OREANDA-NEWS. January 29, 2010. PetroNeft Resources, an independent Russia-focused oil producer with exploration and production licenses in the Tomsk Region, released an operational update. The company announced that construction of a new local pipeline will begin on schedule in early February, and is expected to be completed in April 2010, reported the press-centre of OTKRITIE Financial Corporation.

View: As of the beginning of 2009, the company’s 2P oil reserves amounted to 70m barrels, while 3P reserves were estimated at 530m barrels. Naturally, the timeframe for the commissioning of PetroNeft’s oil fields is dependent upon the pipeline commissioning. According to recent company presentation, PetroNeft plans to produce 2,000 bpd in 2010, while its daily oil production could rise by 4.6x in 2011 and exceed 9,000 bpd. As the pipeline seems to be moving ahead on schedule, we believe that PetroNeft should be able to achieve its production goals.

Valuation: PetroNeft’s stock trades on a 2010 P/E of 25x, at a high premium to independent oil producers.

Action: Although currently we have neither a rating nor a target price for PetroNeft’s stock, we view this news as a long-term positive for the stock.