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Well failure is a setback but it does not undermine our confidence in the company

Amerisur Resources (AMER:AIM) 14p

Gain to date: 3.7%

Original entry point: Buy at 13.5p, 13 December 2018

Frustratingly the gains we chalked up on our trade in Colombian oil firm Amerisur Resources (AMER:AIM) have largely been wiped out on disappointing exploration results.

The Calao-1X well reached target depth with no hydrocarbons (oil or gas) found. It is the third well drilled on CPO-5 block where the company has a 30% stake and is partnered with Indian state operator ONGC and follows success with drilling on the Mariposa and Indico prospects.

Cantor Fitzgerald suggests the news should be kept in perspective. ‘While the result at Calao is disappointing, it is important to recognise that this has no impact on the reserves on CPO-5 – as they are attributed to Mariposa and Indico,’ it says.

‘Two successful wells from three is still a decent record, and we are not hugely surprised at the failure given that the operator is ONGC – which has previous form for drilling in sub-optimal locations.’

Separately Amerisur announced on 20 March that it would exercise an option to acquire the 50% of the Put-18 block it did not already own for $19m.

SHARES SAYS: While disappointing we do not see this news as significantly undermining the investment case.

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