PDP-TSX: $14.95
Target: $30.00
Warren Verbonac
(403) 750-0497· wverbonac@octagoncap.com
Activity Update
• According to yesterday’s release, Petrolifera’s production in the current
quarter (Q3/07) of 7,563 boed is down from that of the Company’s last
release, of 8,890 boed (with productive capability at that time of over 9,600
boed).
• Our previous Q4/07 production estimate of 15,000 boed has been reduced to
10,000 boed, cutting estimated cash flow by $0.35 to $1.72 for 2007.
• Having had a series of production misses and setbacks during the last two
quarters, Petrolifera has decided to stop providing operating and financial
guidance, and has termed the Puesto Morales field as “at a very advanced
stage” – presumably, production may have peaked from this field.
• The Puesto Morales and Rinconada concession comprises less than 10% of
the Company’s net acreage in Argentina’s Neuquen Basin, which still
provides substantial ongoing drilling opportunities.
• Due to rig availability issues, 11 more locations are expected to be drilled by
year‐end, 10 locations short of the original target.
• Q3 results are expected November 6, including an update on the status of
the $37.7 million in asset backed commercial paper held by the Company.
• We continue to regard Petrolifera’s exploration inventory as one of the most
prospective of any junior. With the first drilling in Peru expected soon, there
is tremendous potential.
We are thus maintaining our BUY recommendation
and $30.00 target price.
Connacher Oil and Gas Limited of Calgary, Alberta was responsible for the creation and financing of Petrolifera and remains the single largest shareholder (13.3 million shares on a fully-diluted basis) Connacher also provides management services to Petrolifera.
Visit Connacher Oil and Gas Limited:
www.connacheroil.com
GMP Target is 19.00
TORONTO (Dow Jones)--GMP Securities L.P. cut its stock-price target on Petrolifera Petroleum Ltd. (PDP.T) to C$19 from C$23, noting that logistical challenges are leading to delays in conducting its Argentinian operations.
In a research report, analyst David Beddis said that, while the company's third-quarter production exceeded second-quarter output, it was lower than expected. Petrolifera produced about 7,562 barrels of oil equivalent a day in the third quarter, up from 6,932 barrels of oil equivalent in the second quarter. However, in mid-August, Petrolifera said production had increased to 9,000 barrels of oil equivalent a day.
The analyst said Petrolifera gave no update in a news release Monday about current production.
He said Petrolifera expects that a large portion of its field facilities at Puesto Morales will be completed by November, with the remainder to be completed by year-end. In a previous release, it had reported delays in completion of these field facilities.
The company has completed and/or tested eight wells at Puesto Morales, but other than the 1006 and 1050 wells, it hasn't been able to drill any of its planned high impact exploration wells. This is primarily due to the late arrival of its new rig from China and regulatory issues, Beddis said, and as a result management now believes that it won't be able to drill any exploratory locations until 2008.
As a result of delays and drilling that has been pushed into 2008, Beddis lowered his 2007 production forecast to 8,800 barrels of oil equivalent a day from 10,500 barrels. He expects cash flow of C$1.64 a share, down from his previous estimate of C$1.98.
In 2008, Beddis anticipates production of 16,000 barrels of oil equivalent a day, resulting in cash flow of C$2.53 a share. He had previously anticipated production of 19,000 barrels of oil equivalent a day and cash flow of C$3.25 a share in 2008.
Shares of the Calgary-based oil and gas company are trading up 5 Canadian cents at C$15.00 in Toronto Tuesday.
GMP doesn't have an investment-banking relationship with Petrolifera and Beddis doesn't own shares of the company.
Company Web site: http://www.petrolifera.ca