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Global Energy Development to concentrate on Magdelena project as Peru farm-out gets sign-off, says broker

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Latin America focused Global Energy Development (LON:GED) is free to concentrate its time and money on developing the Magdelena project in Colombia now that its Peruvian farm-out is complete, according to Northland Securities.

This morning the group confirmed that the Peruvian government has officially approved the farm-out of a 60 per cent stake in Block 95 to Gran Tierra Energy. The assets are found in the Marañon Basin of north-eastern Peru.

The deal was initially agreed with Gran Tierra in late 2010. The new partner will earn its 60 per cent stake in the licence by covering all the costs of an exploration well, up to a maximum of US$15 million.

Gran Tierra plan to drill the well in the second half of this year.

“This is a positive low-risk development for Global, which allows it to concentrate on its core Columbian portfolio,” said Northland analyst Andrew McGeary.

He added: “(It) leaves Global free to concentrate its cash resources on developing its substantial portfolio and, in particular, to monetise the Magdalena assets.”

The analyst also said that Global has one of the largest P2 reserves on the AIM market as well as one of the lowest per-barrel valuations, at only 50 cents a barrel compared to an average of around US$9. 

“We believe a re-rating is possible on the basis of the successful development of the Magdalena portfolio following the recently announced strategy to focus on developing those assets,” McGeary added.

This morning Global shares were up 2p, or 1.95 per cent, trading at 104p.

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