Mid-cap oil exploration and production company Amerisur Resources (LSE: AMER) has slumped today, although there seems to be little in the way of news to explain the fall.
Indeed, at time of writing Amerisur has fallen nearly 9% today, despite releasing a stellar set of half-year results less than a week ago.
Record results
Amerisur has worked hard over the past few years to get its wholly owned Platanillo oil field into full production, and management has not disappointed. The company has transformed itself since 2009 as production has surged and the share price has followed suit, rising by 747% during the past five years.
And now Amerisur is coming of age. The company’s production capacity is estimated to be in excess of 10,000 bbl/d, exploration activities are fully funded and Amerisur has plenty of room to grow production.
However, at present Amerisur’s production is constrained — at an average of 6,561 bbl/d during the first half — due a lack of infrastructure. Specifically, the company has to truck its oil to market, which is hitting both production volumes profits.
Nevertheless, Amerisur’s revenue during the first half of this year hit a record level of $114.1m, pre-tax profit of $50.8m was reported. These figures were up 77% and 75% respectively on the year-ago period.
Set for growth
Within the next few months, Amerisur expects to have completed the construction of a key pipeline linking its operations to export markets. This pipeline will have an immediate capacity of 4,000 bbl/d and will reduce transport costs from $23 bbl down to $6 bbl. So, with the new pipeline in place not only will Amerisur’s sales jumped but the company’s margins will also improve.
After taking this into account, City analysts have earnings per share of 5.39p pencilled in for 2015, which means that the company is currently trading at a forward P/E of 9.3. Additionally, Amerisur has no debt and cash generation is strong, so there is the possibility that a maiden dividend payout could be on the cards sometime in the near future.
Time to buy?
With a clean balance sheet and room for growth Amerisur is one of the strongest mid-cap oil producers on the market. That being said, the company’s main oil producing acreage is located within Colombia, where the 50-year-old Revolutionary Armed Forces of Colombia (FARC), once considered the best-funded insurgency in the world, is still at large.
Still, Amerisur’s low valuation and impressive record of growth goes some way to offsetting concerns about operating within the region.