PetroTal Corp. ("PetroTal") (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.
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:
- Community erosion control,
- New community lodging infrastructure,
- Process facilities for agricultural products in Puinahua,
- Diesel supply for Bretana community power generation; and,
- Bretana community electricity generator maintenance.
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.
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.
