TIDMPTAL
RNS Number : 1984X
PetroTal Corp.
25 August 2022
PetroTal Announces Q2 2022 Financial and Operating Results
Seventh straight quarter of production growth
Generated nearly $100 million in net operating income in Q2
2022
Reiterating 2022 Guidance
Calgary, AB and Houston, TX - August 25, 2022- PetroTal Corp.
("PetroTal" or the "Company") (TSX-V: TAL, AIM: PTAL and OTCQX:
PTALF) is pleased to announce its financial and operating results
for the three months ended June 30, 2022 ("Q2 2022").
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 the three and
six months ended June 30, 2022, which are available on SEDAR at
www.sedar.com and on the Company's website at
www.PetroTal--Corp.com. All amounts herein are in United States
dollars ("USD") unless otherwise stated.
PetroTal delivered solid Q2 2022 financial and operational
performance highlighted by record production rates, record cash
flow, and a robust balance sheet profile with a substantial net
cash position.
Q2 2022 Highlights
-- Achieved record quarterly production of 14,467 barrels of oil
per day ("bopd") and quarterly sales of 14,616 bopd, up 25% and
down 5%, respectively, from Q1 2022, representing the Company's
seventh straight quarter of production growth, with unencumbered
sales for the majority of the quarter;
-- Completed well 11H on June 30, 2022, which produced over
300,000 barrels of oil over its first 30 full days on production,
has paid out its capital investment, and averaged over 9,000 bopd
from August 1 to 22, 2022;
-- Achieved a new daily Company production record of 25,218 bopd
on July 1, 2022 with production briefly reaching 26,000 bopd,
representing the maximum capacity at the newly expanded Central
Processing Facility ("CPF-2");
-- Sold approximately 86% of sales through the Brazilian route
with the remaining 14% sold to the Iquitos Refinery while the
Northern Peruvian Oil Pipeline ("ONP") was offline, successfully
redirecting 456,000 barrels from the ONP to the Brazilian
market;
-- Significantly reduced transportation costs through
significantly reduced diluent blending requirements to Brazil,
contributing to record low transportation costs of $3.4 million
($2.54/bbl);
-- Generated record net operating income ("NOI") and EBITDA(a)
of $98.6 million and $93.4 million, respectively, both up three and
a half fold from Q2 2021 levels and almost double from Q1 2022;
-- Generated record free cash flow(a) of $69.4 million before
changes in non-cash working capital and debt service, accumulating
over $100 million, for the six months ended June 30, 2022;
-- Invested approximately $24.0 million in capital expenditures
("Capex"), lower than revised guidance by $5 million, due to
drilling delays from the March 2022 social protests. Approximately
two thirds of Capex spent was for drilling and completion related
investments with the remainder divided amongst smaller production
operation projects;
-- On April 1, 2022, the Company paid $20 million of principal
to bondholders through the 101% call option mechanism set out in
the bond agreement. As of June 30, 2022 and August 25, 2022, the
Company is in compliance with all covenants; with $80 million of
bond principal remaining; and,
-- Exited the quarter with $77 million of total cash, including
$13.5 million of restricted cash, and approximately ($79) million
in net debt/(surplus)(1) , a record level for the Company allowing
for a future return of capital program in Q4 2022 or Q1 2023, with
an extremely solid balance sheet profile.
(1) Net debt/(surplus) defined as cash and restricted cash + VAT
receivable (short and long term) + trade receivables + short term
and long term derivative assets - AP - short and long term leases -
short and long term debt - derivative obligation
Selected Financial and Operational Highlights
Three Months Ended Six Months Ended
===========================================================================================
(in thousands USD) June 30, June 30, 2021 June 30, June 30,
2022 2022 2021
================================= =========== ============== ============ =============
Financial
Crude oil revenues 118,435 42,809 211,187 75,165
Royalties (8,104) (2,306) (14,477) (4,054)
Net operating income
(1) 98,589 29,677 162,783 49,647
Commodity price derivative
(gain)/loss (6,533) 4,147 (27,546) (18,365)
Net income 84,249 11,373 148,759 42,159
Diluted net income (US$/share) 0.10 0.01 0.18 0.05
Capital expenditures 24,024 22,363 41,553 29,476
================================= =========== ============== ============ =============
Operating
Average production (bopd) 14,467 8,839 13,114 8,089
Average sales (bopd) 14,616 8,842 15,065 8,711
Average Brent price ($/bbl) 111.80 69.01 101.54 64.28
Contracted sales price,
gross ($/bbl) 111.39 66.55 99.42 62.79
Netback ($/bbl)(2) 74.13 36.88 59.70 31.49
Funds flow provided by
operations(2) 60,688 19,627 66,432 24,094
Balance sheet
Cash and restricted cash 77,017 79,491
Working capital 141,971 62,634
Total assets 535,202 359,788
Current liabilities 92,988 72,639
Equity 357,732 180,291
================================= =========== ============== ============ =============
1. Net operating income and Netback represent revenues less
royalties, operating expenses, and direct transportation.
2. Netback per barrel ("bbl") and funds flow provided by
operations do not have standardized meaning prescribed by GAAP and
therefore may not be comparable with the calculation of similar
measures for other entities. See "Selected Financial Measures"
section.
Q2 2022 Financial Results
Record revenue . Oil revenue was $118.4 million ($89.04/bbl)
compared to Q2 2021 of $42.8 million ($53.20/bbl) and Q1 2022 of
$92.7 million ($66.41/bbl).
Record net operating income. Generated record NOI and EBITDA(a)
of $98.6 million ($74.13/bbl) and $93.4 million ($70.26/bbl),
respectively, compared to $29.7 million ($36.88/bbl) and $26.4
million ($32.87/bbl), respectively, in Q2 2021 and $64.2 million
($45.96/bbl) and $58.7 million ($42.58/bbl), respectively, in Q1
2022.
Capital investment. Capital expenditures in the quarter totalled
$24.0 million and were focused on drilling and completing well 11H
and advancing infrastructure projects. The total represented
approximately 88% of the budget, due to deferral of drilling
activity as a result of the social protest activity in March 2022,
and deferral of additional facility and water disposal work until
2023. First half 2022 capital expenditures are $41.6 million,
trending well under the $70.0 million approved budget.
Record Q2 and YTD 2022 free cash flow. Generated record free
cash flow(a) before changes in non-cash working capital and debt
service of $69.4 million. Total free cash flow for the six months
ended June 30, 2022 has surpassed $100 million, significantly
boosting the Company's liquidity profile.
Lower operating costs. Total quarterly lifting costs were $8.4
million ($6.28/bbl), a decrease from Q1 2022 of $10.1 million
($7.20/bbl) and from Q2 2021 of $5.5 million ($6.84/bbl), driven by
lower contracted operations and COVID 19 expenses.
Record low transportation costs. Diluent and barging costs were
$3.4 million ($2.54/bbl) in the quarter, reduced significantly from
$12.1 million ($8.68/bbl) in Q2 2022, and down from $5.3 million
($6.61/bbl) in Q2 2021. The decrease was supported by lower barging
standby time, and significantly lower diluent and diesel costs from
shipping through the Brazil and Iquitos routes instead of incurring
ONP costs.
G&A on budget. Q2 2022 G&A was $5.1 million ($3.87/bbl)
compared to $4.7 million ($3.38/bbl) in Q1 2022 and $3.2 million
($4.01/bbl) in Q2 2021 representing a 15% and 3% increase and
decrease, respectively, on a per barrel basis.
Record net income. N et income was $84.2 million an increase of
31% over Q1 2022 of $64.5 million and significantly exceeding $11.4
million in Q2 2021.
Balance sheet reflects a record net debt/(surplus) position .
Net debt/(surplus) was approximately ($79) million as at June 30,
2022, as defined internally by the Company.
Large net derivative asset balance. The total net derivative
asset on the balance sheet as at June 30, 2022 was $56.8 million,
consisting mostly of the true up value of oil in the ONP. As at
June 30, 2022 approximately 3.1 million barrels remained in the ONP
backstopping the net derivative value with a much lower cost base
from sales made in 2020 and 2021. With the ONP maintenance
estimated to be completed in October 2022, and the pipeline
operational again, the schedule to realize the derivative value has
shifted primarily into 2023, which will further supplement the
Company's expected cash reserves.
Operational and Financial Highlights Subsequent to June 30,
2022
Bayovar Export Realized. As announced on June 16, 2022 and July
5, 2022, Petroperu delivered approximately 550,000 barrels through
the ONP to Bayovar and exported nearly 720,000 barrels to an
international refiner. The Company expects to receive $53.9 million
from Petroperu, net of usual ONP fees and adjustments. Post this
Bayovar export, the amount of oil remaining in the ONP dropped from
3.1 million barrels to approximately 2.4 million barrels.
Navigating barging challenges. During July, the Company
encountered barging delays that were compounded by the closure of
the ONP, resulting in production constraints that lowered the
average production to 5,700 bopd from July 7 until July 25. The
Company has secured approximately 420,000 barrels of export barging
capacity for August 2022 plus 60,000 barrels for the Iquitos
Refinery which has allowed production to increase to 19,000 bopd
since August 22, 2022. PetroTal continues to explore long term
solutions to ensure appropriate barging capacity is available to
accommodate higher oil production rates and to optimize logistics
and barging fleet size for our Brazilian route.
Drilling schedule adjustments. Due to well servicing and a
conductor pipe placement for a future well, the Company's revised
drilling plan now schedules drilling the 13H well to be followed by
the 12H well. The 13H was spud on August 24, 2022 and is estimated
to be on production by late October.
Current liquidity update. Current total cash as at August 15,
2022 is approximately $115 million including $15 million in
restricted cash and up to date payments from our Brazilian route
shipping counterparty, but not including outstanding amounts owing
from Petroperu.
Corporate Hedging Update. PetroTal recently sold a swap at
$62.05/bbl and bought a call at $70.00/bbl on approximately 750,000
barrels of H2 2022 production. PetroTal will receive cash when the
Brent oil price is above $70/bbl, and will have a floor price of
$62.05/bbl. After this hedge, the Company is approximately 25%
hedged on corporate production volumes in Q3 and Q4 2022. As 2022
progresses, the Company will look to layer in additional hedges for
H1 2023 on up to 25% of total corporate production.
Ten million barrels produced. On August 22, 2022, the Company
formally surpassed the ten million barrels of produced oil
milestone in only four years.
Reiterating 2022 Guidance
The Company is reiterating guidance provided in May 2022 as
navigated a number of logistical issues caused by the ONP shut down
and barging fleet delays. The Company estimated 2022 average
production to be between 15,000 bopd and 16,000 bopd and the latest
production forecast confirms the lower end of this range. Thanks to
higher oil prices and lower diluent costs, the Company maintains
EBITDA to be approximately $340 million and associated free cash
flow before working capital and debt service to be approximately
$230 million. The reiterated guidance is highly dependent on
certain sales route availability assumptions, ONP maintenance
completion schedules, and Petroperu's unencumbered access to
credit, which if different from current estimates could materially
alter the reiterated guidance.
As a result of the revised drilling schedule, the Company is
guiding 15,000 bopd, and has adjusted Q3 and Q4 2022 production
profiles to the following levels as dictated by available sales
scheduling:
Adjusted Guidance Q1 (actual) Q2 (actual) Q3 Q4 2022
Oil wells completed 1 (10H) 1 (11H) 0 2 4
------------ ------------ ------- ------- -------
Average Production
(bopd) 11,746 14,467 14,250 19,500 15,000
------------ ------------ ------- ------- -------
CAPEX (millions) $18 $24 $29 $40 $111
------------ ------------ ------- ------- -------
USD millions Guidance
Contracted Brent (USD/bbl) $102
-------------------------------
Average Production (bopd) 15,000 - 16,000 (25% downtime)
-------------------------------
Net operating income $351
-------------------------------
G&A ($22)
-------------------------------
Net derivative settlements(1) $13
-------------------------------
Adjusted EBITDA(1) $342
-------------------------------
CAPEX ($111)
-------------------------------
Free cash flow $231
-------------------------------
(1) Approximately $33 million in anticipated 2022 true-up
revenue has now been deferred into 2023 as a result of the ONP
maintenance.
Updated Corporate Presentation, investor webcast and AGM
reminder
PetroTal will host an investor webcast on August 25, 2022 at
9:00 am CT (3:00 pm BST), following release of the Q2 2022 results.
The Company has also provided an updated corporate presentation
inclusive of the Q2 2022 results, on its website. PetroTal's 2021
AGM will be held virtually on September 15, 2022.
Link to PetroTal Q2 2022 webcast
https://stream.brrmedia.co.uk/broadcast/62e8f64f04182f363ba99aa2
Manuel Pablo Zuniga-Pflucker, President and Chief Executive
Officer, commented
"We would like to thank our entire team for another record
quarter on many fronts. Though we have experienced recent
production constraints from short term sales bottlenecks,
unconstrained production run rates are over 20,000 bopd which we
successfully tested in our facilities. The outlook for PetroTal's
low sulfur oil remains incredibly robust with recent strong export
demand realized. We continue to meet commercial challenges head on
and are excited about potential short- and long-term solutions for
PetroTal's river transportation options. From a social perspective,
the 2.5% social fund working table sessions have been extremely
productive, transparent, and aligned, creating the necessary
stability our field has strived for over the years. Many milestones
have yet to be achieved, however, the initiatives remain on track
and functioning as planned with more formal updates on this to come
in H2 2022. Finally, I would like to congratulate the entire
PetroTal team on our recent milestone of ten million barrels
produced in only four short years since first production."
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 2020, 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
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.
READER ADVISORIES
Notes to Press Release
(a) See "Specified Financial Measures".
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 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 revised 2022 guidance and budget including, but not
limited to, estimated or anticipated production levels, capital
expenditures and drilling plans; 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. 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
labor, royalty regimes and exchange rates, 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, 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, wars (including Russia's military actions in Ukraine), 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. Ongoing military actions between Russia and Ukraine
have the potential to threaten the supply of oil and gas from the
region. The long-term impacts of the actions between these nations
remains uncertain. 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
Corporation's most recent annual information form and MD&A,
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.
SHORT-TERM PRODUCTION RATES: References in this press release
peak production, initial 30 days of production 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 for
PetroTal. The Company cautions that such results should be
considered to be preliminary.
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.
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. "Netback" (non-GAAP financial ratio)
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. "Funds flow provided by operations" (non-GAAP financial
measure) includes all cash generated from operating activities and
is calculated before changes in non-cash working capital. "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. "Free cash flow" (non-GAAP
financial measure) is calculated as net operating income less
G&A 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. Please refer to the
MD&A for additional information relating to specified financial
measures.
FOFI DISCLOSURE: This press release contains future-oriented
financial information and financial outlook information
(collectively, "FOFI") about PetroTal's revised budget and
guidance, prospective results of operations, production and
production capacity, free cash flow, revenue, 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.
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END
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