Analyst Actions: Petrominerales Ests Lowered at Credit Suisse
Deep Llanos Update: Petrominerales announced the discovery of oil at its Guala-1 exploration well that tested 2,046 bbls/d with a 6% water cut. However, this success was somewhat offset by disappointment at Tente-1 that tested only water. The next two Deep Llanos exploration prospects appear to be Hungaro-1 and Guarana-1. Hungaro-1 is expected to reach the targeted depth by mid-July 2012 and Guarana-1 looks to commence drilling in early July 2012.
Bromelia Looks Gassy: Initial pre-production testing indications from Bromelia-1 looks to be weighted towards natural gas thus far, based on log data and the presence of natural gas during drilling operations. Production testing for more definitive results is currently planned for late July 2012. Although there is still the potential to find oil down-dip with further appraisal drilling, we believe that first production from this potential discovery could be a year or more from now due to the presence of natural gas and the need for additional infrastructure.
Production Declines, Estimates Revised: Before additions from the Guala-1 discovery, corporate production averaged 30,836 bbls/d in April 2012, 31,602 bbls/d in May 2012, and 30,280 bbls/d to date in June 2012, which was below our Q2/12 estimate of 32,350 bbls/d. Incorporating Guala-1 and removing risked volumes from Bromelia-1, we have elected to revise our production and CPS estimates downward by ~3%. We are also lowering our 2012/2013/2014 EPS estimates to $4.33/$4.87/$5.77 (from $4.49/$5.05/$5.79) respectively.
Recommendation: Production additions from Guala-1 were offset by lower than expected Q2/12 production to date. While awaiting more definitive production testing results from Bromelia-1 to confirm natural gas potential, we currently maintain our Neutral rating and target price of C$13.50.
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