TIDMPTAL
RNS Number : 3992C
PetroTal Corp.
22 February 2022
PetroTal Announces a 2022 Capital Budget of US $120 million
Targeting a 100% growth rate in average oil production to
between 17,500 and 19,500 bopd
Free cash flow pre debt service of $230 million
Calgary, AB and Houston, TX - February 22, 2022-PetroTal Corp.
("PetroTal" or the "Company") (TSX-V: TAL, AIM: PTAL and OTCQX:
PTALF) is pleased to announce a fully funded 2022 capital program
of $120 million that is expected to generate material free cash
flow, allowing for an expected resumption of a dividend to
shareholders by Q4 2022. All amounts are quoted in US dollars.
2022 Key Highlights
-- Invest $75 million in drilling and completing four horizontal
development wells in 2022. Inclusive of well 10H, which commenced
production on January 31, 2022, a total of five new wells will
commence production in 2022;
-- Target a 2022 average production range between 17,500 bopd
and 19,500 barrels of oil per day ("bopd") with an estimated exit
December 2022 production rate of approximately 21,500 bopd;
-- Generate an adjusted EBITDA(1) range of $340 to $365 million,
assuming a 2022 average Brent price of $88/bbl and a $37 million
net derivative true-up payment from oil arriving and being
commercialized at Bayovar through the Northern Peruvian Pipeline
("ONP");
-- Execute a facilities and infrastructure expansion program of
approximately $43 million which includes a new diluent tank,
additional separators, a power plant expansion, additional
injection facilities and key process optimization projects;
-- Generate free cash flow (before debt service)(1) of between $220 and $245 million in 2022;
-- Repay $20 million of the 2021 $100 million bond issue in H1 2022;
-- Redeem the balance of the bonds in Q3 2022, should cash and working capital levels permit;
-- Assuming the entire bond is retired, PetroTal intends to
reinstate a stable and rewarding return of capital program as early
as Q4 2022; and,
-- Allocate approximately $15 million in community social trust
payments and direct community investment projects in 2022.
(1) See "Non-GAAP Financial Measures"
Drilling and Completion Budget
PetroTal will invest approximately $75 million to drill four
separate producing development wells in 2022, and complete well 10H
which commenced drilling in late 2021 and started production on
January 31, 2022. The four new drills in the remainder of 2022 are
11H, 12H, and 13H in the south eastern part of the field and 14H in
the north west. These proved undeveloped wells were strategically
selected to maximize production
increases, and to continue the extension of the reservoir
boundaries. Rig maintenance programs are budgeted to ensure a safe
and stable drilling campaign.
Facilities Budget
In 2022, PetroTal will focus on developing necessary
infrastructure needed to support continued growth. Approximately
$25 million is allocated for a new diluent tank, a three-phase
separator unit including engineering and mechanical works, central
processing facilities ("CPF-3") planning and construction costs,
which will commence in April 2022 and enhance the water injection
system with new water injection pumps. This will enable the Company
to manage diluent levels to avoid frequent diluent shipments and
allow the field to process nearly 200,000 barrels of fluid when
completed, which is expected to be by mid 2023.
Over 20 key field infrastructure projects have been identified,
totaling $18 million, which will be allocated for optimization,
process/production improvement, power expansion, maintenance, and
security projects. These projects will be completed in priority of
near-term need and are subject to changes given the material and
logistical challenges caused by the COVID-19 pandemic.
Block 107 Budget
A total of $2 million is budgeted in 2022 for Block 107 permits.
PetroTal expects approval of the Constitucion and Kametza (Osheki)
permits in 1H 2022 and 1H 2023, respectively. With these permit
approvals, PetroTal will continue to evaluate the Company's deep
portfolio of exploration assets for ways to maximize shareholder
value.
Community Investment Budget
PetroTal will substantially increase its allocations to
community investment in 2022. An estimated $6 million will be
dedicated towards the following key project areas:
-- Direct social investments in programs, training and education - $0.8 million
-- Diesel for electricity generation in Puinahua and other areas - $1.3 million
-- Community river erosion control - $1.2 million
-- Social space construction projects - $0.3 million
-- Environmental innovation - $0.4 million
-- Community relations projects - $1.9 million
In addition, the Company expects to generate material net
revenue in 2022 and will contribute, on a fortnight basis, an
estimated 2022 total of $9 million into community social trust
payments assuming no disruptions to PetroTal's ability to produce
or sell oil through the ONP, Brazil, Iquitos, or other sales routes
planned in the future. PetroTal believes this will create a
long-standing alignment between the government, communities, and
the Company.
Production Guidance
The Company generates various sensitivities for possible
production downtime attributable to social and technical issues.
Considering the implementation of the social trust, the Company's
current assessment of likely downtime, mostly due to social unrest,
and the planned $120 million capital expenditure program,
PetroTal's 2022 oil production is expected to range between 17,500
bopd and 19,500 bopd. At the mid point of the range, PetroTal would
produce about 6.6 million barrels of oil in 2022, representing a
100% production growth rate over 2021. In addition, the Company
expects to exit 2022 with production at approximately 21,500 bopd
and with production materially surpassing the 20,000 bopd mark at
certain flush production points during the year.
OPEX Guidance
OPEX run rates have increased over 2020 and 2021 levels due to
increased activity, inflation pressures, and the Company's
continued commitment to manage COVID-19, safety and security.
Summarized below are the estimated cost run rates expected in
2022:
Fixed and semi-variable lifting costs that scale with production
- estimated at $2.8 million per month including:
-- Fuel
-- Well and various contract services
Variable transportation costs - $7.2/bbl or ($45 - $50 million
for 2022)
-- Gross diluent cost and diluent transportation - $4.2/bbl ($1.4/bbl net with diluent sales)
-- Barging - $1.7/bbl
-- Barging standby, diesel, and supervision - $1.3/bbl
The variable costs outlined above assume that PetroTal is able
to sell oil consistently. Interruptions to the ability to sell
production may create material volatility to the above per barrel
run rates if the Company produces into storage for an extended
period of time. Currently, PetroTal uses a 4% diluent blend into
the oil mix to facilitate productivity, representing a gross cost
of $4.2/bbl. As oilfield dynamics change from increased oil
production, the Company expects to reduce its diluent blend.
Lastly, tariffs, ONP fees, and differentials that are variable in
nature are netted with revenue for financial statement and planning
purposes.
Cash Flow Guidance
Assuming an $88/bbl average 2022 Brent price, the current run
rate cost structure, and sales agreements for oil exports, PetroTal
expects to generate $325 to $350 million of net operating income
("NOI") and between $340 and $365 million of EBITDA(1) inclusive of
$37 million of derivative true-up settlements. The resulting free
cash flow (prior to debt service)(1) is expected to be between $220
- $245 million, thereby allowing the Company to facilitate full
payout of the bonds in Q3 2022 and implement shareholder returns(2)
by Q4 2022, along with maintaining a healthy cash balance.
(1) See "Non-GAAP Financial Measures"
(2) The bonds restrict any shareholder returns until fully paid
out
Quarterly Production and Capital Profile (Mid Case)
Q1 Q2 Q3 Q4
Oil wells completed 1 (10H) 1 (11H) 2 (12H & 13H) 1 (14H)
-------- -------- -------------- --------
Production (bopd) 16,300 15,000 20,500 21,000
-------- -------- -------------- --------
CAPEX (millions) $35 $35 $37 $13
-------- -------- -------------- --------
PetroTal 2022 Budget Summary ($ millions, unless otherwise
stated)
Budget Range (Low - High
Case)
Brent Price $/bbl (Feb 7, 2022 strip
forecast) $88.0
--------------------------
Production bopd 17,500 - 19,500
--------------------------
NOI $325 - $350
--------------------------
G&A $22
--------------------------
Derivative settlements (Feb 7, 2022
strip forecast) $37
--------------------------
EBITDA $340 - $365
--------------------------
CAPEX $120
--------------------------
Free cash flow(1) $220 - $245
--------------------------
1) See "Non-GAAP Financial Measures"
Reimplementation of a Return of Capital policy
PetroTal anticipates material free cash flow generation in 2022.
Based on $88/bbl Brent, free cash flow(1) is expected to range from
$220 to $245 million prior to debt service, taxes, lease payments,
hedge costs, factoring, and VAT. In H1 2022, PetroTal intends to
repay $20 million of the 2021 $100 million bond issue and $30
million in interest, factoring, lease payments and VAT.
(1) See "Non-GAAP Financial Measures"
In Q3 2022, the Company expects to be in a position to retire
the remaining $80 million in bonds with a 6% call premium of $5
million. Interest saved for the remainder of the year will
materially offset this prepayment charge thereby allowing PetroTal
to implement a return of capital policy by Q4 2022. When the bonds
are fully repaid, the Company intends to reinstate a quarterly
dividend (as was done in Q4 2019).
The Company notes that the above intention to reinstate a return
of capital policy is dependent on a number of interplaying factors
materializing as expected.
Hedging Update
During January and February 2022, the Company hedged
approximately 1,100,000 barrels using a combination of puts with an
$85/bbl strike and collars with a range of $63/bbl to $70/bbl
allowing PetroTal to share in any continued commodity price
increases.
In total, PetroTal has approximately 2.2 million barrels hedged,
representing approximately 33% of the 2022 mid case production
guidance, and in line with the Company's hedging strategy.
2022 EBITDA Sensitivities for Production Ranges ($ millions)
Production (bopd)
-------------- ------------------------- ----------------
2022 derivative
EBITDA Matrix 17,500 18,500 19,500 settlement
-------------- ------- ------- ------- ----------------
$100 357 376 395 +63
-------------- ------- ------- ------- ----------------
$95 332 350 367 +52
-------------- ------- ------- ------- ----------------
$90 306 323 340 +41
-------------- ------- ------- ------- ----------------
$85 281 297 312 +30
-------------- ------- ------- ------- ----------------
$80 256 270 284 +19
-------------- ------- ------- ------- ----------------
$75 233 246 259 +8
-------------- ------- ------- ------- ----------------
$70 207 218 230 -3
-------------- ------- ------- ------- ----------------
Brent Price
$/bbl $65 182 193 203 -14
-------------- ------- ------- ------- ----------------
Assuming 2022 average production of 18,250 bopd, PetroTal will
be in a position to fully cash fund its 2022 CAPEX program and all
debt service, VAT, and lease obligations down to $60/bbl Brent
while maintaining a liquidity buffer of approximately $25 million
throughout 2022.
Updated Corporate Presentation
Please see PetroTal's website for an updated version of its
corporate presentation.
2022 Guidance and Reserves Webcast
On February 22, 2022, please join the Company for a summary of
2022 guidance and 2021 year end reserves by clicking on the link
below:
UK - 3:00pm, Calgary - 8:00am, Houston - 9:00am, Lima -
10:00am
https://webcasting.brrmedia.co.uk/broadcast/61f90806d0a01d0d75c3c4e0
Manuel Pablo Zuniga-Pflucker, President and Chief Executive
Officer, commented
"We are excited to communicate our 2022 development plans to the
market. 2022 will be a year of achievement and rewarding
shareholders who continue to believe in our story and management
team. It is vital that we continue drilling wells and executing our
2P development plans by drilling proved-undeveloped locations that
should allow future booked location upgrades, prevent base
declines, and optimize water handling peaks based on our current
infrastructure. We will continue to deliver investment grade well
results and manage our balance sheet prudently, as we have over the
past four years our team has been together."
ABOUT PETROTAL
PetroTal is a publicly traded, tri--quoted (TSXV: 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.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)
Ritchie Balmer / James Spinney / Robert Collins
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
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, including executing 2P development plans to prevent base
declines and optimize water handling peaks; the impact of social
disruption on the Company's operations; drilling, completions,
workovers and other activities and the anticipated costs and
results of such activities; PetroTal's 2022 budget and
financial/operational guidance; PetroTal's anticipated operational
results for 2022 including, but not limited to, estimated or
anticipated production levels, capital expenditures and drilling
plans; the intention to redeem the outstanding bonds; PetroTal
plans to deliver strong operational performance and to generate
free cash flow and growth; capital requirements; the ability of the
Company to achieve drilling success consistent with management's
expectations; the ability of the Company to achieve near term
production targets and operate at unrestricted levels; anticipated
future production and revenue; drilling plans including the timing
of drilling, commissioning, and startup and the impact of delays
thereon; oil production levels, including average and exit
production in 2022; sales expansion through alternative exports
routes, including barging and trucking; the Company's proposals for
collaboration with local communities; and future development and
growth prospects. 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.
Without limitation of the foregoing, future dividend payments, if
any, and the level thereof, is uncertain, as the Company's dividend
policy and the funds available for the payment of dividends from
time to time is dependent upon, among other things, free cash flow
financial requirements for the Company's operations and the
execution of its growth strategy, fluctuations in working capital
and the timing and amount of capital expenditures, debt service
requirements and other factors beyond the Company's control.
Further, the ability of PetroTal to pay dividends will be subject
to applicable laws (including the satisfaction of the solvency test
contained in applicable corporate legislation) and contractual
restrictions contained in the instruments governing its
indebtedness. 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
of the Ministry of Energy to effectively achieve its 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 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,
increased operating and capital costs due to inflationary
pressures, 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, 2020 and management's discussion and
analysis for the three and nine months ended September 30, 2021
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 NI 51-101. All references to Brent
indicate Intercontinental Exchange ("ICE") Brent.
NON-GAAP FINANCIAL MEASURES: This press release contains
financial terms that are not considered measures under generally
accepted accounting principles ("GAAP") such as EBITDA and free
cash flow that do not have any standardized meaning under GAAP and
may not be comparable to similar measures presented 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.
EBITDA 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 EBITDA as a measure of operational performance
and cash flow generating capability. EBITDA impacts the level and
extent of funding for capital projects investments. Free cash flow
is calculated as cash flow from operating activities less
exploration and development capital expenditures and is calculated
prior to all debt service, taxes, lease payments, hedge costs,
factoring, and lease payments. Management uses free cash flow to
determine the amount of funds available to the Company for future
capital allocation decisions.
FOFI DISCLOSURE: This press release contains future-oriented
financial information and financial outlook information
(collectively, "FOFI") about PetroTal's budget and guidance,
prospective results of operations, production and production
capacity, free cash flow, revenue, NOI, adjusted EBITDA, debt
repayment, liquidity, shareholder returns 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
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.
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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END
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