Petroamerica Oil: Get Aboard The Train

Core long position Petroamerica Oil Corp. (PTA) has provided an update on its appraisal activities in Colombia.

What you need to know is that PTA trades at less than 1.5X cash flow currently, the La Casona field will come on stream in November, the La Casona 2 appraisal well is about to be tested, as is the La Guira 1 prospect (stay calm, Tommy). Additionally, three other new exploration targets will be tested over the coming two quarters, any of which could be material for the most undervalued junior oil producer in Colombia.

According to today’s news release, the La Guira-1 exploration well, which was spud on October 9th, has been drilled to a total depth of 12,500 feet. The well was cased and PTA expects to now test the Mirador and Gacheta formations. Note, the La Guira prospect is 7 kilometers to the south of the Las Maracas Field, PTA’s primary asset in Colombia, currently producing over 12,000 barrels per day (50% net to the company). According to PTA’s corporate presentation, the La Guira prospect has a 55% chance of success, and an 8-11MMbbl prize (Page 7).

Additionally, the La Casona-2 appraisal well has reached its target depth of 16,700 feet. Logs indicate potential pay in the Mirador Formation, which was untested in the La-Casona-1 well, and in the Une Formation. The rig is being demobilized and moved to the Rumi 1 prospect (40% probability of success and a potential prize of 4-7MMbbls). It is then expected that a work over rig will be brought in to La Casona-2 to test the Mirador formation.

The company also announced that the long term production facility for the La Casona field, which includes gas compression, is expected to be commissioned very shortly with production at La Casona 1 expected to commence in November. We expect La Casona 1 will produce about 1000 barrels per day (40% net to PTA) with La Casona 2 and subsequent appraisal and development wells to provide steady growth for the company.

In addition to the La Guira 1 prospect, which is about to be tested, Petroamerica’s Drilling Schedule (Page 7) shows three other exploration targets to be tested over the coming two quarters: Rumi-1, Crypto-1 and Malavar-1. Again, discoveries at any of these prospects, including La Guira, would be very material to the company.

Calman Valores wrote a bullish note on PTA earlier today. We agree with Mr. Valores that the market has yet to recognize the value of this company, and welcome him aboard the PTA train, just in time.

Disclaimer: We are investors in PTA since Sept, 2012, and therefore biased with regards to the company. The guidance set by PTA contains forward looking statements. This post contains opinions and no professional or investment advice of any kind. All facts to be verified by the reader. Always do your own due diligence. Thank you.

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