Petromanas: Successful Discoveries Could Be Transformative

Petromanas (PMI.V) is a young TSX-V company with significant onshore acreage in Albania, holding six blocks covering 1.4m acres (gross). It has a JV with Shell and catalysts could generate significant value realisation in the coming months. Shpirag-2 (spudded 30 June) is targeting 233mmboe and the Juban-1 well (54mmboe gross) should spud shortly. Results for both could come in December or early January; successful discoveries could be transformative for the company.

Shell JV on Blocks 2-3 gives confidence in acreage
Shell farmed-in to Petromanas’s Blocks 2-3 in February, gaining 50% interest in return for payments and carried costs up to $50m. The block holds the Shpirag structure, which has a prospective unrisked resource volume of 233mmboe. The prospect is in the same block as Bankers Petroleum’s Patos-Marinza field and drilling by Occidental (OXY) in 2001 tested light oil. As a result, the chance of success is higher than many exploration wells, although the company is drilling for deeper, unexplored targets and OXY’s drilling highlighted technical challenges.

Juban-1, 100% working interest
The Juban-1 well is a shallow, low-cost well targeting 54mmboe due to spud imminently and expected to take 20-30 days. Located in northern A-B blocks, the well is higher risk than Shpirag (and more in line with industry norms, we think).

First steps in diversification
Petromanas recently acquired Gallic Energy, a French-focused company that should provide good synergies with Petromanas’s carbonate expertise in Albania. The deal, (funded through an issuance of 62.7m shares) is expected to close in Q412.

Valuation: Transformation possible with risks
The company is fully funded through 2013 and had C$73m in working capital, equivalent to $0.12/share or around 70% of its share price (as of 30 June). Employing basic parameters indicates that a light oil discovery could be worth more than $7/bbl. This would imply that a field of 233mmboe (and geological CoS of 50%) could be worth around C$0.6/share, although a development of such a find would take many years. With the confidence in the acreage implied by Shell’s farm-in, and two potentially transformative well results in the coming months, we believe that for investors comfortable with high risk oil exploration, Petromanas is worth a look.

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