Ralph Gillcrist

Ralph Gillcrist

Tonight I spoke to the CEO of Petroamerica Oil (TSXV:PTA), Ralph Gillcrist.

The market is valuing Petroamerica at about C $100 million. With about US $26 million in the bank, its enterprise value is about C $69 million.

PTA owns light and medium oil interests in Colombia. Since the start of the oil crisis in September 2014, production has fallen from over 6,500 barrels of oil equivalent per day, to just 4,587 boepd in Q1 2015.

“If you don’t invest, you decline,” Mr. Gillcrist says from his kitchen in Calgary while preparing a family dinner.

Tonight Petroamerica released financial and operating results from Q1 2015. It generated $2.3 million funds flow from operations (net of G&A and taxes) for the quarter, despite oil prices touching as low as $49 per barrel during the period, realizing $17.38 average netbacks.

The Brent Crude Oil price has since climbed to a more forgiving $66.64 Thursday, according to Bloomberg.

Gillcrist says Petroamerica continues to tighten its belt across all aspects of the business, and has cut costs in areas of production, operations, transportation and general and administrative costs.

There’s US $26 million in PTA’s bank account, fully funding its 2015 spending program and beyond. Following the full repayment of a $35 million debt facility a month ago, PTA is also debt free.

The company would like to negotiate a new debt facility to gain breathing room and expansion capital, but Gillcrist is waiting for the right deal.

H1 2015 production guidance for Petroamerica is just 4,200 barrels a day. Gillcrist wants the oil price to stabilize and capital access to improve before providing further guidance.

Petroamerica’s Put-7 block (50% working interest), acquired from Suruco last year, may contain the extension of the Quinde oil field in Southern Colombia. Petroamerica had communicated previously it would apply for operatorship over some of its assets, and Gillcirst tells me Put-7 is one of multiple blocks that could see accelerated drilling as oil markets improve.

Gillcrist says a lack of investment and announced activity from Petroamerica is hurting its share price. The company is still well covered by analysts at TD, CIBC, GMP and Paradigm.

With an eyesore 872.5 million shares outstanding and shareholder approval in hand to consolidate the number of shares, I ask Gillcrist when he is going to roll-back the stock.

Gillcrist gives me the same line he’s always had on the roll-back, that Petroamerica will do so on a positive business transaction.

I call bullshit because PTA won a takeover battle for Suroco last year and could have used that opportunity.

“Please have patience,” Gillcrist says. “We’re making the business sustainable to benefit in the turnaround.”

 

Tommy Humphreys owns Petroamerica Oil stock. This may contain errors and is not a recommendation to buy or sell any security. Always talk to a licensed investment advisor and do your own due diligence prior to making any investment decisions. Junior oil stocks like Petroamerica are very risky and not suitable for most investors. Read the company’s profile on www.SEDAR.com to fully understand the risks.