Amerisur interims

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 interim results today and revenue was up strongly by 77.2% to US$114.1m, operating profit increased by 69.4% to US$51.5m and EPS was increased by 64.4% to $0.0296.

As highlighted for some time production is being constrained by export capacity, field production capacity is estimated to be in excess of 10,000 bopd, but currently constrained due to oil export routes available.  Half 1 production was constrained at an average of 6,561 bopd; however, significant progress has been made on the under river pipeline export solution into Ecuador.  Management consider the project is on schedule to be operational by the end of 2014.  Once in place, the initial capacity will be up to 4,000 bopd and will be increased as experience and confidence with the system continues to build.

Not only will the pipeline substantially increase revenue, but will reduce transport costs from $23 to $5 a barrel.  I make that $21m additional profit on the fist half results, if they were just using the pipeline!  The capacity for the pipeline is 50,000 bopd, currently 5 times field production capacity.

Free cash was an outflow in the period of -$9.8m compared to an outflow of -$8.5m last year (the full year last year saw FCF of $32.8m).  The company has net cash of $76m, along with their internally generated FCF, sufficient for their substantial exploration plans over the next few years in further developing the Platanillo field in Colombia and, the San Pedro block in Paraguay.

There is a lot more to come from Amerisur and at 57p valuing it at 11x expected EPS for this year, they look good value, despite the obvious small oil company risk.