ShareHub13 Feb 2019 18:23
“As many ShareHUB followers know, Amerisur Resources struck black gold with the Indico-1 well in CPO-5 block, Llanos basin Colombia last year. Early in Jan 2019, the well flowed at 5100bopd. This was put immediately on short term testing and will then go onto long testing with all production being sold at the well head. It’s quick payback and instantly delivers reserves. And the markets reward… about 1p to 2p a share at present based on 16.8p. That’s around £20m improvement in market cap. That values the added reserves (approx NET 6.2mmboe) at around £3m per 1mmboe. The industry standard is nearer £10pb or £12pb for light oil offshore with infrastructure. After all costs, AMER’s profit on a well like Indico-1 is around $10m per year. (Note: Other issues like security and development performance also come into play when valuing reserves.) Clearly undervalued and with another 5 to 6 wells due in the basin this year, Amerisur shares should be in hot demand. Of course, risks remain and success with the drill bit needs to translate into higher production and stronger cash flows. The latter is perhaps Amerisur’s weakness of late. Exit rates of 7000bopd seen in 2017 have slowly reduced to rates of around 5400bopd and that’s including the recent approx 1500bopd contribution from Indico-1. That said, assuming all goes well in 2019, Amerisur could be entering 2020 with over 10kbopd. Plenty of success required to get there but fully funded, debt free and cash generative even at oil prices below $25pb, Amerisur looks ready to finally rock and roll.“
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