| The Market Is Mad

4th Aug '10 by jonnyt

32 comments 7987 reads

For those that don't know Petrolatina Energy Plc (LON:PELE) operate 100% in Columbia, not the most politically stable environment granted but most E&P activity is in these sort of Countries.

The most important asset is the La Paloma Block (84.56% owned) which contains the Colon field. This field currently accounts for 50% of the companies reserves. Currently two wells are producing 850 bopd gross. P3 is around 4m barrels recoverable.

However PELE have recently drilled Colon 3 and Colon 3 ST (sidetrack) and have proven oil below the spill point used by Ryder Scott for P3 reserves. PELE believe the field covers more than 1500 acres not the 779 used by Ryder Scott so it is very likely that P1/P2/P3 will be materially increased by the next CPR.

Now to the best bit. Shell have recently bought up acreage adjacent to PELE following the acquisition of 3D seismic by PELE after exiting the country many year's ago. This seismic suggested that there is a deeper, thicker sand channel underneath the current producing Colon field that has never been drilled here or in the surrounding acreage. The Colon 3 ST well drilled this sand channel and has found a 78ft oil bearing formation (confirmed by RNS today) that is in the process of being tested. Put into perspective the current producing zone at Colon at the same location is 10ft thick. This sand channel is thought to extend fully under the existing field.

Given the sand channel is deeper the oil is likely to be lighter and under more pressure so it would be normal for sustainable flow rates from this zone to be above the current formation being developed which is flowing around 500 bopd per well under pump. (On test one well flowed 1200 bopd naturally).

In the past two weeks the Chief Executive and Tribeca a pension fund deemed to be a related party have raised $19m via two placings effectively nearly 30% of the company (between 37 and 40p) in what can only be described as a massive insider endorsement. The CE also bough an additional 294,504 shares at 50p.

It wouldn't be unreasonable to assume that the P3 (even P2 following the drilling of Colon 3) could now be as much as 8m barrels for…

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rgf100

3rd Sep '10

Agreed, I'm loving the rises and there seems to be plenty of volume (particularly today) but I've been wondering if I shouldn't top-slice.

Fangorn

Someone somewhere knows something imv. Such a large move out of the blue is extremely unlikely other than as a result of positive news leaking..Day 3 of double digit rises, wonder where the RNS is?

Now up 32% (22p) to 89.75.

No sign of an RNS.[Correct should be no instead of now ]

Absolutely astounding move.

debbier

You got me going there, but I guess the "Now sign" was a typo and should be "No sign"?!

loglorry

Quite a lot of chat on ADVFN - hard to make any real assesment on value until we find out what is driving it. very small free float though so I can imagine that it will rocket on good news. I think it is probably news on the deeper sand channel which could add a lot to reserves and also to future production estimates which might get as high as 3200/bpd. Terms are good too so this will throw off a lot fo cash.

Market Cap only £90M even after the recent run up so it won't take much of a find to make this market cap look pretty small IMHO.

Having said all that the absense of news is a bit worrying and maybe it is just some sort of hearsay which is having a large effect due to the small free float.

Log

jonnyt

This has shown similar behaviour in the past.

An upbeat RNS usually follows.

Well it looks like to me my assertion that the market is mad was absolutely correct.

Only mad if there is nothing on the news front.

I suspect something extremely positive will be announced in the next few days.

No it was mad valuing PELE at 30p then going to 80p in short order....

fuiseog

IMO it priced PELE at 30p. We're waiting to hear whether there is value behind that price, or it's just dodgy dealing.

fuiseog

8th Sep '10

Down 23% this morning! Not seen any news as of yet.

This has certainly been one volatile stock recently.

Jackalope

has it been ramped on message boards etc - have to wonder...

It looks like a rampers(and traders) dream that's for sure! :)

May have actually managed a successful day trade for probably the first time ever, out at 69 as it fell, more or less caught the bottom at 60. 'Course, there may be more bottoms to come . . .

30th Sep '10

Interims to June'10 out for Pele

http://www.investegate.co.uk/article.aspx?id=201009300700225655T&fe=1

Executive Chairman - "We drilled 8 successful wells during 2009 and a further 3 wells in the first half of 2010 resulting in a significant increase in PetroLatina's rate of production. The results of an updated independent reserves report should be available by the year end serving to highlight the anticipated considerable growth in reserves achieved since we embarked on this aggressive drilling programme in 2009.

Down 15% so far ....

Turns out the market wasn't so mad afterall. Despite a lot of holders putting a brave face on it - things are not looking that great. Colon 3-ST is almost certainly a dud and although production is up and so is revenue and profits I think all this was in the price.

I can see PELE plodding along here and increasing production/profits over a few years but I can't see it being stella. Also there is a definite whiff where the insiders and main funders seems to be using insider info to the detriment of PIs.

Nobody will believe me when I say that I sold 3 seconds into the market open today and got 63p which I have to say surprised even me.

Anyway I'm out now for a small/tiny profit on my purchase price after holding for a year.

I might revisit it if the price sinks to the previous lows as I agree the market is mad at the 40p level however at 63p it seemed not quite so insane!

Log

djpreston

That wouldnt surprise me at all Log. Very nicely done if I may say so.

But Colon ST3 isn't a dud!

Yes the deeper sand channel may not be productive, but to date they haven't decided whether to try a frac yet BUT the fallback option is production from the currently producing UMIR sand which would likely add another 200 bopd production.

So agreed not the result we were hoping for.

However I still see a lot of potential upside here from other Explo targets.

OK Colon 3-ST not a dud but a lot of speculation was in the price for a much bigger deeper sand channel (God I keep hearing stories like that !).

The upper zone is OK yep and they will do fine with it but its not the sort of company transformer that will really get the share price racing. The sort of thing that would have doubled the share price was a result from the side track which might have bought in another 1000bpd.

I'm not saying the dowside isn't well protected and if you totally trust managment then there is money to be made and further explo might increase things further. However for the risk you take with management which has been a wee bit on the dubious side with some of the fund raising I'd say there are better options out there like SLG, SIA, HOIL which have a much more exciting drilling schedule planned.

Put it another way Colon-3-ST was a bit of a free option which expired worthless so I'm out and happy to know have taken a loss.

As for the frac'ing - well its just a line they put in the RNS isn't it to keep hopes alive - It doesn't sound with that sort of porosity they'll even try.

Log

22nd Nov '10

Operational Update RNS today and shares up to 45p. Main highlights:

Zoe-1 well, previously announced to have tested tar and water from the Lisama formation, was recently placed back on test and produced 889 bbls of 23 degree API oil over an 8 day period on very small choke sizes with essentially no water. This is now going to have a pump installed so perhaps they have pulled a rabbit out of the hat.

Santa Lucia-5 well on stable production of 110 bopd of 15 degree API oil

Querubin-1 well producing 200 bopd of 14 degree API oil. Looking to drill more wells in the area.

Serafin production facilities completed - initial gas sales expected by the end of this year

Updated independent reserves report expected to be received by the end of this year

It looks like they haven't given up on the new Colon Sand Channel. If they can get this to flow it would give a major impetus to the shares:
The Colon-3 sidetrack well was drilled to a measured depth of 10,000ft, logged and completed. It intersected a 78ft (gross) thick and previously unknown channel sand and this zone swab tested 5 barrels of 25 degree API oil with essentially no water. The Arcis seismic study is intended to assist in defining the extent and shape of the channel. An acid/frac job is now also being planned for this zone to determine whether it can be produced at commercial rates at the current location.

Work Programme for the remainder of 2010
· Completion of Serafin-1 gas well hook-up and commencement of commercial production
· Establish commerciality of the Querubin area with our partners, Ecopetrol S.A. and Petrosantander (Colombia) Inc.
· Completion of an updated independent reserves report by Ryder Scott Company, L.P.

Proposed Work Programme for 2011
· Shoot 2D seismic and drill the first exploration well on the Putamayo-4 block
· Drill the Juglar-1 exploration well on the La Paloma block
· Commence the Company's full development programme for the Colon field based on the results of the Arcis seismic study currently in progress
· Conduct development drilling in the Querubin area
· Undertake a sidetrack for the Chuira-1 well based on the fracture study produced by Landocean

The market is mad

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Jonnyt

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