Casimir Capital raises its price target on Americas Petrogas after the company announces a new oil discovery on its Totoral block in Argentina.
After announcing a light sweet oil discovery at its La Hoya well on its shallow Totoral block, Americas Petrogas (CVE:BOW) saw Casimir Capital raise its per share price target and maintain its "speculative buy" rating for the company.
Americas Petrogas on Monday called the new light oil discovery, in the Southwestern region of the Neuquen Basin, Argentina, “very exciting” as it adds “significant exploration upside” to a very large area where the Vaca Muerta formation could be produced at relatively shallow depths.
Casimir analyst Ryan Galloway said that the long-awaited results from the La Hoya well were announced as a 33-degree API light sweet crude discovery.
“This is a new exploratory area for the company in the southern region of the Neuquén Basin and has a much shallower depth to Vaca Muerta than Americas’ northern blocks,” he noted in a Morning Catch research report.
Following initial cleanup on a three-stage frac, Casimir said the over-pressured well flowed at between 300 and 600 barrels per day (bbls/d) of fluid with a 10-per-cent oil cut and minimal declines.
“We anticipate the high water cut is likely an issue of fraccing out of zone or inadequate isolation of a water producing interval and could be remedied in future drilling locations,” said Galloway.
“The well is currently being prepared for a pressure build-up, and core analysis is also underway, which should go toward improving future drills.”
Americas has already planned for a second exploratory well in Totoral, where it holds a 90-per-cent interest, the firm said.
In a statement Monday, the company’s managing director of the Argentina operation, Güimar Vaca Coca, said the new discovery could increase the known extent of the Neuquén Basin, which could potentially increase hydrocarbon resources for Americas Petrogas, the Neuquén Province, and Argentina as a whole.
Last week, Americas completed a multi-stage, hydraulic stimulation program on its ALL.x-1 well on the Los Toldos I block in Argentina, in which it has a 45-per-cent stake and acts as operator, and is now proceeding with plans for production testing.
The Los Toldos I block is shared with ExxonMobil (NYSE:XOM), which also has a 45 per cent stake, and Gas y Petróleo del Neuquen, which has a 10-per-cent stake.
Casimir noted that an earlier well in Los Toldos II tested at 309 barrels of oil equivalent per day at 82 per cent oil following a five-stage frac.
The firm upgraded its target price for Americas to $5.00, from $4.00 previously, as it sees Totoral as “partially de-risked” and providing “significant Argentina upside”.
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