TIDMPTAL
RNS Number : 9934F
PetroTal Corp.
20 November 2020
PetroTal announces Third Quarter 2020 Financial and Operating
Results
Following social unrest, production has been restricted to 5,000
bopd to manage oil inventory
Calgary, AB and Houston, TX - November 20, 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 and nine months ended September 30, 2020 ("Q3 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 Q3 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.
Q3 2020 highlights
results at a glance
Nine Months Ended Three Months Ended
September 30 September June March
30 30 31
2020 2019 2020 2020 2020
======================================= ============================== === ========== ========= =========
Financial
Crude oil revenues $59,218 $32,307 $7,611 $9,839 $41,768
Royalties (2,177) (1,581) (248) (123) (1,806)
Net operating income 22,889 13,364 2,324 2,756 17,809
Commodity price derivatives
income (loss) (1) (17,757) 580 4,399 18,264 (40,420)
Net income (loss) (12,199) 1,925 3,224 16,029 (31,452)
Basic and diluted net income
(loss) (US$/share) (0.02) 0.00 0.00 0.02 (0.05)
Capital expenditures 35,982 62,490 3,354 8,756 23,872
======================================= ==================== ======== === ========== ========= =========
Operating
Average production (bopd)
(2)(3) 5,428 2,905 2,444 4,185 9,686
Average sales (bopd) 5,777 2,188 2,327 4,729 10,313
Average Brent oil price (US$/barrel) 42.69 64.67 44.32 29.19 50.14
Average realized price (US$/barrel) 37.41 54.09 35.56 22.87 44.51
Netback (US$/barrel) 14.46 22.38 10.86 6.40 18.98
Funds flow provided by (used
in) operations 15,375 8,198 (548) 862 15,061
======================================= ==================== ======== === ========== ========= =========
Balance sheet
Cash 9,788 20,379 7,373
Working Capital (30,407) (31,845) (61,025)
Total assets 205,531 216,899 194,274
Current liabilities 62,355 76,932 89,914
Equity 126,253 122,789 90,029
======================================= ==================== ======== === ========== ========= =========
(1) Contingent 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.
(3) The field was shut in from July 1 to July 14 and from August
9 to September 27; for the 28 producing days in Q3 2020 constrained
production averaged 8,000 bopd.
Q3 2020 Operational Highlights
-- On July 15, 2020, PetroTal recommenced oil field operations
after the COVID-19 government--imposed shut down on May 7, 2020,
and production returned to 11,500 bopd shortly thereafter;
-- As a preemptive measure, the Bretana oil field was shut down
on August 9, 2020 due to social 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 social unrest was conducted by protestors seeking
government assistance against the COVID-19 crisis; and,
-- As a result of the indigenous communities and government
bodies reaching an agreement that will see increased funding for
the local communities, on September 28, 2020, PetroTal recommenced
oil field operations, and production again was restored to the
pre-shut down level of 11,500 bopd.
Q3 2020 Financial Highlights
-- Revenue decreased to $7.6 million ($35.56/bbl) compared to
$9.8 million ($22.87/bbl) in Q2 2020, due to lower oil production
as a result of social unrest in Q3 2020. However, this was in part,
offset by higher oil prices, with the average Brent oil price
increasing to $44.32/bbl from $29.19/bbl for Q2 2020;
-- Royalties to the Peruvian government were $0.2 million (3.2%
of revenue) compared to $0.1 million (1.3% of revenue) for Q2
2020;
-- Operating costs were $2.5 million ($11.64/bbl) compared to
$2.4 million ($5.67/bbl) for Q2 2020, reflecting consistent
quarterly costs not directly impacted by lower production;
-- Transportation costs were $2.5 million ($11.90/bbl) compared
to $4.5 million ($10.50/bbl) for Q2 2020, reflecting the variable
cost nature associated with lower production;
-- Cash flow used by operations was $0.5 million compared to
$0.9 million generated by operations in Q2 2020;
-- Net operating income was $2.3 million ($10.86/bbl) compared
to net operating income of $2.8 million ($6.40/bbl) in Q2 2020;
-- The Company had cash of $9.8 million at the end of Q3 2020
compared to $20.4 million at the end of Q2 2020. The majority of
the cash reduction is attributed to a $9.4 million reduction in
accounts payable during Q3 2020;
-- The Company's contingent derivative liability relating to oil
sold to Petroperu was reduced to $17.0 million at September 30,
2020 from $22.3 million at June 30, 2020, as a result of higher oil
prices in Q3 2020. This contingent liability relates to the timing
difference between when Petroperu provides an initial payment for
the oil and when the final settlement price is calculated. The
amount of the ultimate liability will be crystallized when the oil
is actually sold by Petroperu, which is expected to commence in
December 2020 and continue into 2021; and,
-- The contingent liability pertaining to the Brent oil price
reduction has 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;
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 in December
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 periods of low
oil prices.
Events subsequent to September 30, 2020
-- After PetroTal recommenced oil field operations on September
28, 2020, the wells were quickly brought into full operation at the
pre shut-down level of 11,500 bopd. The indigenous communities and
government bodies have reached an agreement that will see increased
funding for the local communities. Oil deliveries have commenced to
the Iquitos refinery and, on a limited basis, to the Northern Oil
Pipeline ("ONP") until social issues affecting the ONP are fully
resolved. In order to manage oil inventory levels, production is
currently intentionally constrained to 5,000 bopd, until such time
as the ONP is operational. The Company's stringent COVID-19
protocols continue to ensure that the camp remains safe;
-- In October 2020, the Company sold 192,000 barrels of oil to
the Iquitos refinery and the ONP at pump station #1, thereby
generating revenues of $5.5 million (net of transportation and
fees), which has been paid to the Company;
-- Discussions with Petroperu are continuing with respect to
finalizing the contingent liability Arrangement, and the agreement
is expected to be completed in the coming weeks;
-- The Company continues to diligently pursue a robust credit
facility that will enhance liquidity and enable the Company to
continue investment in the Bretana oil field for development
growth; and,
-- PetroTal has been assessing other oil export options and has
signed a contract with an international oil trader for a pilot
shipment to export 120,000 barrels into the Atlantic region using
the Amazon river through Brazil. The shipment will be sold FOB
Bretana, priced at the forward month Brent ICE price, and paid
within two weeks of loading at Bretana. There are no subsequent oil
price adjustments.
Liquidity Update
At November 19, 2020, PetroTal has cash resources of $9.8
million, with accounts payable and accrued liabilities of
approximately $39.3 million, a reduction of $1 million from
September 30, 2020. Ongoing payments will be managed from expected
oil field revenues and internal cash resources. Pursuant to
contractual terms with our suppliers, approximately 46% of the
amount are not due until into 2021.
Manuel Pablo Zuniga-Pflucker, President and Chief Executive
Officer, commented:
"Whilst the last few months have been challenging, from both a
COVID-19 and a social unrest perspective, we believe we have now
turned the corner. Although we continue to restrict current
production to 5,000 bopd, in order to manage our inventory levels,
we are confident that we can increase production back to 11,500
bopd once the ONP reopens.
We are pleased that the indigenous communities and government
bodies have reached an agreement that will see increased funding
for the local communities, and we look forward to continuing our
strong working relationship with national, regional & local
governments and the communities nearby Bretana as well as their
indigenous leaders.
We are pleased to sign an agreement with an international oil
trader for the pilot export sale of 120,000 barrels of oil into the
Atlantic region, diversifying our oil export options. We also aim
to secure a credit facility in due course, which has the potential
to enhance the Company's liquidity, so we can continue investment
in the Bretana oil field for development growth. In closing, I
would like to thank all our stakeholders for their continued
support, during what has been a challenging period for the Company.
We remain upbeat about the potential of the Bretana field and are
firmly focused on delivering value for all those involved in the
Company."
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; increased oil production volumes due to the reopening of
the Bretana oil field, intentional production constraints to manage
oil inventory and plans to return to full of production at such
time as ONP is operational; the Arrangement with Petroperu,
including the intention to enter into a final agreement in respect
of contingent liabilities; the Company's ability to secure a credit
facility; export alternatives; future development and growth
prospects; and the ongoing effects of Covid-19 and social unrest
and violence in Peru on the Company and its employees. 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, including,
but not limited to, expectations and assumptions concerning the
ability of existing infrastructure to deliver production and the
anticipated capital expenditures associated therewith, reservoir
characteristics, recovery factor, exploration upside, prevailing
commodity prices and the actual prices received for PetroTal's
products, the availability and performance of drilling rigs,
facilities, pipelines, inventory and barge storage capacity, other
oilfield services and skilled labour, royalty regimes and exchange
rates, 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, 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 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
(including recent social unrest and violence), 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 continue to 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 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 prospective results of
operations, production, revenue, cash resources, liquidity, a
future credit facility 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.
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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