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According to a Bloomberg article today, Parex Resources (PXT:TSX) is planning on doubling its current production of 17,500bopd. The company, led by CEO Wayne Foo, has aspirations of growing to 50,000bopd, according to the article.
“To be relevant in the market, you really have to be in the range of 25,000 to 50,000 barrels a day,” Wayne Foo said in the article.
Wayne Foo (EDGAR)
Parex is one of only 10 Canadian oil producers operating in Colombia. In order to grow their production +20% per year, they need to acquire assets and production. According to the article, Mr. Foo remains committed to growing in Colombia as the government is stable and they are comfortable with the oil resources there.
Given the few companies operating in the oil space in Colombia, Petroamerica Oil (PTA:TSXV), looks like a they could be an ideal target. Why? It’s simple; they are cheap. They trade for pennies on the dollar (0.66x current cash flow and $19,000 per flowing barrel). On a reserve multiple basis, they aren’t as cheap because they have yet to prove up large insitu reserves. That is likely to change with more drilling.
Petroamerica have consistently grown production, they have blocks in the right areas of the Llanos Basin and they are already partners on two blocks with Parex; Los Ocarros and El Eden (both currently operated by Parex).
Petroamerica’s Blocks (Source: Petroamerica Oil Corp.)
Acquiring Petroamerica would allow Parex to consolidate its ownership and instantly boost net production from those two blocks as well as grow their land holdings in that key basin.
The reason that Petroamerica might be unattractive to some suitors is the fact they don’t have operatorship of any of their blocks, however, this might be more palatable for Parex given they are already operators on two blocks with Petroamerica.
Overall, Parex looking for more growth in Colombia should be viewed as positive across the sector. Clearly Parex, who have more than doubled their share price over the past year, are committed to Colombia and that bodes well for all who operate there.
Read: Parex Targets Colombian Asset Purchases to Double Output (Bloomberg)
Disclaimer: The author owns shares of Petroamerica Oil Corp. Therefore, this information is very biased and should not be considered investment advice. Always do your own due diligence.