PetroTal Corp (AIM: PTAL): Another high dividend. Production reverting to normal
• The 3Q23 production of 10,909 bbl/d and the liquidity position at the end of September had already been reported.• Amazon river levels are now gradually increasing. Production in October was 11,808 bbl/d and is now 13,420 bbl/d. It is expected to reach ~20 mbbl/d consistently by the last week of November. PetroTal expects production of 14.5 mbbl/d in 4Q23, at the top end of the latest guidance (14-14.5 mbbl/d).
• PetroTal expects to replace the 2P reserves produced in 2023.
• A US$0.02 per share dividend has been declared for 3Q23 (payable in 4Q23). While this is below the dividend for 2Q23 (US$0.025 per share), this is above the expected quarterly dividend base rate of US$0.015 per share.
• The current quarterly dividend of US$0.02 per share (US$0.08 per share per year) represents a dividend yield of ~15%. The ongoing share buyback programme represents a further return of >2% per year. We re-iterate our target price of £1.50 per share.
Progress at export routes
The pilot 0.1 mmbbl oil sales shipment through the OCP Ecuador pipeline to Esmeralda’s port is on track for 4Q23. It will open-up a new route for 2-4 mbbl/d initially and then up to 5 mbbl/d. This is expected to offset the impact of the annual low river levels in 3Q-4Q and should allow PetroTal to maximise production efficiency. A barge-to-ship arrangement has been agreed for the Brazil route. This will allow PetroTal to unload directly from barges to tanker. This will reduce barge waiting times caused by terminal availability and increase the sales capacity of the Brazilian route by 10-15% (1-1.5 mbbl/d).
Valuation
We have trimmed our Brent price forecast from US$90/bbl to US$85/bbl for 4Q23. Our Core NAV and ReNAV are broadly unchanged at ~£1.04 per share and £1.47 per share. Assuming US$85/bbl for Brent from 4Q23, we forecast that PetroTal will have returned >US$110 mm (~20% of the current market cap) in dividends and share buybacks by YE24 and still hold ~US$200 mm in working capital (and no debt) by then.
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.
Auctus has been set up at the beginning of a new decade in which we see significant opportunities in the Energy space. Globally, demand for energy is at record levels and continues to grow. Conversely, investment in traditional energy sources has been severely constrained. We believe this imbalance creates opportunities for both companies and investors.
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