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Aminex plc: THE INVESTMENT CASE
INVESTMENT OVERVIEW

Aminex farm-out agreement should kick-start Ruvuma PSA development, says Shore

The agreement includes up to US$35mln in costs regarding the development of Aminex’s remaining 25% interest in the Ruvuma PSA, which would include the Ntorya project
oil and gas operations
INVESTMENT OVERVIEW: AEX The Big Picture
Zubair is already the company's largest shareholder.

Aminex plc’s (LON:AEX) farm-out agreement with Omani industrial conglomerate The Zubair Corporation is a pragmatic solution to the funding required to develop Ruvuma, says house broker Shore Capital.

In exchange for 50% of its working interest in the Ruvuma production sharing agreement (PSA), Zubair will conduct a minimum work programme including the drilling, completion, and testing of the Chikumbi-1 well; a 3D seismic data survey over 200 square kilometres within the Ntorya project area; and establish an early production system to achieve first gas at Ntorya to a rate of 40mln cubic feet of gas per day (MMcf/d).

READ: Aminex financials improve as production rises and Ntorya project advances

Zubair would also pay US$5mln in cash in addition to fully carrying up to US$35mln in costs regarding the development of Aminex’s remaining 25% interest in the Ruvuma PSA, which would include the Ntorya project.

Jay Bhattacherjee, chief executive, said: "With the Ntorya project carried to a minimum level of production it is now expected that the Company will be self-funded for further development,”

“Aminex continues to develop its Kiliwani and Nyuni assets and is undertaking a review of other opportunities which will deliver robust shareholder returns."

Updating its forecast following the Zumbair signing, house broker Shore said the deal should accelerate the development of the flagship Ntorya project and carry Aminex through to a minimum gross production rate of 40mmcfd or enough for full field development.

“We therefore expect the proposed transaction to eliminate funding risks (which had previously been very evident) and kick-start a major work programme (with an implied US$140m gross value) following a period of relative inactivity.”    

Shore expects commercial production from Ntorya by early 2020, with a net profit of US$12.5mln for that year.

Cash generation should be sufficient also to provide financial flexibility for potential drilling at Kiliwani South and 3D seismic data acquisition at Nyuni. 

Three well programme

Ntorya’s contingent gas resource has now risen to 762.8bn cubic feet of gas, comprising 80.6bn cubic feet of gas that’s described as pending development – to be addressed by the planned initial three well operation.

Two of the three wells have so far been drilled, and the third is due later this year. The gas would be connected to a gas plant located some 33 kilometres away.

“The [Zubair] deal provides an excellent basis for future value creation, enabling Aminex to participate in a meaningful way (and on a fully funded basis) in an active work programme targeting early production and very substantial resource potential.

“Ultimately, a funding solution was needed and has now been found, and we look forward to near term catalysts including drilling of the Chikumbi-1 well.”

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