Source: Streetwise Reports 06/05/2018
Tom Erik Kristiansen, an analyst with Pareto Securities, reviewed this oil and gas company’s recent announcement.
In a May 31 research note, Pareto reported PetroTal Ltd. (SLG:TSX.V) is on track for first oil in June 2018, which, five to seven months ahead of the original, Q4/18 target date, “should lift market confidence in PetroTal’s ability to continue to deliver on its guidance. Also, costs are coming in 25% below the estimate. On this news, Pareto increased its target price on PetroTal (Sterling Resources Ltd.) to CA$0.75 from CA$0.60 per share.
Last year, PetroTal was amalgamated with Sterling Resources Ltd. and now trades as Sterling Resources Ltd. on the TSX Venture Exchange under the ticker symbol SLG.
Production at PetroTal’s Bretaña, in Peru, is expected to start at 1,000 barrels per day (1 Mbbl/day) and gradually increase to 2.5 Mbbl/day by October 2018, “when water handling facilities are scheduled to be in place,” wrote Pareto. Subsequently, the company will ramp up production to 10 Mbbl/day by 2020 via 11 wells.
Having an estimated net back of about US$38 per barrel at current prices, PetroTal would become cash flow positive from 2019. By year-end 2020, the company should get its cash balance to where it exceeds enterprise value, based on an assumed, long-term Brent oil price of US$70 per barrel. Further, the report explained that “this is based on a relatively low estimated recovery factor of 12% that the company believes it can double, which, if realized, would lift output to around 20 Mbbl/day in the early 2020s.”
If PetroTal’s ramp-up is successful, “the company’s share price has greater than five times’ upside potential,” Kristiansen indicated. Pareto’s current net asset value on PetroTal is CA$1.15 per share. “As such, PetroTal has a large repricing potential, and we expect announcement of first oil to trigger further share price appreciation near term.”
Pareto has a Buy recommendation on PetroTal, whose shares are trading at around CA$0.29 per share.
Want to read more Energy Report articles like this? Sign up for our free e-newsletter, and you’ll learn when new articles have been published. To see a list of recent articles and interviews with industry analysts and commentators, visit our Streetwise Interviews page.
Disclosure:
1) Doresa Banning compiled this article for Streetwise Reports LLC and provides services to Streetwise reports as an independent contractor. She or members of her household own securities of the following companies mentioned in the article: None. She or members of her household are paid by the following companies mentioned in this article: None.
2) The following companies mentioned in this article are billboard sponsors of Streetwise Reports: None. Click here for important disclosures about sponsor fees. 3) Comments and opinions expressed are those of the specific experts and not of Streetwise Reports or its officers. The information provided above is for informational purposes only and is not a recommendation to buy or sell any security.
4) The article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility. By opening this page, each reader accepts and agrees to Streetwise Reports’ terms of use and full legal disclaimer. This article is not a solicitation for investment. Streetwise Reports does not render general or specific investment advice and the information on Streetwise Reports should not be considered a recommendation to buy or sell any security. Streetwise Reports does not endorse or recommend the business, products, services or securities of any company mentioned on Streetwise Reports.
5) From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in securities mentioned. Directors, officers, employees or members of their immediate families are prohibited from making purchases and/or sales of those securities in the open market or otherwise from the time of the interview or the decision to write an article, until one week after the publication of the interview or article.
Disclosures from Pareto Securities AS, Blackbird Energy, Research Report, May 7, 2018
This publication or report has been prepared solely by Pareto Securities Research.
Opinions or suggestions from Pareto Securities Research may deviate from recommendations or opinions presented by other departments or companies in the Pareto Securities Group. The reason may typically be the result of differing time horizons, methodologies, contexts or other factors.
Conflicts of interest
Companies in the Pareto Securities Group, affiliates or staff of companies in the Pareto Securities Group, may perform services for, solicit business from, make a market in, hold long or short positions in, or otherwise be interested in the investments (including derivatives) of any company mentioned in the publication or report.
In addition Pareto Securities Group, or affiliates, may from time to time have a broking, advisory or other relationship with a company which is the subject of or referred to in the relevant Research, including acting as that company’s official or sponsoring broker and providing corporate finance or other financial services. It is the policy of Pareto to seek to act as corporate adviser or broker to some of the companies which are covered by Pareto Securities Research. Accordingly companies covered in any Research may be the subject o f marketing initiatives by the Corporate Finance Department.
To limit possible conflicts of interest and counter the abuse of inside knowledge, the analysts of Pareto Securities Research are subject to internal rules on sound ethical conduct, the management of inside information, handling of unpublished research material, contact with other units of the Group Companies and personal account dealing. The internal rules have been prepared in accordance with applicable legislation and relevant industry standards. The object of the internal rules is for example to ensure that no analyst will abuse or cause others to abuse confidential information. It is the policy of Pareto Securities Research that no link exists between revenues from capital markets activities and individual analyst remuneration. The Group Companies are members of national stockbrokers’ associations in each of the countries in which the Group Companies have their head offices. Internal rules have been developed in accordance with recommendations issued by the stockbrokers associations.
This material has been prepared following the Pareto Securities Conflict of Interest Policy. The guidelines in the policy include rules and measures aimed at achieving a sufficient degree of independence between various departments, business areas and sub-business areas within the Pareto Securities Group in order to, as far as possible, avoid conflicts of interest from arising between such departments, business areas and sub-business areas as well as their customers. One purpose of such measures is to restrict the flow of information between certain business areas and sub-business areas within the Pareto Securities Group, where conflicts of interest may arise and to safeguard the impartialness of the employees. For example, the Corporate Finance departments and certain other departments included in the Pareto Securities Group are surrounded by arrangements, so-called Chinese Walls, to restrict the flows of sensitive information from such departments. The internal guidelines also include, without limitation, rules aimed at securing the impartialness of, e.g., analysts working in the Pareto Securities Research departments, restrictions with regard to the remuneration paid to such analysts, requirements with respect to the independence of analysts from other departments within the Pareto Securities Group rules concerning contacts with covered companies and rules concerning personal account trading carried out by analysts.
Pareto Securities AS may hold financial instruments in companies where a recommendation has been produced or distributed by Pareto Securities AS in connection with rendering investment services, including Market Making.
Overview over issuers of financial instruments where Pareto Securities AS have prepared or distributed investment recommendation, where Pareto Securities AS have been lead manager/co-lead manager or have rendered publicly known not immaterial investment banking services over the previous 12 months: PetroTal Ltd.
( Companies Mentioned: SLG:TSX.V,
)