It's easy to feel the chill winds of panic when the lemmings...

It's easy to feel the chill winds of panic when the lemmings start rushing towards the cliff, as they did in the broader market today. One questions one's investment strategy and the accuracy of one's research. Do the privileged few know more than you do? Is the share price unbelievably cheap?

A P/E of 2.6 can't be right, surely! Production of ~2,150 barrels of oil equivalent per day and 2P reserve of 14.4 million barrels of oil equivalent simply can't be valued at $68m. Perhaps there's the whiff of something unmentionable attached to the stock - the proverbial "dog-turd on the shoe at the cocktail party" scenario...

So you re-check the figures, read again the announcements about the re-opening of the shut-in wells and remind yourself that:
* reserves from the four new wells on the Longville project alone are expected to replace one year’s worth of Amadeus’ net production (745,145 BOE in FY08).
* The rapidly diminishing debt is being repaid from increasing production at a rate their bankers are very comfortable with
* earnings are 12.5 cents per share.

It's at this stage that you have to decide whether the published facts are to be relied upon or not. Given management's tendency to play down the PR side and let the numbers do the talking, I personally decided that if all the figures in the public arena are accurate, AMU had to be seriously under-valued.

Consequently, I began buying in the low thirties. Long-life assets (with the low-risk producing assets around 20 years) and a P/E ratio of around 2.6 compared to an industry average of around 15, makes for a compelling story in my view. Today's buying (green on a savage down day) - especially the larger buys - suggests others also see value here.

Of all the oil-producing juniors, this is the only one I can find that has not surged of late, yet its fundamentals are the most compelling of them all in my view.

I've considered the debt (steadily reducing and entirely manageable from production), the impressive earnings, the relatively low number of shares on issue, the low production costs of around US$16 per barrel - in short, I can't see any barrier to a substantial rise beyond Amadeus lacking the "sex appeal" of its brassier peers.

Sometimes you've just got to back your research, whatever the market says in the short term and this one ticks all the boxes for me.

That does not mean it will for others, so DYOR.

Good luck all,

Gupper