Canaccord Morning Coffee.... PEC.... Canaccord Morning Coffee.... Porto Energy* (PEC : TSX-V :
.16), Net Change: 0.02, % Change: 14.29%, Volume: 2,599,480
A nibble for those feeling a bit PEC-ish. If you're looking at beaten-down international oil & gas stories, Porto should make your list. This Portugal-focused oil & gas explorer debuted last March, in a $70 million initial public offering (IPO) priced at $1.00 per share. At IPO, the company had a market cap of ~$262 million (FD). Porto has since traded to a low of
.085 per share and at yesterday's close, the company had a market cap of ~$40 million. PEC holds working interests in five Concessions located in the Lusitanian Basin of Portugal: the Aljubarrota-3, Torres Vedras-3, São Pedro de Muel-2, Cabo Mondego-2 and Rio
Maior-2 covering a total of ~1.44 million net acres or 5,844 km2. PEC has 100%-working interest in the concessions with the exception of the Torres Vedras-3 concession where it has a 97.5% interest for reservoirs below a depth of 400 metres (target) and 87.5% working interest for reservoirs above 400 metres. The concessions expire on August 3, 2015, subject to two extensions of one year subject to relinquishments, a 25-year production lease and five extensions of three years for the production lease. PEC can access European markets through two existing oil refineries with over 340,000 bbl/d processing capacity and a large gas pipeline with over 450 mmcf/d capacity that runs through the company’s concession holdings and within 1 km of the company’s Aljubarrota gas discovery on the Aljubarrota-3 concession. Three modern ports are also located in the cities of Sines, Lisbon and Porto and a modern highway system provides efficient access to concession areas. Portugal offers a sliding scale royalty regime with maximum royalty rates on oil and gas of 10% and 7%, respectively, with no royalty on onshore oil production until a field produces more than 6,125 bbl/d and no royalty on offshore oil production until a field produces more than 10,200 bbl/d. At the beginning of February, PEC completed shooting the last of its 3D seismic programs.
Analyst estimates suggest the company spent some $33 million over the past several quarters to acquire the 3D data. Efforts to find joint venture (JV) partners is ongoing. Wouldn't a JV partner rather pay a modest premium to market and buy PEC? After all, the company has spent an estimated $33 million just on 3D data alone. What's 100%-working interest in ~1.44 million net acres worth? On the Aljubarrota Pre-Salt prospect, estimated dry hole costs alone are ~US$6.5 million. According to recent insider filings, several officers and directors of PEC purchased in aggregate ~2.8 million shares through the public market during December and January at prices ranging
.085-0.12 per share.