March 16, 2010
Petroamerica Hits Paydirt
By James West
MidasLetter.com
Petroamerica (TSX.V:PTA) reported it was successful in drilling its first well in Colombia last week, with a short test (only 1-2 days) showing 1,314 barrels of oil per day (bopd) production.
This well, in which PTA has a 15% interest, is the latest in a long line of big producers in prolific Llanos Basin. It’s a big producer compared to Canada, where the average well is about 80 bopd.
The well could end up being even larger as testing continues. There is the possibility multiple payzones, and production could increase with a pump.
Should the well meet expectations, a second, offsetting well will likely be drilled immediately into the same reservoir. This well hit 20 feet of the targeted oil zone, the Upper Mirador, but the zone is usually 50-65 feet thick.
North American investors would know the Llanos Basin through companies such as Petrominerales (PMG-TSX), with its 10,000 - 15,000 bopd light oil wells and Pacific Rubiales (PRE-TSX) with its fast growing heavy oil production.
Like many discoveries around the world, the Llanos Basin was discovered by Americans – in this case, Texaco, in 1960. But it wasn’t until the giant Cusiana oil field was discovered in 1991 that production really took off. It now produces some 300,000 bopd of light crude – half of Colombia’s production – but it wasn’t until drilling rigs improved and seismic technology – underground mapping of rocks – improved enough for explorationists to find the field.
Petroamerica is partnered with giant oil producer Petrobras, which is partially owned by the Brazilian government, on this well, called Balay-1. By drilling this well PTA has now earned 15% of the entire 175 square mile block, which can support dozens of wells.
Should well #2 and #3 hit commercial rates of production, the market would re-value the Balay block as development drilling instead of exploration. For a junior like Petroamerica, it means not only increased production, but a better valuation on that production as the market sees the field being developed with low risk.
Colombia produced 600,000 bopd in 2008, up from from 540,000 in 2007. It peaked out in 1999 at 830,000, but then natural declines and security issues prevented further exploration and development. President Uribe’s success in restoring social stability to the country has meant a direct impact in increasing oil production. Colombia sends half of its exports to the US, for a total of about 155,000 bopd.
DISCLOSURE: James West owns 10,000 shares of Petroamerica.
SOURCE: http://www.midasletter.com/news/10031601_Petroamerica-hits-paydirt.php
