Member Info for Roth1

Any sensible valuation of the company has to reflect not just the current reserves attributed to Maripos and Indico but also the prospective value of those future drills and that has to be at least two or possibly three times the current CPO5 9.5m reserves (net to Amer).

Geopark has for some time been the partner of choice for ONGC and they have a long term strategy for cooperation in Latin America. I have for some time been of the view that Geopark will probably be the successful bidder for (at least) the CPO5 assets of Amer. If that happens I can see ONGC relinquishing operator-ship in favour of the much more dynamic private company. I don't think they like having an opinionated and probably critical minnow like Amer in tow. A takeover of Amer by Geopark would possibly be in the form of cash plus shares. I can see Occi buying the other assets including the OBA.

The twitter document which appeared yesterday suggested offers have to be in by the end of October/early November so (if that document is correct and allowing for counter offers) I don't see this being resolved until the end of November at the earliest. I don't understand why people are still here if they don't think a satisfactory offer will be received.

We tend to value CPO5 just on the Indico/Mariposa oil production. But you have to remember that the rest of CPO5 (prime acreage) also has an exploration value which is possibly worth as much as the Put acreage and certainly shouldn't be ignored.

I notice the 24/25p trolls have largely disappeared. I suspect their paymasters have accepted that that is not going to happen.

I am with Rhodi on this. Minimum acceptable bid 32p. Likely bid between 32p and 40p. A good deal would be 40p+ to knockout the other bidders and secure the whole package. Sale of all the company preferred but only if we get full CPO5 value!

Here's a thought. The OBA has a technical capacity of 75,000 bopd. Now lets assume a new owner gets that up to an operating capacity of 50,000 bopd and makes a saving of $5 per barrel, operating for 320 days per year. That is worth $80m per year. After three years that is almost the equivalent of Amer's current market cap. That must seriously get big oil tempted to buy the whole package just to get their hands on it!

It is of course not beyond the bounds of possibility that Amer have themselves suggested a delay to the Indico appraisal. If they are looking for an early exit this would seem a sensible course (provided of course they get what they see as fair value for CPO5). If the Indico appraisal starts now some investors may be inclined to await the outcome rather than accept what is put on the table now, with the inevitable delay to the whole process. Amer may prefer to sell the prospect of Indico success rather than the reality which could go either way

I take it you mean $100m and not $100! But if you think that is a fair price for CPO5 you are way off the mark!

It would appear that ONGC are dragging their feet on the Indico appraisal wells, for reasons which we all understand. However, I hope our management do not let this colour their judgement and let this asset go on the cheap. CPO 5 is where most of Amerisur's current value lies. If necessary, I would prefer we sold everything else and keep CPO5 for a further 12 months to ensure the full value is realised. A special dividend to shareholders to be followed by a final sale of CPO5 when appropriate would be better than seeing us sold short, even if this means prolonging the process a bit.
What I am not sure about is whether ONGC has any pre-emption rights (or did this lapse when they failed to take Amer's 30% when we originally bought). If they do have pre-emption rights this may deter alternative investors and leave us in a difficult position.

I think a lot of people are seriously underestimating the true worth of CPO5 and also wrongly anticipating a quick resolution to the bidding process. Unless there is a knock out bid, I cant see the Board accepting anything until at least one of the Indico appraisals has been completed (and that will take us into November). Why would they when the results of the appraisals could significantly increase our reserves.

I am prepared to wait as long as it takes and am hoping for 45p

A few points in respect of your valuation:
1. I agree this situation has been in the offing for some time. Indeed if an approach to buy the company had not been made, I think Amer would have been engineering one!
2. I expect the first Indico appraisal well to be spudded in the next two weeks. Having got so close to this and with it potentially having a big impact on the companies valuation, I can't see them selling the company before the result is known. Either that or a potential buyer has to include some up side in their take out price for a positive result.
3. The $93m work programme Oxy committed to as the price for 50% of the Putumayo blocks has a net value to Amer of $46.5m (Oxy will be 50% beneficiaries of the seismic and other works). So the total value of the whole of the Putumayo block I put at around $100.

Given the above points my valuation comes out pretty close to your own.
PS. Rossannan - Don't know what you get paid for spouting your negativity but you are rubbish at it. Lazy and totally lacking research.

The wider markets are risk averse at the moment and River& Merc may simply be responding to their clients wishing to liquidate equity investments generally by selling parts of their portfolio across the board - so probably nothing to do with how they view Amer's prospects.

CPO5 is the key to unlocking full value here. I have difficulty estimating its true worth and have seen all sorts of estimates ranging from $100m to over $300m. But it is important it is not taken out on the cheap because a year down the road it is likely to be valued at a lot more than now. If necessary, I would be inclined to sell the rest of the portfolio and keep CPO% for another 12 months, if that is what it takes to see full value.

Not much happening at the moment! Each day I expect to see a formal bid and every day without one cheers me and disappoints at the same time. I am expecting a 'low ball' offer which would confirm things are moving forward but equally the longer we go without anything formal, the greater the prospects that we will see at least one of the Indico appraisal wells drilled and, hopefully, the better the final offer. The suspense is killing me and I suspect many others.

Any offer is likely to be valued in US dollars, so Brexit uncertainty and the low £ is working to our advantage. An optimum result could come at the end of October if The £ is at its lowest but after the first Indico appraisal.

Can't pretend I know what your are saying Bas. However, my worry about the current situation has always been that ONGC and OCCi don't really need to do anything with regard to bidding. All they need to do is hope a low ball bid is successful and then exercise ROFR. No need for either of them to enter into the competitive bidding process.

What we need are other parties to push the price up that ONGC and OCCi would have to meet. A friendly PE firm might be one way of ensuring we don't get short changed ( but that might be being a little too Machiavellian).

I am surprised we haven't seen more hedge fund activity given the speculative nature of what's going on and the obvious opportunity for short term gain. They are not usually slow to spot a chance to make a quick buck and with even the most pessimistic predicting a takeout price of 24/25p but with a possibility of something much higher, the opportunity is obvious! A lot of PIs have probably already geared up (myself included) but the institutions seem a bit slow on the uptake.

I would not be surprised to see Amerisur's shares suspended at some stage as the complexity of what is taking place and the number of parties involved means insider dealing will be hard to prevent. I can see this happening if the eventual successful bid is likely to be substantially higher than the prevailing price

I read somewhere that ONGC were cash strapped and looking to sell off assets. So not impossible that they take the opportunity to sell off their 70% at the same time we sell our 30%, so that one buyer gets the whole of CPO5. Maybe that's why they have been bigging up CPO 5 publicly but making such slow progress (seems similar to Amers' tactics - didn't JW recently state that companies with similar assets to Amerisur were selling for billions of dollars).

I have been investing for a long time but I find this 'takeover' the oddest I have ever been involved with. For a start we have had no offer as yet! Second, the normal route would be for the predator to buy in the market before announcing the offer and build a decent position by stealth (but I suppose that would have negated the downward pressure on the share price forced by our seller and been self defeating). But having announced an intention to offer, the normal course would be to buy in the market if only to reduce the eventual take out price. So far as I am aware our 'bidder' hasn't yet made a single purchase. It looks to me like the bid announcement was intended to put us 'in play' ie. a stalking horse. My own sum of the parts valuation would suggest 40p as a fair price. Am I confident we will get there? - not really. However, I am taking advantage of the current price to mitigate the disappointment of a low ball successful bid by increasing my stake. There is a risk that it could all fall through but I can't see that as likely. One way or the other I think we will see either a complete sale or a a sale of parts. The big question for me is 'who is behind the stalking horse'???

Bigsmoke: That's my concern all they need to do is wait and match the price of the low ball bid!!

One possible fly in the ointment would be if ONGC and Occidental have pre-emotion rights. If so couldn't they just wait for a low ball bid to succeed and the exercise those rights rather than get into an auction?