Is Now The Right Time To Buy Amerisur Resources plc And Gulf Keystone Petroleum Limited?


Shares in Amerisur (LSE: AMER) are currently flat today, but were down by as much as 18% after the oil and gas exploration company announced that it will be reducing capital expenditure in the current year. In fact, it has slashed spending by over 50% — from $95m to $45m, as it seeks to focus on production from low-cost platforms.

In addition, it will now aim to minimise the use of high cost transportation this year, at least until its pipeline to Ecuador becomes operational, and will also temporarily suspend production from more expensive pads, with transportation to the Rio Loro oil export facility in Colombia set to be cut to little more than a nominal daily volume.

Still, Amerisur expects production for the full year to increase to around 8,200 bopd and, although the declining price of oil will inevitably hit its bottom line, its reduced spending plans appear to be a sensible and prudent reaction to this.

And, looking ahead, it remains a profitable company that trades at a relatively attractive valuation – even when this year’s forecast decline in earnings of 38% is taken into account. For example, it trades on a price to earnings (P/E) ratio of 13.6 and, with its bottom line forecast to bounce back next year, could prove to be a sound long term buy.

Gulf Keystone

Shares in Gulf Keystone (LSE: GKP) (NASDAQOTH: GFKSY.US) have continued their slide since the turn of the year and are down a whopping 31% year-to-date. Part of the reason for this is concern regarding the company’s finances, with the appointment of a new CFO doing little to improve sentiment in the stock.

In fact, Gulf Keystone continues to suffer from the delayed payment of oil revenues by the Kurdistan Regional Government (KRG). Certainly, the situation has improved in recent months, with Gulf Keystone receiving its first payment and a schedule regarding future payments also being drawn up. However, with over $500m of debt, it would not be a major surprise for Gulf Keystone to need an additional cash injection during the course of the year, which seems to be weighing on the minds of investors at the present time.

Of course, the company’s long-term future remains relatively bright and its strategy seems to be very sound. However, for investors looking to buy a slice of the company, they may wish to wait for a lower share price before doing so and, with sentiment still on the decline, its short term share price performance could continue to disappoint.

Despite this, there are a number of shares in the oil sector that could be worth buying. And, with this in mind, the analysts at The Motley Fool have written a free and without obligation guide called 7 Simple Steps For Seeking Serious Wealth.

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Peter Stephens has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.