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Juxtapose
For example, average Brent in 2018 was $71 per barrel. In 2018 AMER’s average realised oil price was $64.8 per barrel. And as it happens the 2018 average for WTI was $64.90.
Do you see what I’m getting at?
Juxtapose
Have a look at the AMER’s average realised oil price over any given period and see which it is closer to - the applicable WTI average or the applicable Brent average. The answer may surprise you!
Ross DOES speak dross.
Take the last post, for example: we are Brent pricing not WTI. Whilst not of itself a hanging crime, it is indicates a poor grasp of key company data.
rossannan - yeah, but certain AMER assets look more attractive the lower the ppb goes. should be win win. higher ppb, higher the reserves. lower the ppb, the more our Oil Transporation Company licence and infrastrucre saves in transports costs.
For the avoidance of doubt, WTI being over $55 is not the significant and sustained oil price rally that could change the parameters of what is possible here, though every little helps.
Ross does NOT speak dross Imho (neither here nor on the Cerp BB .. which is a pity as it's a nickname that always makes me laugh :-) )
If the “For Sale” sign hadn’t been stuck up, the current share price, frankly, would look even more crackers than it currently does.
Everybody can see that the share price has been walked down for precisely that reason. "How can a company valued at 10p be worth more than double?" says the charlatan. Hence the manipulation down from 20p in a bid to lower the final sale price. But, ultimately, such playground tactics are for kids. It is the value of the assets set against the costs that matter. The real numbers. And the more assets that are proven...
@Rosannan Fair enough. Your opinion is respected. In my view Indico 2 will deliver a substantial uplift in reserves and will boost the confidence of the market in CP0-5. Therefore, the current valuation of circa 17.3p holds no demons for me.
My plan was always to review my investment at the 2 year stage, which is circa end of 2020. Whilst things have been much slower than i had hoped for, I cannot see 2020 being anything other than a very busy year for the blocks AMER are involved in.
In 2020 ;
OXY will drill the Putamayo block ;
ONGC as slow as they are are clearly setting themselves up for a substantial increase in drilling activity on CP0-5 ;
Put 8, which is currently awaiting regulatory approval for change of ownership and drilling inside the block acreage, should achieve this by year end, setting things up for at least 2 drills in that year.
I am more than happy to wait that out. Those developments even in a restrained oil pricing environment should see some good value added from these levels. The sort of value that should have come this year.
Yes there is argument that AMER is a serial underachiever, but in 2020 much of the work is out of their hands and there is an argument to be had that 2019 was needed in order to enable 2020 to really deliver.
So whilst there might be some short term pain, I don't have any concerns. I have a greater concern that the BOD bail at a level that is too far below what all of that 2020 could potentially achieve.
BigBiteNow - You've basically stated my exact thoughts. The maths says one thing, our experience says another. Let's hope we're happy somewhere in the middle!
BBN
As I have said before, 2 things could change my 24p (or equivalent break up valuation) target - a significant and sustained oil price rally and, if the process lasts that long (it might well), an upside surprise from Indico-2. I accept that currency fluctuations could also play a part. In all this I am assuming that now the cat is out of the bag there is no going back, but if the BoD think otherwise that could be a painful scenario for shareholders in the short term.
As for the market getting the valuation wrong, well what exactly does it have to go on?
At the moment we have one "possible" offer but no firm offer and an intention to move forward with such an offer. Other than that we have a confirmation that "multiple parties" have agreed to take part on the process.
Therefore, the market has to factor in the possibility that these parties may walk away from the table. If so we are back to valuing AMER on what it has and what it is achieving to add further value to the business. Prior to the offer that was valued at 12.1p. Since then we have had very little to add to that and Brent oil has pulled back a couple of dollars.
Therefore, the market is highly likely hedging its bets until it has more information to work with. So to say that the market is factoring in a good percentage of the final valuation is for me incorrect. It is more about the risk reward between achieving the rise and suffering the fall should the process fall through.
One other key point I would like to add is that whilst AMER operational progress has been limited this year, there are at least 2 sizeable drills that are on the horizon, they being Indico 2 and 3 appraisal wells.
If the takeover isn't completed fairly speedily then at least one of those drills could well be completed. If it delivers the sort of additional reserves that have been strongly indicated in the previous CP0-5 updates, then the whole valuation will need to be reviewed, as will the starting point for it.
That may or may not be placing pressure on potential suitors interested in CP0-5 to finalise and position their bids at an appropriate level to ensure that their bid is accepted and Indico-2 never influences the process. If I was on the team of one of the suitors it would certainly be on the agenda.
That is yet another factor that throws any assessment of the market's valuation or indeed the willingness of the potential suitors to push their offers higher than the norm. For all we know they may factor in circa 50% of a good success at Indico in order to ensure they get it over the line and achieve the greater overall prize.
We are very much in a wait and see stance with the market likely to react as the risk is seen to either dissipate or grow.
man, i'll miss this BB when it is gone.
Rossannan As it stands, I tend to agree in part at least with your general direction.
This is because my previous experience of AIM listed takeovers tends to demonstrate that the sort of fair valuation that PIs believe should be achieved does not normally come to pass.
However, there are several differences here that should not be so easily written off simply because history says that is not the normal way of things.
Firstly, there is no hostility being demonstrated by any interested party. By that I mean M&P own no shares in AMER at this point in time and with the takeover panel in play, they cannot purchase shares without it being notifiable. Under takeover panel rules they also cannot hide said purchases through other parties, so the chat about funds purchasing on behalf of them (which I was involved in too) was incorrect. Assuming of course that everyone is playing with a straight bat, which I do until demonstrated otherwise.
If M&P intended to go down that route then they surely would have started to accumulate shares prior to making their approach public and allowing AMER to trigger the strategic review thus making everything public.
Secondly, AMER are choosing to strategically review the business, which includes a possible sale of the business, be it in parts or as one entity. At the end of that process if they have not received an offer(s) to their liking then they do not need to sell.
The combination of these two facts means that the process comes down to what someone is willing to pay and the BOD of AMER openness to accepting that offer, knowing it has to be put forward to all shareholders.
Of course the key is winning over the BOD and getting an offer recommended. Experience elsewhere tells me that this can be done at a level that is significantly below that which PIs would believe to be acceptable. However, it will be about balance and what the major shareholders indicate is an acceptable point to bow out.
But as i say the fact that no interested party holds any position means that the starting position of 12.1p (18th July day prior to Strategic review announcement),is not entirely reliable as a start point for your argument. Nor do previous historical cases including the ones I have seen hold a great deal of bearing either.
This is especially true when we fact in the company statement that "multiple parties have now agreed to participate in the FSP through the signing of a confidentiality agreement" (RNS 9th Aug). That fact alone ups the anti and removes a good percentage of all previous "AIM oiler" takeovers.
So to simply base the result of this particular process on previous experiences is for me a mistake at this time based on what we know to date.
That said I remain cautiously in the range of 24p - 30p camp because I expect the final price to fall significantly below the 'independant' valuation because that's AIM life. However, AMER has as good a chance as any to buck that trend.
Roth1
Okay, put it this way - give me one example of an AIM oiler that went for more than twice the share price it was at when it went “in-play” and within a reasonable timeframe (e.g. without the process stopping and starting again months later).
I often post this in response to Ross, but in this case it has my detailed take on the OXY part of the deal:-
As per usual listen to negative Ross or realise this is what we are playing for.
As per ColonelDrake:-(+edits from me)
Rough Calcs
1. CPO-5 to ONGC for premption rights so goes for industry base of $10pb to $12pb per barrel and $1 or $2pb for p50 resources or portion of 2P. Estimated value circa $250m (conservative)
2. Plat based on 4000bopd and 15mmboe $175m
3. OBA - Strategic worth $75m to $100m
4. PUT blocks 50% - $100m to $150m now OXY involved.(replace with $217m per my post below)
5. Cash in bank of $60m approx (based on reduced capex for 2019)
Total $650m to $750m (i get $800m)
Equates to ÂŁ520m to ÂŁ600m(therefore ÂŁ640m)
Based on roughly 1.3bln shares in issue (assumes all management options exercised)
Value 40p to 46p (im at 49p & comes with the bonus of telling my boss to go feck himself)
I also posted :-
Dont forget 30% CPO-5 is held in a separate subsidiary company & is therefore already packaged nicely to be sold separate from the remaining Amerisur assets.
Regarding the Oxy valuation.
The 50% we currently retain has control rights (so should be worth more than the bit we sold+we didnt take the highest bidder back then (now we would)) therefore :-
Our 50% should read $93m + $19m = $112m+(5%Control est) + (5%highest bid est) = $124m
+The Credit for the bit we sold $93m + $19m = $112m less cash recieved $19m = $93m Oxy Credit.
Therefore the total is more likely $124m + $93m = $217m (less any 50% of any OXY spends incurred (no idea if they done much yet)).
That total includes nothing but the OXY involved land.
A few points in respect of your valuation:
1. I agree this situation has been in the offing for some time. Indeed if an approach to buy the company had not been made, I think Amer would have been engineering one!
2. I expect the first Indico appraisal well to be spudded in the next two weeks. Having got so close to this and with it potentially having a big impact on the companies valuation, I can't see them selling the company before the result is known. Either that or a potential buyer has to include some up side in their take out price for a positive result.
3. The $93m work programme Oxy committed to as the price for 50% of the Putumayo blocks has a net value to Amer of $46.5m (Oxy will be 50% beneficiaries of the seismic and other works). So the total value of the whole of the Putumayo block I put at around $100.
Given the above points my valuation comes out pretty close to your own.
PS. Rossannan - Don't know what you get paid for spouting your negativity but you are rubbish at it. Lazy and totally lacking research.
Someone makes an educated guess of a price over 24p.
What are the chances ROSSY turns up like to discredit - ill start by saying 100%.
I thought we had got rid of the deramper fool, but seems not.
A "risk off" market is pricing in the worst possible case, no deal.
Volume is low, indicating that the market is following the BOD's advice, to hold. Some selling is taking place by funds who have to liquidate stocks to fund cash withdrawals. There have been brilliant buying opportunities on AMER and so many of us will be "maxed out" on AMER. It is the prudent balancing of greed and fear: there simply is a limit to how much one should have in any single stock, whatever the potential near term upside.
As PP says, the house broker is going to be close to the mark.
PP
There is no OXY cash: the $19 million for PUT 8 will have been paid by us out of OXY's prepayment and the $93.25 million will be largely "pay as you go" ie they stump up for the seismic etc. as the contracts are signed (mirroring the financial prudence in the PUT 8 scenario). It is not in the year end accounts, but then, of course, the farm in still required approval ANH.
bigsmoke
Of course we are, and the market’s guess should not be ignored, not least because it sensibly excludes the poke that the pig is in!
Rossy- I was not aware we were involved in a game of guess the weight of the pig
pickedpeck
Sounds like wishful thinking - do you really believe that the market could have got it that wrong over the last few weeks?
So as it has been suspiciously quiet I am going to try and call it...
I think some inflated values have been bandied about, but I think we’ve been at this a lot longer than the company has let on. The twitter account dried up mid June rather than mid July, having previously had something to say every few days it went quiet a month before the offer became public.
Amerisur themselves reckon the NPV10 2P value of CPO5 based on Mariposa and Indico is $174m, but that’s pre Indico 2.
Platanillo I think would have a value of $125m or so based on $8 a barrel in the ground, I know it could go higher but the oil price would keep it low with Brent back below $60.
The balance of the Putumayo blocks $200m based on Oxy’s level of interest, could be lower.
Cash in the bank probably somewhere near $60m
Value of OBA? Real terms stands about $20m capex but more importantly 3 years of time. $40m conservatively?
Whichever, that comes out to $600m, or give or take a few quid £500m at the current exchange rate, 40p a share. Discount a bit off for unfounded optimism and you get to Stifel’s 37p.
In other words I think the house broker told us the sale price right back at the beginning. Come up with that and it’s a goer or don’t bother as we won’t be accepting. I would imagine they got Michinoko to back the price and level of return (50% on their 25p block) before publishing the price.
So my call is a board approved offer of 35-37p from most likely OXY or possibly GTE either this week or next week ahead of the interims and also ahead of Indico 2 spudding. The logic of the timing is they will need it approved before Indico 2 potentially puts another $100m on the price, and the offer needs to preempt the interims too to avoid too many questions about where the OXY cash actually is.
If the BOD do not sell this outright or in part during this process, to protect the s/p from dumping they'd better be crystal clear with the market on the value of the 'good' offer(s) they received, that were, in their mind, not good enough. And exactly why.
I say this as the current known offer is approx where the s/p still sits and this against a backdrop of fine assets and a fine balance sheet and known other interest from significant players and the BOD explicitly telling us not to sell at the current market price: Altogether, that this s/p sits at - only - 17/18pish currently underlines one more time to me that this is a brutal market place and in the context that it could easily remain a brutal market place for a long time to come - new brutal paradigm for approx. 2 years already and global marco storm clouds now perhaps approaching too etc- I think the BOD will 'let this go' for - even considerably - less than 40+p.
35p would be a very good outright sale result imho, 30p a good result and 25p-30p an acceptable one and even 23p to 25p a bad deal that they feel they should still go for, 'all things considered' (eg and if a bunch of shares in the purchaser with clear upside potential are included as part of the transaction)
Towards finishing on a 'positive', given the BOD are seemingly good at deal making I feel this will be sold outright for at least 26p and maybe/hopefully 30p or a bit north of that.
ive said along it should be 40-46p for a realistic offer, which would be acceptable to the BOD, I cant see them letting this go for much less, after all these years of holding , its a good business with plenty of upside ,imo why let it go cheaply ???
GLA LTH Patience is key,