Aminex PLC ("Aminex" or "the Group" or "the Company") announces its unaudited half-yearly report for the six months ended 30 June 2024.
REPORTING PERIOD HIGHLIGHTS
· Signing of a gas sales agreement for the sale of Ntorya gas to the Tanzania Petroleum Development Corporation.
· Award of a 25-year development licence over the Ntorya gas discovery area.
· Commitment from the Government of Tanzania to complete the construction of the Ntorya to Madimba pipeline within six months.
· A significant resource upgrade over the Ntorya discovery and wider area.
· Loss for the period of US$1.35 million (30 June 2023: loss of US$0.96 million).
Charles Santos, Executive Chairman of Aminex commented:
"We are pleased with this year's progress on critical commercial aspects of the Ntorya project - the signing of the Gas Sales Agreement and the issuance of the Development Licence. We are excited about ARA Petroleum Tanzania Limited's 3D seismic survey results, which highlighted significant additional resources for the Ntorya discovery and wider area. We look forward to progress on operations through ARA Petroleum Tanzania Limited in the coming months. We are impressed with the Tanzanian Government's resolve to expedite the gas pipeline construction from Ntorya to the Madimba gas plant and its clear commitment to use its gas resources to improve the economic conditions of the Tanzanian people."
Aminex PLC's results for the six months ended 30 June 2024 are set out below.
The Company reports a loss for the period of US$1.35 million (30 June 2023: US$0.96 million). Further information is provided in the Financial Review.
During 2024, the following crucial events have occurred:
· The signing of a gas sales agreement for the sale of Ntorya gas to the Tanzania Petroleum Development Corporation (TPDC), securing a route to market for production from Ntorya.
· The issuance of the Ntorya 25-year Development Licence. The Development Licence is a significant milestone for our Company and for the United Republic of Tanzania, as it is the first such licence issued in more than 13 years, ushering in a new and more dynamic approach to gas production and energy investment in Tanzania.
· The Development Licence Handover Ceremony in Mtwara. This significant event marked the full and public commitment of the Tanzanian government to develop the Ntorya project as a key priority in its urgent effort to address its power shortages and bring the benefits of natural gas to the people of Tanzania.
· The clear and public commitment from the Office of the President and the Office of the Prime Minister to construct a gas pipeline spur from Ntorya to the Madimba gas processing plant in the coming six months.
Furthermore, Eclipse Investments LLC and Aminex signed a funding facility for US$3.00 million in April, ensuring Aminex has sufficient working capital available after 2024 and until the commencement of revenues from Ntorya gas sales.
Ruvuma PSA
In addition to the events mentioned above, I also wish to note the importance of the acquired, processed, and interpreted 338 km2 3D seismic in 2022 and 2023, which resulted in the identification of significant additional potential gas volumes within the licence area. The most likely gas initially in place (GIIP) potentially connected to the reservoir sandstones encountered in the Ntorya-1 (NT-1) and Ntorya-2 (NT-2) discovery wells is now estimated to be 3.45 trillion cubic feet (TCF). Furthermore, the 3D seismic dataset supports a substantial in-place unrisked resource potential of 16.38 TCF.
The Government of Tanzania's prioritisation of the Ntorya project means it has the potential to be developed within a timescale so that Ntorya gas can immediately service a fast-developing domestic market. Moreover, with the government's full support, the TPDC is empowered to move quickly to select a contractor to construct the gas pipeline spur to Madimba to meet the six-month timeline articulated by Tanzania's leadership.
Kiliwani North and Kiliwani South - Kiliwani North Development Licence (KNDL)
We have recently had positive discussions with the TPDC and other Tanzanian government authorities on how best to proceed to ensure investment and gas production from this block. These discussions have, among other things, focused on the importance of revenue generation from Ntorya/the Ruvuma PSA.
Nyuni Area PSA
We continue to have useful discussions with TPDC regarding the Nyuni Area PSA.
Financial Prudence and Funding
The Farm-Out of the Ruvuma PSA in 2020 carries the Company to potentially material levels of production and gas revenues without the need to return to shareholders for 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 gas production volumes with commensurate revenues.
Moreover, we appreciate the continued strong support from our cornerstone investor, Eclipse Investments LLC, which has agreed to provide a funding facility for US$3.00 million against the carry, ensuring Aminex has sufficient working capital available after 2024 and until the commencement of revenues from Ntorya gas sales.
We continue to operate with significantly reduced costs and corporate overheads established in recent years. Base running costs (which exclude non-cash and one-off items), before recharges, increased by 6.5% to US$0.85 million for the six month period to 30 June 2024, compared with US$0.80 million for the same period in 2023. Despite this rise, base running costs are 67% lower, on an annualised basis, than 2018 levels when cost cutting measures were introduced. The Company has maintained an appropriate structure of capabilities and competencies that match current requirements with a more flexible approach that de-risks our business and creates strategic opportunities.
Outlook
This year has been decisive for our Company. We have made significant progress in the Ntorya project, providing shareholders with several catalytic events. More of these value inflection points will come. This year's events have improved the Company's underlying value and demonstrated the Operator's capacity to run numerous critical negotiations and operational workstreams. Of further importance, the Government of Tanzania has indicated its full support for and significance of Ntorya gas production in the shortest time feasible. The net result for Aminex is an essential shift in the narrative of Ntorya, which can now be considered a potentially world-class discovery with a path to positive cash flow by next year - a remarkable turnaround for the Company since 2020.
Financial Review
Revenue Producing Operations
Revenues from continuing operations amounted to US$0.02 million (30 June 2023: US$0.08 million). Group revenues during the first six months of 2024 are derived from the provision of technical and administrative services to joint operations.
Cost of sales was US$0.03 million (30 June 2023: US$0.11 million). The cost of sales for Kiliwani North operations amounted to US$0.02 million (30 June 2023: US$0.08 million) and included general licence related maintenance costs. There was no depletion charge for Kiliwani North as the period saw no production (30 June 2023: US$ nil). The balance of the cost of sales amounting to US$0.01 million (30 June 2023: US$0.03 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$0.01 million for the period compared with a gross loss of US$0.03 million for the comparative period.
Group administrative expenses, excluding depreciation and net of costs capitalised against projects, were US$0.99 million (30 June 2023: US$0.78 million), an increase of US$0.21 million. The increase in expenses during the period was due mainly to increases in the non-cash share options charge (US$0.16 million) and in consulting fees (US$0.09 million), partially offset by reductions in tax provisions (US$0.03 million) and payroll costs (US$0.03 million). Management continues to maintain strict expenditure controls in order to help maintain the cost-saving gains achieved since 2018, although inflationary pressures have recently had an adverse effect.
The Group recognised an impairment during the six-month period against exploration and evaluation assets of US$196,000 (30 June 2023: US$196,000). This is comprised solely of expenditure incurred on the Nyuni Area PSA (30 June 2023: US$181,000), which relates mainly to own costs for geological, geophysical and administrative work and licence maintenance costs, along with training and licence fees. There was no expenditure incurred during the six-month period on Kiliwani South Area (30 June 2023: US$15,000). All expenditure on the Nyuni Licence Area and the Kiliwani South Area continues to be impaired immediately to the income statement upon recognition following the full impairment in 2018 and 2021 respectively. The Group's resulting net loss from operating activities was US$1.29 million (30 June 2023: loss of US$0.98 million).
Finance income of US$18,000 is a result of foreign exchange gains (30 June 2023: US$108,000).
Finance costs amounted to US$76,000 (30 June 2023: US$80,000) and relates solely to the decommissioning interest charge (30 June 2023: US$80,000).
The Group's net loss for the period amounted to US$1.35 million (30 June 2023: US$0.96 million).
Balance Sheet
The Group's investment in exploration and evaluation assets increased slightly from US$37.98 million at 31 December 2023 to US$38.00 million at 30 June 2024. This was due to an increase of US$0.02 million of own costs for the Ruvuma PSA CGU. As noted above, all expenditure on the Nyuni Licence Area and the Kiliwani South Area continues to be impaired immediately to the income statement upon recognition as both are fully impaired. In accordance with the Group's accounting policy, the Group does not record expenditure for its share of costs that are carried by ARA Petroleum Tanzania Limited ("APT") in relation to the Ruvuma PSA asset. The Group is carried for a total of US$35.0 million of development expenditure on the Ruvuma PSA, with carried expenditure in the period relating to development activities.
The carrying value of property, plant and equipment ("PP&E") has decreased from US$4,000 at 31 December 2023 to US$3,000 at 30 June 2024. This is a result of depreciation for the period and no purchases of new equipment. The costs for the Kiliwani North CGU are included in PP&E but are fully impaired (see Note 9).
Current assets amounted to US$3.28 million (31 December 2023: US$4.63 million) with trade and other receivables of US$1.50 million (31 December 2023: US$1.59 million), which as operator includes joint operations partner's interests in gas revenues, and cash and cash equivalents of US$1.78 million (31 December 2023: US$3.04 million). The decrease in current assets of US$1.35 million predominantly related to the reduction in cash due to expenditures on G&A and tax payments.
Current liabilities amounted to US$7.82 million compared with US$8.19 million at 31 December 2023. This balance included amounts payable to joint operations partners for their profit shares from invoiced gas sales, related VAT and excise tax payable on the gas receivables invoices and provisions and accruals for taxes. The decrease related mainly to US$0.33 million in payments to the TRA for accrued VAT and WHT included in the 2019-2020 tax assessment and reduction of amounts due to joint operations partners of US$0.15 million, offset by an increase of US$0.18 million in accrued training and licence fee invoices from the Petroleum Upstream Regulatory Authority in Tanzania. Non-current liabilities are US$1.92 million (31 December 2023: US$1.82 million) being the decommissioning provision which increased during the period as a result of the unwind of the discount during the period of US$0.08 million and US$0.02 million for an increase in estimated costs due to changes in inflation and discount rates.
Total equity has decreased by US$1.07 million between 31 December 2023 and 30 June 2024 to US$31.54 million (31 December 2023: US$32.61 million). This is due to the increase in the retained deficit arising from the loss for the period, offset by increases in issued capital and share premium (US$0.08 million as a result of share options exercised) and the movement in the share option reserve.
Cash Flows
Net cash outflows from operating activities were US$1.29 million during the period (30 June 2023: cash outflow of US$0.71 million), being mainly G&A expenditures and payment of accrued indirect taxes. Net cash outflows from investing activities amounted to US$0.07 million (30 June 2023: US$0.17 million), mainly for care and maintenance expenditure on the KND Licence. Cash inflows from financing activities during the period were US$ 0.08 million from share issue proceeds (30 June 2023: US$nil). Net cash and cash equivalents for the six months ended 30 June 2024 therefore decreased by US$1.28 million compared with a decrease of US$0.88 million for the comparative half-year period. The balance of net cash and cash equivalents at 30 June 2024 was US$1.78 million (30 June 2023: US$5.04 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 2023 Annual Report other than those disclosed in Note 14 to the condensed consolidated financial statements.
Going Concern
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 going concern period to 30 September 2025, review of the key assumptions on which these forecasts are based and the sensitivity analysis. The forecasts reflect the Directors' best estimate of expenditures and receipts during the going concern 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, subject to the principal assumptions noted below, the Group 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 2023 Annual Report, that remain applicable to the Group. The principal assumptions made in relation to the Group's 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 13).
Current liabilities of the Group exceeded its current assets as at 30 June 2024, mainly as a result of provisions made for some contested tax assessments. As disclosed in Note 13, the Group received a tax assessment in February 2020 from the Tanzania Revenue Authority ("TRA") of US$2.2 million in relation to an audit of the Group's Tanzanian wholly owned subsidiary covering the period from 2013 to 2015 and tax assessments in June 2022 for US$4.8 million in relation to audits covering the period from 2016 to 2018. These tax assessments are excluded from the cash forecast as any cash outflow during the going concern period is not considered probable based on either legal advice or the timeframes for tax cases in Tanzania. Tax assessments received in June 2023 from the TRA of US$3.3 million in relation to an audit covering the period from 2019 to 2020 are included insofar as they are covered by a payment plan agreed with the TRA in June 2024. Additionally, development and decommissioning of the Group's assets in Tanzania is excluded from the cash forecast. The Group commenced discussions with the Tanzanian authorities during 2022 to return the Nyuni Area licence to the Ministry of Energy and such discussions have resulted in the Group being requested to market the licence in 2023 and 2024, in an attempt to find a third-party partner willing to pursue and fund a mutually agreed re-negotiated work programme. Regardless of whether the farm-out process is successful or not, it is not considered probable that any capital expenditure would arise in the period. However, a risk exists that the Group lose the objections to the tax assessments or may be unable to renegotiate or defer commitments relating to the development or decommissioning of the operated Licence interests during the period, or that the TPDC may take action to enforce their claims to certain rights during the period and, therefore, the Group may need to raise additional funding to meet these potential liabilities, in addition to the US$3 million funding facility agreement between Aminex and Eclipse Investments LLC, a major shareholder in the Company, signed in April 2024. There is material uncertainty as to its ability to raise such additional funding. This may result in the Group having to raise funds at whatever terms are available at the time, which is not guaranteed.
These circumstances indicate that a material uncertainty exists that may cast significant doubt on the Group's ability to continue as a going concern and, therefore, the Group may be unable to realise its assets and discharge its liabilities in the normal course of business. As the Group has been successful in raising equity funds at various times and in similar circumstances in the recent past on acceptable terms to the Group, the Directors have a reasonable expectation that additional funding can be raised. 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 foreseeable future and have therefore used the going concern basis in preparing these financial statements. The financial statements do not include the adjustments that would result if the Group were unable to continue as a going concern.
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 2024 and concluded that the principal risks identified at 31 December 2023 and disclosed on pages 24 to 26 of the 2023 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
· Lack of exploration, appraisal and development drilling success
· Adverse and unexpected tax assessments in Tanzania
· Ability to secure other financing for Group operations
· Political and fiscal uncertainties
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 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.