PetroTal Corp (AIM: PTAL): Production >21 mbbl/d. Buying a new rig will provide operational flexibility and reduce costs
• 3Q24 production was 15,203 bbl/d. This is in line with previous indications. The cash position at the end of September had been previously reported and there are no surprises in the rest of the balance sheet.• With the end of the dry season, production has rapidly increased from 10.7 mbbl/d during the first week of October to >21 mbbl/d currently.
• PetroTal is buying a new rig that will be imported into Peru in 1Q25. Having a more modern rig will reduce downtime and minimize mobilization and demobilization costs. It will also improve operational efficiency as it will be easier to deploy the rig on different locations as required and on short notice. The purchase price of the rig will be financed through a lease agreement over 36 months with a monthly lease cost of US$0.5 mm. There will be some savings on drilling costs (a well currently costs ~US$14 mm).
• Well 21H reached TD last week. PetroTal will now drill the 22H and 23H locations. The drilling programme will then be halted in order to focus on the river erosion work.
• The completion of the acquisition of Block 131, expected to add ~1.2 mbbl/d of light oil production in 2025 (our forecasts), is expected to occur imminently.
• We have changed our target price to £1.30 per share as we have reduced our Brent price forecasts. Petroperu is working through restructuring issues, which has led to some gridlock throughout Peru’s oil and gas industry. A resolution of the situation and the re-opening of the ONP would be very material for PetroTal. PetroTal has 1.9 mmbbl of pending crude sales with Petroperu. In addition, the re-opening of the ONP would allow PetroTal to increase its production. This route would not be impacted by seasonal levels of the rivers.
Waiting for next year budget
The FY25 budget is expected to be announced in early 2025. There are many moving parts with potential drilling at Block 131 (we assume two wells). Drilling costs are also expected to be lower. Pending further visibility, we have not changed our forecasts for 2025.
Valuation
Our Core NAV and ReNAV are respectively ~£0.90/sh and £1.25/sh. We have reduced our Brent price expectations for 4Q24 and 1Q25 to US$75/bbl. 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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