PetroTal Corp (AIM: PTAL): River blockade lifted. 22 mbbl/d production
• The Indigenous Association for Development and Conservation of Bajo Puinahua (AIDECOBAP) has removed the illegal river blockade. AIDECOBAP has also released the Peruvian and Brazilian oil convoys.• The Peruvian convoy represents ~40,000 bbl that will be sold at the Iquitos refinery. The Brazilian convoy was on its way to the field. We understand that 70,000 bbl have now been loaded to be sold through Brazil.
• The maintenance and installation work on the surface facilities has been completed and production has averaged 22 mbbl/d for the last 7 days.
• Subject to barge availability, 2Q23 production is expected to be 5% higher than the 17 mbbl/d guidance.
• Well 15H has started production and has produced at an average of 8.7 mbbl/d over the last seven days. This is another very good well.
• The story continues to be about significant free cash flow generation, production and reserves growth with generous shareholders returns through a share buyback programme of ~US$3 mm per quarter and a US$0.015 per share quarterly dividend (~11% annual dividend yield).
• We re-iterate our target price of £1.50 per share.
More on the blockade resolution
In return for lifting the blockade, AIDECOBAP signed an alliance act with the Regional Governor, Perupetro and Puinahua’s District Municipality. This act would see PetroTal being replaced by the regional government of Loreto on the executive committee of the 2.5% Fund. This would give the majority of the votes regarding the allocation of funds to the groups who signed the act. PetroTal and the Junta Autonoma del Puinahua, that represents the majority of the population, did not sign this act and PetroTal does not recognize it as a binding document.
Valuation
Our Core NAV of £1.08 per share and ReNAV of ~£1.50 per share are unchanged. Assuming US$75/bbl for Brent from 3Q23, we forecast that PetroTal will have returned ~US$50 mm in dividends and share buybacks in 2023 and will still hold ~US$145 mm in net working capital at YE23. At YE24, the net working capital would be ~US$165 mm net of a further dividend distribution of US$55 mm in 2024.
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