Amerisur Resources Share Discussion Threads

[kaos3] 11/6/2018 12:04

the system works if there is a corrective force (government, army, tax, parent, owner..) when needed. cybernetic loop needs one. with high sensitivity.

here - there I can not see any kind

I am with lucy on this one - who cares about water cut, API quality, wax, layers perforated, stimulations etc.. needed but not enough by a mile

[ladeside] 11/6/2018 10:41

In fairness, some of us have probably been blinded here due to the early success of both the company and the share price, however when you start to dig a little deeper it should be remembered that Fenix was originally being sold to us as a "big deal" and of course the company maker was always supposed to be our fantastic acreage and licences in Pargauay and we all know how that ones turned out.

It really is time that our board put forward a realistic investment case and treated us shareholders with some respect as opposed to the continuing contempt which they display...........

[charlieeee] 11/6/2018 08:55

The problem is not Platinillo, which is declining as expected and projected.

It is the delay in the exploration and development plan, by themselves and their partners which has cratered this share price again.

All that acreage in a country noted for its COS and so few drills since the upturn in oil prices and CPO 5 moving slower than a snail.

It can change so quickly (as can be seen by the exponential growth in other operators in the area/country) but patience is wearing thin, as the "dog ate my homework" excuses continue to roll in: the achievement, not the excuse. Now, we do have a presentation showing the extent of flooding, but personally, I would have preferred more focus on what they have actually done, despite the rain. Perhaps, rather than a one off presentation, they should start a photo gallery and add picture updates regularly?

[football] 11/6/2018 08:49

30 FREE plusone coins here but running out fast so don't miss out!!!
















it's 5 free coins each link above

[odvod] 11/6/2018 08:46

amer woes are first about management, then assets

[foiledagain] 11/6/2018 08:20

What is uncanny is that some considerable time ago a poster came on to this bb and posted about the water cut problems at Plat. I know as I reported my concern to Amerisur. The reply back was there was no problem at all, they were shut in because of oil price and oil price alone. Subsequently they didn't come back in the same production they left in, and now we have this, which is almost on par with what a poster put on amer bb some considerable time ago?

[lucyp00p] 10/6/2018 23:08

does any of it really matter?Probablynot

[bakoven] 10/6/2018 20:23

Economy/shortage of detail.
Are we to be given value(s) of water cut, nearest disposal/injection well, damage to liners and/or packers resulting from poor repeat work-over technique?
Probably not.
Also, will we be informed of possible 3 - 4 week production suspension at Mariposa-1 whilst additional perforations on the column are carried out?
Probably not.

[davwal] 10/6/2018 15:02

Surprisingly varied, with good blanco offerings to boot. Who knew?There was a typical Spanish knees-up in the town yesterday. We watched as an old guy who had been sat on a bench responded to a brass band playing a bull fighting song by acting the matador to the dancing crowd, using his stick as a sword and his trilby as his cape. Such grace of movement. Pure magic.

[sleveen] 10/6/2018 14:48

Nice and oakey?

[bigwavedave] 09/6/2018 09:11

The other day, Quidnunc said he logged in but was "losing the will to live" after reading through this bb. In that case, I do hope he doesn't attempt to wade through the ocean of drivel posted here yesterday. I was drowning by 10am.

[lucyp00p] 09/6/2018 00:30

he should get the B.O.S.S.

[moneylender] 08/6/2018 20:01

John's trouble is he is too greedy with options!

He gets the work done, maybe a little optimistic at times, but its a tough country. He has been there a long time, Emerald Energy before, again he took lots of options out of EE. He has experience in the LLanos with Emerald on the Camporico block, so no doubt he is very valuable to the Indians re CPO-5

[whiskeyinthejar] 08/6/2018 19:37

moneylender,I expect some ppl choked a bit on reading his management view:

"CEO John Wardle is based in-country, he has been in place over 10 years and he has a track record of getting things done"

[moneylender] 08/6/2018 19:14

Thanks for the report Whiskeyinthejar. Makes good reading, if only!

[whiskeyinthejar] 08/6/2018 18:00

If you aren't registered :

Producing E&Ps like AMER can bring interesting risk-reward profiles. Analysts & Market look to be pricing for the downside...

Afternoon all,

Oil prices have been on a tear so far this year (much to this commentator’s surprise) and correspondingly many UK-listed oil related shares have gained significantly year to date.

Therefore, I thought it might be of interest to briefly outline how I think about an Oil & Gas Exploration and Production (E&P) company.

How to look at a company like Amerisur
One laggard that is in our fund (so I fully accept mine is a conflicted view) and has taken a hit this morning is Amerisur. The shares are broadly flat on a 12-month view, compared to Brent which has steadily risen 65% over the same period.

How do production and the Balance Sheet look?
Amerisur is a Colombian-based but AIM-listed business. It has a market cap of US$270m and a net cash balance sheet of US$39m. In 2017, production averaged 4,857 bopd (Barrels of oil per day) with an exit rate at year-end of 6,951 bopd. That delivered revenues of $92.5m and Operating Cash Flow of $30m. That’s a market valuation of exactly 9x reported Operating Cash Flow.

Management usefully publish their production every month. Frequent and regular transparency is paramount when looking at these sorts of companies and this level of disclosure is a real rarity in the sector. It is to be applauded.

Amerisur has averaged around 6,100 bopd for the first five months of 2018. Although today’s announcement for May shows there have been production issues such as lower production rates and increased water cut, meaning May’s oil production was only 4,800 bopd. This hit shares c.9%.

What are Management planning on drilling this year?
Whilst we are now in June and Amerisur has so far not drilled a single well, Management are hoping to complete 14 wells by 2018 year-end in a $61m capex program; a significant investment amount when set against their existing market cap. This second-half-weighted drilling campaign should generate a veritable avalanche of upcoming news flow.

The recent AGM presentation gives an excellent overview of the business and planned drilling campaign:



and is useful to have to hand when reading this.

One thing that attracts me most to Amerisur and this drilling campaign is that, if successful, nearly all of the wells can be rapidly hooked up onto production rather than suffering from a long lead time to cash flow as often can be the case for smaller oil stocks.

The three wells at Platanillo all focus on the N sand opportunity and are drilled from a single pad that has capacity for six wells from this location. The first two wells are vertical and an excellent result for each would be 1,000+ bopd whilst a poor number might be 200 bopd, both eventualities are quite possible; the third well is a horizontal well and these usually, as a rule of thumb, produce something like a factor of 3x the uplift compared to a vertical well if successful. This gives a rough range of 1,000-5,000 bopd from these three wells.

However, with drilling the concept of a "sure thing" does not exist. Therein lies a big part of the risk and the opportunity that markets price into companies like this. Amerisur do operate in a relatively low risk area, as compared to oil basins in other regions both onshore and offshore. According to management, the average success rate since 1966 of a well bringing oil to surface is 85% in the area. Another caveat though, “bringing oil to surface” is not the same thing as flowing commercial barrels.

If all three wells came in it’s likely management would continue to drill further wells here using up the spare slots on location which would be the best result for shareholders.

Licence CPO-5 (Amerisur owns 30% with ONGC as operator) is also a three well campaign targeting the Indico, Aguila and Sol prospects. Management gives a net 40.58 mmbo (million barrels of oil) estimate for all three wells combined, and it flags this estimate as conservative.

Two interesting facts about these wells are:

Firstly, the nearby Maripasa-1 well was previously a success, testing at 5,400 bopd but choked back to 3,000 bopd of current production from only 10ft of perforation, out of 110ft of pay depth. Since initial production in November 2017 there has been no drop in pressure or flow at all and it could be that this producing asset has much better sizing than initially appreciated. The 10ft of perforation is likely to be increased by another 22ft which should, therefore, increase the wells production rate.
Secondly, in the block to the north (LLA-34) are a series of producing fields (combined production 55,000 bopd) owned by Geopark and Parex. Through a series of successful drilling campaigns these fields have significantly increased in resource and production in the last three years.

Amerisur’s three drilling prospects are all on trend but focused on different structure types which have been somewhat derisked by their similarity to the successful Mariposa-1 well. Any success from each of these wells could make a significant difference to valuation. It’s worth noting that Geopark has taken its Colombian production from 3,440 bopd in 2012 to almost 22,000 in 2017, mainly on the back of its assets to the north of CPO-5.

Putumayo 8 (50% ownership) sits to the west of the currently producing Platanillo block and the all important OBA export pipeline. Here AMER is due to drill two wells, the first one is actually being drilled from their neighbours existing and producing oil pad but into Amerisur’s block meaning any success can be brought onto production rapidly whilst the second well has a choice of two objectives and a final decision will be dictated by results from the Platanillo drilling (mentioned above) and the first well in the block. The two choices are an N-sands large look alike (number 3 in presentation, page 19) which would most likely be favoured if the drilling of the North of Platanillo licence proves successful, whilst the smaller Bienparado would be drilled otherwise, as a similar play to existing Platanillo production nearby.

Lastly Amerisur has Putumayo 12 (60% working interest) and 9 (100% ownership) blocks both with three well drilling programs and with 2D seismic activity on-going. These wells are slated for later in the year and we shouldn’t be surprised to see a few of these perhaps slip into early 2019, more details are likely to emerge nearer spud date. However with a combined net to Amerisur prospective 289 mmbo there is a large potential prize waiting any drilling success from these six planned wells.

Slide 24 is worth a glance with Putumayo 30, Terecay and Tacacho combined having 926 mmbo prospective resources.

If Amerisur can grow its shorter-term cash flows then it has a whole host of prospectivity to drill into through the next three years or so but to really make any inroads in here they need to be a larger business with a bigger balance sheet. Perhaps these land assets might attract a larger balance sheet partner or takeover of the business given current high oil prices.

The success of its own pipeline investment is now becoming clear, so far the opex savings on a quite low average throughput have paid back the capex over only 15 months. However, its real value can only increase if exploration can provide the output to step up throughput to more like 20,000 bopd in a couple of year’s time.

Experienced Management
Long-term, stable and experienced Management are a crucial factor for a business when we’re assessing whether it should be in our fund. Amerisur is in a strong position on this front. CEO John Wardle is based in-country, he has been in place over 10 years and he has a track record of getting things done in a country where this is no easy task. He’s also survived through the cycle as oil prices have ranged from $36/bbl to well over $100/bbl and all the way back down again during his tenure.

Time for the back of an envelope…
Making the VERY rough and arbitrary estimate that seven out of 14 wells and the increased perforation at Mariposa provide 7,000 bopd then current production could double by mid-2019.

Current sell side analysts that provide estimates have well below this sort of production increase in their estimates. Most analysts seem to be clustered around the 7,500-8,000 bopd range for 2019.

See recent notes from GMP FirstEnergy (here) and Arden Partners (here).

Undertaking some basic scenario analysis, below are four scenarios for 2019 production. The two variables we’ve used are:

Whether the lower production this month is an aberration or not, in which case we model 2018 exit production at either 5,000 bopd or 6,000 bopd; and
Whether any drilling success gets tied-in on time around March 2019 or it slips to Mid-2019:
AMER prodn scenario analysis

As I say above, the analysts are clustering around 7,500-8,000 bopd and so look to us to be forecasting around the pessimistic scenario.

At 7,500 bopd, Cash Flow from Operations (CFO) could range from $47-68m depending on oil prices (assuming they stay in the current 1-year range of $50-$75/bbl). That implies a Price to CFO of 3.9x-5.8x. Not a demanding multiple.

At 10,000 bopd CFO rises to $62-91m, and a P/CFO of 3.0x-4.4x. At 12,500 bopd CFO rises to $78-114m, and a P/CFO of 2.4x-3.5x.

Therefore, the market is, in our view, pricing in even more pessimism than the analysts.

The upside potential relative to downside risk over the next 12 months, combined with the active newsflow, is why we like it.

To conclude
I deliberately chose a share that has production because I’m not a fan of pure exploration plays as candidates for a portfolio. These companies with production and cash generation still bring a lot of risk but the risks are easier to understand and the cash flow allows these companies to survive when there is an inevitable slump in oil prices.

As I outline above, there is a lot of subjectivity in shares like Amerisur and we need to be comfortable with those risks before we add them to our fund. The same goes for anyone looking at this sector.

[whiskeyinthejar] 08/6/2018 17:54

Producing E&Ps like AMER can bring interesting risk-reward profiles. Analysts & Market look to be pricing for the downside...

[lucyp00p] 08/6/2018 17:07

I couldn't agree more.

[kipper62] 08/6/2018 15:53

Lucy. As a 'value investor' carried along by the unfullfilled promises of the BOD since 2014-2015 when my large 'value investment' multiple purchases ranged from 50 to 60p, I have watched a steady decline in the 'value' of my 'future investment' dwindle down to 16p. Since then I have heard so many speak of 'future potential' when the evidence is to the contrary. That is why I have resorted to being an ocassional 'trader' along the way in order to try to re-coup some of the losses sustained in believing the many 'forecasts' in RNS's and unwavering faith of commentators on BB's. How many more years should I wait to realise this 'future potential'which always seems to be over the horizon?
(No sarcasm implied Lucy. We are all travelling on the same train....just wish it was a gravy train !)