TIDMPTAL
RNS Number : 1438M
PetroTal Corp.
19 January 2021
PetroTal Announces Completion of Arrangement with Petroperu, and
Two Year Extension of Oil Sales Contract
Update on Third-Party Sale of Shares
Calgary, AB and Houston, TX - January 19, 2021 - PetroTal Corp.
("PetroTal" or the "Company") (TSX--V: TAL and AIM: PTAL) is
pleased to announce that it has executed final agreements with
PETROPERU S.A. ("Petroperu") to complete the restructuring (the
"Arrangement") of the contingent liability referenced in PetroTal's
June 12, 2020 press release and to extend the oil sales contract
with Petroperu ("Oil Sales Contract") for an additional two
years.
Highlights
-- Oil sales to Petroperu under the Oil Sales Contract for
deliveries through the Northern Oil Pipeline ("ONP") have been
extended for an additional two years beyond December 23, 2020 ;
-- At PetroTal's expense, Petroperu will place commodity price
hedges on all oil sold through the ONP, after the oil is delivered
by PetroTal to Pump Station # 1 at Saramuro, which will
substantially limit PetroTal's exposure to the impact of oil price
fluctuations in the period until Petroperu ultimately sells the oil
from the Bayovar port;
-- The amount of the contingent liability at November 30, 2020
was $16.6 million. PetroTal will pay this amount to Petroperu over
three years in equal monthly instalments, with interest at an
annual rate of 6.12%. The amount can be prepaid at any time,
without penalty and is expected to be prepaid following successful
completion of the contemplated bond issue announced on January 12,
2021;
-- Based on the current Brent oil price forward curve, when the
physical oil sales are arranged by Petroperu, which is expected
over the next six months, this will result in PetroTal receiving
payments from Petroperu totalling approximately $26.1 million;
and,
-- The Company continues to develop an alternative export route
through to the Atlantic, based on the success of the first 106,000
barrel pilot in December 2020, and PetroTal has now arranged a
second 200,000 barrel pilot in February 2021, FOB Bretana.
Arrangement
Pursuant to the Arrangement, PetroTal and Petroperu have agreed
to resolve the entire contingent liability that arose due to the
significant reduction in oil prices in early 2020, on a one-time
basis that will result in the obligation being paid evenly over a
three year period, together with interest at an annual rate of
6.12%. From the total of 2.4 million barrels of oil that gave rise
to the contingent liability, approximately 575,000 barrels were
sold between July and November 2020, and the remaining 1.8 million
barrels of oil are either in the pipeline or storage tanks.
Based on the average oil price for November 2020, the contingent
liability was $16.6 million. The actual liability or asset value
will be determined based on the future Brent oil price when the
remaining 1.8 million barrels of oil are sold. For reference,
assuming the physical oil sales are completed by Petroperu over the
next six months based on the current Brent forward curve, PetroTal
will receive payment from Petroperu of approximately $26.1
million.
As part of the security package, the production facilities of
PetroTal at Bretana have been pledged to Petroperu as security
under the Arrangement and additional security will be pledged
pursuant to a trust agreement that is expected to be finalized
within 30 days. Along with the contractual monthly repayments,
PetroTal may make additional pre-payments to facilitate an earlier
payout, without penalty and PetroTal expects to prepay the
Arrangement following successful completion of the contemplated
bond issue announced on January 12, 2021. Once Petroperu has been
repaid in full, the security arrangements will terminate, and all
pledged production facilities and other security will be released
back to PetroTal.
As noted above, PetroTal is expected to continue to benefit from
higher projected oil prices when the oil volumes that have been
sold to Petroperu under the Oil Sales Contract and the oil swap
contract are sold by Petroperu, which is expected to occur by the
end of Q2 2021.
Amendments to the Oil Sales Contract
In order to solidify the long-term operating and commercial
relationship between PetroTal and Petroperu, the parties have
amended certain terms of the Oil Sales Contract. The key changes
are:
-- Extension of the term for an additional two years, effective from December 23, 2020 ;
-- Given the extended time for Petroperu to realize the export
sales, future invoices submitted by PetroTal will be due 240 days
from when PetroTal delivers the oil at Saramuro;
-- PetroTal will continue to have the ability to immediately
factor future invoices, at a nominal rate, and therefore cash flow
is expected to remain largely unaffected by this longer invoice
period;
-- The initial differential at the time Bretana oil is sold to
Petroperu has been adjusted to $6 per barrel (previously $4 per
barrel). If the actual differential is less than the initial $6 per
barrel at the time the oil is physically sold 8 to 12 months later,
then PetroTal will recapture the difference as revenue, and if the
actual differential is higher than $6 per barrel then PetroTal will
pay the difference. As a reference, the first cargo of Bretana oil
was sold in July 2020 with a differential of $1.39 per barrel to
Brent and, a second cargo (of three oil blends), was sold in
November 2020 with a differential of $4.25 per barrel to Brent. As
the basis for ongoing price determination, the differential for
each subsequent physical sale by Petroperu will be utilized for
prevailing invoices;
-- Future value fluctuation settlements will occur at the date
the physical oil is sold by Petroperu;
-- To minimize the future price differential, Petroperu will use
their best efforts to sell the Bretana oil at the best market
conditions;
-- Petroperu will hedge future sales of the Bretana oil sold
into the ONP to limit price exposure, at the Company's expense;
and,
-- Once Petroperu has been repaid in full and the securities are
released, PetroTal will fund an escrow reserve account with a
pledge in favor of Petroperu for $2.5 million (to be increased up
to $6 million by monthly installments of $0.55 million) to secure
the financial costs associated to the hedge and future price
differential.
Update on Third-Party Sale of Shares
On December 14, 2020, the Company announced that it had been
informed by Gran Tierra Resources Ltd. ("GTRL"), a control person
of PetroTal, that GTRL had entered into a private purchase and sale
agreement with Remus Horizons PCC Limited ("Remus") in respect of
the purchase by Remus of 218,012,500 common shares of PetroTal
currently held by GTRL.
On January 18, 2021, GTRL informed PetroTal that the purchase
and sale agreement has been terminated. PetroTal was not a party to
the agreement and would not have received any proceeds from the
transaction had it been completed.
Manuel Pablo Zuniga-Pflucker, President and Chief Executive
Officer, commented:
"PetroTal is pleased to finalize this agreement with Petroperu
that effectively deals with the legacy contingent liability and
ensures that PetroTal is substantially protected against future oil
price volatility through hedging arrangements. Petroperu's pipeline
and refinery network are important elements of PetroTal's ongoing
Bretana oil field development, and the Company embraces the strong
working relationship it has with Petroperu. In addition to the
Company's recently announced successful pilot oil export through
Brazil, this agreement with Petroperu that ensures future oil sales
into the ONP, along with settlement of the contingent liability,
significantly enhances PetroTal's operations."
Updated Corporate Presentation
As announced on January 12, 2021, an updated corporate
presentation is now available on the Company's website at
www.petrotal-corp.com .
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 settlement of the contingent liability with
Petroperu pursuant to the Arrangement and the timing thereof; the
pledge of additional security pursuant to the Arrangement; and
future oil sales and price hedging under the Oil Sales Agreement.
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 volatility, price differentials and the actual prices
received for products, 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 for the year ended December 31, 2019 and
management's discussion and analysis for the year ended December
31, 2019 and for the three and nine months ended September 30, 2020
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.
FOFI DISCLOSURE : This press release contains future oriented
financial information and financial outlook information
(collectively, "FOFI") about PetroTal's liability or entitlements
under the Arrangement, including the final amount and settlement
thereof, oil sales and hedging arrangements under the Oil Sales
Contract and components thereof, all of which are subject to the
same assumptions, risk factors, limitations and qualifications as
set forth in the above paragraphs. FOFI contained in this press
release was approved by management as of the date of this press
release and was included for the purpose of providing further
information about PetroTal's anticipated future business
operations. PetroTal disclaims any intention or obligation to
update or revise any FOFI contained in this press release, whether
as a result of new information, future events or otherwise, unless
required pursuant to applicable law. Readers are cautioned that the
FOFI contained in this press release should not be used for
purposes other than for which it is disclosed herein.
OIL REFERENCES : All references to "oil" or "crude oil"
production, revenue or sales in this press release mean "heavy
crude oil" as defined in National Instrument 51-101 - Standards of
Disclosure for Oil and Gas Activities.
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