Amerisur Resources (LSE: AMER) shareholders have had a tough time, seeing the value of their stock lose 65% of its value over the past five years. But then, it’s been a torrid time for smaller oil explorers all round, which really did not look attractive when a barrel was selling at around $30.
But while some have been staging a comeback, Amerisur shares have remained stubbornly flat over the past year — pretty much in line with the FTSE 100, but a lot more volatile.
Back in April, my colleague Rupert Hargreaves suggested that Amerisur was “one of the market’s most undervalued small-cap oil stocks,” and I can see why he thought that. Results for 2017 looked impressive to me too. But what looked like it might have been a share price recovery soon afterwards quickly fizzled out as June’s operational and production update failed to enthuse the markets.
Frustrations
Chief executive John Wardle did say that “the continuing cycle of well work is frustrating,” speaking of maintenance work required at the firm’s Platanillo field. But investors who don’t expect such things, which are pretty much inevitable during the lifecycle of an oil field, should probably be putting their money elsewhere.
The most recent operational update in early August looked solid, with Mr Wardle sounding upbeat about the company’s operations getting back on track — and, unlike some, he’s not one who seems to be afflicted with undue bullishness.
And on Friday, we heard of the spudding of the Pintadillo-1 well, which is the first of three exploration wells set to investigate the same target.
One thing that separates Amerisur is that it’s not a cash-burn explorer, and there are decent profits on the cards for this year. A definite possibility in my book.
Recovery
Tullow Oil (LSE: TLW) was also hit hard by the oil price crash, made worse by the company’s very large debt mountain. But the recovery looks to have started, with the shares up 50% over the past 12 months while Amerisur’s were flat.
Over five years, however, the picture is different, with Tullow’s share price fall of 74% looking distinctly worse than Amerisur’s.
An update from Eco (Atlantic) Oil & Gas on Friday is also good news for Tullow, strengthening the prospects for the two companies’ jointly-owned Orinduik licence in Guyana. But generally, Tullow’s asset portfolio looks very solid — in fact, that’s never been the problem.
Debt
The problem has been debt. But it’s coming down — at the interim stage at 30 June, Tullow had reduced its net debt to $3.1bn. That might sound like a lot, but it’s down from $3.5m at December 2017 — and it had been as high as $4.8bn a year prior to that.
The recovering oil price combined with successful refinancing played a big part in that, but production figures look like they’re going to keep climbing too. At June’s first-half point, chief executive Paul McDade spoke of plans to increase production at the company’s assets in West Africa, with onshore developments in East Africa set to see progress too.
The big question is whether Tullow is a good investment right now. To me it’s somewhere between the giants like BP and Royal Dutch Shell, which I rate as perpetually great, and the mass of smaller blue-sky explorers, which I think are generally too risky. But yes, I’m optimistic on Tullow.
