Amerisur outlook & guidance

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).

Following the ~50% reduction in the oil price over the last 4 months, Amerisur has updated the market on actions they are taking.  Management have decided to optimise production from the Company's low lifting and transportation cost platforms in the Platanillo field.

This will mean that in the interim 4,500 bopd will be produced from Pads 5 and 9; the oil is able to be lifted at a cost of approximately $12 per barrel and transported and commercialised through Orito and the OTA pipeline at approximately $12 per barrel.

Production from more expensive pads are to be temporarily suspended and transportation to Rio Loro at a cost of $23 per barrel is to be reduced to a nominal daily volume, so preserving this delivery option.

The Ecuador pipeline, that is expected to have transportation costs below $5 per barrel, has been delayed mainly due to expansion of the technical scope.  Management expect to be operating it in the second half of this year.  

Capital expenditure guidance for 2015 has also been reduced to ~$45m from $95m.

Elsewhere in the statement they state that 2014 production averaged 6,242 bopd, compared to 4,730 bopd last year and 6,561 bopd for the first 6 months of this year.  At 6,242 bopd for 2014 and the reducing oil price from September, I would estimate turnover would be ~$200m for the year, with earnings around $50m and an EPS of $0.047.

Management say that they are working with an average oil price of $48 for 2015 and $65 for 2016 in their plans and expect to exit 2015 producing 8,200 BOPD.

Using just the 4,500 bopd and a price of $48 a barrel, turnover would be just $72m with earnings of $12.5m (using lift and transport costs of $24) and EPS $0.012.  Obviously this would be substantially higher if the Ecuador pipeline was operating early in the second half of this year.

For 2016 with output at the exit rate of 2015's 8,200 BOPD and reduced costs from the Ecuador pipeline, profits should be back to last year's $50m even if the oil price stays at these levels.

So clearly two events will drive the share price in the short term, sustained improvement in the price of oil above $60 and news that the Ecuador pipeline is operational.