PetroTal Corp (AIM: PTAL): High FY25 production driven by high uptime during the dry season and investment
• PetroTal expects to produce 21-23 mbbl/d in 2025, with the midpoint of this guidance exceeding our expectations of 21.2 mbbl/d.• Although only four new wells are expected to come online in 2025 (including the 23H well but excluding the final well of the FY25 four-well drilling program), average production is expected to grow by ~4.2 mbbl/d from 2024 to 2025. In comparison, six new producers were brought online in 2024 (excluding the 23H well but including the 16H well), but production increased by only ~3.4 mbbl/d from 2023 to 2024.
• Production is projected to average 20 mbbl/d in 3Q25 and 24.5 mbbl/d in 4Q25, significantly higher than 15.2 mbbl/d in 3Q24 and 19.2 mbbl/d in 4Q24.
• While FY25 production will include a contribution from the Los Angeles field (we estimate ~1.2 mbbl/d over FY25), the anticipated high production in 3Q25 and 4Q25 suggests effective management of the constraints associated with low river levels during these quarters. This is crucial for future production, as river-related issues have been the main constraints to production increases.
• The FY25 capex program is set at only US$140 mm, well below our expectations of US$180 mm, which assumed one additional well and more erosion capex. The FY25 capex budget includes the completion of a fourth train at the Bretaña processing facility, adding 8 mbbl/d of oil production capacity to reach 32 mbbl/d. This suggests that production at Bretaña could exceed our estimate of peak production for the field (approximately 25 mbbl/d). Drilling at the Los Angeles field is expected to start around mid-2025, ahead of the rig moving to the Bretaña field.
• We re-iterate our target price of £1.30 per share. However, we have increased our valuation for the company based on its 2P reserves alone from £0.93 per share to £1.08 per share. At the current share price, the expected FY25 dividend yield is >12%.
Thoughts on the erosion control project
The cost of the erosion control project continues to be estimated at US$65-75 mm including US$35-40 mm in 2025 (75% of which will be accounted for as opex) and US$15-20 mm in 1H26.
Valuation
We now assume 21.7 mbbl/d production in 2025 and US$140 mm capex. We have also rolled forward our DCF model to YE25. We have increased our 2P Core NAV from £0.93/sh to £1.08/sh and our ReNAV from £1.28/sh to £1.32/sh. We estimate PetroTal will hold ~US$100 mm in net cash by YE25. We forecast US$74/bbl in 2025 and US$70/bbl thereafter.
Auctus Advisors is a specialist Equity Capital Markets and Advisory business with a focus in the Energy Sector.
The partners have complementary skill sets, with decades of experience across Equity Capital Markets, Investment Banking and the Energy industry. We have worked at Société Générale, Canaccord Capital, BMO Capital Markets and Schlumberger. Most recently we have worked together for many years at GMP FirstEnergy.
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