Analyst Who Called Pacific E&P Crash Has a New Colombia Oil Bet

  • Sees Parex, Gran Tierra likely suitors for Ecopetrol assets
  • Companies with `reasonable' capital structure can make money

Ian Macqueen, the 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 in Calgary raised his recommendation this month on Canadian driller Gran Tierra Energy Inc., which operates 16 oil blocks in Colombia. The 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.

Macqueen is warming to Colombia after telling investors as early as February 2014 to dump Pacific E&P, warning that 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 percent 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 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.”

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