PetroTal Corp. (PTALF:OTCMKTS;PTAL:AIM) has released a promising report at the end of 1Q23 showing that oil production is performing better than previously expected.
Stephane Foucaud of Auctus Advisors writes: "1Q23 production was 12,618 bbl/d, above our expectations of 11,500 bbl/d. Oil sales continued to be very high in March at 21,500 bbl/d with 19,565 bbl/d sold through Brazil and the balance to Iquitos, with production averaging > 20 mbbl/d for more than 60 consecutive days."
PetroTal is experiencing generous returns for its shareholders through a share buyback program that allows up to 10% of the share capital over a 12-month period in 2023. With a US$0.015 per share quarterly dividend, investors are seeing an annual dividend of around 13%.
Review of Results
Foucaud presented the key points of PetroTal's latest reports.
The company expects a few catalysts in 2023 that could increase production even further.
"The Northern Peruvian Pipeline (ONP) has also resumed operations, and PetroTal estimates that ~270,000 bbbl of oil will be exported in late 2Q23 at Bayovar, generating US$5-7 mm in net revenue," according to Foucaud's report. However, the company is currently not exporting new volumes of oil through this pipeline until credit lines are guaranteed for payment from Petroperu.
At the same time, PetroTal has put Well 14H into production and is producing 3/mmbl/d, which is within expectations and performing at a similar initial rate to Well 12H.
Valuation
Foucaud maintains Auctus' previous target price of £1.50 per share, noting that "[t]he story continues to be about significant free cash flow generation, production, and reserves growth."
PetroTal continues to commit to producing 14-15mmbbl/d for this year, even expecting a potential of up to 17mmbbl/d later in 2023.
Structure and Predictions
The company has outperformed its own cash productions for the first quarter of this year by US$15 mm, coming in with a working capital surplus of US$104 mm.
Following the audit of the FY22 accounts, additional tax loss pools are now available to offset the FY23 tax. This results in an additional US$30 mm free cash flow in 2023. We now forecast that PetroTal will hold US$190 mm in working capital at YE23 (~US$160 mm previously)," Foucaud reports.
Auctus' valuations have increased, with a Core NAV of £1.13/sh and a ReNAV of £1.52/sh. The company is expected to distribute US$41 mm in dividends this year, US$56 mm next year while continuing to maintain over 50% of the current market cap in working capital.
PetroTal has 950 mm shares diluted and is estimated to reach 944 mm by the end of 2023. Its market cap is currently US$541 mm with anticipated marginal growth. The current share price is £0.46 and the price target is £1.50.
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Disclosures for Auctus Advisors, PetroTal Corp., April 25, 2023
Copyright and Risk Warnings PetroTal Corp. (“PetroTal” or the “Company”) is a corporate client of Auctus Advisors LLP (“Auctus”). Auctus receives, and has received in the past 12 months, compensation for providing corporate broking and/or investment banking services to the Company, including the publication and dissemination of marketing material from time to time. MiFID II Disclosures This document, being paid for by a corporate issuer, is believed by Auctus to be an ‘acceptable minor non-monetary benefit’ as set out in Article 12 (3) of the Commission Delegated Act C(2016) 2031 which is part of UK law by virtue of the European Union (Withdrawal) Act 2018. It is produced solely in support of our corporate broking and corporate finance business. Auctus does not offer a secondary execution service in the UK. This note is a marketing communication and NOT independent research. 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