Mr. Manolo Zuniga reports
PETROTAL ANNOUNCES THIRD QUARTER FINANCIAL RESULTS AND OPERATIONS UPDATE
Petrotal Corp. has provided a summary of its financial and operating results as of Sept. 30, 2019.
Selected financial and operational information is outlined below and should be read in conjunction with the company's unaudited consolidated financial statements and management's discussion and analysis (MD&A) for the three and nine months ended Sept. 30, 2019, which are available on SEDAR and the company's website. All figures referred to in this press release are denominated in U.S. dollars.
2019 third quarter highlights and operational update
Third quarter highlights:
- Oil production increased to an average of 4,760 barrels of oil per day (bopd), a 58-per-cent increase from the second quarter of 2019;
- Recorded net income of $3.0-million (U.S.) for the third quarter and $1.9-million (U.S.) for the nine-month period;
- Drilled a new water disposal well;
- Completed a workover on the existing water disposal well to convert the well into an oil producer. Upon completion, this well produced approximately 2,300 bopd over a 30-day test period;
- Continued with facility expansion and development of various oil sales venues;
- Executed first transaction under the terms of the contract with Petroperu to utilize the North Peruvian oil pipeline and placed 200,001 barrels of crude oil in the pipeline on Aug. 25, 2019;
- The company's cash and cash equivalents position as at Sept. 30, 2019, was $20.5-million and not approximately $40-million, as stated in the company's news release dated Oct. 21, 2019, as set out below.
Subsequent to the third quarter:
- Completed the BN 95-4H horizontal well on time and under budget by approximately $3.0-million using new technology to maximize oil production;
- The 4H initial four-day production rate of 6,200 bopd exceeded management's expectations, as well as its 30-day average of 6,000 bopd;
- Interim upgrades to production facilities have increased production capacity;
- Current Bretana oil field production reached new record production with the last 30 days averaging over 8,500 bopd, now with all five oil wells on line;
- Commenced drilling the BN 95-5H well, which will be the company's second horizontal development oil well. The 5H is expected to be on line in December, coinciding with the commissioning of the central production facility for Bretana (CPF-1);
- The company's cash position as at Oct. 31, 2019, was $21.1-million (U.S.).
The company continued the development of the Bretana oil field and produced an average of 4,760 bopd during the third quarter, compared with 3,010 bopd in the fiscal second quarter. Petrotal has successfully completed the 4H well, the company's first horizontal well in the Bretana oil field. The well had an approximately 500-metre lateral completion utilizing autonomous inflow control device (AICD) valves to maximize oil production. Initial production from the well during the first four days of production was 6,200 bopd. The 4H well was drilled updip toward the crest of the structure and provided data to confirm management's analysis of the reservoir. The well was drilled under budget by approximately $3.0-million (representing a savings of approximately 20 per cent), which will expedite payout of the well.
During the third quarter, the company also upgraded the production facilities, expanding Petrotal's production capacity to over 7,500 bopd. The company plans to commission phase 1 of its CPF-1 in December, 2019, which will increase full field production capacity to over 10,000 bopd. Incremental implementation of phase 2 of the company's production facilities (CPF-2) is planned for July, 2020. When CPF-2 is fully integrated by year-end 2020, Petrotal will have the capacity to produce up to 20,000 bopd. Facility expansion is being implemented on a modular basis to time facilities with well completions to most efficiently deploy capital.
As a result of the company's successful drilling campaign in block 95 to date, the board of directors approved an additional $19.0-million of capital expenditures for 2019. Approximately $14.0-million will be deployed to drill and complete the 5H well, the company's second horizontal well that will target updip oil to the northern portion of the structure; and $5.0-million will be directed to bring additional production facilities to the field by mid-2020, as an interim step to installing CPF-2 before year-end 2020. The company expects this additional capital to yield an additional 5,000 bopd of capacity by mid-2020, for a total of 12,500 bopd. Production from the well is expected to help the company achieve a targeted exit rate of 10,000 bopd at year-end 2019 and fourth quarter average production of approximately 7,500 bopd. The 5H well will also be completed with AICD valves in the lateral section. The well is expected to come on line simultaneously with the facilities commissioning at year-end.
Clarification on the company's cash position
It has come to management's attention during the preparation of the financial statements that the cash and cash equivalents amount of approximately $40-million stated in the company's news release dated Oct. 21, 2019, was incorrect.
The company's actual cash and cash equivalents position as at Sept. 30, 2019, was $20.5-million, and its total current assets, which, in addition to the cash and cash equivalents, comprise VAT (value-added tax) receivables ($9.9-million), trade and other receivables ($2-million), inventory ($8.5-million), and advances and prepaid expenses ($780,000), totalled $41.7-million as at Sept. 30, 2019. The main reason for the difference is that the news release dated Oct. 21, 2019, incorrectly grouped these current asset items as cash and cash equivalents.
Manolo Zuniga, president and chief executive officer, stated: "Petrotal's focus on the Bretana oil field development in the third quarter represented a balanced approach between drilling and facility enhancement. The company is well positioned to handle continued success from its drilling program. The strong performance of the 4H well demonstrates the potential of horizontal wells in this area and the benefits of using the latest engineering technology.
"I congratulate the Petrotal team on all their collaborative efforts as we achieve record production levels. Innovation and optimization in all our operations is an important element to continued success. I also thank our shareholders for your continued support and confidence."
The associated table summarizes key financial highlights associated with the company's financial performance.
(in thousands, except where define)
Three months Nine months
ended Sept. 30, ended Sept. 30,
2019 2018 2019 2018
Oil revenues (before royalty expense) $19,746 $4,301 $32,374 $4,301
(Expenses) (16,729) (3,794) (30,449) (6,738)
Net income (loss) 3,017 507 1,925 (2,437)
Net (loss) per weighted
average common share -- basic and diluted 0.00 0.00 0.00 (0.00)
Exploration and evaluation asset expenditures 610 965 1,005 13,904
Property plant and equipment expenditures 27,241 4,451 61,485 4,629
Net working capital surplus (deficit) (3,538) 28,258
Total assets 161,963 91,322
Total liabilities 58,446 11,655
Shareholder equity 103,517 79,667
About Petrotal Corp.
Petrotal is a publicly traded, dual-listed oil and gas development and production company domiciled in Calgary, Alta., focused on the development of oil assets in Peru. Petrotal's development asset is the Bretana oil field in Peru's block 95 where oil production was initiated in June, 2018, six months after acquisition. Additionally, the company has large exploration prospects and is engaged in finding a partner to drill the Osheki prospect in block 107.
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