Delivered Q1 2023 production of 12,193 bopd representing 17.5% growth over Q4 2022
Achieved record sales volumes of 21,500 bopd in March 2023 through Brazil exports and Iquitos
Fully repaid the Company's corporate bonds
Formalized the shareholder return policy and minimum liquidity requirement
Calgary, Alberta and Houston, Texas--(Newsfile Corp. - May 11, 2023) - PetroTal Corp. (TSX: TAL) (AIM: PTAL) (OTCQX: PTALF) ("PetroTal" or the "Company") is pleased to report its operating and financial results for the three months ("Q1") ended March 31, 2023.
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 months ended March 31, 2023, which are available on SEDAR at www.sedar.com and on the Company's website at www.PetroTal‐Corp.com. All amounts herein are in United States dollars unless otherwise stated.
Manuel Pablo Zuniga-Pflucker, President and Chief Executive Officer, commented:
"I am pleased to report that the Company has achieved production in excess of 20,000 bopd for over 74 days since late February 2023. Q1 2023 was a transformational quarter for our business, as we repaid our corporate bonds in full, reinitiated a material and rewarding return of capital program, and upsized the barging fleet. With the recent permit approval of the L2 West Platform, the Company can now drill for more than two years ahead, allowing for increasing production levels to be achieved. Our value proposition is very clear; we can deliver both material production growth per share and a significant free cash flow yield, instead of having to prioritize one over the other."
Q1 2023 Selected Highlights
Achieved average quarterly sales of 12,618 barrels ("bbls") of oil per day ("bopd"), up 21% from the fourth quarter ("Q4") of 2022;
Delivered monthly record sales in March 2023, with over 660,000 bbls of oil sold through Brazil and to the Iquitos refinery;
Fully repaid the remaining $80 million in corporate bonds in the first quarter of 2023, paving the way for a significant dividend and share buyback program to commence in the second quarter of 2023;
Reinstated a return of capital program, including a USD$0.015 per share quarterly eligible dividend payable in June 2023, representing an annualized yield of 10% based on a US$0.60/share trading price and intends to commence a normal course issuer bid ("NCIB") share buyback program in the second quarter of 2023, subject to approval by the Toronto Stock Exchange ("TSX");
Generated $53.5 million ($47.12/bbl) and $47.9 million ($42.23/bbl) of net operating income and EBITDA, respectively over Q1 2023, an average 10.5% increase from the Q4 2022 net operating income and EBITDA, as a result of higher sales volumes in Q1 2023 compared to Q4 2022;
In conjunction with the oil trading company handling Bretana oil exports through Brazil, negotiated an upsized barging fleet, thereby allowing the Company to have access to over 1.5 million bbls of barging capacity, an increase of approximately 25% from the previous capacity of 1.2 million bbls;
Completed well 14H on March 27, 2023. The well has produced at a constrained average rate of 2,880 bopd during May 2023 to date, in line with expectations;
Completed a fourth water disposal well in late January 2023, increasing the Company's disposal capacity to over 150,000 bbls of water per day ("bwpd") when fully tied into the Company's field disposal system; and,
Exited Q1 2023 with $71.6 million in total cash and a $71.1 million net surplus. (see note 9 below).
Selected Q1 2023 Financial and Operational Highlights
| Q1-2023 | Q4-2022 | |||||||||||
| ($ thousands) | $/bbl | $ thousands | $/bbl | $ thousands | ||||||||
| Average Production (bopd) (1) | 12,193 | 10,374 | ||||||||||
| Average sales (bopd) | 12,618 | 10,420 | ||||||||||
| Total sales (bbls) | 1,135,611 | 958,624 | ||||||||||
| Average Brent price | $ | 82.51 | $ | 88.61 | ||||||||
| Contracted sales price, gross(1) | $ | 80.32 | $ | 88.22 | ||||||||
| Tariffs, fees and differentials | ($20.01 | ) | ($21.71 | ) | ||||||||
| Realized sales price, net | $ | 60.31 | $ | 66.51 | ||||||||
| Oil revenue | $ | 60.31 | $ | 68,494 | $ | 66.51 | $ | 63,755 | ||||
| Royalties(2) | $ | 5.49 | $ | 6,238 | $ | 6.08 | $ | 5,824 | ||||
| Operating expense | $ | 5.60 | $ | 6,354 | $ | 7.42 | $ | 7,115 | ||||
| Direct Transportation: | ||||||||||||
| Diluent | $ | 1.20 | $ | 1,368 | $ | 1.33 | $ | 1,274 | ||||
| Barging | $ | 0.80 | $ | 906 | $ | 0.86 | $ | 824 | ||||
| Diesel | $ | 0.10 | $ | 113 | $ | 0.15 | $ | 144 | ||||
| Storage | $ | 0.00 | $ | 0 | $ | 0.16 | $ | 152 | ||||
| Total Transportation | $ | 2.10 | $ | 2,387 | $ | 2.50 | $ | 2,394 | ||||
| Net Operating Income(4) | $ | 47.12 | $ | 53,515 | $ | 50.51 | $ | 48,422 | ||||
| G&A | $ | 4.90 | $ | 5,559 | $ | 5.57 | $ | 5,339 | ||||
| EBITDA(3) | $ | 42.22 | $ | 47,956 | $ | 38.78 | $ | 43,083 | ||||
| Adjusted EBITDA(3) | $ | 35.92 | $ | 40,825 | $ | 37.91 | $ | 36,338 | ||||
| Net Income | $ | 14.82 | $ | 16,979 | $ | 38.78 | $ | 37,176 | ||||
| Basic Shares Outstanding | 883,800 | 862,209 | ||||||||||
| Market Capitalization(6) | $ | 521,046 | $ | 431,104 | ||||||||
| Net Income/Share | $ | 0.019 | $ | 0.043 | ||||||||
| Capex | $ | 32,919 | $ | 32,024 | ||||||||
| Free Funds Flow(3) (7) | $ | 8.13 | $ | 7,906 | $ | 3.80 | $ | 4,314 | ||||
| % of Market Capitalization(6) | 2% | 1% | ||||||||||
| Total Cash(8) | $ | 71,635 | $ | 119,969 | ||||||||
| Net Surplus (Debt) (3) (9) | $ | 71,117 | $ | 74,225 | ||||||||
- Approximately 86% of sales over Q1 2023 were through the Brazilian route vs 84% in Q4 2022.
- Royalties in Q1 2023 include the impact of the 2.5% community social trust.
- Non-GAAP (defined below) measure that does not have any standardized meaning prescribed by GAAP and therefore may not be comparable with the calculation of similar measures presented by other entities. See "Selected Financial Measures" section.
- Net operating income represents revenues less royalties, operating expenses, and direct transportation; See "Selected Financial Measures" section.
- Adjusted EBITDA is net operating income less general and administrative ("G&A") and plus/minus realized derivative impacts. See "Selected Financial Measures" section.
- Market capitalization for Q1 2023 and Q4 2022 assume share prices of US$0.59 and US$0.50, respectively.
- Free funds flow is defined as adjusted EBITDA less capital expenditures. See "Selected Financial Measures" section.
- Includes restricted cash balances.
- Net Surplus/Debt = Total cash + all trade and VAT receivables + short and long term net derivative balances - total current liabilities - long term debt - non current lease liabilities - deferred tax - other long term obligations.
Financial and Operating Highlights Subsequent to March 31, 2023
Drilling Commencement of Well 15H. The Company commenced drilling well 15H on April 11, 2023. The well is expected to cost approximately $15 million with completion anticipated in mid June 2023. The well will reach approximately 4,550 meters in total depth with an expected 1,100 meter lateral section.
Approval of the L2 West Platform. On April 15, 2023, PetroTal received approval from Perupetro to install and finalize construction of a new west drilling platform ("L2 West Platform") at Bretana. This project is budgeted at approximately $11 million and will allow Q3 and Q4 2023 drilling locations to commence as scheduled in addition to locations in the 2024 and 2025 long range plan.
Robust Current Oil Production. Production was approximately 21,000 bopd for the month of April 2023 and has averaged 21,140 bopd in May 2023, to date. Near the end of April 2023, the Company fully recovered constrained production volumes from January and February 2023 and now is slightly ahead of plan year to date.
ONP Reopening. The Northern Peruvian Pipeline ("ONP") resumed pipeline operations on April 12, 2023, after over a year of being shut down for maintenance and social unrest related reasons. The Company expects that an estimated 270,000 bbls of oil already in the pipeline will be exported in late Q2 2023 at the Bayovar port by Petroperu, generating between $5 and $6 million in net revenue for the Company at current oil prices. PetroTal has not re-commenced shipping oil through the ONP. It will consider that option once Petroperu's full credit lines are reopened and functioning normally.
Return of Capital Policy. The Company has formalized its dividend and share buyback policy. Subject to maintaining a minimum liquidity level of $60 million, including unused credit facility capacity, the Company will a). pursue a share buyback program of approximately $3 million per quarter and b). pay eligible dividends in 2023 equal to the sum of USD$0.015 per share per quarter and incremental amounts from available cash consistent with maintaining the minimum liquidity level.
Strong Liquidity. The Company continues to receive regular scheduled payments from Petroperu and Brazil export revenue payments are current. Following payment of the June 2023 dividend, the Company anticipates having approximately $60 to $70 million of total cash.
2023 Virtual and in Person AGM
The Company is pleased to announce its 2023 annual general and special meeting of shareholders ("AGM") will be held on June 15, 2023 (10:00am MT/15:00 UK) at the offices of Stikeman Elliott LLP in Calgary, Alberta. The Company's Management Information Circular and Proxy Statement in respect of the AGM is available on SEDAR (www.sedar.com) and the Company's website (www.petrotal-corp.com).
Updated Corporate Presentation and Investor Webcast
PetroTal will host a virtual investor webcast meeting on May 15, 2023 beginning at 9:00am Central Time (3:00pm London time). See the link below to join the webcast. The Company has also provided an updated corporate presentation, with the Q1 2023 results, on its website.
https://stream.brrmedia.co.uk/broadcast/6436734e09685ed9886963e9
ABOUT PETROTAL
PetroTal is a publicly traded, tri‐quoted (TSX: TAL) (AIM: PTAL) (OTCQX: PTALF) oil and gas development and production Company domiciled in Calgary, Alberta, focused on the development of oil assets in Peru. PetroTal's flagship asset is its 100% working interest in Bretana oil field in Peru's Block 95 where oil production was initiated in June 2018. In early 2022, PetroTal became the largest crude oil producer in Peru. The Company's management team has significant experience in developing and exploring for oil in Peru and is led by a Board of Directors that is focused on safely and cost effectively developing the Bretana oil field. It is actively building new initiatives to champion community sensitive energy production, benefiting all stakeholders.
For further information, please see the Company's website at www.petrotal-corp.com, the Company's filed documents at www.sedar.com, or below:
Douglas Urch
Executive Vice President and Chief Financial Officer
Durch@PetroTal-Corp.com
T: (713) 609-9101
Manolo Zuniga
President and Chief Executive Officer
Mzuniga@PetroTal-Corp.com
T: (713) 609-9101
PetroTal Investor Relations
InvestorRelations@PetroTal-Corp.com
Celicourt Communications
Mark Antelme / Jimmy Lea
petrotal@celicourt.uk
T : 44 (0) 208 434 2643
Strand Hanson Limited (Nominated & Financial Adviser)
Ritchie Balmer / James Spinney / Robert Collins
T: 44 (0) 207 409 3494
Stifel Nicolaus Europe Limited (Joint Broker)
Callum Stewart / Simon Mensley / Ashton Clanfield
T: +44 (0) 20 7710 7600
Auctus Advisors LLP (Joint Broker)
Jonathan Wright
T: +44 (0) 7711 627449
READER ADVISORIES
FORWARD-LOOKING STATEMENTS: This press release contains certain statements that may be deemed to be forward-looking statements. Such statements relate to possible future events, including, but not limited to: drilling, completions, workovers and other activities and the anticipated costs and results of such activities, including but not limited to costs relating to well 15H and estimated Q2 2023 net revenue generation relating to the ONP reopening; anticipated future production and revenue; drilling plans including the timing of drilling, commissioning, and startup (including in relation to the ONP, well 15H and the L2 West Platform); oil production levels; expectations relating to well 15H including in respect of its expected depth, completion and timing thereof; PetroTal's liquidity following payment of the June 2023 dividend; the Company's return of capital program including regular dividends and share buybacks under the NCIB; commencement and receipt of TSX approval for the NCIB and timing thereof; expectations relating to the ONP reopening including in respect of exportation volumes expected to be delivered by Petroperu at the Bayovar port through Q2 2023, resulting revenue generation and possibility of shipping oil through ONP (upon the reopening and normal functioning of Petroperu's full credit lines) and PetroTal's consideration of the same; expectations surrounding the installation and construction of the L2 West Platform including in respect of impact to commencement of Q3 and Q4 2023 drilling locations as well as locations in the 2024 and 2025 long range plan and timing thereof and the effect of PetroTal's engagement of Zeus Capital on international and UK investor exposure. All statements other than statements of historical fact may be forward-looking statements. In addition, statements relating to expected production, reserves, recovery, replacement, costs and valuation are deemed to be forward-looking statements as they involve the implied assessment, based on certain estimates and assumptions that the reserves described can be profitably produced in the future. Forward-looking statements are often, but not always, identified by the use of words such as "anticipate", "believe", "expect", "plan", "estimate", "potential", "will", "should", "continue", "may", "objective" and similar expressions. More particularly, this press release contains statements concerning the future declaration and payment of dividends and the timing and amount thereof. Future dividend payments, if any, and the level thereof, is uncertain, as the Company's dividend policy and the funds available for the payment of dividends from time to time is dependent upon, among other things, free funds flow financial requirements for the Company's operations and the execution of its growth strategy, fluctuations in working capital and the timing and amount of capital expenditures, debt service requirements and other factors beyond the Company's control. Further, the ability of PetroTal to pay dividends will be subject to applicable laws (including the satisfaction of the solvency test contained in applicable corporate legislation) and contractual restrictions contained in the instruments governing its indebtedness. The forward-looking statements are based on certain key expectations and assumptions made by the Company, including, but not limited to, expectations and assumptions concerning the ability of existing infrastructure to deliver production and the anticipated capital expenditures associated therewith, the ability of the Ministry of Energy to effectively achieve its objectives in respect of reducing social conflict and collaborating towards continued investment in the energy sector, reservoir characteristics, recovery factor, exploration upside, prevailing commodity prices and the actual prices received for PetroTal's products, including pursuant to hedging arrangements, the availability and performance of drilling rigs, facilities, pipelines, other oilfield services and skilled labour, royalty regimes and exchange rates, the impact of inflation on costs, the application of regulatory and licensing requirements, the accuracy of PetroTal's geological interpretation of its drilling and land opportunities, current legislation, receipt of required regulatory approval, the success of future drilling and development activities, the performance of new wells including well 15H, future river water levels, the Company's growth strategy, general economic conditions and availability of required equipment and services. Although the Company believes that the expectations and assumptions on which the forward-looking statements are based are reasonable, undue reliance should not be placed on the forward-looking statements because the Company can give no assurance that they will prove to be correct. Since forward-looking statements address future events and conditions, by their very nature they involve inherent risks and uncertainties. Actual results could differ materially from those currently anticipated due to a number of factors and risks. These include, but are not limited to, risks associated with the oil and gas industry in general (e.g., operational risks in development, exploration and production; delays or changes in plans with respect to exploration or development projects or capital expenditures; the uncertainty of reserve estimates; the uncertainty of estimates and projections relating to production, costs and expenses; and health, safety and environmental risks), commodity price volatility, price differentials and the actual prices received for products, exchange rate fluctuations, legal, political and economic instability in Peru, access to transportation routes and markets for the Company's production, changes in legislation affecting the oil and gas industry and uncertainties resulting from potential delays or changes in plans with respect to exploration or development projects or capital expenditures; changes in the financial landscape both domestically and abroad, including volatility in the stock market and financial system; and wars (including Russia's war in Ukraine). In addition, the Company cautions that uncertainty regarding the full impact of the COVID-19 virus on global economies and oil demand and commodity prices, including the effects of recent outbreaks of COVID-19 in China, may have a negative effect on the Company's business, financial condition and results of operations. Please refer to the risk factors identified in the Company's AIF and MD&A which are available on SEDAR at www.sedar.com. The forward-looking statements contained in this press release are made as of the date hereof and the Company undertakes no obligation to update publicly or revise any forward-looking statements or information, whether as a result of new information, future events or otherwise, unless so required by applicable securities laws.
OIL REFERENCES: All references to "oil" or "crude oil" production, revenue or sales in this press release mean "heavy crude oil" as defined in NI 51-101. All references to Brent indicate Intercontinental Exchange ("ICE") Brent. Recovery factor percentages include historical production.
DRILLING LOCATIONS: This press release discloses drilling inventory in three categories: (a) proved locations; (b) probable locations; and (c) possible locations, all of which are derived from the independent reserves report ("NSAI Report") prepared by Netherland, Sewell & Associates, Inc. ("NSAI") effective December 31, 2022 and account for drilling locations that have associated proved, probable and/or possible reserves, as applicable. There is no certainty that PetroTal will drill all booked drilling locations and if drilled there is no certainty that such locations will result in additional oil reserves or production. The drilling locations considered for future development will ultimately depend upon the availability of capital, regulatory approvals, seasonal restrictions, oil prices, costs, actual drilling results, additional reservoir information that is obtained and other factors. While certain of the possible drilling locations have been de-risked by drilling existing wells in relative close proximity to such drilling locations, other possible drilling locations are farther away from existing wells where management has less information about the characteristics of the reservoir and therefore there is more uncertainty whether wells will be drilled in such locations and if drilled there is more uncertainty that such wells will result in additional oil reserves or production.
SHORT-TERM PRODUCTION RATES: References in this press release to the peak rates and other short term production rates are useful in confirming the presence of hydrocarbons, however such rates are not determinative of the rate at which such wells will commence production and decline thereafter and are not indicative of long-term performance or of ultimate recovery. While encouraging, readers are cautioned not to place reliance on such rates in calculating the aggregate production for PetroTal. The Company cautions that such results should be considered to be preliminary.
SPECIFIED FINANCIAL MEASURES: This press release includes various specified financial measures, including non-GAAP financial measures, non-GAAP financial ratios and capital management measures as further described herein. These measures do not have a standardized meaning prescribed by generally accepted accounting principles ("GAAP") and, therefore, may not be comparable with the calculation of similar measures by other companies. Management uses these non-GAAP measures for its own performance measurement and to provide shareholders and investors with additional measurements of the Company's efficiency and its ability to fund a portion of its future capital expenditures. "Adjusted EBITDA" (non-GAAP financial measure) is calculated as consolidated net income (loss) before interest and financing expenses, income taxes, depletion, depreciation and amortization and adjusted for G&A impacts and certain non-cash, extraordinary and non-recurring items primarily relating to unrealized gains and losses on financial instruments and impairment losses, including derivative true-up settlements. PetroTal utilizes adjusted EBITDA as a measure of operational performance and cash flow generating capability. Adjusted EBITDA impacts the level and extent of funding for capital projects investments. Reference to "EBITDA" is calculated as net operating income less G&A. "Free funds flow" (non-GAAP financial measure) is calculated as net operating income less G&A less exploration and development capital expenditures less realized derivative gains/losses and is calculated prior to all debt service, taxes, lease payments, hedge costs, factoring, and lease payments. Management uses free funds flow to determine the amount of funds available to the Company for future capital allocation decisions. "Net Surplus/Debt" is calculated as total cash + all trade and VAT receivables + short and long term net derivative balances - total current liabilities - long term debt - non current lease liabilities - deferred tax - other long term obligations. Please refer to the MD&A for additional information relating to specified financial measures.
ELIGIBLE DIVIDEND: An eligible dividend is one which is characterized as such by the dividend-paying corporation for Canadian residents. The primary benefit of an eligible dividend is that it benefits from an enhanced gross-up and credit regime at the shareholder level (i.e., the shareholder pays less tax on eligible dividends than non-eligible dividends). This is meant to compensate for the higher general corporate tax rate paid by non-CCPC's on their income and generally preserve integration of Canada's tax rates. As an example, for federal income tax purposes the gross-up rate for eligible dividends is 38% (as compared to 15% for non-eligible dividends) such that the amount of the dividend is multiplied by 1.38 to determine the taxable income to the shareholder. The dividend tax credit for eligible dividends is additionally increased to 6/11 (or 15.02%), as compared to 9/13 (9%) for non-eligible dividends, to offset the greater income inclusion to the taxpayer. Each province provides similar relief on the tax they would otherwise levy on the dividends, although the effective gross-up and credit differs by province.
FOFI DISCLOSURE: This press release contains future-oriented financial information and financial outlook information (collectively, "FOFI") about NPV-10, future development and abandonment costs, prospective results of operations, production and production capacity, free funds flow, revenue, margins, net operating income, shareholder returns and components thereof, all of which are subject to the same assumptions, risk factors, limitations and qualifications as set forth in the above paragraphs. FOFI contained in this press release was approved by management as of the date of this press release and was included for the purpose of providing further information about PetroTal's anticipated future business operations. PetroTal and its management believe that FOFI has been prepared on a reasonable basis, reflecting management's best estimates and judgments, and represent, to the best of management's knowledge and opinion, the Company's expected course of action. However, because this information is highly subjective, it should not be relied on as necessarily indicative of future results. PetroTal disclaims any intention or obligation to update or revise any FOFI contained in this press release, whether as a result of new information, future events or otherwise, unless required pursuant to applicable law. Readers are cautioned that the FOFI contained in this press release should not be used for purposes other than for which it is disclosed herein. All FOFI contained in this press release complies with the requirements of Canadian securities legislation, including NI 51-101. Changes in forecast commodity prices, differences in the timing of capital expenditures, and variances in average production estimates can have a significant impact on the key performance measures included in PetroTal's guidance. The Company's actual results may differ materially from these estimates.
Neither the TSX Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Exchange) accepts responsibility for the adequacy or accuracy of this press release.
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