Mr. Corey Ruttan reports
PETROMINERALES ANNOUNCES 2013 CAPITAL PLAN, OPERATIONAL UPDATE AND INCREASED CREDIT FACILITY
Petrominerales Ltd. is outlining its 2013 capital program and is providing an operational update. The company is also pleased to announce that it has received commitments from a syndicate of banks for an increased $250-million (U.S.) credit facility.
The company's 2013 capital program provides shareholders with exposure to a balance between high-impact exploration and development drilling opportunities in Colombia, Peru and Brazil. The highlights of the company's 2013 capital program are:
- Drilling up to 12 exploration wells in the Llanos basin of Colombia,
targeting light oil resources of up to 120 million barrels of
undiscovered petroleum initially in place;
- Drilling up to six appraisal and development wells at the company's Yenac and
Mantis oil fields in the Central Llanos;
- Recommencing the company's development drilling program at the company's Orito and Neiva
blocks, drilling up to nine wells at Orito and up to six wells at Neiva;
- Drilling six heavy oil wells on the company's Colombian acreage, targeting new
undiscovered resource fairways and testing existing discoveries to
- Acquiring 436 square kilometres of new, high-quality 3-D seismic on the company's block 25, Mapache and Las Aguilas blocks, positioning the company to increase its multiyear prospect inventory, which currently sits at over 100 drilling
- Drilling at least two exploration wells in Brazil, targeting conventional
potential and the Gomo formation, to start unlocking a large,
unconventional oil resource on the company's newly acquired lands;
- Exposure to up to two high-impact exploration prospects to be drilled by
the company's joint venture partner in Peru.
Using a Brent oil benchmark price of $100 (U.S.) per barrel, the company expects its 2013 capital program to be fully financed through operating cash flows. The company has additional financial resources from its undrawn, reserves-based credit facility that the company is in the process of renewing with an increased $250-million (U.S.) borrowing base. The company has received commitments from a syndicate of banks totalling over $250-million (U.S.) and, subject to customary closing conditions, expects to close the transaction in early January.
The company plans to continue its dividend program at the current quarterly rate of 12.5 Canadian cents per share. The company's dividend program represents a small portion of its operating cash flow but, at current share prices, provides shareholders with an annualized yield of approximately 6 per cent. The annual cost of the company's dividend is $42.2-million (Canadian), based on the current number of shares outstanding.
For more information on the company's operational update and 2013 capital program, please refer to the company's most recent corporate presentation on the company's website.
Production averaged 25,032 barrels of oil per day during November, 3 per cent lower than October, primarily due to production additions coming on late in the month, offset by natural declines.
In the Central Llanos, the company's Mantis-HZ1 well, the first horizontal well in the company's Mantis oil field, was placed on production Nov. 30. During the first 17 days of December, the well averaged 928 barrels of oil per day of 10-degree-API gravity oil at a water cut of 60 per cent. Following Mantis-HZ1, the company began drilling its Yenac-8 well (formerly called Gaita-1 sidetrack) on Dec. 3. Gaita-1 was drilled outside of the company's existing seismic control but on trend with the Yenac pool. On Dec. 12, Yenac-8 reached a total depth of 7,655 feet, targeting the structurally high side of the fault, where the company expected to encounter the probable extension of the Yenac pool. The company's preliminary petrophysical interpretation indicates the presence of potential net oil pay in the Lower and Upper Mirador formations in a structural position 28 feet higher than Gaita-1. Yenac-8 has been cased for testing. If successful, Yenac-8 could add several additional development locations, including a Yenac-7 location targeting the Upper Mirador reservoir and a second Yenac horizontal well targeting the Lower Mirador formation.
On the company's Corcel block, the company has two successful production tests in its Maya-1 well. The first successful test was in the Lower Sand 3 formation and tested over a 21-hour period using an electric submersible pump. During this test period, production averaged 563 barrels of oil per day of 41-degree-API gravity oil at a water cut of 48 per cent. Subsequently, the company tested the Guadalupe formation over a five-day period using an ESP. Production averaged 566 barrels of oil per day of 23-degree-API gravity oil at a water cut of 67 per cent, and the company has placed the well on long-term production.
Following Maya-1, the company drilled its Mapanare-1 prospect on the Guatiquia block to a total vertical depth of 11,694 feet on Dec. 4. The well has been cased, and the company has initiated a testing program that the company expects to complete by the end of December.
The company completed drilling a sidetrack to the company's Macapay well on Dec. 3. The company decided to abandon the well after analysis of well logs and drilling data that indicated the well penetrated the structure below the original oil water contact.
On the company's Las Aguilas block, the company commenced drilling its Gurania-1 well on Nov. 19. The company has set intermediate casing in the Villeta formation and is drilling to the company's targeted depth through the Caballos formation.
On the company's Antorcha block, located in the Middle Magdalena basin of Colombia, the company finished drilling its second stratigraphic well, Antest-1, on Nov. 21 and commenced drilling its Tortola-1 conventional well on Dec. 5. Tortola-1 reached a total depth of 1,372 feet on Dec. 12 and is currently being cased. Testing equipment is currently being mobilized to the lease to evaluate the zone.
Capital and drilling plans by region in
Deep Llanos basin (Corcel, Guatiquia and south block 31), Colombia
In this region of the basin, the company has extensive high-quality 3-D seismic coverage on the company's land base and over 30 Corcel-type prospects currently in the company's inventory. The company plans to drill up to six exploration wells, using one drilling rig operating continuously in the area throughout 2013.
Foothills blocks (blocks 25, 31, 59 and 15), Deep Llanos basin, Colombia
The company now has an extensive 3-D seismic data set of over 600 square kilometres covering a large portion of the company's Foothills acreage. In the first quarter of 2013, the company plans to acquire an additional 282 square kilometres of 3-D seismic on block 25. The company will continue to interpret and evaluate these seismic programs throughout the year to delineate further and expand the company's current Foothills inventory of 17 prospects. During the second half of 2013, the company plans to drill up to three wells in this area, targeting up to 48 million undiscovered petroleum initially in place. In early 2014, the company expects to be in a position to drill high-impact wells in the Foothills trend south of the Cusiana-Cupiagua complex, as well as target Corcel-type prospects initially identified on the existing 2-D seismic data.
Central Llanos basin (Casimena, Castor, Casanare Este, Mapache blocks), Colombia
In the central portion of the basin, the company has extensive high-quality 3-D seismic coverage on the company's land base and over 30 prospects in the company's current drilling inventory. In 2013, the company plans to acquire 75 square kilometres of 3-D seismic on the company's Mapache block to follow up on the company's Tucuso success in 2012. Using one drilling rig operating continuously throughout 2013, the company plans to drill at least three wells focusing on developing the company's Yenac and Mantis oil fields and up to three exploration wells.
The company is currently completing its Yenac-8 well (formerly called Gaita-1 sidetrack), and the company expects to have test results by the end of December. The company has also identified additional locations that could extend the size of the Mantis field, where the company made its Mantis-1 discovery in January, 2011. With success at Yenac-8 and Mantis Norte, the company could add a minimum of six additional development locations targeting both the Upper and Lower Mirador formations.
Llanos basin heavy oil blocks (Rio Ariari, Chiguiro Oeste, Chiguiro Este), Colombia
On the company's heavy oil acreage, the company has established a large data set with 3-D and 2-D seismic and the 16 stratigraphic and 11 exploration wells the company has drilled to date.
On the company's Rio Ariari block, the company has initiated an 80-kilometre 2-D seismic program on the eastern portion of the block. In 2013, the company plans to drill four exploration wells and one horizontal appraisal well. The company's objectives are to expand the company's discovered petroleum in place and to test and establish commercial deliverability of the company's existing discoveries to position the company to implement a larger-scale commercial development quickly.
In November, the company drilled Nopal-1 to test the Lower Mirador sands in the Nopal valley located in the central part of the Rio Ariari block. The well encountered thick Upper and Lower Mirador sands with good oil and gas shows while drilling. Well logs indicate potential net pay of 33 feet in the Mirador formation. The company has cased the well for testing. The Nopal well tested a play concept based upon 2-D seismic data that could prove up a large, new play fairway in the area.
Neiva (Upper Magdalena basin), Colombia
In the second half of 2013, the company plans to resume its development drilling program at Neiva with one rig drilling up to six development wells and completing up to eight workovers. The Neiva field was discovered in the early 1960s and reached peak production in 1983 of approximately 7,300 harrels of oil per day. With the company's recent successes, the company has increased the field's gross production to over 7,500 barrels of oil per day. The company currently has 26 proved plus probable development locations in the company's drilling inventory. The company's 2013 drilling program will target higher deliverability wells using multistage fracture stimulations and/or with horizontal wells in the Honda and Monserrate formations.
Orito and Las Aguilas (Putumayo basin), Colombia
At Orito, the company is planning a multiwell development drilling program of up to nine wells that are expected to commence later this month. The Orito field is the largest oil field in the Putumayo basin of southern Colombia and has produced close to 240 million barrels of oil to date from over one billion barrels of total petroleum initially in place. The company believes there is significant opportunity remaining at Orito and currently has in inventory 43 proved plus probable development drilling locations and 25 additional locations based on the company's geological analysis.
Reconcavo basin, Brazil
Petrominerales acquired a 75-per-cent interest in a Brazilian entity that owns the licences for three marginal fields and seven exploration contracts covering over 50,000 acres in the Reconcavo basin, onshore Brazil. In 2013, the company plans to drill at least two exploration wells in Brazil targeting the Gomo to start unlocking a large oil resource on the company's newly acquired lands. The company is excited about its initial entry into Brazil with this large resource opportunity. The company's vision is to implement a large-scale, repeatable, low-risk, multiwell development program starting as early as 2014.
Block 126, Peru
On Oct. 22, the company announced the Sheshea discovery on block 126, the Ucayali basin of Peru. The results of the company's discovery were encouraging because they demonstrated: (1) that the Peruvian acreage has attributes for successful oil exploration; (2) that an active petroleum system and oil migration and trapping opportunities exist on the block; (3) the validity of the company's geological model and interpretations; and (4) that commercialization opportunities exist, as the company's light oil discovery provides sales flexibility to maximize pricing and is located in proximity to river barge transportation. The company is currently working to obtain regulatory approvals to acquire 3-D seismic over the Sheshea structure to assist in the evaluation of the test results and to select possible appraisal drilling locations. The company is also concurrently working to obtain regulatory approvals for possible commercialization. The anticipated timeline to obtain both of these approvals is 18 months.
Blocks 114 and 131, Peru
Petrominerales holds a 30-per-cent working interest in blocks 114 and 131, through which the company is carried for the first phases of exploration. On block 131, the operator has identified two drillable prospects, one of which is estimated to commence drilling during the second quarter of 2013. On block 114, the acquisition of 260 kilometres of 2-D seismic has been completed. Subject to technical and economic evaluations and regulatory environmental approval, the operator is planning to drill one exploration well no later than the second quarter of 2014.
Block 161 and 141, Peru
Petrominerales holds a 100-per-cent working interest in block 161. Terms of reference to complete the environmental impact assessment's public consultation plan are in the final stages of the Peruvian Ministry of Energy and Mines approval. Upon completion and approval of the EIA, the planned 353-kilometre 2-D seismic program will commence, likely in the second half of 2013.
Petrominerales also holds a 100-per-cent working interest in block 141. In July, 2012, the company received approval to commence its public consultation plan, a key step in the completion of the EIA. The company's 300-kilometre 2-D seismic program is currently scheduled to begin in early 2014, pending the completion and approval of the EIA.
We seek Safe Harbor.