Aminex
I caught up with Jay Bhattacherjee last week to chat about
the farm-out deal Aminex has done with Zubair and to try and understand why the
market has cooled on the process. I think it is fair to say that the
institutional holders are happier than the retail and within that band there
are people who don’t agree that it is quite as good as advertised.
It is also worth noting that when I first wrote up my views,
before speaking to Jay I was a big fan of the deal and it has to be said that I
still am.
With the significant cash payment up front by Zubair and the carry on
3D seismic and drilling Aminex has had a liquidity moment with what is
effectively a material unlocking of cash. The deal accelerates development and
production from Ntorya and means that permitting etc could mean that the next
well might be spudded by the end of this year.
With an initial target of production of 40 mmscf/d Aminex
gets net cash flow of $10-12m pa but I suspect the arrival of the Zubairs means
that a much higher production rate is likely in due course. Hence my original
valuation of 10p which is predicated on substantial long-term cash flow for
Aminex. There have been some suggestions that Aminex raise the money and fund
this huge prospect themselves which I put to Jay. He told me that they have
explored all routes from equity to debt to off-take agreements but none of
these were either available of produced the kind of deal they have come up
with. Whilst I can see part of the bear case I think that this deal will
eventually allow significant amounts of value to materialise for Aminex
shareholders and accordingly I remain a long term believer in the company.
Big Thanks to Malcy https://wAww.malcysblog.com/2018/08/oil-price-savannah-petroleum-faroe-aminex-and-finally/