PetroTal Corp (AIM: PTAL): High production
• 2Q23 production was 19,031 bbl/d. This is higher than our forecast (18.5 mbbl/d) and the company’s recently increased 2Q23 guidance (5% higher than 17 mbbl/d). During the quarter, production was affected by the ongoing ONP closure and six days of planned maintenance, which constrained production by ~25%.• Well 15H continues to produce at high rates (6,040 bbl/d currently after 25 days of production).
• Well 16H is expected to commence drilling in late 3Q23.
• Depending on the Amazon river levels during the dry season, on which the company expects to have visibility by next month, the company could upgrade its FY23 production guidance
• The story continues to be about significant free cash flow generation, production and reserves growth with generous shareholders returns with a US$0.015 per share quarterly dividend (~11% annual dividend yield) and share buybacks. High impact exploration drilling could also take place in 2024.
• We re-iterate our target price of £1.50 per share.
Balance sheet in line
PetroTal held ~US$75 mm of unrestricted cash and US$17 mm of restricted cash at the end of 2Q23. These numbers are in line with our expectations and represent an increase of respectively US$19 mm and US$8 mm. Accounts receivable at the end of June were ~US$100 mm (in line) and are contractually current. Accounts payable were ~US$59 mm (in line).
Valuation
Our Core NAV of £1.09 per share and ReNAV of ~£1.51 per share are broadly unchanged. Assuming US$75/bbl for Brent from 3Q23, we continue to forecast that PetroTal will have returned >US$100 mm (~20% of the current market cap) in dividends and share buybacks by YE24 and still hold US$165 mm in working capital (and no debt) by then. On our higher oil price assumptions (~US$92/bbl in 2024), the company would hold ~US$290 mm in working capital at YE24, which represents ~60% of the current market cap.
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.
Auctus provides Corporate Broking, Equity Research and Investment Banking services.
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