Importantly, the extension was one of the last remaining conditions required for Aminex to complete a farm-out transaction with ARA Petroleum.
It is expected that the partners will acquire 200 square kilometres of 3D seismic (estimated gross cost of US$7mln) and drill the Chikumbi-1 exploration well (at least US$15mln). These programmes are expected to provide key inputs into an application for a development licence for the Ntorya project area.
Aminex noted, however, that it is acknowledged by all parties that a full work programme is unlikely to be completed during the one-year extension period, and it is anticipated that further extensions will be applied for as necessary.
"With this licence extension granted, we now have line of sight towards the development of a nationally important resource with the drilling of the Chikumbi-1 well,” John Bell, Aminex's chairman said in a statement.
He added: “Fortunately, gas prices in Tanzania are not linked to the price of crude oil and given the shortage of gas, demand is strong. We have long since believed in the value of this field to Tanzania and to the Aminex shareholders and are delighted, at long last, to once again be moving into the growth and operational phase that will further de-risk the 763 billion cubic feet of 2C resources at the Ntorya field and propel the Company towards long-term sustainable cash flows."
Cost-cutting and coronavirus
In a separate statement, Aminex also detailed a number of measures it is taking to reduce costs and position the company amid the coronavirus (COVID-19) pandemic and the recent collapse in crude oil markets.
The group said it has promoted non-executive director Robert Ambrose to chief executive, with Ambrose taking a cash salary of £60,000 – compared to £180,000 paid to the prior chief executive - plus share options in lieu of cash.
Ambrose previously spent 20 years working in The Zubair Corporation, parent of ARA Petroleum, though following his retirement from that company in September 2019 he is no longer their employee, consultant or representative.
Tom Mackay has stepped down from his position as interim chief executive and has left the company, the group added.
Aminex is reducing its boardroom headcount to four, from the seven it started 2019 with, and non-executive directors John Bell and Linda Beal have agreed to give up director fees in return for stock options.
Some staff have been furloughed and all UK-based management have taken temporary salary reductions of 20 to 40% to assist the company’s cashflow. Senior management will be compensated with stock options, the company said.
These changes are expected to reduce outgoings by around US$75,000 per month, an indicative annual saving of US$900,000. Aminex noted that it expects to realise additional savings of around 25% on top of the 30% it achieved in 2019.
It also said that with the company’s focus on gas development, including fixed-price gas contracts, it is largely shielded against fluctuations in global oil prices.
The company added: “The first quarter of 2020 has seen the material drop in global equities as a result of the pandemic coupled with the drop in oil price impacting the sector, which the group has not been immune to despite not being an oil producer.
"The directors recognise that the current macro-economic environment may result in limited or more expensive sources of funding. It is likely that if the restriction on movement continues for a significant period, there may be a delay in the group's operations in Tanzania as access to sites, personnel and equipment may not be possible.
“The group will consequently carefully review any capital asset investment decisions and take further action to reduce costs if necessary.”