WTI $57.34 +$1.09, Brent $63.82 +$1.42, Diff -$6.48 +33c, NG $2.29 +5c
Oil rallied yesterday in thin trade ahead of the Independence Day Holiday, the EIA stats were not quite as good as the API ones but were shrugged off by the market which was definitely risk-off ahead of interest rate cuts.
I recently met with PetroTal Corp CFO Greg Smith, to catch up with this company listed on the TSX Ventures market and on London’s Aim market. (Ticker PTAL.L) PetroTal is focused in Peru and at present has two main assets, the Bretaña Field located in Block 95 with 100% WI and also Block 107/133, which is where the Osheki prospect is located, also 100% WI. Peru is considered to be low risk, low cost production with a good encouraging fiscal regime and its oil is priced off Brent. The company tell me that they have no problems in terms of settlement for crude sales.
The company has a strong balance sheet with no debt, it recently completed a ‘significantly oversubscribed’ (2X) equity raise which having initially aimed to bring in £15m eventually took in £20m at 15p per share. The reasons for the raise were to accelerate development activity on the Bretaña field which has already seen significant progress this year.
The Bretaña field has 39.8 MMBO 2P reserves and 79.3 MMBO 3P and is already in production, target production for the end of June was 5,000 b/d and with expansion of its processing capacity the end 2019 target is 10-11,000 b/d. Indeed, with the money from the raise they are going to be very well placed to grow, having the rig for the rest of the year gives them scope to develop the field through drilling. The rig now moves to drill a water disposal well then on to re-complete an existing water disposal well as an oil producer. I understand that they plan to side-track the 2XD well and 3D well into horizontal producers, but likely will drill two new horizontal wells to materially increase production capacity by year end. The company also plans to workover the 1XD well to install an ESP to increase production. This means that PetroTal should exit 2019 with 5 oil producing wells and 2 water disposal wells with all that means for cash flow and further investment.
As for disposal PetroTal has a number of export routes including a local refinery and after 2020 potential to use the upgraded Talala refinery. With the production site’s position on the river all export routes use barging to a greater or lesser degree so costs are relatively low.
The increased production from this work will enable the company to continue to invest at Bretaña and of course prepare for activity on Block 107 which is drill ready and a farm-out process is under way. I understand that the company has had a number of indications of interest and so drilling a well in 2020 is highly likely.
PetroTal looks to be in a strong position with profitable, growing production providing cash flow with exploration opportunities giving upside. After the recent raise the board announced that it would start paying dividends and have targeted an annual yield of around 4% which adds to the investment appeal.
Predator Oil & Gas
In a Trinidad update this morning Predator announce that the key Certificate of Environmental Clearance has been issued, well completion design has been updated to potentially reduce costs and enhance economics and workovers at AT-4 and AT-5X are due to begin shortly. This is key because the CEC approves injection of locally sourced carbon dioxide provided exclusively by Predator.
Also out today is a CPR which gives contingent, development pending, resources of 5.3-8.9 MMbo on success of the pilot project and if PRD were to buy FRAM would be acquiring resources ‘for significantly less than $1 pb’. With the company saying that operational planning is progressing well shareholders should be pleased that this potentially key milestone has been passed and the project is progressing according to plan. I will add more after I have spoken to Paul Griffiths.
We rather sweated on the final, must win game of the CWC preliminaries but England came through against the Kiwis and will play in the second semi-final next Thursday…