Analyst who called Pacific E&P crash warms to Colombia

Ian Macqueen, the Calgary analyst who called Pacific Exploration & Production’s downfall, has a new buy recommendation for investors looking to benefit from Colombia’s oil potential.

The analyst at Paradigm Capital raised his recommendation this month on driller Gran Tierra Energy Inc., which operates 16 oil blocks in Colombia. The Calgarybased company is a likely suitor for assets that state-run oil company Ecopetrol SA and others might be selling, Macqueen said.

“Colombia is actually a very profitable place to produce, providing you have a reasonable capital structure to begin with,” Macqueen said in an interview.

He is warming to Colombia after telling investors as early as February 2014 to dump Pacific E&P, warning the Bogota-based company wasn’t having enough luck finding a replacement for its biggest field and its balance sheet was weakening. At the time, Pacific E&P was at the tail-end of boosting its revenue eight-fold in five years, earning buy recommendations from 24 other analysts.

Since then, Pacific E&P has lost more than 95 per cent of its market value, and trading of the stock was halted this week in Bogota and Toronto after the company reached a restructuring deal that mostly wipes out what little shareholder equity is left. Parex Resources Inc., a Calgary-based oil producer with operations in Colombia, is another company with a healthy balance sheet that could benefit as Ecopetrol

I only like three companies ... Oil is still too low for a lot of companies to actually be able to sustain positive earnings.

sells assets to reduce leverage, Macqueen said. He also initiated coverage on Calgary-based gas explorer Seven Generations Energy Ltd. with a buy rating on April 11, saying it’s poised to outperform as it drills more wells and liquids prices recover.

“I only really like three companies right now,” he said. “Oil is still too low for a lot of companies to actually be able to sustain positive earnings.”