Saturday, February 14, 2015

Rig count continues to plunge and new speculative position


The number of active U.S. land rigs plunged by 98 this week in one of the biggest declines in the past three decades as fallen oil prices continued to pummel the industry’s drilling ambitions.

Eighty-four U.S. oil rigs were idled this week and 14 gas rigs stopped running, according to oil field services firm Baker Hughes. Two U.S. offshore rigs became active this week.

Baker Hughes’ 71-year-old U.S. rig count, one of the industry’s go-to indicators of future oil production and demand for rigs, was down by 406 drilling units compared to Feb. 13, 2014. The last time the rig count fell by 98 was in January, 2009 – the two declines are tied for the biggest drops since 1987.

I added Madalena Energy to the speculative portfolio last week. I am going to go ahead and add Petroamerica (PTA.V) to the speculative portfolio this week. I have owned Petroamerica in the past, and this recent big drop has re attracted me to the name. Petroamerica operates in Columbia.

Tommy Humphrey's has a good update on the company over at CEO.CA.
The company has approx US $60 million in cash and CAD $35 million (approx $28 million US) in debt due in April. The company had previously announced it looks to refinance the facility.
The company is guiding 5400 barrels per day production for the first half of 2015 and is deferring its growth plans until oil prices recover.

#PTA is substantially carried for two high impact wells in the Llanos Basin that Parex will drill in the first half of the year. Both are 50% working interest to PTA.

Year end reserves and end of year financials will be released by mid April.

It’s all about cost saving measures now, Ralph says. The G&A has been reduced by a third already and they intend to decrease it further. They are working to renegotiate service contracts. 

Transportation and diesel costs are coming down.

The company’s Llanos Basin production should have sufficient margin down to the mid $30’s, with Putomayo production likely costing $40-$45 per barrel (my estimates). This is inclusive of royalties.

If oil goes back up to $85-100 this stock will easily be a multi bagger. The question is how long do oil prices stay down.This is another high risk high possible return situation which looks like it has suffered capitulation as a large holder of stock dumped their shares.

1 comment:

Chris McKinnon said...

Keep in mind that Petro America will be doing a share consolidation 10:1 very shortly. Usually a negative effect on the stock for that.

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