Aminex plc (LON:AEX) has received its first payment for gas pumped from their Kiliwani North-1 well in Tanzania, alongside project partner Solo Oil PLC (LON:SOLO).
For Aminex, the payment represents a significant milestone in its Tanzania-centric portfolio.
The sum itself wasn’t disclosed, but is likely to have been relatively minor reflecting initial commissioning rates. The gas was supplied to state hydrocarbons company, Tanzania Petroleum Development Corporation (TPDC).
A key step in a long-awaited development
The group continues to work with TPDC during the current commissioning period to achieve an optimal rate and is being paid for all gas produced during this phase.
Payments were received in US dollars and will continue with scheduled future payments, in accordance with the gas sales agreement.
The Kiliwani North gas project began production in April and was a key step in Aminex’s much anticipated phase of development.
Aminex owns around 56% of the project, with the rest owned by Solo, TPDC, RAK Gas and Bounty Oil & Gas.
Kiliwani is expected to initially produce between 20 and 30mln cubic feet of gas per day.
28bn cubic feet of gas resources
In a May 2015 evaluation, the project was estimated to generate net cash flows of between US$10mln and US$15mln.
It is currently estimated to host 28bn cubic feet of contingent gas resources which could be converted to reserves once production is established.
Testing in July reached a flow rate of 30mln cubic feet per day, equating to 5,000 oil barrels equivalent.
From Songo Songo, the Kiliwani North gas will be transported by pipeline to Tanzania’s capital Dar es Salaam.
Wellhead price
Kiliwani North’s gas is, however, sold ‘at the well head’.
The wellhead price was set out in the gas sales agreements signed in January 2016. The gas is to be sold at US$3.07 per thousand cubic feet.
Shore Capital analysts were keen to highlight the high levels of well production capability that have been achieved from the project and restated its 2017 forecasts.
The broker expects a robust financial performance, including US$10mln of operating cash flow, as the group reaps the benefits of its first full year of Tanzanian production.
Ruvuma project
Shore Capital also highlighted the impending drilling at Aminex’s Ruvuma project, where it sees “considerable un-risked potential” to complement the cash flow emerging from Kiliwani North.
“This upgrade reflects accretion driven by cancellation of the Bowleven deal, which has left Aminex with a larger slice of the Kiliwani North and Ruvuma pies,” said analyst Craig Howie.
Back in November, top level terms were agreed for a tie-up with Bowleven, before it was cancelled in February.
Alternative solutions
Aminex, at that time, said a forward work programme could not be agreed that would be acceptable to the company and other stakeholders – including the company’s lenders and the Tanzanian authorities.
Aminex is pursuing alternative solutions to facilitate its planned work programme at Ruvuma, which offers scope for early production.
“We have been impressed by the well-invested management team’s restructuring of the business and expect operating cash flow to provide valuable support as Aminex works to fully unlock the value in its re-focused portfolio,” added the broker.
Shares rose to a six month high at around 1.62p, and are up 22% in that period. Shore Capital reckons puts Aminex’s net ‘risked’ asset value at 4.8p a share or £90mln.