Thursday, September 05, 2013

Americas Petrogas Plays For Shale In Argentina

I'm all about energy today.  Americas Petrogas (BOE.V / APEOF) wants to pull oil and gas out of shale formations in Argentina.  I believe they have a very competent and experienced management team.  I like the fact that they have deep-pocketed JV partners.  I like the fact that they've discovered light sweet crude deposits, which are easier to refine.  I like that maps of their project areas show good coverage by existing pipelines.

One concern I have is that this is in Argentina.  That country is #102 (out of 174) on Transparency International's Corruption Perceptions Index and #160 (out of 177) on the Heritage Foundation's Index of Economic Freedom.  The political risk for any foreign investment in Argentina is enormous.

The company had just under C$26M in cash on hand as of June 30, 2013 according to their quarterly statement. Their net income has swung from a loss to a positive in about one year.  I'm less concerned with burn rate for a company at this stage provided their revenue is growing and their operating costs remain stable.

I'm adding Americas Petrogas to my watch list.  It deserves a more serious look once I can calculate its intrinsic value based on their proven (P90) and probable (P50) reserves.

Full disclosure:  No position in Americas Petrogas at this time.