Is this company the next Tullow Oil plc or Afren?

Updated: 
Oil well of the nodding donkey variety

Shares in Aminex (LSE: AEX) have surged higher by 112% over the past three weeks as investors have rushed to get in on the firm's rapid growth. These gains have taken the company's market capitalisation from around £50m to £110m, which means Aminex has been officially dragged out of the sub-£100m speculative market into the realm of small-cap growth stocks.

The question is, does it deserve this accolade? The company is still in its early stages of growth and there's no telling yet if the firm will turn out to be the next big thing like Tullow Oil or flame out like Afren.

NAV growth

Aminex's key assets are located in Tanzania and City analysts believe existing assets could be worth as much as 3.9p per share. This valuation could be subject to a significant upgrade if the recently drilled Ntorya-2 appraisal well in Tanzania turns out to be as promising as the initial expectations seem to indicate. 

Earlier this month, Aminex reported that the Ntorya-2 well has been successfully drilled to a depth of 2,750 metres and encountered 51 metres of gross gas bearing reservoir, with net pay interpreted to be between 25 and 30 metres. The well is now undergoing petrochemical analysis and flow testing, the results of which are expected to be published in late February. When these figures are released, investors will have more of an indication of what the future holds for the firm. It is expected that the company will apply for a 25-year development licence for the field.

A long way to go

Despite the promising figures from Ntorya-2, there's still a long way to go before Aminex can claim to be on the road to becoming the oil sector's next Tullow. 

Nonetheless, City analysts are expecting big things from it over the next three years. Specifically, analysts have pencilled-in a pre-tax profit of £3.7m for 2017 on revenues of £12.8m. Next year, earnings per share are expected to grow 160% to 0.24p as pre-tax profit grows threefold to £10.6m. Revenue is expected to hit £20.3m. 

These forecasts could be subject to substantial revisions higher as they are only based on Aminex's current production from its Kiliwani North-1 well, which is churning out 30 mmcf/day of gas. 2017 will be the first year of full production from the asset and the company should be able to use cash flows from this production to fund the development of its next well.

The bottom line 

Overall, it looks as if Aminex has a bright future. Unlike most small-cap oil producers, the firm is generating income and this can be used to develop new prospects, which could deliver a substantial increase to net asset value and revenue. 

If the company manages to hit City targets for growth for the next two years the shares could have further to run. And if Ntorya-2 turns out to yield better-than-expected results, Aminex shareholders could be well rewarded. With this being the case, it looks as if it is more likely to be the next Tullow than Afren.

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Rupert Hargreaves has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.