TIDMPTAL
RNS Number : 6485S
PetroTal Corp.
10 July 2020
PetroTal announces First Quarter 2020 Financial and Operating
Results
Average Q1 2020 oil production of 9,686 bopd
Calgary and Houston - July 10, 2020-PetroTal Corp. ("PetroTal"
or the "Company") (TSX--V: TAL and AIM: PTAL) is pleased to
announce its financial and operating results for the three months
ended March 31, 2020 ("Q1 2020").
Selected financial, reserves and operational information is
outlined below and should be read in conjunction with the Company's
unaudited consolidated financial statements ("Financial
Statements") and management's discussion and analysis ("MD&A")
for Q1 2020, which are available on SEDAR at www.sedar.com and the
Company's website at www.petrotal-corp.com. Reserve numbers
presented herein were derived from an independent reserves report
(the "NSAI Report") prepared by Netherland, Sewell &
Associates, Inc. ("NSAI") effective December 31, 2019. All amounts
herein are in United States dollars ("US$") unless otherwise
stated.
Q1 2020 highlights
The Company reached several key operational and financial
achievements as described below:
Q1 2020 Operational Highlights
-- Commenced drilling the BN 95-6H horizontal well (the "6H
well") on February 17, 2020. The well reached a lateral length of
1,178 meters and was completed using autonomous inflow control
device ("AICD") valves that restrict water inflow. The 6H well came
online on April 10, 2020 producing approximately 5,750 barrels of
oil per day ("bopd") initially, and achieved average production of
approximately 4,500 bopd for the first 10 production days during
April;
-- The 6H well was completed on time and under the original $12.6 million budget;
-- The Breta ñ a oil field reached new record quarterly
production of 9,686 bopd and sales of 10,313 bopd. This represents
a 25% increase from Q4 2019 production of 7,767 bopd;
-- Completed commissioning of the enhanced central production
facilities ("CPF-1") bringing overall oil production capacity to
between 16,000 bopd and 18,000 bopd;
-- Announced increases in all reserve categories following 2019
year-end reserves evaluation by NSAI:
o Proved ("1P") reserves of 21.5 million barrels ("mmbbl"), an
increase of 20% (17.9 mmbbl at
year-end 2018);
o Proved plus Probable ("2P") reserves of 47.7 mmbbl, an
increase of 21% (39.4 mmbbl at year
end 2018); and,
o Proved plus Probable and Possible ("3P") reserves of 84.8 mmbbl, an increase of 8% (78.7
mmbbl at year end 2018);
-- In light of global market uncertainty, postponed the drilling
of a second water disposal well, delayed completion of CPF-2
facilities, and postponed drilling of the BN 95-7H horizontal
well.
Q1 2020 Financial Highlights
-- Generated revenue of $41.8 million ($44.51/bbl) compared to
$50.5 million ($57.71/bbl) in Q4 2019;
-- Royalties to the Peruvian government were $1.8 million (4.3%
of revenue) during Q1 2020 compared to $1.8 million (3.6% of
revenue) for Q4 2019;
-- Funds flow provided by operations was $15.1 million compared to $21.7 million in Q4 2019;
-- Operating costs were $6.0 million ($6.42/bbl) for Q1 2020
consistent with $6.0 million ($6.91/bbl) for Q4 2019;
-- Transportation costs, were $16.1 million ($17.18/bbl) for Q1
2020 increased from $14.3 million ($16.30/bbl) for Q4 2019, as a
result of the new oil sales contract finalized in December
2019;
-- The company had cash of $7.4 million at the end of Q1 2020
compared to $21.1 million at year-end 2019 and $17.8 million at the
end of Q1 2019. Current cash (as at July 9, 2020) is $24
million;
-- Net operating income was $17.8 million ($18.98/bbl) in Q1
2020 compared to net operating income of $28.4 million ($32.42/bbl)
in Q4 2019; and,
-- Resulting from the significant global oil price reduction,
the Company had a contingent derivative liability of $40.8 million
at March 31, 2020. The actual liability of the oil price difference
determination is expected to be lower due to the projected
improvement in oil prices when physical sales occur in Q3 and Q4
2020 (for reference, based on the average Brent oil price of
approximately $40/bbl for June 2020, the contingent liability is
approximately $25 million).
March 31, 2020 Subsequent Events
-- On May 7, 2020, the health department of the Peruvian
government issued a directive for COVID-19 prevention in certain
high-risk areas. As a result of the directive:
o Petroperu temporarily shut down pipeline operations to
comply;
o Operations at the Breta ñ a oil field were temporarily shut in
due to storage capacity limitations. The Breta ña oil field was
producing approximately 11,500 bopd prior to being shut in;
o PetroTal is coordinating with Petroperu to reopen the Breta ñ
a oil field in July 2020;
o The Company deferred its planned capital expenditure for
2020;
o The oil field shutdown triggered significant reductions in
operating and transportation costs; and,
o The Company proactively reduced its general and administrative
costs, inclusive of an average 20% compensation reduction for
management and directors.
-- During May 2020, the Company received government-sponsored
financial support related to the Covid-19 economic impact totaling
$3.2 million. The Peruvian government provided $2.9 million (to be
repaid over four years, with repayment commencing after one year
for a three year period, and annual interest at 1.12%) and the US
government provided $0.3 million under the Paycheck Protection
Program (no repayment is required);
-- On June 12, 2020, the Company announced that the contingent
liability pertaining to the Brent oil price reduction had been
structured into a three-year payment arrangement ("Arrangement")
with Petroperu (the "Parties"):
o The amount of this contingent liability to Petroperu will be
definitively determined when the security arrangements for
PetroTal's obligations are finalized, expected to be by the end of
July 2020. Based on current Brent oil prices, the liability is
expected to be approximately $25 million;
o The Arrangement allows PetroTal to settle the obligations to
Petroperu now while still allowing the Company to benefit from
higher oil prices forecasted by the Brent forward strip pricing
curve when the physical oil sales occur;
o The Parties have agreed to extend the one-year Oil Sales
Contract to three years upon expiry of the current term on December
23, 2020;
o The Parties established a framework to ensure that future oil
sales under the Oil Sales Contract have adequate hedge protection
to avoid future downside losses; and,
o The Parties have agreed to further amendments to the Oil Sales
Contract for lower pipeline tariffs and fees during the period of
low oil prices;
-- On June 18, 2020, the Company completed an equity issue,
raising gross proceeds of approximately $18 million. The Company
intends to use the net proceeds for the ongoing development of the
Breta ñ a oilfield, to enhance working capital and towards the
reopening of the oilfield;
-- On June 25, 2020, PetroTal entered into a financial swap for
460,000 barrels of oil to cover the upcoming sale by Petroperu at
the Bayovar port. The ICE Brent crude oil swap is priced at $40.58
per bbl and settles on July 17, 2020, using the July 1-17,2020
average ICE Brent crude oil price; and,
-- The Company is confident in its ability to ramp up activity
at Breta ñ a, ahead of the planned reopening in July 2020, to
ensure the oil field will return to normal operating status.
The following table summarizes key financial and operating
highlights associated with the Company's performance for the three
months ended March 31, 2020, December 31, 2019 and March 31, 2019.
Note that the commodity price derivative is a non-cash item. See
the Financial Statements and MD&A for further details.
Quarter ended Quarter ended Quarter
ended
Results at a glance March 31, December 31, March 31,
2019
2020 2019
====================================== =============================== ============== ==========
Financial
Crude oil revenues 41,768 50,482 4,529
Royalties (1,806) (1,813) (214)
Net operating income 17,809 28,353 845
Commodity price derivative
loss (income) (1) (1) 40,420 (213) -
Net income (loss) (31,452) 18,223 (1,610)
Basic and diluted net income
(loss) (US$/share) (0.05) 0.03 0.00
Capital expenditures 23,872 26,273 9,771
====================================== =============================== ============== ==========
Operating
Average production (bopd) 9,686 7,767 904
Average sales (bopd) 10,313 9,509 923
Average Brent oil price
(US$/barrel) 50.14 63.26 63.83
Average realized price (US$/barrel) 44.51 57.71 54.54
Netback (US$/barrel) 18.98 32.42 10.18
Funds flow from operations 15,059 21,709 (728)
====================================== =============================== ============== ==========
Balance sheet
Cash 7,373 21,101 17,781
Working Capital (61,025) (11,762) 15,789
Total assets 194,274 194,181 100,808
Current liabilities 89,914 59,286 14,694
Equity 90,029 121,057 75,966
====================================== =============================== ============== ==========
(1) On June 12, 2020, the Company announced that this contingent
liability will be paid over a three-year period.
Based on current oil prices, the overall amount has been reduced
to approximately $25 million.
Q1-20 Q4-19 Q1-19
$/bbl $/bbl $/bbl
=============== ================== ==================================== =================================== =====================================
Average Production
SALES: (bopd) 9,686 7,767 904
Bbls Sold 938,478 874,802 83,040
Average sold
(bopd) 10,313 9,509 923
Average Brent
price
($/bbl) 50.14 63.26 63.83
Quality price
differential
(%) -11.2% -8.8% -14.6%
=================== ============ ====================== =========== ====================== ========== =========================
Revenues
Oil revenue $44.51 $41,768 $57.71 $50,482 $54.54 $4,529
Less: Royalties $1.92 $1,806 $2.07 $1,814 $2.58 $214
Operating expense $6.42 $6,028 $6.91 $6,047 $30.44 $2,527
Transportation
expense $17.18 $16,125 $16.30 $14,268 $11.36 $943
NET OPERATING INCOME $18.98 $17,809 $32.42 $28,353 $10.18 $845
Netback as % of
Revenue 42.6% 56.2% 18.7%
=================== ============ ====================== =========== ====================== ========== =========================
General and administrative
expense $2.12 $1,993 $6.91 $6,048 $19.62 $1,629
Derivative loss (income) $43.07 $40,420 -$0.24 ($213) $0.00 $0
Accretion and other expense $0.24 $229 $0.26 $229 $1.06 $88
Finance expense $0.53 $499 $0.15 $135 $0.00 $0
Deferred income
taxes
(recovery) $0.06 $60 $0.05 $45 $0.71 $59
Depletion,
depreciation
& amortization $6.10 $5,725 $4.30 $3,760 $8.97 $745
Impairment and
foreign
exchange $0.36 $335 $0.14 $126 -$0.79 ($66)
================ ================= ====================== =========== ======================
NET INCOME (LOSS) ($31,452) $18,223 ($1,610)
=================================== ============ ====================== =========== ====================== ==========
FUNDS FLOW FROM OPERATIONS $15,059 $21,709 $(728)
=================================== ============ ====================== =========== ====================== ========== =========================
Manuel Pablo Zuniga-Pflucker, President and Chief Executive
Officer, commented:
"Despite the challenging macro backdrop, PetroTal achieved a
great deal during the first quarter of 2020. The Company
successfully drilled the 6H well on time and under the original
budget. To date, the well has performed in line with expectations,
producing approximately 4,500 bopd for the first 10 days in April
2020.
Post-period end, we chose to take decisive action to preserve
the Company's liquidity position and I am pleased with the results
we have achieved to date. We remain on track to restart production
at Bretaña later this month and I look forward to updating all our
stakeholders as we look to resume normal operating conditions in
due course."
ABOUT PETROTAL
PetroTal is a publicly--traded, dual--quoted (TSXV: TAL and AIM:
PTAL) oil and gas development and production company domiciled in
Calgary, Alberta, focused on the development of oil assets in Peru.
PetroTal's flagship asset is its 100% working interest in Bretaña
oil field in Peru's Block 95 where oil production was initiated in
June 2018, and in early 2020 became the second largest crude oil
producer in Peru. Additionally, the Company has large exploration
prospects and is engaged in finding a partner to drill the Osheki
prospect in Block 107. The Company's management team has
significant experience in developing and exploring for oil in
Northern Peru and is led by a Board of Directors that is focused on
safely and cost effectively developing the Bretaña oil field.
For further information, please see the Company's website at
www.petrotal-corp.com , the Company's filed documents at
www.sedar.com , or contact:
Douglas Urch
Executive Vice President and Chief Financial Officer
Durch@PetroTal-Corp.com
T: (713) 609-9101
Manolo Pablo Zuniga- Pflucker
President and Chief Executive Officer
Mzuniga@PetroTal-Corp.com
T: (713) 609-9101
Celicourt Communications
Mark Antelme / Jimmy Lea
petrotal@celicourt.uk
T : 44 (0) 208 434 2643
Strand Hanson Limited (Nominated & Financial Adviser)
James Spinney / Ritchie Balmer
T: 44 (0) 207 409 3494
Stifel Nicolaus Europe Limited (Joint Broker)
Callum Stewart / Simon Mensley / Ashton Clanfield
Tel: +44 (0) 20 7710 7600
Auctus Advisors LLP (Joint Broker)
Jonathan Wright / Rupert Holdsworth Hunt / Harry Baker
T: +44 (0) 7711 627449
READER ADVISORIES
FORWARD--LOOKING STATEMENTS: This press release contains certain
statements that may be deemed to be forward--looking statements.
Such statements relate to possible future events, including, but
not limited to: PetroTal's business strategy, objectives, strength
and focus; the Company's ability to operate in accordance with
developing public health efforts to contain COVID-19; the timing of
filing the Interim Filings. All statements other than statements of
historical fact may be forward--looking statements. Forward--
looking statements are often, but not always, identified by the use
of words such as "anticipate", "believe", "expect", "plan",
"estimate", "potential", "will", "should", "continue", "may",
"objective" and similar expressions. The forward--looking
statements are based on certain key expectations and assumptions
made by the Company. Although the Company believes that the
expectations and assumptions on which the forward--looking
statements are based are reasonable, undue reliance should not be
placed on the forward--looking statements because the Company can
give no assurance that they will prove to be correct. Since
forward--looking statements address future events and conditions,
by their very nature they involve inherent risks and uncertainties.
Actual results could differ materially from those currently
anticipated due to a number of factors and risks. These include,
but are not limited to, risks associated with the oil and gas
industry in general (e. g. , operational risks in development,
exploration and production; delays or changes in plans with respect
to exploration or development projects or capital expenditures; the
uncertainty of reserve estimates; the uncertainty of estimates and
projections relating to production, costs and expenses; and health,
safety and environmental risks), commodity price and exchange rate
fluctuations, legal, political and economic instability in Peru,
access to transportation routes and markets for the Company's
production, changes in legislation affecting the oil and gas
industry and uncertainties resulting from potential delays or
changes in plans with respect to exploration or development
projects or capital expenditures. In addition, the Company cautions
that current
global uncertainty with respect to the spread of the COVID-19
virus and its effect on the broader global economy may have a
significant negative effect on the Company. While the precise
impact of the COVID-19 virus on the Company remains unknown, rapid
spread of the COVID-19 virus may continue to have a material
adverse effect on global economic activity, and may continue to
result in volatility and disruption to global supply chains,
operations, mobility of people and the financial markets, which
could affect interest rates, credit ratings, credit risk,
inflation, business, financial conditions, results of operations
and other factors relevant to the Company. Please refer to the risk
factors identified in the Company's annual information form and
management's discussion and analysis for the year ended December
31, 2019 which are available on SEDAR at www.sedar.com. The
forward--looking statements contained in this press release are
made as of the date hereof and the Company undertakes no obligation
to update publicly or revise any forward--looking statements or
information, whether as a result of new information, future events
or otherwise, unless so required by applicable securities laws.
Neither the TSX Venture Exchange nor its Regulation Services
Provider (as that term is defined in the policies of the TSX
Venture Exchange) accepts responsibility for the adequacy or
accuracy of this press release.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
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