TIDMPTAL
RNS Number : 7460G
PetroTal Corp.
17 November 2022
PetroTal Announces Q3 2022 Financial and Operating Results
Strong balance sheet position
$150 million of free cash flow delivered in nine months of
2022
Calgary, AB and Houston, TX - November 17, 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 and nine months ended September 30, 2022 ("Q3
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
nine months ended September 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.
Q3 2022 Highlights
-- Production in the quarter averaged 12,229 barrels of oil per
day ("bopd") with sales of 12,186 bopd (1.1 million barrels),
despite being constrained as low river levels reduced barge
capacity;
-- Generated net operating income(1) ("NOI") of approximately
$62.3 million, EBITDA(1) of $57.6 million, and free cash flow(1)
before all debt service of $37.0 million equating to a 44% free
cash flow margin(2) ;
-- Capital investment totaled $20.6 million, primarily to drill
well 13H and key infrastructure projects;
-- Petroperu exported approximately 720,000 barrels of oil to an
international refiner, crystalizing for PetroTal over $64 million
(including VAT) of true up revenue and reducing the amount of
PetroTal's oil in the Northern Peruvian Pipeline ("ONP") to 2.4
million barrels;
-- Demonstrated continued balance sheet strength with cash of
$93 million at September 30, 2022, a net surplus(2) balance of
$75.5 million. The Company remains in full compliance with all bond
covenants as at September 30, 2022; and,
-- On September 15, 2022, PetroTal welcomed two new Directors,
Messrs. Luis Carranza and Jon Harris, and announced the retirement
of Messrs. Gary Guidry and Ryan Ellson.
(1) Free cash flow defined as EBITDA less capital expenditures.
Free cash flow margin defined as free cash flow divided by crude
oil revenues. See "Selected Financial Measures"
(2) Net debt / surplus defined as (total cash + total trade and
VAT receivables + total derivative assets) - (trade and VAT
payables + total bond debt + total derivative obligations + total
lease obligations)
Manuel Pablo Zuniga-Pflucker, President and Chief Executive
Officer, commented:
"Having produced over 10.5 million barrels of oil since
inception, we are on track to deliver average production growth of
approximately 40% and almost $200 million in free cash flow in
2022. Although the Company encountered external transportation
challenges, we expect to deliver double digit yearly production
growth with potentially 40% plus free cash flow yields under
current Brent oil forward strip pricing conditions. The high margin
nature of our business should be at the forefront of investors'
sentiment, alongside our proven ability to execute
technically."
Selected Financial and Operational Highlights
Three Months Ended Nine Months Ended
======================================================================================================================
(in thousands USD) Sept 30, Sept 30, 2021 Sept 30, Sept 30,
2022 2022 2021
======================================== =============== ==================== ================= ==================
Financial
Crude oil revenues 84,164 44,781 295,350 119,946
Royalties (3) (11,689) (2,604) (26,166) (6,658)
Net operating income
(1) 62,333 29,587 225,114 79,234
Commodity price derivative
(gain)/loss 32,686 (293) 5,139 (18,658)
Net income 2,594 14,970 151,351 57,129
Diluted net income (US$/share) 0.00 0.02 0.18 0.07
Capital expenditures 20,625 26,114 62,178 55,590
======================================== =============== ==================== ================= ==================
Operating
Average production (bopd) 12,229 9,508 12,816 8,567
Average sales (bopd) 12,186 9,142 14,095 8,856
Average Brent price ($/bbl) 97.89 73.21 102.39 67.76
Contracted sales price,
gross ($/bbl) 97.21 71.06 98.78 65.67
Netback ($/bbl)(2) 55.60 35.18 58.50 32.77
Funds flow provided by
operations 46,205 18,648 112,636 42,742
Balance sheet
Cash and restricted cash 93,018 57,655
Working capital 136,338 56,455
Total assets 549,838 373,261
Current liabilities 110,160 69,785
Equity 361,367 195,572
======================================== =============== ==================== ================= ==================
1. Net operating income ("NOI") 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.
3. Royalties in Q3 2022 include the value since January 1, 2022
inception for the 2.5% social trust initiative.
Q3 2022 Financial Highlights
Strong revenue profile . Oil revenue in Q3 2022 was $84.2
million ($75.07/bbl) compared to Q2 2022 of $118.4 million
($89.04/bbl) and Q3 2021 of $44.8 million ($53.24/bbl).
High margin operational cash flow. Generated NOI and EBITDA of
$62.3 million ($55.60/bbl) and $57.6 million ($51.42/bbl),
respectively, compared to $98.6 million ($74.12/bbl) and $93.4
million ($70.26/bbl), respectively, in Q2 2022 and $29.6 million
($35.18/bbl) and $26.1 million ($31.07/bbl), respectively, in Q3
2021.
Efficient capital deployment. Capital expenditures in the
quarter totalled $20.6 million and were focused on drilling and
completing well 13H. During the nine months ended September 30,
2022, the Company invested a total of $62.2 million, demonstrating
capital flexibility under sales constraint conditions.
Robust free cash flow. Generated free cash flow before changes
in non-cash working capital and debt service of $37.0 million
($33.03/bbl) in the quarter. Total free cash flow before changes in
non-cash working capital and debt service for the nine months ended
September 30, 2022 is nearly $150 million significantly
strengthening the Company's net surplus position by nearly $130
million.
Total operating costs under $10/bbl. The Company had lower gross
total operating cost expense in the quarter of $10.1 million
($9.06/bbl) from $11.7 million ($8.82/bbl) in Q2 2022. Total
quarterly lifting costs were $7.4 million ($6.62/bbl), a decrease
from Q2 2022 of $8.4 million ($6.28/bbl) and an increase from Q3
2021 of $5.4 million ($6.47/bbl). Total transportation costs were
$2.7 million ($2.44/bbl) a slight decrease from $3.4 million
($2.54/bbl) in Q2 2022 and a substantial decrease from $7.1 million
($8.50/bbl) in Q3 2021.
G&A on budget. Q3 2022 G&A was $4.7 million ($4.18/bbl)
compared to $5.1 million ($3.87/bbl) in Q2 2022 and $3.4 million
($4.11/bbl) in Q3 2021.
Net income/loss. PetroTal posted net income of $2.6 million, a
decrease from Q2 2022 net income of approximately $84 million,
primarily from lower sales in the quarter, a non cash commodity
price derivative loss of approximately $33 million, and royalty
provision for the social trust.
Balance sheet in a cash surplus position . Net surplus was
approximately $75.5 million as at September 30, 2022, consistent
with the prior quarter and up substantially from Q3 2021, as
defined internally by the Company.
Net derivative asset balance. The total net derivative asset on
the balance sheet as at September 30, 2022 was $3.5 million, a
decrease of $53.3 million from Q2 2022, as a result of reclassified
true up revenue of $64 million realized in July 2022, along with
other mark to market changes in the value of oil in the ONP. As at
September 30, 2022 approximately 2.4 million barrels remained in
the ONP.
Operational and Financial Highlights Subsequent to September 30,
2022
Excellent well 13H results. Well 13H successfully tested at over
8,000 bopd during its first week of production and has averaged
approximately 6,200 bopd month to date ending November 14, 2022,
which was slightly constrained during this period. At its current
trend and assuming a $55/bbl netback, the well is on track to
payout within 60 days. In addition, the technical team encountered
the producing formation five meters higher near the end of the
horizontal section of the well possibly increasing future oil in
place and reserve estimates.
Commenced drilling well 12H. On October 16, 2022, the Company
commenced drilling well 12H with a budgeted cost of $14 million and
estimated completion in mid December 2022.
Slowly rising river levels in November. During the month of
October, river levels in Brazil continued to be at record low
levels, in some cases, exposing sand bars above the water level.
This significantly impacted the Company's ability to sell oil in
the month of October limiting production to approximately 6,500
bopd. The Company expects to sell nearly 900 thousand barrels over
November and December as river levels return to normal. On November
10 and 11th, 2022 the Company was able to produce over 20,000
bopd.
2021 ESG report being finalized. Over the coming weeks PetroTal
will release its second annual Sustainability Report covering the
2021 year. The Company is now calibrated to Sustainability
Accounting Standards ("SASB"), Global Reporting Initiatives
("GRI"), and Sustainable Development Goal standards and is
committed to being a sustainable energy leader in Peru. In 2021,
the Company had zero hydrocarbon spills, delivered a scope 1
emissions intensity metric of 11.4 kg/bbl, and invested millions in
various ESG projects as outlined in the report, showcasing the
modest operational footprint that the Company has managed in the
Loreto region.
Petroperu update. The Company continues to work with Petroperu's
management team to assess and negotiate payment of approximately
$90 million of receivable value. On October 10, 2022 the government
of Peru agreed to make a capital contribution to Petroperu of $1
billion in order to strengthen its financial capacity for continued
operations, and provide $500 million of credit facility support.
The priority of allocation is immediate fuel and energy needs in
Peru, and the Company expects that the $64 million outstanding
amount owed to the Company will be paid on a negotiated payment
schedule.
Guidance Update
The Company is adjusting Q4 2022, and therefore 2022 guidance
based on October 2022 and early November river conditions into
Brazil. Final 2022 guidance is now between 12,000 and 13,000 bopd
for Q4 2022 and 2022 full year.
Adjusted Guidance Q1 (actual) Q2 (actual) Q3 (actual) Q4 2022
Oil wells completed 1 (10H) 1 (11H) 0 2 4
------------ ------------ ------------ --------- --------------
Average Production 12,000 -
(bopd) 11,746 14,467 12,229 13,000 12,000-13,000
------------ ------------ ------------ --------- --------------
CAPEX (millions) $18 $24 $21 $37 $100
------------ ------------ ------------ --------- --------------
USD millions, unless stated otherwise Guidance
Realized Brent (USD/bbl) $80
----------------
Average Production (bopd) 12,000 - 13,000
----------------
Net operating income $292
----------------
G&A ($21)
----------------
Net derivative settlements $27
----------------
Adjusted EBITDA $298
----------------
CAPEX ($100)
----------------
Free cash flow $198
----------------
PetroTal Rebranding
PetroTal is excited to announce a corporate rebranding which
includes a new vision, color scheme and logo design. Over the
coming weeks we will be rolling out a new website with many new and
exciting features for investors and or interested stakeholders.
Further updates on this will be made when available.
Updated Corporate Presentation and investor webcast
Please see the Company's newly designed investor presentation
now posted at www.petrotal-corp.com.
Webcast link for November 17, 2022 at 8am MDT
https://stream.brrmedia.co.uk/broadcast/63590b2298f6352ab0eba9cc
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
READER ADVISORIES
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.
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.
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; 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; the intention to redeem the
outstanding bonds and become debt free; a future robust capital
return program; PetroTal's plans to deliver strong operational
performance and to generate free cash flow and growth; capital
requirements and the Company's ability to access capital on
desirable terms and within required timelines; 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; revised 2022 guidance; oil production levels and
production growth, including average and exit production in 2022;
future oil sales and sales expansion through alternative exports
routes, including barging and trucking; the Company's proposals for
collaboration with local communities; future river water levels and
their impacts on transportation systems; 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.
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, 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, future river water levels, 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 war 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. The ongoing war between Russia and Ukraine has the
potential to threaten the supply of oil and gas from the region.
The long-term impacts of the war 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 annual information form (filed April 28, 2022) and
MD&A (filed November 17, 2022) (the "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 to
the initial week of production of well 13H and other short term
production rates are useful in confirming the presence of
hydrocarbons, however such rates are not determinative of the rate
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.
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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