Mr. Ralph Gillcrist reports
PETROAMERICA ANNOUNCES 2015 THIRD QUARTER RESULTS
Petroamerica Oil Corp. has released the financial and operating results for the three and nine months ended Sept. 30, 2015, and has provided an operations update on the company's activities in Colombia.
Copies of the company's management's discussion and analysis and interim financial statements have been filed with the Canadian securities regulatory authorities and can be viewed or downloaded at the company's website or at SEDAR. (The financial results for all periods presented are in U.S. dollars unless otherwise indicated.)
Financial and operating highlights:
- Announced the signing of an arrangement agreement with Gran Tierra Energy Inc. whereby Gran Tierra will acquire 100 per cent of the company's outstanding shares. This arrangement is expected to close around the end of January, 2016;
- Completed the acquisition of PetroNova Inc., increasing the company's interest in the highly prospective PUT-2 block, as well as acquiring operatorship and an additional three blocks with significant potential;
- Announced a private placement of up to $20-million by way of a secured debenture financing with AV Securities Inc., with up to $10-million available for the company to close on until Jan. 16, 2016, and up to $10-million available for the company to close on approximately four months later;
- Recognized funds flow from operations in the quarter of $3.5-million (three cents per share) in a difficult oil price environment;
- Realized a Brent referenced sales price of $51.16 per barrel, an operating netback of $14.54 per bbl and a cash netback of $7.54 per bbl for the quarter;
- Managed capital expenditures to a minimum, spending $2.2-million throughout the quarter;
- Reduced average unit transportation costs to 9.34 per bbl compared with 12.25 per bbl for the previous quarter.
Financial and operating results
The attached table presents the highlights of Petroamerica's financial and operating results.
FINANCIAL AND OPERATING HIGHLIGHTS
(in $000 (U.S.) except per share or unless otherwise noted)
Q3 2015 Q2 2015 Nine Q3 2014
months
2015
Oil revenue -- net of royalties $12,887 $15,873 $45,815 $43,150
Funds flow from operations $3,505 $3,022 $8,819 $1,048
Funds flow per share -- basic $0.03 $0.03 $0.10 $0.01
Funds flow per share -- diluted $0.03 $0.03 $0.10 $0.01
(Loss) income for period $(73,299) $(2,024) $(82,275) $(7,947)
Total comprehensive (loss) income $(70,900) $(2,628) $(82,872) $(14,182)
(Loss) income per share -- basic $(0.72) $(0.02) $(0.89) $(0.10)
(Loss) income per share -- diluted $(0.72) $(0.02) $(0.89) $(0.10)
Average production -- boepd 3,655 3,634 3,943 6,009
Selling price $/boe $44.10 $54.47 $48.47 $94.59
Royalty $/boe $(5.17) $(6.80) $(5.70) $(18.57)
Average transportation costs $/boe $(9.34) $(12.25) $(12.04) $(14.87)
Average production cost $/boe $(15.05) $(14.54) $(13.29) $(15.46)
Operating netback $/boe $14.54 $20.88 $17.44 $45.69
Cash netback $/boe $7.54 $8.92 $8.67 $33.46
Reference price -- Brent ($/bbl) $51.16 $63.50 $56.58 $103.46
Third quarter financial summary
For the three months ended Sept. 30, 2015, the company reported $14.6-million in revenue (before royalties) from the sale of 331,000 barrels of oil equivalent or 3,655 barrels of oil equivalent per day. The realized sales price was $44.10 per boe, generating an operating netback of $14.54 per boe and a cash netback of $7.54 per boe.
For the third quarter of 2015, the company's net loss was $73.3-million (72 cents per share diluted) due primarily to the recognition of $90-million in non-cash depletion and depreciation and impairment expense in the current quarter. The impairment charge is a result of a re-evaluation of the carrying value of the company's assets due to lower projected oil prices. The company's capital expenditures for the third quarter were $2.2-million, all invested in Colombia. As at Sept. 30, 2015, the company held 50,000 barrels of oil in inventory.
The company continues to focus on reducing field operating expenditures. On a per barrel basis, production costs were $15.05 for the third quarter of 2015, a reduction from $15.46 per boe for the third quarter of 2014. Transportation costs have been reduced from $14.87 per boe in the third quarter of 2014 to $9.34 per boe in the current quarter.
Private placement
On Oct. 27, 2015, the company announced that that it had entered into an agreement with AV Securities to issue up to $20-million in debt financing, with up to $10-million expected to close in the fourth quarter of 2015 and up to $10-million to close approximately four months later.
Petroamerica is pleased to provide an update that AV Securities has agreed to extend the initial drawdown deadline for up to $10-million until Jan. 16, 2016, and up to an additional $10-million to be available approximately four months later.
This placement will be cancelled in the event that the arrangement with Gran Tierra outlined below is completed.
Guidance for 2015
The company is targeting gross company share production (net before royalty) for full-year 2015 of 3,600 boepd. Petroamerica's expected capital spending projection for the same period is now expected to be approximately $6.8-million.
Operations update
Company working interest production (before royalties) for the third quarter of 2015 averaged 3,655 boepd, with 2,388 boepd coming from the Llanos basin and 1,267 boepd from the Putumayo basin. Company WI production for the first nine months of 2015 averaged 3,943 boepd. In the fourth quarter, WI production averaged approximately 2,912 boepd up to and including Nov. 25. Production in the Las Maracas field was lower than expected during this period due to pump failures on two key wells, Las Maracas-9 and Las Maracas-15, which required pump repairs and additional remedial work to minimize the occurrence of future failures. Both wells have been returned to production, and the field has been restored to full productivity. Production operations were normal in the Suroriente field during this period, with the exception of a six-day production interruption in mid-October, when production was at 25 per cent of productive capacity due to local road blockades, which were subsequently removed. Assuming normal operations for the rest of 2015, the company expects to meet the previously announced full-year working interest production target of 3,600 boepd.
Arrangement with Gran Tierra
On Nov. 13, 2015, the company announced that it had entered into an arrangement agreement whereby Gran Tierra has agreed to acquire all of the issued and outstanding common shares of Petroamerica by way of a statutory plan of arrangement under the Business Corporations Act (Alberta). Under the terms of the arrangement agreement, Petroamerica shareholders will receive, at their election, either 0.40 of a Gran Tierra common share or $1.33 (Canadian) in cash for each Petroamerica share, subject to a maximum of 70 per cent of the consideration payable in cash. The acquisition is expected to close on or around the end of January, 2016.
This acquisition of Petroamerica is highly strategic and will strengthen Gran Tierra's position as the premier operator and landholder in the Putumayo basin. Gran Tierra has the financial capacity to pursue additional exploration and development projects within Petroamerica's asset portfolio maximizing its value.
Petroamerica established a special committee, composed of independent directors, to explore various transaction alternatives available to Petroamerica, including transactions similar in nature to the acquisition. The offer from Gran Tierra was unanimously recommended to the board of directors by the special committee, and the board of directors of Petroamerica, with the exception of one director who recused himself for potential conflict reasons but who unequivocally supports the transaction, has unanimously recommended approval of the acquisition determining that the acquisition is in the best interests of Petroamerica shareholders.
CONDENSED CONSOLIDATED INTERIM STATEMENTS OF (LOSS) INCOME AND COMPREHENSIVE (LOSS) INCOME
(thousands of U.S. dollars, except per-share amounts)
Three months ended Nine months ended
Sept. 30, Sept. 30,
2015 2014 2015 2014
Revenue
Oil revenue -- net of royalties $ 12,887 $ 43,150 $ 45,815 $ 142,677
Total revenue 12,887 43,150 45,815 142,677
Expenses
Production (4,983) (8,777) (14,233) (13,769)
Transportation (3,093) (8,441) (12,899) (29,954)
Purchased oil -- -- -- (1,625)
Exploration and evaluation -- (715) -- (1,069)
Depletion and depreciation (6,434) (10,938) (22,518) (29,888)
Colombian equity tax -- -- (501) --
Impairment (90,394) -- (90,394) --
General and administration (2,164) (5,272) (7,592) (11,745)
Transaction costs (966) (7,818) (976) (9,047)
Share-based payments 135 (360) 23 (2,352)
Total expenses (107,899) (42,321) (149,090) (99,449)
Finance and other 497 (1,744) (1,443) (4,245)
Foreign exchange gain (loss) (1,802) 1,185 1,025 3,028
Income (loss) before income taxes (96,317) 270 (103,693) 42,011
Current income tax expense 389 (2,971) (390) (18,781)
Deferred tax recovery (expense) 22,629 (5,246) 21,808 (7,134)
Net income (loss) for the period (73,299) (7,947) (82,275) 16,096
Other comprehensive income (loss)
Items that may be reclassified subsequently to
income or (loss)
Reserve on translation of foreign operations 2,399 (6,235) (597) (8,286)
Total comprehensive income (loss) $ (70,900) $ (14,182) $(82,872) $ 7,810
Basic income (loss) per share $ (0.72) $ (0.10) $ (0.89) $ 0.24
Diluted income (loss) per share $ (0.72) $ (0.10) $ (0.89) $ 0.23
We seek Safe Harbor.
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