Canadian oil and gas company New Stratus Energy Inc. (NSE:TSX.V) said workers are having success restarting production in wells at its concern in oil fields in Venezuela.
During the first two months of 2024, pumps were replaced on the LZ-621 and NG-522 wells in the Lido-Limon and Oficina fields in the joint venture Petrolera Vencupet SA, of which GoldPillar International Fund SPC Ltd. holds a 40% stake.
New Stratus announced in January it had acquired a 50% indirect interest in GoldPillar, giving it a 20% interest in the oil fields.
After the reactivations, gross production at the wells started at 116 barrels per day (bbl/d) in January. Production rose to 260 bbl/d by March 4.
"Reactivation operations are ramping up into March and April, with an additional five wells to be restored, expected to drive production to 1,000 [bbl/d] (gross) by the end of April," analyst Adam Gill of Echelon Capital Markets noted in an updated research note on March 4.
These are "very early days in the fields, but [it's a] strong positive that the Company is already starting to get volumes ramped-up in short order after signing the deal right at the end of 2023," continued Gill, who rated the stock a Speculative Buy with a CA$1.40 per share target price. "We look towards continued operational momentum to build on that success into the end of Q1/24 and into early Q2/24."
The joint venture company possesses the rights to oil extraction in several fields situated in the Anzoategui and Monagas States in Eastern Venezuela, christened as Adas, Lido, Limon, Leona, Oficina Norte, and Oficina Central.
The company was one of asset manager Chen Lin's top stock picks for 2024. The What is Chen Buying? What is Chen Selling? author noted that he had recently met with Chief Executive Officer José Francisco Arata.
"NSE's new Venezuela field is doing great," Chen wrote on March 6. "They are producing 260 barrels/day for the first two wells. The guidance was only 80-100 bpd. The production should ramp up quickly and generate free cash flow to cover the operating expenses."
The Catalyst: 1,000 Barrels a Day in the Next Two Months
New Stratus said the reactivation of the wells will continue "in earnest" for the first quarter with wells OG-271, OS-95, NZ-211, NS-803, and NS-806 in the Oficina Central and Lido-Limon fields, with the objective of reaching aggregate production at Vencupet of approximately 1,000 bbl/d in the next two months.
"Goldpillar now has all the technical, operational, and administrative personnel in position to continue executing the 2024 investment plan that contemplates the reactivation of 36 additional wells in addition to the seven wells itemized above, with the goal of achieving production at Vencupet of approximately 3,500 [bbl/d] by the end of 2024," the company noted.
Analyst Gill noted that the company's stock is a relatively low risk from a geological perspective, given the wells have "already shown production."
"There are also other revenue streams that lower the risk to commodity exposure near term," Gill wrote. "While jurisdictional risk is higher given that the assets are in Venezuela, the portfolio is expected to be diversified over time and if the U.S. reimposes sanctions, it should not impact New Stratus/GoldPillar's business. With that, we feel comfortable seeing the stock move higher."
A Top 50 TSX.V Company
In a corporate update, New Stratus also noted it had CA$35.4 million in working capital as of March 4.
Streetwise Ownership Overview*It also said it continues to advance its previously announced acquisition opportunity in Mexico. New Stratus has signed a memorandum of understanding (MOU) to get operatorship and high working interest in a light oil production block. The definitive agreement is expected in the next month.
New Stratus also said the TSX Venture Exchange has named it a Top 50 company for 2024 for strong performance on the index in the last year. The recognition is for ten companies from five sectors. New Stratus was listed as No. 2 among the energy companies.
Ownership and Share Structure
According to Reuters, about 2.4% of the company is owned by institutions, 10.8% by strategic entities, and 15.96% by management and insiders.
Top shareholders include the CEO Arata with 4.91%, Independent Director Wuilian Mauco with 4.82%, Chief Geological Officer and Executive Director Marino Ostos with 4.11%, and U.S. Global Investors Inc. with 1.51%.
Its market cap is CA$78.75 million, with 125 million shares outstanding. It trades in a 52-week range of CA$0.84 and CA$0.21.
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Important Disclosures:
- As of the date of this article, officers and/or employees of Streetwise Reports LLC (including members of their household) own securities of New Stratus Energy Inc.
- Steve Sobek wrote this article for Streetwise Reports LLC and provides services to Streetwise Reports as an employee.
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