TIDMPTAL
RNS Number : 4282W
PetroTal Corp.
18 August 2020
PetroTal announces Second Quarter 2020 Financial and Operating
Results
Swift and effective cost reductions delivered savings that
offset the oil field being shut in for most of Q2 2020, resulting
in being operationally cash flow positive.
Calgary and Houston - August 18, 2020-PetroTal Corp. ("PetroTal"
or the "Company") (TSX--V: TAL and AIM: PTAL) is pleased to
announce its financial and operating results for the six and three
months ended June 30, 2020 ("Q2 2020").
Selected financial 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 Q2 2020,
which are available on SEDAR at www.sedar.com and the Company's
website at www.PetroTal--Corp.com. All amounts herein are in United
States dollars ("US$") unless otherwise stated.
Q2 2020 highlights
results at a glance
Six Months Six Months Three Three Months Three
Ended Ended Months Ended Months
June 30, June 30, Ended March 31, Ended
2020 2019 June 30, 2020 June 30,
2020 2019
======================================= =========== =========== ========== ============= ==========
Financial
Crude oil revenues 51,607 12,628 9,839 41,768 8,099
Royalties (1,929) (644) (123) (1,806) (430)
Net operating income 20,565 4,201 2,756 17,809 3,355
Commodity price derivatives
income (loss) (1) (22,156) - 18,264 (40,420) -
Net income (loss) (15,423) (1,090) 16,029 (31,452) 520
Basic and diluted net income
(loss) (US$/share) (0.02) (0.00) 0.02 (0.05) 0.00
Capital expenditures 32,628 34,639 8,756 23,872 24,868
======================================= =========== =========== ========== ============= ==========
Operating
Average production (bopd)
(2) 6,936 1,963 4,185 9,686 3,010
Average sales (bopd) 7,521 1,230 4,729 10,313 1,533
Average Brent oil price (US$/barrel) 39.67 66.06 29.19 50.14 68.95
Average realized price (US$/barrel) 37.70 56.74 22.87 44.51 58.05
Netback (US$/barrel) 15.02 18.88 6.40 18.98 24.05
Funds flow from operations 15,987 1,048 869 15,118 1,776
======================================= =========== =========== ========== ============= ==========
Balance sheet
Cash 20,379 7,373 33,128
Working Capital (31,845) (61,025) 17,776
Total assets 216,899 194,274 145,833
Current liabilities 76,932 89,914 32,380
Equity 122,789 90,029 100,158
======================================= =========== =========== ========== ============= ==========
(1) On June 12, 2020, the Company announced that the non-cash
contingent derivative liability will be paid over a three-year
period.
(2) The field was shut in on May 7, 2020; for the 37 producing
days in Q2 2020, production averaged 11,500 bopd.
Q2 2020 Operational Highlights
-- The 6H well commenced operations on April 10, 2020 producing
approximately 5,750 barrels of oil per day ("bopd") initially, with
average production of approximately 4,329 bopd for the first 30
production days during April. The 6H well was completed on time and
under the original $12.6 million budget;
-- 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;
o Operations at the Bretana oil field were temporarily shut in
due to storage capacity limitations. The Bretana oil field was
producing approximately 11,500 bopd prior to being shut in;
o The oil field shutdown triggered significant reductions in
operating and transportation costs;
o The Company proactively reduced its general and administrative
costs, inclusive of an average 20% compensation reduction for
management and directors; and,
-- 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.
Q2 2020 Financial Highlights
-- Revenue decreased to $9.8 million ($22.87/bbl) compared to
$41.8 million ($44.51/bbl) in Q1 2020, due to the global oil price
collapse and the COVID-19 pandemic, which led to the field being
shut in on May 7, 2020. The average Brent oil price dropped by 42%
to $29.19/bbl from $50.14/bbl for Q1 2020;
-- Royalties to the Peruvian government were $0.1 million (1.3%
of revenue) compared to $1.8 million (4.3% of revenue) for Q1
2020;
-- Cash flow from operations was $0.9 million compared to $15.1 million in Q1 2020;
-- Operating costs were $2.4 million ($5.67/bbl), a reduction
from $6.0 million ($6.42/bbl) for Q1 2020;
-- Transportation costs were $4.5 million ($10.50/bbl) compared
to $16.1 million ($17.18/bbl) for Q1 2020, reflecting the variable
cost nature associated with lower production;
-- The Company had cash of $20.4 million at the end of Q2 2020
compared to $7.4 million at the end of Q1 2020;
-- Net operating income was $2.8 million ($6.40/bbl) compared to
net operating income of $17.8 million ($18.98/bbl) in Q1 2020;
-- The Company has a contingent derivative liability relating to
oil sold to PetroPeru, and the timing difference between when
PetroPeru provides an initial payment for the oil and when the
final settlement price is calculated. As at March 31, 2020, this
liability was $40.4 million, as a result of the fall in oil prices
in that quarter. As at June 30, 2020, this amount was reduced to
$22.2 million, reflecting the rise in oil prices during the most
recent quarter. The amount of the ultimate actual liability will be
crystallized when the oil is actually sold by PetroPeru, which is
expected to occur in Q3 and Q4;
-- During May 2020, the Company received financial support
related to the COVID-19 economic impact totaling $3.2 million. The
Peruvian government sponsored a stimulus program that provided $2.9
million (to be repaid over three years, with repayment commencing
after one year for a two year period, at an 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, which is expected to be by
the end of August 2020. Based on current Brent oil prices, the
liability is expected to be lower than $22 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;
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; and,
-- 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
Bretana oilfield and for general corporate purposes.
June 30, 2020 Subsequent Events
-- Bretana oil production recommenced on July 15, 2020 and
achieved over 12,000 bopd when all seven wells were online. Oil
deliveries commenced initially to the Iquitos refinery, where
approximately 40,000 barrels were delivered during July 2020. Oil
was also barged to the Saramuro Pump Station ready for delivery
into the Northern Oil Pipeline ("ONP") for recommencement of its
operations. Approximately 40,000 barrels were delivered to Saramuro
in July 2020. To manage the Company's inventory and barge storage
capacity, production at that time was reduced to approximately
8,000 bopd until such time as the ONP is back to full capacity;
-- As disclosed in the Company's announcement on August 10,
2020, on August 9, 2020, as a preemptive measure, the Bretana oil
field was shut down due to civil unrest against the government
outside the field camp that resulted in a violent confrontation
between protestors, intending to occupy the Bretana facilities, and
the police. The civil unrest has been conducted by the same group
that, the prior week, took over Petroperu's pump station No.5 at
Saramiriza, seeking government assistance against the COVID-19
crisis. The field closure is expected to last until the inquiry
into the incident is completed. The inquiry is progressing and
favorable discussions between the Government of Peru and the
communities has resulted in the protestors allowing operations at
the ONP to restart this week. The Company expects that it will be
able to recommence oil production at Bretana by the end of August
2020; and,
-- On June 25, 2020, PetroTal entered a commodity swap
transaction with an international bank and commodity broker to
hedge 460,000 barrels of crude oil at $40.58 per barrel. This
transaction had a termination date of July 17, 2020 to coincide
with a physical oil sale of a similar amount.
Liquidity Update
At August 17, 2020, PetroTal has cash resources of $13.5
million, with a ccounts payable and accrued liabilities of
approximately $37 million, a reduction of $12 million from the end
of Q2 2020. Ongoing payments will be managed from expected oil
field revenues and internal cash resources. Pursuant to contractual
terms with our suppliers, approximately 23% of the amount are not
due until into 2021.
Updated Corporate Presentation
PetroTal is pleased to announce that on August 19, 2020, an
updated corporate presentation will be available on the Company's
website at www.petrotal-corp.com .
Manuel Pablo Zuniga-Pflucker, President and Chief Executive
Officer, commented:
"In the face of a difficult macro environment, I am very pleased
with PetroTal's performance during the second quarter of the year.
A number of the steps we took to preserve the Company's liquidity
began to yield results, which enabled us to deliver a break-even
quarter.
"Whilst it is disappointing that we had to shut in the Bretana
oil field post period end, it is a testament to the team as to how
quickly we were able to get production back up and running prior to
this shutdown, quickly achieving over 12,000 bopd when all seven
wells commenced production. First and foremost, we are a Peruvian
led and operated oil company whose mission and vision is in tune
with the local communities, so we look forward to working with all
our stakeholders to get production at the field up and running as
soon as practically possible"
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 Bretana
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 Bretana 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
Manuel 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.
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END
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