On October 20, 2010 I wrote a very bullish article on Petrobank for gurufocus.com and titled the article “Petrobank – An Exceptional Risk/Reward Scenario”. The link to this article is here:
http://www.gurufocus.com/news.php?id=109940
My favorite way to recap my thoughts on Petrobank is as follows:
1) The price you pay today for Petrobank basically equals the market cap of the two publicly traded subs Petrobakken and Petrominerales
2) That alone is a pretty good deal as I believe both Petrobakken and Petrominerales are excellent investments at the current share prices
3) That means you pay nothing for over 700 million BOE of oil assets in the companies Heavy Oil Business Unit
4) That means you pay nothing for PBG’s patented THAI technology which promises to increase the amount of oil recovered from heavy oil
I also wrote about why I think Petrobakken is a good value:
http://www.gurufocus.com/news.php?id=114090
And I gave a little color on why THAI could be so valuable:
http://www.gurufocus.com/news.php?id=114412
And detailed the 100% spinout of Petrominerales:
http://www.gurufocus.com/news.php?id=111456
Today Petrobank shareholders received two additional pieces of good news.
1) The exploration success at Petrominerales just keeps rolling along. Today we learned that the Caruto – 1 well on the Northeast area of the Corcel block has tested at 10,000 barrels of oil per day and is expected to produce at 12,000 barrels of oil per day. October production from the company was 30,000 barrels per day, so this is a material addition.
2) Petrobank has received final approval to go ahead with its Dawson bitumen project that has planned production of 25,000 barrels of oil per day. Dawson will be the third reservoir type (bitumen) that the THAI process has been used in with Kerrobert (conventional heavy oil) and Conklin (oil sands) being the first two.
Petrominerales’ successful exploration program continues to be impressive. The company has already had 100% year over year average daily production increases for four consecutive years. Exit rate production figures for the past few years look to be as follows:
2010 – About 40,000 barrels of oil per day
2009 – 25,000 barrels of oil per day
2008 – 15,000 barrels of oil per day
2007 – 10,000 barrels of oil per day
2006 – 2,500 barrels of oil per day
The really impressive part is that the company estimates that thus far they have explored about 5% of what they are looking at as being potential exploration targets. If you are interested in a company that is exciting to follow, PMG is for you. In 2011 the company plans to drill 40 to 50 Exploration wells. Every one of those wells provide a potential positive catalyst for the company. There will be many misses as well, but with the share price still at a reasonable multiple of cash flow (about 5.5x Q3) and reserves (about 1.4x 2P reserves) you really do get basically a free ride on this huge upside potential.
Here are some basic metrics on the high impact areas Petrominerales has targeted:
1) Property - Deep Llanos
Country – Columbia
Acres – 634,000
Identified Drilling Targets – 40
To be Drilled in 2011 – 15
Target size – 3 million to 25 million barrels
2) Property – Deep Llanos (Foothills)
Country – Columbia
Acres – Part of above
Identified Drilling Targets – 8
To Be Drilled in 2011 – 3
Target size – 25 million barrels plus
3) Property – Central Llanos
Country – Columbia
Acres – 540,000
Identified Drilling Targets – 15
To Be Drilled in 2011 – 12
Target size – 1 million to 15 million barrels
4) Property – Heavy Oil
Country – Columbia
Acres – 906,000
Identified Drilling Targets – 20
To Be Drilled in 2011 – 12
Target size – 50 million barrels plus
5) Property – Peru
Country – Peru
Acres – 9,387,000
Identified Drilling Targets – 3
To Be Drilled in 2011 – 3
Target size – 25 million barrels plus
The inventory of Petrominerales’ exploration targets is long and the size of the targets are quite large. The question that you should be asking is how does one company that had virtually no production 4 years ago manage to amass this kind of exploration portfolio ?
It is really a case of being in the right place, at the right time. Petrobank CEO John Wright and CFO Corey Ruttan had worked for an oil company in Ecuador which was called Pacalta. Pacalta was bought out by the Alberta Energy Company (Encana) in 1999. Wright and Ruttan went to AEC and bought Pacalta’s Colombian assets. They slowly started working those assets and then in 2004 when the Columbian Government made new land available Wright and Ruttan bought big and acquired 2 million acres in known but undeveloped basins.
In other words they got in early, they got in cheap, and they got in big. Their land grab half a decade ago now results in an envious position in an underexplored region and the drilling results are just starting.
I encourage listening to the most recent presentation done on PMG by Chairman John Wright (link below). It is going to be a fast and furious 2011 as the results of 40 exploration wells come in.
http://www.petrominerales.com/investors/
http://www.gurufocus.com/news.php?id=109940
My favorite way to recap my thoughts on Petrobank is as follows:
1) The price you pay today for Petrobank basically equals the market cap of the two publicly traded subs Petrobakken and Petrominerales
2) That alone is a pretty good deal as I believe both Petrobakken and Petrominerales are excellent investments at the current share prices
3) That means you pay nothing for over 700 million BOE of oil assets in the companies Heavy Oil Business Unit
4) That means you pay nothing for PBG’s patented THAI technology which promises to increase the amount of oil recovered from heavy oil
I also wrote about why I think Petrobakken is a good value:
http://www.gurufocus.com/news.php?id=114090
And I gave a little color on why THAI could be so valuable:
http://www.gurufocus.com/news.php?id=114412
And detailed the 100% spinout of Petrominerales:
http://www.gurufocus.com/news.php?id=111456
Today Petrobank shareholders received two additional pieces of good news.
1) The exploration success at Petrominerales just keeps rolling along. Today we learned that the Caruto – 1 well on the Northeast area of the Corcel block has tested at 10,000 barrels of oil per day and is expected to produce at 12,000 barrels of oil per day. October production from the company was 30,000 barrels per day, so this is a material addition.
2) Petrobank has received final approval to go ahead with its Dawson bitumen project that has planned production of 25,000 barrels of oil per day. Dawson will be the third reservoir type (bitumen) that the THAI process has been used in with Kerrobert (conventional heavy oil) and Conklin (oil sands) being the first two.
Petrominerales’ successful exploration program continues to be impressive. The company has already had 100% year over year average daily production increases for four consecutive years. Exit rate production figures for the past few years look to be as follows:
2010 – About 40,000 barrels of oil per day
2009 – 25,000 barrels of oil per day
2008 – 15,000 barrels of oil per day
2007 – 10,000 barrels of oil per day
2006 – 2,500 barrels of oil per day
The really impressive part is that the company estimates that thus far they have explored about 5% of what they are looking at as being potential exploration targets. If you are interested in a company that is exciting to follow, PMG is for you. In 2011 the company plans to drill 40 to 50 Exploration wells. Every one of those wells provide a potential positive catalyst for the company. There will be many misses as well, but with the share price still at a reasonable multiple of cash flow (about 5.5x Q3) and reserves (about 1.4x 2P reserves) you really do get basically a free ride on this huge upside potential.
Here are some basic metrics on the high impact areas Petrominerales has targeted:
1) Property - Deep Llanos
Country – Columbia
Acres – 634,000
Identified Drilling Targets – 40
To be Drilled in 2011 – 15
Target size – 3 million to 25 million barrels
2) Property – Deep Llanos (Foothills)
Country – Columbia
Acres – Part of above
Identified Drilling Targets – 8
To Be Drilled in 2011 – 3
Target size – 25 million barrels plus
3) Property – Central Llanos
Country – Columbia
Acres – 540,000
Identified Drilling Targets – 15
To Be Drilled in 2011 – 12
Target size – 1 million to 15 million barrels
4) Property – Heavy Oil
Country – Columbia
Acres – 906,000
Identified Drilling Targets – 20
To Be Drilled in 2011 – 12
Target size – 50 million barrels plus
5) Property – Peru
Country – Peru
Acres – 9,387,000
Identified Drilling Targets – 3
To Be Drilled in 2011 – 3
Target size – 25 million barrels plus
The inventory of Petrominerales’ exploration targets is long and the size of the targets are quite large. The question that you should be asking is how does one company that had virtually no production 4 years ago manage to amass this kind of exploration portfolio ?
It is really a case of being in the right place, at the right time. Petrobank CEO John Wright and CFO Corey Ruttan had worked for an oil company in Ecuador which was called Pacalta. Pacalta was bought out by the Alberta Energy Company (Encana) in 1999. Wright and Ruttan went to AEC and bought Pacalta’s Colombian assets. They slowly started working those assets and then in 2004 when the Columbian Government made new land available Wright and Ruttan bought big and acquired 2 million acres in known but undeveloped basins.
In other words they got in early, they got in cheap, and they got in big. Their land grab half a decade ago now results in an envious position in an underexplored region and the drilling results are just starting.
I encourage listening to the most recent presentation done on PMG by Chairman John Wright (link below). It is going to be a fast and furious 2011 as the results of 40 exploration wells come in.
http://www.petrominerales.com/investors/
