PTA – Petroamerica Makes Two New Oil Discoveries in Colombia And Sets Conservative 2014 Guidance

The two wells drilled in El Eden block represent two new oil discoveries for Petroamerica (Image: Petroamerica Oil Corp.)

The two wells drilled in El Eden block represent two new oil discoveries for Petroamerica (Image: Petroamerica Oil Corp.)

Petroamerica (PTA:TSXV) announced exciting news just after market today with two new oil discoveries made in Colombia.   The discoveries were made on the El Eden block (40% working interest with PXT 60% operated interest) in the prolific Llanos Basin of Colombia.  At their La Casona 2 well the companies discovered 545 barrels of light 47 degree API oil and 3.6MMscf of gas in the Mirador formation.  They also discover 15.5 degree API oil in the Une Formation at their Rumi-1 well (also on the El Eden Block) which tested up to 1,274bopd under natural flow conditions.  These two wells represent new oil discoveries for Petroamerica and gives them an exciting new oil play.  The company also announced their La Guira-2 well has reached its target depth of 12,600 feet and is being logged.

La Casona-2 was tested for a 7-day period from a 12-foot perforated interval on a restricted choke and tested at an average rate of 545bopd with peak rates reaching 740bopd.  A total of 3,903 barrels of 47 degree API oil was recovered from the test.

The Rumi-1 well was drilled to a total depth of 14,620 feet and encountered a 60 feet hydrocarbon column in the Une Formation of which 27 feet is interpreted as net oil pay distributed over four separate sands.  When all four sands were tested together, they flow tested at rates of approximately 1,000bopd for the first 20 hours.  Over the full 30 hour test, rates averaged 762bopd with peak rates reaching 1,274bopd.  The water-cut at the end of the test was high at 32%.  The company plans to complete the well with an electo-submersible pump and place on long-term test.

Petroamerica ended 2013 with average daily production of 5,440boe/d (5,433bopd and 14.9 MMscf of gas) which represents 21% above guidance (roughly 940bopd above guidance) and a substantial 390% increase over 2012 average production of 1,392bopd.  They averaged well above that in the fourth quarter with 6,414boe/d of production of which 6,328 barrels were oil.

Petroamerica holds over 303,000 net acres in the Llanos Basin in Colombia (Image: Petroamerica Oil Corp.)

Petroamerica holds over 303,000 net acres in the Llanos Basin in Colombia (Image: Petroamerica Oil Corp.)

The company is targeting 5,000 to 5,500boe/d of production this year, but that is probably pessimistic due to the fact this estimate does not include the two discoveries announced today nor any exploration success this year (very likely).  Their 2014 production guidance is based on Las Maracas, Balay, La Casona-1 and Cuiara-1.

Petroamerica also gave an update on their 2014 capital program which they are estimating roughly $70 million for exploration and development in the Llanos Basin.  $49 million of that is budgeted for exploration, $5 million for appraisal and long-term testing and $16 million is for development activities.

In 2014, Petroamerica and their operating partners plan on being active on their Colombian blocks with a number of wells already firmly planned.  These include:

  • La Guira-2 well in Q1
  • Crypto-1 well Q2
  • Malavar-1 well Q3
  • Los Ocarros-X-1 Q3

They expect this capital program to be funded through existing cash as well as operating cash flows from current production.  With +$70 operating netbacks, the company is making nearly $500,000 per day in operating cash flows (given 6,400boe/d production levels from fourth quarter 2013).

The company has secured ICE Brent $95 puts for 5,000bopd of production for the first quarter of 2014.

Read: Petroamerica Announces Two Oil Discoveries, 2014 Guidance and Provides an Operations Update for Activities in Colombia

We own PTA.  This is an opinion and not investment advice.  Due your own due diligence.

PRE – Pacific Rubiales Closes $1.3 Billion Oversubscribed Note Offering with $4 Billion Order Book

Pacific Rubiales predominately produces heavy oil which requires expensive diluents for transportation

Pacific Rubiales predominately produces heavy oil which requires expensive diluents for transportation

The largest independent oil and gas producer in Latin America, Pacific Rubiales (PRE:TSX) has closed its previously announced offering of US$1.3 billion of senior unsecured notes with an interest rate of 5.375% maturing in 2019.  PRE is one of the fastest growing and according to Bloomberg their compound production growth over the last five years is 47 percent, the fastest among 109 producers with a market value of at least $5 billion.  The notes were placed through a syndicate of underwriters, including Merrill Lynch and Pierce, Fenner & Smith Inc.  The proceeds will be used, in part to close the acquisition of Petrominerales (PMG:TSX).

Ronald Pantin, the company’s CEO, commented: “We are very pleased with the success of this offering. The order book for the offering exceeded $4.0-billion (U.S.) with broad participation from over 260 investors in the United States, Canada, Latin America (including Colombia), Europe and Asia, which demonstrates the continued confidence of international investors in Pacific Rubiales, its business strategy and future prospects.”

In connection with the offering of the notes, the company obtained approval from Peru’s Banking, Insurance and Pension Funds Superintendent for registration of the notes in Peru. With this registration, the notes are eligible to be purchased by Peru’s pension funds.

Through the PMG acquisition, PRE will gain access to more pipelines

Through the PMG acquisition, PRE will gain access to more pipelines

The company is on track to spend $400 million more in capex by year-end with 10 exploration wells and 57 development wells planned.  In their recently released third quarter results, they announced average production of 127,728boe/d with much of that being heavy oil.  The company has been focused on decreased diluent costs by replacing purchased diluents with their own produced oil for blending.  This has seen their diluent costs decline 58% year-over-year and they continue to focus on this as seen through the rationale for purchasing PMG (mainly for light oil production which can be used for blending down their heavy oil).

This $1.3 billion is in addition to the company’s $355 million in available cash which will be used to finance the PMG acquisition with working capital left over.  With an order book exceeding $4 billion, the company clearly has available capital for further acquisitions of this nature.  Clearly investors have appetite for acquisitions of Colombian light oil producers.  PRE has made 10 acquisitions in the last 2 years.

Parex Resources (PXT:TSX) is one of the most likely takeover candidates which will likely see Petroamerica (PTA:TSXV) get taken out as well.  Parex is up 50% since hitting summer lows on the back of increased M&A activity in the Llanos Basin in Colombia.  Petroamerica shares have reacted similarly, up nearly 45% since their summer low of $0.22 per share.

Read: Pacific Rubiales announces closing of U.S. $1.3 billion 5.375% senior unsecured note offering

PTA – Colombian Light Oil Producer Petroamerica Posts Stellar Third Quarter

PTA is currently producing over 6,312bpd and is set to beat 2013 guidance of 5,000bpd

PTA is currently producing over 6,312bpd and is set to beat 2013 guidance of 5,000bpd

Some of the best value offered in the junior markets come in the form of junior to mid-cap international E&P’s.  These are substantially discounted to their domestic peers.  Petroamerica Oil (PTA:TSXV) is one of these junior international E&P’s.  The company released their third quarter results which highlighted the profitability of this light oil producer.  The company produced an average of 5,951bpd in the third quarter which represented quarter over quarter growth of over 18% from second quarter average daily production of 5,046bpd.  They sold a total of 558,524 barrels of oil in the quarter for total revenue of $54.8 million. The company averaged over 6,312bpd over the month of October which is the new high water mark.  PTA is guiding an average production rate of 5,000bpd for 2013 which they are surely to exceed considering that average production, YTD, is approximately 5,255bpd.

PTA sold these barrels at an average price of $108 per barrel and generated operating netbacks of $78 per barrel over the quarter.  On the back of this, the company generated per share earnings of $0.03 ($18.2 million) and positive cash flow from operations of $0.06 per share ($34.1 million).

PRE bought Petrominerales at $47,000 per flowing barrel

PRE bought Petrominerales at $47,000 per flowing barrel

While the company continues putting out quarter over quarter of profitable growth, the company’s value is not bridging the valuation gap.  Considering the recent M&A activity in Colombia’s light oil fields which are seeing Pacific Rubiales (PRE:TSX), amoung others, absorbing as much light oil assets as they can, the company’s value is not reflecting that.  Light oil is of the utmost strategic importance to heavy oil producers in Colombia (and elsewhere), such as PRE, because light oil dilutes their heavy oil product which significantly decreases their transportation costs.

PTA spent over $17.5 million in the quarter, focused solely in Colombia and mainly in the Llanos Basin.  PTA participated in the drilling of four development and appraisal wells: Las Maracas-10, Las Maracas-11, Las Maracas-12 and Las Maracas-14, resulting in four oil producing wells.  They also drilled the La Casona-2 well which has been cased and is awaiting a workover rig to begin testing the Mirador Formation.  A long-term test production facility for the La Casona-1 well has been commissioned.

PTA spent over $17.5 million in the quarter and expects to spend $80 million over 2013, which is completely self-funding.  They expect 2014 to be self-funding as well and will release their 2014 guidance in the next few weeks.  PTA is currently sitting on $77.9 million in cash and with continued strong oil pricing, that should grow.

The company is trading at an enterprise value of $34,000 per flowing barrel of oil which is roughly half that of their Colombian peers and even less when compared to domestic North American companies.  PTA continues to exceed expectations; they are guiding over 10,000bpd in 2014 (58% upside from current levels) and 15,000-20,000 by this time in 2015.

PTA is working to increase its operatorship

PTA is working to increase its operatorship

If PTA continues to trade at the current discounted EV/flowing barrel, but grows average daily production to 10,000bpd next year; then the shares of PTA should trade north of $0.65 per share (low end).  Add to that the fact that the company is working to becoming operator on more of their blocks, this should help to close the valuation gap (companies without operatorship are discounted because they do not have control of their own programs and are less desirable for takeovers).  The company recently increased its working interest from 25% to 100% in the exploration area of the El Porton Block with the objective of drilling the Crypto-1 well early in 2014.

Although the company is set to hit the important 10,000bpd mark next year and is, at the same time, increasing its operatorship, the shares do not reflect the growth – here’s the 5-year chart:

PTA Chart

Read: Petroamerica Announces Third Quarter 2013 Results and Operating Results for the  Three and Nine Months Ended September 30, 2013

Disclaimer: We are investors in PTA since Sept, 2012, and therefore biased with regards to the company. The guidance set by PTA contains forward looking statements. This post contains opinions and no professional or investment advice of any kind. All facts to be verified by the reader. Always do your own due diligence. Thank you.

PXT – Parex Prepares for Profitable 2014 Production Growth of Over 15%

Parex expects to grow production by over 15% in 2014

Parex expects to grow production by over 15% in 2014

Parex Resources (PXT:TSX), who recently increased its 2013 exit rate guidance from 15,500bpd to 15,700bpd due to stellar production success from their light oil assets in Colombia’s Llanos Basin have now sets the bar high for 2014.  The company announced their 2014 production guidance and capital budget plans which set Parex up for a profitable 2014.  PXT expects to produce 17,500-18,500bpd by year-end 2014.  This represents growth of approximately 12-18% over 2013 and 53-62% growth from 2012 (11,407bpd in 2012).  In connection with their growth plans, PXT plans to spend $250 million in exploration and development which it anticipates to be able to fund through cash flow and existing facilities.

Parex is planning to drill at least a total (gross) of 37 wells of which they will be on the hook to finance 23.4 of them.  Of these total gross wells to be drilled, 15 are to be appraisal and development wells of existing fields, 19 are to be drilled proven exploration targets and 3 will test completely new concepts.  Including budgets for drilling, facilities and other items, the development wells will cost a total of $90 million, exploration of proven plays will cost $125 million and the new concepts will cost roughly $35 million.  Parex has also allocated an additional $30 million which it will spend if certain plays warrant the increased drilling expenditures.

Parex expects Vasconia/Brent pricing to average roughly $100/bbl over 2014 and expects its production and transportation costs to range from $27-$30/bbl.  Other netback components are expected to be inline with 2013, except for royalties which are expected to be 15% higher in 2014 due to their planned drilling on high royalty rate fields.

PXT expects to focus its development and appraisal drilling on the Cabrestero (100% operated), LLA-30 (100% operated) and LLA-34 (45% non-operated; Geopark and P1).  These are high quality blocks within the productive Llanos Basin of Colombia.  On Cabrestero and LLA-34 the company expects to drill 12 development/appraisal wells and 5 exploration wells.  LLA-30 discovered significant oil in the second quarter of 2013 and flowed 38 degree API light oil at over 1,000bpd from the Adalia well.

PXT expects to produce 17,500-18.500bpd by year-end 2014

PXT expects to produce 17,500-18.500bpd by year-end 2014

Parex’s exploration drilling schedule provides for a catalyst rich program with 17 of a possible 22 exploration prospects expected to be drilled in the first half of 2014.  Parex also has the opportunity to drill another 8-10 appraisal wells in 2014 as follow- up to exploration success.  In total the company is spending 10% more in total capital in 2014 than 2013 and expect to grow production by over 15% (at least).  With management’s history of beating guidance with production success, we would expect guidance to be revised to the upside in H2/2014.  Parex grew 2013 2P reserves by over 47% from 2012, to 23.7mmbbl and expects to grow that even further over 2014 as part of their budget.

PXT has consistently strong operating netbacks and heavy focus on light oil, Parex is a ripe takeover target due to its strategic locations within the Llanos Basin.  Active acquirers such as Pacific Rubiales will be looking for more light oil assets over 2014 and Parex offers some of the best performing blocks in the basin.  If Parex goes, then Petroamerica Oil (PTA:TSXV) is likely to go with them (or shortly after).  Parex is the operating partner on PTA’s Los Ocarros and El Eden blocks.  Los Ocarros hosts the highly productive Las Maracas well series which have had high success rates of both exploration and production.

Read: Parex Resources Announces 2014 Guidance Highlighted by Cash Flow Funded 15% Production Growth

PTA – Light Oil Discovery At La Guira And Two New Wells Coming On Production For Petroamerica

PTA is averaging over 6,300bpd

PTA is averaging over 6,300bpd

Parex Resources (PXT:TSX), the 50% operating partner of Petroamerica Oil (PTA:TSXV) in the Los Ocarros Block in Colombia’s Llanos Basin, announced the initial results from the La Guira-1 exploration well, in their third quarter release (and subsequently in a release from PTA).  La Guira-1 was spud on October 9th and targeted the Mirador, Gacheta and Une formations and was drilled to a total depth of 12,500 feet.  La Guira-1 hit 11 feet of net oil pay in the Mirador formation.  The well was tested over a 24.5 hour period and during the first hour was flowing at over 1,000 barrels of light 37.5-degree API oil with a 20% water cut under natural flow conditions.  As testing continued, the water cut increased to over 50% and the well ceased flowing naturally.

A total of 206 barrels of oil were recovered from the test.  The Gacheta formation was flow tested, but did not produce commercial amounts of oil.  PTA will now run a electrosubmersible pump into the well and will tie the well into the Las Maracas central production facility which is located 7km away.  They should be able to commence long-term production tests soon given how close the Las Maracas production facilities are to this latest discovery.

La Guira located on the Los Ocarros Block

La Guira located on the Los Ocarros Block

PTA has announced plans to drill an updip appraisal well, La Guira-2, due to management’s interpretation of the La Guira-1 discovery well being low in the La Guira structure.  As a result, they need to gain more vertical height above the Mirador oil-water contact and intersect the Gacheta reservoir.  This is an exciting discovery and although the well itself was somewhat disappointing due to the water cut, the fact the company has made a new light oil discovery is promising.  As with many Colombian light oil wells, the initial watercut will likely be manageable once longer-term testing is done.

PTA has also updated shareholders on the La Casona-2 appraisal well located on the El Eden block (40% non-operated working interest, PXT is the 60% operator).  The well has been drilled and a workover rig is going to test the Mirador formation there given that the Mirador, which is typically highly productive, was untested in the original La Casona-1 well.  The company expects the workover rig to be onsite within the next 2 weeks.  La Casona-1 production is expected to start during the next week.  Commissioning of the long-term test production facility for the La Casona-1 well is now complete.

The company’s other well on the El Eden block, Rumi-1 was spudded on November 6, 2013 and is currently at a depth of 5,000 feet and will target the Mirador, Gacheta and Une formations with results expected by mid-December.

The company is flowing at over 6,300bpd and is still targeting 10,000bpd by this time next year.  Successful watercut management with further success on the La Guira discovery as well as strong production from La Casona will help get them to that benchmark.  Combine that with their stellar production at Las Maracas and the company looks set to deliver strong production growth over 2014.

Pacific Rubiales is actively acquiring light oil assets in Colombia

Pacific Rubiales is actively acquiring light oil assets in Colombia

It will be a busy year-end for important newsflow.  Watch for the results from La Guira-2 as well as the production from La Casona-1 and the Rumi-1 initial flow rates which are expected by mid-December.  With recent M&A activity picking up in Colombia’s light oil fields also, PTA looks like a prime takeover candidate, especially given their current valuations; trading at an enterprise value of $26,500 per flowing barrel of oil.  Petrominerales (PMG:TSX) is being purchased by Pacific Rubiales (PRE:TSX) at almost double that value ($46,990 per flowing barrel).

Read: Petroamerica Tests Light Oil at La Guira-1 and Provides an Operations Update for its Activities in Colombia

Related: Pacific Rubiales to Buy Petrominerales for $1.6 Billion and 56% Premium

PTA Is Leaving The Station

PTA COO and EVP Ralph Gillcrist

PTA COO and EVP Ralph Gillcrist

Core long position Petroamerica Oil Corp. (TSXV:PTA) has provided an update on its appraisal activities in Colombia.

What you need to know is that PTA trades at less than 1.5X cash flow currently, the La Casona field will come on stream in November, the La Casona 2 appraisal well is about to be tested, as is the La Guira 1 prospect (stay calm, Tommy). Additionally, three other new exploration targets will be tested over the coming two quarters, any of which could be material for the most undervalued junior oil producer in Colombia.

According to today’s news release, the La Guira-1 exploration well, which was spud on October 9th, has been drilled to a total depth of 12,500 feet. The well was cased and PTA expects to now test the Mirador and Gacheta formations. Note, the La Guira prospect is 7 kilometers to the south of the Las Maracas Field, PTA’s primary asset in Colombia, currently producing over 12,000 barrels per day (50% net to the company). According to PTA’s corporate presentation, the La Guira prospect has a 55% chance of success, and an 8-11MMbbl prize (Page 7).

Additionally, the La Casona-2 appraisal well has reached its target depth of 16,700 feet. Logs indicate potential pay in the Mirador Formation, which was untested in the La-Casona-1 well, and in the Une Formation. The rig is being demobilized and moved to the Rumi 1 prospect (40% probability of success and a potential prize of 4-7MMbbls). It is then expected that a work over rig will be brought in to La Casona-2 to test the Mirador formation.

The company also announced that the long term production facility for the La Casona field, which includes gas compression, is expected to be commissioned very shortly with production at La Casona 1 expected to commence in November. We expect La Casona 1 will produce about 1000 barrels per day (40% net to PTA) with La Casona 2 and subsequent appraisal and development wells to provide steady growth for the company.

In addition to the La Guira 1 prospect, which is about to be tested, Petroamerica’s Drilling Schedule (Page 7) shows three other exploration targets to be tested over the coming two quarters: Rumi-1, Crypto-1 and Malavar-1. Again, discoveries at any of these prospects, including La Guira, would be very material to the company.

Calman Valores over at Seeking Alpha wrote a bullish note on PTA earlier today (link here). We agree with Mr. Valores that the market has yet to recognize the value of this company, and we welcome him aboard the PTA train, just in time.

Read: Petroamerica Provides an Update for its Appraisal Activities in Colombia

PTA Chart

PTA data by YCharts

Disclaimer: We are investors in PTA since Sept, 2012, and therefore biased with regards to the company. The guidance set by PTA contains forward looking statements. This post contains opinions and no professional or investment advice of any kind. All facts to be verified by the reader. Always do your own due diligence. Thank you.

PTA – Petroamerica Spuds La Guira Prospect, Trading at 1.2x Forward Cash Flows

3D Seismic showing the La Guira 1 prospect (company presentation)

3D Seismic showing the La Guira 1 prospect (company presentation)

Petroamerica Oil Corp. (TSXV:PTA), a Calgary-based junior oil and gas company operating in Colombia’s Llanos Basin, has started drilling its La Guira-1 exploration well on the Los Ocarros Block. The well was spud (read: started drilling) October 9, 2013 and is targeting the Mirador, Gacheta and Une Formations which produce at the adjacent Las Maracas Field, the company’s cornerstone asset, which provides the bulk of their ~6200 barrels per day reported production (September, 2013). The well is being drilled to a total depth of 12,500 feet and is expected to take one month to drill and case. The company says La Guira is a potential satellite to the Las Maracas Field, and is located on the next fault block to the immediate south.

PTA holds a 50% non-operated participating interest in the Los Ocarros Block, with Parex Resources holding the other 50% and operatorship.

Read: http://online.wsj.com/article/PR-CO-20131011-906675.html

1.2x Forward Cash Flow

According to the company’s Oct 2, 2013 Operational Update, PTA produced ~6200 barrels per day in September with netbacks of over $70 per barrel, which if production levels and oil prices maintain, the company should see approx. $158.4 million in cash flow for the year forward looking (365 x $70 x 6200). PTA’s market cap today is $189 million.

Petroamerica primarily produces light oil from the Las Maracas field, with a little bit of production coming from Balay. The La Casona discovery (November 2012), is scheduled to come on stream in the next few weeks and provides a development opportunity for the company.

The La Guira prospect, spudded today, provides investors with something new to get excited about.

Thesis

PTA Executive Chairman Jeff Boyce, was founding CEO of Vermillion Energy (TSX:VET), and was Alberta's Amateur Baseball Player of the Year in 1981

PTA Executive Chairman Jeff Boyce, was founding CEO of Vermillion Energy (TSX:VET), and was Alberta’s Amateur Baseball Player of the Year in 1981

PTA is cashed up ($64 million as of Sept 30, 2013), fully funded for growth, with good management.

Pacific Rubiales Energy (TSX:PRE), Colombia’s largest state owned oil producer, has been buying light oil producers in Colombia of late (C&C Energia, Petrominerales), because it needs the light oil as a diluent for its heavy oil production (light oil blended with heavy oil makes if flow through Colombia’s pipelines more easily).

Petroamerica, along with other oil producers in the country, are trading at historically low valuations. Pre credit crisis 2008 cash flow / share price valuation of Colombian oil and gas companies averaged approx 9x. Between 2009 and 2011 it was approx 6.5. Now it is ~1.5-2.8x. Forward looking, PTA is just over 1.2x.

Criticisms the company faces from investors include concerns over decline rates, which other companies in Colombia have had difficulties with. PTA says they are holding back the choke at their wells to prudently manage the flows, and have yet to experience such high declines. Additionally, investors want to see Petroamerica gain operatorship, which the company has said they are pursuing actively. Finally, there are ~593,000,000 shares out on Petroamerica, which some investors don’t like. The company will only consolidate the share structure on positive news, such as a business combination, and are fully funded for future growth, management have said.

Officials from the company will be presenting at next week’s Canaccord Genuity Global Resources Conference in Miami, which we will also be attending.

We have been following the company closely since August, 2012, and a shareholder since September, 2012.

Here’s the 12 month PTA.V chart:

PTA 12 months (Stockwatch)

PTA 12 months (Stockwatch)

Please read Petroamerica’s Presentation for a full disclaimer and cautionary note from the company. This is not investment advice. Always do your own due diligence. Thank you.

PTA – Petroamerica Oil Produces 6,213 bopd in September, Provides Progress Update

PTA News WSJPetroamerica Oil Corp. (TSXV:PTA), a junior light oil producer focused in Colombia’s Llanos Basin, has provided an operations and financial update in a news release out this morning.

PTA has US$64 million in cash as of Sept 30, 2013, and all planned future capital programs through 2014 are expected to be fully funded internally.

Production for the third quarter averaged 5,951 barrels of oil per day (“bopd”), an increase of 18% over Q2 2013. Production for the month of September averaged 6,213 bopd, compared to an August average of 5,997 bopd, representing a 4% increase.

Production from the Las Maracas Field (50% non-operated working interest) is currently being managed with the objective of extending the production plateau, optimising total fluid production and delaying the future decline. Las Maracas is expected to be maintained at approximately 12,000 to 12,500 bopd gross throughout the rest of this year.

The Las Maracas-5 well has been recompleted as a Mirador producer, after producing 332,886 barrels of oil from the Gacheta and Une formations. Tests show excellent properties at the Mirador reservoir (~2,993 bopd).

The Las Maracas-12 development well targeting attic oil in the Gacheta and Une reservoirs, encountered a total net pay thickness of approximately 17 feet. The well produced light oil (29.8(o) API) on test from the Une Formation at an average of 674 bopd and has since been completed as a producer. Additionally, the Las Maracas-14 well has successfully delineated the southern extent of the Las Maracas Field.

On the La Casona field (40% non-operated working interest), the LC2 well has encountered drilling challenges, and has initiated a second sidetrack to test the deeper part of the well. Logs from the unsuccessful attempts are encouraging, indicating up to 46 feet of potential net oil pay in the Mirador Formation, 25 feet in the Gacheta and up to 25 feet of potential net pay in the Une Formation. The company added a caveat that quality of the logs from the Une Formation weren’t great.

Construction of the long-term test production facility for the La Casona-1 well, which includes gas compression, is now complete. In the interest of safety, production from this well will not commence before the Tuscany 119 rig, which is drilling the La Casona-2 Sidetrack-2 well from the same surface pad, has moved off location. Bringing LC1 on production represents an important milestone for the company in that it provides field diversification and opportunities for future development.

Shares in Petroamerica were off 5% at press time (7:10am PST), last at .29. Here’s the 12 month PTA.V chart

PTA Chart

PTA data by YCharts

News Release: Petroamerica Provides an Operations and Financial Update for its Activities in Colombia

We own PTA.  This is an opinion and not investment advice.  Due your own due diligence.

PRE/PMG – Pacific Rubiales to Buy Petrominerales for $1.6 Billion and 56% Premium

PRE CEO Ronald Pantin

PRE CEO Ronald Pantin

The second largest oil producer in Colombia, Pacific Rubiales Energy (TSX:PRE), has agreed to buy light oil producer Petrominerales (TSX:PMG) for $1.6 billion in an all cash deal that represents a 56% premium for PMG shareholders. The transaction also implies a value to Petrominerales of $47,000 per flowing barrel.  Each PMG shareholder will receive $11 per share in cash, plus one common share of a newly formed E&P company that will hold Petrominerales’ current Brazilian exploration assets and $100 million in cash. PRE will assume nearly $640 million in net debt. Further details can be found in the news release. Read: Pacific Rubiales Announces Strategic Acquisition of Petrominerales.

“This is a natural fit,” said David Neuhauser, a managing director at Livermore Partners Inc., to Bloomberg. Neuhauser continued, “Pacific needs the light oil, and Petrominerales needs the capital to develop their vast acreage. Should be very positive for both companies.”

Light oil in Colombia is critical to Pacific Rubiales as a diluent for the company’s heavy oil production (127,555boe/d in Q2/2013).  Petrominerales offers 21,539 bopd of light oil production from Colombia and Peru as well as approximately 100 light oil exploration targets. PRE CFO Carlos Perez told Bloomberg in August that they “have been looking at Petrominerales for years but the problem is the declining rates they have,” (see Rubiales Would Consider Buying Light Oil Producer, CFO Says).  It appears that, in the end, PRE couldn’t resist the valuations offered by PMG.

Also, Petrominerales is heavily leveraged (it has $750 million in debt and a $550 million market cap) and as a result was working to reduce costs and shore up cash and so was unable to properly develop its asset base.  With PRE’s financial flexibility, they should be able to achieve upside on the development assets they are acquiring as well.  Add to this the fact that PMG offers access to key strategic oil pipelines, and you start to see why PRE pulled the trigger.

This opens up other light oil producers for consolidation in Colombia, in particular those operating in the highly productive Llanos Basin. Now that Petrominerales is gone, Canacol (CNE:TSX)Parex (PXT:TSX), and Petroamerica (PTA:TSXV) come into focus.

Today’s transaction also highlights the valuation disconnect currently being experienced by Colombian light oil producers. Although they offer attractive topline pricing (Vasconia, very similar to Brent), some of the highest netbacks in the entire oil and gas industry (over $70 per barrel in the case of PXT/PTA’s Las Maracas field, for example), and are able to optimize their decline rates better than they have in the past, these companies still trade at fractions of their historical multiples as well as those of their North American peers.

Expect shares of PXT, PTA and CNE to do well tomorrow.

Here’s the 5 year Pacific Rubiales chart:

PRE Chart

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Disclaimer: These are opinions and not advice. All figures approximate and all facts to be verified by the reader. Do your own due diligence.

BOE – Americas Petrogas Puts Up the ‘For Sale’ Sign

BOE could fetch +$250 million in a sale

BOE could fetch +$250 million in a sale

America’s Petrogas (BOE:TSX) announced that it is under ‘strategic review’ (aka it has put up the ‘for sale’ sign).  Shares closed up $0.12 per share (12.5%) to $1.08 on 2.9 million shares bringing the company’s value to $200 million which, after a premium, could fetch $250-$350 million for the whole company.

Depending on how this sale goes, this could be the beginning of a consolidation phase in the Latin American junior oil and gas space.  The mid-caps are receiving a bit more warmth than their sub-10,000bpd junior counter-parts and so the valuation difference may lend itself to a consolidation wave.  Parex buying Petroamerica to consolidate their highly successful Los Ocarros Block in Colombia would make sense given Parex shares are up, almost 50%, over the last few months.

Here’s the release: Americas Petrogas Announces Strategic Review

PTA – Will Petroamerica Make it 5 for 5?

While many market technicians may cast doubt on the efficacy of the so called “golden cross”, there can be no doubt that this technical signal is especially strong with powerfully trending stocks – Petroamerica Oil is one of these stocks:

PTA_50_200_crosses

In the past 3 three years a strategy of simply buying when the 10-week moving average (50-day) crosses above the 40-week moving average (200-day) and selling when it crossed below would have worked 4 out of 4 times including avoiding the painful 2011 downturn.

Today we got a golden cross in PTA.V:

PTA_Weekly_9.3.2013

Will PTA make it 5 for 5? My money says YES, and I see .50 as being easily achievable by year end.

PTA – Petroamerica Announces Q2 2013 Results and Surpasses 6,000 bopd Production Milestone

Screen shot 2013-08-21 at 5.15.56 PM

Click here for the news release

Petroamerica Oil Corp. (TSXV:PTA) just reported net income of $11.2 million for the quarter ended June 30, 2013.

A review of the quarter and an Activity Schedule of upcoming catalysts can be found in the news release.

Read: Petroamerica Announces Second Quarter 2013 Results and Surpasses 6,000 bopd Production Milestone

PTA also announced that they have surpassed the 6000 barrels per day production milestone.

The company has come a long way from the 1500 barrel per day operation we met a year ago and management deserves full credit.

Here’s the strengthening 36 month PTA chart:

Hist (3)

We own some PTA. Do your own due diligence.

Petroamerica Announces the Successful Testing of its Las Maracas-10 Well in Colombia and Encouraging Preliminary Results on the La Casona-2 Sidetrack Appraisal Well

Screen shot 2013-08-20 at 2.56.34 PM

Click for news release

Petroamerica Oil Corp. (TSXV:PTA) has released the results from its Las Maracas-10 development well, which tested under natural flow, light 29.8-degree API oil at an average rate of approximately 1,000 barrels of oil per day from the Gacheta formation.

The Las Maracas-10 development well was specifically targeting attic oil in the main Gacheta reservoir, however, it also unexpectedly encountered oil in the Mirador Formation on the downthrown side of the main fault delineating the field. The well encountered a total net pay thickness of 48 feet, 34 feet of which are in the Gacheta and Une Formations, and 14 feet in the Mirador Formation. The well produced on test under natural flow conditions, light oil (29.8o API) from a 16-foot perforated interval in the main Gacheta sand. The total duration of the test was 6 hours and the average oil rate through a 40/64 inch restricted choke was approximately 1,000 bopd with a wellhead pressure of 300 psi. Total oil recovered during the test was 436 barrels with 67 barrels of water and the water cut at the end of the test was approximately 1%. The well is currently shut-in and will be completed later on as a Gacheta producer utilizing a workover rig. The Tuscany 109 drilling rig was skidded and has commenced drilling the Las Maracas-12 development well, which will also target the Gacheta and Une Formations in an up-dip attic position.

A total of 11 wells have now been successfully drilled on the Las Maracas Field, resulting in 10 oil producers or potential oil producers (3 Mirador and 7 Gacheta) and one water disposal well. Petroamerica holds a 50% working interest in the Los Ocarros Block, where the Las Maracas Field is situated.

The La Casona-2 Sidetrack appraisal well, which is situated on the El Eden Block where Petroamerica holds a 40% working interest, is currently drilling at a depth of approximately 16,000 feet. While drilling through the Mirador Formation, the well encountered good hydrocarbon shows and LWD (logging-while-drilling) logs indicate the presence of oil pay. A full disclosure of the results of this well will be released after the well has reached its target depth, which is anticipated to be towards the end of August.”

News Release: Petroamerica Announces the Successful Testing of its Las Maracas-10 Well in Colombia and Encouraging Preliminary Results on the La Casona-2 Sidetrack Appraisal Well

Upcoming drilling:

  • Las Maracas-12 development drilling expected Q3/2013
  • La Casona-1 long-term test Q3/2013
  • La Casona-2 appraisal drilling Q3/2013
  • Rumi-1 exploration drilling Q3/2013
  • Las Maracas-14 appraisal drilling expected Q4/2013
  • Las Maracas-15 appraisal drilling expected Q3/2013
  • La Guira-1 exploration drilling Q4/2013

Stock performance:

PTA 3 Year

PTA 3 Year

Contributors to this website are long PTA. Always do your own due diligence.

Rubiales Would Consider Buying Light Oil Producer, CFO Says (Bloomberg)

Bloomberg article puts the spotlight on Colombia's light oil producers.

Bloomberg article puts the spotlight on Colombia’s light oil producers.

Aug. 9 (Bloomberg) — Pacific Rubiales Energy Corp., Latin America’s most valuable non-state crude producer, said buying a light crude producer in Colombia would help reduce transport costs for the mostly heavy oil producer.

Increasing low-density crude output would reduce purchases of diluents needed to transport heavier oils by pipeline, Chief Financial Officer Carlos Perez said today by telephone.

While the Bogota-based company isn’t actively pursuing any specific acquisitions, it doesn’t rule out selling bonds next year to finance an opportunity should it arise, Perez said. Petrominerales Ltd.’s declining Colombian production diminishes the Calgary-based company’s appeal as a target, he said.

“Any interest could be in a company producing light oil,” said Perez. “We have been looking at Petrominerales for years but the problem is the declining rate they have.”

Source: Rubiales Would Consider Buying Light Oil Producer, CFO Says

Related: Petroamerica coverage