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This is perhaps quite a useful article
https://www.argusmedia.com/en/news/2204922-perus-presidential-rivals-shake-investors
Of note in this is Castillo wanting to change the constitution which means he sees it as a problem to what he would like to do.
Thank you, great post. I'm thinking - with Peruvian leaders and Manolo's dads history with PeruPetro (family matters in Peru) they'll probably not be a target for years. But risk went up and that doesn't help the SP - I'm wondering if a good ER will even push it up much before we've got a more clear political situation. Catching up with the situation now will require some research. PTAL is probably 8-10% of my portfolio so... I don't like the impact on risk/reward.
This is a good example of sovereign risk. If you are interested in this issue it is worth studying the history of Peru and the politics of Peru.
It is right to say that the Congress would have to support legislative changes. Current estimates give Peru Libre possibly around 30 seats out of 130. That would be insufficient to prevent impeachment of the president. Fujimori is unpopular and so it is not a popularity contest, but an unpopularity contest. Castillo has some association or links with organisations linked to Shining Path. That adds to the political complexity.
Trading volumes in Petrotal are really low today. This is a risk issue which existed last week and continues to exist for any company. Personally I am not selling, but I am also being cautious about extending my holdings.
I cannot, however, offer any certainties. If you have a heavy investment on margin in a very concentrated portfolio it is a factor to consider. The questions are
a) Who wins in June
b) If Castillo were to win could/would he nationalise Petrotal.
c) If he did what would he pay
What I would say is that Petrotal is not what I would think as being the top target for such action.
It will be worth translating the local media to find out what he actually says in the elections. What Peru did many years ago did not work out that well and people do remember it.
If you go back to the 2017 and 2019 General Elections in the UK there was sovereign risk. That has faded to some extent with Jeremy Corbyn not being leader of the Labour Party. In Peru, however, when we know what the political balance in the Congress is that will last for five years (most likely).
The response of the market to this has been to assess the situation. The response of the Peruvian market yesterday to the outcome which was known there yesterday was to fall back a bit, but come up since then.
I don't know what the best indicators are for the peruvian market, but here is a NASDAQ index
https://www.google.com/finance/quote/NQPE:INDEXNASDAQ?window=1Y
If anyone has any better suggestions I would be interested to see them.
Peru uses D'hondt for allocating seats which takes a little time (I think they also have preferential voting) hence we don't have the final congress figures as yet.
@johnhemming do you have any worry about this? I have no clue about how their democrazy works. If the parliament has a small/minor group of hard left members - would nationalization even be a topic? I'm assuming it's not something you'll be able to just decide as a president. They might raise taxes but further than that... US would probably also make any President really uneasy about this - with Venezuela as a clear example of what not to do and what to expect with embargos from US.
"Mr. Castillo, 51, wants to nationalize the country’s natural resources to help pay for investments in health care and education; promises to have a top court elected by popular mandate; and is proposing a new constitution to favor ordinary Peruvians and not business interests."
I hope he's not elected. And if so, that they're not as stupid and incompetent as their socialist brothers in Venezuela.
https://www.reuters.com/article/us-venezuela-election-nationalizations-idUSBRE89701X20121008
https://www.nytimes.com/2021/04/12/world/americas/peru-Pedro-Castillo.html
Run-off in June.
Ultra-left v. ultra-right.
Big howdy do.
It looks like Fujimori vs Castello. The unicameral Congress was also elected. Not that many far left in that. The uncertainty to me is the number of voters that (with compulsory voting) cast an abstention and whether they will do that with Castello vs fujimori (about as polarised as you could get)
Can only hope Castillo isn't going to win in the election in June.
"Castillo has promised to redraft the country’s 27-year-old constitution, one of the key demands of young protesters who launched last year’s anti-government demonstrations, with a view to weakening the business elite and giving the state a more dominant role in sectors such as mining, ***oil***, hydropower, gas and communications."
I rather hope it's vs "liberal economist Hernando de Soto".
Just imagine what sell-off the whole mining. O&G will face if Castillo wins. Should think Venezuela would give Peru a hint about what will be the end scenario if foreign investment stays clear of Peru.
https://www.aljazeera.com/news/2021/4/12/pedro-castillo-leads-perus-presidential-race-exit-poll
Muddled at best.
Maybe Fujimori in the run-off.
Might be enough for the next year or 2, but at some point the water cut will make it insufficient. But as long as they can stay ahead with the next CPF it's ok. Peanuts, as you say, also compared with the 25ish millions they're spending on seismics.
Makes me wonder what a vertical wild cat drill smack on Osheki would cost :) I honestly hate that they're even talking about maybe abandoning that prospect - I really hope the crazy wall of cash will change their perspective on Osheki, including perhaps the farm-out thoughts.
I think it wont be enough. the original plan was 8000 bbls per well, now planned to change the pumps to do 12 000 per well. I think it wont be a problem nor highly cost intensive to add additional water pumps. considering cpf 1 and 2 in all cost around 24mio it just looks to be peanuts compared to a horizontal well that costs around 12-14mio alone....
In the mid 2020 presentation they planned 80 000 bopd water handling, now they already upped it to 100 000.
When CPF-2 is complete in H2 2021 the capacity will be 24.000 BOPD - 100.000 BO Water PD.
I wonder if that's enough after full development in 2024. 124.000 should be enough for 10 wells @ 12.000 BO liquids PD.
Hey viable,
They are currently working with 2 water injector wells. the next one to drill will be the 3rd one, but only the 2nd they drilled on their own. the other one was a former producer gran tierra energy drilled but was converted to a wi 1,5-2 years ago.
water cut seems to be between 75-80% atm ( at least at the 4h well they recently changed the pump. It's lifting 12 000 instead of 8000 bbl of liquids a day. the water cut rose from 76% to around 80% with pumping higher volumes.
but as they are able top handle additional 4000 bbls of liquids a day atm it shows you that the current 2 working WI are enough to handle all water. but after next well another one seems to be needed!
https://www.aljazeera.com/news/2021/4/4/peru-reports-new-covid-deaths-record-ahead-of-presidential-polls
Lescano may or may not succeed in becoming Peru's next president.
I haven't given it enough attention or have any definitive ideas. Whatever the outcome a coalition is the likely result and the muddle to continue until June. AlJazeera plus video highlights the difficulties. The bottom line is no jobs with general unrest a likely consequence.
Tentatively the Pinuahuans are possibly one of few communities that will remain relatively quiet. We might not see any uptick until H2.
Offhand, and indicated earlier, it seems logical that production is not going to increase until the second water disposal well is online. 90% water cut is a big number which can only be handled by a second reinjection well.
The following four groups continue to hold a fair quantity of stock. Burggraben have become particularly enthusiastic this year.
Meridian Capital International Fund . . . 154,010,361 - 18.9%
Gran Tierra Resources Limited . . . 137,093,750 - 16.8%
Kite Lake Capital Management (UK) LLP . . . 55,126,554 - 6.8%
Burggraben Holding AG . . . 39,465,933 - 4.8%
Hadron Capital . . . 29.8m - 3.6%