Petrominerales shares tumble 20%

South American rival Gran Tierra sees stock rise

Share prices in two Calgarybased South American oil and gas producers diverged wildly Monday after one reported deep cuts to reserves and the other noted unexciting but expected financial results.

Investors bid Petrominerales Ltd. down $4.65 to $19.05 — a one-day drop of nearly 20 per cent — after it reported that proved reserves were down 28 per cent and proved plus probable reserves were off 14 per cent in a year-end report.

The company’s 52-week high price was $40.88 last February.

Stock in cross-town rival Gran Tierra Energy Inc., meanwhile, rose 4.5 per cent or 26 cents to $6.03 after it reported its 2011 net income more than doubled to $127 million U.S. and average production after royalties climbed 20 per cent to 17,400 barrels of oil equivalent per day.

Corey Ruttan, president and chief executive of Petrominerales, said Monday’s market activity caught him off-guard.

“We went through a period where we had certainly much lower than historical exploration success and that’s obviously reflected in the reserves,” he said.

“We’ve been announcing those well results . . . so I’m frankly shocked at the reaction.”

Production averaged 33,500 boe/d in January, down seven per cent from 36,000 in December, but is back at 36,000 now, he said. Average production for 2011 was 38,400 boe/d, up four per cent over 2010, the company reported.

Ruttan said Petrominerales has been exploring deeper formations in a new fairway of the Colombia basin in which it holds land, but it is moving back into its core area because of the poor results.

Analyst Alex Klein of Dundee Securities, who covers both companies, said Petrominerales disappointed observers by failing to replace its 2011 production in Colombia.

“That’s negative,” he said. “Maybe it shouldn’t have been a surprise because their exploration program last year wasn’t as successful as they may have hoped.”

An operational update from Petrominerales Monday was also disappointing, he added, with wells either being delayed because of operational problems or failing to deliver results as expected.

At least three of the 23 analysts who cover Petrominerales cut their 52-week target prices following Monday’s news.

“The reserve update is quite negative, with reserves falling as a result of a poor exploratory campaign in 2011,” Juan David Pineros, a Medellin-based oil industry analyst at Interbolsa SA, Colombia’s biggest brokerage, told Bloomberg.

In its news release, Petrominerales said it produced 14 million barrels of oil equivalent in 2011 but added only 9.3 million barrels of proved developed reserves, 1.8 million proved reserves and 5.3 million barrels of proved plus probable reserves.

Petrominerales was spun out from Petrobank Energy and Resources Ltd. of Calgary and became an independent company as of the end of 2010.

Gran Tierra, meanwhile, enjoyed nine months of ownership of Petrolifera Petroleum Ltd., purchased last March for stock and assumed debt worth a total of $195 million and adding assets in Colombia, Argentina and Peru.

“Gran Tierra Energy had an excellent year in 2011,” Dana Coffield, president and chief executive, said on a conference call with analysts.

Fourth-quarter net income was $33 million or 11 cents per share, up from $13 million or four cents a year earlier, as revenue jumped 44 percent to $162 million from $113 million.

Gran Tierra’s funds flow from operations in the three months ended Dec. 31 was $90 million versus $68 million in the same period of 2010.

Operating expenses increased by 46 per cent to $86 million in 2011 over 2010, however, noted chief financial officer James Rozon, adding the increase translates to 21 per cent per barrel of output.