PetroTal Announces Oil Sales and Risk Management Update
Completion of Second Oil Export through Brazilian Terminal and Hedging Arrangements
Calgary, Alberta and Houston, Texas--(Newsfile Corp. - March 31, 2021) - PetroTal Corp. (TSXV: TAL) (AIM: PTAL) ("PetroTal" or the "Company") is pleased to announce the second export of Bretana crude oil into the Atlantic region through Brazil and the execution of crude oil price derivative contracts. All currency amounts are in United States dollars (unless otherwise stated).
- PetroTal has completed the initial implementation of its oil price hedging program for 2021. Approximately 590,000 barrels have been hedged, (representing approximately 16% of forecast oil production covering April 1, 2021 to December 31, 2021), in a Put structure with a $60/bbl strike;
- The Company completed the second Bretana oil export through Brazil, selling 225,000 barrels of oil at $61/bbl less a quality differential and commercial fees, similar to the first Brazilian export completed in December 2020; and,
- Physical sales from the 1.8 million barrels of oil in the Northern Oil Pipeline ("ONP") have commenced, with 360,000 barrels to be sold by Petroperu in April for $62/bbl less a $2.06/bbl quality differential, further reinforcing the strong demand for Bretana oil. This will result in PetroTal receiving an incremental true-up payment of approximately $20/bbl over the revenue booked from the original sale, including differential adjustments.
Executed Corporate Hedging Contract
In order to support the 2021 capital development program and mitigate Brent oil price downside risk prior to oil delivery, PetroTal has executed a 590,252 barrel Put option with a strike price of $60/bbl, for the period April 1, 2021 to December 31, 2021. The Company hedged these volumes based on the 2021 budget's monthly oil production profile and will look to layer on additional H2 2021 and H1 2022 hedges as production levels grow following commencement of drilling activity.
Second Oil Export Sale Through Brazil
The Company has completed a second oil export through Brazil of 225,000 barrels of oil, sold FOB Bretana. The oil was loaded into a series of barges at Bretana, destined for transport to a terminal near Manaus, Brazil. The sales invoice is based on the Brent oil price forecast for April 2021 of $61/bbl, and PetroTal has received full payment for this export.
Based on run rate cost assumptions, inclusive of royalties, operating and transportation costs, and export related fees, the Company estimates a netback of approximately $31/bbl, an improvement from the netback realized from the previously announced first export sale through Brazil in December 2020.
PetroTal has now executed a contract for additional Brazilian oil exports through to July 31, 2022 that will supplement existing sales arrangements using the ONP, providing flexibility in the sales program and production continuity.
Petroperu Hedging Program Update
For sales into the ONP, the Company is paid an initial price when oil is delivered to pump station #1 at Saramuro, with a true-up payment received approximately eight months later from Petroperu, based on the Brent price at the Bayovar port. To alleviate the oil price risk associated with PetroTal's monthly deliveries into the ONP, the monthly sales invoices are, pursuant to the previously announced amended oil sales contract with Petroperu, now priced based on the eight month Brent strip price forecast, and Petroperu has placed oil price Swaps for these sales to alleviate significant price adjustments.
With the Company's guidance and in accordance with the amended oil sales contract, Petroperu is facilitating commodity price hedge arrangements for the remaining 1.8 million barrels of oil in the ONP from previous deliveries, produced from Bretana in 2019 and 2020. These arranged volumes carry an average initial price of $44/bbl and are expected to reach the Bayovar port for export by Petroperu over the next six months from April 2021. The current incremental value of the arranged true-up payments to PetroTal, which is subject to change, is approximately $36 million, based on the March 25, 2021 forward Brent strip oil price forecast. As noted below, a Swap arrangement has been placed by Petroperu for the first 360,000 barrels.
Petroperu will continue to hedge the remaining arranged 1.4 million barrels and ongoing future deliveries into the ONP.
First True-up ONP Revenue Sale Tendered in April
The Company was advised that Petroperu has arranged a physical sale in April of 360,000 barrels arriving at the Bayovar port, at April's average Brent price less a $2.06/bbl quality differential. This represents approximately 20% of the arranged barrels that were subject to the contingent derivative liability in 2020. To assure price certainty for PetroTal in April, Petroperu has hedged this volume with a $62/bbl Swap.
Q1 2021 Operations and Financial Update
PetroTal will provide a Q1 2021 operations and financial update on April 7, 2021 followed by a general conference call shortly after. Details on how to participate will be available on our website listed below, prior to the call.
Manuel Pablo Zuniga-Pflucker, President and Chief Executive Officer, commented:
"We are very pleased to be able to execute our second Brazil shipment, demonstrating this is a viable offtake option that can scale up with operational pace and cost efficiency, based on production activity and ONP availability. Having the Brazilian offtake option ensures healthy commercial competition amongst all oil sales options. The associated commercial terms on all our recent liftings are an indicator of the continued high demand of Bretana crude. We are also extremely happy to enter into the first phase of our 2021 hedging strategy, giving stakeholders greater confidence around our 2021 cash flow profile. We have an exciting operational program planned over the coming months and we look forward to updating our progress shortly."
PetroTal is a publicly traded, dual‐quoted (TSXV: TAL) and (AIM: PTAL) 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, and in early 2020 became the second largest crude oil producer in Peru. Additionally, the Company has large exploration prospects and is engaged in finding a partner to drill the Osheki prospect in Block 107. The Company's management team has significant experience in developing and exploring for oil in Northern Peru and is led by a Board of Directors that is focused on safely and cost effectively developing the Bretana oil field.
Executive Vice President and Chief Financial Officer
T: (713) 609-9101
President and Chief Executive Officer
T: (713) 609-9101
PetroTal Investor Relations
Mark Antelme / Jimmy Lea
T : 44 (0) 208 434 2643
Strand Hanson Limited (Nominated & Financial Adviser)
James Spinney / Ritchie Balmer
T: 44 (0) 207 409 3494
Stifel Nicolaus Europe Limited (Joint Broker)
Callum Stewart / Simon Mensley / Ashton Clanfield
Tel: +44 (0) 20 7710 7600
Auctus Advisors LLP (Joint Broker)
Jonathan Wright / Rupert Holdsworth Hunt / Harry Baker
T: +44 (0) 7711 627449
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: PetroTal's business strategy, objectives, strength and focus; hedging program; drilling activities; anticipated future production and revenue; transportation alternatives and sales continuity, including pursuant to a contract for future exports through Brazil; and future development and growth prospects. All statements other than statements of historical fact may be forward-looking statements. In addition, statements relating to expected production, reserves, recovery, 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. 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, 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 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, 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. In addition, the Company cautions that current global uncertainty with respect to the spread of the COVID-19 virus and its effect on the broader global economy may have a significant negative effect on the Company. While the precise impact of the COVID-19 virus on the Company remains unknown, rapid spread of the COVID-19 virus may continue to have a material adverse effect on global economic activity, and may continue to result in volatility and disruption to global supply chains, operations, mobility of people and the financial markets, which could affect interest rates, credit ratings, credit risk, inflation, business, financial conditions, results of operations and other factors relevant to the Company. Please refer to the risk factors identified in the Company's annual information form for the year ended December 31, 2019 and management's discussion and analysis for the year ended December 31, 2020 and for the three and nine months ended September 30, 2020 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 AND GAS INFORMATION: This press release contains metrics commonly used in the oil and natural gas industry, such as netback. "Netback" equals total petroleum sales less quality discount, lifting costs, transportation costs and royalty payments calculated on a bbl basis. These terms have been calculated by management and do not have a standardized meaning and may not be comparable to similar measures presented by other companies, and therefore should not be used to make such comparisons. Management uses these oil and gas metrics for its own performance measurements and to provide shareholders with measures to compare PetroTal's operations over time. Readers are cautioned that the information provided by these metrics, or that can be derived from the metrics presented in this press release, should not be relied upon for investment or other purposes.
OIL REFERENCES: All references to "oil" or "crude oil" production, revenue or sales in this press release mean "heavy crude oil" as defined in National Instrument 51-101 - Standards of Disclosure for Oil and Gas Activities ("NI 51-101"). All references to Brent indicate Intercontinental Exchange ("ICE") Brent.
FOFI DISCLOSURE: This press release contains future-oriented financial information and financial outlook information (collectively, "FOFI") about PetroTal's prospective results of operations, production, exports, hedging, 2021 cash flow profile 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 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.
Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this press release.
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