CZE / CNCEF is conservative with forward guidance. CZE is not guiding additional Zopilote success. CZE is planning some high impact drilling in 2012, the upcoming one is Tardigrado-1 on their Andaquies block, in the Putuamyo basin. There are two Andaquies prospects about 15-50MM bbl recoverable. In a recent presentation the CEO noted that Andaquies was the favorite propsect amoung their geologist.
CZE's CapEx for exploration on Andaquies and Coati blocks is partially carried by Canacol Energy, their JV partner. I believe C&C Energia plans to release their 2012 Capital Investment program in December. CZE current cash flow allows them to expand their program. C&C Energia needs to increase reserves thru 2012 exploration success to increase their valuation. The market is not currently providing risked valuation for any 2012 exploration. On a cash flow basis, what other peer has a lower OpEx cash flow multiple than CZE, based on the Q3 report.
2011 in Colombia that Environmental and drilling permits took longer than scheduled. Given the location in the Putumayo basin near a point of sale, it will take ~ 6 months to begin first production from a new discovery. Its unlikely, C&C Energia will increase their 2012 cash flow significantly above $235 million. That doesn't been that C&C Energia won't add reserve value (NAV) in 2012 from exploration success.
The $235 million in 2012 cash flow, fully funds the 2013 operational and capital investment programs. The same for 2013 and 2014, 2014 program is funded by 2013 cash flow. Eventually, they make a new discovery that will double their current 2P NAV. Long term C&C Energia looks like a double, simply from reinvesting last years profits(cash flow). No debt, and re-investing profits(cash flow) is a point where I like to invest. Gran Tierra has been doing that for years and Coastal Energy CEN has been doing that, for a few quarters.
I have a big position in Coastal Energy CEN. If you want a high growth story Coastal 2012 will see CEN significantly grow cash flow and reserves. CEN may be a better investment, but I'm diversifying a bit between CEN , GTE, and CZE. |
