Andes Energia Share Discussion Threads

[velvetide] 06/4/2011 07:06

new shareholder:

[maytrees] 01/4/2011 09:46

Added at 28.1p

[maytrees] 30/3/2011 10:43

There's your (delayed) tick up empirestate

[empirestate] 29/3/2011 19:42

looks like we have a sell order to fill here, todays buy trades would have usually nudged the sp

[polyps] 28/3/2011 20:43

Did anyone attend the AGM?

[stluke] 28/3/2011 15:52

Nothing like a AGM statement, communication is a bit poor here would have thought we would have had something by now.

[stuart14] 25/3/2011 12:30

Didn't realise there were 2 RNS this morning. We are also now an Oil Producer albeit at 120 bopd. Looks very good to me.

How many different blocks do we own now?

[stuart14] 25/3/2011 12:14

Totally agree. Even better the Electricity side has great cash flow and profit which can be used to fund the exploration on the Oil & Gas side. I think this is a hidden gem of a Co.

[stluke] 25/3/2011 08:16

Yes looks very promising empirestate, its clearly obvious that the electricity side now looks after itself and they are going to push hard on the Oil & Gas front this year, what i like the most is it is in a area of the world that not too much is known about but when big chinese oil compnaies are sniffing around for land you get the feeling your in the right place.

[empirestate] 25/3/2011 08:08

looks like the news is being well received, it would be nice to get to 30+

[empirestate] 25/3/2011 07:26

i don't have a clue wat those oil and gas numbers mean, but AEN do say its a decent comparative deal so must be good

[empirestate] 24/3/2011 23:49

very quiet here considering mondays GM

[empirestate] 17/3/2011 19:05

hopefully hear something at the GM

[polyps] 15/3/2011 18:36

No not the response I would expect to the figures, Need news release about exact timings of propsed drilling, hopefully starting with the farm in at Nequen that is for free till commercial discovery.

[empirestate] 14/3/2011 14:07

todays news will hopefully get some coverage from proactive investors news round up on friday which may create some interest. hopefully they have an update ready for the GM statement

[stluke] 14/3/2011 07:42

Cracking figures for the full year, looking forward to end of month and plans for the O&G interests now.

[stuart14] 14/3/2011 07:15

Absolutely

[empirestate] 14/3/2011 07:09

looks a decent set of EDEMSA numbers

[stluke] 11/3/2011 09:48

Notice of general meeting document now available on company website.

Information&id=130

Seems the electricity side is looking after itself nicely and they are going to now develop the oil and gas projects with more vigour, all looks promising for 2011 to be a very good year.

[maytrees] 10/3/2011 15:30

Interesting read StLuke - tx

[stluke] 10/3/2011 13:21

Taken from iii posted a month or so back, broker coverage of AEN which gives a very good overview of company.

Andes' strategy is to create a fully integrated South American energy business. The group has downstream operations in the electricity distribution and hydroelectric power generation sectors complemented by an exciting portfolio of oil and gas exploration assets. With the management also evaluating oil and gas production projects which will enable the group to participate at every level of the energy supply chain, we believe that Andes' longer term prospects are very attractive.

Year end Revenue EBITDA PBT PAT* EPS* PER
Dec US$ US$ US$ US$ p x
FY 2008A 138,087 9,670 (12,523) (9,620) -4.4 -6.8
FY 2009A 138,644 18,754 3,624 (533) -0.3 -103.6
FY 2010E 165,775 28,834 18,165 5,490 2.9 10.3
FY 2011E 177,387 29,195 19,511 5,998 3.1 9.8
FY 2012E 189,820 30,674 21,560 6,644 3.4 8.8
*Attributable to Andes Energia
· EDEMSA has been consistently profitable since the third tariff review at the end of 2009 and the refinancing of the EDEMSA bonds in June 2010 has strengthened the group balance sheet significantly. As such, we anticipate a strong set of group results for 2010.
· Andes' oil and gas exploration portfolio has a considerable degree of upside potential which we believe is not reflected in the current share price. The group has the opportunity to realise some of this value through farm
out agreements in the near term as well as through the drill bit, funds permitting.
· We anticipate that Andes will exercise its option to acquire up to 50% of the Vega Grande oil field in 2011.
This will provide the group with both production and reserves and advance Andes 'strategy to become an integrated energy player.
Based on our sum of the parts valuation, we are initiating coverage of Andes with a short term price target of 54p per fully diluted share. Given that we have used highly conservative criteria to determine our initial
valuation, we are confident that there will be significant upside for the share price over the course of 2011.


Executive summary
Andes' long term strategy is to build a fully integrated South American energy company. In the downstream segment, the group has significant interests in both electricity distribution and hydroelectric power generation. In the upstream, Andes has a highly prospective portfolio of oil and gas exploration assets. Going forward, the management is evaluating projects which will add
oil and gas production to the group's portfolio and enable Andes to participate at every level of the energy supply chain.
Most of Andes' income is generated by its 51% indirect controlling interest in Argentine electricity distribution business, EDEMSA, based in Mendoza Province. EDEMSA has been profitable since the end of 2009 when local government controlled tariff increases enabled margins to recover
sharply. Although the next formal tariff review is not expected until 2013, we are confident that the government will recognise inflation linked tariff adjustments in the interim period and EDEMSA will continue to provide solid returns to Andes.
EDEMSA is exposed to exchange rate fluctuations given that its income is in Argentine Pesos and its borrowings are US dollar denominated. However, Andes restructured its debt in June 2010, reducing both its ongoing financing costs and its currency exposure to a significant degree.
As a consequence, Andes' balance sheet is now substantially stronger compared to 2009 and we expect that group gearing will be less than 55% at the end of 2010.
Andes also has a 47% indirect controlling interest in HASA, a hydroelectric plant operator located in Chubut Province. Although a small part of Andes' overall business, HASA is debt free and provides a solid income stream to the group.
We believe that Andes' oil and gas exploration portfolio has a substantial degree of upside potential. As yet, the group has not booked any proven reserves. However, two licences have contingent resources and an additional two blocks are located adjacent to a number of existing discoveries. The potential of these latter two licences is such that YPF, a subsidiary of Repsol
YPF S.A. (NYSE ticker: REP), Argentina's largest oil producer, farmed into the acreage in November 2010 on terms favourable to Andes. We do not rule out subsequent farm in deals on Andes' other exploration acreage which could accelerate exploration activity across the whole portfolio.
Andes owns an option to acquire up to 50% of the Vega Grande oil production licence located in Mendoza Province. Although the timing of such a move is yet to be determined, the exercise of this option would provide Andes with both production and reserves and advance the group's strategy to become an integrated energy player.
Andes receives a management fee from EDEMSA and a dividend from HASA which provide modest working capital of approximately US$3m per annum. However, in order to exercise the option on Vega Grande and progress a wider work programme on the group's other oil and gas
assets, the group will need substantially larger sums and we have therefore not ruled out the possibility of future equity raisings.
We have valued Andes on a sum of the parts basis using a raft of highly conservative criteria. On the basis of the current issued equity, we believe that Andes is worth over 58p per share. All of Andes outstanding warrants are currently under water. However, for the purposes of consistency
going forward, we believe the most prudent approach would be to value the group on a diluted equity basis. As such, are initiating coverage with an initial valuation and short term price target
of 54p per fully diluted share.


Valuation
At this stage, we have disregarded a price to earnings ratio (PER) valuation for Andes given that it would not attach any value to the company's oil and gas assets which do not currently generate any income. In addition, a PER which is an ideal tool for comparative peer group analysis is also not particularly useful in Andes' case given that Andes has a unique integrated structure of upstream and downstream assets which is unlike any listed peers.
We have therefore elected to conduct a sum of the parts valuation based on Andes' discrete business units. Our findings are outlined in the summary below.
Summary valuation of Andes Energia Asset Estimated value Value per share Value per share
(US$) Undiluted Fully diluted
Utilities
EDEMSA (Andes: 51%) $90.1m 46.0p 37.1p
HASA (Andes: 47%) $7.7m 3.9p 3.2p
Oil and gas
Confluencia and Laguna le Loro $27.9m 14.7p 11.9p
Vega Grande option - - -
Other exploration assets - - -
Outstanding warrants $15.8m - 6.5p
Less parent company net debt ($12.3m) (6.3p) (5.1p)
Aggregate valuation $129.2m 58.3p 53.6p
Source: OPLC estimates


Huge upside potential
We are using our fully diluted valuation per share as our primary reference point. This is based on a total equity base of 151.8m shares including 29.3m outstanding warrants. These warrants, most of which are exercisable in October 2012, have an exercise price of 54p per share and would provide US$15.8m of additional cash to the company.
It should also be noted that our analysis ascribes direct value to only two blocks within Andes' portfolio of nine oil and gas licences. At present, we believe it reasonable to attribute a heavily risked valuation to the Confluencia and Laguna el Loro licences which have contingent resources
ascribed to them. However, given the early stage nature of many of Andes' oil and gas assets, our valuation does not reflect the potential value of the rest of Andes' exploration portfolio, much of which is located in highly prospective areas, adjacent to existing discoveries in a number of
Argentina's major hydrocarbon basins.
We have also ascribed no value to Andes' option on the Vega Grande field given that the exercise price, timing and equity interest in the asset have yet to be established.
Finally, the larger proportion of Andes' debt resides in EDEMSA and is accounted for in our DCFbased valuation of this division. However, the balance resides in the parent company and is therefore debited from our aggregate valuation.

[maytrees] 09/3/2011 09:08

Why the wish to have power allot new shares at an AGM I wonder?
Useful to have the power to do so generally but
do they have any specific reason atm?

I hold.

[stluke] 08/3/2011 18:23

All in all a very good day following yesterday afternoons rise, long term chart above is screaming out 35p and EDEMSA could well be the cataylst required.