Three different authors agree that PTA is very undervalued in comparison with its peers in Colombia, or other countries outside North America.
The undervaluation is not something like 10% or 20%, it exceeds 50% in the most cases, and more.
The deal with Suroco was transformative for PTA but before market realize it the sharp drop in oil prices has made investors to overlooked it.
Among other things, check the sensitivity analysis between PTA fundamentals and oil's price to realize why the very few shorters' warnings are just meaningless scare tactics.
Agree, but there is no gov. problems either. Colombia is not Venezuela...The only problem was the farmers unrest in one of the areas the company operates and that has already ended.
No we have an update and next is Q3. Let's see.
CALGARY, Nov. 6, 2014 /CNW/ - Petroamerica Oil Corp. (TSX-V:PTA.V - News)("Petroamerica" or the "Company"), a Canadian oil and gas company operating in Colombia is pleased to announce the commencement of drilling operations on two of its exploration properties in the Llanos Basin of Colombia.
The Zampoña-1 exploration well was spud on October 28, 2014 and is targeting Mirador, Gacheta and Une formations on the next fault trend to the east of the currently producing Las Maracas Field. The well is expected reach a total depth of approximately 12,700 feet (measured depth). Zampoña-1 is situated on the Los Ocarros Block where Petroamerica holds a 50% working interest ("WI").
The Langur-1x exploration well was spud on November 4, 2014 and is targeting Mirador, Gacheta and Une formations in a highly prospective low-side fault closure. The well is expected reach a total depth of approximately 13,800 feet (measured depth). The Langur-1x well is situated in the Llanos-19 block, where Petroamerica holds a 50% participating interest, subject to ANH (National Hydrocarbon Agency) approval, and the Company will pay 100% of the drilling costs up to a cap of US $17 million.
Results for both of these wells are expected before year-end.
Petroamerica is also pleased to announce that it has reached an agreement with Petromont Colombia S.A. Sucursal Colombia ("Petromont") to acquire an additional 5.5% working interest from Petromont on the Llanos-10 Block for a total consideration of US $850,000. Under this agreement Petroamerica, along with Parex Resources Colombia Ltd. Sucursal ("Parex"), the other partner on the block, will each assume an equal share of Petromont's 11% WI and Parex will assume operatorship of the block. With the completion of this agreement, Petroamerica and Parex now each hold a 50% WI in the Llanos-10 Block, subject to ANH approval.
It's a fact that despite oil continued to drop, PTAXF has held the 0.23-0.25 level about we talked about a few days ago.
Bears predictions were wrong.
PTAXF is sitll one of them most undervalued EP companies. The main concern remains the price of oil, but don't forget that the cost for Petroamerica is much lower than the most US based companies. Read the SA article of "TheValueMan" to see how PTAXF could make money even with oil at $60.
What very simply investors have to do, is to read Nuttall's arguments and judge if these arguments are rational. I think Nuttall this time is right.
Eric Nuttall, a guest columnist for Inside the Market, is portfolio manager of the Sprott Energy Fund.
The Canadian energy sector has experienced one of the worst monthly corrections in recent memory, with many oil stocks down by more than 20 per cent. Perhaps a little perspective is in order.
I queried a handful of Canadian oil executives this past week after the stock market pummelling, asking "how's business." The universal reply was "great."
One might have expected a more dour answer.
But consider the following: Despite oil having sold off this month by about 3.5 per cent in U.S.-dollar terms, when you take into account the positive impact of the falling loonie and the marginal shrinking of the Canadian light differential, the price of oil is down less than 2 per cent.
Further, given the continued efficiency improvements in how wells in many oil plays are being drilled and fracture stimulated, oil well economics today are the highest they have been in decades. I routinely see wells paying out in under a year, which speaks to the impressive returns that these oil executives are seeing.
Finally, the oil executives pointed out that service-cost inflation is essentially non-existent, and that drilling and pressure pumping equipment availability is not a problem. In short, business is indeed great and they foresee another strong year in 2015 of impressive production gains that will generate excellent investment returns.
Now, if I were to ask the average investor how they feel about the energy sector right now, I would expect their answer to be the exact opposite of the rosy responses of those in the business, given the daily shellacking of oil stocks and the negative feedback loop that it has created.
Several comparisons with its regional peershttp://seekingalpha.com/article/2517215-after-an-impressive-payoff-arsenal-energy-is-not-in-the-bargain-bin-anymore
Actually, the whole sector is correcting due to oil price drop, plus what don't_panich mentioned about a problem which is totally temporary. There is a possibility also that some of Suroco holders are selling, or a fund due to 3rd quarter close.
I haven't found any other negative news.
To sum it up, this is Petroamerica's enterprise value based on the average metrics of the peers:
1) Per EV/Production = $687 million.
2) Per EV/2P Reserves= $298 million.
3) Per EV/EBITDA= $893 million.
Based on the average metrics of the peers, Petroamerica's enterprise value should be: 687 + 298 + 893 = 1878 / 3 = $626 million.
Since Petroamerica's net debt is negative and currently stands at approximately $35 million, the market cap will be approximately $661 million. Dividing this market cap by 858 million outstanding shares, I get $0.77/share or C$0.85/share (1 USD = 1.097 CAD).
Given that Petroamerica's current price is C$0.39/share, there is an upside of approximately 115% from the current levels.
It is clear that Petroamerica generates a higher margin per barrel of oil produced than the oil-weighted companies operating in Canada and the US. More importantly, a high netback allows the company to fully fund its capital program from cash flow and cash on hand. Petroamerica does not need to fund capital expenditures through debt and thus can maintain the strength of its balance sheet.
These high netbacks is the result of the following factors:
1) Petroamerica's production consists of light and medium oil.
2) The company is indexing its oil price to Brent that has been consistently trading at a premium to WTI over the last years.
3) The bottlenecks that were hampering the production growth of the Colombian producers until 2011 have been resolved. Fortunately, oil transportation infrastructure in Colombia has caught up with production over the last years. Last year, the Bicentenario line began operating, while the Ocensa pipeline was expanded. Calgary-based Enbridge (NYSE:ENB) is also considering building a line to Colombia's Pacific coast. And according to Parex's CEO: "At present there is lots of excess capacity in pipelines."
The Valuation Is A Steal
In this paragraph, I will compare Petroamerica to its peers. Due to the increasing M&A activity in Colombia over the last two years, there are not many companies left with light oil-weighted production and assets exclusively in Colombia. This is why, I had to broaden a bit the criteria as below:
1) The peers are either big junior producers (production at approximately 10,000 boepd) or small intermediate producers.
2) They have light oil-weighted production coming from onshore assets.
3) All their producing properties are located in South America, and all or most of their production is coming from Colombia.
Based on these criteria, here are Petroamerica's peers:
1) GeoPark Limited (NYSE:GPRK).
2) Amerisur Resources (OTC:ASUXF).
3) Canacol Energy.
4) Parex Resources.
5) Gran Tierra Energy (NYSEMKT:GTE).
Petroamerica made a transformative deal by acquiring Suroco Energy, and addressed all the challenges it was facing.
This acquisition significantly strengthens and diversifies the company's asset base.
Now, Petroamerica has everything: strong production growth, high netbacks, stellar balance sheet with a strong cash position and an aggressive management.
With management focused on continuing to grow, the tremendous valuation gap with the peers can close anytime and Petroamerica's shareholders stand to benefit a lot.
First, this acquisition gave Petroamerica four blocks in Putumayo and boosted the company's production and 2P reserves by approximately 50% and 100% respectively.
Through that deal, Petroamerica also addressed both the single asset risk and its relatively short RLI (Reserves Life Index), while the company added operatorship, given that Suroco was qualified as a restricted operator in the 2010 bid round. On top of that, the combined company intends to apply to become an unrestricted operator over the next months.
Furthermore, it matters a lot to me the fact that Suroco's technical team who has gained substantial experience working in Ecuador will remain part of the combined company. This will facilitate Petroamerica's potential expansion to Ecuador, if needed.
This article contains a factual detailed analysis about PTAXF, but it won't be available to the public soon, because it's a top rated PRO TOP IDEA article. so, I will copy paste some parts of it for those who will be interested in the near future for PTAXF:
PTA trades just 1.5 times its EBITDA at the current price of C$0.37 per share.
Mart Resources (MMT) that drills in one of the riskiest countries of the world (Nigeria) currently trades almost 6 times its EBITDA.
PTA's peers in Latin America also trade 4 (PXT.T) to 9 times (AMER.L) their EBITDA.
PTA has also Negative Net Debt, while most of its peers above have Positive Net Debt.
Mr. Navarrete has over 24 years of oil and gas experience through his extensive career with the State Oil Company of Colombia - Ecopetrol, he served as Vice President of Exporation and Production department.
Mr. Navarrete has also held several board positions with some of the subsidiaries of Ecopetrol, namely;
Ecopetrol America Inc.,
Ecopetrol de Brasil,
Therefore, Mr. Navarrete has contacts with all the executives of the big energy companies in Colombia.
For example, this is from the upcoming Enercol Symposium this September. It will take place in Bogota and it is considered as most important meeting of the energy sector in the country:
"Panel: Estrategias de crecimiento del sector
Moderador: Nelson Navarrete
Héctor Manosalva. Vicepresidente de Desarrollo y Producción. Ecopetrol
Javier Betancourt. Presidente. ANH
Ronald Pantin. Director Ejecutivo CEO. Pacific Rubiales Energy"
CPE purchased about 10% of the size of the acreage that Nighthawk has.
Check these news with all the details to see how undervalued NHEGF is in comparison with its peers.
Good price to consider start buying here.
The price has dropped a little due to oil price drop, but now that most investors are cautious, it's time to find a good entry point in Nighthawk.
This stock is still undervalued as Value Digger has explained thorougly in his SA article a few months ago.