Shares of Platino Energy (PZE:TSXV) remain halted this morning after the company announced it would be acquiring Colombia Energy Development Company (CEDCO) for US $50 million in cash. CEDCO is a wholly-owned subsidiary of Global Energy Development Plc.
CEDCO holds 100%-interests in three exploration blocks in the Llanos Basin covering roughly 31,000 gross acres. Production from the two blocks in Q2/2014 was 950 bopd (on a working-interest-before-royalty basis) and the company generates operating netbacks of approximately US $51 per barrel.
The company holds 2P reserves of 2.1 million barrels of light and medium oil.
At the $50 million price-tag, Platino is acquiring CEDCO for approximately $52,600 per flowing barrel of light oil.
Tomas Villamil, President and CEO of Platino, stated: “The acquisition of CEDCO satisfies Platino’s previously stated strategy of leveraging our existing cash balance and management expertise to complement our long-term Putumayo exploration portfolio with near- to medium-term opportunities. The production and reserves from these assets position Platino to achieve significant shareholder value creation in Colombia.”
Mr. Vilamil and much of his management team were founders and executives of C&C Energy which held a number of assets near CEDCO’s assets in the Llanos Basin.
C&C Energy was acquired by Pacific Rubiales in late 2012 for over $500 million and Platino was spun out of the deal with $80 million in cash and some non-core Colombian oil concessions. C&C Energy was an incubated portfolio company of private equity firm Denham Capital and as a result Platino’s Chairman, Carl Tricoli, is one of Denham’s founders.
C&C was producing 11,500 boepd at the time of their acquisition, representing an acquisition price of approximately $44,000 per flowing barrel.
Platino has a portfolio of blocks in Colombia’s Putumayo Basin which is a relatively underexplored but prospective oil basin compared to the more mature Llanos Basin which provides much of the country’s light oil production. An export pipeline system exists in the Putumayo area and it has excess capacity.
Colombian Oils Remain Battered:
The entire Colombian oil space remains battered with companies across the spectrum, from Gran Tierra and Pacific Rubiales to Petroamerica and Platino trading at, or near, 52-week lows.
Petroamerica produces approximately 7,400 boepd and at $0.23 per share is valued at just under $200 million meaning it is trading at $28,000 per flowing barrel of oil.
I have been told by a number of smart guys that 10,000 boepd is a threshold whereby a significant re-rating can occur. Over the next three years, Petroamerica’s management team believes they will be able to grow production to 30,000 boepd putting it in Parex Resources current production levels. Parex currently produces 25,000 boepd and is valued at over $1.5 billion.
Petroamerica remains one of the best run oil companies in Colombia and one with a portfolio of 12 blocks comprising over 1 million gross acres in the Putumayo and Llanos Basins yet it trades at some of the lowest multiples in the entire sector.
Shares of Platino will remain halted pending receipt and review of acceptable documentation regarding the acquisition by the TSX Venture Exchange.