TransAtlantic Petroleum's Data, Eastern European Exposure May Yield Growth

• TransAtlantic Petroleum Ltd TAT in August reported mixed second quarter results, mostly driven by the decline in oil prices.
• In a report issued Wednesday, Edison analysts Peter Lynch and Will Forbes notice that while progress is slightly slower than expected, especially on the gas side, the company is still moving in the right direction.
• Shares of TransAtlantic Petroleum were down more than 6 percent on Wednesday.

The report began with a look at some important figures from the second quarter, where production started to decline (about 4 percent quarter-over-quarter, to 5.9mboe/d) from the peak hit in the first quarter, as no wells were completed over the period. Cost reductions also fell short of Edison’s expectations, while operating cash flow of $8.0 million was not enough to cover cap expenditures of $10.2 million. Consequently, the company had to draw money from its cash reserve to cover debt repayments.

According to the note, the decline in oil prices back to $50/bbl Brent “may lead TAT to conserve cash and further trim capex until the next uptick.” As management said back in June, the company is still looking for new joint venture partners willing to help fund drilling expenses in Turkey and Albania. However, in the current environment, attracting interest seems to be a difficult task.

“Notwithstanding the tough macro, its asset base in Turkey and Albania remains attractive with significant growth potential,” the experts conclude.

TransAtlantic Petroleum is a research client of Edison Investment Research Limited

Disclosure: Javier Hasse holds no positions in any of the securities mentioned above.