Poor update on the pipeline, which was the main thing going to give this a near term lift. Given that an Ecuador Govt review needs to take place first, I think we are looking at end of year now (maybe) for this to be constructed. Throw in potential Iranian oil coming to market, storage concerns in the US and US oil output as high as ever, and there is too much risk and downside to be invested here. I pulled out a couple of weeks ago and put money in airlines as at least they are rising on cheap oil, once it looks like the oil price will rise again , i'll look at oil companies including Amer. Good luck all.
"The Board considers the independent evaluation of the reserves in Platanillo to be a conservative view, which we believe would improve once the field can be brought to its full production potential. Additionally, the SCAL analysis, including definitive porosity and permeability measurement of the core samples from Platanillo-20 and the eventual commercial production from the T and N sands, plus our future drilling in the northern structures of Platanillo will have a positive impact on reserves next year."
Competent person: Technical information in this announcement has been reviewed by John Wardle Ph.D., the Company's Chief Executive. John Wardle has 28 years' experience in the industry, having worked for BP, Britoil, Emerald Energy and Pebercan, and is a trained drilling enginee
With today's reserves announcement a couple of things are becoming clear: reserves were overbooked in 2013; the pipeline is not going to happen anytime soon; and production is declining hard. What investors seem to be missing is that once Platanillo cumulatively produces thru 5M barrels, it becomes subject to high price royalty. Which in the days of $90 oil means additional 23%+, meaning cash flow per barrel would have been halved. Platanillo is now very close to this threshold. So they need to make some new field discoveries soon. For last three years they have only drilled appraisal/infill wells which have generally been of lower and lower quality (hence the negative technical revision to this years reserves). This field has gone from 45-60m bbls potential to 25m bbl reality. As every month passes the pipeline gets farther and farther away. Don't think they even have the Colombian enviro permit yet. So any talk of near term construction is misleading at best, not sure they have even ordered long-lead items. Half their production is uneconomic at current prices (nearby peer Gran Tierra still producing). So looks like this will continue to be a challenged story with shrinking production and now shrinking reserves. Have no debt cause no bank will lend on that reserve book, and now living on shrinking cash flow. Need to explore their way out of this box and this mgmt team has not had a true exploration discovery in years if ever. They have been misleading investors and cashing out options all the way down, while promising news that never comes. The stock chart looks very weak and if it breaks 25 (which it should) then 15 is next stop. Second reserve writedown in two years should cause remaining institutional holders to seriously consider selling. Leaving only bloggers and retail punters to hold the price in.
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