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Amerisur in right place at right time in Colombia

The aim is to grow production and reserves substantially throughout the year

A famous Colombian export

Colombia has made huge strides forward since the civil war ended in 2016 and AIM-listed oil group Amerisur Resources PLC (LON:AMER) has been moving in step.

Mariposa-1 on the CPO-5 Block in the Llanos Basin in the north-east of the country was discovered in 2017 and is now pumping at a steady 3,000 plus barrels of oil per day.

WATCH: Amerisur Resources details 2019 work programme as it spuds third CPO-5 well

In December, Amerisur revealed the next well at CPO-5, Indico-1, was performing even better and producing at over 5,100 barrels per day.

The company has a 30% interest in the Llanos Basin assets, with the local subsidiary of giant Indian firm ONGC its partner and operator.

Indico was up dip of Mariposa but it turned out to be three times better with a 283 feet oil column that has yet to hit the oil/water contact point.

“You don’t find a 300ft oil column in isolation. It has to be part of a bigger trapping system,” says John Wardle, chief executive.

Geological analysis of Indico-1 has classified at least 18mln barrels in the 1P category, he adds, the most certain category there is.

If the oil/water contact point turns out to be, say 40ft lower than 283ft, those reserves will go up to 33mln barrels, but deeper than that can rise to 70mln or even 100mln barrels.

The drill rig has now moved onto a third well, Calao-1, which will test the geology to the south-west of Indico, to be followed by Pavo Real-1 to the North East.

In all, six wells are planned on CPO-5 this, year including two appraisals.

Six well development programme

It is a major development programme but Amerisur has the funding in place and after the success at Indico, confidence is high.

Wardle says the aim is to grow production and reserves substantially throughout the year.

Amerisur’s net production is about 20% of the gross number, once everything is included.

Llanos presents some very good-looking numbers but this is only half the story at Amerisur.

The company’s extensive acreage in the south-west of the country at Putumayo in the shadow of the Andes is potentially an even bigger prize.

Amerisur received a huge boost in November when US giant Occidental farmed into 50% of four of the blocks via a US$93.3mln package of seismic and drilling.

The deal includes a full carry on five exploration wells and 85% of the cost of 2D seismic over 878 sq km of the licences, a substantial area.

For Wardle, it was validation of a strategy that as well as acquiring acreage, saw it put in a pipeline known as the OBA to transport crude into Ecuador.

Blue sky at Putumayo

Amerisur now has almost 900mln of resources in blocks close to the OBA, which includes the four where Occidental has farmed-in.

One, Platanillo, is in production at between 3-4,000 barrels daily but the deal with Occidental has enabled Amerisur to bring forward the opportunity to explore for a major find.

Discoveries of billions of barrels have been made just over the border in Peru and Ecuador and Wardle believes there is scope for something similar at Putumayo.

Of course, the acid test will come when the seismic is done and drilling starts but if local knowledge counts for anything Wardle has good reason to be upbeat.

He worked for BP when it first established itself in the country 25 years ago and he has stayed put all through the troubles.

The challenges were considerable but because of the country’s problems, Amerisur was able to buy its assets at knock-down prices.

The Putumayo licences, for example, cost the company nothing effectively due to tax breaks.

Now with relative stability, oil companies are coming back again looking for bargains, though they won’t find any, he quips: “Because we bought them all”.

Directors stump up

Putumayo aside, Wardle believes the numbers from this year’s drilling programme at CPO-5 alone will show Amerisur is substantially undervalued, a view he has backed with share purchases worth £1.25mln over the past three months.

Companies in the Llanos Basin with similar-sized assets have been turning down (gross) offers of US$2bn, he adds.

At present and at 17p, the market value is just shy of £200mln.

There is cash of US$40mln and a debt facility of US$30mln to carry out its programme of work at Llanos, with Occidental paying for the majority of the activity at Putumayo.

“The economics are very attractive," says Wardle.

“And where else would you find a company with its own infrastructure. In a virgin basin where it owns 1mln hectares and that has just picked up a $100mln farm-in while adding 30mln barrels of new reserves [at CPO-5]."

Quick facts: Amerisur Resources

Price: 19.02 GBX

Market: AIM
Market Cap: £231.18 m

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