by Stockwatch Business Reporter
West Texas Intermediate crude for October delivery added 84 cents to $46.25 on the New York Merc, while Brent for October added 94 cents to $50.50 (all figures in this para U.S.). Western Canadian Select traded at a discount of $14.10 to WTI ($32.15), up from a discount of $14.55. Natural gas for October lost 5.4 cents to $2.648. The TSX energy index lost 1.69 points to close at 172.78.
Wayne Foo's Parex Resources Ltd. (PXT) added 27 cents to $9.22 on 1.41 million shares. It has not released any news in almost a month, but has still risen from $7.38 since Tuesday of last week, benefiting from stronger recent oil prices and possibly from the updates released by joint venturer GeoPark in Colombia. GeoPark holds 45 per cent and Parex 55 per cent of the LLA-34 light oil block. This block contributes over half of Parex's production, which was 27,025 barrels of oil a day in the second quarter. Last Thursday, GeoPark announced a new oil discovery made by the Chachalaca-1 exploration well, and this morning, it announced another new discovery made by the Jacana-1 exploration well. Chachalaca-1 tested at 1,100 barrels of oil a day and Jacana-1 at 1,880 barrels a day. They are the seventh and eight discoveries, respectively, made by the joint venturers on the block since mid-2012.
It is curious that Parex decided not to announce them. One possibility is that the company is revising its 2015 guidance and will bundle that with the news of the discoveries into one big update. The current guidance calls for full-year average production of 26,500 barrels a day and does not assume any exploration success. In May, Parex announced that its Rumba-1 exploration well successfully made a discovery, and said it would "revisit" its 2015 guidance depending on the results of some of its other exploration wells. The wells it mentioned by name were Bazar-1 on the LLA-26 block (which proved unsuccessful), Zorro Rojo-1 on the LLA-20 block (same), Guepardo-1 on the LLA-32 block (which was spudded on July 27) and Carcayu-1 (which will follow Guepardo-1). None of the wells it specifically mentioned were on the LLA-34 block -- that is, the above-mentioned Chachalaca-1 and Jacana-1 discoveries -- but those still bode well for a potential guidance boost.
Even after all the wells mentioned above, there are at least 11 others in Parex's second-half exploration program; Parex is one of very few companies spending a lot of money on exploration in this jittery market. One of the planned fourth quarter wells that is worth a mention is Tautaco-1 on the LLA-10 block, a joint venture with Jeff Boyce's Petroamerica Oil Corp. (PTA), up half a cent to 71 cents on 104,500 shares. Petroamerica has a 50-per-cent carried interest in the block and must pay just 5.5 per cent of the well's costs. Success would thus provide a relatively inexpensive boost for the company, which could use some good news. A little over a year has passed since it closed its acquisition of fellow Colombian producer Suroco Energy, in a deal meant to take its production up to 9,000 barrels of oil equivalent a day from about 6,500. Instead, a combination of community protests, budget reductions and operational hiccups drove production down; it was under 4,600 barrels a day in the first quarter of 2015. Petroamerica tried to create a stir in the second quarter by buying PetroNova and its 300 barrels a day of production. Instead, shareholders just seemed more disappointed -- not least because all these deals had nearly doubled Petroamerica's share count, taking it past one billion. The company rolled back 1 for 10 and opened at 77 cents on July 30. By comparison, after adjusting for the rollback, it traded above $4 this time last year.
Last week, Petroamerica released its second quarter financials, its first operational update since the PetroNova acquisition and underwhelming new guidance. Production for the six days up to Aug. 23 was about 4,100 barrels of oil equivalent a day, the same as production over the first half of the year. Given that Petroamerica expects a full-year average of 3,600 barrels a day, however, it must be aiming for second-half production of just 3,100 barrels a day, mainly reflecting a bare-bones budget. The company has $11-million (U.S.) in working capital and no debt, so it could afford to spend more, but prefers to be cautious. TD Securities analyst Jamie Somerville was unimpressed with the update over all and lowered his price target to $1.80 from $2. He did note, though, that success on the above-mentioned Tautaco-1 well "could be worth $40-million to $80-million (50 cents to $1 per share)" net to Petroamerica, making it a "key potential catalyst." Catalyst is analyst jargon for good news.
Massimo and Bruno Geremia's Manitok Energy Inc. (MEI) lost four cents to 49 cents on 246,200 shares, on top of the seven cents it lost yesterday after releasing its second quarter financials, raising the "going concern" red flag and cutting this year's planned drill program in half. Production of 4,521 barrels of oil equivalent a day was about the same as the 4,504 barrels a day produced in the first quarter. Normally it would have gone down because Manitok did not drill any wells during the first half of the year, but on June 12, the company closed a $61.5-million asset acquisition in the Wayne area of southeast Alberta. (All of Manitok's production comes from Alberta, particularly the foothills area in the southwest.) The Wayne assets contributed just 175 barrels a day to the second quarter total because of the timing of the acquisition, but they actually produce 1,800 barrels a day, which had led Manitok to estimate in June that its total production would reach 5,800 barrels a day once the deal closed. Yet its new update said that current production is still 4,500 barrels a day because of infrastructure constraints that have put over 1,300 barrels a day behind pipe. On top of that, Manitok now says it will drill just three wells in the second half of the year, down from the original plan of six. The effects of the scaled-down drill program could be offset by the effects of the infrastructure constraints being lifted, but it is not clear when that will happen, making it difficult to get a sense of what Manitok will look like operationally over the rest of the year.
The picture is much clearer financially: Money is tight. Manitok's $80-million bank line, which is $69.9-million drawn, includes a $35-million loan with a repayment schedule of $5-million by Dec. 31, 2015, $10-million by March 31, 2016, and $20-million by May 31, 2016. Manitok seems to doubt that it will have enough cash flow to meet those obligations, and says it is "pursuing alternative debt arrangements, joint venture arrangements, property acquisitions or divestitures, corporate mergers and acquisitions, and other recapitalization opportunities."
Another Alberta-focused junior is worth a brief mention. Jim Saunders's Twin Butte Energy Ltd. (TBE), up 1.5 cents to 37 cents on 2.31 million shares, was discussed in the Aug. 27 Energy Summary after president and CEO Rob Wollmann bought 156,000 shares that day. He had recently left a note on Twin Butte's website about "increased confidence" in the company's wells in the Provost medium oil area of Alberta and the Lloydminster heavy oil area on the Alberta-Saskatchewan border 147104. This week, Twin Butte enjoyed more insider buying, this time by director Tom Greschner, who bought 258,000 shares on Monday and another 240,000 shares yesterday. Presumably he shares Mr. Wollmann's confidence about Twin Butte's wells. Investors do not seem quite as confident that the wells will be enough to support the 0.3-cent monthly dividend, which was lowered from one cent earlier this month but still yields a generous 9.7 per cent.