亚美能源(02686) 　　Event: Co-CEO and COO Mr Carl Lakey resigned effective 30 October 2016, in order to spend more time with his family in US. He also retains all his stock grants. Under new arrangements, for at least one year, he will now serve as a consultant to AAG, advising on operations and strategic development, including the recently announced M&A transaction under evaluation. Former Co-CEO and President Mr Jing “Pearce” Li becomes sole CEO and assumes all responsibilities of Mr Lakey’s roles as co-CEO and COO. In June 2016 AAG hired a veteran, Mr Shuxing Dong, as Vice-President of Technology. He will assist Mr Li in managing technical operations; Mr Dong has over 20 years of diversified experience in the oil and gas industry including reservoir engineering, production engineering and completion engineering, and was most recently Chief Reservoir Engineer of ConocoPhillips China Inc. Conoco (COP US, NR, CP USD44.13) during a 19 years career there.Implications: Mr Lakey’s departure should not affect operations or strategy. We believe AAG continues to make steady progress in Panzhoung (producing) and in Mabi (awaiting approvals). We see no material impact on the company’s ability to make decisions or execute plans related to production, assets or strategic direction due the change in Mr Lakey’s employment status. Mr Lakey’s vested and unvested share-based compensation was disclosed; we believe his consulting and share-based compensation will motivate him to make the best possible decisions for shareholders. Outlook: Upon final approval of the first Mabi Overall Development Plan (Mabi ODP I) by the NDRC, expected early 2017, AAG will commercialize reserves. Regarding the potential M&A transaction, no further details are available.Maintain Buy; TP of HKD1.70. Our TP is based on a 2016-34e DCF (10%) with noterminal growth. We use a 10% discount rate, which is an oil industry standard for young E&P companies. We also think positive policy support in the form of a subsidy on CBM production will help lift sentiment and benefit AAG’s near- and long-term valuation profile. Key downside risks: Lower-than-expected gas selling prices,delays in Mabi ODP application and approval, lower-than-expected production, a lower-than expected recovery rate of proved, forex fluctuations, and government policies on CBM VAT rebates and subsidies, M&A.