TIDMPTAL
RNS Number : 8021M
PetroTal Corp.
16 January 2023
PetroTal Announces 2023 Capital Investment Budget of US$125
million
Return of capital program that targets a minimum quarterly cash
liquidity of US$50 million
Development plan targeting average 2023 production between
14,000 and 15,000 bopd
Anticipated 2023 EBITDA of $220 million at $84/bbl Brent oil
forecast
Calgary, AB and Houston, TX - January 16, 2023-PetroTal Corp.
("PetroTal" or the "Company") (TSX-V: TAL, AIM: PTAL and OTCQX:
PTALF) is pleased to announce a fully funded 2023 capital
investment program of $125 million that is expected to generate
significant after-tax, pre debt service free cash flow of $55
million in 2023. Combined with the year-end 2022 cash balance of
over $100 million, other working capital inflows, and contracted
2023 cash inflows of $57 million from Petroperu, the Company
expects to have approximately $240 million of available cash to
repay the Company's debt, accrued interest, and initiate a capital
return program to shareholders through a combination of share
buybacks and dividends. All amounts are quoted in US dollars.
2023 Key Highlights and Objectives(1,2)
-- Target 2023 production growth of 15% to 19% above 2022
levels, equivalent to 14,000 and 15,000 barrels of oil per day
("bopd") with similar associated sales volumes. Should additional
sales capacity become available mid-year, the Company may be able
to increase late 2023 production to approximately 17,000 bopd;
-- Generate EBITDA of $220 million, based on the forward strip
price of Brent oil for 2023 (at Dec 30, 2022), representing an
average of $84/bbl;
-- Drill and complete three horizontal development wells and one
water disposal well in 2023, and complete two workovers of
previously drilled wells;
-- Invest in production infrastructure to support future
development and production, including additional oil storage and
water injection systems, the construction of a new west drilling
platform ("L2 West Platform"), enabling future drilling until the
end of 2025 and spending on erosion control for the Company's
site;
-- Generate after-tax free cash flow (before all debt service)
of approximately $55 million, net of an estimated $40 million in
corporate tax and related obligations;
-- Become debt free in Q1 2023 from full payout of the remaining
$80 million in bonds and thereafter maintain a minimum liquidity
balance of $50 million, distributing out available cash that
exceeds this amount through a share buyback and dividend
program;
-- Allocate an estimated $7.5 million in social trust payments
in 2023 and another $10 million in other G&A related community
projects.
(1) See "Non-GAAP Financial Measures"
(2) The Company's bonds restrict any shareholder returns until fully paid out
Drilling and Completion Summary
PetroTal will invest approximately $69 million in drilling and
workover activities in 2023. The Company's first operation will
include a new water disposal well to enable the Company to have
approximately 120,000 barrels of water per day ("bwpd") disposal
capacity throughout 2023 and 140,000 bwpd by Q4 2023 once pumping
infrastructure installation has been completed. PetroTal will
subsequently drill wells 14H and 15H between mid-February 2023 and
the end of June 2023. Drilling of the Company's third horizontal
well in Q4 2023 will enable sales maximization should the Northern
Peruvian Pipeline ("ONP") be operational near the end of 2023,
and/or Brazilian sales exports expansion targets are achieved.
Facilities Budget
In 2023, PetroTal will focus on water management facilities,
erosion control, construction of the L2 West Platform, and finish a
new oil/diluent storage tank. PetroTal was thoughtful in the
composition and quantum of its 2023 facilities budget ensuring
critical infrastructure is completed earlier in 2023 with more
flexible projects starting in H2 2023.
Block 95 Expansion Budget
A total of $3 million is budgeted for permit approvals and
seismic preparation for the Block 95 expansion. During 2022, the
Company was able to better technically assess the potential of its
broad portfolio of Block 95 leads verifying various exciting
subsurface features. While waiting for 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 allocate nearly $18 million in 2023 for social and
community programs comprised as follows:
-- 2.5% social trust - approximately $7.5 million (various projects as approved by the trust)
-- $10 million in G&A and OPEX allocated to the following key projects in the community:
o Community erosion control,
o New community lodging infrastructure,
o Process facilities for agricultural products in Puinahua,
o Diesel supply for Bretana community power generation; and,
o Bretana community electricity generator maintenance.
PetroTal's recently signed trust addendum unifies and aligns
local communities in the operating district together as one. As a
result of these successful negotiations, we anticipate a
significant reduction in social unrest driven downtime in 2023,
signaling an alignment between communities, the Government of Peru
and the Company.
Production Guidance
PetroTal forecasts an average production and sales range of
14,000 bopd to 15,000 bopd for 2023. The production forecast
considers a 5% social unrest driven downtime assumption, no access
to the ONP, a constrained dry low river season (starting in mid Q3
2023 running until mid Q4 2023), and a barge route normalization
period in January 2023. Current production in the field from
January 8 to 14, 2023 has averaged 11,506 bopd as barge
transportation routes have started to normalize from extensive
December 2022 backlogged oil loadings.
Guidance on Operating Expenses
The Company is anticipating total Operating Expenses ("OPEX") to
be under $9.00/bbl for 2023. Expected fixed and variable OPEX run
rates have increased over 2022 levels, due to a higher producing
well count, power needs and inflation pressures. Materially
offsetting these increases are significant savings on barging,
diluent, and COVID-19 costs compared to prior years.
Fixed lifting costs totaling approximately $37 million
($7.55/bbl) for 2023 and include:
-- Fuel
-- Various field and camp contract services
Variable transportation costs totaling $5 million ($1.02/bbl)
for 2023 and include:
-- Gross diluent costs and diluent transportation - $0.50/bbl
-- Barging - $0.52/bbl
Variable transportation costs will be negligible in 2023 as no
ONP oil sales are forecast. The Brazilian export sales are FOB
Bretana and all transportation costs are deducted in the net
realized oil price.
Cash Flow Guidance(1)
Assuming an $84/bbl average 2023 Brent oil price, PetroTal
expects to generate $255 million of net operating income ("NOI")
and $220 million of EBITDA, net of $27 million of G&A
($5.10/bbl), and $7 million of G&A related community and social
costs. The resulting after tax free cash flow(1) (prior to all debt
service) is expected to be $55 million and is net of approximately
$40 million of expected corporate tax in 2023.
(1) See "Non-GAAP Financial Measures"
2023 Quarterly Production and Capital Profile (Mid-point)
Q1 Q2 Q3 Q4 Total
2 (14H &
Oil wells completed 15H) 1 (16H) 3
-------- --------- -------------- -------- -------
Workovers completed 2 (2XD & 1XD) 2
-------- --------- -------------- -------- -------
Water disposal wells 1 (4WD) 1
-------- --------- -------------- -------- -------
Average Production
(bopd) 13,500 15,000 13,500 16,250 14,500
-------- --------- -------------- -------- -------
Total CAPEX (millions) $40 $41 $22 $22 $125
-------- --------- -------------- -------- -------
PetroTal 2023 Budget Summary ($ millions, unless otherwise
stated)(1)
Budget Range (Mid-point)
Brent Price ($/bbl) $84.1
--------------------------
Production (bopd) 14,500
--------------------------
NOI $255
--------------------------
G&A ($34)
--------------------------
Derivative settlements ($2)
--------------------------
EBITDA $220
--------------------------
Tax ($40)
--------------------------
CAPEX ($125)
---------------------------------------------------------- --------------------------
2023 Free cash flow $55
---------------------------------------------------------- --------------------------
December 31, 2022 unrestricted cash + $104
--------------------------
Anticipated warrant exercise proceeds + $10
--------------------------
Petroperu scheduled payments + $57
--------------------------
Other forecast net working capital inflows + $15
---------------------------------------------------------- --------------------------
Total accessible cash in 2023 (prior to all debt service
and return of capital) $241
---------------------------------------------------------- --------------------------
1) See "Non-GAAP Financial Measures"
Returning material cash to shareholders in 2023
Subject to market conditions and quarterly review, PetroTal
anticipates returning all available cash in excess of $50 million
to shareholders in 2023, through a combination of share buybacks
and a material/progressive dividend policy. The Company will
commence its return of capital program post retirement of the
Company's corporate bonds of $80 million, which is expected to
occur by the end of Q1 2023. A normal course issuer bid and
dividend declaration could commence in March 2023, in accordance
with the Toronto Stock Exchange trading policies.
Q4 2022 Production and Operations Update
PetroTal's Q4 2022 oil production was approximately 954,400
barrels (10,374 bopd), reflective of constraints during much of
October and November 2022 due to low river levels, and the river
blockade. Once the river blockade was cleared, the Company was able
to ramp production from 1,667 bopd to 20,301 bopd in just two days
and subsequently produce an average of 20,766 bopd from December 15
to 31, 2022. PetroTal exited the year producing 23,709 bopd on
December 31, 2022 and was able to fill a backlog of barges that
were on standby nearby the field. Production in 2022 averaged
12,200 bopd, representing 36% growth over 2021's average of 8,966
bopd.
The Company's first drilling operation in 2023 will be to drill
and core its fourth water disposal well ("4WD") at a cost of
approximately $16 million and with an estimated completion by the
end of March 2023. The Company anticipates exporting approximately
245,000 barrels to Brazil and Iquitos in January 2023 and is in
discussions to sell approximately 450,000 barrels in February.
Well 12H continues to naturally flow at strong rates having
produced at an average rate of 6,012 bopd since January 8, 2023.
The well has averaged 3,861 bopd during its first 27 days of
production, with the majority of time being off pump to clean out
drilling fluids.
Liquidity Update
At December 31, 2022, the Company had approximately $120 million
in total cash, of which $16 million is restricted. At the end of
2022, accounts payable were approximately $64 million, and
estimated accounts receivable were $105 million, with $75 million
from Petroperu and $30 million of current receivables from the
Company's Brazilian trading partner. As announced on December 9,
2022, PetroTal finalized a repayment schedule with Petroperu
related to the $64 million true-up revenue owed to the Company from
the June 2022 Bayovar export. PetroTal has now received payments
totaling $16.1 million, with remaining monthly payments expected
until full repayment on August 1, 2023.
Pareto Securities 2023 London Conference and Private Investor
Event
PetroTal will present at the upcoming Pareto Securities London
Conference on January 18, 2023. An updated corporate presentation
can be found on the Company's website: www.petrotal-corp.com .
In addition, PetroTal will host a private investor event in
London on January 19, 2023 which is now fully subscribed. The
Company will post the presented materials on its website shortly
after the meeting.
Manuel Pablo Zuniga-Pflucker, President and Chief Executive
Officer, commented:
"The approved 2023 budget allows PetroTal to return a large
portion of its current market capitalization to shareholders, while
still delivering meaningful annual production growth in a tactical
way. The Company's 2023 budget uses an average $84/bbl Brent oil
forecast, and has the flexibility, should oil prices be lower, to
adjust non-core components of its capital program. Similarly, it
allows for production flexibility in the event that oil export
conditions improve during the year. This will ensure return of
capital stability in 2023 and beyond."
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; the impact of social disruption on the Company's
operations; drilling, completions, workovers including of oil
producing and water disposal wells and the results and timing of
such activities; and other activities and the anticipated costs and
results of such activities; PetroTal's 2023 budget and
financial/operational guidance; PetroTal's anticipated operational
results for 2023 including, but not limited to, anticipated
production levels, capital expenditures and drilling plans; the
Company's intentions with respect to return of capital, including
returning $100 million to shareholders using dividends and share
buybacks; the commencement of a normal course issuer bid and
receipt of stock exchange approval thereof; the dividend policy;
PetroTal's liquidity and financial position; the capacity for
increased production in the event additional sales capacity is
identified; PetroTal's 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 2023; sales expansion
through alternative exports routes, including barging; the
Company's proposals for collaboration with local communities and
capital contributions in relation thereto including in respect of
its investments in community, education, and support programs; 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", "target",
"potential", "will", "should", "continue", "may", "objective" and
similar expressions . Without limitation of the foregoing, future
dividend payments and share buybacks, , if any, and the level
thereof, are uncertain, as the Company's return of capital and
dividend policy and the funds available for the payment of such
activities 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 and
buyback shares 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, 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. 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, 2021 and management's
discussion and analysis for the three and nine months ended
September 30, 2022 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 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.
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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