RJ analyst comment
PTA: Calatea-1 Has Oil Shows But Cannot Test and Has Been
Abandoned
Event : Following oil shows on logs, Petroamerica was unable to test the Calatea-1
exploration well due to difficult down-hole conditions.
Action : We are maintaining our Outperform rating and C$1.10/shr target price.
Analysis: The Calatea-1 well was drilled to total vertical depth of 16,821 feet and
encountered positive hydrocarbon indicators (high trip gas readings and oil in
the mud filter-cake) while drilling reservoir sections. Electrical logs acquired
indicated a possible hydrocarbon bearing zone in the Une Formation. But
following the deployment of high mud weights to control the gas influx into the
well, difficult down-hole conditions ensued. The company did not provide any
further details on these issues, but we note that the use of heavy mud could
imply high down-hole pressure.
Following several attempts, the company made a decision to postpone any
further attempt to test the well. Re-entry in the future will be kept as an
option. The well is located in the El Porton block of the Llanos Basin in
Colombia. Petroamerica purchased its 25% participating interest in the block
from Talisman in 2010.
We note that the fact the well was unable to test could be interpreted as
negative by the markets; however, with the share price down in recent weeks,
it could already be priced in by the street. While the company was unable to
test the well, we believe that it is highly likely it hit hydrocarbons due to the log
results, the oil shows in the mud and the need for heavy drilling mud as
indicated in the press release