Member Info for JP2000

Is there any evidence about rig availability? Another explanation could be that ONGC are a large corporate bureaucratic enterprise, the financial year runs Apr-Mar and that once budgets are assigned that's it for the year. There might be some headroom if other Colombian (onshore/offshore) projects are delayed but otherwise quite difficult to make in year changes to CAPEX. The AGM comments re fulfilling A3 requirements seem positive and suggest ramping up exploration next year.

Thanks Jux. The pp presentation had a slide on the drill programme, though nothing on timings. Can you shed any light on that slide?

Much of the exploration can be funded from retained earnings provided there’s no divi or buybacks. Where they’ll need debt is for development; OBA, RODA, CPO5 pipeline, production facilities.

http://www.controlhidrocarburos.gob.ec/wp-content/uploads/2019/05/Prod-Mensual-Fiscalizada-14-MAYO-2019.pdf

Not immediately apparent they’re pumping any 3rd party oil at the moment despite the tanker delivery.

http://www.amerisurresources.com/images/rns-pdfs/AGM-Presentation-14-05-19.pdf

Drill programme remains in tact.

9-18,000 bopd

CYB, there are only two fields so not difficult to calculate. AGM presentation likely to be released 9.30-11am.

Multiple rigs for CPO5 is highly desirable but not AMER's gift to make. Why set unrealistic expectations?

Yes & no. Deal subject to regulatory approval so not sure if the funds have transferred and $15m VAT refund to offset, net cost $4m

Why 2000bopd?

No new operation runs at full capacity on day 1.

Current operational capacity c9000bopd, expandable to 50k but lead times (6-12 mth??) even to add 5000.

Assuming 3-4 Put drills over the next 12 mth, only takes one gusher to utilise spare capacity.

The plan looks sensible.

Wilec, turn the question round, what news flow is expected soon because that’s the main driver for SP.

AGM, a new presentation and video, update on drill plan.
Platanillo in fill drill spud.
Sol1 spud
OBA 3rd party permission
Put 8 farm out (possible not guaranteed)
Seismic results

the simplist way to get a revaluation is deliver bopd and solid operating cashflows. If AMER grows production to 10,000bopd which is eminently possible in 2019, then SP will re-rate. Two notes of caution, GTE is also down and the oil sector is unloved, secondly ONGC call the shots in CPO5 and they appear more interested in exploration rather than maximising production.

Must have missed something, what's your basis for predicting Sol failure, you've reviewed the seismics (not in the public domain) and deduced there's no enclosure cap?

The difference between Calao and Sol is expectation and hype. Nothing other than production is priced in and even then many would say barely priced.

X factors; CPO5 23%, Plat not sure either 0 or 8%, they never say except a very old slide said 8% tax which could just have been the baseline tax.

All blocks pay baseline royalties 8% up to 5000bopd, then pro rata to 20% up to 125000bopd

Also a high oil price tax, very significant but details never disclosed.

CPO5 has a 2% royalty payable to previous owner.

When JW raves about CPO5 being “low cost production”, that’s absolutely correct compared to offshore. He omits to mention baseline royalty, X factor royalty, HOPT, 3rd party royalty and corporation tax.

Government royalties collected at wellhead and are a reduction in revenue in P&L.
HOPT & 3rd Party payable later, contained in Cost of Sales.

Pavo delayed based on Calao duster, next CPO5 drills all this year Sol, Aguila, Indico 2 &3.

Think one drill into Coendu (Put 9&12) and one drill into Platanillo so 6 drills in total.

Sol & Aguila are low resource probably higher risk than the other drills but important to establish LS3 model.

Unless you're the operator you don't control the outlook.

Put 8 demonstrates many of the issues, long delayed by Vetra due to the GTE sale, we had a capable new partner who'd have been drilling Miraparriba-1 at this very moment. Is the current plan to retain 100% or farm 50% to Oxy, perhaps Oxy is part of the reason for new seismics and pushing drill plans out to Q4'19 which we all know means 2020. There's been no coms on the economics and they need two drills just to break even as the 100% owner operator, worse is the opportunity cost of CAPEX which could have been used for other drills. Not saying the prospective resources don't justify the acquisition cost but its delayed operational delivery by at least 12 months and is counter to the farm out/risk reduction strategy so from that perspective it seems a negative in the short term.

Bays, you're completely right, AMER has been treading water for the last 3 years due to JW's wheeler dealing and that's got to change, its all about operational delivery and that only happens with new blood.

The latest ONGC tender is out for oil sales.

A couple of interesting points:

1) ONGC appear to be selling their 70% separately to Amer.

2) a couple of tables outing the relative values of API, worth a read.

http://www.ongcvidesh.com/wp-content/uploads/2019/04/Colombia-OIL-SALE-TENDER.pdf

AMER uses the mushroom technique on shareholders (kept in the dark and fed a diet of horse ****), unlike other O&G cos they don't reveal the drill risk or NPV, the only thing we know is it targets 4mmbo which net of taxes is c$40-80m (difficult to be more precise, co's netback and cash flows don't readily reconcile), AMER gets 30% so impact is up to 1 pence on SP but not much else. In fact we know very little about Sol1 at the moment, could there be any upside, is it purely standalone or part of a regional play, the latter would be significant. suspect it will be hyped up for the AGM.

The annual report 9th Apr slide 31 but page 29 talks about possibly using a second rig for Sol1 but no mention today.

Question is when did they take the decision to drill Sol1 because JW was angling for Indico2 immediately after they announced Calao results so sometime between 26th Mar-9th Apr, latter date when JW told analysts rather than shareholders. Assuming 4 week mobilisation, then spud date 26th Apr - 9th May.