Malcy on Petrotal19 Nov 2019 11:44
PetroTal Corp- A growth play par excellence
I have written about PetroTal a number of times, notably on 4th July after I had met the management again and I have been lucky enough to have met them again several times recently. The company is developing assets in Peru, it has a very strong and experienced management team recently bolstered by the appointment of Douglas Urch as CFO, from the Chairman role and of course first rate CEO Manolo Zúñiga.
The company’s primary, at least for the time being, asset is the Bretaña field (100%) with 16.9m of 1P reserves, 37.5m of 2P reserves and 75.8m of 3P reserves. The company also owns 100% of block 107 in the Ucayali Basin on trend with other large fields and four leads that, combined with Osheki prospect, have an unrisked high estimate of prospective resources of 4.6 billion barrels of oil. There is a farm-out process planned here as the numbers are so substantial with management confident of a partner for the project.
Recent growth has been spectacular with promised production increases keeping up with market expectations. Currently production is between 7,500-8,000 b/d as each well delivers better than expected results and is expected to be 10/- b/d by the year end if not somewhat more. Indeed, the company has one of the five oil wells shut in and could produce more, something they will surely do with more successful drilling and an increase in processing capacity. Indeed the production facilities due to be installed next month may even give the company up to 12/- b/d with a following wind.
A combination of careful management of cash flow, for example the phased approach of facilities coming onstream, is also seen in the drilling of the wells which are all drilled from one site and the same platform. Here there may be 20 oil producers and 6 water disposal wells, water is not a problem here as it is treated as a natural waterflood’ and from now I suspect all wells will be horizontal with electro submersible pumps. The wells drilled so far, as well as those due in the future, it is becoming more obvious showing that the structure of the reservoir is defined and management feels comfortable with Netherland Sewell’s 2P OOIP estimate of 330 m barrels, and at current prices an operating netback of around $40.
Longer term the story gets better, the production target for end 2020 is 15-20,000 b/d and with the CPF-2 to be installed in ‘late 2020’ provided the wells deliver the goods production should double again next year. Another thing that I’m not sure the market gives the company credit for is the increase in recovery factors, given 12% by Netherland Sewell the well data coming in so far indicates is moving towards 24%, no wonder CEO Manolo said recently that ‘this will be a cash machine for years to come’.
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