It’s where Western Canadian Basin was 50 years ago
A huge land rush is happening in the energy sector in Colombia, and Canadian listed exploration and production companies are leading the way.
An improved political and security climate, along with new technology such as horizontal drilling and 3D seismic, are driving the interest.
Canadian securities firm Genuity Capital Markets recently issued a 105 page research report stating that “Colombia is one of the most attractive places to invest in oil and gas globally.” Colombia’s geology is similar to western Canada – a mountain range, foothills and plains that have the potential to hold billions of barrels of oil. And operators using 3D seismic has increased the success rate in exploration to 70% in the country.
“Colombia is undergoing an evolution that is very similar to what had previously occurred in Western Canada,” states the report, “companies are improving seismic data and interpretation to reduce exploration risk...the triple benefit of improved terms, better technology, and higher oil prices is so compelling that we believe those that have not aggressively acquired land and resource potential risk having missed the land rush in Colombia.”
Intermediate sized producers from Canada such as Gran Tierra Energy (GTE-TSX) Petrominerales (PMG-TSX), and Pacific Rubiales Energy (PRE-TSX) – who have all been in the country for a few years - have made big discoveries in Colombia and built huge shareholder value. These intermediate Colombia-focused oil companies have outperformed the S&P/TSX Energy index by 122% since early 2008.
The juniors who are now causing this land rush are just starting their production growth curve.
These include companies like Petroamerica, (PTA-TSXv) which has just earned into a huge 175 sq km block, capable of supporting many wells. Their first well hit over 1000 bopd, and a second test is planned to increase that.
Other juniors in Colombia include Alange Energy, Canacol Energy Ltd. (CNE-TSX), Parex Resources Inc (PXT-TSX) and CapLink Ventures Ltd (CAV-TSX).
The main reason investors should be attracted to Junior International E&Ps is their upside potential,” says Genuity, “Trading at 0.18x our unrisked NAVPS estimates on average (compared to 0.29x for the Intermediate E&Ps), the Junior E&Ps that we are highlighting in this report have greater upside potential than the established Intermediates in Colombia (as well as higher risk levels)”.
The Llanos Basin in the centre of the country is the most prolific oil producing region. Most of the juniors in Colombia have their core assets there. The geology is similar to western Canada – but greatly underexplored in comparison.
Petroamerica Oil Corp. (PTA-TSXv) has properties in 10 different basins in Colombia, but recently secured its flagship property, a 15% interest in the 175 square mile Balay Block of the Llanos Basin. President Paul Kroshko have had strong success in Colombia in the past, building up one producer from 2,000 – 20,000 bopd in five years.
Alange Energy Corp (ALE-TSX) has high-profile management led by CEO Luis E. Giusti, who was previously Chairman and CEO of PDVSA (the Venezuelan state oil company) and was an External Director of Shell Transport and Trading. Mr. Giusti has assembled an experienced operations team including many former PDVSA colleagues. High-impact explorations are planned for Q2/10 including drilling key exploration wells on its Topoyaco and Santa Cruz blocks with resource potential of around 50 MMBbl.
Canacol Energy (CNE-TSX) has more than 1.2 million net acres in the emerging Caguan heavy oil trend, and it has the largest Colombian land holdings among junior Latin American E&Ps. Canacol has an estimated net recoverable resource potential of over 160 MMBbl. Three exploration wells are planned for C2010. Well funded for 2010 capital program, CNE had a cash position of $30.5 million as of December 31, 2009, of which approximately $9 million will remain after the completion of the company’s C2010 capital program (of US$46 million).
Investors Guru Small Cap Stock Observer publishes interesting articles by contributing writers, in addition to its own content. This article was written by Guy Bennett and we have not verified its details.