PetroTal Corp (AIM: PTAL): FY24 production expected to grow by 20%. Two new export routes to be opened in 2024
• The FY24 production guidance stands at 16.5-17.5 mbbl/d (we forecasted 18.6 mbbl/d assuming a moderate dry season) with US$135 mm capex (broadly in line with our expectations of US$130 mm).• The FY24 production guidance assumes a dry season as severe as in 2023 with production of only 13 mbbl/d in 3Q24 and 17.5 mbbl/d in 4Q24. The Ecuador export route through the OCP will be operational in October (2 mbbl/d) while a new route via Yurimaguas to Bayovar (2 mbbl/d) could be operational in July. With these new routes fully operational over 2025, we anticipate that the impact of the dry season will be less material next year. We forecast 19.9 mbbl/d production in 2025.
• The FY24 capex programme includes US$107 mm at Bretana and US$12 mm for seismic to validate the oil migration models to the South of Bretana. This could partially derisk prospects on Block 95, some of which could be as large as Bretana.
• The FY24 capex programme also includes US$14 mm for preventive erosion control. The purpose of the programme is to protect the Bretana oilfield and nearby communities against riverbank erosion issues. During 2024, PetroTal plans to also incur a further opex of US$23 mm for erosion control and US$7 mm for community projects . An additional US$4.2 mm (from G&A) will be allocated to community support. The FY24 opex component of the erosion project is expected to be a one off occurrence and the residual project capex of ~US$14 mm will be spent in 2025.
• As we incorporate our lower oil price assumptions for 2024, the erosion control cost, the FY24 production guidance and higher £/US$ exchange rate, we have changed our target price to £1.35/sh in line with our new ReNAV. PetroTal anticipates distributing US$66 mm to shareholders in 2024 (12% of market cap) including a total dividend of US$0.06/sh.
Economics of export route
Since the installation of new pumps, the export route to Iquitos no longer requires diluent. This has improved the netbacks for this route by US$8.5/bbl. The OCP export route is expected to offer netbacks only marginally below (-US$1/bbl) the Brazil route while the netbacks through the Yurimaguas route are expected to be ~US$8.5/bbl below the Brazil route’s due to the need to truck the oil. Both routes are expected to eventually reach 5,000 bbl/d capacity.
Valuation
At US$85.5/bbl for Brent in 2024, we now forecast that PetroTal will hold ~US$90 mm in unrestricted cash (and no debt) at YE24. Our Core NAV and ReNAV stand respectively at £0.95 per share and £1.33 per share.
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