Energy firm Aminex (LSE:AEX) advanced 5.1pc to 1.8p this morning after announcing progress in its efforts to secure a rig for a new well within its 75pc-owned Ruvuma production sharing agreement (PSA) in Tanzania. It said a tendering process for a platform to drill the well, which is called Chikumbi-1 (CH-1), has now completed. It has received numerous bids and is currently evaluating them on their ‘technical and commercial merits’.
CH-1 is located up dip from Aminex’s Ntorya project, which is part of the Ruvuma PSA and contains 1.87TCF of gas initially in place. Ntorya currently consists of the Ntorya-1 discovery well, which tested at rates of up to 20MMcf/d with 139bbls of condensate and the Ntorya-2 well, which tested at a stabilised rate of c.17MMcf/d.
Aminex said it expects CH-1 to delineate the Ntorya gas field in a significantly thicker section of the Cretaceous reservoir system. It also plans to evaluate a deeper exploration target in the Jurassic formation. If CH-1 is successful, then its gas will be produced into the existing Madimba Gas Processing Plant, and ultimately integrated into a full-field development programme.
Elsewhere in today’s update, Aminex said pressure at its Kiliwani North-1 well has sufficiently built, with the firm continuing to work with all involved parties to stimulate production as soon as possible. Kiliwani North-1 is located at its 57.5pc owned and operated Kiliwani North field in Tanzania.
Jay Bhattacherjee, CEO of Aminex said: ‘The company continues to progress the completion of the proposed farm out transaction while driving forward operations over its key assets at Ruvuma and Kiliwani North.’
Solo Oil (LSE:SOLO), which holds a 25pc interest in the Ruvuma PSA and 7.6pc stake in Kiliwani North-1, also welcomed today’s news, with shares sitting relatively flat at 2.2p. Chairman Alastair Ferguson said:
‘We are pleased to see operational progress being made by Aminex in operations in Tanzania. The rig tendering process is an important step towards the planning and execution of Chikumbi-1, a well designed to further unlock the potential resources in the Ruvuma PSA. We look forward to further updates from Aminex on Kiliwani North-1 as the well stimulation works continue.’
Last month, Aminex announced a farm-out deal to accelerate the development of Ntorya, which will see ARA Petroleum Tanzania pay it $5m for a 50pc interest in the Ruvuma PSA. Under the terms of the farm-out, ARA will have to drill, complete, and test Chikumbi-1 and acquire, process, and interpret 3D seismic over 200km2 within the Ntorya area. It must also establish an early production system to achieve accelerated first gas to a minimum gross rate of 40MMcf/d. equivalent to around 6,700bbls/d.
Finally, ARA will also fully carry Aminex for its share of costs up to $35m in respect of its remaining 25pc stake in the Ruvuma PSA. This implies a potential expenditure during the carry period of up to $105m for the aggregate working interest without the need for new funding by Aminex. What’s more, if 40MMcf/d is achieved before Aminex’s 25pc interest is carried, APT must assign a quarter of its share of profit gas to pay the unspent carry amount until the full $35m is realised.
We highlighted Aminex as a buy in January, when Bhattacharjee told us Ntorya is ‘an asset of national importance’ for Tanzania, which has the power to change the country’s rate of industrialisation. Because of this, Tanzania’s government has built the infrastructure needed to get gas out of the ground, significantly cutting costs.
As we wrote at the time, with the Ntorya discovery offering great upside and Tanzania providing a developing resource-rich backdrop, concerns over liquidity and fears associated with operating in Africa seem overcooked. With a farm-in now in place, the development of Ntorya can accelerate without the need for diluting Aminex’s investors – it will be interesting to see where shares go from here.