Mr.
Ronald Pantin reports
PACIFIC RUBIALES ANNOUNCES FOURTH QUARTER & YEAR END 2013 RESULTS: REPORTS RECORD FINANCIAL AND OPERATING RESULTS
Pacific Rubiales Energy Corp. has released its audited
consolidated financial results for the full year and quarter ended
Dec. 31, 2013, together with its management discussion and analysis
(MD&A). These documents will be posted on the company's website, SEDAR, the SIMEV website and the BOVESPA website. All values in this release and the company's financial disclosures are
in United States dollars unless otherwise stated.
Operational highlights
- Total field production for the year was 311,177 barrels of oil equivalent per day (boe/d), an increase of
26 per cent compared with 2012.
- Gross production for the year was 157,976 boe/d, an increase of 33 per cent
compared with 2012.
- Net production for the year was 129,386 boe/d, an increase of 32 per cent
compared with 2012. Net production was above the high end of the
company's annual guidance despite accommodating for 1.3 million barrels
associated with the PAP arbitration decision.
- Average net production for the fourth quarter 2013 reached a record
134,313 boe/d, a 24-per-cent increase compared with the same period of 2012.
- Sales volumes for the year were 134,621 boe/d, an increase of 24 per cent
compared with 2012, despite accommodating for the 500,000 barrels associated
with the one-time Bicentenario pipeline fill.
- The company was able to increase its operating netbacks compared with the
previous year, a result of the successful implementation of cost
reduction initiatives, despite a 3-per-cent drop in combined realized prices in
2013. Operating netbacks on combined crude oil and natural gas
production for 2013 were $60.77 per barrel of oil equivalent (boe) compared with $60.20 per boe in 2012.
- Oil operating costs in the fourth quarter 2013 were reduced by $7.46 per barrel (bbl) compared with the same period of 2012, substantially in line with the
company's previously announced target of an $8 per bbl reduction by year-end 2013. Costs are expected to decline further in 2014.
Financial highlights
- Revenues for the year were $4.6-billion, an increase of 19 per cent compared with
2012 despite a reduction in international oil prices.
- Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) for the year was $2.6-billion, an increase of 27 per cent
compared with 2012, representing a 55-per-cent margin on total revenues for the
period.
- Cash flow (funds flow from operations) for the year was $1.9-billion, an
increase of 38 per cent compared with 2012.
- Total E&D capital expenditures were $2.1-billion, compared with $1.5-billion
in 2012.
- In 2013, the company paid a total of $196-million in dividends to
shareholders.
- The company commenced purchasing its common shares in November under a
normal course issuer bid, which has continued into 2014. As of the date
hereof, approximately 10.7 million common shares have been purchased
for cancellation.
Additional highlights
- A total of 34 exploration wells were drilled during 2013, resulting in
23 discoveries achieving a 68 per cent success rate for the year.
- Total proved plus probable net after royalties reserves (2P) grew to 619.2 million barrels (mmboe) of oil equivalent at Dec. 31, 2013, an increase of 21 per cent from
513.7 mmboe at Dec. 31, 2012, representing a reserve replacement
ratio of 324 per cent. Total net 2P reserve additions of 153 mmboe include 89
mmboe from acquisitions and 66 mmboe from exploration.
- The company continued diversification away from the Rubiales field, which now
represents less than 11 per cent of total net 2P reserves.
- In November, the company completed the strategic acquisition of
Petrominerales Ltd. In December, the company reached an agreement to sell its 5-per-cent interest
and transportation rights in the Ocensa oil pipeline in Colombia
(acquired through the Petrominerales acquisition) for $385-million.
First oil test results and oil production from the CPE-6 block were
achieved by year-end.
Ronald Pantin, chief executive officer of the company, commented:
"At Pacific Rubiales, we focus on production growth and cash generation,
believing these to be the single most important measures of value
creation over time for an E&P company. I am very pleased that 2013
represents the sixth consecutive year of growth in EBITDA, and fourth
consecutive year of growth in both production and cash flow. During
2013, we once again delivered solid operating and financial results,
with both production and sales volumes, and all cash flow indicators,
including EBITDA and funds flow from operations, reaching record
levels.
"We were able to maintain a strong operating netback consistent with
that of last year despite a drop in oil and natural gas sales prices,
largely driven by a reduction in international oil benchmark prices. I
am particularly pleased with our progress in reducing oil operating
costs. The target was to reduce these costs (based on an aggregate of
production plus transportation plus diluent costs) by approximately
$8 per bbl by year-end 2013. The actual reduction in the fourth quarter
2013 compared with the same quarter in 2012 was $7.46 per bbl, driven largely
by the start-up of the Bicentenario pipeline and a reduction in
purchased diluent volumes. The electrification of the PEL power
transmission line in January, 2014 (delayed approximately one month due
to late regulatory approvals), along with the anticipated start-up of
the Agrocascada water irrigation project, will contribute to further
reductions in operating costs in full year 2014.
"Late in 2013, we closed the Petrominerales acquisition. It is important
to fully understand both the strategic business and operational value
drivers behind this important acquisition, including: additional
light oil production which we can use as a lower cost and reliable
supply of diluent for our rising heavy oil production, replacing high-cost purchased distillate, reserves of light oil which we were able
to grow by approximately 24 per cent at year-end 2013, 43 million barrels (mmbbl) of new net
2P heavy oil reserves to develop on the 100-per-cent-operated Rio Ariari block
and interests in the Ocensa and Bicentenario oil pipelines, also
strategic to our expectations of rising oil production from the Llanos
basin in Colombia. Late in 2013, we announced the sale of the acquired
5-per-cent interest in the Ocensa pipeline for $385-million, retaining
long-term transport capacity, and expect to close the sale in the first
quarter of 2014. Further sales of other mid-stream assets are expected
to continue through 2014 and 2015. The proceeds from these sales are
expected to be used to reduce debt and for share repurchases.
"Through our successful exploration program and acquisition strategy, we
were able to grow our reserves by a net 21 per cent and further diversify our
reserve base beyond the Rubiales field, which now represents less than
11 per cent of total net 2P reserves. As part of our near-term objective of
replacing production from the Rubiales field, heavy oil discoveries on
our CPE-6 and Rio Ariari blocks are now progressing to development and
are expected to contribute significant production growth over the next
three years.
"Since receiving the CPE-6 blanket exploration and development licence
in November, 2013, the company has drilled seven wells with successful
tests conducted on two wells and additional tests in progress or
planned in other wells. Currently the company has two drill rigs
operating on the block and plans to drill a total of 25 exploration and
development wells during 2014.
"Since acquiring the Rio Ariari block in late November, 2013, the company
has drilled two horizontal wells that tested oil and is optimizing
equipment for further extended testing. Currently, the company has two
drill rigs operating on the block and plans to drill between 17 and 20
exploration and production wells (including horizontals) during 2014.
One additional rig is currently being mobilized.
"Since 2007, the company has been able to convert over 150 mmboe of net
2P reserves to production as well as grow net 2P reserves more than
fivefold, in step with production growth. We have the assets, the
technical expertise and the track record to largely replace the current
net production from the Rubiales field by the time the primary contract
expires in 2016.
"In 2013, the company was able to demonstrate sustained thermal
operation of its Star secondary recovery technology in the Quifa SW
pilot project. A doubling of the primary recovery factor through the
application of Star in the pilot area was achieved, certified by three
independent engineers, and the company was granted two 20-year
patents for the exclusive application of Star technology in Colombia.
In 2014, we plan to expand the pilot to first full commercial scale by
converting additional adjacent pads currently producing under primary
flow. Pacific Rubiales currently holds one of the largest acreage
positions along Colombia's heavy oil resource trend. With a very large
volume of oil initially in place in a number of already discovered
fields, Star is as much the potential future of the Colombia oil
industry, as it is the future of Pacific Rubiales.
"In May, 2013, the company increased its quarterly dividend by 50 per cent and
late in the year commenced repurchasing its common shares pursuant to a
normal course issuer bid, purchasing approximately 10.7 million common
shares for cancellation to date. This is a clear demonstration of our
commitment to balance growth with returns, our confidence in the
sustainability of future earnings and cash flow underpinned by our
expectation of continued production growth, and our belief that the
company's shares are currently very undervalued.
"During the year we made a number of significant exploration
discoveries, including the Kangaroo and Bilby discoveries in the
offshore Karoon blocks in the Santos basin, Brazil, and the Los Angeles
discovery on block 131 onshore Peru. The company is planning to drill
appraisal wells on these discoveries over the next 12 months and has a
large and exciting exploration drilling program planned for 2014.
"To conclude, we are pleased to close off a successful year in 2013 and
look forward to another strong year of operational and financial
performance. We expect this year will be marked by a return to large
heavy oil field development in Colombia, modest growth in light oil
production onshore Colombia and offshore Peru and an exciting
exploration program targeting both the appraisal of prior-year
discoveries and new high-impact exploration targets, building for the
long-term benefit of our shareholders and employees, the leading E&P
company focused in Latin America."
FINANCIAL SUMMARY
Year ended Three months ended
Dec. 31, Dec. 31,
2013 2012 2013 2012
Oil and gas sales revenues ($ millions) $4,626.9 $3,884.8 $1,202.6 $1,046.7
Adjusted EBITDA ($ millions) 2,567.0 2,020.0 655.3 429.6
Adjusted EBITDA margin
(adjusted EBITDA/revenues) 55% 52% 54% 41%
Adjusted EBITDA per share 7.95 6.85 2.02 1.45
Cash flow (funds flow from
operations) ($ millions) 1,913.1 1,387.5 476.9 231.5
Cash flow (funds flow from
operations) per share 5.92 4.71 1.47 0.78
Adjusted net earnings from
operations ($ millions) 490.2 650.9 152.1 58.7
Adjusted net earnings from
operations per share 1.52 2.21 0.47 0.20
Net earnings (loss) ($ millions) 430.4 527.7 143.0 (23.8)
Net earnings per share (loss) 1.33 1.79 0.44 (0.08)
Net production (boe/d) 129,386 97,657 134,313 108,149
Sales volumes (boe/d) 134,621 108,980 143,864 120,141
Exchange rate (COP$/US$) 1,926.83 1,768.23 1,926.83 1,768.23
NET PRODUCTION SUMMARY
Year ended Three months ended
Dec. 31, Dec. 31,
2013 2012 2013 2012
Oil and liquids (bbl/d)
Colombia 117,089 85,123 122,190 95,526
Peru 1,355 1,573 1,244 1,457
Total oil and liquids (bbl/d) 118,444 86,696 123,434 96,983
Natural gas (boe/d)
Colombia 10,942 10,961 10,879 11,166
Total natural gas (boe/d) 10,942 10,961 10,879 11,166
Total equivalent production (boe/d) 129,386 97,657 134,313 108,149
In 2013, the company's net production of 129,386 boe/d increased 32 per cent
compared with a year ago, driven by rising production volumes in heavy
oil fields and added volumes and growth in light oil production.
Net production from the Rubiales field increased 18 per cent to 70,214 bbl/d
from 59,285 bbl/d a year ago, and from the Quifa SW field increased 7 per cent
to 23,610 bbl/d from 22,070 bbl/d a year ago, primarily due to the
environmental permits received in August, 2012, which allowed for
increased water injection at the Rubiales field.
Total net light oil production grew over fivefold to 21,783 bbl/d from
4,243 bbl/d a year ago, primarily the result of the C&C Energia Ltd.
and PetroMagdalena Energy Corp. assets acquired in July and December of
2012, respectively, and growth through successful exploration and
development of these assets. The company expects light oil production
to increase further in 2014 with the additional production from the
Petrominerales acquisition and growth resulting from continuing
development drilling in block Z-1 offshore Peru.
PRODUCTION TO TOTAL SALES RECONCILIATION
Year ended Three months ended
Dec. 31, Dec. 31,
2013 2012 2013 2012
Net production (boe/d)
Colombia 128,031 96,084 133,069 106,692
Peru 1,355 1,573 1,244 1,457
Total net production (boe/d) 129,386 97,657 134,313 108,149
Sales volumes (boe/d)
Production available
for sale (boe/d) 129,386 96,463 134,313 107,071
Diluent volumes (bbl/d) 5,085 9,609 2,261 9,671
Oil for trading volumes (bbl/d) 3,832 4,937 3,399 1,718
PAP settlement (loss) (bbl/d) (3,492) (1,499) (6,363) -
Bicentenario pipeline
fill (loss) (bbl/d) (1,344) - (920) -
Inventory movement and
other (loss) (boe/d) 1,154 (530) 11,174 1,681
Total volumes sold (boe/d) 134,621 108,980 143,864 120,141
The company produces and sells crude oil and natural gas. It also
purchases liquids and crude oil from third parties for trading purposes
and distillate for diluent mixing with heavy oil production, which are
included in the reported volumes sold. Sales volumes are also
impacted by the relative movement in inventories during a reporting
period. Both revenues and costs are recognized on the respective
volumes sold during the period.
Production available for sale for the year increased to 129,386 boe/d
from 96,463 boe/d in 2012 (an increase of 34 per cent), due to rising volumes
in producing fields. Despite an increase in the company's net heavy
oil production from 2012 levels, purchased diluent volumes decreased
47 per cent the result of replacing purchased diluent by its own light crude
oil. Oil for trading volumes for the year decreased to 3,832 bbl/d from
4,937 bbl/d a year ago, while inventory balances for the year decreased
to a 1,154 boe/d draw from a 530 boe/d build compared with 2012.
Total volumes sold, composed of production volumes available for sale,
purchased diluent volumes, oil for trading volumes and inventory
balance changes, increased to 134,621 boe/d in the current year from
108,980 boe/d a year ago (an increase of 24 per cent). Total volumes sold
during 2013 were impacted by two events.
PAP settlement
During the year, the company delivered 3,492 bbl/d
(approximately 1.3 mmbbl total) to Ecopetrol SA as part of the PAP
arbitration settlement at Quifa SW. The volumes were accounted against
the financial provisions booked as of December, 2012, and June, 2013. The
remaining balance of approximately 500,000 bbl will be delivered by the
end of the first quarter of 2014.
Bicentenario pipeline fill
During the year, the company delivered
1,344 bbl/d (approximately 500,000 bbl total) of its share of the
Bicentenario pipeline fill. The pipeline fill was completed during the
third quarter and the costs associated with this operation were
capitalized as a fixed asset.
OIL AND GAS PRODUCTION VOLUMES AND NETBACKS
Three months Three months
Year ended Dec. 31, 2013 Year ended Dec. 31, 2012 ended Dec. 31, 2013 ended Dec. 31, 2012
Natural Natural Natural Natural
Oil gas Combined Oil gas Combined Oil gas Combined Oil gas Combined
Volumes
sold (boe/d) 120,002 10,787 130,789 93,141 10,902 104,043 129,547 10,918 140,465 107,392 11,031 118,423
Crude oil and
natural gas
sales price
($/boe) $99.05 $37.27 $93.95 $102.94 $42.19 $96.58 $95.54 $32.69 $90.66 $99.83 $43.80 $94.61
Production
costs ($/boe) 15.24 5.11 14.41 11.71 4.60 10.96 14.80 4.24 13.98 14.78 6.61 14.02
Transportation
costs ($/boe) 14.54 0.10 13.35 13.95 0.20 12.51 13.29 - 12.26 14.57 0.01 13.22
Diluent
costs ($/boe) 5.46 - 5.01 11.08 - 9.92 2.32 - 2.14 8.52 - 7.72
Subtotal
costs ($/boe) 35.24 5.21 32.77 36.74 4.80 33.39 30.41 4.24 28.38 37.87 6.62 34.96
Other costs
($/boe) 1.77 2.62 1.84 1.12 2.65 1.28 4.53 3.02 4.42 5.14 2.99 4.94
Overlift/
underlift (loss)
costs ($/boe) (1.56) - (1.43) 1.94 (0.27) 1.71 (1.71) 0.07 (1.57) 9.21 (0.89) 8.27
Total costs
($/boe) 35.45 7.83 33.18 39.80 7.18 36.38 33.23 7.33 31.23 52.22 8.72 48.17
Operating
netback ($/boe) 63.60 29.44 60.77 63.14 35.01 60.20 62.31 25.36 59.43 47.61 35.08 46.44
Additional cost and netback details are available in the MD&A.
In a news release dated April 9, 2013, the company disclosed plans for a
structural reduction in its oil operating costs (production,
transportation and diluent costs) on a pro forma basis by year-end
2013, the result of a number of initiatives and projects, including a
new electrical transmission line supplying less expensive energy to
power field operations, increased pipeline transportation replacing
more expensive trucking of crude oil, and efficiencies and
optimizations related to diluent costs and supply.
For the fourth quarter of 2013, the company was able to achieve an oil
operating cost of $30.41 per bbl compared with $37.87 per bbl in the fourth
quarter of 2012, a reduction of $7.46 per bbl, compared with the same period
of 2012, resulting in a substantial achievement of the targeted $8 per bbl
reduction. With the electrification of the PEL electrical power
transmission line (delivering lower cost electrical power for operating
the Rubiales and Quifa fields) following Colombian ministerial approval
in January, the company expects to realize a full year of production
cost reduction in 2014 and is now targeting operating costs of $28 to
$30 per boe for the year, below original annual guidance of $30 to $33 per boe.
The company also reports separately netback on crude oil for trading
which was $1.54 per bbl in 2013, compared with $3.38 per bbl in 2012. The netback
on crude trading activities during the fourth quarter and full year
2013 was lower than 2012, mainly due to an increase in the cost of
purchases relative to sales price. Additional oil for trading details
are available in the MD&A.
2013 reserves
The associated table summarizes information contained in the reserves
reports prepared by the company's independent reserves engineering
firms: RPS Energy Canada Ltd., Petrotech Engineering Ltd., Netherland
Sewell & Associates Inc. and DeGolyer McNaughton, with an effective
date of Dec. 31, 2013. These reserves reports were prepared in
accordance with National Instrument 51-101 -- standards of disclosure
for oil and gas activities -- and included in the company's Form NI 51-101 F1 -- statement of
reserves data and other oil and gas information -- for Pacific Rubiales
Energy filed on SEDAR.
Total net 2P reserves, expressed in boe, increased slightly in the F1
report, from that previously announced, as a result of a small
non-material net movement from royalties paid in kind to paid in cash.
RESERVES AT DEC. 31, 2013
(mmboe)
Proved
Field Total proved (P1) Probable (P2) plus probable (2P) Hydrocarbon
100% Gross Net 100% Gross Net 100% Gross Net type
Colombia
Rubiales 197.8 83.5 66.8 - - - 197.8 83.5 66.8 Heavy oil
Quifa SW 133.8 80.3 64.8 11.8 7.1 5.8 145.6 87.3 70.5 Heavy oil
CPE-6 34.1 17.0 15.6 104.5 52.3 47.3 138.6 69.3 62.9 Heavy oil
Rio Ariari 10.3 10.3 9.7 35.7 35.7 33.5 46.1 46.1 43.2 Heavy oil
Other heavy oil blocks 99.3 69.5 58.2 76.6 48.3 39.8 175.9 117.8 98.0 Heavy oil
Petrominerales blocks 49.5 32.0 28.4 27.7 19.6 17.5 77.2 51.6 45.9 Light and medium oil
Other light oil blocks 47.7 34.4 29.7 17.6 11.4 9.6 65.3 45.8 39.4 Light and medium oil,
associated natural
gas
Natural gas blocks 107.2 107.2 100.2 20.5 20.5 19.2 127.6 127.6 119.3 Natural gas
Subtotal 679.6 434.1 373.3 294.4 194.8 172.6 974.0 629.0 546.0 Oil and natural gas
Peru
Blocks Z-1 and 131 42.7 20.8 20.8 106.6 52.2 52.4 149.3 73.0 73.2 Light and medium oil,
natural gas
Total at Dec. 31, 2013 722.3 454.9 394.1 400.9 247.1 225.1 1,123.3 702.0 619.2 Oil and natural gas
Total at Dec. 31, 2012 670.4 389.8 335.5 373.9 209.8 178.2 1,044.4 599.6 513.7
Difference 51.9 65.2 58.6 27.0 37.2 46.9 78.9 102.4 105.5
Total reserves
2013 production 113.6 57.7 47.2 incorporated 192.4 160.1 152.7
Exploration Update
During 2013, a total of 34 exploration wells were drilled (including
appraisal and stratigraphic), resulting in 23 discoveries achieving a
68-per-cent success rate for the year. Eighteen of these exploration wells were
drilled during the fourth quarter of the year. This exploration
drilling campaign resulted in new discoveries in the CPE-6, Rio Ariari,
Quifa, Arrendajo, Cravoviejo, Cachicamo, Casanare Este, Casimena,
Cubiro, Yama, La Creciente and Guama blocks in Colombia, in block 131
in Peru, and in the Karoon blocks in Brazil. Additional details are
available in the company's 2013 quarterly and year-end MD&A.
Fourth quarter and year-end 2013 conference call details
The company has scheduled a telephone conference call for investors and
analysts on Thursday, March 13, 2014, at 8 a.m. (Bogota time), 9 a.m. (Toronto time) and 10 a.m. (Rio de Janeiro time) to discuss the
company's fourth quarter and year-end 2013 results. Participants will
include Ronald Pantin, chief executive officer, Jose Francisco Arata,
president, and selected members of senior management.
The live conference call will be conducted in English with simultaneous
Spanish translation. A presentation will be posted on the company's
website prior to the call.
Analysts and interested investors are invited to participate using the
dial-in numbers as follows:
Participant number (international/local): 647-427-7450
Participant number (toll-free Colombia): 01-800-518-0661
Participant number (toll-free North America): 888-231-8191
Conference ID (English participants): 23639502
Conference ID (Spanish participants): 23580209
The conference call will be webcast, which can be accessed through the
company's website.
A replay of the call will be available until 11:59 p.m. (Toronto time), March
27, 2014, and can be accessed using the following dial-in numbers:
Encore toll-free dial-in number: 1-855-859-2056
Local dial-in-number: 416-849-0833
Encore ID (English participants): 23639502
Encore ID (Spanish participants): 23580209
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