TD ReportTD target at 0.45/sh. They too are excited about the 100% WI at El Porton.
Impact
POSITIVE.
Production is trending above our prior expectations and
continues to trend above the company’s guidance levels (Exhibit 1). In
addition, the Las Maracas-11 well appears to be one of the most productive
wells drilled to date in the Las Maracas discovery, suggesting the trend of
outperformance against guidance is likely to continue, at least in the short
term. Due to recent share price movements and a slight increase to our nearterm
production expectations, we view Petroamerica as trading at an
increasingly compelling discount to its closest peers on near-term EV/DACF.
We believe production trending above guidance should build at least minor
expectations for reserve increases at the Las Maracas field. This view is also
supported by the operator of the field, Parex Resources (PXT-T), recently
noting positive technical revisions for the Las Maracas field as one of
multiple contributors to increased mid-year reserve estimates. We have
increased our reserve assumptions for Petroamerica in line with adjustments
for Parex, conservatively assuming 0.5 mmbbl of 2P additions (in our view,
Parex’ disclosure implies that Petroamerica’s 2P reserves have increased by
0.5-1.5 mmbbl, or 10-30%, since start-year). In combination with a potentially
significant discovery at Curiara-1 (announced in May), we already believe
Petroamerica is likely to see 2P reserve additions at year-end 2013 that at least
replace production (of roughly 1.9 mmbbl), without including potential from
significant exploration wells planned for H2/13.
We are also encouraged that Petroamerica has been able to increase its
working interest (from 25% to 100%) in the El Porton block (excluding the
Curiara-1 discovery) due to non-participation by partners in a new exploration
well (Crypto-1) that Petroamerica now plans to drill in Q1/14. Recall that part
o
f Petroamerica’s success in recent years has come from interests obtained in
a similar manner in this area of the Llanos Basin. The company’s updated
forward drilling schedule (Exhibit 2) is roughly as expected and holds
potential for significant discoveries.
Energy Producers - Internationals