I'm still angry at the discount to market offered in Friday's capital raising. As I have said in previous posts, AMU's bankers were perfectly happy with the pay-down of debt from the strong revenue stream, despite the broader economic climate. Why then dilute existing holders at such a discount?
Clearly, the company feels that its debt level is a mill-stone suppressing the share price. In that, the board is undoubtedly partly correct but a greater obstacle to SP appreciation, in my view, has been management's inability to communicate its production numbers and exploration agenda to the market.
Any company that has long-life producing assets in a stable country (the U.S.) generating around 13 cents per share and a P/E ration around 2.6 has got to take a long, hard look at its marketing capabilities. So many other juniors with negligible production enjoy far higher market caps than AMU, which will have over 2000 BOEPD once the Longville wells return on stream. Consider RFE for example: a market cap of $164m and producing under 50 boepd. And it's not as if AMU's drilling programme is moribund either. The Garner well results are pending and the size of the target is significant (25bcf with AMU 50%).
Overall, I am not angry that management has opted to pay down debt; I am angry at the size of the discount to market that is being offered.
This is a terrific company with excellent producing assets. Despite the above sentiments, the pain of the discount will be short-lived, in my opinion, and the medium term prospects remain outstanding relative to peers. I note that John Campbell in the Oil and Gas Weekly rates AMU and PSA as 'outstanding value' at these levels.
You can be pretty sure that value is going to get even more 'outstanding' over coming days as the SP trends towards the .26 cent mark.
I'm holding and will purchase more if prices get crazy low.
Good luck all. DYOR
Gupper
AMU Price at posting:
33.0¢ Sentiment: Hold Disclosure: Held
