from a number of international companies offering high work commitments, including for open acreage directly adjoining the Amicoh Resources licence. Madagascar has become a focus of industry interest over the last two years and Aminex is therefore pleased to have acquired an excellent licence on favourable terms in late 2005.
U.S.A.
Aminex USA, Inc., a wholly-owned subsidiary, has interests in four principal producing locations, being Alta Loma, Shoats Creek, South Weslaco and Somerset. Alta Loma produces from a single gas well which has been intermittently shut-in for some time now as a result of a major fire and explosion some months ago at BP’s Texas City Refinery which was the customer for its production. However, Texas City is now operational again and Aminex and partners are considering the construction of a new sales pipeline, to be operational this year, which would hook up to Texas City and allow greater gas volumes to be produced than before. Next year a further well is contemplated at Alta Loma, probably in the first quarter. Aminex and partners have just drilled a third well at South Weslaco in addition to two gas wells drilled in 2005 which are now on production. The third well, which aims to test a deeper Lower Frio sand, has now been drilled and cased and the rig has left the location. Results of this well will be announced to shareholders once a completion rig has conducted a production test, expected in the near future. Remedial work and initial workovers have been carried out at Shoats Creek, Louisiana, and facilities reconstructed and upgraded. Aminex believes that Shoats Creek has considerable unrealised potential which will be assessed by a 3D seismic survey to be conducted in the area by Forest Oil in the next few months at no cost to Aminex. With the benefit of this survey Aminex will be able to reassess the potential of Shoats Creek. Somerset stripper production in south Texas benefits from high prices for heavy crude. A programme of upgrading has been carried out at Somerset, a number of old wells abandoned and a limited water flood is planned to increase production.
Kenya
Aminex and partners Upstream Petroleum Services Ltd. and SomKen concluded a seismic survey and seabed coring exercise over the near shore areas of Kenya offshore blocks L9 and L10 earlier in the year under the terms of a Technical Evaluation Agreement. Negotiations are in progress to convert this acreage to full Production Sharing Agreement (“PSA”) status and shareholders will be kept advised of progress. Woodside Petroleum and partners are thought to be planning an early well offshore Kenya in deep water which could be very significant for Kenya’s future oil and gas potential.
North Korea
In North Korea (the Democratic Peoples Republic of Korea or “DPRK”) progress has been slower than anticipated, mainly on account of a series of bureaucratic delays. Aminex’s area of concentration is currently the East Sea where a data gathering exercise is under way. It is likely that a new agreement will be signed some time during the remainder of this year which will facilitate accelerated operations and Aminex has been assured that the timetable for the 2005 PSA will be extended to enable commitments to be met in an orderly manner. Aminex considers the oil and gas potential of the DPRK to be very high, even though operations require both patience and perseverance. Aminex enjoys excellent relations with its hosts in the DPRK.
Egypt
On 17th September 2006, as announced to shareholders, a licence for Block 2 in the onshore West Esh el Mellahah area (“WEEM”) was finalised in Cairo with the Minister of Petroleum at a formal ceremony. This marks the end of lengthy negotiations and the beginning of a first three year work programme, in which three wells are planned for 2007. The main prospects in Block 2 are already covered by 3D seismic data which means that it will be possible to move straight into the drilling phase. Aminex has an interest of 10% in WEEM and its share of exploration costs will be carried through to first commercial production by partners. WEEM is in a proven oil and gas area and close to major existing production in neighbouring WEEM Block 1. Aminex is reviewing further exploration opportunities in Egypt.
Strategy & prospects
Aminex has now developed a material portfolio of exploration assets on the East African margin, in Egypt and on the Korean peninsula, in addition to which it owns a small but well-run American producing operation. Aminex’s strategy is to move fast to acquire good acreage positions in areas which have not yet fully attracted the attention of the industry and this strategy has already been vindicated in Tanzania and Madagascar where interest is growing rapidly in the areas where Aminex already holds acreage. Most of the work carried out in 2006 has been preparatory to a major drilling campaign which Aminex proposes to launch in 2007, involving two new wells on each of its Tanzanian licences, three wells in Egypt and two to three wells in the USA, including a major well at Alta Loma. Depending on the rate of progress, there is a further possibility of drilling in both Kenya and Madagascar. This is clearly an ambitious programme and the precise timing of each well will depend on securing rigs and associated equipment, the market for which is currently tight. Success in any of these wells could transform Aminex.
