Jennings says 6000 bpd commingled. Results this weJennings initiated coverage on QEI this morning with $ 0.40 target. Had some interesting comments on Canaguay
INITIATING COVERAGE
NOT THE QUETZAL YOU’RE THINKING OF…
Bob Szczuczko, Chairman and CEO, joined Quetzal late in
2009 and was instrumental in obtaining interests in four ideally
situated blocks in the Llanos basin, Colombia, which had a
prospective and undiscovered resource estimate of
40.9 MMBbl. The Company also holds two legacy assets in
Guatemala. Quetzal successfully drilled its first exploration well
on the Canaguaro block within ten months of its acquisition.
Canaguaro Block (25.0% W.I.): covers 24,103 acres, just
north to Petroamerica Oil Corp.’s (TSXV-PTA Recommendation
SPECULATIVE BUY; Target C
.80) Balay block.
ƒ The first exploration well, Canaguay-1, spud August 2010,
had an initial flow test from the Lower Mirador of 2,225 Bbl/d
of 20.7° API oil with trace amounts of water. Quetzal believes
that production from the Lower Mirador could reach 3,000 to
4,000 Bbl/d with an ESP.
ƒ Quetzal is currently testing the Upper Mirador, which holds
the majority of the total Mirador net oil pay, with results
expected before year-end. Recall the Balay-1 well produced
1,314 Bbl/d of 28.3° API oil on natural flow from the Upper
Mirador, and both wells targeted the same formations at
roughly the same depths and are in close proximity.
ƒ If the Upper Mirador is capable of production, the Canaguay-1
well could produce above the 3,000 to 4,000 Bbl/d estimate,
assuming the Mirador intervals are commingled.
LLA-27 Block (34.3% W.I.): covers 40,698 acres, just south of
Ecopetrol’s La Punta block.
ƒ Three wells have been drilled at the La Punta block on a fault
trend that could continue into the LLA-27 block. The most
recent well, La Punta-3, had an I.P. rate of 2,771 Bbl/d of 35°
API oil, which increased to 3,377 Bbl/d in a month, on natural
flow. Quetzal plans to drill the first exploration well in Q1/11.
ƒ Mr. Szczuczko, former President and CEO at Delavaco
Energy Inc. which held a small interest at La Punta, feels that
with an ESP installed, the La Punta wells could see
+4,000 Bbl/d per well, a play that could continue into LLA-27.
Balance Sheet. At September 30, 2010, Quetzal had cash and
short-term restricted cash of US$4.5 million, US$5.2 million in
current assets, US$5.6 million in current liabilities and zero
long-term debt, resulting in a working capital deficit of
US
.4 million. The Company also holds US$7.2 million in longterm restricted cash held for future capital expenditures.
Upcoming Catalyst.
The Canaguay-1 well is currently testing
the Upper Mirador and positive results could produce a post ESP I.P. rate of +6,000 Bbl/d, assuming the Upper and Lower Mirador are commingled.
Results are expected this week.
We are initiating coverage on Quetzal Energy Ltd. with a
SPECULATIVE BUY recommendation and 12-month target
price of C
.40/share, based on a 1.0X multiple on our ExNAV
of US
.36/shar