GTE... Raymond James comments........ $10.00 target Gran Tierra Energy February 7, 2012
GTE-TSX | GTE-AMEX Company Comment
Rafi Khouri B.Sc, MBA | 403.509.0560 | rafi.khouri@raymondjames.ca
Cynthia Yee (Associate) | 403.221.0355 | cynthia.yee@raymondjames.ca
Ana Wessel (Associate) | 403.509.0541 | ana.wessel@raymondjames.ca
International Oil & Gas
Reports 2011 Year-End Reserves
Event
Gran Tierra reported 2011 year-end 2P reserves of 61.4 mmboe, up from 60.1
mmboe (combined Gran Tierra and Petrolifera reserves) at the end of 2010.
While this represents a y/y increase, we note it was slightly below our risked
reserve projection of 63.5 mmboe. The company also reported 4Q11
production of 18,600 boed which was in-line with our estimate of 18,568 boed.
Action
We maintain our Strong Buy rating but have lowered our target price to
C$10.00/share, from C$10.50/share previously.
Analysis
The company replaced ~8.5 mmboe of production in 2011, as well as adding
new reserves. We have adjusted our model to reflect reported 2011 reserves
using a 2012 year-end calculation. This results in a new 2P reserve value of
C$5.47/share, down from C$6.18/share prior. Other notable changes include
lowering our risk factor associated with Colombia exploration (to 15% from
20% previously) to reflect our view that capital markets may wait for material
Colombian exploration success prior to fully acknowledging the value
associated with Gran Tierra's highly prospective land base. Furthermore, we
have lowered our Peru exploration upside resource estimate, to reflect the
company’s submission of documentation for the relinquishment of 3 blocks in
late-2011. A caveat we would like to note is that our new valuation is based on
partial disclosure and we will revisit our model once the company releases its
NI 51-101 at the end of February.
We believe investors are looking for material discoveries this year. Gran Tierra
has an extensive drilling program planned for 2012, with 10 exploration wells
and 18 delineation/development wells. Moreover, Moqueta still has the
potential to grow in reserves/production – the delineation wells drilled have
not yet found oil/water contact – and we anticipate material production adds
from the field in 2013.
Valuation
Our valuation reflects our contingent risked NAV of C$10.25/share, compared
to $10.38/share previously, due to the abovementioned changes. Please refer
to Exhibit 1 for details. |
