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PetroTal announces third quarter financial results and operations update

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PetroTal Corp. had a strong third quarter of 2019, showing increases in production during the period compared to 2018 and successful completion of several projects.

Third Quarter Highlights:

  • Oil production increased to an average of 4,760 barrels of oil per day ("BOPD"), a 58% increase from Q2, 2019.
  • Recorded net income of US$3.0 million for the third quarter and US$1.9 million for the nine months 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 August 25, 2019.
  • The Company's cash and cash equivalents position as at September 30, 2019 was $20.5 million and not approximately $40 million, as stated in the Company's RNS dated October 21, 2019 as set out below.

Subsequent to the Third Quarter:

  • Completed the BN 95-4H ("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 has increased production capacity.
  • Current Bretaña oil field production reached new record production with the last 30-days averaging over 8,500 BOPD, now with all five oil wells online.
  • Commenced drilling the BN 95-5H ("5H") well, which will be the Company's second horizontal development oil well. The 5H is expected to be online in December, coinciding with the commissioning of the central production facility for Bretaña ("CPF-1").
  • The Company's cash position as at 31 October 2019 was US$21.1 million.

OPERATIONS UPDATE

The Company continued the development of the Bretaña oil field and produced an average of 4,760 BOPD during the third quarter, compared to 3,010 BOPD in the fiscal second quarter. PetroTal has successfully completed the 4H well, the Company's first horizontal well in the Bretaña oil field. The well had an approximately 500-meter 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 towards 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 percent), 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 one of its CPF-1 in December 2019, which will increase full field production capacity to over 10,000 BOPD. Incremental implementation of phase two 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 which 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 online 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 RNS dated October 21, 2019 was incorrect.

The Company's actual cash and cash equivalents position as at September 30, 2019 was $20.5 million, and its total current assets, which in addition to the cash and cash equivalents comprise of VAT receivables ($9.9 million), trade & other receivables ($2 million), inventory ($8.5 million), and advances & prepaid expenses ($0.78 million), totaled $41.7 million as at September 30, 2019. The main reason for the difference is that the RNS dated October 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 oilfield 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."

ABOUT PETROTAL

PetroTal is a publicly-traded, dual-listed (TSXV: TAL) (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 the Bretaña 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. 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 Bretaña oil field. 

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