This week’s stock of the week is Amerisur Resources, an independent full cycle oil and gas company focused on South America. Listed on the AIM market of the London Stock Exchange, Amerisur recently entered into a $35m working capital facility with Shell Western Supply and Trading limited and it seems it is one of the market’s most undervalued small-cap oil stocks.

Indeed, the company has reported revenue growth of 96% to $92.5, up nearly 100% year-on-year due to higher oil prices and increased production of 58%. Growing production and improving oil prices resulted in a strong cash position of $41.3m with zero debt, and low-cost production generated significant cash flow from operations.

The firm currently wholly owns the OBA oil transfer line into Ecuador and has plans to expand its exploration portfolio; it holds a strong presence in the unexplored Putumayo region of Columbia for which 14 fully funded exploration and development wells are planned for 2018.

Given the unrest involved with the FARC rebels in the past, the Putumayo region suffered from a lack of investment and development. Now with a peace process in place, the region and Amerisur should benefit from the government’s commitment to a large increase in rural investment spending.

The outlook for 2018 appears positive and sustainable growth is expected. If all commitments are met, Amerisur is in a very strong position. This is a small oil and gas exploration firm operating in a potentially unstable region and thus represents a high risk investment, however, we maintain our recommendation of Amerisur as a ‘buy’ for growth-seeking investors willing to accept a higher level of risk.