Amerisur Resources (LSE:AMER), like most established oil producers, has experienced a significant price decline since 2014. What’s different with Amerisur is that its share price has still not recovered despite a dramatic hike in oil prices. Could the company on the verge of a turnaround?
Amerisur is an oil and gas producer and explorer focused on South America and is currently valued at £192m. A quick glance at its financials shows a pre-tax profit of $47.49m in 2014, became a $23.79m loss in 2015. Hardly surprising with oil plummeting by $50 a barrel during that period. However, while many oil companies found themselves filling up with debt, Amerisur took protectionist action – reducing its production levels and costs.
This year’s forecast is a small but nonetheless important, $2m profit. This estimate was made prior to social issues in July last year which resulted in the suspension of production for a period of 18 days but assumed WTI Crude at $45 a barrel. The company reported a loss of $1.6m before tax in its interim results, but the oil price continued to climb during H2.
With production ramping up to almost 7000 bopd and operating netback of $29.6 per barrel in H1 2017 and rising, the company looks poised for positive cashflow. Having no debt issues, and a cash balance at the half year of $29m, Amerisur looks in very good shape and could be about to deliver profitability – if not in FY 2017, it seems likely in 2018 barring any breakdown in the oil price recovery.
Chartwise, the share price has been consolidating around the 16p area and needs to resist posting a further lower low. A breakout above diagonal resistance around 20p and a close above the recent 21.5p high would be very bullish indeed.
Author: Stuart Langelaan
Disclosure: The author of this piece owns shares in the company written about above