Amerisur finals

Amerisur Resources is an independent full-cycle oil and gas company focused on South America, with assets in Colombia and Paraguay. I have a holding in my growth portfolio (epic code: AMER).

Amerisur announced their final results today and excluding the large impairment charge, were as expected.  Revenue was up 17.9% to $199.5m (my estimate was $200m see here) on a constrained average full year production of 6,242 barrels of oil per day that was up 32%.  The difference between production and revenue was due to the lower oil price in the second half of the year. 

Operating profit was down 7.4% to $68.8m, due to the lower oil price in the second half and increased costs caused by the effects of social unrest within Columbia.

There is an impairment charge in the year of $26.5m due to writing down the investment in the Fenix Block that is considered geologically too complex to exploit at the current oil price.  Earnings were $27.4m and if we exclude the one-off impairment about $45m, similar to last year's $46.8m, but less than the $50m I was expecting. EPS was 2.55c a decline on last year of 42%.

Net cash at the year end was $95.6m an increase of $24m, due to free cash flow of $12.8m ($32.8m last year), net proceeds from investments of $10.3m and cash received of $0.9m on the exercise of share options.  They also have a lending facility of £175m with a consortium of banks.  This places the company in a strong position to survive a weak oil price over the next 18-24 months if necessary and continue exploration of a limited number of wells.

Following management’s decision detailed in their outlook & guidance output was reduced in the first quarter and achieved an average production of 4,380 bopd (expected to be 4,500bopd for the full year).

The share price fell just over 5% on the day to 22.75p, which values the shares on about 28x expected 2015's earnings.  The value proposition for Amerisur at this price is conditional on two events, an increase in the oil price (WTI crude) to around $60 average in 2016 and, successful implementation of the Ecuador pipeline (see here for the latest update and valuation assumptions) by the year-end so that output can be increased and transport costs reduced.