FYI Stifel research20 Mar 2019 07:48
Amerisur exercises $19.1M right of first refusal on PUT-8: On 20 February 2019 Amerisur's Putumayo basin peer Gran Tierra Energy announced three asset acquisitions in the region, one of which was the purchase of a 50% working interest in PUT-8 from Vetra Energy subject to a right of first refusal (the right belonging to Amerisur Resources, 50% partner in the block). AMER has now exercised this right of first refusal to buy Vetra's 50% stake in the licence on the same terms, namely a $19.1M upfront cash consideration. The transaction remains subject to regulatory approval.
$20M exploration work programme unchanged: AMER has identified a number of prospects in the licence, notably the Miraparriba (4.4M bbls) and Bienparado structures, the latter <1km from Amerisur's Platanillo field. Permitting is underway to drill on these prospects, an event that is guided for Q3/Q4 2019. The company will also acquire 112 sq km of 3D seismic. The total cost of the two wells + seismic is anticipated at c.$20M.
We see a 1.5-year payback period on acquisition costs + upfront capex: The strategic significance of the PUT-8 licence to Amerisur is that it lies adjacent to the Platanillo field with its wholly-owned OBA pipeline infrastructure.
Attractive terms and netbacks: There is a 2% X-factor royalty and 0% high prices tariff on the first 5M bbls of production from the licence. Initial production would benefit from existing tax losses acquired from Platino Energy. Initial, pre-tax netbacks may be in the range $35-40/bbl at current commodity prices, normalising to ~$25/bbl on a post-tax basis after 1-2 years.
At a production rate of 2,000 bbls/d, initial cash flows would be $25-30M/yr, recouping the ~c.$40M initial investment ($19.1M purchase price + $20M capex) in ~1.5 years.
NAV and financials updated: See summary on Figure 1 (NAV) and page 2 (financials). Factoring in the additional capex, we now forecast AMER to end the year with $28M of cash, vs $47M previously.
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