LONDON (Alliance News) - Amerisur Resources PLC shares dropped on Wednesday after it proposed a share placing in an attempt to raise USD35.0 million so it can accelerate exploration, appraisal and development activity in Colombia.
Amerisur shares were down 14% to 25.49 pence per share on Wednesday morning.
Amerisur wants to speed up its work in the country to take advantage of the current low drilling and service costs, aiming to increase production from the current 4,400 barrels a day to around 5,300 barrels this year.
However, the extra USD35.0 million of work will be on top of its existing plans, meaning its capital expenditure budget for 2016 has increased to almost USD60.0 million at a time when the wider market is hunkering down. Amerisur believes conducting the work sooner rather than later is better as it can capitalise on low costs within Colombia at present.
Amerisur said the placing is being conducted through a bookbuilding process, which has been launched immediately, and is available to new and existing investors.
Stifel, Investec and RBC have been appointed as joint bookrunners.
Amerisur wholly owns and operates the Platanillo block within the Putumayo basin in Colombia, and has also acquired interests over the last couple of years in numerous nearby blocks in the country.
Amerisur said it will use the USD35.0 million to drill five wells in the country, two of which will be step-out wells, plus a 3D seismic programme.
The 3D seismic will be conducted over the Coati evaluation area within the Temblon field and start in the second quarter of this year. That programme will cost USD12.0 million.
Two step out wells on Plantanillo will cost USD9.0 million in total, or USD4.5 million each. The first one will be drilled in the second quarter followed by the other well in the third quarter.
The remaining money will be spent on the PUT-8 North Platanillo West well to be drilled in the fourth quarter this year at a cost of USD4.0 million, and on the Coati Development well at a cost of USD5.0 million. The last well, PUT-8 South N Sand anomaly well, will cost the remaining USD5.0 million, but will not be carried out until the first quarter of 2017.
Although that work is costly, Amerisur has decided to fund it by raising funds from the placing despite reporting a cash balance of USD40.0 million. In addition, Amerisur has no debt and undrawn reserves amounting to USD80.0 million.
Amerisur said, taking into account the extra USD35.0 million of work, its capital expenditure in 2016 will amount to around USD57.0 million, most of which will be spent in Colombia with other expenditure in Paraguay.
Amerisur said it expects 2015 full year production to be around 4,400 barrels of oil per day, and said the average price over the full year will be lower than the average reported in the first half of the year.
Although oil prices remain under pressure, the company expects to report a cash operating cost of around USD25 per barrel in 2015, which should provide a healthy margin.
In 2016, the company expects production to rise to 5,300 barrels a day, and plans to exit 2016 at a production rate of around 7,200 barrels. That operating cost will also fall to around USD15 per barrel.
By Joshua Warner; joshuawarner@alliancenews.com; @JoshAlliance
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