PetroTal Corp. - 2024 Budget and Other Corporate Updates
22/01/2024 07:00
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RNS Number : 3709A PetroTal Corp. 22 January 2024
PetroTal Announces 2024 Budget and Other Corporate Updates
2024 production / sales expected to average 17,000 bopd, 20% year on year
increase
Forecast funds flow and free funds flow of $160 million and $25 million,
respectively
Targeting a ~12% return from dividends and buybacks prior to liquidity sweeps
Initial 7 day production rate for well 16H of 7,500 bopd
Calgary, AB and Houston, TX - January 22, 2024-PetroTal Corp. ("PetroTal" or
the "Company") (TSX: TAL, AIM: PTAL and OTCQX: PTALF) announces its fully
funded 2024 budget. All amounts are in US dollars unless otherwise stated.
Key 2024 Budget and drilling highlights
· Average 2024 production and sales target of 17,000 barrels of oil per
day ("bopd"), expected to grow 20% year on year. The production forecast
assumes a dry season as severe as in 2023 with a quarterly profile of (Q1
18,500 bopd, Q2 19,000 bopd, Q3 13,000 bopd, Q4 17,500 bopd);
· Investing $107 million at the Bretana oilfield, including three new
oil wells, alongside infrastructure growth in line with the field's
development plan with flexibility for reduction at lower Brent levels;
· 2024 funds flow forecast to reach $160 million and free funds flow
(after capex but prior to net working capital cash adjustments) of $25 million
using the December 14, 2023 Brent oil strip ($77/bbl flat in 2024) with an
estimated incremental $10 million of free funds flow for every $3/bbl change
in Brent oil price;
· Initiating a two year seismic program south of our producing Bretana
oilfield in Block 95, aiming to validate our technical interpretation of oil
migration towards the southern structural leads;
· Maintaining a return of capital program consisting of quarterly
dividends at US$0.015/share and share buybacks of approximately $1.0
million/month in accordance with the Company's return of capital policy;
· Commercializing two new Bretana oil sales routes, via Yurimaguas to
the port of Bayovar and also through the OCP in Ecuador; each expected to
deliver 2,000 bopd commencing around July and October 2024, respectively; and,
· Well 16H is on stream and has averaged around 7,500 bopd in the first
week, estimated to payback by the end of Q1 2024. Well 17H commenced
drilling on January 12, 2024 and is expected to be completed by the end of
March 2024.
PetroTal 2024 Guidance Summary 2024 Guidance $/bbl
In USD millions unless stated (Midpoint)
Production & sales (bopd and bbls)((1)) 17,000 / 6,222,000 -
Average Contracted Brent ($/bbl) $77.00 $77.00
Revenue $360 $57.85
Royalty payments((2)) ($37) ($5.95)
Lifting costs ($37) ($5.95)
Transportation costs ($26) ($4.18)
Erosion control and community expense((3)) ($30) ($4.82)
Net operating income $230 $36.95
G&A costs((4)) ($30) ($4.82)
Adjusted EBITDA((5)) $200 $32.13
Finance and tax expense((6,7)) ($40) ($6.43)
Funds flow $160 $25.70
Capex((8)) ($135) ($21.70)
Free funds flow $25 $4.00
Estimated 2024 net working capital movements((9)) $11
Dividends and share buybacks((10)) ($66)
Derivative true up payments((11)) $5
Total 2024 change in cash ((12)) ($25)
Opening 2024 unrestricted cash $90
Estimated closing 2024 unrestricted cash $65
Notes:
1. Production guidance range is 16,500 to 17,500 bopd and
assumes matching production and sales profiles.
2. Royalties include the 2.5% social trust allocations.
3. Erosion control expense refers to erosion amounts expensed
related to community support totaling $23 million. The other $7 million
pertains to ongoing community support opex projects.
4. 2024 G&A includes community spending and non-cash equity
compensation amounts totaling $8.4 million of the $30 million.
5. Adjusted EBITDA - see disclaimers and non Gaap financial
metrics.
6. Finance expense includes factoring and other finance related
items.
7. Taxes per table above indicate 2024 accrued taxes. Taxes
accrued in 2024 that will be cash paid in 2025 are approximately $25 million.
8. Capex includes approximately $14 million of capitalized
erosion control costs.
9. Estimated net working capital movements are approximately $30
million in cash savings from the payment of tax in 2025 offset by prepaid
erosion costs of approximately $15 million and other smaller payable items.
10. Dividends are assumed at the base dividend level of US$0.015/share
and buybacks are assumed at $1.0 million per month.
11. Derivative true up payments refer to expected payments from
Petroperu that reflect the difference in value from when the Company's oil
entered the ONP to when it is exported at Bayovar. The assumed export at
Bayovar represents approximately 500,000 barrels already in the ONP, is
targeted for Q1 2024, and the expected true up payment is based on using
December 14, 2023 Brent oil strip pricing.
12. "Adjusted EBITDA", "Free Funds Flow" and "Net Operating Income" do
not have standardized meanings under IFRS, See "Reader Advisories - Specified
Financial Measures".
Manuel Pablo Zuniga-Pflucker, President and Chief Executive Officer,
commented:
"PetroTal's fully funded 2024 budget has many exciting components. Last year
we were focused on repaying debt and starting to return capital, with both
items being successfully achieved in early 2023. In 2024, the Company will
continue to develop Bretana, aiming to deliver 20% average daily production
growth, while maintaining our base return of capital program to offer around
12% in total yield at current prices. We will also continue to invest in
critical safety infrastructure to protect the river banks near our asset from
future erosion threats.
Our exploration program will further advance our Block 95 and 107 expansion
areas with the kickoff of a seismic program in Block 95 aimed at proving up
the technical assumption of oil migration to prospective leads on trend to the
south of the Bretana Field.
I would like to wish everyone a productive 2024, and thank all our
shareholders, employees and wider stakeholders for their continued support in
2023. As we look forward to 2024, we are confident that the Company is well
positioned to meet the opportunities and challenges head on, with well 16H
setting the stage for a great year."
Overall Capital Program
The Company's board of directors has approved a three part capital budget for
2024 totaling $135 million, an expected 13% increase year on year.
· First, Petrotal will spend approximately $107 million at the Bretana
oilfield for continued development, including approximately $7 million carry
forward amounts from our 2023 facilities plan.
· Second, the Company will initiate a seismic program in Block 95,
totaling $12 million, aimed at validating internal oil migration models south
of the Bretana oilfield. PetroTal estimates there could be several
commercial fields in Block 95, some of which could be potentially as large as
Bretana. In addition, approximately $2 million will be allocated to Block
107 for required permitting while the Company advances partnership discussions
for this block.
· Third, PetroTal will allocate $14 million of capital to its
preventative erosion control program which will likely continue into 2025.
Approximately $10 million was spent in 2023 on temporary erosion mitigation
and engineering studies. The erosion control project has been designed by a
leading international engineering firm specializing in coastal and river
engineering solutions, and is aimed at ensuring a permanent hydrology strategy
to protect the Bretana oilfield and nearby community.
Drilling and Facilities Program at Bretana
· In 2024, having recently completed the 16H oil well, the Company will
drill and complete three other oil wells (17H, 18H, and 19H) for an
approximate cost of $50 million. These new wells will be drilled in Q1, Q2,
and Q3 2024 respectively, after which the Company will assess its options
based on oil price and performance, and may continue drilling.
· PetroTal's 2024 facilities program will be approximately $57 million
and deployed with a focus on current and future fluid handling and water
handling infrastructure with many upgrades to accommodate field sustainability
over the long term. A summary of these key projects is provided below:
o Facility upgrades and reliability improvements - $27 million
o Water injection facilities and flowlines - $14 million
o Logistics & dock upgrades, carbon footprint reduction and studies -
$12 million
o IT, digital and others - $4 million
Production and Sales Guidance
· The Company is guiding 2024 average production and oil sales to
17,000 bopd, with a range of 16,500 to 17,500 bopd, representing an increase
of approximately 20% over 2023 average production. The forecast assumes a
dry season as impactful as in 2023, which is expected to be partially
mitigated by dedicated barge unloading at Manaus, and an upsized fleet
capacity to 1.6 million barrels from late 2023.
· The Company will conduct pilot sales shipments to the OCP in Ecuador
of 200,000 barrels of oil with permanent recurring sales of 2,000 bopd assumed
to start in Q4 2024.
· A new sales route will commence through Yurimaguas to Bayovar
starting in July 2024, assuming permanent and recurring sales of 2,000 bopd at
that time. This route will involve barging oil to Yurimaguas and trucking to
the Bayovar port for export.
· No oil volumes are expected to be delivered through the Northern
Peruvian Pipeline ("ONP") in 2024 and the Company's budget was contemplated
using route to markets that are currently commercial and or in
development/pilot phase. Should the ONP become a viable option in 2024,
PetroTal will consider the financial and technical risks of using the ONP as
an additional dry season coverage option.
Opex
Operating costs will consist of four parts: lifting, transportation, erosion
control, and community support totaling $93 million.
· Lifting costs will be approximately $37 million, an increase of $8
million from 2023 due to inflation adjusted fixed contract services, increased
chemical use and additional technical allocations from G&A;
· Transportation costs will be around $26 million in 2024 to include
barging, trucking, and terminal transfer costs for both the Ecuadorian and
Yurimaguas routes.
· Erosion control in opex is estimated to be $23 million ($3.70/bbl)
and represents erosion control mitigation that benefits the nearby Bretana
community.
· Excluding erosion and community support, total lifting and
transportation costs are approximately $10.13/bbl, just slightly above the
2023 amount.
G&A
· G&A in 2024 will be approximately $30 million, roughly flat from
2023. This equates to $4.82/bbl using the 2024 budget midpoint production
level. PetroTal's G&A includes approximately $4.2 million in community
support programs and $4.2 million in non-cash equity compensation for 2024.
The operating and G&A portion of community support will be reduced in
future years as social trust funds are invested in community projects.
Normalizing these items out of the G&A results in a run rate of $3.47/bbl.
Dividends and Share Buybacks
· The Company expects to continue its monthly share buyback program at
approximately $1.0 million per month.
· PetroTal plans to maintain its base quarterly dividend of
US$0.015/share, along with dividend top up payments to be determined at the
declaration dates, pursuant to the Company's dividend policy.
· Total estimated returns from the Company's 2024 dividend and buyback
plan represent 12%, prior to any additional liquidity sweep enhancements,
based on a market capitalization of approximately $550 million.
Other Items
· 2024 taxes are expected to be $40 million on an accrued basis. The
cash tax impact in 2024 is approximately $15 million, with the remainder of
2024's accrued tax being paid in early 2025.
· True up revenue of $5 million is estimated in 2024 using the December
14, 2023 Brent strip price for oil already in the ONP, but which hasn't yet
reached the Bayovar port for export. Please refer to the Company's financial
statements for a detailed explanation on the mechanics of this arrangement.
Government and Community Amounts
· PetroTal estimates its royalties to the government will be
approximately $28 million in 2024, an increase of almost $7 million over 2023
based on higher production volumes in 2024.
· In addition, approximately $9 million will be allocated to the
Company's 2.5% social fund for 2024 in addition to the $4.2 million of amounts
estimated in G&A and approximately $7 million in opex. This totals
approximately $20 million for social funding in 2024.
Well 16H update
The Company is pleased to announce the first 7-day oil rate for well 16H of
7,500 bopd. The well should be in line with or slightly above the Company's
performance expectations. Using a $42/bbl netback assumption, the well
should payout after producing approximately 360,000 barrels of oil, estimated
by the end of Q1 2024.
Drilling Commencement of Well 17H
PetroTal also announces the drilling commencement of well 17H, the Company's
18th producing well, budgeted at $15.2 million with production expected by the
end of Q1 2024.
2024 Budget link for January 22, 2024 at 9am CT webcast
PetroTal will host a webcast to discuss its 2024 budget at 9:00am Central Time
(3:00pm GMT). Please see the link below to register.
https://stream.brrmedia.co.uk/broadcast/65967ac7b012a6d30b474779
(https://stream.brrmedia.co.uk/broadcast/65967ac7b012a6d30b474779)
Updated Investor Presentation
PetroTal has updated its investor presentation with the 2024 budget and is
posted at www.petrotalcorp.com (http://www.petrotalcorp.com) .
Pareto Conference
The Company will present at the Pareto Conference in London on January 25,
2024 and will host an in-person presentation for analysts on January 29, 2024.
About PetroTal
PetroTal is a publicly traded, tri‐quoted (TSX: TAL, AIM: PTAL and 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 the 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.petrotalcorp.com (http://www.petrotalcorp.com) , the Company's filed
documents at www.sedarplus.ca (http://www.sedarplus.ca) , 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.comT: (713) 609-9101
PetroTal Investor Relations
InvestorRelations@PetroTal-Corp.com
Celicourt Communications
Mark Antelme / Jimmy Lea
petrotal@celicourt.uk
T : 44 (0) 20 7770 6424
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
Peel Hunt LLP (Joint Broker)
Richard Crichton / David McKeown / Georgia Langoulant
T: +44 (0) 20 7418 8900
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. All statements other than statements of historical
fact may be forward-looking statements. 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. Without limitation,
this press release contains forward-looking statements pertaining to:
PetroTal's intention to continue to develop the Bretana asset; the targeted
20% growth rate from 2023; ( )PetroTal's forecast 2024 funds flow of $160
million; plans with respect to the Company's seismic program in the southern
part of Block 95 including with respect to its intended duration and purposes;
PetroTal's intentions to continue seeking a partner for co-investment for
Block 107 and obtain development permits; the positioning of the Company in
2024; PetroTal's intentions with respect to its return of capital program
(including that it will maintain a 12% yield and that the program will
continue to consist of dividends at $0.015/share and buybacks of approximately
$1.0 million/month in accordance with the Company's return of capital policy);
PetroTal's plans to commercialize new sales routes through the OCP in Ecuador
and through Yurimaguas to Bayovar and the anticipated benefits therefrom
(including in respect of production estimates) and the timing thereof;
expectations surrounding the Company's 2.5% social fund including PetroTal's
intended capital allocation of $9 million towards the fund; PetroTal's plans
to defer drilling a water disposal well into 2025 and expectations regarding
capacity within the Company's existing water disposal wells throughout 2024;
estimated returns from the Company's 2024 dividend and buyback plan; drilling
plans including with respect to the commencement and completion of drilling
wells 17H, 18H, and 19H; intentions regarding well 17H, including in respect
of timing and budgetary expectations; estimated payback from well 16H and
the timing thereof; PetroTal's plans to continue to allocate capital to its
long term preventative erosion control program; PetroTal's 2024 budget for the
erosion control project and plans in respect thereof; the 2024 Capex budget;
plans with respect to PetroTal's 2024 facilities program including anticipated
key projects and expenditures in respect thereof; and PetroTal's expectations
regarding 2024 operating costs. 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. 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 to obtain necessary permits,
the ability of government groups to effectively achieve 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, 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, the
Israeli- Hamas conflict and the Houthis attacks in the Red Sea). Please refer
to the risk factors identified in the Company's most recent annual information
form and management's discussion and analysis (the "MD&A") which are
available on SEDAR+ at www.sedarplus.ca
(https://www.sedarplus.ca/landingpage/) . 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.
SHORT-TERM RESULTS: References in this press release to peak production rates,
current production rates, initial 14-day production rates and other short-term
production rates are useful in confirming the presence of hydrocarbons,
however such rates are not determinative of the rates 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.
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").
SPECIFIED FINANCIAL MEASURES: This press release includes various specified
financial measures, including non-GAAP financial measures, non-GAAP financial
ratios and capital management measures such as "Netback", "EBITDA", "Adjusted
EBITDA", "Net Operating Income" and "free funds flow". 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. 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. "Netback" (non-GAAP financial
measure) equals total petroleum sales less quality discount, lifting costs,
transportation costs and royalty payments calculated on a bbl basis. The
Company considers netbacks to be a key measure as they demonstrate Company's
profitability relative to current commodity prices. "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 EBITDA as a measure of
operational performance and cash flow generating capability. EBITDA impacts
the level and extent of funding for capital projects investments. "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. "Net Operating Income" (non-GAAP financial measure) is calculated as
revenues less royalties, operating expenses, and direct transportation. The
Company considers Net Operating Income measure as they demonstrate Company's
profitability relative to current commodity prices. "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. Please refer to the MD&A for
additional information relating to specified financial measures.
FOFI DISCLOSURE: This press release contains future-oriented financial
information and financial outlook information (collectively, "FOFI") about
PetroTal's 2024 fully funded budget and guidance, prospective results of
operations, estimated growth rate, 2024 targets (including production and
sales targets), 2024 average sales target of 17,000 bopd, initial 14 day
production rate for well 16H of 6,000 bopd, production capacity, forecast
funds flow of $160 million, free funds flow of $25 million and the components
thereof including dividends and share buybacks and the targeted 12% return
therefrom as well as derivative true up payments, erosion control and
community expense, revenue, capex, average contracted brent, EBITDA, adjusted
EBITDA, estimated closing 2024 cash and components thereof including estimated
net working capital movements, forecast 2024 funds flow, free funds flow, free
funds flow (after capex), payout of wells, estimated payback, netback, OPEX
and the components thereof, G&A expenses and the components thereof, tax
rates, Capex, royalty rates, future investments and capital allocation
(including capital deployed towards any government and community amounts in
2024 such as the 2.5% social fund), 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
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.
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