TIDMPTAL
RNS Number : 0008W
PetroTal Corp.
20 April 2021
PetroTal Provides Risk Management Update
Remaining 1.4 million barrels of oil in the ONP now hedged by
Petroperu
Additional 622,000 barrels hedged by PetroTal
PetroTal maintains low cash flow exposure from Peruvian currency
fluctuations
Calgary, AB and Houston, TX - April 20, 2021 - PetroTal Corp.
("PetroTal" or the "Company") (TSXV: TAL and AIM: PTAL) is pleased
to announce the following risk management update. All currency
amounts are in United States dollars ("USD"), unless otherwise
stated.
Highlights:
- Further to the Company's press release dated March 31, 2021,
the remaining 1.4 million barrels of oil in the North Peruvian
Pipeline ("ONP") have now been hedged by Petroperu, thereby
securing future total true-up revenue payments of approximately
USD$31 million for the original 1.8 million barrels;
- At the corporate level, over 1.2 million barrels in total are
now hedged, representing 32% of forecast oil production for April
2021 to December 2021. PetroTal completed a second layer of its oil
hedging program for 2021. Approximately 338,000 barrels have been
hedged (representing 9% of forecast oil production covering August
2021 to December 2021) in a Put structure with a $60/bbl strike. In
addition, 284,000 barrels have been hedged (representing 8% of
forecast oil production covering May 2021 to July 2021), in a
synthetic Put structure with a swap price of $62.15/bbl and a call
strike of $66.00/bbl;
- To address the recent volatility of the Peruvian Sol, the
Company has maintained low cash flow exposure to the currency, with
Peruvian Sol accounting for an estimated 8% of operating costs, 60%
of Peruvian general and administrative ("G&A") costs, and 8% of
capital expenditures; and
- 2020 year-end results will be announced on April 22, 2021.
Petroperu Hedging Update
Further to the press release dated March 31, 2021, Petroperu has
now finalized hedges for the remaining 1.4 million barrels of oil
in the ONP, produced from Bretana in 2019 and 2020. In doing so,
PetroTal benefits from reduced volatility around the future value
of the true-up revenue payments to be received during the remainder
of 2021. Based on the hedged amounts, the true-up payment is
expected to be approximately USD$31 million, which will be paid to
PetroTal when the barrels in the ONP reach the Bayovar port and are
exported in batches by Petroperu. In total, 1.8 million barrels of
oil in the ONP have been hedged at prices between $60.60/bbl and
$62.00/bbl and will be realized when the batches are sold.
Corporate Hedging Update
PetroTal has executed two additional hedges totaling 622,000
barrels to further protect the 2021 capital program. The first
hedge is in a Put structure for 338,000 barrels with a strike price
of $60.00/bbl covering August 1, 2021 to December 31, 2021. The
second hedge is in a costless synthetic Put structure for 284,000
barrels, with a swap price of $62.15/bbl and a call strike of
$66.00/bbl, covering May 1, 2021 to July 31, 2021, that allows the
Company to receive the floating Brent price above the call strike
should commodity prices continue to increase. Including the hedged
volume announced on March 31, 2021, PetroTal has hedged a total of
1.2 million barrels at the corporate level, representing 32% of
forecast oil production for April 1, 2021 to December 31, 2021. The
Company plans to maintain a rolling hedge book as hedges mature and
will look to be opportunistic if oil prices increase in the summer
driving season.
Foreign Currency Exposure
PetroTal uses USD as its functional currency. Revenues are
received in USD and the majority of expenses, including debt
service, are paid in USD creating limited consolidated cash flow
exposure to fluctuations in the Peruvian Sol. An estimated 8% of
operating costs, 60% of Peruvian G&A, and 8% of capital
expenditures are paid in Peruvian Sol and therefore a 1% movement
in Peruvian Sol would impact these expenditures by approximately
USD$180,000 on an annualized basis. From a functional currency
perspective, a weakening of the Peruvian Sol versus the USD would
consolidate into lower USD translated expenses for the Company.
Manuel Pablo Zuniga-Pflucker, President and Chief Executive
Officer, commented:
"Over the past month we have been working closely with Petroperu
to finalize hedging arrangements for the remaining barrels in the
ONP. Working with their risk management team has been seamless and
we have an efficient working process to execute further derivative
strategies together for future oil deliveries through the ONP. The
total true-up revenue of around USD$31 million will be a welcome
addition to our 2021 liquidity.
Furthermore, we are now in a position of strength to potentially
layer on additional opportunistic hedges with approximately 32% of
our volumes currently price protected. We are naturally hedged from
a currency standpoint from fluctuations in the Peruvian Sol, which
has experienced increased volatility recently.
Internally, financial and technical fundamentals have never been
stronger, and our management team have many years of experience
operating in different environments that transition politically.
Peru has attracted material external global capital and we believe
it will continue to remain an attractive jurisdiction for
investment, following the results of the upcoming Peruvian
elections."
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 below:
Douglas Urch
Executive Vice President and Chief Financial Officer
Durch@PetroTal-Corp.com
T: (713) 609-9101
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) 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; future true-up payments from Petroperu; hedging program
and the terms thereof; timing of year end filings; and future
development and growth prospects, including future acquisitions.
All statements other than statements of historical fact may be
forward-looking statements. In addition, statements relating to
expected production, reserves, recovery, costs and valuation are
deemed to be forward-looking statements as they involve the implied
assessment, based on certain estimates and assumptions that the
reserves described can be profitably produced in the future.
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, 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 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 (including volatility of the
Peruvian Sol), legal, political and economic instability in Peru
(including in respect of the Peruvian election), 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, 2020 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.
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 ("NI 51-101"). All references
to Brent indicate Intercontinental Exchange ("ICE") Brent.
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, hedging
arrangements, exposure to Peruvian Sol, 2021 capital program and
budget 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. All FOFI contained in this press
release complies with the requirements of Canadian securities
legislation, including NI 51-101.
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END
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