PetroTal Corp (AIM: PTAL): Accelerating drilling programme. Successfully dealing with low water levels
• 2Q24 production of 18,290 bbl/d had been reported previously.• Production in July was 20,034 bbl/d, very close to the production of 20,555 bbl/d in June.
• The dry river season indicators are at the moment at lower levels than 2023. However, the production guidance of ~13 mbbl/d for 3Q24 has been re-iterated thanks to the increased barge fleet size.
• Our FY24 forecast of 16.8 mbbl/d is unchanged (unchanged guidance of 16.5-17.5 mbbl/d).
• PetroTal is accelerating drilling capex to minimize rig standby fees and maximize production thanks to the increased water handling capacity. The 20H well is expected to be onstream by the end of 3Q24. Following the completion of the 20H well, PetroTal will drill and complete wells 21H, 22H and 23H at Bretana by the end of 1Q25. As a result, total FY24 capex is now expected to be US$150-175 mm instead of US$150-160 mm previously.
• We forecast production of ~22 mbbl/d in 2025 (including production from Los Angeles) with capex similar to 2024.
• The acquisition of Block 131 continues to be expected to completed in 4Q24.
• We have changed our target price to £1.40 per share as we incorporate higher capex and lower share buybacks in 2H24. The current dividend yield is >10%.
Financials
PetroTal held US$84 mm of unrestricted cash at the end of June. Overall Petrotal held working capital of ~US$140 mm at the end of June. In light of the accelerated drilling programme, the company is reducing its share buyback programme. We are now assuming a level of share buy back in 3Q24 and 4Q24 similar to 2Q24 (~US$0.7 mm).
Valuation
Our new Core NAV for the company based on the 2P reserves only (including Los Angeles) is £0.98 per share with a ReNAV of £1.43 per share.
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