Energy Prospectus

This company hosted our Houston luncheon on June 22.

PetroTal Announces First Oil from Bretana and Provides Operations Update

CALGARY and HOUSTON, July 3, 2018 /CNW/ - PetroTal Corp. ("PetroTal" or the "Company") (TSX-V: TAL) is pleased to announce that it has achieved first oil production from the Bretana Norte discovery well (the "Discovery Well" or the "well") at the Bretana field in Block 95 in Peru. The Company is also pleased to provide further operations updates for both Bretana and Block 107. All figures referred to in this press release are denominated in U.S. dollars.

Operations Highlights
•First oil production achieved in five months, significantly ahead of schedule
•Discovery well flowed oil without stimulation
•Well produced 100 percent oil with minimal natural gas and no formation water to date
•Commissioning of facilities is progressing as expected and on schedule
•Water handling facilities on schedule for commissioning in October, 2018
•7,000 barrels of oil produced to date through the ongoing long-term testing phase
•Signed oil sales contract allows for strong operating netbacks to PetroTal
•First oil sales and shipment expected in early July, 2018
•Osheki prospect in Block 107 remapped, independent resource audit being prepared

Full Report Here: https://www.newswire.ca/news-releases/p ... 03491.html

Some of you may recall that Gran Tierra Energy (GTE), a former Sweet 16 Growth Portfolio company, drilled the initial discovery at Bretana Norte four or five years ago. GTE (with a market cap over $1.3 Billion USD) sold the Bretana Norte concession and the Osheki Prospect to PetroTal for cash and more than a 40% equity stake in PetroTal. GTE is a large Canadian based upstream company that has significant operations in Columbia. I think GTE has three more concessions in Peru that might be rolled into PetroTal eventually.

I know GTE very well. I think I lost money on it three times.

Dan,
Any chance you could do an update on GTE?

The last time I looked at GTE was April, 2015. If you look at a MAX chart for GTE you see that it has had lots of ups and downs, BUT it has survived. Lots of upstream companies did not survive the brutal oil price cycle, so we can give management some credit for keeping it a float. BTW the max charts for almost all of our Sweet 16 look about the same.

GTE was doing quite well until the oil price crash. Actually, the discovery well in Peru (Bretana Norte) was a big deal at the time. However, they got over extended in Columbia and in Peru. I think the fact that GTE is now totally focused on Peru is a big plus.

Today, five Wall Street firms cover GTE and three of them rate it a Strong Buy. The other two rate it a BUY.

GTE had positive earnings in Q1 2018 and the Wall Street Gang expects them to be earnings positive in 2018 and 2019
Here are the current forecasts for GTE from Reuters / First Call (based on lower oil prices than we have today)
2018 Estimates: $0.34 EPS and $0.80 operating cash flow per share
2019 Estimates: $0.42 EPS and $0.96 operating cash flow per share

IMO GTE's decision to put their Peru assets in PetroTal for cash + equity makes a lot of sense. Each country is different and PetroTal management has a lot of experience in Peru. I was more impressed by them at our June 22nd luncheon than I expected to be.

I will take a closer look at GTE in a few days. It has been added to by very long To Do List.

Petrotal making nice progress. Nice 2P reserves increase along with 2018-2019 expense reduction. They TD'd their second Bretaña Field well. Evaluation oil from the Bretaña Field is "19.2 degree gravity API and lower viscosity" according to the company website 11/15/18 news release.

From their 4/11/19 news release, Manolo Zuniga, PetroTal's President and Chief Executive Officer, stated:
"The increased NPV-10 is a result of lower than expected development costs, partly as a result of using produced oil to power the field. The lower development costs truly drive the NPV-10 of the project, where we see a major increase from $282 million to $535 million. Even more important is the NPV-10 of the 3P reserves, estimated at $1.25 billion, which underpins our future value, which could primarily be obtained by increasing the field's recovery factor."

https://www.newswire.ca/news-releases/p ... 64168.html

They dealt in stride with some "interesting" nearby landowner relations: https://www.reuters.com/article/us-peru ... SKCN1R701Q

If I read correctly, Petrotal had no debt as of 9/30/2018. Maybe still no debt?