TIDMPTAL
RNS Number : 5491P
PetroTal Corp.
18 February 2021
PetroTal announces 2021 Capital Budget of US$100 million
Targeting 2021 average oil production between 11,000 and 12,000
bopd, with a 2021 exit range of 18,000 to 19,000 bopd
Calgary, AB and Houston, TX - February 18, 2021 - PetroTal Corp.
("PetroTal" or the "Company") (TSX--V: TAL and AIM: PTAL) is
pleased to announce its 2021 capital program of US$100 million. The
program will be fully funded from the recently announced US$100
million bond issue, supplemented with funds generated from
operations and existing cash resources.
The drilling focused development program is expected to start in
March 2021 and continue through December 2021. The program is
designed to enable PetroTal to more than double production from Q1
2021 to Q4 2021, and complete phase two of the highly scalable
central processing facility ("CPF-2") in Q3 2021. All amounts are
quoted in US dollars.
2021 Capital Program Highlights
-- Drill and complete three horizontal development wells, one
deviated production well and a second water disposal well at the
Bretana oil field;
-- Complete the second phase of CPF-2 in Q3 2021, taking overall
fluid production capacity up to 124,000 barrels per day, sufficient
to handle 24,000 barrels of oil per day ("bopd" );
-- Target average 2021 oil production between 11,000 and 12,000
bopd with a target 2021 exit range of 18,000 to 19,000 bopd,
-- Generate cash flow ("EBITDA") of approximately $90 million,
based on a forecast Brent oil price of $50 per barrel flat;
-- Total 2021 capital expenditures of $100 million, fully funded
from proceeds of the recent $100 million bond issue, funds from
operations and existing cash resources; and,
-- In addition to ongoing Environmental, Social and Governance
("ESG") initiatives, PetroTal has allocated over $1 million in
operating and capital spending for specific community
investments.
2021 CAPITAL BUDGET
Based on the successful 2019 and 2020 drilling results, PetroTal
will spud five new development wells at Block 95 costing
approximately $7 million for the deviated well and between $12- $14
million per horizontal well. Four of these oil wells are expected
to be producing in 2021, with the fifth well on production in
February 2022. A second water disposal well is planned in May at an
estimated cost of $9 million, providing an expected 50,000 barrels
of water per day of additional disposal capacity and enabling oil
production growth beyond 20,000 bopd.
Completion of CPF-2 in Q3 2021 for an estimated $12 million will
boost fluid handling capacity to 124,000 barrels per day,
sufficient for approximately 24,000 bopd. The additional investment
will bring total investment in CPF-2 to $24 million, approximately
$4 million less than the original estimate. Extensions to the
loading dock to handle larger oil volumes and optimal integration
of CPF-1 and CPF--2 will require $3 million. Commissioning CPF-2
for commencement in Q3 2021 is designed to facilitate our Q4 2021
average oil production target of between 16,000 and 17,000
bopd.
Remaining notable capital investments include injection pumps,
electrical infrastructure, and various field and security upgrades.
These smaller capital items will complement the expected
operational pace and fluids growth profile throughout 2021. In
addition, a $1 million workover on the 4H well will commence in
March that will result in a higher capacity pump being installed.
The 4H well has been shut in since late January due to a
transformer failure during the commissioning of the new crude oil
power generation plant, thereby causing issues with the original
pump. With the enhanced capacity pump, the estimated lost
production of approximately 100,000 barrels of oil will be
recovered in Q3 2021 and will lead to consistently higher
production rates and a higher estimated ultimate recovery for the
4H well.
COMMUNITY RELATIONS
Included in the 2021 operating and capital budget are amounts
related to community and social focused projects. Notable items
include over $1 million allocated for community upgrades to
electricity and water systems, building infrastructure and a
commitment to provide diesel at Bretaña for community use. In
addition, as part of these corporate social awareness initiatives,
PetroTal has delivered certified construction materials for a
200-meter bridge in the community of Urarinas. This will benefit
more than 65 families, including 175 children, who will have direct
access to their school, and can avoid commuting via boat. As in
past years, PetroTal will continue to provide ongoing agricultural
and aquaculture training to over 300 local families to promote the
local economy. Additionally, as part of our overall COVID-19
protocol we continue assisting the local communities of the Bretana
district with medical supplies and testing kits.
BLOCK 107
Approximately $1.8 million will be allocated for continued
technical and permitting work at Block 107, representing
approximately 2% of the 2021 total capital program.
Capital Budget Summary $ millions
Drilling and Completion $68
Production Facilities $13
Infrastructure and ESG $17
Other - Block 107 $2
--------------------------- -----------
Total 2021 Capital Budget $100
--------------------------- -----------
PRODUCTION GUIDANCE
With this capital program, PetroTal estimates 2021 average
production of between 11,000 and 12,000 bopd, an increase from the
2020 average production of 5,675 bopd, and well above the Q4 2020
average production of 6,413 bopd.
The first 2021 development well is expected to be on production
in April and increase oil production rates to pre-May 2020 shut-in
levels of between 10,500 and 11,500 bopd, inclusive of base
reservoir declines. In addition, before the end of June 2021,
PetroTal will drill a water disposal well, resulting in H1 2021
average production of 9,000 to 10,000 bopd, equivalent to the Q1
2020 pre COVID-19 rate. Three additional horizontal development
wells are expected on production through H2 2021 with the final
well of the 2021 program drilled in late 2021 and on production in
early February 2022. Production is expected to average between
14,000 and 15,000 bopd in H2 2021.
PRODUCTION AND CAPITAL PROFILE
Q1 Q2 Q3 Q4 2021
New oil wells completed* 0 1 1 2 4
-------- -------- --------- ---------
New water disposal
wells 0 1 0 0 1
-------------------------- -------- -------- --------- ---------
10,000
7,000 - - 11,500 16,000 11,000
Oil production (bopd) 8,000 11,000 -12,500 -17,000 -12,000
-------------------------- -------- -------- --------- ---------
Total CAPEX ($ millions) 15 30 30 25 100
-------------------------- -------- -------- --------- ---------
*Excludes one horizontal well to commence drilling in December
2021 and be completed in early 2022
CAPITAL PROGRAM FUNDING
The fully subscribed $100 million bond offering, which closed on
February 16, 2021, allows PetroTal to kickstart its 2021 capital
program in March 2021 and immediately commence near term operations
without working capital constraints. The 2021 capital budget has
been planned conservatively and is fundable down to an unhedged
$44/bbl Brent flat for the remainder of 2021. At $50/bbl Brent
flat, the 2021 budget is substantially funded out of cash flow by
2021 year end, allowing PetroTal the flexibility to allocate
additional liquidity from the bond issuance to the highest return
weighted projects, while maintaining strong credit metrics. With an
enhanced risk management focus, PetroTal plans to implement a
robust hedging program with an emphasis on protecting the 2021
capital budget and ensuring covenant compliance should oil prices
fall materially from current levels. The program may include swaps,
puts, and collars over the next twelve months' production.
Manuel Pablo Zuniga-Pflucker, President and Chief Executive
Officer, commented:
"We are excited about our early achievements in 2021. As a
management team, we overcame many unique challenges in 2020 and we
are now positioned stronger than before the pandemic. With the
successful placement of our three year bond, we can pivot into a
forward leaning position operationally and have the financial
confidence to execute what we do best, namely development of the
Bretana oil field. We believe our approved 2021 capital budget is
balanced and paced appropriately to fit our short and long-term
targets. Ongoing operational success and financial discipline will
allow the Company to be rewarded in a rising oil price environment.
We intend for 2021 to be a year of operational excellence as we
continue to demonstrate our repeatable organic growth story to the
market. Having additional liquidity will also allow our highly
experienced technical team to evaluate further opportunities to the
benefit of our stakeholders.
2021 will be a defining year for the Company as we look to
double production and realize scale and synergies that compete with
the best oil plays in the world. I would like to sincerely thank
the entire PetroTal team, the Board, our shareholders, and our new
bondholders for their continued support in what is an exciting
period for PetroTal."
Qualified Person's Statement
Estuardo Alvarez-Calderon, the Company's Vice President,
Exploration and Development, who has over 35 years of relevant
experience in the oil industry, has approved the technical
information contained in this announcement. Mr. Alvarez-Calderon
received a Bachelor of Science degree in Geology from the
University of Texas at Austin and is registered on the Texas Board
of Professional Geoscientists.
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 $100 million bond issue and the closing thereof;
drilling, water and other activities and the anticipated costs and
results of such activities; the ability of the Company to achieve
drilling success consistent with management's expectations;
anticipated future production and revenue; drilling plans including
the timing of drilling; oil production levels, including average
production and exit production in 2021; decline rates; the 2021
capital program and budget, including drilling plans, the proposed
scale-up of CPF-2 and the timing thereof; development of Block 107;
commitment to ESG principles; hedging program and the terms
thereof; and future development and growth prospects. 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, 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 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 prospective results of
operations, production and production capacity, operating costs,
EBITDA, 2021 capital program and budget (including the expectation
that such budget will be cash flow funded by 2021 year end), bond
offering 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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