Houston American Energy's Stake in Colombia May Pay Off
Thursday, March 11, 2010
The Wall Street Journal
by Jennifer Cummings
Houston American Energy Corp., a small energy company focused on Colombia, may soon reap big rewards from its well-established presence in that country.
Houston American and partner South Korean energy giant SK Energy Co. are expected to begin drilling at a nearly 550-square-mile oil exploration block in Colombia called CPO 4 by the end of the year.
The block is nestled between projects that have been producing solid results for other companies, and if Houston American has similar success to its neighbors, its stock, which was trading at around $13 Tuesday, could easily reach $50 over the next two years, Global Hunter Securities analyst Philip McPherson said.
Colombia has become a magnet for exploration and production companies in recent years as the country has become more business friendly under President Alvaro Uribe Velez.
At a time when energy companies are increasingly relying on unconventional methods to tap into new sources of oil, in Colombia there is still a lot of oil that can be accessed with more cost-effective, conventional techniques.
"Imagine going back to Texas in the 20s," Houston American Chief Financial Officer James Jacobs said.
Houston American's stock began going on a tear in mid-February when Colombia-based Petrominerales Ltd.. announced huge production rates in acreage that abuts the CPO 4.
Houston American shares have surged since Petrominerales announced Feb. 15 that its latest well produced at a rate of 15,800 barrels of oil per day. That came after an initial well there flowed at 12,400 barrels per day. Currently, Houston American produces about 1,000 to 1,200 barrels of oil a day via its other projects in Colombia, Mr. Jacobs said. A chunk of revenue derived from the CPO 4 block will go to partner SK Energy and the Colombian government, but if just one well there produces at rates similar to Petrominerales' wells, Houston American's revenue will at least double, Mr. McPherson said.
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