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Page 10 of the PTAL August 2019 presentation of the 2P oil in place was 329 mmbls for year end Dec 2018 by NSAI. PetroTals management estimate then - was up to 367 mmbls.
Today NSAI have increased the oil in place to 364 mmbls and bang on target of Petrotals own internal estimate made last August.
"PetroTal is glad to see that NSAI's 2P OOIP estimate now approximates our internal estimate. We are confident that future production data will substantiate the higher recovery factors"
Page 4 of that August 2019 presentation for the 3P oil in place case showed 500 mmbls. Today the 3P Reserves case increased by 8% and this i like ! The clues are there in looking ahead and how this is way too cheap at the current price.
I would expect later this year to see a management view of increased oil in place against the previous Aug 2019 364 mmbls and Dec 2018 329 mmbls resepectively - maybe to 400 mmbls in place. Also by the end of the year there should be a lot more production data available on existing and new wells.
If they get to 400 mmbls in place and a RF growing to 20% - that's a looming 80 mmbls P2 and surely well beyond the unrisked target of 88p in todays broker note.
Ultimately over time with 500 mmbls in place and a RF of 20-30% is a 100-150 mmbo P2 case without any of the other prospects on this block or the 4 billion bl+ potential on the other.
Still ridiculoulsy cheap at 25.4p and on a P2 reserves basis alone the company is only valued at $4.67 per barrel given it's a major producer, infrastructure developed and debt free while paying a dividend on the march to 20,000 bopd.
At the end year strip price the 2P reserves are valued at over $700m or over $15 per barrel.
Todays Numis buy note re-iterates that serious undervaluation with a target price of 50p and unrisked 88p.
Major upside still to come from any increased recovery which should gather pace leading to further reserves increases.
Still 3-4 exploration structures on the block on trend to Bretana.
Farm out or go it alone potential on the other block of some 4 billion+ bls unrisked.
Fair value currently should now be 40p+
With future excess cash, the potential for buying up further assets exists to grow the share price beyond current broker targets.
From Numis
PetroTal (Buy, TP: 50p) 21% increase in 2P reserves underpins growth
PetroTal, which is developing the Bretana field onshore Peru, has reported a strong 21% increase in independently audited 2P reserves to 47.7mmbbls. This growth is driven by the excellent operational results delivered by the team in 2019. Reported 2P reserves are ~2% ahead of our risked NAV modelling – we incorporated an expectation reserves would increase at YE 2019 and this has now been delivered. PetroTal trades at 0.51x our discovered resource NAV, a 23% discount to the sector on 0.66x. We forecast strong FCF generation of ~US$0.5bn over the next 5yrs at US$65/bbl Brent, equivalent to ~2.25x the current market cap. We continue to see the potential for further NAV increases over time towards our un-risked 88p/sh, if the production performance of the field tends towards that of other analogue fields in the region.
• Growth across all reserves categories: Strong reserves growth was repeated across all reserves categories, with 1P (proven) reserves increasing 20%, 2P reserves (proven + probable, or most likely) increasing 21%, and even 3P reserves (proven + probable + probable) increasing 8% to 84.8mmbbls.
• Recovery factor increase, more to go for: The recovery factor attributed by the reserves auditor has increased from 12% to 13.6% at the 2P level, and the 2P reserves assessment now approximates management’s internal estimate. There is still plenty of room for the recovery factor to increase over time; management believes a recovery factor of ~24% could be achieved given the performance of analogue fields in the region. Our discovered resource NAV stands at 49p/sh; this increases to 88p/sh in the higher recovery factor scenario, ~3.5x the current share price.
• Drilling restarted: Planned maintenance of the drilling rig is now complete and the 6H development well commenced drilling on 17 Feb, with completion expected around mid April. Drilling will continue through the year, and is expected to drive further production increases.
• Facilities commissioning nearing completion: Current production stands at 10mbbls/d, and has been fluctuating during commissioning of the Central Processing Facility, which is now nearing completion. We forecast production of 10.9mbbls/d for 1Q 2020 and production of 13.0mbbls/d for 2020, with 2020 production growth back-end loaded as production wells are drilled and brought onstream.
So....
- 2P reserves of 47.7 MMBBL, upgraded by 21% (+8.3 MMBBL)
- 6H well drilling underway
- NPV10 of $1.1 billion
- Zero debt, significant historical tax loss benefits
Market cap £169m.