Thread by @kingsonheights

|PETROTAL OIL PRODUCTION GROWING RAPIDLY TOWARDS 25 000 BOPD.
1/X | In this thread I will go through Petrotal – in my opinion – the best investment opportunity in the Oil industry. I will – in short – go through the positives (AND THERE ARE MANY), and the negatives.
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2/X | The 8H well – coming online any day – will boost production to ~13 000/14 000 bopd. And before year end we will see Petrotal producing somewhere around 18 000 bopd. During 2022 production at the Bretana field will continue increasing towards the 25 000 bopd target
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3/X |The math is easy. With oil at ~$75 and a breakeven at ~$27, Petrotal is generating a fantastic profit. If you compare their cash flow to their peers, with regards to market cap, Petrotal is an outstanding investment opportunity.
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4/X | And if you want further operational upsides. During 2022 Petrotal has committed to drill two exploration wells at Block 107. A great looking prospect, and Petrotal has the funds to commence drilling themselves if they don’t engage in a joint venture partnership.
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5/X | Looking at organizational performance, Petrotal is very undervalued at current share price. The reason for why people are hesitating buying in – in my opinion – is for two reasons: A history of political uncertainty, and civil unrest in Peru. My view on these issues:
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6/X | Civil unrest in Peru: Indigenous people in the rural parts of Peru have on several occasions blocked operations of the Northern Pipeline as well as companies operating the oil fields. They seek the attention from government to speed up community development
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7/X | Petrotal have on several occasions been affected by this with periods of production shut-downs as a result. Since 2020 a lot has improved to avoid these shut-downs in the future. Here I will mention: Gap closing plan, Brazilian export route, storage capacity.
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8/X | Gap closing plan & other initiatives: During 2020 the government, together with corporations and indigenous representatives signed up on a gap closing plan to make sure that the economic growth of Peru benefits not only the urban areas.
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9/X | Petrotal is a standout corporation that for a long time has invested in the areas of their operations. Helping communities out with electricity, infrastructure, scholarships and job opportunities. More can be read on their website…
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10/X | The Brazilian export route has already completed two successful shipments with the option of further shipments. This – In my opinion – is just one example showing the ability of the Petrotal management. I suspect more positive updates related to/in line with this.
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11/X | Storage capacity: From Petrotals latest investor presentation we can see that – in case of Pipeline unavailability – the company can maintain a production of 20 000 bopd for ~60 days. And should it be unavailable for longer…
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12/X | … there is alternative export routes to maintain production levels of minimum 9 300 bopd.
In my view the management have shown great capability to find ways to deal with any complications. Therefore I have faith in this also going forward.
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13/X | Political uncertainty in Peru: Even though the recent decades have seen a significant economic growth for Peru with investment from foreign investors. Little have been seen when it comes to long lasting political institutions. In fact…
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14/X | up until end of last year, all presidents elected since 1985 had either been impeached, imprisoned or sought in criminal investigations. During 2020’s pandemic it all culminated with three sitting presidents within the span of one week and a population in disbelief
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15/X | Obviously the stage was set for a continued shit show in the 2021 presidential election where, from the general election, two candidates emerged with less than a combined third of the total votes. One the leader of a communist party…
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16/X | …the other, a two time second round loser and daughter of jailed former president Alberto Fujimori. When people turned up for the second round voting; it was more a choice between bad alternatives than anything else…
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17/X | What is important to know is that sitting government only holds 42 out of 130 seats in congress. This makes it literally impossible to make any drastic changes like increased taxation on corporations etc, since congress majority is centre/right.
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18/X | Political instability may continue for a while, but the congress majority will not want to jeopardize the foreign investments who has played a big part in the country’s economic growth.
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19/X | I’m OK with the risk. In my opinion the reward is many multiples higher in this case. Petrotal is very clear that money made – at this point – is going right back into the ground. That means investing in increased production. But what can we expect in 2022 or 2023?
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20/X | During 2022 we should see production increase to ~25 000 bopd. My expectation is that with the free cash flow we will see going forward, there should be share buy-backs, and plans for setting up shareholder dividend again
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21/X | Of course: DYOR! In my opinion, buying in around 0.3 CAD/0.17p is a great opportunity as I believe share price should multiply a couple of 100% as we move into 2022 and 2023.
Do you like Petrotal? Please reply and share what you think every investor needs to know!
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