Interim Management Statement

RNS Number : 3861W

Aminex PLC

18 November 2010

 



 AMINEX PLC

INTERIM MANAGEMENT STATEMENT - THIRD QUARTER 2010

Aminex PLC ("Aminex" or the "Company"), the oil and gas company listed in London and Dublin, today issues its Interim Management Statement ("IMS") for the period 1 July 2010 to the date of this statement in accordance with the EU's Transparency Directive which requires certain listed companies to provide periodic updates to the capital markets in addition to their existing reporting requirements.

TANZANIA

Nyuni PSA - Kiliwani North gas field ('BCF gas' refers to billions of cubic feet of gas in place):  

Recent mapping based on new seismic data acquired in 2009 shows the structure on which the Kiliwani North discovery was made to be technically robust.  An independent assessment of Kiliwani North calculates that it contains 45 BCF gas on a Pmean basis and Aminex calculates that a likely recovery factor will be 73-83% of gas originally in place.  A formal development plan has been submitted to the Tanzanian authorities and certain outstanding issues between the pipeline operator and government concerning an expansion project for the Songo-Songo gas treatment plant have now been satisfactorily resolved so that detailed engineering work is now proceeding.  This should provide a sales route for gas to be produced from the Kiliwani North gas field to the Songo-Songo plant (about 2.5 kms in a straight line or 3 kilometres if a pipeline follows the existing road).  This will make Kiliwani North economically viable and discussions with potential buyers for its gas are in progress. 

Nyuni PSA - Other prospects:  Nyuni-1 was drilled to nearly 4,000 metres in 2004 to test Neocomian reservoirs, but suspended with a wellhead in place after drilling difficulties.  A recent independent re-evaluation of this well concludes that sands logged in the shallower Albian/Aptian sands at around 2,600 metres vertical depth could contain 233 BCF gas on a Pmean basis.  Although this interval was never tested, Aminex now therefore considers that it has made two gas discoveries on the Nyuni PSA, being Nyuni-1 and Kiliwani North-1, whose contingent resources together aggregate over one quarter of a trillion cubic feet of gas (Pmean basis). 

The Nyuni PSA contains significant undrilled prospects, notably the Nyuni prospect itself and the Okuza and Fanjove prospects. Independent consultants have evaluated the prospective resources on these three prospects to aggregate 2.5 trillion cubic feet of gas (Pmean basis) or 4.9 trillion cubic feet of gas (P10 basis).  These are significantly larger than the volumes of gas already discovered and, on an order of magnitude basis, comparable with the size of prospects in the Tanzanian deep water areas, but with the benefit of being close to shore and easier to exploit.

Aminex and partners plan to drill a well to test the potential of the Neocomian sandstones in the Nyuni prospect early in 2011, using Nyuni Island as a base.

Aminex (operator) has 50% of the Nyuni PSA and partners are RAK Gas Commission (25%), Key Petroleum (20%) and Bounty Oil (5%).

West Songo-Songo PSA:  Progress has been limited so far on this prospective PSA, but Aminex considers it to be a valuable component of its Tanzanian portfolio.  A discovery at West Songo-Songo in due course could be tied into a proposed gas gathering hub based around Kiliwani North.  Operator Key Petroleum has stated its view that there is potential for one trillion cubic feet of gas at West Songo-Songo.

Aminex and Key Petroleum (operator) each has 50% of this PSA.

Ruvuma PSA:  Aminex and partners drilled the Likonde-1 onshore well in 2010 and results were announced to shareholders on 1 April.  Likonde-1 provided strong indications of both oil and gas as well as encountering over 800 feet of reservoir quality sands before drilling was halted due to a massive influx of gas below 3,100 metres and very high pressure readings.  Previous wells drilled in the Ruvuma basin were located at considerable distances from Likonde, which was drilled as a first exploration well purely on seismic. The wealth of hard data now available from Likonde is currently being analysed and will enable the joint venture to select a second drilling location with greater precision.  Operator Tullow Oil has successfully negotiated an extension to the first period so that the next well will now be drilled in the second half of 2011, allowing sufficient time to maximise the chances of success through extensive geological and geophysical work. 

The Ruvuma PSA comprises two contiguous licences in the extreme south-east of Tanzania, known as Lindi and Mtwara.  Approximately 80% is onshore and 20% offshore in shallow water.  The Ruvuma River divides Tanzania and Mozambique and this basin, onshore and offshore, is one of the least explored of the great African river deltas.  There has been intense drilling activity on the Mozambique side of the basin in the last year with three deep water gas discoveries reported, one of which also reported indications of oil in non-commercial quantities. 

Aminex has 37.5% in the Ruvuma PSA, Tullow Oil (operator) has 50% and Solo Oil has 12.5%.

USA

Shoats Creek, Beauregard Parish, Louisiana:  Oil and gas production.  (Aminex 100% plus 50% of El Paso 'Wilcox' joint venture area.)

Olympia Minerals-1 well ("OM-1") which was drilled in the first half of 2010 is now on production from Cockfield Sands.  Part of the Shoats Creek area was hived off during the period into a 50-50 joint venture agreement with neighbouring operator El Paso E&P, LP ("El Paso"), which also contributed its own acreage to the joint venture.  The joint venture acreage is for depths in excess of 10,000 feet so it excludes the Frio and Cockfield formations which remain 100% in Aminex's ownership.  The purpose of the joint venture is to test Wilcox sands, deeper than 10,000 feet, which span El Paso's and Aminex's acreage.  Olympia Minerals 10-1 ("OM10-1") was drilled in the joint venture area during the period, encountering oil and gas bearing sands in 5 separate Upper Wilcox zones. All 5 zones were subsequently fracture-treated and 3 zones were placed on test production at an initial rate of 500 barrels oil equivalent per day (approximately 70% light crude oil and 30% natural gas).  OM10-1 has effectively de-risked the Upper Wilcox sands and converted an exploration prospect into proved reserves, now delivering both oil and gas to market through regional pipelines.  Two development wells are planned for 2011 and an updated reserves report, now being worked on, will be made available to shareholders once it is complete.

Alta Loma, Galveston County, Texas:  Oil and gas production.  (Aminex 37.5%)

Production from the Upper Andrau sands in the Sunny Ernst-2 discovery well drilled in 2008 produced beyond expectations but has now materially declined.  To restore production the overlying 'S' sands, where a 60 foot interval of hydrocarbons was logged in 2008, will be completed for production in early 2011.  Locations for the next well, Sunny Ernst-3, continue to be evaluated by the operator, El Paso.  Sunny Ernst-3 is now unlikely to be drilled in the immediate future.

South Weslaco:  Gas production.  No immediate further drilling plans. (Aminex 25%)

Somerset:  Oil production. (Aminex 100%)

EGYPT

West Esh el Mellaha ("WEEM-2"):  Three wells have now been drilled on the WEEM-2 permit, two of which provided strong indications of hydrocarbons but none of which has been a commercial success.  The WEEM area onshore in the Gulf of Suez has complicated and highly faulted geology and overlying rocks make seismic interpretation difficult.  However successful wells tend to be prolific producers and perseverance may be rewarded through future drilling.  The group has committed to a second exploration period of three years which involves drilling two further exploration wells.  Aminex has a 10% beneficial interest in this property and its share of costs is carried through to first commercial production.

KOREAN PENINSULA

East Korea Bay Basin:  In 2010 Aminex sold a 50% interest in its subsidiary Korex Ltd. to Chosun Energy of Singapore.  Korex subsequently signed a new PSC with Korea Oil Exploration Company (KOEC), the state oil company of the Democratic People's Republic of Korea ('DPRK'), covering over 50,000 km²offshore in the Korean East Sea.  The PSC calls for new marine seismic to be acquired in the next two years but so far only desk-top evaluation has been carried out.  This is a long-term project which is only likely to come fully to fruition with the support of the international community.  Whereas politics have improved and deteriorated several times during the long period that Aminex has been evaluating the DPRK's potential and negotiating with its officials, the geology remains a constant and gives cause for optimism.

Aminex's partner Chosun Energy will become increasingly involved in the management of this project.

OILFIELD SERVICES SUBSIDIARY

Aminex's wholly-owned oilfield service and supply subsidiary, AMOSSCO, has been trading in line with expectation and will be supporting the next phase of drilling at Nyuni in Tanzania.  It is currently providing support services to oil companies in Europe, South America and North Africa.

FINANCIAL

Aminex issued its interim results statement for the six months to 30 June 2010 on 27 August 2010.  Trading from the beginning of the third quarter has been approximately in line with expectations.  As previously reported, revenues in 2010 have been lower than in 2009 due to the anticipated decline in production from the Upper Andrau formation at the Alta Loma field but the commencement of production from the OM-1 and OM10-1 wells at Shoats Creek since 1 July is expected to contribute strongly to second half performance.  US operations continue to benefit from improved commodity prices compared with 2009. 

Aminex has recently finalised the placing of 24,073,250 million Ordinary Shares, raising approximately $2.7 million net of expenses, to be used partly towards securing long lead items for drilling the Nyuni-2 well in Tanzania and partly to assist the development programme at Shoats Creek, Louisiana.  The Company is considering alternative methods of financing its proposed capital expenditure programme in 2011.  Other than minor, equipment-related leases in the US, the Group remains debt-free.

OUTLOOK

Tanzania continues to be the main focus of Aminex's international exploration activity with drilling planned on both the Nyuni and Ruvuma PSAs in 2011.  The Kiliwani North gas discovery at Nyuni will benefit from the recent resolution of third party issues and a development plan has been submitted to government.  Negotiations with gas customers in the Dar es Salaam area are in progress and also underway for a new PSA in the Nyuni area, as the existing Nyuni PSA expires in 2011.  The Nyuni PSA will be the first to have achieved its full 11-year term since oil and gas exploration began in the country.  With two discoveries made and some large prospects to drill, Nyuni, together with the less advanced exploration programme at neighbouring West Songo-Songo, is becoming a successful venture which Aminex aims to exploit to the full.

The potential for the Ruvuma basin to become a new oil province in southern Tanzania following the drilling of Likonde-1 (operated by Tullow Oil) in the first quarter of this year opens up exciting upside for Aminex and drilling in late 2011 will follow a detailed appraisal of the Likonde well. 

At Shoats Creek, Louisiana, dual drilling successes in both Cockfield and Wilcox sands, the first wells to be drilled with benefit of 3D seismic, will improve revenues and upgrade reserves.  Further development drilling is planned for 2011.  Also in 2011, the Sunny Ernst-2 well at Alta Loma, Texas will be recompleted in a higher zone with the intention if restoring production to 2008 levels.

In order to fulfil its ambitious 2011 drilling programme, the Company is actively working on the several options available to it for securing requisite funding.

In recent weeks Shore Capital, Goldman Sachs and Ambrian have all initiated coverage on Aminex.  The Company will be making a presentation to the Oilbarrel conference in London today, 18 November, and a copy of the presentation is being posted to the Company's website www.aminex-plc.comduring the course of the morning.

For further information please contact:

Aminex PLC                                        [phone]

Brian Hall - Chairman

Pelham Bell Pottinger                   [phone] or [phone]

Archie Berens

 

END

 

 

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