Amerisur has operating, cash-generative assets which fund its upstream activities (a significant number of local opportunities). There's a cash pile, a management team with experience and skin in the game. They have low cost of production (in part thanks to the pipeline through to Ecuador). The metrics speak for themselves. OK the recent spudding results have been varied and one large shareholder has been offloading chunks (though I believe he now owns less than 3%). I guess they are operating in a difficult area geographically an politically but they know it well.
Can anyone educate me as to why the recent share price moves have been "sub-optimal" to say the least?
This share looks badly mispriced to me.
Hi Gus,
OA does not appear to be investing in Amerisur. It's investing in Amerisur's assets, not the listed company. As a former Amerisur investor, I thought, and still do think, that its assets and its broad plan are sound. What I came to believe was that the management team was unable to deliver. At times, I felt that I was watching a game of monopoly. An absence of success at the drillbit seemed a perennial problem.
As for acquiring Amerisur, I agree it does put OA in pole position. But what about anyone else? And, of course, for what price? The company now finds itself caught between an American multinational and India's state oil company. Amerisur no longer appears in charge of its own destiny. I find this a little strange given the efforts that it has made to consolidate its acreage and to ensure that it has as much control as possible. I would have thought that the deal will make it far less attractive an acquisition target for all potential suitors apart from OA. In some respects, this seems like a partial sale of the company with an option to buy it at an unknown price in the future thrown in.
Whether or not Indico-1 is successful, it might be useful to remember that ONGC effectively calls the shots in CPO-5. Amerisur with its 30% non-working interest is a back seat partner. That means that the field will be developed at ONGC's pace and not Amerisur's. What does this mean? For starters, the Mariposa-1 well is still on long-term testing a year after spudding which impacts Amerisur's ability to include its CPO-5 reserves on its balance sheet.
Just a final point. As a former investor in Amerisur, something I learned was to read between the lines of its RNSs. And also to read them very very carefully. That said, I suspect that the Board may be in office but not in power. The institutions are clearly concerned about the company's direction and, in reality, could have taken over. This might be a salvage operation.
.JPG)
