Shares in Calgary-based Petrominerales jumped by as much as 12 per cent Wednesday after it announced a well targeting a new oil pool in Colombia had come on at more than 10,000 barrels per day.
The stock peaked at $37.39 just after noon in Toronto after the company announced its Yatay-1 exploration well was producing 10,440 bpd of 43 degree API light oil under natural flow. It slumped to close at $36, up $2.69 or eight per cent.
The company said in a news release it is looking at followup locations near the 3,600-metre well, the first into a new structure located near the Candelilla discovery which produced 7.3 million barrels of light oil in 2010.
“A year ago they drilled a discovery called Candelilla, which is near this one and also produced wells with 10,000 to 13,000 bpd, also of light oil,” said Alan Knowles, an analyst with Haywood Securities. “So now they have a second discovery into the same area so it looks like it’s prone to high deliverability. It has good reservoir and there’s probably more of these to be drilled in the future.”
He pointed out the company has six rigs running in the area to drive growth.
Canaccord Genuity analyst Frederick Kozak pointed out the company has more liquidity because of the distribution this week of the 66 per cent of Petrominerales stock held by Petrobank Energy to its shareholders.
It could also benefit from the expected listing of its stock on the Colombian Stock Exchange in Bogota later this month or in February, which will allow some Latin American funds to buy in.
Both Kozak and Knowles have “buy” recommendations on Petrominerales. A Bloomberg survey of 21 analysts shows an average 12-month target price of $36.76. The only analyst with a sell recommendation is Rafi Khouri of Raymond James, who holds a $21 target price on the company.
“The 10,000-bpd flow rate is definitely in line with what we’ve seen from the Candelilla or the Corcel wells,” he said. “Also keep in mind that some of the wells have shown some pretty high decline rates, in the order of 50 per cent or higher in year one.”
He added higher production won’t necessarily translate into higher reserves.
Petrominerales said production averaged 34,800 bpd in December and 33,200 bpd during the last three months of 2010.