Malcy’s Blog – Oil price, Aminex & Diversified Gas & Oil

WTI $29.43 +$1.87, Brent $32.50 +$1.37, Diff -$3.07 -50c, NG $1.65 -3c

By Malcolm Graham-Wood

Oil price

With a good run into the weekend the oil price is continuing its rally, as I write both crudes are up over another 2 dollars after WTI was up a short 20% last week and Brent up 5%. The WTI price is almost entirely a massive relief rally ahead of tomorrows expiry, how childish is that?

No the main stories are a combination of falling supply as detailed here last week and for longer, as well as a modest increase in demand which has started a potential stock draw. We can take a look at the gasoline situation tomorrow when the retail data emerges but with demand rising and Memorial Day next Monday starting the Driving Season it will be worth watching.

With the news on COVID-19 generally looking better, equity markets are shrugging off risk and rallying modestly. The first storm of the season is Tropical Storm Arthur but is at present moving towards the Atlantic coast.

Finally, last week I was a guest speaker on an oil webinar hosted by IG and was joined by new Victoria Oil & Gas CEO Roy Kelly as well as expert oil and trading analysts from the home team. The link is below and is very long but I come on at 6m30s and Roy at 28m30s if you are interested!

IGTV interview: Oil – Has The Market Changed Forever?


Robert Ambrose, the new CEO of Aminex, appeared on Proactive Investors on Friday discussing his new role and the next steps for the Company. I thought he gave a good introduction to his background, which is firmly placed in the oil and gas industry, before updating investors on cost savings including some salary reductions for the Board.

I was able to have a long chat with Robert this morning and was very impressed with his understanding of the patience of the shareholders, he agreed with me it had been a long wait and that he had been watching AEX for some years. Ruvuma, he says has always been an interesting project with high potential showed by the no 2 well that was certainly not short of gas.

He then continued by discussing the future for the Company’s fully-carried interest in the Ruvuma licence production development, where progress seems to finally be underway. Interestingly Robert said that he would be disappointed if the next well, Chikumbi-1, wasn’t spudded  by Q1 2021, suggesting that Aminex and the Zubairs are aiming for drilling around the end of the year. With long-lead item orders already being addressed and a rig being assessed the c.6 months needed for both seismic and drilling has started, all that is needed now is to conclude the paperwork and get ministerial sign-off.

Elsewhere the Kiliwani development  still offers potential to restart production and of course the larger Nyuni exploration licence has multi TCF potential and the company is looking forward to a smaller work programme which the TPDC seem happy with. Seismic on these prospects is probably subject to partnering but with the appeal of the area should not cause any impediment.

Robert then went on to briefly discuss the Company’s finances, highlighting that a production deal was a focus for the management to fund further progress in the short term. Indeed it makes sense for Aminex to partner up with someone as strategic partnering and consolidation is best for the company. Aminex shareholders have good reason to feel increasingly optimistic about their investment and patience should be rewarded.

Diversified Gas & Oil

A big day in the history of DGO as the company announce that it has been admitted to the Premium Segment of the Official List of the FCA and to trading on the London Stock Exchange’s Main Market. An apposite time as DGO is about to close two significant acquisitions and to do so on the big board will be most appropriate.

These acquisitions are accretive both to EPS as they have come cheaper than DGO’s own rating and remember that the deal franks forward dividend payments so it seems folly not to cash in on the 13%+ yield on offer. With a blue chip international shareholder list added to by the oversubscribed raise and at a tiny 1.6% discount, at the placing price (108p) that seems like a decent marker to me, today’s 101.8p is thus a fantastic opportunity.

I was lucky to be able to chat with CEO and Co-founder Rusty Hutson Jnr on Friday although he was almost losing his voice after having done that worldwide virtual roadshow over the last two weeks, but still strong enough to remind me that the company has no intention to cut or stop that dividend payment. He was also able to put to bed any criticisms of the company’s accounting and was keen to point out the re-audit process and the 100% clean prospectus driven by the move to the senior market today.

This is a very compelling story and as I have described recently the DGO model is perfectly placed to deliver as promised. Indeed Rusty was able to tell me that there are still plenty of acquisition opportunities out there as people need solutions to their debt problems and assets are available at ‘compelling prices’. Indeed the natural gas dynamic in the US is looking more positive, as we head towards 2021 associated gas volumes fall with US domestic oil production boosting prices.

The next chapter of DGO’s growth story starts here and Mr Hutson is clearly most excited about the prospects from the base that the last three years has given them. He says

Tangentially to our strategy of focus on long-term value creating growth, we have become the largest independent producer by volume listed in London, and our robust business model and healthy balance sheet ensures that we are well positioned to capitalise on compelling opportunities that the current market will present’.

Either way, this is a significant milestone, and often overused expression but not here, this is long-term, value creation in the making with the goal of enhancing shareholder returns and starting with a yield north of 13% I expect to see both income and capital appreciation before long.

Malcolm Graham-Wood

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Disclaimer: Malcy’s Blog is provided for general information about the international oil and gas industry and the companies that operate within it. It does not constitute investment advice and Malcy does not buy or sell shares, warrants or bonds in any company written about within the blog. Information is taken from publicly available sources and any comment is that of the author who does not take any third party comment in the publication.

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