PetroTal Corp. (TSX: TAL) (AIM: PTAL) (OTCQX: PTALF) (“PetroTal”) is pleased to announce the execution of a definitive agreement (the “Acquisition Agreement“) to acquire a 100% working interest in Peru’s Block 131, including the producing Los Angeles field, through the acquisition of CEPSA Peruana, S.A.C. (“CEPSA Peru“), which represents the entire Peruvian business unit of Compania Española de Petroleos S.A.U. (“CEPSA“), for a purchase price of approximately $5.0 million in cash, subject to adjustment as set forth in the Acquisition Agreement (the “Acquisition“).
Manuel Pablo Zuniga-Pflucker, President and Chief Executive Officer, commented:
“This is PetroTal’s first acquisition since entering Peru in late 2017. This transaction marks an important step forward in delivering on our ongoing growth vision. The assets being acquired are synergistic, highly accretive to the Company’s current operations and we have immediate plans for development once the transaction is complete. All production from the assets is directed to the Iquitos refinery.
Completion of this acquisition will add approximately 900 bopd to our current 18,500 bopd of Bretana production, with the potential for further upside in the near to medium term. Furthermore, our operational team is assessing the potential upside in the deeper zones of the Los Angeles field, that were previously penetrated but were not tested. Finally, the location of Block 131 is of strategic importance, as it is connected by a 130km highway to the Company’s Block 107 prospect. We look forward to announcing further updates on this acquisition process in due course.”
The assets to be acquired, pursuant to the Acquisition, (the “Assets“) are currently producing approximately 900 barrels of oil per day (“bopd”) from four wells previously drilled into the Cretaceous aged Cushabatay sand at the Los Angeles field. With strong aquifer support, these wells are producing with a low base decline profile, high recovery factor, and at a 40-45º API oil quality. The Company’s expectation is for near term development and production growth from this block.
Strategic Rationale
Management and the Board of PetroTal believe the Acquisition provides the following strategic attributes:
- Low-cost light oil reserve additions with upside potential.
- Recoverable reserves estimated between 3.0 and 4.9 million barrels of oil (“bbls”);
- Iquitos Refinery capacity synergies. Block 131’s light oil production will allow PetroTal to increase the sales capacity of heavier Bretana crude through Iquitos and allow more oil to be sold in dry river conditions; and,
- Netback enhancements. From the combined lighter oil mix sold to Iquitos, lower Brent differentials can potentially be realized.
Operational Strategy
PetroTal’s management team have identified three near term low risk operational initiatives at Block 131:
- Identification of bypassed oil for low risk horizontal well locations drilled high on structure;
- Potential use of hydraulic pumps (vs ESPs) and optimized tubing to reduce operating costs; and,
- Implementation of an operationally straightforward solution to lower chemical costs from treating asphaltene.
Asset Background
Discovered in 2013, CEPSA Peru’s assets include the Los Angeles oil field on Block 131 (100% working interest), which are all located onshore Peru. At March 31, 2024 the assets have produced a total of approximately 7.6 million barrels. The assets are held under a concession agreement expiring in 2037 and are subject to a 23.9% royalty rate at field production levels under 5,000 bopd with a similar scaling factor as Block 95 above 5,000 bopd. All the crude oil produced is sold to Petroperu, the State-owned oil company, and transported by barge along the Ucayali River, passing by PetroTal’s Bretana oil field, to the refinery in Iquitos.
The Acquisition
Completion of the Acquisition is subject to the satisfaction of certain conditions, including, but not limited to, required regulatory approvals. Closing will occur following the satisfaction of such conditions. The effective date of the Acquisition will be January 1, 2024.
Evercore Group LLC is acting as the exclusive financial advisor to PetroTal with respect to the Acquisition.
Stikeman Elliott LLP is acting as legal counsel to PetroTal with respect to the Acquisition.
Q1 2024 results webcast link for May 9, 2024
PetroTal will host a webcast for its Q1 2024 results and to discuss the Cepsa acquisition on May 9, 2024 at 9am CT (Houston) and 3pm BST (London). Please see the link below to register.
Qualified Person’s Statement
Estuardo Alvarez-Calderon, a consultant to the Company, who has over 35 years of relevant experience in the oil industry, has approved the technical information contained in this announcement. Mr. Alvarez-Calderon received a Bachelor of Science degree in Geology from the University of Texas at Austin and is registered on the Texas Board of Professional Geoscientists.
The recovery and reserve estimates provided in this news release are estimates only, and there is no guarantee that the estimated reserves will be recovered. Actual reserves may eventually prove to be greater than, or less than, the estimates provided herein.
