3R Production Surpasses PetroConcavo; Action Triggers
3R Petroleum released strong production data for December – filling a gap in 2P reserve estimates and marking what analysts see as an inflection point for the company. Combined production rose 42% from November to 18.8 thousand barrels of oil per day.
This figure was driven by the integration of the Papa-Terra field (which added 2,700 barrels) and the completion of interventions in the Recôncavo group facilities (which added an additional 2,000 barrels). 3R stock is up nearly 8% on this morning’s news. In December, Papa-Terra only produced nine days, with 3R taking over on the 23rd.
Considering that they produced the whole month, 3R’s total production has already increased to 25,300 bpd, an increase of 92%. Itau BBA said December’s production increase partially helped close the gap between actual 3R production and 2P reserve estimates (when an oil company certifies its reserves, it discloses how much it expects to produce with them).
With December production, 3R closed the year 13% below its estimate for 2022. One long-term capital investor notes that with December numbers – and given Papa-Terra’s total – 3R has already surpassed PetroRecôncavo in terms of daily production. “And 3R still has the Pottiguar field to start sinking,” he said. During the month, PetroReconcavo’s daily production was 23,400 barrels per day, which is almost flat compared to November.
On the other hand, PetroRio saw its production drop in December due to temporary shutdowns in some of its fields. However, both companies ended the year with production in line with 2P reserve estimates. For an investor, 3R is a similar case for Eneva. “In the past, Eneva was a very good company, but with very good partners, it ended up becoming a market darling.
With 3R, I think the same can happen.” The production boost comes just weeks after 3R made major changes to its senior management, changing its CEO and firing three chief legal officers. The changes were largely related to shareholder and board dissatisfaction with the pace of production.
Yesterday, JP Morgan started hedging the company with a recommendation to buy the stock with a price target of R$100 – 140% upside potential. 3R also had a decent short position (12% of its float), which may have pushed the rally.