I must be missing something

Saturday, Nov 17 2018 by

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.

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Amerisur Resources plc is an independent full-cycle oil and gas company. The Company's principal activity is investing in oil and gas exploration and development in South America, principally in Paraguay and Colombia. It operates through oil exploration and development segment. It operates in Colombia, Paraguay and the United Kingdom. In Colombia, it is an operator and has interest in the Platanillo block, which includes the Platanillo field, an approximately 11,341-hectare block located in the Putumayo Basin. It has interests in block Put-12, which is adjacent to Platanillo. It also has interest in Put-30, an approximately 38,514-hectare block. In addition, the Company has an interest in the CPO-5 contract, located in the Llanos basin and a working interest in the Tacacho contract, located in the Caguan-Putumayo basin. In Paraguay, it owns over 5.2 million hectares covering approximately five oil and gas permits in the Paraguayan part of the Chaco and Parana Basins. more »

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40 Posts on this Thread show/hide all

skinner66 23rd Nov '18 21 of 40

with the loss of 50% for funding, as in dragons den if any watch, its better to make money with help than nothing. im no expert but i see this a good thing, any thumbs down please put your view,

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gus 1065 24th Nov '18 22 of 40

In reply to post #421384

Hi LongValue.

Interesting that (the cynical side of) you take the transaction as an indication of Amerisur Resources (LON:AMER) management lack of confidence in the Indico-1 well prospects. Presumably the investor, Occidental Andina, is on the ball and has done its data due diligence and takes the opposite view. OA presumably think their investment is a good deal at this price. As part of a £46bn market cap US oil major, they are hopefully better resourced than Amerisur to assess the position and invest accordingly. This said, given the previous divergence between Amerisur’s commentary and performance, part of me shares your general cynicism!

One other thought on the transaction is the potential M&A scenario. The whole of Amerisur Resources (LON:AMER) at say 30p a share/£400m would be little more than a rounding error in the numbers for Occidental. If they’re keen to expand their activities into Colombia with this particular combination of assets and infrastructure, why not take full control and all of the upside? If not now, maybe at some point in the future? Different set of circumstances, but similar to the situation a couple of years ago when Delek Oil first invested in and then took over Ithaca Energy once the latter had proved up its reserves in the North Sea Greater Stella field (although as a shareholder in Ithaca at the time I recall feeling short changed that Delek got the deal at a knock down price).



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LongValue 25th Nov '18 23 of 40

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.

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gus 1065 26th Nov '18 24 of 40

Thanks for the reply LongValue. Makes sense.

Interested to note John Wardle/the CEO’s investment company bought about £1m of Amerisur Resources (LON:AMER) stock on Friday at just over 12p/share.



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LongValue 26th Nov '18 25 of 40

In reply to post #421624


With the share price up some 15% on today's opening, I would have thought it a little odd if the rest of the Board did not follow through with sizeable purchases. It would certainly convey confidence in the company's new strategy.

Incidentally, not having skin in the game is an accusation that could not be levelled at Peter Levine the CEO of President Energy (LON:PPC). A not dissimilar sized Latin American oiler. In his case, he holds some 30% of the stock.

Even after the recent purchase by John Wardle, he barely owns 2.5% of the company. And my understanding is that most of the stock he owns was awarded through share options rather than bought on the open market.

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Edward John Canham 10th Dec '18 26 of 40

In reply to post #421769

Amerisur Resources (LON:AMER)

Strike oil at CPO-5.


I would be grateful if an oiler could translate into layman's language - sounds good but my experience here is limited.


Edit: (30% stake)

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LongValue 11th Dec '18 27 of 40

As yesterday's RNS outlined, the Indico-1 well came in far ahead of expectations. And, obviously, the upside for Amerisur appears substantial. What this means for shareholders, I am unsure. For starters, this project is led by ONGC and not Amerisur. To put it politely, the former has been very conservative in its approach to CPO-5. And what is really needed are flow rates. Just how productive is this well?

Possibly as a result of Amerisur's ingrained habit of over-promising and under-delivering, the market may really want to see the numbers. The stock price is up some 20% on the announcement but, in my opinion, it could go a lot higher subject to delivery and, of course, the oil price.

However, the company now seems to be very dependent on decisions made by the Indian state oil company and an American multinational. The impression that I get is that the only likely buyer of Amerisur will be OA and OA will not begin drilling until 2020. So the company is unlikely to be sold before then. It also seems extremely reluctant to pay a dividend.

And something that I think most new shareholders may not have taken on board is that almost everyone who has bought into the company over the last five years is underwater. I would guess there are many investors who are simply aiming to get their money back and who will sell at the earliest opportunity.

Am I tempted to get back into the stock? No. If it drilled Indico-1 in May 2018 as it promised then I would probably still be a shareholder. But it seems to have issues in its core Platanillo producing area. Moreover, the only exit route for investors appears to be the sale of the company and that, in my view, is going to be some way off and at an unknown price and probably to a buyer who holds most of the cards.

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LongValue 3rd Jan 28 of 40

In reply to post #421624

The figures say it all. When this thread began, Amerisur's stock was languishing at around 10.5p. As I write, it sits a little under 18.5p. Why? Firstly, Pintadillo-1 proved successful. Maybe not as successful as anticipated but still reasonably successful. And Indico-1 came in ahead of expectations. Even its Stockopedia rating has dramatically improved. It's now a “Super Stock”. Just a few months ago it was a “Sucker Stock”. But there you go.

Should its CPO-5 block prove to be as promising as the company is suggesting then its development could well be transformational for the company – even with only a 30% non-working interest. And it might be worth remembering that Amerisur picked up this asset for peanuts as part of a deal that it did when oil prices were in the doldrums.

The one downside may be the performance of its core Platanillo assets. But this will probably become clearer when it publishes its first quarterly production figures in the next two weeks. There seems to be an assumption that its recent successes can be added to its current production. Few seem prepared to accept that it might be replacing it.

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Edward John Canham 3rd Jan 29 of 40

In reply to post #432078

The market seems to be impressed by the Indico-1 result, although I think it'll be some time yet before they can confirm just how good it is, although the immediate decision to drill a further 4 wells around it bodes well.

However, think you're right to point out the uncertainty over current production from Platanillo. This has not been reported on since mid October and in the run-up to that report production had been falling/static at best - so who knows what the current situation may be. In fact it was a pretty brutal cutting of the information flow which worried me at the time and still does.

The one thing I would point out is that there were a couple of significant director buys reported today which gives some comfort - but only time will tell as always.


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Lordyjordy 6th Jan 30 of 40

Good evening

Ive just read this from ongc videsh


Now if indico and mariposa are connected and they are 6.5km apart - is this not a huge find? John wardle seems to agree in his latest rns. What are the ramifications of this. I'm very sceptical of the language (promises) made by amer but for ongc to release this has got me thinking it could well be.

Also I didn't realise that john wardles purchase of shares a short while ago was for nearly a million pounds. In relation to his previous holding that's some vote of confidence?

I was very tempted to buy more of these at 10p. I'm tempted now at twenty but would like to see the production figures before I do so. Can't help but feel there is a problem as long value has said previously


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Edward John Canham 7th Jan 31 of 40

In reply to post #433168

I'm just watching (albeit with a small but rapidly increasing stake) with a bemused smile on my face at the moment.

The directors' buys are saying this is huge - the Bulletin Boards have been massively active this weekend - hype or fact - no idea. (The point that a large company like ONGC describes it as a significant discovery perhaps gives some credence to the hype).

Would love to hear LongValue's take on this weekends speculation.


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LongValue 7th Jan 32 of 40

In reply to post #433193

Phil, the keyword appears to be “Speculation”. A quick scan of much reported on one bulletin board over the weekend leads me to think that some private investors are staking a great deal on CPO-5 without fully appreciating that ONGC, the Indian state oil company, is the operator with a 70% interest. Should a well come up as a duster, how will the latter react? Will it plough on regardless or put its plans on hold? It may even choose to "Sweat it out" and force Amerisur to sell at a price it dictates.

But, as I have said before, the assets behind Amerisur appear strong. For whatever reason, the Board has been unable to unlock the potential. This time it could be different. The company has four wells primed to go on CPO-5. And the farm-out with OA will kick-in over the next three years. I would also guess that the institutions are taking a far keener interest in the day-to-day management of the company than has been the case in the past.

If I was currently an investor, my most immediate concern would be the forthcoming production figures. Is any uplift in production from CPO-5 simply replacing dwindling production from its core Platanillo field? And remembering that CPO-5 production is sold at the wellhead while its Platanillo production goes through its OBA pipeline.

As an afterthought, it may also be worth considering the time, effort and attention that the company gave to exploiting the N-Sands anomaly with its Pintadillo-1 well. This came up dry in December 2018. Although the well was partially successful with a discovery netting almost 600 BOPD, its main target was not successful and this was based on 3-D seismic in an area where it had great knowledge. Developing CPO-5 will not be without risk and cost.

Incidentally, I have written about Amerisur and give the reasons why I bought the stock as well as why I sold it on another thread for those who are interested.


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LongValue 22nd Jan 33 of 40

The update released this morning, in my view, points to a very disappointing 2018 but possibly a very exciting 2019. In terms of production, it produced some 423,386 barrels of oil in Q4 2018 (Q4 2017: 588,360). Put crudely its production has fallen by 28% year-on-year and without its share from Mariposa-1 on CPO-5, the fall would have been even greater. By the way, tucked inside this update is a statement outlining how the company made no sales from its Platanillo assets in December 2018 due to the low oil price. Instead, it chose to store the production. Not a major issue but it will distort the final results for 2018 and 2019.

The real and possibly very substantial upside lies with CPO-5. This is not only lifting or should I say replacing its Platanillo production but it's also giving a major uplift to the company's reserves. And it does offer very short-term gains through a drill ready programme. Plus the prospect of further development later this year. However, from reading the RNS it's not made clear that Amerisur is the junior partner in this field. The speed of travel will be dictated by ONGC.

The company plans on being busy with a variety of work in the Putumayo region over the next year. But just how accurate its time frames are given its record is anyone's guess.

Cash will be a key figure for investors when the company's final accounts are released. In terms of cash accrual, 2018 should have been a strong year for the company. But I suspect that production from the Platanillo is more expensive than most investors realise.

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mercury61 26th Mar 34 of 40

Today RNS Amerisur Resources - Calao-1x Exploration Well Was Drilled To 11,445 Feet, Ls3 Reservoir Was Logged And No Hydrocarbon Potential Was Identified
Through Q1/19 Working Interest Production Is Expected To Average Around 4,600 Bopd
At Platanillo Production Averaged 3,000 Bopd With Oba Throughput Around 2,000 Bopd
Down over 15% at time of writing. Could be more downside?
Disclosure. I did hold.

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LongValue 26th Mar 35 of 40

Just how painfully slow progress, or the lack of it, has been at Amerisur Resources (LON:AMER) can be seen from today's RNS. Basically, its Calao-1X well, on its much-vaunted CPO-5 block, has come up a duster.

Something that I think should be more concerning for investors is the year-on-year decline in oil production. If we look at Q1 2018, its average production over the period was 6,687.5 BOPD. It now expects production over Q1 2019 to average 4,600 BOPD. That said, production from a key CPO-5 well was choked back to allow the drilling of Calao-1X. But it does represent a 31% drop in production over the same period a year earlier. Even if we add back that lost production of 770 BOPD, the fall is still around 20%. And this is after what was supposed to have been a transformational 2018. Just as concerning is the decline in OBA throughput. This appears to have gone down from an average of 5,530 BOPD for Q1 2018 to just 2,000 BOPD for Q1 2019. Important because barrels flowing through its OBA pipeline are higher margin.

Incidentally, why the company waited so long before releasing the Calao-1X result is unclear having spudded the well some 54 days ago. But it may reiterate the fact that it's definitely the junior partner in its CPO-5 block. Basically, its partner will decide on the news flow and, presumably, the pace of development.

On a more positive note, earlier this month the company booked a substantial increase in its 1P reserves of 3.88 MMBO to 17.82 MMBO representing a 28% increase on a year earlier. But this was only due to an increase in its CPO-5 reserves. Its Platanillo reserves are falling.

Whether its recent acquisition of the remaining 50% share of Put 8 for US$19.1 million will reinvigorate its Platanillo assets is yet to be seen. In the meantime, it appears to be taking action to increase production from its currently producing Platanillo wells.

Noticeable by its absence and something that the company never opens up about to private investors is what it has referred to in the past as “Social issues”. This is in regard to the indigenous communities living in its core producing areas. There seems to be the potential for these issues to disrupt or even halt production. And there may even be problems for the operation of its OBA pipeline, running under the Putumayo river. The Siona people who live along the shores of the river have claimed that the company is responsible for polluting the river. This dispute is ongoing.

At the moment, I still think there are other oil companies with greater control over their own destinies and more potential upside than Amerisur.

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LongValue 10th Apr 36 of 40

Strange but what I find most telling from Amerisur's final results is what they don't reveal. But first, let's briefly examine what they do tell us. Revenue is up some 28% to US$108.2 million. Adjusted EBITDA is up 72% to US$34 million. And not surprisingly, operating profit has shot-up – rising from US$0.3 million to US$11 million. Its cash pile has increased moderately to US$44.1 million (2017: US$41.3 million) and it has no debt. Importantly, its 1P reserves have increased by 27.8% to 17.82 MMBO. On the face of it, a reasonable set of figures.

However, in what was supposed to have been a transformational year for drilling with a programme of up to 16 wells (It managed just two), average production is up only 10% year on year. The company has obviously hugely benefited from relatively strong oil prices. Its average sales price per barrel has risen from US$50 to US$64.8. Although its cash balance has increased by around 6.8%, it made no major acquisitions during the period. And post-period it has spent some US$19.1 million on acquiring the remaining 50% stake in Put 8. So presumably, it's cash position is now substantially lower than it was at the year-end.

Where I have serious reservations is in terms of several phrases dotted about its report. Such as “Social problems”, “Sensitive operating environment” and “Potential challenges”. These seem to be in reference to its core operating area and its OBA pipeline. No further information is provided and it's really up to investors to do their own research. But they appear to have the potential to halt or disrupt production. What the likelihood of this is almost impossible for investors to calculate. But the risk seems to be there. As the company points out, these issues disrupted its 2018 drilling programme. And reduced its capex for the period. They present a real risk to the company and are not set out for investors. The peace process in Colombia does not appear comparable to what has happened in Northern Ireland – the scale of the conflict, its intensity, the loss of life and all the associated issues are in a different league. Even the levels of poverty as well as the geography are dissimilar. Basically, it operates in a difficult environment.

It's also worth remembering that it's now closely tied in with two oil giants – Occidental and ONGC. It may sound impressive and the Oxy farm-out could prove to be very exciting. However, it's difficult to see Amerisur as a potential takeover target. Dismembering and selling its constituent parts could prove tricky. In the meantime, it pays no dividend and there appears little scope for one to appear anytime soon.

Not wishing to sound too downbeat, I can recall when the N Sands were presented to investors as an El Dorado. When drilling was finally completed in 2018, it became apparent that this was not to be the case. The focus then moved to CPO-5. Drilling has resulted in one success and one failure. The attention now seems to be moving on to the Oxy deal. And on the back burner is a possible expansion into Ecuador.

The company has several irons in the fire. This includes transporting other producers' oil through its OBA pipeline. It's quite possible that developing CPO-5 will make its Putumayo assets redundant. And, of course, in the next two to three years the Oxy deal is due to kick in.

However, the company has so often over-promised and under-delivered that delivery may be the only metric by which it can be judged. And that means substantially increasing both reserves and production. But as I pointed out before, there are other oil companies out there that may present a greater upside as well as greater transparency.

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LongValue 8th May 37 of 40

In more auspicious times, yesterday's RNS would probably have been greeted very warmly. The company has received the necessary approvals to transport third-party oil through its OBA pipeline. In theory, the pipeline could take more than 50,000 BOPD. However, the reality is that there are bottlenecks caused by under-investment on the Ecuadorian side of the border. The building of a re-pumping station at Chiritza in Ecuador by Amerisur will go some way to improving the situation but much remains to be done. That said, Amerisur is pumping less than 5,000 BOPD through this very useful pipeline. And it has in place an agreement that will allow it to pump at least 9,000 BOPD.

There seems little or no downside in pumping other producers' oil. The company has even put in place the necessary hedging to mitigate commodity price risk. The big problem appears to be a lack of investor faith. Put bluntly, the market seems to have lost confidence and patience with the current team.

The company will hold its AGM next week – to its credit it will now be held at a far more accessible place than has been the case in previous years. If the article below is accurate then it could be a lively affair. Of course, that's presuming that institutional investors can be bothered to attend the AGM of a company where they have invested and lost very large amounts of other people's money.


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clarea 19th Jul 38 of 40

Looks like the for sale sign has been raised up circa 40% at current time

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LongValue 19th Jul 39 of 40

In reply to post #494451

Today's RNS probably comes as an enormous relief for long-term investors. In short, the company has put itself up for sale. On discovering the news, I immediately bought back into the stock.

My views on the company are pretty much unchanged: the assets are good, it operates in a difficult part of the world, the management lacks focus, it has consistently over-promised and under-delivered and it has not been run in the best interests of shareholders. For me, the first part summarises the situation. The assets can be more efficiently run by a different team.

Just how much the company is worth is very difficult to figure out but we need to bear in mind that this is not a fire sale and the company has no debt. It might also be worth remembering that the geology only tells us part of the story. Simply because the oil is there does not mean that it can be economically extracted. There are complex issues on the ground. For example, with indigenous communities and the integration of former paramilitaries into mainstream society. But I believe that those assets are first class and, by the way, so it appears does Occidental Petroleum.

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Sully8786 19th Jul 40 of 40

In reply to post #494486

Hi LongValue,

As an ex-shareholder, I also bought back in on reading the news - think the assets are undervalued by the market and a larger / non-uk operator could snap the company up at what I would hope is north of 30p.

I was lucky and sold out at the heady 60p level when I exited all oil related portfolio positions in 2014.

It will be interesting to see how it plays out - in any case my position is sized for disappointment.



Company: Dave Sullivan - Talking Stocks
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