RE:RE:Q3Dusted an important well with Parex (Zampona).
Surprisingly large Suroco deal costs, currency hedging loss, production down for part of quarter means company generated $1mm of cash flow from operations, which is mind bogglingly poor.
Current assets at mid year were $130mm, are now $94. Current liabilities were $56mm, and are now $73mm. That means liquid assets were $74mm and now they're $21mm. They've eroded liquid assets by $53mm this quarter. They still have over $63mm of cash on hand which they will trumpet, but don't forget how much current liabilities were stretched to preserve the cash number.
Rolling the dice now on a pay 100% to earn 50% well with Pacific Rubiales - $17mm of capital being sunk as we speak. Hope it works.
Brent straight average for Q3 was $102.16. Their realized selling price was $94.59.
Q4 average thus far for Brent is $84.31. That would in theory imply their selling price is ~$77 in Q4. That means $46 netbacks are going to be closer to $39 before other costs - notably G&A which was $9.30/boe. Lot of that won't be recurring, but it'll still be over $5. So we're talking sub $35 cash netback pre tax, probably sub $30 with tax.
Yes commodity prices are off which has pressured the share price, but what observers will see is that on top of a commodity price decline, the corporate actions of PTA have eroded both value and its balance sheet with a combination of high costs, unsuccessful wells, production issues, hedging.
Interestingly, aside from the Suroco acquisition, they wrote up their decommissioning liability on their own assets by 50% which is in note 9 of the financials, about a $2.7mm add on $5.2mm original balance, then addin $2mm of Suroco's, for a total of about $10.
People have always said the $32mm of debt maturity in April was so far off and they have the cash. Well, yes it's 5 months off, and yes they have enough cash. The issue is it's closer, they have less cash, and refinance markets have only deteriorated. And they're going deep with that $17mm exploration well right now. At 50% WI, unless that well finds $34mm of value (say 1,500+ bbl/d on initial production) plus suitable lead on a sizeable field, they won't have even broken even on it.
I know with all this you may be worried for management. But don't worry, during Q3 alone they issued themselves 9mm options!
Are we having fun yet? And I know I'll be flamed by Perdikoilgas as not being long term thinking enough, just like when I made these comments in September. If you give them another quarter they will continue the trend of eroding more value...