PetroTal Announces Q2 2024
Financial and Operating Results
Q2 2024 average sales
and production of 18,050 bopd and 18,290 bopd,
respectively
Generated Q2 2024 free funds
flow of $36 million (7% quarterly yield)
Exited quarter with $96
million in total cash
Declaring dividend of
$0.015/share payable Sept 13, 2024
Board
changes
Calgary, AB and Houston, TX -
August 08, 2024-PetroTal
Corp. ("PetroTal" or the "Company") (TSX: TAL, AIM: PTAL and OTCQX:
PTALF) is pleased to report its operating and financial results for
the three and six months ended June 30, 2024.
Selected financial and operational
information is outlined below and should be read in conjunction
with the Company's unaudited consolidated financial statements and
management's discussion and analysis ("MD&A") for the three and
six months ended June 30, 2024, which are available on SEDAR+ at
www.sedarplus.ca and on the Company's website at
www.PetroTal‐Corp.com. All amounts herein are in United States
dollars unless otherwise stated.
Selected Q2 2024 Highlights
·
Average Q2 2024 production and sales of 18,290 and
18,050 barrels ("bbls") of oil per day ("bopd"), respectively,
which included a brief river blockade;
·
Generated Q2 2024 EBITDA(1) and free
funds flow(1) of $69.5 million ($42.31/bbl) and $36.3
million ($22.11/bbl), respectively;
·
Exited Q2 2024 in a strong cash position with
$95.9 million in total cash ($84.1 million unrestricted), with over
$93.2 million in current receivables due subsequent to June 30,
2024;
·
In early May 2024, PetroTal signed an acquisition
agreement to acquire a 100% working interest in Peru's Block 131,
including the producing Los Angeles field for a purchase price of
$5 million, subject to closing adjustments and with an effective
date of January 1, 2024;
·
Successfully drilled two new oil wells in the
quarter. Well 19H has averaged over 6,860 bopd over its initial 30
days, placing it in the Company's top five initial rate wells and
achieving payout in approximately 40 days;
·
Delivered strong operating cost metrics with
lifting and variable transportation costs under $8.00/bbl in the
quarter, slightly higher than Q1 2024, and generating a near 78%
net operating income margin in the quarter;
·
Capital expenditures ("Capex") totaled $38.9
million in Q2 2024 and were focused on drilling wells 18H and
19H;
·
Completed all regulatory approvals for the
Company's Oleoducto de Crudos Pesados Oil Pipeline ("OCP") route to
market in Ecuador, onto which oil loading into barges was
subsequently commenced in mid July 2024. Actual final sale of
the pilot oil is expected in October 2024;
·
Delivered strong Q2 2024 net income of $35.4
million ($0.04/share); and,
·
Paid total dividends of $0.015/share and
repurchased 1.2 million common
shares in Q2 2024, representing approximately $15
million of total capital returned to shareholders (approximately 3%
of June 30, 2024, market capitalization).
(1) Non-GAAP (defined
below) measure that does not have any standardized meaning
prescribed by GAAP and therefore may not be comparable with the
calculation of similar measures presented by other entities. See
"Selected Financial Measures" section.
Manuel Pablo Zuniga-Pflucker,
President and Chief Executive Officer, commented:
"Our Q2 2024 operating and financial results were robust and
Q3 and Q4 are now underpinned by strong drilling results this
quarter. The 19H well was initially producing in excess of
8,000 bopd despite being designed with a shorter horizontal section
compared to previous drills and has now averaged over 6,800 bopd
over the last 30 days.
In
addition, we are extremely excited about our formal route
activation through the OCP. Having completed all the
regulatory approvals, the Company is now in a position to further
diversify its oil sales routes and to allow for offtake optionality
during the dry season. Activating additional routes to market is a
priority for the Company and we look forward to sending further
updates in the fall of 2024.
We
are expecting to close the Block 131 acquisition later this year
becoming the Company's first diversified production stream with the
expectation of significantly increasing its light oil production
profile in 2025."
Selected Financial Highlights
|
Three Months
Ended
|
Six Months
Ended
|
|
Q2-2024
|
|
Q1-2024
|
|
Q2-2024
|
|
Q2-2023
|
|
|
$/bbl
|
$ 000
|
$/bbl
|
$ 000
|
$/bbl
|
$ 000
|
$/bbl
|
$ 000
|
Average Production (bopd)
|
|
18,290
|
|
18,518
|
|
18,404
|
|
15,631
|
Average sales (bopd)
|
|
18,050
|
|
18,347
|
|
18,198
|
|
15,567
|
Total sales (bbls)(1)
|
|
1,642,578
|
|
1,669,537
|
|
3,312,115
|
|
2,817,573
|
Average Brent price
|
$83.87
|
|
$81.01
|
|
$82.46
|
|
$79.73
|
|
Contracted sales price, gross
|
$83.92
|
|
$81.14
|
|
$82.35
|
|
$78.86
|
|
Tariffs, fees and differentials
|
($21.15)
|
|
($20.89)
|
|
($20.86)
|
|
($20.75)
|
|
Realized sales price, net
|
$62.76
|
|
$60.25
|
|
$61.49
|
|
$58.11
|
|
Oil
revenue(1)
|
$62.76
|
$103,086
|
$60.25
|
$100,583
|
$61.49
|
$203,669
|
$58.11
|
$163,723
|
Royalties(2)
|
$6.08
|
$9,991
|
$5.69
|
$9,500
|
$5.88
|
$19,491
|
$5.37
|
$15,137
|
Operating expense
|
$6.10
|
$10,023
|
$5.56
|
$9,278
|
$5.83
|
$19,301
|
$4.78
|
$13,454
|
Direct Transportation:
|
|
|
|
|
|
|
|
|
Diluent
|
$1.16
|
$1,898
|
$0.94
|
$1,567
|
$1.73
|
$5,740
|
$1.07
|
$3,009
|
Barging
|
$0.58
|
$951
|
$0.60
|
$1,005
|
$0.02
|
$54
|
$0.64
|
$1,802
|
Diesel
|
$0.11
|
$186
|
$0.05
|
$80
|
($0.03)
|
($106)
|
$0.08
|
$233
|
Storage
|
$0.01
|
$12
|
($0.27)
|
($457)
|
($0.13)
|
($445)
|
$0.00
|
$0
|
Total Transportation
|
$1.86
|
$3,047
|
$1.32
|
$2,195
|
$1.59
|
$5,243
|
$1.79
|
$5,044
|
Net
Operating Income(3,4)
|
$48.72
|
$80,025
|
$47.68
|
$79,610
|
$48.19
|
$159,634
|
$46.17
|
$130,088
|
G&A
|
$6.41
|
$10,528
|
$4.83
|
$8,071
|
$5.61
|
$18,597
|
$4.30
|
$12,107
|
EBITDA(3)
|
$42.31
|
$69,497
|
$42.85
|
$71,539
|
$42.58
|
$141,037
|
$41.87
|
$117,981
|
Adjusted EBITDA(3,5)
|
$45.78
|
$75,201
|
$43.15
|
$72,048
|
$44.46
|
$147,250
|
$47.44
|
$133,670
|
Net
Income
|
$21.55
|
$35,405
|
$28.52
|
$47,619
|
$25.07
|
$83,028
|
$22.58
|
$63,614
|
Basic Shares Outstanding (000)
|
|
914,196
|
|
914,104
|
|
914,196
|
|
922,306
|
Market Capitalization(6)
|
|
$504,152
|
|
$511,898
|
|
$504,152
|
|
$433,484
|
Net
Income/Share ($/share)
|
|
$0.04
|
|
$0.05
|
|
$0.09
|
|
$0.069
|
Capex
|
|
$38,867
|
|
$30,352
|
|
$69,219
|
|
$59,286
|
Free
Funds Flow(3) (7)
|
$22.12
|
$36,334
|
$24.97
|
$41,696
|
$23.56
|
$78,030
|
$26.40
|
$74,384
|
% of
Market Capitalization(6)
|
|
7.2%
|
|
8.2%
|
|
15.5%
|
|
17.2%
|
Total Cash(8)
|
|
$95,859
|
|
$85,151
|
|
$95,859
|
|
$92,552
|
Net
Surplus (Debt) (3) (9)
|
|
$50,324
|
|
$55,522
|
|
$50,324
|
|
$97,523
|
The table below summarizes
PetroTal's comparative financial position.
1. Approximately 89% of Q2
2024 sales were through the Brazilian route vs 87% in Q1
2024.
2. Royalties at year to date
June 30, 2024 and March 31, 2024 include the impact of the 2.5%
community social trust.
3. Non-GAAP (defined below)
measure that does not have any standardized meaning prescribed by
GAAP and therefore may not be comparable with the calculation of
similar measures presented by other entities. See "Selected
Financial Measures" section.
4. Net operating income
represents revenues less royalties, operating expenses, and direct
transportation.
5. Adjusted EBITDA is net
operating income less general and administrative ("G&A") and
plus/minus realized derivative impacts.
6. Market capitalization for
Q2, 2024, Q1 2024 and Q2 2023, assume share prices of $0.53, $0.56,
and $0.45 respectively on the last trading day of the
quarter.
7. Free funds flow is defined
as adjusted EBITDA less capital expenditures. See "Selected
Financial Measures" section.
8. Includes restricted cash
balances.
9. Net Surplus (Debt) = Total
cash + all trade and net VAT receivables + short and long term net
derivative balances - total current liabilities - long term debt -
non current lease liabilities - net deferred tax - other long term
obligations.
Q2
2024 Financial Variance Summary
|
Three months
ended
|
Six months
ended
|
US$/bbl Variance Summary
|
Q2 2024
|
Q1 2024
|
Variance
|
Q2 2024
|
Q2 2023
|
Variance
|
Oil
Sales (bopd)
|
18,050
|
18,347
|
(297)
|
18,198
|
15,567
|
2,631
|
Contracted Brent Price
|
$83.92
|
$81.14
|
$2.78
|
$82.35
|
$78.86
|
$3.49
|
Realized Sales Price
|
$62.76
|
$60.25
|
$2.51
|
$61.49
|
$58.11
|
$3.38
|
Royalties
|
$6.08
|
$5.69
|
$0.39
|
$5.88
|
$5.37
|
$0.51
|
Total OPEX and
Transportation
|
$7.96
|
$6.88
|
$1.08
|
$7.42
|
$6.57
|
$0.85
|
Net
Operating Income(1,2)
|
$48.72
|
$47.68
|
$1.04
|
$48.19
|
$46.17
|
$2.02
|
G&A
|
$6.41
|
$4.83
|
$1.58
|
$5.61
|
$4.30
|
$1.31
|
EBITDA
|
$42.31
|
$42.85
|
($0.54)
|
$42.58
|
$41.87
|
$0.71
|
Net Income
|
$21.55
|
$28.52
|
($6.97)
|
$25.07
|
$22.58
|
$2.49
|
Free Funds Flow(1,3)
|
$22.12
|
$24.97
|
($2.85)
|
$23.56
|
$26.40
|
$2.84
|
Q2
2024 Financial Variance Commentary
·
Near-flat sales volume compared to prior quarter
with six months ended sales volumes up 17% from Q2 2023;
·
Higher lifting costs in the quarter, driven by
higher contracted service and erosion control opex allocations
compared to previous quarter. Higher diluent costs in the
quarter due to higher transportation costs of diluent;
·
Capital spending increased by 28% to $38.9 million
in the quarter from the prior quarter of $30.2 million due to
increased drilling activity;
·
Strong Q2 2024 production and favorable oil
pricing generated free funds flow per barrel in the quarter of
approximately $22.1/bbl compared to $24.9/bbl in Q4
2023;
·
Liquidity increased 13% in Q2 2024 compared to Q1
2024, with total cash increasing by approximately $11 million to
$96 million despite transferring nearly $12 million of restricted
cash to the social trust fund; and,
·
PetroTal maintained a strong balance sheet in Q2
2024 with no long term bank debt and a net surplus(1,4) of $50 million, and
inclusive of a $65 million net deferred tax liability.
1. See "Selected Financial
Measures".
2. Net operating income
represents revenues less royalties, operating expenses, and direct
transportation.
3. Free funds flow is defined
as adjusted EBITDA less capital expenditures.
4. Net Surplus (Debt) = Total
cash + all trade and net VAT receivables + short and long term net
derivative balances - total current liabilities - long term debt -
non current lease liabilities - net deferred tax - other long term
obligations.
Additional Financial and Operating Updates in, and subsequent
to June 30, 2024
Operations Update
Corporate production averaged 20,034
bopd in July 2024, with contributions from the 19H and 18H wells,
which averaged 5,167 and 2,278 bopd, respectively. Dry river season
indicators are at the moment at lower levels than 2023.
Notwithstanding, production and sales constraints from August
through October 2024 are kept as originally budgeted thanks to the
increased barge fleet size. Q3 2024 production guidance is
reiterated at approximately 13,000 bopd.
With expected low river conditions
in Q3 and early Q4, the Company is reaffirming production guidance
of 16,500 to 17,500 bopd for 2024. Assuming a full year 2024
Brent price of $82/bbl, full year 2024 EBITDA is now expected to be
in the range of $200 to $240 million. Previous 2024 EBITDA guidance
was $200 million.
PetroTal completed drilling 5WD on
July 22, 2024, the Company's fourth water disposal well with
injectivity tests at approximately 50,000 barrels of water per day
("bwpd"). The 5WD well is already online at a total cost of
$10.7 million and below its budget of $12.7 million. Once the
three high pressure pumps and the additional 50,000 barrels of
water tank are fully tied in, the total field water disposal
capacity will reach an estimated 170,000 bwpd by year end from the
current 110,000 bwpd.
Drilling commenced on Well 20H on
July 26, 2024 with an estimated cost of $13.7 million. Well
completion and first production are estimated by late Q3
2024.
In order to minimize rig standby
fees and maximize production thanks to the increased water handling
capacity heading into the next wet season, PetroTal is accelerating
capex. Following the completion of the 20H well, PetroTal will
drill and complete wells 21H, 22H and 23H at Bretana by the end of
Q1 2025. As a result, total estimated 2024 capital spend is now
expected to fall within a range of $150 to $175 million, from a
range of $150 to $160 million previously.
ONP
Update
On July 17, 2024 the Company was
notified that approximately 322,000 barrels of Northern Peruvian
Pipeline ("ONP") oil located in section II of the line was
successfully pumped to the Bayovar port for tender and eventual
sale. When the tender process is completed by Petroperu, it
will trigger a true up payment to PetroTal if the realized price
for those barrels is greater than the oil's cost base. The
average cost base of the Company's 2.2 million barrels of oil in
the ONP is approximately $72.5/bbl Brent. Including the
recent oil movement, as of the end of July, there are approximately
1.88 million barrels remaining in the ONP.
Cepsa Acquisition Update
Since the signing of the acquisition
agreement in early May 2024, PetroTal's integration team has been
progressing on the necessary regulatory approvals required to close
the acquisition. The first milestone was achieved in late
June 2024 with an approval from Perupetro. Approval into
supreme decree is still estimated in Q4 2024. The Block 131 assets
have been producing between 800 and 1,000 bopd and generating
positive EBITDA per month since the transaction effective date of
January 1, 2024. It is the Company's intention to optimize
production starting next year.
JP
Morgan Line of Credit
In May 2024, PetroTal was able to
secure a $20 million line of credit with JP Morgan to further
enhance short term liquidity. The line of credit is for 120
days at market variable interest rates with payment due in full at
the end of the term. Including the previously announced $20
million line of credit with Banco de Credito del Peru, the Company
has approximately $40 million of undrawn short term credit
capacity.
Share Buyback Plan Update
PetroTal's updated liquidity
strategy prioritises dividend sustainability, potential Block 131
development, and erosion control working capital
requirements. In Q2 2024, the Company set additional
constraints on the share buyback program that better align daily
buyback execution with lower share prices. As a result, a
decreased volume of buybacks was realized in Q2 2024 compared to
previous quarters. The Company will continue to monitor
buyback levels.
Q3
2024 dividend declaration
A cash dividend of USD$0.015 per
common share has been declared to be paid in Q3 2024. This
approximately represents a 12% annualized yield based on the
current share price and includes the recurring USD$0.015 per common
share amount, without the liquidity sweep this quarter due to
anticipated heavier cash requirements over the next two
quarters. The total dividend of USD$0.015 per common share
will be paid according to the following timetable:
·
Record date: August 30, 2024
·
Payment date: September 13, 2024
The dividend is an eligible dividend
for the purposes of the Income Tax Act (Canada) and investors
should note that the excess liquidity sweep portion of all future
dividends may be subject to fluctuations up or down in accordance
with the Company's return of capital policy. Shareholders
outside of Canada should contact their respective brokers or
registrar agents for the appropriate tax election forms regarding
this dividend.
Director Resignation
Effective August 8, 2024, Dr. Roger
Tucker has resigned as a Company director so he can focus on
leading the growth of Africa Oil. Dr. Tucker has been a board
member since the end of 2019 when the Company started its
successful horizontal well drilling campaign and has made many
other significant technical contributions to our success at
Bretana. PetroTal would like to thank Dr. Tucker for his
contributions to the company and wishes him well in his future
endeavors.
Q2
2024 Webcast Link for August 8, 2024
PetroTal will host a webcast for its
Q2 2024 results on August 8, 2024 at 9am CT (Houston) and 3pm BST
(London). Please see the link below to register.
https://stream.brrmedia.co.uk/broadcast/666ae961ee30aaf32018b5c3
ABOUT PETROTAL
PetroTal is a publicly traded,
tri‐quoted (TSX: TAL, AIM: PTAL and OTCQX: PTALF) 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. In early 2022, PetroTal became the largest crude oil
producer in Peru. The Company's management team has significant
experience in developing and exploring for oil in Peru and is led
by a Board of Directors that is focused on safely and cost
effectively developing the Bretana oil field. It is actively
building new initiatives to champion community sensitive energy
production, benefiting all stakeholders.
For further information, please see
the Company's website at www.petrotal-corp.com,
the Company's filed documents at www.sedarplus.ca, or below:
Camilo McAllister
Executive Vice President and Chief Financial
Officer
Cmcallister@PetroTal-Corp.com
T: (386) 383 1634
Manolo Zuniga
President and Chief Executive Officer
Mzuniga@PetroTal-Corp.com
T: (713) 609-9101
PetroTal Investor Relations
InvestorRelations@PetroTal-Corp.com
Celicourt Communications
Mark Antelme / Jimmy Lea
petrotal@celicourt.uk
T : 44 (0) 20 7770 6424
Strand Hanson Limited (Nominated & Financial
Adviser)
Ritchie Balmer / James Spinney /
Robert Collins
T: 44 (0) 207 409 3494
Stifel Nicolaus Europe Limited (Joint
Broker)
Callum Stewart / Simon Mensley /
Ashton Clanfield
T: +44 (0) 20 7710 7600
Peel Hunt LLP (Joint Broker)
Richard Crichton / David McKeown
/ Georgia Langoulant
T: +44 (0) 20 7418 8900
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, oil production levels and guidance.
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. Without limitation, this press release contains
forward-looking statements pertaining to: PetroTal's drilling,
completions, workovers and other activities; anticipated future
production and revenue; drilling plans including the timing of
drilling, commissioning, and startup; PetroTal's 2024 guidance;
expectations regarding the strategic acquisition of CEPSA Peruana,
S.A.C (the "Acquisition"), including in respect of its terms,
timing, benefits and closing (including that it will close pending
regulatory approvals); the Company's expectation to meet Q3 2024
production guidance in face of production and sales constraints in
August and September of Q3; expectations of timing to realize
revenues from the Company's OCP oil route to market; expectations
regarding the tender process and sale of the ONP oil; expectations
surrounding PetroTal's short term receivables and when they become
due; Q3 2024 dividend declaration of $0.015/share payable September
13, 2024 and expectations in respect of thereof (including timing);
the renewal of the share buyback plan; expectations surrounding
PetroTal's new leadership team; and average 2024 production. The
forward-looking statements are based on certain key expectations
and assumptions made by the Company, including, but not limited to,
expectations and assumptions concerning the ability of existing
infrastructure to deliver production and the anticipated capital
expenditures associated therewith, the ability to obtain and
maintain necessary permits and licenses, the ability of government
groups to effectively achieve objectives in respect of reducing
social conflict and collaborating towards continued investment in
the energy sector, reservoir characteristics, recovery factor,
exploration upside, prevailing commodity prices and the actual
prices received for PetroTal's products, including pursuant to
hedging arrangements, the availability and performance of drilling
rigs, facilities, pipelines, other oilfield services and skilled
labour, royalty regimes and exchange rates, the impact of inflation
on costs, the application of regulatory and licensing requirements,
the accuracy of PetroTal's geological interpretation of its
drilling and land opportunities, current legislation, receipt of
required regulatory approval, the success of future drilling and
development activities, the performance of new wells, future river
water levels, the Company's growth strategy, general economic
conditions and availability of required equipment and services.
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: counterparty risk to closing the Acquisition and
unforeseen difficulties in integrating the assets pursuant to such
acquisition into PetroTal's operations; incorrect assessments of
the value of benefits to be obtained from acquisitions and
exploration and development programs (including the
Acquisition); 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; changes in the financial
landscape both domestically and abroad, including volatility in the
stock market and financial system; and wars (including Russia's war
in Ukraine and the Israeli-Hamas conflict). Please refer to the
risk factors identified in the Company's most recent annual
information form and MD&A which are available on SEDAR+ at
www.sedarplus.ca. 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.
OIL REFERENCES: All references to "light oil" in this press
release mean "light crude oil" as defined in NI 51-101. All
references to "heavy oil" in this press release mean "heavy crude
oil" as defined in NI 51-101. All references to Brent indicate
Intercontinental Exchange ("ICE") Brent.
SHORT TERM RESULTS: References in this press release to peak
rates, initial rates, production rates since inception, current
production rates, and other short-term production rates are useful
in confirming the presence of hydrocarbons, however such rates are
not determinative of the rates at which such wells will commence
production and decline thereafter and are not indicative of
long-term performance or of ultimate recovery. While encouraging,
readers are cautioned not to place reliance on such rates in
calculating the aggregate production of PetroTal. The Company
cautions that such results should be considered to be
preliminary.
SPECIFIED FINANCIAL MEASURES: This press release includes
various specified financial measures, including non-GAAP financial
measures, non-GAAP financial ratios and capital management measures
as further described herein. These measures do not have a
standardized meaning prescribed by generally accepted accounting
principles ("GAAP") and, therefore, may not be comparable with the
calculation of similar measures by other companies. Management uses
these non- GAAP measures for its own performance measurement and to
provide shareholders and investors with additional measurements of
the Company's efficiency and its ability to fund a portion of its
future capital expenditures. "Adjusted EBITDA" (non-GAAP financial
measure) is calculated as consolidated net income (loss) before
interest and financing expenses, income taxes, depletion,
depreciation and amortization and adjusted for G&A impacts and
certain non-cash, extraordinary and non-recurring items primarily
relating to unrealized gains and losses on financial instruments
and impairment losses, including derivative true-up settlements.
PetroTal utilizes adjusted EBITDA as a measure of operational
performance and cash flow generating capability. Adjusted EBITDA
impacts the level and extent of funding for capital projects
investments. Reference to EBITDA is calculated as net operating
income less G&A. "Netback" (non-GAAP financial measure) equals
total petroleum sales less quality discount, lifting costs,
transportation costs and royalty payments calculated on a bbl
basis. The Company considers netbacks to be a key measure as they
demonstrate Company's profitability relative to current commodity
prices. "Net Operating Income" (non-GAAP financial measure) is
calculated as revenues less royalties, operating expenses, and
direct transportation. The Company considers Net Operating Income
measure as they demonstrate Company's profitability relative to
current commodity prices. "Net surplus (debt)" (non-GAAP financial
measure) is calculated by adding together total cash, trade and VAT
receivables, and short and long-term net derivative balances less
total current liabilities, long-term debt, non-current lease
liabilities, deferred tax, and other long-term obligations. Net
surplus (debt) is used by management to provide a more complete
understanding of the Company's capital structure and provides a key
measure to assess the Company's liquidity. "Free funds flow"
(non-GAAP financial measure) is calculated as net operating income
less G&A less exploration and development capital expenditures
less realized derivative gains/losses and is calculated prior to
all debt service, taxes, lease payments, hedge costs, factoring,
and lease payments. Management uses free funds flow to determine
the amount of funds available to the Company for future capital
allocation decisions. Please refer to the MD&A for additional
information relating to specified financial
measures.
Eligible Dividend: An eligible dividend is one which is
characterized as such by the dividend-paying corporation for
Canadian residents. The primary benefit of an eligible dividend is
that it benefits from an enhanced gross-up and credit regime at the
shareholder level (i.e., the shareholder pays less tax on eligible
dividends than non-eligible dividends). This is meant to compensate
for the higher general corporate tax rate paid by non-CCPC's on
their income and generally preserve integration of Canada's tax
rates. As an example, for federal income tax purposes the gross-up
rate for eligible dividends is 38% (as compared to 15% for
non-eligible dividends) such that the amount of the dividend is
multiplied by 1.38 to determine the taxable income to the
shareholder. The dividend tax credit for eligible dividends is
additionally increased to 6/11 (or 15.02%), as compared to 9/13
(9%) for non-eligible dividends, to offset the greater income
inclusion to the taxpayer. Each province provides similar relief on
the tax they would otherwise levy on the dividends, although the
effective gross-up and credit differs by
province.
FOFI DISCLOSURE: This press release contains future-oriented
financial information and financial outlook information
(collectively, "FOFI") about PetroTal's prospective results of
operations and production results, free funds flow, cost estimates,
tax rates, budget, EBITDA, netback, dividends, capex, 2024 average
production and production and sales targets, shareholder returns
and components thereof, including pro forma the completion of the
Acquisition, 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 and its management
believe that FOFI has been prepared on a reasonable basis,
reflecting management's best estimates and judgments, and
represent, to the best of management's knowledge and opinion, the
Company's expected course of action. However, because this
information is highly subjective, it should not be relied on as
necessarily indicative of future results. 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. All FOFI contained in this press release complies
with the requirements of Canadian securities legislation, including
Canadian National Instrument 51-101 - Standards of Disclosure for
Oil and Gas Activities. Changes in forecast commodity prices,
differences in the timing of capital expenditures, and variances in
average production estimates can have a significant impact on the
key performance measures included in PetroTal's guidance. The
Company's actual results may differ materially from these
estimates.