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 updated the market on operations today. They key points were their latest exploratory drill Platanillo-2 ST1 sidetrack has been drilled to a depth of 9,396ft and encountered 68ft gross, 39ft net pay. Total oil produced from their Colombian fields during the 49 days to 18 August averaged 6,522 BOPD and they have signed oil transport agreements with Cenit, PetroEcuador and OCP Ltd to facilitate exports of Amerisur crude oil through the Ecuadorian transport system. This latter point is part of the Company's plan to develop and pursue export capacity additions in both Colombia and Ecuador, in order to support continued growth in production.
Unfortunately Colombia has experienced a series of strikes by farmers and transport workers who are impeding traffic on the main roads of the country. This has compelled all oil producers in Putumayo and several other producing areas to suspend production. Amerisur reduced production over the past 11 days and closed in the Platanillo wells in a controlled manner 3 days ago as a contingent response. The Colombian Government is in negotiations with the strikers and the Company is prepared to immediately re-establish production as soon as those negotiations are completed.
Colombia is a difficult territory with rebel armies such as ELN and Farc causing disruption and kidnapping foreign workers, the latest a Canadian geologist along with four other workers working for Braevel Mining. The current strikes also follow on the heels of the recent disruptions in the mining industry.
Oil exploration often takes place in harsh inhospitable environments, for the more difficult areas in the world there will be a risk discount to the valuation. At a forward P/E of less than 6 AMER's discount is somewhat overdone, given its track record and growth expectations.
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