PetroTal Corp. is pleased to announce its financial and operating results for the year and the three months ("Q4") ended December 31, 2020.
2020 Highlights
- Drilled and completed the 6H well on schedule and within budget achieving a 10-day flush production average of approximately 4,500 bopd;
- Successfully and seamlessly reopened the Bretana field in late September 2020 after COVID 19, social, and Northern Oil Pipeline ("ONP") maintenance related issues. There was no additional downtime or related safety issues once startup commenced, with field production rising back to approximately 11,000 bopd (pre shut down levels) ten days later;
- Completed commissioning of the enhanced central production facilities ("CPF-1"), bringing overall oil production capacity to between 16,000 and 18,000 bopd;
- Optimized the 2020 capital program to maximize liquidity and operational performance due to the COVID 19 pandemic, ongoing government social related issues, and shut down of the ONP;
- Signed an extended oil sales contract with Petroperu outlining improved terms, including reduced pipelined tariffs and fees during periods of low oil prices;
- Raised approximately $18 million in equity to provide 2020 liquidity support;
- Delivered a material lift in 2020 year ended 3P oil reserves with a lower 2P operating cost profile based on positive technical revisions, historical well performance, and field cost reduction initiatives;
- Concluded historic collaboration between the local Bretana residents and communities, aligning their goals and objectives with the Company's; and,
- Executed a route to market diversification strategy through Brazil with comparable margins to the ONP route.
Events Subsequent to December 31, 2020
- On January 19, 2021, the Company executed a final agreement with Petroperu, restructuring the contingent derivative liability over three years. The amount of the contingent liability represented $16.6 million (based on the November 30, 2020 valuation) and was subsequently paid out (along with the $3 million Peruvian-government COVID emergency response loan), from the $100 million bond offering referred to below. Since that time, the Company through Petroperu, has recently placed hedges, solidifying approximately $30 million of true-up revenue on the 1.8 million barrels in the ONP that originally caused the contingent liability;
- On February 2, 2021, the Company announced completion of a 3-year $100 million senior secured bond with an annual 12% coupon, issued at a 5% discount. The bonds issued by PetroTal are the Company's only interest bearing debt and the proceeds are for payout of the Petroperu derivative liability with Petroperu and Reactiva loan, totaling $20 million, to support the Company's crude oil price hedging strategy ($15 million), to finance potential acquisitions ($20 million), with the remainder for continued development of the Bretana oil field;
- On February 18, 2021, the Company announced its 2021 capital development program of $100 million, to be funded from the bond proceeds and internally generated funds from operations, along with existing cash resources;
- The Company has hedged approximately 32% of expected April to December 2021 oil production. Additionally, Petroperu has now hedged 100% of oil sales through the ONP. This robust hedging program will ensure funding stability to support the 2021 capital development program, in the event that Brent oil price drops materially; and,
- Pursuant to the Company's oil market diversification strategy, in Q1 2021 the Company completed a second shipment of 225,000 barrels of oil through Brazil for export into the Atlantic region. The oil sale was FOB Bretana and generated revenue of $8.8 million.
Three months ended December 31, 2020 ("Q4") Highlights
- PetroTal produced 6,410 bopd and sales volumes averaged 5,471 bopd, compared to sales of 2,327 bopd in Q3 2020;
- Indigenous communities and government bodies reached agreements that will see increased funding for the local communities, thereby allowing for the ONP to resume full operations;
- The Company's stringent COVID-19 protocols continue to ensure that the camp remains safe;
- The Company sold 397,000 barrels of oil to the Iquitos refinery and the ONP (at pump station #1 at Saramuro), thereby generating revenues of $12.4 million, net of transportation and fees;
- PetroTal reached agreement with an international oil trader for an initial shipment to export 106,000 barrels through Brazil into the Atlantic region, via the Amazon river. The December 2020 shipment was sold FOB Bretana, priced at the forward month Brent ICE price, and paid within two weeks of loading at Bretana. Importantly, there are no subsequent oil price adjustments;
- Operating income of $5.9 million ($11.90/bbl) compared to $2.3 million ($10.86/bbl) in Q3 2020;
- Funds flow provided by operations of $1.3 million compared to a deficiency of $0.5 million in Q3 2020; and,
- Capital expenditures were $6.3 million compared to $3.4 million in Q3 2020.
2020 Operational Highlights
- Six producing wells and one water disposal well were operating during Q4 2020, inclusive of the initial water disposal well that was converted to an oil producer;
- Approximately $42 million incurred in capital expenditures to drill one oil well, build production facilities and standby-related charges, compared to $89 million in 2019;
- PetroTal produced a total of 2.1 million barrels of oil in 2020, representing average oil production of 5,675 bopd, an increase of 37% from the average production of 4,131 bopd realized in 2019;
- Annual independent reserve assessment, as prepared by NSAI shows increases in all reserve categories:
Proved ("1P") reserves of 22.3 million barrels ("mmbbl"), an increase of 4% from the 21.5 mmbbl recorded at the end of 2019;
- Proved plus Probable ("2P") reserves of 51.0 mmbbl, an increase of 7% from the 47.7 mmbbl recorded at the end of 2019; and,
- Proved plus Probable and Possible ("3P") reserves of 106.1 mmbbl, an increase of 25% from the 84.8 mmbbl recorded at the end of 2019;
- Original oil in place ("OOIP") estimates for 1P, 2P and 3P reserve categories were unchanged from 2019 at 235, 364 and 579 mmbbls, respectively; and,
- Net Present Value (after tax, discounted at 10%) ("NPV-10") represents $271 million ($12.15/bbl) for 1P reserves, $621 million ($12.17/bbl) for 2P reserves and $1.2 billion ($11.03/bbl) for 3P reserves based on the NSAI year end 2020 price deck.
2020 Financial Highlights
- Generated revenue in 2020 of $76.6 million ($36.71/bbl) compared to $82.8 million ($56.24/bbl) in 2019;
- Royalties to the Peruvian government were $2.9 million compared to $3.4 million for 2019;
- Generated funds from operations of $16.6 million compared to $30.3 million in 2019, as a result of the significant decrease in oil prices;
- Operating and transportation costs, were $44.8 million ($21.49/bbl) compared to $37.7 million ($25.59/bbl) for 2019, an improvement of 21%, on a per barrel basis;
- Net operating income (netback) was $28.9 million ($13.84/bbl) compared to $41.7 million ($28.34/bbl) in 2019;
- Cash flow generated was $13.4 million compared to $51.1 million in 2019. Cash flow represents netback inclusive of G&A costs, realized gain (losses) on commodity contracts and all other cash transactions; and,
- At December 31, 2020, the Company held cash of $9.6 million, compared to $21.1 million at the end of 2019.
Manuel Pablo Zuniga-Pflucker, President and Chief Executive Officer, commented
"2020 was an extremely challenging year for the global economy and PetroTal emerged from the downturn in a position of strength, a testament to our team's dedication and resolve. Although our 2020 results were impacted by many one-time events, the Company's announcements over the last six months have been overwhelmingly positive and will underpin our growth through 2021 and beyond. I am excited to continue to deliver on our 2021 capital program, which we anticipate will generate value for our equity, debt, and ESG stakeholders.
"I would like to thank PetroTal's shareholders, directors, employees, and contractors for their continued support and I look forward to keeping all our stakeholders updated on the Company's progress throughout the remainder of 2021."