Dear all,

Having had a cursory look at the Aminex presentation, and one or two other sources, I'm greatly puzzled by this company. The USA assets seem to so exceed the share price, that there seems to be no sense.

Either an asset-stripper ought to be swooping, or I ought to buy as much as my pocket can afford.

What is it that I'm missing here, please? Is it just timing, as no imminent news may be relieving buyers of the need to tie up money and take the opportunity cost?

Or are there pages in the books (what books?) which I'm too dim to understand?

Please help me to get a handle on what's going on with Aminex....

Uncle

Pretty straightforward really - ought to buy as much as my pocket can afford.
The value will out in due course.

Uncle,

...The USA assets seem to so exceed the share price, that there seems to be no sense.

As for all E&P NAVs, the input assumptions dictate the outcome.

The recent reserves 'valuation' is based on "Using a discount factor of 10 per cent of commodity prices going forward from 2010 of no more than US$61.12 per barrel and US$7.53 per thousand cubic feet of gas, OPC has given the 2P reserves a value of US$84.5 million."

Some may feel these estimates are on the high side, who knows? Using the more conservative estimates of a note from Edison in Feb 2006 of $7/bbl and $10/boe results in a valuation of the US assets of US$48.2 million (14p per share). The 'right' value probably lies somewhere in between.

As for the explo, this has a value of between zero and lots, depending on the outcome of drilling. My own risked 'guestimate' is of around 36p per share. Add on the cash and deduct expected capex and you get a subjective risked NAV.

Here's one I prepared earlier.

http://boards.fool.co.uk/Message.asp?mid=10215550&sort=whole#10215848

HTH
kyu66
Long AEX

My view is that Aminex looks pretty good, but there are plenty of other E&Ps which also look at least equally good. Aminex doesn't stand out, and so the sensible portfolio position is to have some of each. WShak, amongst others, has made the sensible point that for these sort of explo calculations you want the shares to have the potential to multibag before you start to be interested in holding them.

The 15.1$/2Pbbl on p7 of the Edison 2 April 07 note looks high to me. Many E&Ps would look deeply undervalued if valued on a comparable basis.

The key distinguishing features amongst the many early-ish stage explo companies that look deeply undervalued are IMO
(a) which are funded for their wells, as funding is difficult to raise and dilutive, and on this criteria Aminex isn't well positioned, and
(b) which actually have booked rigs on firm dates in the near future for the wells, on which criteria Aminex also isn't well positioned.
It's easy to hold early-stage explo companies that appear to have great potential but which carry on and on staying cheap. If you want to increase your return on invested capital the best game plan is actually to identify the companies which are funded and have firm drilling plans.

I hold some Aminex so I'm overall positive, but IMO there are other companies which look better and I wouldn't be getting too euphoric about Aminex until they get some funding and firm wells planned.

Dear kyu66,

Thanks for this. I will study your other post!

Uncle

Dear SirLurkalot,

It's easy to hold early-stage explo companies that appear to have great potential but which carry on and on staying cheap. If you want to increase your return on invested capital the best game plan is actually to identify the companies which are funded and have firm drilling plans.

Thanks for this. And how on earth do you identify them? I'm not being disingenuous, I'm trying to read and understand more about this sector....

The 15.1$/2Pbbl on p7 of the Edison 2 April 07 note looks high to me. Many E&Ps would look deeply undervalued if valued on a comparable basis.

Oh dear, this is where my social sciences and liberal arts background really bugger me up. Can you, gently, tell me what this means please?

Uncle

(b) which actually have booked rigs on firm dates in the near future for the wells, on which criteria Aminex also isn't well positioned.</i?

Sir L you are mistaken:

A rig has been secured for two wells in Tanzinia, commencing late 9
Also West esh el Mellahah (Egypt)
AND Alta Loma and South Weslaco (Texas)

That's four firm wells and there maybe more.

Of course news on DRPK is what we are all really holding for as this could potentially 100 bag this share over time

Hi SirL,

My view is that Aminex looks pretty good, but there are plenty of other E&Ps which also look at least equally good. Aminex doesn't stand out, and so the sensible portfolio position is to have some of each. WShak, amongst others, has made the sensible point that for these sort of explo calculations you want the shares to have the potential to multibag before you start to be interested in holding them.

The 15.1$/2Pbbl on p7 of the Edison 2 April 07 note looks high to me. Many E&Ps would look deeply undervalued if valued on a comparable basis.

The key distinguishing features amongst the many early-ish stage explo companies that look deeply undervalued are IMO
(a) which are funded for their wells, as funding is difficult to raise and dilutive, and on this criteria Aminex isn't well positioned, and
(b) which actually have booked rigs on firm dates in the near future for the wells, on which criteria Aminex also isn't well positioned.
It's easy to hold early-stage explo companies that appear to have great potential but which carry on and on staying cheap. If you want to increase your return on invested capital the best game plan is actually to identify the companies which are funded and have firm drilling plans.

I couldn't disagree with anything that is written here. I do pop over to the Aminex board occasionally as a lurker and am somewhat amused at the agonising over which to buy between Soco and Aminex. The two companies are miles apart in profile and there is simply no rational comparison to make. Anyway, Aminex is undoubtedly cheap but not especially so, whilst Soco isn't particularly cheap at today's levels but they are totally different animals. Soco has great potential but that's already been taken into account in it's risked NAV so I certainly wouldn't be adding at these levels unless I was convinced that the next two wells are going to come in, which no-one can know. Aminex is an illiquid juinor which still has it all to do so should surely be compared with it's peer group, not something like Soco. As for Aminex being worth it's current market cap. on purely it's American assets, that's crazy talk. There's no way they would be able to sell the assets for that kind of price - if they could then they would be sold in a shot since it would solve their funding problems and allow them to focus on East Africa. Aminex have long contended that they would sell out of US if a decent offer was made.

Aminex is a favourite on TMF (and I backed it strongly myself) but I wonder if people would be agonising over it's "cheapness" if it had never been mentioned here. It's key attraction to me when I bought was the possibility in North Korea but the story seems to have changed completely over the last year. I always doubted whether the company would ever be allowed to get any oil out of North Korea but did feel that they'd get further along the road than they have within a two year period, thereby causing the share price to rise rapidly. Anyone who is still holding great hopes for North Korea is kidding themselves in my view - it ain't gonna happen, that duck is dead. East Africa is highly promising and Aminex have done well to be ahead of the pack there - that's the only reason to hold IMHO.

Personally, I took the view a while back that whilst Aminex was a nice company with good management, there's nothing about it that would make me think it stands out, especially within it's peer group. The lack of liquidity in the shares is an issue, as well as the obvious cash shortage in a difficult market in which to raise funds. If they get an early win in Nyini, the shares will do well, otherwise it could be a long slog for them. Ruvuma looks very promising but is some way off from being drilled.

WShak

WShak,

Yes of course Aminex and Soco are at quite different stages, and Aminex should be compared to its peer group not Soco. I agree those questioning which to invest in as if the two are comparable aren't really understanding the nature of the two companies. I agree Aminex couldn't sell the US assets for the sort of values being quoted, but that doesn't necessarily mean those values are inappropriate: I have doubts Dana could sell their bitty near-exhaustion/decommissioning N Sea portfolio (or therefore the plc) for the sorts of values attributed to that.

"I wonder if people would be agonising over [Aminex]'s "cheapness" if it had never been mentioned here". Exactly. The ghost of ee lives on after his departure.... but personally I think there are plenty of other companies in Aminex's peer group which are at least as attractive. Those sort of companies are always at a big/huge discount to a calculated NAV. We all have our favourites in this category, I like Faroe, you like Frontera, ee likes Aminex (IMO partly only because its ISAable), H likes FOGL, t seems to like Plectrum, but these sort of companies are always going to continue to look deeply cheap compared to their NAVs until they actually discover the black stuff and get serious. We've discussed ways to play these kind of shares and could continue, but LadyL's almost finished cooking so I've no time now...

We all have our favourites in this category, I like Faroe, you like Frontera, ee likes Aminex (IMO partly only because its ISAable), H likes FOGL, t seems to like Plectrum, but these sort of companies are always going to continue to look deeply cheap compared to their NAVs until they actually discover the black stuff and get serious.

Funny that, I hold then all other than Plectum!

Perhaps its time we set up a Foolish Investment Trust aimed squarely at the oil sector and covering all of our favoured stocks?

Ahem,

Edison, Equity Development et al are not independent.

FK

Crikey O Reilly Sir Lurkalot your wife cooks!

FK

I have held this share in my watchlist for a long time and watched it go up and down like a wave. I now own a modest amount.

Is it because the company begins with an A? Well, perhaps. But I liked it before all the presentation Dragon's Den stuff. I liked it because it was boldly going where noone else was - North Korea, and anyone who can make deals with an ostracised country such as Korea has to be admired. I reckoned that Mr. Hall is a great communicator even though nothing goes at the moment. It will in the long term.

I once owned Anadarko and they ended up having lakes of oil and it was really nice to make a wee soupcon. Helped buy the car which I still have five years later. Then there was VPC and I also bought low and sold high (very modestly).

My biggest miss was Dana at 12p. I got diverted with other stocks and PYAD advice to ca' canny as we say up here in Aberdeen. I am still rueing the day as I could now be looking forward to early retirement.

I now hold as well as Aminex, Tullow and , JKX - what a wonderful buy they have proved to be. My newest little bit of faith, is the diminutive Black Rock Oil and Gas. I liked the name of the company. Such a Fool am I. Yet I am hoping it will help me purchase my next car which will be a new model of the first car I ever drove and the best. The new Fiat 500. Check it out!

Crikey O Reilly Sir Lurkalot your wife cooks!

FK

He actually said that she's almost finished cooking. Strange eating habits they have in these foreign countries....

As for holding AEX, I feel it is worth exposure at these prices. I sold out earlier holdings when they hit mid 30's. At 17p, the second time round, I thought it was a no brainer. A portfolio of this type of company is pretty much the same. It depends on your mindset. If you are good enough to keep turning your money over, then fine. Not everyone is in SirL's league though.

Buffy

P.S Crikey O'Reilly....it's a long time since I heard that expression. :^)

...Not everyone is in SirL's league though...

I think that is a wonderful example of classic british understatement. SirL is, as far as I am concerned, in a league all of his own.

Crikey O'Reilly, don't you guys live in households where people cook occasionally? Even though LadyL and I like travelling (to sunny apartments with cooking facilities and broadband), we do still cook, and even I have been known to don a chefs hat from time to time. We're about to head back to France for the summer.

We're about to head back to France for the summer.

Maybe next year if Frontera, Aminex or Falcon do the business I'll be joining you!