Petronova (PNA) is poised to take off in 2014.
This from Calgary-based energy investment banker and investor Sonny Mottahed. Mr. Mottahed in a telephone interview tells us about one company that impresses him a lot.
Colombian oil and gas explorer Petronova just announced a farm in-deal with Pacific Rubiales (PRE), Colombia’s largest non-state owned oil producer. Pacific Rubiales can earn into 50% of Petronova’s Tinigua prospect by paying back-costs of U.S. $12.5 million and spending U.S. $33 million for drilling, completing and testing up to four wells. Petronova will keep 40% of the project.
Tinigua could be the largest untested target in Colombia, Mottahed believes, with unrisked potential of 159 million barrels of medium to heavy oil.
If proven successful, those barrels could be worth between $20 and $25 in the ground. Petronova’s 40% could be worth $1.27 billion to $1.6 billion, which is impressive considering the company’s market cap today is $65 million.
Our request for comment sent to Serafino Iacono, co-founder and co-chairman of Pacific Rubiales, was responded with two words, “Good grounds.”
The first exploratory well at Tinigua will start drilling in the second half of 2014.
Petronova has a second asset in Colombia, the PUT-2 block (75% working interest), which just drilled its first well; results are expected any day now. Success there could lead to an early production scenario.
“Management may not come across as the most promotional, but they are capable, focused and experienced,” Mr. Mottahed said. “If they are successful at PUT-2, watch out.”
[This is Sonny Mottahed’s first appearance in these CEO.ca blogs, and we are grateful to him for sharing his time and ideas with us.]
CEO Technician: There is a big 2 year base here but PNA needs over $.40 to get the excitement going. (Stockcharts.com)
Mottahed owns other energy names in Colombia, including Petroamerica Oil Corp. (TSXV:PTA), a 6,000 barrels per day light-oil producer trading at 1.4 times cash flow. Mr. Mottahed says the company has a strong exploration track record and has been creative in its deal making, even as Petroamerica receives little recognition in the stock market. Petroamerica soon will show results from its sole risk La Guira 2 well. Barring success at La Guira 2, Mottahed expects the stock could see a tailwind of new buying interest after the expiry of 80 million $0.35 cent warrants on May 9, 2014.
CEO Technician: PTA has formed a very tight range around .28-.32; there is some evidence of quiet accumulation. A strong push above .35 would be very constructive and move towards a longer term breakout targeting .50+. (Stockcharts.com)
Canacol (CNE), having climbed 200% in recent months, is another Mottahed favourite.
“It’s had a huge run, but they have an incredible asset portfolio, and results from their Exxon well are imminent; so it’s very easy to be excited about Canacol.”
CEO Technician: Heavy accumulation within recent bullish consolidation – $10 is certainly achievable for CNE by June. (Stockcharts.com)
Petromanas Energy (TSXV:PMI) came up multiple times during our call. That company saw its share price rise to $0.205 from $0.14 last week after a report by Oil & Gas Investments Bulletin’s Keith Schaefer suggested Petromanas could deliver 20-fold returns to investors. Petromanas is developing its early stage onshore deep light-oil discovery in Albania with Royal Dutch Shell.
Mr. Mottahed says Petromanas Energy’s assets as they exist today could substantiate a share price of $0.70.
“These guys are onto something that looks like it is out of this world, enormous,” he says.
“Actually getting oil up and putting it into tanks and selling it will probably go a long ways in the eyes of any doubters of this discovery.”
Mottahed says the company’s second well, Molisht-1, probably will be cheaper and more efficient than its first well, Shpirag-2. Still, the banker warned that the play could take 2 to 3 years to mature, albeit with lots of milestones that could keep investors’ eyes on Petromanas.
CEO Technician: High volume breakout last week in PMI, needs to hold above $.25 to confirm and target $.40. (Stockcharts.com)
We discussed a few of Sonny Mottahed’s favourite frontiers in the international energy business in 2014.
He credited Peru for encouraging exploration investment and said that Gran Tierra (GTE) has drilled a “monster” discovery there.
CEO Technician: Big bearish engulfing candlestick on volume last week although GTE is in a very nice long term uptrend. Above $8.50 it’s no problem but it looks a little dangerous here in the short term. (Stockcharts.com)
Nigeria, where Mottahed once lived and worked and keeps close connections, is a tough place to do business but has a robust hydrocarbon system, the financier said.
“We think the onshore in Nigeria has a lot of low hanging fruit.”
Mottahed also is looking at early stage opportunities in Indonesia.
Junior energy companies have a very high risk of going bust. They are not suitable for most investors, he reminds us.
“No matter how good the science, geology or close-ology may be, you never know what Mother Nature is going to turn up until you turn the drill bit to the right far enough to figure it out.”
Disclaimer: Black Spruce has a business relationship or Sonny Mottahed is an investor in all of the companies mentioned in this article. Author has a financial interest in Petroamerica Oil Corp. and Petromanas Energy. Mr. Mottahed’s comments are his opinions solely and are in no way assurances of one outcome or another. Views expressed in this article are NOT to be considered individual investment or professional advice of any kind. All facts are to be verified by the reader. Always do your own due diligence.