Petroamerica Oil Corp: Bankable Growth, Outstanding People, Staying Strong

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Our readers have been hearing about Petroamerica Oil Corp. ($PTA) since August, 2012. Since then, we’ve been covering the Colombian-focused oil and gas junior closely -- and we’ve done well owning the shares.

Sunday evening, PTA management convened in Vancouver for a round of investor meetings today. We were able to join PTA’s Executive Chairman Jeff Boyce, CEO Nelson Navarrete, and EVP Exploration and Business Development Ralph Gillcrist for an update on the company before they headed off to Toronto this afternoon.

The management's visit was well-timed. On Friday, PTA experienced a stock market setback, crashing from 40 to 27.5 cents at the open, before climbing back up to 36 cents on a strong 8 million shares traded to close out the day.

The flash crash was triggered by a missed exploration well at the company’s CPO-1 block. While analysts covering the company valued the missed well at just 1 to 2 cents per share, the shares crashed 12.5 cents immediately at open -- likely the result of one or numerous stop loss market orders. “The market will shake the tree hard,” Boyce told us, remaining optimistic. “Smart money was backing up the truck on Friday... Nothing has changed,” he said, “we’re still growing, acting prudently, and undervalued in this market.”

We’re inclined to agree. The company’s Las Maracas oil field has outperformed, and with their additional discovery at La Casona, and a bit of production coming from the Balay field, Petroamerica is still a very promising company. The analyst community has begun to show support also, with Haywood's Al Knowles reiterating his Sector Outperform rating and $.55 price target after the news came out on Friday.

Today, Petroamerica’s key value driver is the Las Maracas oil field, a 50/50 joint venture with Parex Resources. Producing 400 barrels of oil per day (BOPD) in 2011, Las Maracas helped grow PTA’s production nearly tenfold in 2012 to 4,000 BOPD by December, with impressive netbacks of around 70$+. Simple math has PTA trading at approximately 2X cash flow.

When PTA and Parex’s joint permanent production facility is completed in Q2 2013 at Las Maracas, the field will be capable of producing 7,500 BOPD net to PTA, although the company forecasts a more conservative 4,500 BOPD throughout 2013 base case. This added capacity is a significant part of our upside. “There’s plenty of room in our current asset base for further growth. We think we can get to 7 to 10k BOPD over the next 18 months with what we have now,” Navarrete told us. Gilchrist added, “We haven’t seen declines yet, we haven’t seen water, and we’re picking up other reservoir intervals. Las Maracas keeps getting better.”

Over the medium term, PTA’s looking to acquire longer life assets. They also reiterated that becoming an operator is another priority.

On the exploration front, PTA will drill an additional four prospects in 2013, telling us to expect steady news flow throughout the year. The Curiara well at the El Porton block will be spudded in February. And drilling at the company’s La Guira prospect on the Los Occoros block may start in Q2, rather than Q3.

Management is also working to enhance netbacks per barrel by leveraging transportation and marketing opportunities. Such efforts could potentially add $5-6 per barrel to what are already some of the highest netbacks in the entire oil and gas industry.

When we asked PTA management if they had any plans to sell in 2013, Boyce told us, “You can’t plan for that. You create an attractive business for somebody who wants 100 shares, 100,000 shares, or all of them. You never design it to sell, you design it to be attractive to the right people. We have an obligation to shareholders to consider any offer, but we don’t have our shingle out, because buyers don’t take you seriously. When you build a company to sell, nobody wants it, but if you build an attractive business that will sustain itself, the odds are better that people will want it."

Despite Friday’s flash crash, nothing at PTA has fundamentally changed. CPO-1 was a simple exploration well, and the company’s growth prospects remain intact. PTA’s management has our trust and confidence. They’re a great team and it was very encouraging as a shareholder to hear them defend their story yesterday.

Disclaimer: We own Petroamerica Oil Corp. shares and reserve the right to sell them at any time without notice. This is not investment advice. Please do your own due diligence and talk to a licensed investment advisor before buying or selling any security (We are not investment advisors). Also, Petroamerica's 2013 production guidance is forward looking and unrisked. Please see Petroamerica's disclaimer. All facts to be verified by the reader. These are opinions, not advice. We seek safe harbour.

Tommy Humphreys

Tommy Humphreys, 30, is an entrepreneur, investor and writer from Vancouver, Canada. He founded CEO.CA, a popular junior mining and Canadian finance blog, in 2012. He has been the president of Pacific Website Company Inc., a private marketing and web development company, since 2007. Tommy has authored articles for Globe and Mail, Financial Post and others. He speaks at select conferences. Reach him by email: tommy@ceo.ca. Follow him on Twitter: @TommyHump More →

Twitter: @tommyhump

tommyhump@gmail.com

Tommy Humphreys

Twitter: @tommyhump

tommyhump@gmail.com

Disclaimer:

Readers are advised that the material contained herein is solely for information purposes. Readers are encouraged to conduct their own research and due diligence, and/or obtain professional advice. Nothing contained herein constitutes a representation by the publisher, nor a solicitation for the purchase or sale of securities. The information contained herein is based on sources which the publisher believes to be reliable, but is not guaranteed to be accurate, and does not purport to be a complete statement or summary of the available data. Any opinions expressed are subject to change without notice. The owner, editor, writer and publisher and their associates are not responsible for errors or omissions. They may from time to time have a position in the securities of the companies mentioned herein, and may change their positions without notice. (Any significant positions will be disclosed explicitly. This article is not intended to meet your specific individual investment needs and it is not tailored to your personal financial situation. Nothing contained herein constitutes, is intended, or deemed to be — either implied or otherwise — investment advice. Thomas Humphreys, Pacific Website Company Inc., and other entities in which he has an interest, employees, officers, family, and associates may from time to time have positions in the securities or commodities covered in these publications or web site. We reserve the right to buy and sell such securities or commodities without notice to readers. While the information herein is believed to be accurate and reliable it is not guaranteed or implied to be so. The information herein may not be complete or correct; it is provided in good faith but without any legal responsibility or obligation to provide future updates. Neither Thomas Humphreys, nor anyone else, accepts any responsibility, or assumes any liability, whatsoever, for any direct, indirect or consequential loss arising from the use of the information in these publications or web site.

Forward-Looking Statements: This article may include certain "forward-looking information" within the meaning of Canadian securities legislation. Forward-looking statements include predictions, projections and forecasts and are often, but not always, identified by the use of words such as "seek", "anticipate", "believe", "plan", "estimate", "forecast", "expect", "potential", "project", "target", "schedule", budget" and "intend" and statements that an event or result "may", "will", "should", "could" or "might" occur or be achieved and other similar expressions and includes the negatives thereof. All statements other than statements of historical fact included in this release, including, without limitation, statements regarding the potential of the Company's properties are forward-looking statements that involve various risks and uncertainties. There can be no assurance that such statements will prove to be accurate and actual results and future events could differ materially from those anticipated in such statements. Forward-looking statements are based on a number of material factors and assumptions. Important factors that could cause actual results to differ materially from Company's expectations include actual exploration results, changes in project parameters as plans continue to be refined, future metal prices, availability of capital and financing on acceptable terms, general economic, market or business conditions, uninsured risks, regulatory changes, delays or inability to receive required approvals, and other exploration or other risks detailed herein and from time to time in the filings made by the Company with securities regulators. Although the Company has attempted to identify important factors that could cause actual actions, events or results to differ from those described in forward-looking statements, there may be other factors that cause such actions, events or results to differ materially from those anticipated. There can be no assurance that forward-looking statements will prove to be accurate and accordingly readers are cautioned not to place undue reliance on forward-looking statements which speak only as of the date of this article. The Company disclaims any intention or obligation, except to the extent required by law, to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

Always do your own due diligence. We seek safe harbor.