Join our community of smart investors

Amerisur Resources: proof needed

After a strong six months of production, the Colombian explorer-producer is entering a make-or-break drilling phase
September 14, 2018

The clue’s in the name. More so than most London-listed oil stocks, an investment in Colombian explorer-producer Amerisur Resources (AMER) completely hinges on the resource base. For too long now, it’s failed to grow.

IC TIP: Buy at 15.4p

In the first half of 2018, production rose 33 per cent to 5,959 barrels of oil per day (bopd). Together with higher prices, that has been positive for both the top line and cash generation. To look at it another way: of the 13.9m barrels of proven oil reserves on the balance sheet at the end of 2017, 8 per cent has now been pumped. 

So, while strong production from the Mariposa-1 well suggests the reserves base could increase, investors find themselves three-quarters of the way through 2018, waiting for a reason to extend the faith for another year.

Fortunately, low operating costs and higher realised prices have led to a bump in cash. All drilling, both planned and ongoing, is now fully funded. And since the period-end, the Pintadillo-1 well has been spudded and civil works at the Indicio-1 well have been completed.

Peel Hunt expects full-year adjusted pre-tax profits of $37.3m (£28.5m) and EPS of 2.6¢ ($41.7m and 2.2¢ in 2019).

AMERISUR RESOURCES (AMER)  
ORD PRICE:14.9pMARKET VALUE:£180m
TOUCH:14.9-15p12-MONTH HIGH:23pLOW: 13p
DIVIDEND YIELD:NILPE RATIO:10
NET ASSET VALUE:18.2¢NET CASH:$37.9m
Half-year to 30 JunTurnover ($m)Pre-tax profit ($m)Earnings per share (¢)Dividend per share (¢)
201735.1-1.6-0.19nil
201867.912.50.89nil
% change+93-902--
Ex-div:n/a   
Payment:n/a   
£1=$1.30