aex - shore

8/7/2019 AEX - Shore

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Equities Research Initiation of coverage 15 November 2010

No recommendation+

Price 8.1pOil & GasUnited Kingdom

FTSE All Share 2990

Reuters/Bloomberg AEX

No. of shares in issue (m) 454.0

Market Cap (m) 36.8

Estimated Net Cash (m) 2.7

Enterprise Value (m) 34.1

Website www.aminex-plc.com

Core NAV (p/share) 12

Total NAV (p/share) 26

Price/Total NAV (x) 0.3

Next update

Q3 IMS November 2010

Performance 1M 3M 12M

Absolute (%) (6) (11) (2)

Rel Index (%) (10) (22) (2)

Relative to FTSE Oil & Gas Index

Research analyst

Craig Howie

0151 600 3703

Conflicts of interest:

+ This is a non-independent marketing

communication. The analyst who has

prepared this report is aware that Shore

Capital Stockbrokers and/or another

member of the Shore Capital Group has a

relationship with the company covered in

this report. Accordingly, it has not been

prepared in accordance with legal

requirements designed to promote the

independence of investment research andis not subject to any prohibition on dealing

ahead of the dissemination of investment

research.

Shore Capital Stockbrokers Limited acts as

Joint Broker to Aminex.

Disclosures of potential conflicts of interest as required by regulatorybodies are shown on page 19.

Results and Forecasts

Year to

December

Turnover

($m)

PBT

($m)

EPS

(c)

DPS

(c)

Net Cash

($m)

PER

(x)

EV/EBITDA

(x)

Div Yield

(%)

2008A 10.2 (9.7) (0.6) - 3.9 n/a n/a n/a

2009A 7.9 (2.9) (0.9) - 11.6 n/a n/a n/a

2010F 7.4 (3.3) (0.8) - 2.2 n/a n/a n/a

2011F 17.4 2.2 0.5 - (18.2) 28.8 9.7 n/a

Source: Aminex, Shore Capital Stockbrokers

Aminex

US production with Tanzanian upside

Aminex recently reported strong flow rates from its OM10-1 well onshoreLouisiana, although these were not enough to kick-start the shares, whichhave more than halved from a 17p high earlier in 2010. The company has

announced a placing raising 1.7m (net) at a 7.5p issue price, ahead of amulti-well programme planned for next year, which will include a second,high-impact well at Ruvuma. This project is operated by Tullow in the samebasin as the Anadarko/Cove joint ventures recent discoveries offshoreMozambique. We expect a recovery in US production, and are forecastingrevenues of $17.4m in FY2011. In the meantime, we estimate that the sharesare trading at 0.3x total NAV, providing a highly attractive entry-point, evenallowing for future dilution as Aminex funds its 2011 drilling programme.

Tanzanian excitement: Aminex has a diverse asset portfolio although webelieve that Tanzania could provide the most powerful share price catalysts. An

exploration well is planned at Nyuni in the first quarter of 2011 and, if successful,could be tied into the existing discovery at Kiliwani North. Drilling of a follow-upexploration well at Ruvuma is planned for late 2011, in the same basin as recentdiscoveries by the Anadarko/Cove joint venture offshore Mozambique.

Strong recovery in US production expected: Aminex recently reported flowrates of 500boepd from OM10-1 at Shoats Creek, where two more deep wells areplanned for 2011. Recompletion of SE-2 in the second quarter should reverseproduction declines at Alta Loma, helping to deliver total attributable production of251mboe in FY2011, compared with the 94mboe we are forecasting this year. InTanzania, Kiliwani North could be producing commercially in 2012.

Trading at a substantial discount to risked NAV: We have calculated total NAVof 26p per share, with core NAV of 12p per share and risked upside of a further14p per share. Even allowing for potential future dilution, a current price/NAV ratioof 0.3x looks too low, and we believe that the shares enjoy the potential to regainlost ground as drilling catalysts and increased production emerge through 2011. Inthe meantime, there is strong valuation support at current levels, we believe.


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15 November 2010 AMINEX

2

Trading at a discount to core and risked NAV

Our sum-of-the-parts valuation includes net present values (NPVs) for Aminexs production

and development assets in the United States. NPVs are derived from independent

evaluations completed by consultants Sojen, and have been calculated using a 10%

discount rate. In the case of Shoats Creek, where further development drilling is planned, we

have applied a 90% probability of success to reflect project development risk.

We think that this is appropriate given the likelihood of a reserves upgrade following good

results from the two wells drilled earlier this year. We have excluded the Somerset field from

our valuation given its high operating costs and minimal NPV.

We have applied a multiple of 1x 2010F revenues to derive a value for the Amossco oilfield

services business, and made adjustments reflecting the present value of central costs and

for net cash. This results in core NAV of 12p per share, implying that Aminex trades at a

33% discount to the fair value of its existing and near-term production, and providing strong

valuation support, in our view.

Our valuation also takes into account exploration and appraisal potential by calculating

risked values for Nyuni (including the Kiliwani North discovery) and Ruvuma. The former has

been subject to volumetric studies by Isis Petroleum Consultants, with prospective and

contingent resources totalling 1.6tcf (we assume a conservative 60% recovery factor).

We assume that the second well at Ruvuma targets 100mmboe (the Likonde prospect

drilled earlier this year was estimated to have upside resource potential of 153mmboe). Wehave taken these resource estimates and used an in ground value of $5/boe with

probabilities of success ranging from 10% to 30%.

This approach gives risked exploration upside of a further 14p per share, implying total NAV

of 26p. This figure excludes West Songo-Songo, an earlier stage project operated by Key

Petroleum, as well as Egypt and North Korea, which provide further potential. With the

shares currently trading at a 69% discount to total NAV, we see lots of upside on a fully

risked basis.

Aminexs share price has arguably been held back by perceived funding risks associated

with heavy capital spend, which we estimate at $31.5m through the 2011 year-end, and this

is worthy of comment from a valuation perspective. The placing announced today will secure

long lead items for the next well in Tanzania, although Aminex will need additional financing

to cover its activities at Nyuni, Ruvuma and Shoats Creek. The company has several

available options including a farm-out at Nyuni and reserves-based lending facility in the US.

We believe that a 30% discount to total NAV is adequate to reflect potential future dilution at

the asset or corporate level, implying that an 18p share price remains achievable at the

current stage, giving 122% potential upside from current levels.

We have taken an NPV plus risked

exploration upside approach

Core NAV of 12p/share provides

strong valuation support

14p/share of risked upside at Nyuni

and Ruvuma

Perceived funding risks already

factored in


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3

Following an excellent test result from the OM10-1 well, we expect future activity in the US

to include recompletion of Sunny Ernst-2 at Alta Loma, and drilling of two more deep Wilcoxwells at Shoats Creek as part of Aminexs unitisation agreement with El Paso Corporation.

However, the highest impact events are likely to come with further drilling at Nyuni and

Ruvuma, which could provide catalysts with important implications for valuation.

Fig 1: Aminex sum-of-the-parts valuation

Unrisked CoS Risked Unrisked Risked Risked

US$m % US$m US$/share US$/share GBP/share

Alta Loma 26.5 100 26.5 0.06 0.06 0.03

Shoats Creek 95.4 90 85.9 0.20 0.18 0.11S. Weslaco 4.0 100 4.0 0.01 0.01 0.01

Oil services 2.5 100 2.5 0.01 0.01 0.00

Net cash 2.2 100 2.2 0.00 0.00 0.00

G&A (30.8) 100 (30.8) (0.06) (0.06) (0.04)

Core NAV 99.8 - 90.3 0.21 0.19 0.12

Nyuni appraisal 71.9 30 21.6 0.15 0.04 0.03

Nyuni exploration 338.5 20 67.7 0.70 0.14 0.09

Ruvuma 187.5 10 18.8 0.39 0.04 0.02

Total NAV 697.7 - 198.3 1.45 0.41 0.26

Source: Shore Capital Stockbrokers, independent reporting engineers

High impact drilling should provide

catalysts


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4

Exciting times in the Ruvuma basin

The Tullow-operated (TLW, no recommendation at 1236p) Ruvuma licence, covering

12,000km2 on Tanzanias southern border with Mozambique, is primarily onshore but

adjacent to the Mnazi Bay gas field operated by Maurel & Prom in shallow coastal waters.

Other operators have been active on the Mozambique side of the basin, including Anadarko

which, with Cove Energy (COV, no recommendation at 84p), has recently drilled its fourth

offshore well in a six well programme. Tullow, with partners Aminex and Solo (SOLO, no

recommendation at 0.4p), holds the principal onshore acreage north of the border in

Tanzania. Aminex has a 37.5% working interest.

Since award of the PSA in 2005, 370km of offshore and 430km of onshore 2-D seismic data

have been acquired. Following the completion of interpretation work, four large onshore

prospects were identified with P50 resources of 50mmbbl and/or 300bcf estimated in each.

From these, two drilling locations were selected, with a first well (Mikindani-1) scheduled for

spudding in late 2009.

Tullow-operated onshore block

Fig 2: Ruvuma location map

Source: Aminex

2-D seismic has enabled

identification of large, drillable

prospects


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5

However, detailed reprocessing work by Tullow led to the selection of a new, more

prospective well location; Likonde-1 spudded in the New Year, targeting multiple reservoirsincluding Tertiary and Cretaceous intervals, to a planned total vertical depth of 3,200m. Like

Mikindani, this was primarily an oil prospect, with upside resource potential estimated at

153mmboe and an estimated one in four chance of success.

Results from Likonde-1 were reported in early April after a powerful gas influx halted drilling

at an extended total depth of 3,650m. Results from drilling, logging and coring showed that

the well had intersected two sandstone intervals with a combined thickness of over 820 feet

(250m) and evidence of residual oil and gas. High gas readings were recorded through most

of the well bore with drill cuttings and sidewall cores providing evidence of crude oil.

Although Likonde-1 was not a commercial discovery (and has since been plugged and

abandoned), the hydrocarbon shows and potential net reservoir thickness provide lots ofencouragement ahead of drilling of a second well. Residual hydrocarbons demonstrate that

there is a working petroleum system in the Ruvuma basin although the oil appears to have

leaked beyond the cap rock overlaying the reservoir. The priority therefore is to find a

structure with an effective trapping mechanism.

Likonde-1 provides a wealth of new data and Tullow is undertaking detailed technical work

ahead of selection of the next drilling location. Importantly, recent well data can now be

integrated for the first time with existing seismic lines. We understand that evaluation work is

well advanced and that, although the next drilling location is to be confirmed following a

recent joint venture meeting in South Africa, a follow-up well is currently scheduled for the

fourth quarter of 2011 at an estimated cost of US$14m (100%).

The Ruvuma PSA originally required drilling to commence by October 2009, although

extensions were subsequently granted to give the partners additional flexibility. Two

commitment wells still form part of the current exploration period; this will expire in late 2011

and, with the second well now scheduled for spudding at around this time, it is critical that

the partners manage any slippage to ensure the continued support of the Tanzanian

authorities. We think that it should be possible to obtain further extensions if necessary,

given the JVs planned investment and strong working relationship with the local ministry.

Likonde-1 targeted multiple

reservoirs

Hydrocarbon shows and potential

reservoir thickness provide

encouragement

Evidence of a working petroleum

system

Follow-up well scheduled for late

2011

Strong relationship with authorities

has provided flexibility


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6

Read-across from Anadarko and Cove

The Ruvuma PSA remains a high-risk, high-reward exploration opportunity although the

wider Ruvuma basin has been the subject of intense industry interest, particularly offshore.

ExxonMobil and BG (BG, no recommendation at 1254p) have separately farmed into

offshore blocks on the Tanzanian side whilst Anadarko is undertaking a major drilling

programme over the border in Mozambique. Anadarkos partner Cove recently raised

110m via a placing, primarily to fund its activities offshore Mozambique.

Discoveries to date on the East African margin have previously been limited to gas,

including Anadarkos Windjammer discovery earlier this year. The Windjammer exploration

wildcat was the first of a continuous six well offshore programme, with 555 feet of net gas

pay reported in March 2010. This was followed by the Collier well, which was suspendedabove the predicted reservoir objective due to operational problems, and Ironclad, which

encountered 125 feet of net oil and gas pay (albeit with poor reservoir quality). A fourth well,

Barquentine, was recently drilled and declared a discovery, encountering (like Windjammer)

substantial gas pay with excellent reservoir quality. The drill ship has since moved off

location and commenced drilling of the penultimate well, Lagosta-1.

Cove Energy has stated that, with the Windjammer/Barquentine discoveries, it has found a

multi-TCF gas resource. However, we think that Ironclad brings a particularly important

read-across to Aminex, as it provides the first documented occurrence of liquid

hydrocarbons in deepwater East Africa. In addition, it proves that there are working

petroleum systems extending across the basin, north to south, in Mozambican waters.

The read-across from the basin onshoreMozambique is perhaps less compelling although,

to be fair, just one well has been drilled in recent years (Mecupa-1 by Anadarko in late

2009). The Mecupa-1 well encountered good reservoir sands with hydrocarbon shows at

various intervals, but was not a commercial discovery and consequently plugged and

abandoned. With the Phase 1 exploration commitment now fulfilled, a technical evaluation is

underway to help formulate a Phase 2 work programme by January 2011.

Analysis of seismic data had already resulted in a number of onshore leads being identified

by Anadarko, including oil and gas plays. Although Andarkos exploration programme is gas-

focused, mean prospective resources in the Tertiary oil plays of 104mmboe seem consistent

with volumetric estimates on the Tanzanian side. Oil seeps have also been identified

onshore while, over the border in Tanzania, the wells at the Mnazi Bay gas field have

reportedly also produced small quantities of oil with several possible source rocks identified.

With oil encountered at Ironclad, and evidence of residual hydrocarbons at Likonde-1, we

are enthusiastic about the potential here.

Aminexs interest in the Ruvuma project currently accounts for just 2p per share in our risked

NAV calculation, reflecting the aggressive 10% risk factor we have applied. However, this

translates into almost 25p per share on an unrisked basis, indicating that commercial

success would be a real company-maker.

Basin has been subject of intense

industry interest

Anadarko and Cove have enjoyed

high rates of drilling success

Ironclad well provides documented

evidence of liquid hydrocarbons

Anadarko has drilled just one

recent well in the onshore portion

Potential for oil has been

established

Significant unrisked potential for

Aminex


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7

Nyuni drilling ahead of first gas in 2012

Also known as Kiliwani North, the Aminex-operated Nyuni appraisal area was carved out of

the existing Nyuni exploration licence (Aminex 50%) following drilling of the KN-1 well on

Songo-Songo Island. This was Aminexs third Tanzanian well and declared a commercial

discovery, testing at a flow rate of 40mmcfd (6,900boepd) in June 2008. Kiliwani North is

adjacent to the producing Songo-Songo gas field in an area of shallow reefs and islands,

with drilling carried out using small islands as drilling pads. KN-1 intersected a 60m gross

gas column and, following testing, was completed and suspended for future production.

A new 2-D seismic survey has since been completed over an area on and around Songo-

Songo Island, acquiring additional data to determine the areal extent of the field. Following

processing and interpretation, Isis Petroleum Consultants estimates contingent resources of45bcf at Kiliwani North, with 1.5tcf of additional potential across the wider Nyuni block.

Expansion of the gas treatment plant required to bring Kiliwani North on-stream has been

held up for the past two years due to a dispute between the Tanzanian regulator and

pipeline operator Songas. However, Aminex reports that these issues have now been

resolved, with detailed engineering plans submitted for final approval. Although the final

timetable is to be confirmed by Songas, Aminex estimates that first gas will be delivered into

the pipeline from Kiliwani North in the first half of 2012, at an initial flow rate of 20mmcfd.

Timing is perhaps still subject to some uncertainty, but visibility has improved following

submission of the field development plan for government approval. We like Kiliwani North

because of its simplicity as a single well development and proximity to existing infrastructure

on Songo-Songo Island. The project is 2.5km overland from the existing Songas treatment

facility, with a common user pipeline taking gas to shore and onwards to Dar es Salaam.

Gas from successful step-out wells could be readily tied into the existing facilities, and KN-1

should make a material contribution once on-stream. Ahead of this, we estimate that

Aminexs share of the plant expansion will cost a modest $1.8m in 2011.

Fig 3: Nyuni contingent and prospective resources

Major Structural Prospects PMean unrisked GIIP

Neocomian Aptian/ Albian TotalProspect

Gas(bcf)

Gas(mmboe)

Gas(bcf)

Gas(mmboe)

Gas(bcf)

Gas(mmboe)

Kiliwani N. 45 8 0 0 45 8

Nyuni Contingent 0 0 233 40 233 40

Nyuni Prospective 1,309 226 0 0 1,309 226

Okuza 640 110 222 38 862 149

Fanjove N. 254 44 40 7 294 51

Fanjove S. 62 11 21 4 83 14

Total 2,310 398 516 89 2,826 487

Source: Isis Petroleum Consultants

Aminexs third Tanzanian well

(KN-1) was a commercial discovery

1.6tcf of resource potential

identified at Nyuni

Detailed engineering plans finally

submitted with first gas expected in

2012

Proximity to existing infrastructure

is a real bonus


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8

In addition to the potential for commercial production from Kiliwani North in 2012, the

technical work undertaken by Isis reinforces previous evaluations of reserve upside in thewider Nyuni block. The Nyuni-1 well drilled by Aminex in 2003-4 encountered gas shows

during drilling, but was not tested due to mechanical problems. However, downhole logging

data has given Isis sufficient confidence to attribute a 233bcf contingent resource to Nyuni at

the Aptian/Albian level, which lies above the Neocomian reservoir successfully tested by

KN-1. The Neocomian interval still represents the primary reservoir objective, accounting for

over 80% of total contingent and prospective resources. However, the presence of gas in

the Aptian/Albian provides additional potential upside.

Nyuni-1 was drilled on Nyuni Island, which lies approximately 16km to the north-east of the

pipeline terminal on Songo-Songo Island. A follow-up exploration well (Nyuni-2) is now

planned for the first quarter of 2011, giving Aminex its first high-impact well for next year.

This will target the Nyuni East structure, using the same drilling pad as the previous well, at

an estimated cost of $15m (100%).

Technically, Aminex is obligated to drill a further well on the Nyuni block in 2011, with Nyuni

West being a possible target. However, the Tanzanian authorities have indicated their

willingness to negotiate a completely new PSA ahead of further drilling, and we expect the

second well to fall into this. History suggests that Aminex will be able to agree a new

timetable for the second well, and we therefore assume just one new well on Nyuni during

our forecast period.

Aptian/Albian levels provide

additional potential

Nyuni-2 will give Aminex its first

high impact well for next year


9/20


9

US production underpins valuation

Tanzania may provide lots of excitement, but we believe that the presence of a portfolio of

producing oil and gas projects in the US is an underappreciated part of the Aminex

investment story. In addition to the US providing revenues to help cover the companys

central costs, our valuation work indicates that existing 2P reserves underpin value in their

own right, giving core NAV of 12p per share and effectively throwing in Tanzania for free.

Aminex has four projects onshore US, although Alta Loma in Texas and Shoats Creek in

Louisiana are, in our opinion, the most material of these. Alta Loma, which is operated by El

Paso Corporation and where Aminex has a 37.5% working interest, contributed the lions

share of production in FY2009, with 80,000boe produced from the field (net to Aminex).

However, production from the existing Sunny Ernst-2 well (drilled in 2008) has since fallendue to natural declines in the Upper Andrau formation, as illustrated by the interim results

and our forecasts, which see under 40,000boe produced from Alta Loma in the current

financial year.

This production decline adversely affected first half revenues, which fell by a third year-on-

year to $2.6m, and the operator is planning to recomplete Sunny Ernst-2 to bring a new

interval (the S sand) on-stream, which should get production back up to historical rates

(initially over 1,300boepd gross). The SE-2 recompletion is scheduled for the second quarter

of next year, at an estimated cost to Aminex of around $400,000. A relatively small

investment should therefore make a material difference to production from this field in the

short term, with an additional well (Sunny Ernst-3) anticipated in 2012.

Also yet to be reflected in Aminexs reported numbers is its success at its second key project

in the US, Shoats Creek in Louisiana, where the company is operator with a 100% working

interest. This was a mature field, with one shallow well producing just 20bopd. However, the

OM-1 appraisal well drilled in the first half of this year changed this position, having

successfully tested at 504bopd from one zone in the Cockfield Sands, with stabilised

production rates of 120-150bopd expected going forward.

Aminex also entered into a unitisation agreement with its neighbour at Shoats Creek, El

Paso Corporation, whereby the partners would drill on a 50:50 basis, targeting the deeper

Wilcox play in an area spanning the acreage of both companies. The first exploration well,

OM10-1, has been a resounding success, relying on high quality 3-D seismic and recently

testing at 500boepd from five zones. Although production testing is continuing, commercial

oil and gas production could exceed these levels, with two more development wells planned

for next year. Taking into account recovering well productivity at Alta Loma, and the

contribution of new wells at Shoats Creek, we are forecasting a 165% year-on-year uplift in

total attributable production to 251,000boe in FY2011.

US portfolio generates revenues

and underpins valuation

Declines at Alta Loma have

impacted production this year

SE-2 recompletion should ensure

recovery in well productivity

Two successful wells drilled at

Shoats Creek

Strong increase in FY2011

production forecast


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10

Fig 4: Aminex US reserves at 31 December 2009

Asset Working

Interest (%)

Reserves

Category

Net Oil

(mmbbl)

Net Gas

(bcf)

Net Oil

Equivalent

(mmboe)

NPV10 (net)

($m)

1P 0.1 3.9 0.8 22.4Alta Loma 37.5

2P 0.2 4.8 1.0 26.5

1P 0.0 0.2 0.1 1.0Shoats

Creek100

2P 1.7 16.7 4.5 95.4

1P 0.0 1.3 0.2 3.5S. Weslaco 25

2P 0.0 1.6 0.3 4.0

Somerset 100 0 0.0 0.0 0.0 0.01P 0.2 5.4 1.1 26.8

Totals2P 1.9 22.5 5.8 125.9

Source: Independent reporting engineers

Other projects

In addition to Amossco, the companys in-house services division which mainly procures

equipment for Aminex-operated joint ventures, Aminex has three other projects, none of

which has a material influence on our forecasts or valuation at this stage.

The West Songo-Songo exploration project, which is operated by Key Petroleum (Aminex

50%), is in Tanzania and located to the west of the Songo-Songo gas field and Aminexs

Nyuni project. Key has been planning to reprocess existing seismic data ahead of fulfilling a

single well commitment next year although, given the limited progress to date, our 2011

forecasts do not assume any drilling here.

In Egypt, Aminex has a 10% carried interest in the WEEM-2 project where three wells have

been drilled, with one recovering oil to surface. Further drilling is planned following a recent

decision to move into the next phase of the Production Sharing Contract. Aminex is fully

carried through to commercial production, so it does not have any current financial

exposure.

Finally, in North Korea, a new Production Sharing Agreement was signed in 2010, covering

a large offshore area in the Korean East Sea. Singapore-based Chosun Energy has

acquired a 50% interest in Aminexs North Korean subsidiary for a $500,000 consideration

and $500,000 carry in the first exploration phase. This is clearly a high-risk play but, again,

we see no material financial impact for the foreseeable future.

Amossco provides in-house

procurement services

Limited progress at West Songo-

Songo

Aminex has a free carry in Egypt

North Korea has no material impact

for the time being


11/20


11

Forecasts

Our profit & loss forecasts for Aminex use a $75/bbl oil price deck in the current financial

year, rising to $80/bbl in 2011, with a US gas price of $4.50/mcf and $5.00/mcf in 2010 and

2011, respectively. Although we see net attributable production falling 25% to 94.3mboe in

the current financial year, we see a 165% improvement to 250.5mboe in 2011, with a full

years contribution from two new wells at Shoats Creek and a second half recovery at Alta

Loma. Our forecasts show unit production costs falling back to the $22.50/boe level in 2011,

when we expect higher production, better commodity pricing, economies of scale and a

small contribution from Amossco to result in FY2011 PBT of $2.2m (on revenues of

$17.4m), translating into diluted EPS of 0.5c (compared with a loss this year).

Fig 5: Aminex net annual production, 2008-2011F

90

12694

251

0

50

100

150

200

250

300

2008A 2009A 2010E 2011E

MBOE


Although we expect operating cash flow of $5.3m in 2011, we also are also forecasting

heavy capital spend totalling $31.5m in the 18 months from June 2010 to December 2011.

This is expected to cover items including two more deep wells at Shoats Creek, pipeline

facilities at Kiliwani North, drilling of Nyuni-2 and drilling of Ruvuma-2. Although our

forecasts imply the need for additional funding to get Aminex through its planned work

programme, the company has several potential ways to address this, including a farm-out at

Nyuni and reserves-based lending facility in the US. In the meantime, we have attempted to

account for potential future dilution by applying a 30% discount to our Risked NAV

calculation, which still implies a substantial uplift from the current share price.

We expect to see higher

production, better pricing and lower

per barrel costs coming through

next year

Additional funding required

although Aminex has several

possible solutions


12/20


12

Fig 6: Aminex profit & loss ($'000)

Yr-end December 2008A 2009A 2010F 2011F

Revenues

US production 5,539 4,247 4,883 14,635

Oil services 4,638 3,601 2,500 2,750

Total revenues 10,177 7,848 7,383 17,385

Operating costs

US production (3,885) (4,428) (4,292) (8,894)

Oil services (4,427) (3,431) (2,425) (2,668)

Central costs (3,466) (2,754) (4,000) (3,500)

Exploration (8,107) - - -

Total operating costs (19,885) (10,613) (10,717) (15,061)

Operating profit

US production 1,654 (181) 591 5,741

Oil services 211 170 75 83

Central costs (3,466) (2,754) (4,000) (3,500)

Exploration (8,107) - - -

Total operating profit (9,708) (2,765) (3,334) 2,324

Profit on disposal - - 238 -

Net interest 46 (130) (150) (150)

Profit before tax (9,662) (2,895) (3,246) 2,174

Tax - - - -Profit after tax (9,662) (2,895) (3,246) 2,174

Average shares (000) 242,118 315,176 425,393 454,007

EPS (cents) (3.99) (0.92) (0.76) 0.48

Adjusted EPS (cents) (0.64) (0.92) (0.82) 0.48

Adjusted diluted EPS (cents) (0.64) (0.92) (0.82) 0.45



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13

Fig 7: Aminex cash flow ($'000)


Net profit (9,662) (2,895) (3,246) 2,174

DD&A 758 1,590 1,226 3,257

Depreciation of other assets 79 50 50 50

Asset write-down 8,107 0 0 0

Other provisions 11 0 0 0

FX (gains)/losses (924) 215 0 0

Net interest (46) 130 150 150

Profits on disposal (26) 20 (238) 0

Impairment provisions 328 0 0 0

Share based payments 473 191 925 250

Working capital movement 777 (968) 750 (500)

Decommissioning costs 0 0 (100) (100)

Interest paid (17) (13) (10) (10)

Operating cash flow (142) (1,680) (493) 5,270

Capital expenditure (4,292) (1,360) (3,603) (7,150)

Exploration expenditure (10,748) (5,918) (9,731) (18,500)

Payment of back costs 0 1,250 0 0

Proceeds from disposal 428 91 0 0

Interest received 226 7 4 0

Other 0 0 0 0Free cash flow (14,528) (7,610) (13,823) (20,380)

Share issues 41 15,250 4,475 0

Net cash flow (14,487) 7,640 (9,348) (20,380)

Opening net cash 18,401 3,914 11,554 2,206

Closing net cash 3,914 11,554 2,206 (18,174)



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14

Fig 8: Aminex production and cost data


Total oil production (000bbl) 36.0 42.0 49.5 144.5

Total gas production (000mcf) 314 489 260 615

Total oil & gas production (000boe) 90.1 126.3 94.3 250.5

Average oil price ($/bbl) 86.79 55.25 75.00 80.00

Average gas price ($/mcf) 7.75 3.91 4.50 5.00

Oil revenues ($000) 3,124 2,321 3,713 11,560

Gas revenues ($000) 2,434 1,912 1,170 3,075

Total revenues ($000) 5,539 4,247 4,883 14,635

Production costs/boe ($) (34.69) (22.47) (32.50) (22.50)

Production costs ($000) (3,127) (2,838) (3,066) (5,637)

Cash operating profit ($000) 2,412 1,409 1,817 8,998

DD&A/boe ($) (8.41) (12.59) (13.00) (13.00)

DD&A ($000) (758) (1,590) (1,226) (3,257)

Total operating costs (US production) ($000) (3,885) (4,428) (4,292) (8,894)

Operating profit (US production) ($000) 1,654 (181) 591 5,741



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15

Fig 9: Aminex asset summary

Asset Country Status Operator Aminex

interest

Gross

production

Next steps

Alta Loma US Producing from Sunny Ernst-2

well

El Paso 37.5% Circa

400boepd

Sunny Ernst-2 recompletion

Shoats

Creek

US OM-1 and OM10-1 on-stream Aminex 50-100% Circa

650boepd

Development drilling (2 deep

wells)

South

Weslaco

US Producing from 5 wells Kaler Energy 25% 1.9mmcfd GU-40 development well

Somerset US Production from multiple stripper

wells

Aminex 100% 100bopd Marginal production; under

ongoing review

Kiliwani

North

Tanzania Field development plan submitted

following KN-1 discovery

Aminex 50% Tested at

40mmcfd

Commercial production in

2012

Nyuni Tanzania Exploration with existing seismic

and well data

Aminex 50% None Nyuni-2 exploration well

Ruvuma Tanzania Exploration with existing seismic

and well data

Tullow 37.5% None Ruvuma-2 exploration well

W. Songo-

Songo

Tanzania Exploration licence awarded in

2008

Key Petroleum 50% None Seismic reprocessing planned

WEEM-2 Egypt Exploration; three wells drilled Aminex

Petroleum Egypt

10% (carried) None Further drilling planned

North

Korea

N. Korea Exploration; new PSC signed Korex 50% None Seismic

reprocessing/reinterpretation



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16

Fig 10: Aminex indicative well programme

2011 2012Q1 Q2 Q3 Q4

Tanzania

Nyuni

Nyuni-2 exploration well

Kiliwani North on-stream

Follow-up drilling

Ruvuma

Ruvuma-2 exploration well

United States

Shoats Creek

1st Wilcox development well

2nd Wilcox development well

Alta LomaSE-2 recompletion

SE-3 development well



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17

Common abbreviations

BBL Barrels

BCF Billion Cubic Feet

BOE Barrels of Oil Equivalent

BOPD Barrels of Oil Per Day

GIIP Gas Initially In Place

MBOE Thousand Barrels of Oil Equivalent

MCF Thousand Cubic Feet

MMBBL Million Barrels

MMBOE Million Barrels of Oil Equivalent

MMCFD Million Cubic Feet Per Day

PSA Production Sharing Agreement

TCF Trillion Cubic Feet


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18

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19

CONFLICTS

^ Independent Research:This is independent research. The analyst who has prepared this research is not aware of Shore Capital Stockbrokers and/or another member ofthe Shore Capital Group having a relationship with the company covered in this research report. Accordingly this research has been prepared onthe basis that Shore Capital does not have a conflict of interest and this report may be viewed as being independent.

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accordance with legal requirements designed to promote the independence of investment research and is not subject to any prohibition on thedealing ahead of the dissemination of investment research.

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