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From closing its high-cost Evander underground operations through to bringing Elikhulu on stream, the company has gone through a re-positioning – it's now a low-cost Gold producer. Seeing demonstrable results will, in my opinion, result in the company being re-rated. Obviously, if the re-organisation does not feed through to the bottom line that will not happen. But the heavy lifting in terms of capital expenditure and retrenchment costs has been made.

There are also multiple development opportunities within its current licences such as the Royal Sheba project; the company views this as a medium-term proposition that fits into its low-cost near-surface model.

And let's not forget this is not a build to sell operation. Pan African has historically been one of the highest yielding Gold shares in the sector. When it's profitable it distributes surplus cash to the owners of the business. In my view, the managers actually act like managers - they act on behalf of the owners. It's not a jam tomorrow business.

Maybe I am being a little cynical but if you take a look at P53 of the 2017 Annual Report there is a paragraph outlining the awards to be given to the CEO and CFO in the event of a takeover. The CEO will be due a lump sum payment equivalent to 12 months of his fees if his contract is terminated within 6 months of a change of management. While Nick Harrison is in line for 12 months salary and benefits.

My understanding is that John Wardle, via Tracarta, now holds 21889505 ordinary shares while Nick Harrison holds 6460152 ordinary shares. The former earned £850,000 in salary and fees in 2017 and the latter £234,000 (These are the base figures without any benefits). As Rex Harbour has demonstrated, offloading large blocks of this stock is problematical. I would suggest especially so if you are a Director.

The question I ask is whether they would welcome a takeover?

At the recent Brewer's Hall presentation, Fiona MacAulay, CEO of Echo Energy, made an interesting point that is probably relevant to President Energy. She mentioned that the recent Argentine economic crisis and subsequent devaluation of the Argentine Peso gave her company a useful uplift. The figure she mentioned was a 25% reduction in operating costs. Whether that is true for President or not, is difficult to say. However, I suspect that President's management is underplaying the upside of the Peso devaluation.

Growth rather than income was the primary reason for my investing in Amerisur. However, the growth in terms of production has not been forthcoming and yet the cash is piling up simply due to a higher than expected oil price. According to the interim report for the period ended 30th June 2017, the company was targeting up to 16 wells by the end of 2018. For the whole of 2018, it has only just managed to drill one well – And that has not gone according to plan. Sure, we are not at the end of 2018 but, thus far, it's looking like a pretty poor performance. In the meantime, the company's core Platanillo assets appear tired with declining production.

Owning such large acreage, no debt and plenty of cash, I assumed that we would be a lot further down the line than where we are. Rather than simply retain the cash, I would like to see it used to benefit the owners of the business. Distributing at least some of it by way of a dividend would be, in my view, in the best interests of the shareholders. Incidentally, in the last interview that Giles Clarke gave to Malcy in January 2018, there was no mention of a dividend being subject to the company producing 20,000 BOPD or producing from three fields. But he did hint that it was linked to the continuation of a relatively high oil price – around US$65 per barrel.

Paying a dividend would, in my opinion, put in place a discipline that the Board needs. It would compel them to continue distributing surplus cash to shareholders or to give an explanation as to why they are stopping it.

Don't get me wrong, I think the company's assets and its plans are first-rate. But there seems to be a problem with the execution of its plans and an inability to fully exploit its current assets. If I thought the money was going to be used wisely by the Board, I would not want a distribution.

Oil is definitely not going into extinction in the near or even medium term. The replacement of oil will require the replacement of much of the transport system's capital. From cars to ships and even aeroplanes. And of course, there is a wide range of uses for oil, including in the plastics industry. But I would suggest that the finite nature of an oil company's reserves and the oil industry's very long-term displacement means that shareholders require a more immediate return on their investment. The jam tomorrow oil industry model does not seem to interest fund managers.

By the way, Amerisur has been listed for some eleven years and has never paid its shareholders a penny. But it has distributed large sums to its Directors. This seems to be a pretty typical model for small to medium-sized oil companies. In my opinion, it begs the question as to what the exit plan for investors really is?

That seems to get to the nub of the problem. Oil companies have often not delivered in respect of total shareholder returns. Amerisur is one of many in terms of poor share price performance over recent years. As a class, I would suggest that fund managers are not impressed by the oil sector generally.

In my opinion, there seems to be something flawed about the accepted model adopted by many listed oil companies. The build to sell approach no longer seems to work. Sure, it works for the managers but not for shareholders. There seem to be too many variables, including the price of oil, and the timelines are too long. In essence, shareholder rewards are back-ended while Board rewards are immediate. The Board will probably be taking money off the table using all means at its disposal. While investors are supposed to simply wait until the company is purchased. There seems to be a misalignment of interests. And the very long-term backdrop is a world coming off of oil.

Having said the above, I think that Amerisur has good assets and is built on sound plans. But the management team are not the right people to deliver on this business. It requires a focus they don't have.

Unlike the aborted SDX deal to buy BP'S Egypt assets, SOCO's proposed purchase of Merlon Petroleum for US$215 million in cash and shares appears very manageable. Right off the bat, they are similar in terms of production' roughly 7000/8000 BOPD each. SOCO is not going into a completely different league in respect to output. In addition, as Ed Story, SOCO's CEO, recently pointed out in a Malcy interview, they know Merlon's management. There are long-standing relationships. And SOCO goes into the deal with a considerable amount of cash, around US$129 million as of the end of June 2018, as well as substantial and flexible financing totalling US$250 million. It's not taking on a mountain of debt, in relation to the assets acquired. And finally, it has made plain that the acquisition will not impact its dividend policy.

The last bit is very important. Unlike many resource companies, SOCO has a clear policy of distributing its surplus cash flow to shareholders. That's key to its business model. It's not a jam tomorrow stock based upon the promise of being bought out at some point in the future. And, by the way, many of those jam tomorrow resource stocks have Boards syphoning money out of the business from day one using a variety of devices from high salaries through to connected party transactions.

Easy to overlook but, in my view very important, this is a company with serious institutional support. Taking a look at its 2017 annual report, we can see the likes of JP Morgan and Credit Suisse with reportable holdings as of 31st March 2018. And this is a company whose market cap is currently around £480 million and the shares are now trading with a spread of around 14 basis points. Basically, it's a liquid stock that they could get out of if they wished. They clearly are not holding those positions because they cannot get out.

Even adding the stock that some Directors bought this year, collectively the Board owns around 4% of the company. According to an RNS dated 23rd May 2018, John Wardle, via Tracarta Ltd, owned just 1.8% of the company's equity. They may act as if they do own the business but they simply don't. I would suggest that any decision on a price for a takeover will ultimately be in the hands of the institutions.

It might be worth considering, that in April 2017 when the Elikhulu financing was finalised, the project was based upon a Gold price of ZAR16319 per oz. This was projected as giving it a real post-tax internal rate of return of 34.3%. The Gold price now sits at about ZAR17452 per oz. And, of course, it's now operational and generating cash.

Since arranging the finance, the company has moved a large proportion of its production from very expensive underground operations to far less costly overground re-treatment. But its share price still does not appear to reflect the change – it's currently some 45% lower than it was in April 2017 and, yet, the company appears to be in better shape. It has more debt – repayments will not start until next year as it has a grace period – but it's well on the way to reshaping its business model.

Compared year on year, which is a little tricky, these figures are poor on an operational day basis (September 2017: 6033 BOPD/September 2018: 4974 BOPD). September 2017 was impacted, apparently, by the Papal visit and the perennial “Social issues”. The current figures also fail to break down how much is flowing through the OBA pipeline, that is to say, high-value output.

In respect to releasing production figures on a quarterly rather than a monthly basis, this bodes ill for investors. Especially having released these figures as late as they could possibly get away with. Those with inside knowledge stand to gain the most. It seems a fair assumption that the next step will be to issue no quarterly updates. Expectations are, indeed, being managed.

In summary, the current Board does not seem to be delivering for shareholders and, in my opinion, needs to be changed but that is down to the institutions. At the moment they appear to be doing all they can to cling on.

It seems to me to be fairly obvious that publishing the monthly oil production figures is part and parcel of Amerisur's investment model. This is one of the reasons that investors have bought into the company. Abandonment would clearly not be in the best interests of shareholders. The notion that this could be jettisoned with no explanation is not acceptable. Should the management decide unilaterally to abandon this policy, then the owners of the business need to find a new Board. Incidentally, the absence of this month's figures appears to be creating a false market in the company's stock.

As for having to guess its progress with CPO-5 based upon a few photographs. This is absurd behaviour for a public company.

Brasso3

You are indeed correct, the targeted exit figure for 2018 production is 3300 BOPD. That is the figure given in an RNS dated 24th September 2018. The figure I quoted was from the one given earlier at the President reception on 4th September. By the way, I think that the figure of 3000 BOPD is more realistic. We are only 10 weeks from Christmas and each well is anticipated to take 21 days to drill. As I write, the first is yet to complete.

In respect to its gas output, this is currently, as you rightly say, negligible – some 5% of its total production. However, the upside from Estancia Vieja appears substantial. For starters, the company is on track to become energy self-sufficient in its Puesto Flores concession by using the output from Estancia Vieja for internal purposes. Which is useful as it avoids royalties. Bearing in mind that it currently spends some US$150000-US$200000 per month on electricity this is not an insignificant amount. The project is set to launch early 2019 and has an 18 month payback period. The company is looking at initially producing around 500 BOEPD should it go ahead with gas production in Estancia Vieja.

It's not just buying a pipeline for US$10 million. It's buying two ten-year concessions covering around 210 square kilometres in total. Both have useful capital equipment that requires repair and upgrading. Both have shut-in wells and exploration potential. And, the deal comes with very valuable pipelines. By the way, from what I can understand, the cost of building the necessary pipeline to bring its Estancia Vieja gas to market would have cost around US$25 million. Based upon the savings associated with the pipeline, this appears to be an excellent deal.

President recently held a reception for private investors. I attended the event and from what I gathered the company was targeting an exit rate of production for 2018 of around 3000 BOPD. However, this is BOPD rather than BOEPD. That is to say, it does not include gas production. The recently announced proposed deal involving the Puesto Prado and Las Bases concessions will give the company the ability to get its gas from Estancia Vieja to market. Whether that will be in operation by the year-end, I don't know. However, the pipeline appears a very cost-effective way of monetising its gas assets and increasing its production.

It might be worth bearing in mind the money that is now flowing into the Lithium space. Both Livent and Ganfeng Lithium IPO'd this week. Bearing in mind the recent nosedive in world stockmarkets and this year's fall in the price of Lithium, it's no wonder that they received a poor reception. However, against that backdrop, they managed to raise some US$760 million between them.

Incidentally, it may seem like a minor point but, I would suggest, that this is very important. KZG has successfully mined and sold Tantalum to a very demanding customer. It has demonstrated an ability to meet exacting standards. This is a key component to any long-term offtake agreement with end-users of Lithium. The Lithium will probably find its way into batteries, especially car batteries. There has to be a reliability in terms of quality. It must meet certain requirements in respect of its chemical properties. The cost of recalling vehicles because of faulty batteries would be enormous. In terms of being able to deliver, KZG appears a long way ahead of most Lithium projects. And it has the infrastructure in place.

This piece of research from Wood Mackenzie is definitely worth a look. In essence, it reiterates the shortage of Lithium required to facilitate the development of electric vehicles. It also points to end-users seeking to lock-in production agreements - something that KZG is experienced in with its Tantalum output.

https://www.woodmac.com/news/editorial/What-is-the-role-of-battery-raw-materials-in-the-electric-vehicle-revolution/?_lrsc=be195a91-a815-44ae-83ee-19d035d1bdec&utm_source=elevate&utm_medium=social&utm_campaign=twitter

The Gold Forum webcast is, in my opinion, worth viewing. Obviously, he puts his company's investment case but as he points out, Russian Gold miners have been listed on the London stockmarket for some 20 years. During that time, he argues, there have been no major issues in terms of Russian Government intervention – tax issues, revocation of licences and hostile takeovers. He makes it clear that there is a major difference between the oil (And gas) and Gold mining sectors. The latter is not subject to the same type of interference that has beset the oil sector. According to Alexandrov, the Russian Government simply does not control the participants in Gold mining in the same way as it has done so in the oil and gas industry. And, as he says, the last time the Government got involved in the sector was in the 1980s and that was a disaster. So, basically, it has been left to the private sector. Having said that, in my view, it seems to have issues overcoming past perceptions.

By the way, this piece from the FT published last year could be worth a read.

https://www.ft.com/content/8fc7038c-f81f-11e6-9516-2d969e0d3b65

It does seem quite on the news front. Ironically, President is probably entering a key period in its development. In the next week or so, it will likely announce the results of the spudding of the first well in its three well campaign on its Puesto Flores assets. In total it's targeting some 600 BOPD as a base target. How will it go? Who knows? But we do know that two managers have in recent days made purchases of the company's stock, albeit on a modest scale.

As for the company's gas assets, these are located on its Estancia Vieja block. My understanding is that the real issue is not whether the gas is there or even whether it's commercially accessible. The real problem has been how to get it to market. The company appears to have found a solution. It intends to buy the Puesto Prado and Las Bases concessions for around US$10 million. These will provide various development and exploration opportunities. However, in my opinion, the real upside is the pipeline that is part of the deal. This will allow President to get its gas out of Estancia Vieja and to market. That deal should be formalised in Q4 2018. Basically, this seems to be a company that is rapidly monetising its assets.

For those looking for more background on the company, yesterday's Malcy interview with Ed Story, the company's CEO, provides much food for thought. Unglamorous it may be but SOCO has paid back substantial amounts to shareholders. Unlike some oil companies of a similar size, it does not appear to be on a quest simply to produce more oil. It distributes excess cash flow via dividends. From 2006 to 2017 it dispensed some US$476 million. Not only is it committed to this model but it's in the throes of expanding via a strategic acquisition in Egypt that should open up even more opportunities.

https://www.youtube.com/watch?v=uieCFpFdGCs

Putting Rex Harbour to one side. Over the last four years from H1 2014 to H1 2018, the company's oil production has fallen. Sure, the company is now cash rich and has a plethora of opportunities. But production has fallen over the Rex Harbour saga period. And that seems to be reflected in the share price. The real issue is why?

Taking a closer look at the company's RNSs reveals, in my view, a pattern of missed deadlines. From spudding wells to building the OBA pipeline. It seems to be systemic. And yet we have a very talented team of executives. The real issue may lie in the nature of the business. It's essentially a project-driven enterprise that is comprised of many minor projects that are interlinked. A failure in one project has a knock-on effect. Basically, it requires enormous attention to detail. The Board appears lacking in this respect. John Wardle, Giles Clarke and Nick Harrison all have international business interests. This is one of many irons that they have in various fires.

From negotiating with indigenous groups to dealing with unexpected technical problems in remote areas, it's fairly obvious that the company operates in a difficult environment. This may not be the right management team to optimise these assets. It may require a commitment in terms of focus and time that they don't have.

Ironically, I think the assets are very good and so is the strategy but the weakness appears to be in terms of implementation and execution. In monetising those assets.