Albania’s next great play?
Could another company be about to strike it rich in the energy sector's favourite Adriatic destination?
When he was younger, Max Fawcett wanted to make a mint in the markets. Now as the managing editor of Alberta Venture he gets to write about them. Close enough, right? He can be reached at firstname.lastname@example.org
by Max Fawcett
Shareholders of Bankers Petroleum (TSE:BNK) have done very well for themselves of late. Over the last year its shares are up almost 60 per cent, while they’ve nearly tripled since the stock bottomed in June of 2012 on concerns about the company’s ability to grow its production. And now, there’s another Canadian company operating in Albania that’s making money for investors – and could be about to make them a whole lot more. But while Bankers is in the business of bringing a massive old field back to life, Petromanas (TSXV:PMI) is looking for a new one. Keith Schaefer, the author of the Oil and Gas Bulletin, thinks it may have found it – and that shareholders could be staring at a “multi-multi-multi-bagger.” Indeed, its shares are already up 20 per cent over the last two days, but he thinks they could be looking at an upside of 20 times the current price.
It’s still highly risky, of course, but Schaefer thinks the fact that Shell is carrying them for $100 million on exploration and seismic costs (and repaying them for their sunk costs to date) suggests there’s something there. “It’s rare to see a super major aggressively seek out a partnership with a company the size of Petromanas. Shell’s interest is a huge validation of the true potential of the assets that Petromanas owns.”
Those assets, he says, could be enormous. “The size of the prize here is huge. We are talking about 500 to 800 million barrels. And these aren’t resource-play barrels that require hundreds of wells that decline very quickly. This is a conventional play–prolific wells with lower decline curves. Little Petromanas could have a 25 per cent interest of a 500 to 800 million barrel field. That would be 125 to 200 million barrels net to them. Based on the analogous fields across the Adriatic in Italy, barrels in this type of field have NPVs (net present values) of $10 to $12 per barrel. Now the simple math: 120 million barrels worth $10 each adds up to $1.2 billion.”
The company’s current market cap? $160 million. Schaefer breaks down the story in much more detail here.