Interim Management Statement

RNS Number : 8755G

Aminex PLC

19 May 2011

 



AMINEX PLC

INTERIM MANAGEMENT STATEMENT - FIRST QUARTER 2011

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 January 2011 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.

HIGHLIGHTS

·    Rig now mobilised for Nyuni-2 well, offshore Tanzania, which will be spudded shortly.

·    Next prospect in Ruvuma Basin now identified and awaiting government consent for drilling this year.

·    Recent Development Licence award for Kiliwani North gas field is key to commercialisation.

·    Further drilling planned this summer at Shoats Creek, Louisiana.

·    Sunny Ernst-2, Alta Loma, Texas now recompleted and producing from the 'S' sands.

·    New PSA to replace expiring agreement at Nyuni, Tanzania is negotiated and awaiting ratification.

·    Institutional placing and open offer of new shares in first quarter raising £26 million (before expenses) leaves Aminex securely funded to implement a significant exploration and development programme.

CHAIRMAN'S COMMENT

"We have an active drilling and development programme coming up this year, with exploration wells in Tanzania, development wells in the USA and commercialisation of the Kiliwani North gas field all moving ahead.  We enjoyed strong levels of support during our recent fund-raising and are optimistic that our forthcoming activities will deliver positive results."

GLOSSARY OF TERMS USED

PSA or PSC:                       Production Sharing Agreement or Contract

BCF:                                      Billions of cubic feet of natural gas

TCF:                                       Trillions of cubic feet of natural gas

BBLS:                                    Barrels of oil

BOPD:                                  Barrels of oil per day

BCPD:                                  Barrels of condensate per day

MMcfd                                Millions of cubic feet per day of natural gas

Pmean:                              The average (mean) probability of occurrence

TANZANIA

Kiliwani North gas field 

The Kiliwani North Gas Field ('Kiliwani North') was formally granted a Development Licence in April 2011 by the Tanzanian Minister of Energy and Minerals.  Commercialisation is now moving ahead and a commercialisation team is installed and progressing agreements for access to gas processing and transportation and for gas sales.  A 3 kilometre, 6" pipeline connecting the Kiliwani North wellhead to gas processing facilities on Songo-Songo Island is scheduled for installation this year with first gas sales provisionally in early 2012.  A shortfall in energy supplies in Tanzania will make Kiliwani North gas an important new component of the domestic energy market.  Kiliwani North was discovered and tested in 2008 and an independent valuation carried out by Isis Petroleum Consultants in 2010 attributed 45 BCF gas in place to it, on a Pmean basis.  Reservoir modelling indicates that 73-83% of gas in place could be recovered from Kiliwani North. 

Nyuni PSA

Aminex is scheduled to start drilling its fourth exploration well, designated Nyuni-2, under the existing Nyuni PSA in the next few weeks.  The well will be drilled directionally from the small Nyuni Island in the north-east of the licence area to test a large Neocomian prospect with a bottom-hole location approximately 1,200 metres to south-east of the island.  The Caroil-6 land drilling rig is at present being offloaded and set up for drilling on the island.  30" conductor pipe for the well has already been set. 

A new PSA has now been negotiated with the Tanzanian authorities, which will include four additional, contiguous blocks to the north of the existing PSA area.  Finalisation of the PSA is imminent and in the meantime the Government of Tanzania has helpfully granted a formal, 6-month extension to the existing PSA to allow for any delays in the upcoming drilling activity.  Shareholders will be advised when the well has been spudded.    

In February 2011, Aminex entered into a farm-in agreement with Key Petroleum.  Under the terms of the agreement, Aminex, through its wholly-owned subsidiary Ndovu Resources Ltd., is increasing its interest in the Nyuni PSA and Kiliwani North Development Licence by 15%, from 50% to 65%, in return for meeting Key Petroleum's 20% share of the Nyuni-2 well.  Ndovu Resources Ltd. is the operator of both licences.  Partners are The RAK Gas Commission (25%), Bounty Oil & Gas (5%) and Key Petroleum (5%).

West Songo-Songo PSA

Progress remains limited 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 TCF gas at West Songo-Songo.

Aminex and Key Petroleum (operator) each has 50% of the West Songo-Songo PSA.

Ruvuma PSA

Aminex and partners Tullow Oil (operator) and Solo Oil plan to drill a further exploration well in the second half of this year as a follow-up to the Likonde-1 onshore well drilled in 2010.  This 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 very high pressure and temperature readings associated with high gas influx.  A new well location has now been selected by the joint venture and its precise location and potential targets will be announced when it has been formally approved by the Tanzanian authorities.  It is currently estimated that the well will be spudded in September/October 2011.   

The Ruvuma PSA comprises two contiguous licences, known as Lindi and Mtwara, in the extreme south-east of Tanzania.  Approximately 80% is onshore and 20% offshore in shallow water.  Likonde-1 was drilled in the Lindi licence area and the next provisional location is in the Mtwara licence area.  The Ruvuma River divides Tanzania and Mozambique and the Ruvuma Basin, onshore and offshore, is one of the least explored of the great African deltaic basins.  This year the BG Group and partners have announced a discovery of gas directly offshore of the Ruvuma PSA in deep water.  Directly to the south of the BG discovery, a group led by Anadarko has now made four major gas discoveries in the same geological setting, offshore Mozambique. 

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 Aminex-El Paso 'Wilcox' joint venture area.)

The primary producing areas at Shoats Creek are (1) the Cockfield Sands (shallower than 10,000 feet and partly depleted through production over several decades) and (2) the Wilcox sands (deeper than 10,000 feet and recently discovered on the property and tested by the Aminex-El Paso joint venture).

In 2010 a well was drilled in each:  Olympia Minerals-1 ("OM-1") was drilled 100% by Aminex in the first half of the year to test a Cockfield target; Olympia Minerals 10-1 ("OM10-1") was drilled 50-50 by the Aminex-El Paso joint venture in the second half to test an Upper Wilcox target.  Both wells successfully encountered their targets and were completed for production.  Two follow-up wells are planned by the Aminex-El Paso joint venture this year in the Upper Wilcox formation.  The Lower Wilcox, below 12,000 feet, has not yet been drilled and remains an exploration prospect.

Aminex has a very much better understanding of the complex geology of the Shoats Creek area following interpretation of 3D seismic.  Nevertheless, the geology can be difficult to interpret and the wells and the field require careful management.  Although the wells produce a high quality and valuable crude oil, together with natural gas, the oil has a high paraffin content which can cause the wells to wax up if produced too slowly.  However, if they are produced too quickly, the volume of water produced becomes difficult to handle.  This has tended to create a stop-start production situation over the last few months.

To help resolve these issues, a downhole 'jet pump' has recently been installed at OM-1 (operated by Aminex) following engineering recommendations, and this is initially yielding improved production results from the Cockfield sands but needs to be tested further before it will be possible to establish a stabilised and consistent production rate.  At OM10-1 (operated by El Paso) further water disposal facilities are required before the well's full potential can be realised and the remaining two of the five hydrocarbon-bearing zones which have already been perforated can be placed on production.

Water disposal often requires costly new drilling but there are a number of old and idle well bores in Aminex's lease area which lend themselves to conversion for water disposal purposes.  Using old well bores for water disposal from the Wilcox sands also provides an opportunity for increased production from Cockfield sands and ties in with the engineering report which recently upgraded 2P reserves at Shoats Creek, published by the Company in April.  The report recommended a programme of reservoir pressure maintenance by water injection for most effective sweeping of the Cockfield reservoir.  This calls for an integrated approach, through injecting produced water from Wilcox wells via existing idle well bores to support pressure in the Cockfield reservoir.  A pilot study has now been completed and it is likely that a test project will be initiated this summer.   

Alta Loma, Galveston County, Texas 

Oil and gas production.  (Aminex 37.5%, El Paso 25% - operator, others 37.5%)

The Upper Andrau sands in the Sunny Ernst-2 discovery well drilled in 2008 produced at rates beyond original expectations but production subsequently declined.  To restore production, the overlying 'S' sands, where a 60 foot interval of hydrocarbons was logged in 2008, have recently been completed for production in the Sunny Ernst-2 well bore and the original producing interval in Upper Andrau sands has been plugged off.  The 'S' sands are now delivering both oil and gas to market on a restricted choke at the rate of approximately 3.9 MMcfd gas and 150 BCPD.  The installation of upgraded production equipment is in progress and this will enable the zone to produce at a much higher rate within pipeline limitations.    A follow-on well on this property, Sunny Ernst-3, is now scheduled for drilling in 2012.

EGYPT

West Esh el Mellaha ("WEEM-2") 

The joint venture group has committed to a second exploration period of three years which involves drilling two further exploration wells, most likely commencing later this year or early in 2012.  Three wells were drilled on the WEEM-2 permit in the initial exploration period, 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.  Aminex has a 10% beneficial interest in this property and its share of exploration costs is carried through to first commercial production.

KOREAN PENINSULA

East Korea Bay Basin 

Aminex is a 50% shareholder In Korex Ltd., managed by Chosun Energy of Singapore.  In 2010 Korex signed a PSC with Korea Oil Exploration Company (KOEC), the state oil company of the Democratic People's Republic of Korea ('DPRK'), covering over 50,000 km² offshore in the Korean East Sea, in both shallow and deep water.  The PSC calls for new marine seismic to be acquired in the next two years but evaluation has so far only reached the desk top stage.  This is a long-term project which is likely to come fully to fruition in a more favourable political climate.  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 great optimism.

Korex Ltd.'s 50% shareholder, Chosun Energy, operates this project.

OILFIELD SERVICES SUBSIDIARY

Aminex's wholly-owned oilfield service and supply subsidiary, AMOSSCO, has been trading in line with expectation and is currently providing supply and logistical support for the Company's upcoming drilling operations at Nyuni Island in Tanzania.  It is currently providing support services to operating oil companies in four continents.

FINANCIAL

Since the year end the Company has raised approximately £26 million (before issue expenses) in new equity through a combination of an institutional placing and an open offer of new shares to existing shareholders.  The interim results for the half year to 30 June 2011 will be announced on 31 August 2011.

COMPANY MEETINGS

·    The Company's AGM will be held at the Westbury Hotel, Dublin 2 on Wednesday 8 June at 11.00 a.m., at which an operational update will be provided to shareholders after completion of the formal business.  This presentation will be simultaneously posted to the Company's website

·    The AGM operational presentation will also be made at an informal meeting in London the following day, for the benefit of qualifying shareholders who are unable to attend the AGM in Dublin.  This will be held at 11.00 a.m. at The Bloomsbury Hotel, 16-22 Great Russell Street, London WC1B 3NN.

OUTLOOK

Aminex has an active drilling programme in hand during the remainder of this year.  The Nyuni-2 exploration well in Tanzania, due to spud in the near future, is targeting a potentially large natural gas prospect on the Nyuni PSA.  The second well in the Tullow Oil-operated Ruvuma Basin PSA is scheduled to be drilled in the second half.  In the USA, two development wells are planned for the Aminex-El Paso joint venture area at Shoats Creek, Louisiana as follows-ups to the successful exploration well drilled in Upper Wilcox sands last year.

After a number of regulatory delays beyond the Company's control, real progress is now being made on development of the Kiliwani North gas field, following the granting of a ground-breaking Development Licence, the first to be granted for a discovery made in recent times.  This will lead to the Company's first production in Tanzania.

A new PSA to reflect the expiring Nyuni PSA in Tanzania is expected to be completed very soon.

With drilling and development funded through the Company's institutional placing and open offer of new shares earlier in the year, Aminex is well placed to fulfil an exciting programme.

For further information please contact:

Aminex PLC                                        [phone]

Brian Hall - Chairman

Pelham Bell Pottinger                   [phone] or [phone]

Archie Berens

 

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