a PetroConcavo (RECV3) held a webinar on Wednesday (12) to clarify the main points that overshadowed the Approved Reserves Exploration Capital estimates. to me Itaú BBAHowever, the effort was successful.
Many concerns surrounded the prospects for the operation. The unveiled plan did not say whether all of the envisioned projects would actually be implemented, suggesting an unwelcome easing of cost control for the small oil company.
In a report, Itaú BBA took the opportunity to reiterate the Buy recommendation and raise its price target for the stock by 88% by the end of 2023, at R$37. Currently, Petroreconcavo is trading at R$20.65, at a level considered discounted by the bank.
In addition to a more accurate assessment of operating prospects, the analysis house highlights a favorable macroeconomic scenario and a price curve petroleum.
What jumped in Itaú BBA
At the event attended by investors, the oil start-up explained that the reserve certificate, filed in March, includes projects that may or may not be undertaken in order to cover new reserves.
The selection of projects, according to the company’s management, is based on a thorough analysis of the risks and the investment capital that will be drawn in the process. “Management reiterated the company’s focus on productivity and cost efficiency,” the report adds.
Regarding the exploration scenarios presented in the webinar, Itaú BBA notes that most of the additional reserves identified by Petroreconcavo will be viable at costs in excess of US$15 per barrel of crude oil. This is about 63% of the required investment capital, which is a level considered high.
Thus, bearing in mind the cost hypothesis, Itaú BBA was convinced that the company would not “take risks” by strictly following all of the above projects”. It is expected that the company will choose not to undertake the most expensive projects, especially if the company is unable to make them less cost and more profitable.
In this sense, the good news for Petroreconcavo is that, according to estimates by the Itaú BBA, the most expensive projects should not open up much more value.
On the other hand, due to the current discounted value of the stock, selecting projects with low capex will also not be able to generate more downward pressure.
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