Member Info for pickedpeck

JTD et al, I agree there is a share price manipulation going on here. There is no rational other explanation, the company cash at the current generation rate will pass the mkt cap at some point in 2020

(~$240m mkt cap, ~$70m current cash, generating free cash flow at about $1.7m pw, ~ 100 weeks to pass $240m)

Obviously will not happen because of spending plans etc, but just illustrates how ridiculous the current position is.

Maybe it is time for a full FTSE listing, plenty of FTSE small caps with lower market capitalisation than AMER. That of course assumes they will stay public...

I have less of a problem with the missing the deadlines due to flooding than not giving an update to that effect. You can’t build roads and do ground works through a flood created by El Niño, and predicting the weather based on previous years as part of the plan turned out to be a bad idea. We would have all been much happier with a less adventurous plan that they could have exceeded rather than the other way round. Similarly whilst they did issue RNS on the floods, they did not state the impact to time lines which they clearly should have. Having said that, the cash position has to be in excess of $60m now, subtracting that from the market cap makes the p/e even more ridiculous. Any net asset value increase through drilling in H2 could make the EV and forward p/e completely insane.

It does give us the final figure for H1 production and a decent guess at revenue though. 1,078,617 barrels, at a $68 average sell price that would be about $73m revenue. Net back of $50 gives gross profit of $54m, I would take a guess of H1 EBITDA of around $35m. Against a current mkt cap of £183m that puts us on a H1 pro rata p/e of about 3.7 , long term average for the sector p/e is between 12 and 15, so on earnings basis AMER is now about 4x underpriced against sector earnings average. That’s a lot of bets against them increasing the EV with the drill bit. It also says the production decline through H1 has slowed or stopped, and tells us that the drilling is going to start this month after flooding caused 2 months of delays, so at long last that EV might start going the right direction. Here’s hoping for H2!

JTD - The spread does seem to be maintained wider recently, this is normally due to a lack of liquidity, a conscious choice by MMs to deter buyers. It makes it look higher risk, as soon as you buy you are the spread down. Maybe whoever has been selling is now out, the ATs have been level or outweighing the Os for a week or so too and now its gone quiet. Volume today is nowhere!

I bought more yesterday at 15.22, too cheap to stay there. I can't see it going a lot further down, the cash generation in the first half, drilling program in H2, possible acquisition / block targets.

JTD - Did you know it was Sinopec that bought Emerald Energy, John Wardle was CEO of Emerald.

One last late night thought, what's the investment timescale you are after? If your investment horizon is days and weeks rather than months or years then AMER may not be the right investment. I think the BoD contrary to the bulletin board view of them may be playing a pretty damn smart game, just on a longer timescale than most PIs want. We may be at the start of a multi-year run up in the price of oil, the game is to time the return right with the market. We are all happy clapping because POO is $70, there seems to be a consensus building that whilst it may level out or even drop back short term that the longer outlook takes it back to $100 and above. In that scenario that $8.69 in the ground may become much more like $30 in the ground. Maybe the timescale we should occasionally think about is 2020 rather than July. This is an interesting view on where oil is going: https://www.bnnbloomberg.ca/video/josef-schachter-discusses-where-oil-may-be-headed~1420404

Don't talk nonsense, fields don't deplete in two months, the asset still has the same underlying value. The last RNS states they have a water problem in some of the Platanillo wells, not least because much of the area has been under it for a couple of months. I expect reworks, they may even have to drill new wells into existing reservoirs if they can't fix it. However the production is there to fund the drilling campaigns and reserves expansion which my point below hopefully highlights it has. Simply put AMER like all E&P companies is valued by serious investors based on EV rather than just the profit from production, and the biggest influence on the EV is the valuation of the 2P reserves. If you look at the recent VETRA Put 8 deal @ $8.69 in the ground then the current share price plus net cash is not a million miles from that based on our latest 2P statement. In other words all drilling prospects are discounted to zero. The point I was making (possibly badly) is that the free cash flow from H1 will fund not just this year's campaign to expand those 2P reserves but also put cash in the bank for next year also. The H2 planned wells should help expand the EV, that's the message from the Board Meeting presentation - Its all about the assets not the production, but the production funds expanding the assets. The P50 prospective drilling targets are 131MMBoe for an investment of $61m Capex. The Capex can be paid from cash now after H1, if they hit the mid case that would be $8.69 x 131m, or over a billion dollars in 2P value added to the share price. That's a billion incremental that is currently value at zero. The other wildcard is acquisition strategy. Small cap E&P companies for some reason have not risen in value in line with the oil price, its not just AMER that is crazy cheap. AMER having cash in the bank and access to credit options may lead to acquisition or bidding for more blocks whilst the price is low. By get a grip I meant stop being chicken little and having a sky falling in attitude and try to remain objective. Despite the work over issues, May production last year was lower than May this year, in fact 8 months of production last year were lower than the impaired production in May this year, so maybe not as impaired as it seems. This year we should also be getting 50% more per barrel, in May last year the POO dropped below $50 and stayed there for the summer. Despite lower production, a lower price of oil, and less profit in May last year the share price was around 26p, 70% higher than today. Something stinky going on.

5.1% down on a say when the rest of Colombia is going up. 3:2 sells:buys ratio. Bad news lingers it seems, maybe people have taken the fall off in production last month seriously. Between now and mid August we should have the June production update, an overall operational update on H1 to give guidance for the interims, and we should also have spudded more than one well. With any luck we could also have a fund raising round for an acquisition or accelerated development post election. Because we have five months out of six for H1 already published in terms of production (924,551 boe so far this year), extrapolating even at May's figure gives a first half of 1,075MMBoe for the half. The average price realised must be about $67.50 , so H1 revenue would be i.ro. $72.5m. The whole of FY17 was only $92.5m. A Netback of close to $50 must be possible (last year it was $31.60 against an average of $50 per barrel sale price), so we are talking about $50m ish gross profit for the first half, maybe $25-30m net? Get a grip folks. Last year was 96% up YoY agains FY16, H1 of FY18 looks like we will see a similar % growth again vs FY17 this year.

I agree we are highly vulnerable at the moment, share price in the doldrums, undervalued and exploitable assets, and a pile of cash offsetting the purchase price. The only issue is a lot of shareholders would be unwilling to offload at even 2x this price, it would have to be a pretty decent offer to land us and I also see no one building a stake to make a move from. Arden are only different in that they are tiny, and appear to almost entirely focus on raising capital in one form or another. They are not really a general broker. That implies an acquisition target. Stifel and Arden couldn’t be that much more different in nature, global American full service broker vs small specialty AIM fund raiser.

I agree Baysil, the new broker Arden only has 38 clients and is a specialist in placings and fund raising. With the cash generation at AMER the only reason to raise funds would be acquisition, the current or even an expanded drilling campaign could be paid from cash flow. For JTD this is likely AMER trying to be predator rather than prey, fun and games and a very unpredictable near term ahead. One to watch very closely from now on, this could be a giggle.

JTD - part of my job has been working extensively with many oil and gas companies on engineering projects. I can absolutely guarantee that all the Indian companies, ONGC included, run at the speed of a striking slug in just about every way imaginable and to suggest they could possibly be dragging their heels deliberately would imply a competence level way beyond reality. Generally the Brits, Americans, Dutch, and French manage to get things done which is why they make up the vast majority of operator licenses worldwide. I would have said Europeans but having worked with ENI on a project I would bundle them with the Indians. I do agree next week could be interesting, but the number of proposed wells in such a short spa of time will need some serious management and co-ordination, beyond what I think AMER have previously achieved. Having said that I think a couple of decent hits between now and September and all would be forgiven

Interesting that they have paid $8.49 per 2P boe for Vetra. The price per flowing barrel is hardly anything, the EV is all about the reserves. AMER’s valuation really is going to be dependent on the drill bit over the next six months, the production just has to be enough to pay for the exploration it seems.

Market makers open the spread for the open of trading on most shares to catch the unwary who may have placed buy or sell orders without sensible limits overnight. Its the market makers being crooks, you need to wait 10 - 15 mom's from the open to see the true position.

Rhodi, the monthly figures for May have not been released yet, likely to be released tomorrow or friday. I do wonder whether they have delayed them a few days to link an announcement about spudding one of the Wells for this month at the same time.

Bays - PMO 12x production of AMER but only near 4x the price despite a huge P2 asset base. For long term holders the current price of PMO is still in the emergency ward, they nearly went bust because of that debt pile and still might if POO drops in the next 18months.

My oilers portfolio is pretty much all red apart from AMER, plus WTI down more than Brent. Interesting how AMER is holding up, seems like the seller backlog and pressure may finally have lifted. I am not as optimistic on the May figures, I think 6,400 to 6,600 rather than higher. It’s all about spudding wells this month though, but the price drive will likely not happen until the figures are known. Worth also noting that AMER may have to make a tradin statement as their profits will be materially ahead of expectations for the first half which concludes at the end of this month. So June and July could be game changing months.

Bays - I agree but it's about timing, and it would be madness to sell Cpo5 in 2018 or even h1 2019. By then ONGC will have upped its block valuation through the drill bit. For Amer 2018 is about the E of E&P, maximising the asset base value by turning unrisked to 2P, 2019 will bring any 2018 discoveries online. For the first time I can see a route to an exit rate for 2019 in line with (the agm presentation repeated) target of 20kbopd. If they get there do they need to sell?

I think there is near zero chance of selling CPO5, it’s obviously completely undeveloped as an asset and the current drilling campaign will only scratch the surface of what’s down there. The neighbouring block Llanos34 - from which it appears the geology of CPO5 continues is producing 55kboepd. Selling before the block is fully explored would be madness unless there was an offer they (we) could not refuse. For the less mathematical, 55kbopd is 20MM barrels a year, at $50 net back that’s $1Bn p.a gross profit, of which $300m would be attributable to AMER. How much is a potential $300m annual income worth? All conjecture of course, but you would have to have a serious capital need to give up an asset like that at any price. The only reason I can think would be to generate massive capital investment in Putamayo, but that need is a couple of years away and likely to be headed off by corporate action. More likely AMER would become a takeover target before they would sell the asset, no debt and cash in the bank would make them look zero risk if CPO5 looks likely to pay off.

The OECD thing has been going on a while, odd selection of South American countries. In general comparative values are crazy hard, but nice to see green against a sea of red today. Maybe it’s because it’s nearly June :)

Thanks for the link to the presentation Baysil, I just listened to it all. I think I may buy some more tomorrow on the dip in Brent, JW sounds like a man with a plan, and a plan b,c, and possibly d. It’s a really good presentation, honest and tackles the issues and past misses but highlights the strategy the company is following and the potential upsides. Note plural on upsides, each of the plays they are making will add value from CPO5 where the enthusiasm and excitement clearly came through to the Put blocks and the priority order, to the expansion of OBA to cope with the future put volumes. Exciting stuff, every investor should listen. I’ll look at the scrubber tech, but not just the Saudis that have sour crude. Most of the Middle East and Kazakhstan has the same problem, Russia is mixed.