Wednesday, 9 July 2025

Aminex - Addressing the buyout question!

 

🔍 Factors suggesting a buyout is unlikely in the near term


  1. Funding and Carry Arrangements

    • The current structure includes APT carrying Aminex’s share of development costs (approx. USD 35 m net), with no further capital required from Aminex for phases up to mid-2026 Aminex remains capital-light and focussed on production ramp-up, which removes immediate financial pressure to sell its stake.

  2. Strategic Alignment and Joint Upside

    • Aminex benefits from a secure funding structure while retaining upside as production ramps from ~40‑60 MMscfd to a potential 140 MMscfd 

    • APT carries the operator risk but by keeping Aminex onboard, it maintains JV partners aligned on field development.

  3. No Reported Negotiations or Valuation Discussions

    • Searches reveal no credible sources indicating acquisition talks or intentions by APT to buy out Aminex.

    • APT’s ambitions seem focused on developing and expanding operations—not consolidation of ownership.

  4. Supportive Government & Shared Milestones

    • The Tanzanian government and TPDC have been supportive of the current JV structure, including awarding the 25-year development licence to the JV

    • This suggests no pressure to restructure or transfer equity at this stage.


✅ What might change this dynamic?

Trigger EventPossible Impact
Aminex funding constraintsIf future phases require more capital and carry arrangements lapse, Aminex might be open to sell.
APT’s strategic expansionIf APT wants full operational control to pursue aggressive field development, it could approach Aminex.
Valuations change significantlyAPT might buy low if Aminex’s share-price drops or reserves valuation mismatches emerge.
Regulatory or lender pressureLenders or authorities might prefer a single, controlling operator if it simplifies governance or financing.

🧮 Estimated probability (qualitative)

  • Near-term (next 12–18 months): Low (< 20%)

    • The current JV structure is financially and operationally stable; no signs point to a takeover.

  • Medium-term (2–4 years): Moderate (20%–40%)

    • Once production is established, and if additional wells require new investment or JV alignment, APT might consider consolidation.

  • Long-term (5+ years): Higher (40%–60%)

    • As the field matures and ramp-up continues, appetite for full ownership could increase, depending on field economics and strategy.


📌 Summary

There’s currently no concrete evidence of negotiations or intent for APT to acquire Aminex’s stake. The relationship is financially beneficial for both—Aminex retains upside with minimal outlay, while APT maintains operational control. In my view:

  • Unlikely in the short term (< 20%).

  • Possibly in the mid-to-long term if strategic or financial drivers change.

Would you be interested in exploring scenarios where a buyout could occur—such as valuation triggers or financing gaps—or comparing it to similar JV arrangements in the industry?

EPC Award and why it matters


📈 Why this EPC award matters

On 3 July 2025, the Tanzania Petroleum Development Corporation (TPDC) officially awarded the Engineering, Procurement & Construction (EPC) contract for the 35 km pipeline from Ntorya to Madimba to China Petroleum Pipeline and China Petroleum Technology & Development Corporation

  • Aminex holds a 25% non-operated interest in the Ntorya project, alongside partner ARA Petroleum Tanzania (APT) 

  • The pipeline is designed with a capacity of 140 MMscfd, aligning with the Ntorya Field Development Plan (FDP) 

  • The award follows major milestones in the past 18 months:

    • 25-year development licence granted

    • Gas Sales Agreement signed in January 2024

    • Updated FDP and 3D seismic campaign affirming ~1.8 tcf proven reserves, with up to 16 tcf GIIP potential


Market reaction & strategic edge

  • Shares surged by ~40% on the news, reflecting investor optimism and the government’s visible commitment

  • Resting on zero net development cost (covered by a carry arrangement through ~$140 m gross capex, $35 m net to Aminex) and with a $3 m working capital facility, Aminex is well-positioned financially 

  • Significantly, the EPC award de-risks the path to first gas, turning scattered milestones into one coherent execution plan.




What happens next? 🚧 Timeline & next steps

1. Pipeline construction (mid‑2025 to mid‑2026)

  • Engineering, procurement, and construction by Chinese firms commence imminently following the award

  • Expected completion by mid‑2026, in time to match forecasts from the 2024 Annual Report

2. Well commissioning and start-up

  • Once ready, Ntorya‑2 (NT‑2) will be hooked into the pipeline for gas production

  • Next in sequence:

    • Workover of Ntorya‑1 (NT‑1)

    • Drilling of Chikumbi‑1 (CH‑1)

  • Initial gas output projected around mid‑2026, at 40–60 MMscfd, ramping to ~140 MMscfd within a few years

3. Long-term phased development

  • The FDP envisages up to 14 new wells over the next decade, with target production rising to 280 MMscfd

  • Capital will be funded through the existing carry and future Ntorya revenues—no extra shareholder funding expected 

4. Monetisation & gas sales

  • Gas sold under the January 2024 GSA with TPDC ensures offtake security 

  • Ethically and strategically important: The gas supports Tanzania’s domestic power, industrial, and cleaner cooking needs.


Outlook for Aminex & ARA

Aminex PLC

  • Shareholder value looks promising: Cashflow from first gas (mid‑2026), financed capex, low capex outflows, and significantly de-risked development path.

  • The company expects positive cash flow post mid‑2026 and is operating with efficient overheads (US$1.59 m G&A) 

  • Growth beyond the early phase—additional wells could unlock further reserves and revenues.

ARA Petroleum Tanzania (APT)

  • As operator, ARA drives the project execution, well expansions, and stakeholder engagement.

  • Gains credibility from delivering on its FDP, likely to aid future Tanzanian projects.

  • Success here cements its operational credentials in East Africa.

Together (Aminex & ARA)

  • They stand to benefit from increased gas volumes, line utilisation, and phased development upside.

  • Successful delivery builds investor and governmental confidence, opening doors to further JV opportunities.

  • On the flip side, they must vigilantly manage execution—pipeline builds, drilling risks, commodity price volatility, and regional policy shifts.


Key risks to monitor

  • Engineering delays or cost overruns on the pipeline—though Chinese EPC firms are credible contractors.

  • Drilling hiccups: CH‑1, NT‑1 workover could face technical setbacks—impacting ramp-up timelines.

  • Gas pipeline commissioning and tie-in: Complex logistics, regulatory approvals, and local coordination may pose delays.

  • Gas price dynamics: Though under GSA, profit margins hinge on price stability and local consumption growth.

  • Funding beyond carry: While early phases are financed, scaling to 14 wells may need additional capital down the line.


Summary (≈ 100 words)

With the EPC award for the Ntorya–Madimba pipeline secured, Aminex and ARA have unlocked execution for first gas, expected mid‑2026. Financially streamlined, with capex largely carried, Aminex is set to benefit from ramping gas production under a secure offtake agreement. ARA, as operator, leads delivery and sets the stage for future growth. If construction and drilling proceed smoothly, both stand to capture significant value from Tanzania’s growing gas market. Key next steps: track pipeline completion, NT‑2 commissioning, CH‑1 and NT‑1 operations, and progressive drilling through the FDP.


🔍 What happens next

  • Mid‑2025 to mid‑2026: Pipeline built; NT‑2 tied in; first gas flows begin.

  • H2 2026 onward: CH‑1 drilled, NT‑1 reworked; production ramps to 140 MMscfd, scaling toward 280 MMscfd.

  • 2027+: Phased drilling unlocks full field ambition. Additional wells generate growth and monetisation.