Aminex PLC ("Aminex" or "the Group" or "the Company") announces its unaudited half-yearly report for the six months ended 30 June 2022.
REPORTING PERIOD HIGHLIGHTS
· Successful placing in April 2022 raised US$4.2 million (£3.3 million) before expenses, to fund the Company to expected receipt of revenue projected for end of 2024
· Substantial progress on all aspects of Ruvuma operations, including 3D seismic acquisition, Chikumbi-1 well planning and commercial negotiations with Government of Tanzania
· Agreement reached in April 2022 with subsidiary of Orca Energy Group Inc, PanAfrican Energy Tanzania ("PAET"), for PAET to acquire approximately 12.5km² of high-resolution 3D seismic data over the Kiliwani North Development Licence at no cost to Aminex and its partners
· Loss for the period of US$1.27 million (30 June 2021: loss of US$1.59 million), a decrease of 20% on the same period last year
POST PERIOD END
· Ruvuma 3D seismic full acquisition of data expected to be completed by 8 October 2022, with processing and interpretation continuing into early 2023
· Spudding of Chikumbi-1 remains on schedule for November 2022
· KNDL 3D seismic acquisition programme expected to be completed before year end
Charles Santos, Executive Chairman of Aminex commented:
"The fully subscribed placement in April was an extremely important event, ensuring a solid financial foundation for the Company through to expected cash flows from Ruvuma. We are delighted that all activities on Ruvuma, operational and commercial, continue to progress under the efforts of the operator, APT. Finally, we look forward to completion of the 3D seismic acquisition programme by PAET over the core area of the KNDL, which will provide valuable data to the Company."
The Company reports a loss for the period of US$1.27 million (30 June 2021: US$1.59 million). Further information is provided in the Financial Review.
It is clear from numerous government statements and actions that Tanzania is seeking to expand its energy production to achieve further industrialisation. This national effort has seen the planning and construction of multiple facilities along existing gas delivery infrastructure either directly connected to or in proximity to our Tanzanian assets, which are expected to increase local gas demand significantly soon. In addition, it has been reported that Tanzania is exploring the possibility of supplying gas to its neighbours in the East African region. These developments bode well for the future commercialisation of our assets.
Our non-operating corporate strategy is essentially a de-risking strategy that enables the Company to take advantage of the growing Tanzania demand for natural gas while avoiding the potential risks and pitfalls that might undermine a Company of our size. The core of this de-risking strategy is:
1. The Ruvuma Farm-out
2. Significant cost-cutting
3. The payment of money owed to the Company (the Kiliwani receivables)
4. Funds from our recent equity placing to cover our running costs (before one-off and exceptional items) until receipt of Ruvuma revenue, planned for the end of 2024
We have successfully implemented this strategy, making Aminex a stronger company with a low-cost base, an entirely carried position on its most important asset, Ruvuma, and sufficient funding to take the Company through until cash flow.
It is essential to remind shareholders that the Farm-Out completed with ARA Petroleum Tanzania Limited ("APT") in October 2020 potentially carries the Company to material levels of production and revenue without the need to return to shareholders for any additional funding for the development of the Ntorya field. The Company holds a 25% interest in the Ruvuma PSA with a US$35 million carry of its share of costs. The carry, equivalent to US$140 million of gross field expenditure, is expected to see the Company through to potentially significant volumes of gas production with commensurate revenues. The Farm-Out represents the culmination of many successful years of exploration and evaluation work by Aminex, which recognised the underlying value and opportunities in the Ruvuma Basin. Multiple parties, including both commercial and Tanzanian government entities, have recently recognised this value in the effort to acquire Scirocco's 25% interest in Ruvuma. Our non-operating position in Ruvuma is the cornerstone of the Company's de-risking strategy.
Substantial progress has been made on Ruvuma: The 3D seismic survey is now 80% complete, with the drilling and testing of Chikumbi-1 and the integration of the seismic and well results to formulate a Field Development Plan ("FDP") for the Ntorya gas-field expected in the coming months. The 3D seismic acquisition effort is projected to be completed by the end of the first week of October 2022 and s pudding of Chikumbi-1 remains on schedule for November 2022 . The current operations represent a significant step towards monetising this extensive gas resource through production into existing infrastructure and transportation to established power and industrial markets in Tanzania. Since acquiring operatorship, APT has demonstrated focused determination and commitment to moving the project forward.
Kiliwani North and Kiliwani South - Kiliwani North Development Licence ("KNDL")
As reported earlier, Orca Energy Group Inc., via its subsidiary PanAfrican Energy Tanzania ("PAET"), will acquire some 12.5 km2 of new 3D seismic data over part of the KNDL that borders the Songo Songo field to the west as part of their planned full-field survey. PAET has awarded its seismic contract and the 3D survey is expected to be completed by the end of this year, at no cost to the Company. The incursion into the KNDL should provide valuable data to improve structural mapping and refine the prospectivity of the Kiliwani North and South structures, allowing the Company to determine more effectively potential new drill and infill drill opportunities.
The Company will pursue farm-in partners to fund and operate the asset once our assessment of the 3D survey is complete. Notwithstanding the delays caused by late payment for gas, the outstanding commercial terms to be agreed upon, and the move to a non-operator strategy, the Kiliwani North and Kiliwani South assets remain fully impaired.
Nyuni Area PSA
As mentioned in our Annual Report for 2021, although we believe the Nyuni Area acreage offers upside exploration potential to complement the development projects at Ntorya and Kiliwani North, the significant risks of exploration and the lack of a farm-out partner give us little alternative but to return the licence to the Ministry. We have recently commenced this process with the relevant authorities in Tanzania.
Wherever possible, we will continue to cut costs and reduce corporate overheads. We have successfully reduced the Company's gross G&A costs (before one-off costs and exceptional items) by 75% from 2018 levels. Through these initiatives, the Company has established an appropriate structure of capabilities and competencies that match the current business requirements with a more flexible approach that de-risks our business and can help create or attract strategic opportunities.
Outlook and Funding
On 1 April 2022, we announced the fully subscribed share placement raising approximately $4.2 million (£3.3 million), representing a significant development for the Company. The funding is an essential pillar in our effort to de-risk and anchor value. The funds ensure a solid financial foundation for the Company through to the expected commencement of cash flow receipts from sales of Ruvuma gas.
Revenue Producing Operations
Revenues from continuing operations amounted to US$0.03 million (30 June 2021: US$0.09 million). Group revenues during the first six months of 2022 are derived from the provision of technical and administrative services to joint venture operations.
Cost of sales was US$0.13 million (30 June 2021: US$0.31 million). The cost of sales for Kiliwani North operations amounted to US$0.09 million (30 June 2021: US$0.20 million) and included general licence related maintenance costs. There was no depletion charge for Kiliwani North as the period saw no production (30 June 2021: US$ nil). The balance of the cost of sales amounting to US$0.04 million (30 June 2021: US$0.11 million) related to the oilfield services operations and minor non-operated costs related to the Group's interest in the Ruvuma PSA. Accordingly, there was a gross loss of US$0.10 million for the period compared with a gross loss of US$0.22 million for the comparative period.
Group administrative expenses, excluding depreciation and net of costs capitalised against projects, were US$0.83 million (30 June 2021: US$0.91 million), a decrease of US$0.08 million. The decrease in expenses during the period reflects the cost saving initiatives implemented by the Company, which commenced in 2019, included savings in respect of employment costs, advisors' fees and office related costs. Management maintains strict expenditure controls and continues to seek cost saving solutions and efficiencies across the Group. As the Company forecasted in 2022, these cost-saving efforts have reduced gross general and administrative expenditure (before one-off costs and exceptional items) to less than US$1.5 million per annum, representing a 75% reduction from 2018 levels. Depreciation charged in the period was US$0.02 million (30 June 2021: US$0.11 million) and related predominantly to depreciation of accounting software and hardware.
Following the settlement with TPDC of past gas sales receivables from Kiliwani North Development Licence the Group does not expect a credit loss on its trade receivables at the end of the period (30 June 2021: US$0.09 million).
The Group recognised an impairment during the six-month period against exploration and evaluation assets. The impairment recognised against exploration and evaluation assets of US$0.22 million (30 June 2021: US$0.30 million) is related to expenditure incurred on Kiliwani South Area of US$0.02 million (30 June 2021: US$ nil) and US$0.20 million (30 June 2021: US$ 0.30 million) relates to expenditure incurred on the Nyuni Area PSA predominantly related to own costs for geological, geophysical and administrative work and licence maintenance costs, along with training and licence fees. All expenditure on the Nyuni Licence Area continues to be impaired immediately to the income statement upon recognition following the full impairment of the Nyuni Area Licence in 2018. The Group's resulting net loss from operating activities was US$1.17 million (30 June 2021: loss of US$1.54 million).
Finance costs amounted to US$0.10 million (30 June 2021: US$0.05 million), comprising US$0.05 million (30 June 2021: US$0.04 million) for the decommissioning interest charge and finance costs of US$0.03 million related to foreign exchange losses on monetary assets (30 June 2021: gain of US$0.01 million). The Group incurred interest expense in the six-month period of US$0.02 million (30 June 2021: US$ nil) as the Group became debt-free on the completion of the issue of new ordinary shares in April 2022 and the subsequent settlement of the $0.45 million carry advance loan facility from ARA. In the comparative six-month period the Group also recognised a US$ nil charge for the finance charges on finance leases (30 June 2021 US$0.003).
The Group's net loss for the period amounted to US$1.27 million (30 June 2021: loss of US$1.59 million).
The Group's investment in exploration and evaluation assets increased from US$38.13 million at 31 December 2021 to US$38.28 million at 30 June 2022. The increase of US$0.15 million reflected exploration and evaluation expenditure on the Kiliwani South CGU and additions to the Ruvuma PSA CGU offset by the impairment of US$0.02 on the Kiliwani South CGU as this asset has continued to be fully impaired. In accordance with the Group's accounting policy, the Group will not record subsequent expenditure for its share of costs that are carried by APT in relation to the Ruvuma PSA asset. The Group is carried for US$35.0 million of development expenditure on the Ruvuma PSA, with expenditure in the period related to the operator establishing operations in Tanzania, remapping of existing seismic and progressing the acquisition of 3D seismic.
The carrying value of property, plant and equipment has decreased from US$0.04 million at 31 December 2021 to US$0.01 million at 30 June 2022. The decrease relates predominantly to the depreciation of right of use assets recognised in property, plant and equipment and the disposal of fixed assets due to the termination of the London office lease in January 2022. Current assets amounted to US$7.83 million (31 December 2021: US$6.05 million) with trade and other receivables of US$1.44 million (31 December 2021: US$1.36 million), which as operator includes joint venture parties' interests in gas revenues, and cash and cash equivalents of US$6.39 million (31 December 2021: US$4.68 million). The increase in current assets of US$1.78 million predominantly related to the placing of new ordinary shares partially offset by the payment of the carry advance loan facility with ARA Petroleum LLC and other suppliers.
Current liabilities amounted to US$9.11 million compared with US$9.85 million at 31 December 2021. This balance included amounts payable to the TPDC and joint venture partners for their profit shares from invoiced gas sales, along with related VAT and excise tax payable on the gas receivables invoices. The decrease in current liabilities predominantly relates to expenditures on operated Tanzania gas assets, repayment of the carry advance loan facility with ARA Petroleum LLC and legal costs incurred during the period. Non-current liabilities amounting to US$1.67 million (31 December 2021: US$1.62 million) include the non-current decommissioning provision which increased during the period by US$0.05 million from US$1.62 million at 31 December 2021 to US$1.67 million, the increase relating to the unwind of the discount charge during the period.
Total equity has increased by US$2.59 million between 31 December 2021 and 30 June 2022 to US$35.34 million (31 December 2021: US$32.75 million). A net increase of US$ 3.95 million to the share capital, US$0.01 million to the share option reserve, an increase in the foreign currency translation reserve of US$0.11 million and the net movement of US$1.27 million in retained earnings arising on the loss of US$1.27 million for the period.
Net cash outflows from operating activities were US$1.38 million during the period (30 June 2021: cash inflow of US$0.38 million). This was predominantly in relation to the receipt from TPDC of past gas sales net of certain amounts due to TPDC. This resulted in a decrease in debtors of US$1.07 million and a decrease in creditors of US$0.80 million as well as the settlement of third-party costs on the Group's operated assets. Net cash outflows from investing activities amounted to US$0.37 million (30 June 2021: cash outflow US$0.19 million) related to expenditure on the Group's exploration and evaluation assets, relating mostly to payments for general licence maintenance of the Nyuni Area and Kiliwani South gas assets. Net cash inflows from financing activities were US$3.48 million (30 June 2021: cash outflow US$0.14 million) due to proceeds from the issue of new shares offset by the repayment of ARA facility loan of $0.45 million and interest of US$0.02 million. Net cash and cash equivalents for the six months ended 30 June 2022 therefore increased by US$1.74 million compared with an increase of US$0.05 million for the comparative half-year period. The balance of net cash and cash equivalents at 30 June 2022 was US$6.39 million (30 June 2021: US$0.49 million).
Related party transactions
There have been no material changes in the related party transactions affecting the financial position or the performance of the Group in the period since publication of the 2021 Annual Report other than those disclosed in Note 15 to the condensed consolidated financial statements.
The financial statements of the Group are prepared on a going concern basis.
The Directors have given careful consideration to the Group's ability to continue as a going concern through review of cash flow forecasts prepared by management for the period to 30 September 2023, review of the key assumptions on which these forecasts are based and the sensitivity analysis. The forecasts reflect the Group's best estimate of expenditures and receipts for the period. The forecasts are regularly updated to enable continuous monitoring and management of the Group's cash flow and liquidity risk. The forecasts indicate that with the equity placement announced on 1 April 2022 for approximately US$4.2 million, settlement of the ARA Loan plus accrued interest of approximately US$470,000 in aggregate and subject to the principal assumptions noted below, the Group and Company would have adequate resources to continue as a going concern for the foreseeable future, that is a period of not less than 12 months from the date of approval of the consolidated financial statements.
As part of its analysis in making the going concern assumption, the Directors have considered the range of risks facing the business on an ongoing basis, as set out in the risk section of the 2021 Annual Report that remain applicable to the Group. The principal assumptions made in relation to the going concern assessment relate to the capital commitments on its operated assets in Tanzania, the reservation of rights made by the TPDC in respect of certain claims that the Directors consider are without merit and the ongoing objections to the tax assessments in Tanzania (see Note 14).
As disclosed in Note 14, the Group received tax assessments from the TRA of (a) US$2.2 million in relation to a tax audit covering the period from 2013 to 2015; (b) US$1.6 million in relation to a tax audit covering the period from 2016 to 2018; and (c) US$3.3 million in relation to a corporate income tax audit covering the period from 2016 to 2018, all of which are excluded from the cash forecast as any cash outflow during the going concern period is considered unlikely based on legal advice and the timeframes for tax cases in Tanzania. Additionally, development of the Group's other assets in Tanzania is excluded from the cash forecast and consequently any capital expenditure in the period is unlikely to arise. However, a risk exists that the Group loses its objections to the tax assessments or is unable to renegotiate or defer commitments on its operated Licence interests during the period. Additional funding would be required to meet these potential liabilities. There remains significant uncertainty as regards the ability of Aminex to raise funds, if required. This may result in the Company having to raise funds at whatever terms are available at the time.
These circumstances indicate that a material uncertainty exists that may cast significant doubt on the Group's ability to continue to apply the going concern basis of accounting. As a result of their review, and despite the aforementioned material uncertainty, the Directors have confidence in the Group's forecasts and have a reasonable expectation that the Group will continue in operational existence for the going concern assessment period and have therefore used the going concern basis in preparing these consolidated financial statements.
Principal Risks and Uncertainties
The Group's strategic objectives for its principal activities, being the production and development of and the exploration for oil and gas reserves, are only achievable if certain risks are managed effectively. The Board has overall accountability for determining the type and level of risk it is prepared to take. The Board is assisted by the Audit and Risk Committee, which oversees the process for review and monitoring of risks, and the implementation of mitigation actions, by management. The Audit and Risk Committee reviews management's findings regularly and reports to the Board accordingly. Assessment of risks is made under four categories: Strategic Risks, Operational Risks, Compliance Risks and Financial Risks.
Aminex has reviewed and assessed the principal risks and uncertainties at 30 June 2022 and concluded that the principal risks identified at 31 December 2021 and disclosed on pages 24 to 26 of the 2021 Annual Report are still appropriate. The following are considered to be the key principal risks facing the Group over the next six months although there are other risks which may impact the Group's performance:
· Ability to meet licence work commitments
· Ability to secure other financing for Group operations
· Adverse and unexpected tax assessments in Tanzania
· Political and fiscal uncertainties
· Lack of exploration, appraisal and development drilling success
Forward Looking Statements
Certain statements made in this half-yearly financial report are forward-looking statements. Such statements are based on current expectations and are subject to a number of risks and uncertainties that could cause actual events or results to differ materially from the expected future events or results referred to in these forward-looking statements.
Statement of Directors Responsibilities
In respect of the Half-Yearly Financial Report
Each of the Directors who held office at the date of this report, confirm their responsibility for preparing the half-yearly financial report in accordance with the Transparency (Directive 2004/109/EC) Regulations 2007 (as amended) and the Disclosure and IAS 34 Interim Financial Reporting, as adopted by the EU and to the best of each person's knowledge and belief:
· The condensed consolidated financial statements comprising the condensed consolidated income statement, the condensed consolidated statement of comprehensive income, the condensed consolidated balance sheet, the condensed consolidated statement of changes in equity, the condensed consolidated statement of cashflows and the related explanatory notes have been prepared in accordance with IAS 34 Financial Reporting as adopted by the EU.
· The Interim Management Report includes a fair review of the information required by:
(a) Regulation 8(2) of the Transparency (Directive 2004/109/EC) Regulations 2007, being an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed set of financial statements; and a description of the principal risks and uncertainties for the remaining six months of the year; and
(b) Regulation 8(3) of the Transparency (Directive 2004/109/EC) Regulations 2007, being related party transactions that have taken place in the first six months of the current financial year and that have materially affected the financial position or performance of the entity during that period; and any changes in the related party transactions described in the last annual report that could do so.