PetroTal Corp (AIM: PTAL): Production and cash well above expectations
• 3Q24 production was 15,160 bbl/d. This is well above expectations of 13 mbbl/d. While the river levels were at record lows, PetroTal has maximized the barge fleet capacity during the quarter.• Production during the first week of October was 10.7 mbbl/d. With the end of the dry season in sight, production is expected to return to capacity by mid-November,
• As a result, FY24 production is expected to be at the top end of the 16.5-17.5 mbbl/d guidance.
• Petrotal held US$133 mm in cash (US$121 mm unrestricted) at the end of October. This is also significantly above our expectations of only US$75 mm. The difference is due to (1) higher production than we forecasted and (2) a very large reduction in receivables from US$106 mm at the end of June to just US$55 mm at the end of September. Payables have increased from ~US$70 mm to US$81 mm. Overall the difference between receivables and payables has decreased by >US$60 mm from end of June to end of September.
• The completion of the acquisition of Block 131, expected to add ~1.2 mbbl/d of light oil production in 2025 (our forecasts), is on track to be completed by YE24 with the Supreme Decree allowing for the amendment of the licence having been signed by the President of Peru. This is the last major regulatory hurdle. The renewal of the investment certificate from the Peruvian tax authority is expected to be received in 30 days. We do not anticipate any cash payment on closing.
• As we incorporate the strong 3Q24 production and assume a rebalancing of receivables and payables by YE24, we re-iterate our target price of £1.40 per share.
Drilling update
Well 20H is another good well. It has been put on production at a peak rate of 5,357 bbl/d. Drilling operations at Well 21H have commenced. Wells 22H and 23H will be completed in 1Q25. This will allow the company to maximize production in 1H25 ahead of the dry season.
Valuation
Our Core NAV and ReNAV are broadly unchanged at respectively £1.00/sh and £1.41/sh. We have reduced our Brent price expectations for 4Q24 from US$85/bbl to US$80/bbl. We forecast US$76/bbl in 2025 and US$70/bbl thereafter. While 5 barges out of 6 could not reach the OCP pipeline in Ecuador due to low river levels, the high production achieved in 3Q24 is an important milestone given that we view the low river levels during the dry season as the main constraint to production growth. We forecast ~22 mmbbl/d production in 2025.
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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