Aminex plc
("Aminex" or "the Company")
PRELIMINARY RESULTS FOR THE YEAR ENDED 31 DECEMBER
2016
Aminex PLC ("Aminex" or "the
Group" or "the Company") today announces its preliminary results
for the year ended 31 December 2016.
Financial Highlights:
•
First production revenues received from Kiliwani
North-1
•
Regular gas receipts paid in US Dollars
•
Placing and Open Offer raised net $24.37 million
•
Zubair Corporation of Oman became a strategic
investor with 29.9% holding
•
Corporate loan facility extended to 31 January 2018
and significantly paid down
•
Loss of $2.53 million for year (2015: $3.78
million)
Operating Highlights:
•
Kiliwani North-1 average production rate of
approximately 15 MMcfd from July 2016
•
Ntorya-2 appraisal well spudded in December 2016
•
Mtwara Licence extended to December 2017
•
Nyuni Area licence extended to October 2019
Post year-end:
•
Ntorya-2 appraisal well tested at average flow rate
of 17 MMcfd.
Aminex Chief Executive Officer, Jay Bhattacherjee,
commented: "2016 was a transformative year with Aminex achieving first gas
production from its Kiliwani North field, the introduction of a strategic
investor and spudding the Ntorya-2 appraisal well, which subsequently tested at
an average rate of 17 MMcfd. The Company is now looking forward to
developing the resources in the onshore Ruvuma Basin, while gas revenues assist
with the early repayment of corporate debt. We appreciate the continued
trust that shareholders have put in management."
CHAIRMAN'S LETTER
Dear Shareholder,
Herewith are Aminex PLC's results for the year
ended 31 December 2016. During the year, the Group recorded a loss of
$2.53 million compared with a loss of $3.78 million in the previous year.
Net assets at year end totalled $106.35 million, including net current assets
of $11.00 million.
2016 was a landmark year for your Company in
Tanzania.
In the early part of the year we started producing
from the Kiliwani North-1 well into the new Tanzanian national pipeline system
and production continues at approximately 16 MMcfd at the time of
writing. Kiliwani North is Aminex's first African production and is
making a positive impact on the Company's finances.
In the summer, the Company completed a placing of
new shares together with an open offer to existing shareholders which raised
$24.37 million after expenses in order to move forward a development-led work
programme. The largest contributor to the placing was Eclipse Investments
LLC, a division of the Zubair Corporation of Oman, which now holds a strategic
stake of just under 30% of the Company's issued share capital. The Zubair
Corporation, through its interest in ARA Petroleum LLC ("ARA"), had
identified the long-term potential of our acreage in Tanzania and we have
subsequently been pleased to welcome Mr. Ola Fjeld of ARA to our Board.
Ola has a strong track record of successful operations in our industry and his
participation and support is warmly appreciated. Since the fund raising,
Philip Thompson, who joined Aminex in 2013, left the Company for personal
reasons and we wish him well in the future.
Just before the year-end we spudded the Ntorya-2
appraisal well in the Ruvuma Basin, a follow-up to our earlier Ntorya-1 gas
discovery. Since the year-end, we have successfully finished drilling
this well, recording a 51-metre gross reservoir section with approximately 31
metres of net pay. Evidence of trace oil was found while drilling the
reservoir section. The well was successfully tested and the Company is
currently updating its basin model so as to determine the optimal development
plan.
We have been working in Tanzania for a long time
and have never lost our conviction that there is a major hydrocarbons play to
be exploited. Earlier drilling successes at Kiliwani North and Ntorya
were important milestones but our latest discovery at Ntorya-2 opens up a new
era of development possibilities. We were also pleased to receive
an extension to the Nyuni Area PSA in December 2016, which will enable us to
accelerate activity on that licence. The Company remains focused on
projects that have the potential for early cash flow and with infrastructure
available, the Ruvuma PSA provides us with a great opportunity for development.
Aminex management and technical team has done a
fine job in persevering with these projects through many difficulties, while
all of us at the Company appreciate the support of shareholders who have stayed
with us through good times and bad, as we look forward to an exciting future.
Yours sincerely,
Brian Hall
Chairman
CHIEF EXECUTIVE'S REVIEW
Aminex has progressed strongly on many fronts
during 2016 and early 2017, becoming a Tanzanian gas producer for the first
time following Kiliwani North start-up and significantly advancing the
production potential of the Ntorya Prospect in the Ruvuma Basin with the
success of the recent Ntorya-2 appraisal well.
The loss for the period was $2.53 million compared
with $3.78 million for the previous year. A full commentary on the results is
provided in the Financial Review section.
Tanzania
Aminex's principal assets are its three interests
in Tanzania.
(1) Ruvuma PSA. The results of the
Ntorya-2 well test, announced since the year-end, endorse the Board's belief in
the quality of the assets held by Aminex in the Ruvuma Basin. This well
was drilled to a final total vertical depth of 2,795 metres and at 2,593 metres
encountered a gross gas-bearing reservoir unit of approximately 51 metres with
significant gas influx and high associated pressures. The well was tested
and flowed dry, high quality gas at an average rate of 17 MMscfd (2,833 BOED)
on a 40/64" choke. Strong pressure build-up occurred in all instances
during the well test. Ntorya-2 also encountered traces of oil in the
gross reservoir interval and the Company is updating its basin model to
determine the optimal drilling depths for Ntorya-3 and for future development
wells. Post analysis, Aminex will be able to revise its interpretation of
in-place volumes.
Aminex will now apply for a 25-year development
licence. Subject to tie-in, gas from the field can be produced into the
National Gas Gathering System and the Company is also evaluating, with the
Tanzania Petroleum Development Corporation ('TPDC'), early production options
for monetising the gas. To allow for an effective review of the Ntorya-2
well results and development licence application, Aminex is requesting a
further extension of time for the Mtwara Licence within the Ruvuma PSA.
Discussions are ongoing simultaneously on an extension of the other part of the
Ruvuma PSA, the neighbouring Lindi Licence, which officially ended in January
2017, as the Ntorya-Likonde prospects straddle the licence boundaries and
development may be conducted in both licences for greater efficiency. The Board
has a reasonable expectation of achieving a favourable outcome with the
Tanzanian authorities.
(2) Kiliwani North. KN-1 has been
producing gas into the new Songo Songo Island Gas Processing Plant since April
2016 and, since July, commercial rates have been averaging approximately 15
MMcfd. The gas is being sold at wellhead and has achieved an average price of
$3.25 per Mcf, ahead of the predicted $3.07 per Mcf. The higher price is
a result of (i) a higher calorific value than expected and (ii) price
indexation. TPDC has not yet confirmed a commercial operations date and
therefore has not finalised the agreed credit guarantees but production rates
remain constant and regular payments are being received by Aminex in US
Dollars.
(3) Nyuni Area PSA. The Company
received the formal extension of the licence into the First Extension Period,
currently due to end in October 2019. However due to delays in finalising
the new arrangements, Aminex has requested that the four-year extension be
effective from the date of grant of the First Extension Period in December 2016
and this is currently being considered by the authorities. Aminex now
plans to re-tender for 3D seismic acquisition over the deep-water sector of the
licence and in parallel is conducting a review of potential leads in the
licence area and over the adjoining Kiliwani North block. The objective
of this is to fast-track potential development opportunities, production from
which could be tied back to the Songo Songo Island Gas Processing Plant.
Financial Position
The Company's successful capital raise in August
2016 was supported by Eclipse Investments LLC, part of the Zubair Corporation
of Oman, which is now a 29.9% shareholder, and Majedie Asset Management, which
now holds just under 10%. Strong, supportive shareholders will greatly
assist development and the Company has now been able to advance its capital
expenditure programme in Tanzania. At 31 December 2016, cash balances
were $19.57 million while corporate debt had been reduced substantially to
$4.93 million with repayments funded primarily from gas revenues. The
Company has continued to pay down debt after the year-end and this remains a
priority.
Evaluation of New Opportunities
The Company's management and technical team
continues to evaluate and analyse new production-led business opportunities
with a view to creating a well-balanced and larger company.
Looking Forward
Following the success of the Ntorya-2 well, the
interpretation of results will be used to finalise the design for the Ntorya-3
well. Aminex is prioritising preparation of a development plan for Ntorya
and will submit an application to the Tanzanian authorities for a 25-year
development licence over the prospect with the intention of identifying and
drilling development wells in the most cost effective manner. The Company
proposes to monetise gas from Ruvuma as quickly as possible and will continue to
work with TPDC on suitable early production systems, with the ultimate aim of
supplying gas into the National Gas Gathering System. Production from
Kiliwani North is being used to accelerate repayment of the Company's corporate
debt facility in full ahead of the 31 January 2018 repayment date. The
Group's ongoing overhead expenses are closely monitored although, as attention
turns to development and production, the in-house technical team will be
strengthened to meet expanding operations.
I would like to thank our staff and all those that
have been associated with the Company's progress for their consistent hard work
but most of all our shareholders for their continued support and trust.
Jay Bhattacherjee
Chief Executive
FINANCIAL REVIEW
Financing and future operations
In April 2016, the Kiliwani North gas field started
production, initially for the supply of gas for testing and commissioning the
new Songo Songo Island Gas Processing Plant. From July 2016, production was
increased to a consistent rate which has averaged approximately 16 MMcfd during
the second half of 2016, providing a strong revenue stream which has supported
operations and contributed to retiring corporate debt.
In August 2016, Aminex completed a capital raising
of approximately $24.37 million net of expenses, assisted by the introduction
of a strategic investor, the Zubair Corporation, which now has a 29.9%
shareholding in the Company. The funds raised were primarily to enable
the drilling of the Ntorya-2 appraisal well and the planned Ntorya-3
exploration well. Ntorya-2 was spudded on 21 December 2016 and on 6
February 2017 reached a total depth of 2,795 metres. This well was
subsequently tested and achieved an average flow rate of 17 MMcfd. Aminex
plans to apply for a Ntorya development licence as the next stage for Ntorya.
As previously advised, the repayment of the
corporate loan is a priority for the Board. In June 2016 Aminex
negotiated and agreed an eighteen-month extension to the repayment date which
expires on 31 January 2018. During the second half of 2016, Aminex repaid
$4.5 million against the corporate loan from the receipt of gas revenues and
the application of part of the Open Offer funds. Since the year-end, a
further $2.40 million has been repaid reducing the corporate debt to
approximately $3.0 million at the date of this report. Over the last two
years, the Board has considered a number of refinancing options primarily to
reduce the cost of the loan but with the regular revenues from Kiliwani North
has concluded that the Company should focus on repaying the loan in full,
targeting final repayment during the third quarter of 2017, well ahead of the
agreed repayment date of 31 January 2018. Early repayment will reduce the
interest burden from the loan and, by not refinancing the loan, the Company
will not incur new loan and legal fees.
In April 2016 Aminex entered into an asset sale
agreement for the sale of a 4.0263% interest (or a 3.825% interest net of a
back-in for 5% by the Tanzania Petroleum Development Corporation
("TPDC")) in the Kiliwani North Development Licence to Solo Oil plc
for a consideration of approximately $2.17 million. The first tranche of
the sale, being $0.57 million for a 1.0526% interest, was concluded in April
2016. The second tranche for a 1.3158% interest did not meet the
condition of completion within fifteen days of receipt of first revenue
payments by the TPDC, although a third instalment for a 1.6579% interest
remains effective. TPDC has indicated to the Company that it would like
to participate in the joint venture by taking a 5% interest as permitted under
the terms of the Nyuni East Songo Songo Production Sharing Agreement but as at
the date of this report the transfer of interest has not concluded.
Revenues from Kiliwani North, the extension of the
repayment period for and the planned early repayment of the corporate loan, the
capital raising and the commitment of the new strategic investor all provide a
strong financial base to enable Aminex to become a debt-free company, to meet
its work commitments over the next twelve months and to fast-track its existing
projects as well as seek new development opportunities.
Revenue producing operations
Revenues from continuing operations amounted to
$4.93 million (2015: $0.35 million). The revenues included Aminex's share
of gas production of 1.45 BCF from Kiliwani North-1, giving rise to gas
revenues of $4.57 million (2015: $nil). The remaining revenues of $0.36
million (2015: $0.35 million) related to oilfield services comprising the provision
of technical and administrative services to joint venture operations and sales
of equipment to third parties. Cost of sales was $1.69 million (2015:
$0.34 million) of which the depletion charge on Kiliwani North production
amounted to $1.24 million (2015: $nil), with production costs for gas
operations of $0.09 (2015: $nil) and $0.36 million (2015: $0.34 million) for
oilfield services. The low gas production costs reflect the sale of gas
from Kiliwani North-1 at wellhead. Accordingly, there was a gross profit
of $3.25 million for the year compared with a gross profit of $0.01 million for
the previous year.
Group administrative expenses, including
depreciation and net of costs capitalised against projects, were $2.85 million
(2015: $1.63 million). The expenses for the current period include a
share-based payment charge of $0.81 million relating to executive share options
granted in May 2016. No options were granted in the comparative
period. On a like-for-like basis, excluding the share-based payment
charge, the Group's administrative expenses for the period under review were
$2.04 million, an increase of $0.41 million. The increase includes
administrative expenses of $0.12 million for production operations which were
previously capitalised to development assets. Management has continued to
maintain strict expenditure controls and, where possible, to reduce overhead
costs but continues to strengthen the technical team as the Company moves from
exploration to production and development. The partial disposal of the
Group's interest in the Kiliwani North Development Licence gave rise to a gain
of $0.34 million (2015: gain $1.77 million). Following a review of the
carrying value of assets, the Board has decided to reduce the fair value of the
production payment receivable to $nil: the provision arising of $1.97 million
recognises continuing non-payment of amounts due by Mayan Energy Limited
(formerly Northcote Energy Limited), although Aminex is seeking settlement of
outstanding receivables related to the 2014 sale of US assets. A
further impairment provision of $0.02 million was made against available for
sale assets. Impairment provisions and losses in the comparative year amounted
to $2.24 million. The Group's resulting net loss from operating activities
was $1.25 million (2015: $2.10 million).
Finance costs reflect an interest charge of $1.30
million (2015: $1.69 million). Of this, a charge of $1.26 million (2015:
$1.64 million) relates to the corporate loan, while the unwinding of the
discount on the decommissioning provision was $0.04 million (2015: $0.04
million).
The Group's net loss for the period amounted to
$2.53 million (2015: $3.78 million).
Balance sheet
The Group's investment in exploration and
evaluation assets increased from $79.86 million at 31 December 2015 to $84.62
million at 31 December 2016. The increase reflected well planning for two
Ntorya wells, the initial costs of the Ntorya-2 appraisal well spudded on 21
December 2016, as well as licence expenses for the Ruvuma PSA and the Nyuni
Area PSA. After review, the Directors have concluded that there is no
impairment to these assets, which include the cost of the Ntorya-1 gas
discovery. The carrying value of property, plant and equipment has decreased
from $12.42 million at 31 December 2015 to $11.22 million at 31 December
2016. The net decrease of $1.20 million reflected the depletion charge of
$1.24 million and the amount of $0.13 million released on the part disposal of
an interest in the field in April 2016 offset by additions of $0.17
million. Non-current trade and other receivables relate to the fair value
of production payments due from the US amounting to $1.97 million at 31
December 2015, which has reduced to a fair value of $nil in the year under
review. Current assets comprise trade and other receivables of $9.18 million,
including the gross receivable of $5.90 million due from TPDC for gas revenues,
and cash and cash equivalents of $19.57 million.
Under current liabilities, loans and borrowings of
$4.93 million relate to the corporate loan (see commentary under Going Concern
below) which had reduced from $8.56 million at the 31 December 2015 following
repayments amounting to $4.5 million offset by additional interest. The
outstanding loan amount has been reduced by repayments of a further $2.4
million since the period end. Trade payables amounted to $12.83
million. The non-current decommissioning provision increased from $0.45
million at 31 December 2015 to $0.48 million, the net increase arising on the
release of $0.01 million on the partial disposal of the interest in Kiliwani
North offsetting the unwinding of the discount charge of $0.04 million for the
period. Total equity has increased by $21.48 million between 31 December
2015 and 31 December 2016 to $106.35 million. The net movement comprises
the increase in issued capital and share premium of $25.92 million arising from
the capital raise completed in August; the foreign currency translation reserve
has increased by $1.56 million as a result of a stronger US dollar; and the
movement of $3.48 million in retained earnings comprises the loss of $2.53
million for the year and the cost of $1.55 million for the capital raise offset
by a release of $0.60 million from the share option reserve.
Cash Flows
The net increase in cash and cash equivalents for
the year ended 31 December 2016 was $17.44 million compared with an increase of
$0.36 million for the comparative period. The Company raised net proceeds
of $24.37 million on the issue of new equity through a capital raise in August
2016. During the period, the Group also received $0.57 million net
consideration for the part-disposal of the Kiliwani North Development
Licence. Net cash outflows from operating activities amounted to $3.20
million (2015: $2.50 million). Expenditure on exploration and evaluation assets
in the current period amounted to $2.11 million (2015: $1.00 million), relating
to the Ntorya-2 appraisal well spudded on 21 December 2016 on the Ruvuma PSA
acreage, together with continuing licence costs. Expenditure on property,
plant and equipment was $0.13 million for pre-production expenditure on the
Kiliwani North licence and the acquisition and installation of a new wellhead
control panel since production started. The cash balance at 31 December
2016 was $19.57 million (31 December 2015: $2.13 million).
Going concern
The Directors have given careful consideration to
the Group's ability to continue as a going concern. The Group continuously
monitors and manages its cash flow and liquidity risk. Cash forecasts are
regularly updated and sensitivities are run for different scenarios, including
the production flow and timing of cash flow from the Group's Kiliwani North
producing asset, the timing and cost of the Group's drilling and exploration
activities and the timing of corporate loan repayments. The Directors
have concluded that, following consideration of the Group's cash forecasts and
taking account of the capital raise in August 2016 which raised approximately
$24.37 million net of transaction costs, the Group has sufficient capital
resources from both ongoing operating cash flows and existing cash resources to
continue as a going concern for the foreseeable future, that is a period of not
less than 12 months from the date of approval of this preliminary statement and
accordingly, they are satisfied that it is appropriate to adopt the going
concern basis of accounting in the preparation of the financial
statements. The Group's ability to continue to make planned capital
expenditure, in particular on its main licence interests in Tanzania, can be
assisted if necessary by the successful sale of assets, deferral of planned
expenditure or an alternative method of raising capital. The Directors
have a reasonable expectation that the Group would be able to implement one or
more of these mitigating actions should it be required.
Max Williams
Finance Director
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