PetroTal Corp. - Strategic Acquisition of Block 131 in Peru
08/05/2024 08:00
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RNS Number : 5066N PetroTal Corp. 08 May 2024
PetroTal Announces Strategic Acquisition of Block 131 in Peru
Addition of 900 bopd of production effective January 1, 2024
Recoverable reserve estimates up to 4.9 million bbls
Significant upside potential from deeper reservoirs
Calgary, AB and Houston, TX - May 8 2024 - PetroTal Corp. ("PetroTal" or the
"Company") (TSX: TAL, AIM: PTAL and OTCQX: PTALF) is pleased to announce the
execution of a definitive agreement (the "Acquisition Agreement") to acquire a
100% working interest in Peru's Block 131, including the producing Los Angeles
field, through the acquisition of CEPSA Peruana, S.A.C. ("CEPSA Peru"), which
represents the entire Peruvian business unit of Compania Española de
Petroleos S.A.U. ("CEPSA"), for a purchase price of approximately $5.0 million
in cash, subject to adjustment as set forth in the Acquisition Agreement (the
"Acquisition").
Manuel Pablo Zuniga-Pflucker, President and Chief Executive Officer,
commented:
"This is PetroTal's first acquisition since entering Peru in late 2017. This
transaction marks an important step forward in delivering on our ongoing
growth vision. The assets being acquired are synergistic, highly accretive to
the Company's current operations and we have immediate plans for development
once the transaction is complete. All production from the assets is directed
to the Iquitos refinery.
Completion of this acquisition will add approximately 900 bopd to our current
18,500 bopd of Bretana production, with the potential for further upside in
the near to medium term. Furthermore, our operational team is assessing the
potential upside in the deeper zones of the Los Angeles field, that were
previously penetrated but were not tested. Finally, the location of Block 131
is of strategic importance, as it is connected by a 130km highway to the
Company's Block 107 prospect. We look forward to announcing further updates on
this acquisition process in due course."
The assets to be acquired, pursuant to the Acquisition, (the "Assets") are
currently producing approximately 900 barrels of oil per day ("bopd") from
four wells previously drilled into the Cretaceous aged Cushabatay sand at the
Los Angeles field. With strong aquifer support, these wells are producing with
a low base decline profile, high recovery factor, and at a 40-45º API oil
quality. The Company's expectation is for near term development and production
growth from this block.
Strategic Rationale
Management and the Board of PetroTal believe the Acquisition provides the
following strategic attributes:
· Low-cost light oil reserve additions with upside potential.
o Recoverable reserves estimated between 3.0 and 4.9 million barrels of oil
("bbls");
· Iquitos Refinery capacity synergies. Block 131's light oil
production will allow PetroTal to increase the sales capacity of heavier
Bretana crude through Iquitos and allow more oil to be sold in dry river
conditions; and,
· Netback enhancements. From the combined lighter oil mix sold to
Iquitos, lower Brent differentials can potentially be realized.
Operational Strategy
PetroTal's management team have identified three near term low risk
operational initiatives at Block 131:
· Identification of bypassed oil for low risk horizontal well locations
drilled high on structure;
· Potential use of hydraulic pumps (vs ESPs) and optimized tubing to
reduce operating costs; and,
· Implementation of an operationally straightforward solution to lower
chemical costs from treating asphaltene.
Asset Background
Discovered in 2013, CEPSA Peru's assets include the Los Angeles oil field on
Block 131 (100% working interest), which are all located onshore Peru. At
March 31, 2024 the assets have produced a total of approximately 7.6 million
barrels. The assets are held under a concession agreement expiring in 2037 and
are subject to a 23.9% royalty rate at field production levels under 5,000
bopd with a similar scaling factor as Block 95 above 5,000 bopd. All the crude
oil produced is sold to Petroperu, the State-owned oil company, and
transported by barge along the Ucayali River, passing by PetroTal's Bretana
oil field, to the refinery in Iquitos.
The Acquisition
Completion of the Acquisition is subject to the satisfaction of certain
conditions, including, but not limited to, required regulatory approvals.
Closing will occur following the satisfaction of such conditions. The
effective date of the Acquisition will be January 1, 2024.
Evercore Group LLC is acting as the exclusive financial advisor to PetroTal
with respect to the Acquisition.
Stikeman Elliott LLP is acting as legal counsel to PetroTal with respect to
the Acquisition.
Q1 2024 results webcast link for May 9, 2024
PetroTal will host a webcast for its Q1 2024 results and to discuss the Cepsa
acquisition on May 9, 2024 at 9am CT (Houston) and 3pm BST (London). Please
see the link below to register.
https://stream.brrmedia.co.uk/broadcast/660bc6a92eae5d4dcf2e6319
(https://stream.brrmedia.co.uk/broadcast/660bc6a92eae5d4dcf2e6319)
Qualified Person's Statement
Estuardo Alvarez-Calderon, a consultant to the Company, who has over 35 years
of relevant experience in the oil industry, has approved the technical
information contained in this announcement. Mr. Alvarez-Calderon received a
Bachelor of Science degree in Geology from the University of Texas at Austin
and is registered on the Texas Board of Professional Geoscientists.
The recovery and reserve estimates provided in this news release are estimates
only, and there is no guarantee that the estimated reserves will be recovered.
Actual reserves may eventually prove to be greater than, or less than, the
estimates provided herein.
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 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 (http://www.petrotal-corp.com) , the Company's filed
documents at www.sedarplus.ca (http://www.sedarplus.ca) , or below:
Camilo McAllister
Executive Vice President and Chief Financial Officer
Cmcallister@PetroTal-Corp.com
T: (386) 383 1634
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) 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
forward-looking information (collectively referred to herein as
"forward-looking statements") within the meaning of applicable securities
laws. Forward-looking statements are often, but not always, identified by the
use of words such as "guidance", "outlook", "anticipate", "target", "plan",
"continue", "intend", "consider", "estimate", "expect", "may", "will",
"should", "could" or similar words suggesting future outcomes. More
particularly, this press release contains statements concerning: PetroTal's
business strategy, objectives, strength and focus; the Acquisition;
satisfaction or waiver of the closing conditions to the Acquisition; receipt
of required regulatory approvals for the completion of the Acquisition; the
purchase price of the Acquisition net closing adjustments; the anticipated
benefits of the Acquisition, including the impact of the Acquisition on the
Company's operations, reserves, inventory and opportunities, financial
condition and overall strategy; expectations with respect to reserves, oil
production levels and decline rates related to the Assets following the
Acquisition; and development for the Assets, including the ability to
replicate prior results.
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 business plan of PetroTal, CEPSA Peru and the
Assets; the receipt of all approvals and satisfaction of all conditions to the
completion of the Acquisition; the timing of and success of future drilling,
development and completion activities; the geological characteristics of
PetroTal's properties; the characteristics of the Assets; the successful
integration of the Assets into PetroTal's operations; the ability of existing
infrastructure to deliver production and the anticipated capital expenditures
associated therewith, 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:
counterparty risk to closing the Acquisition; unforeseen difficulties in
integrating the Assets into PetroTal's operations; incorrect assessments of
the value of benefits to be obtained from acquisitions and exploration and
development programs (including the Acquisition); 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).
Please refer to the risk factors identified in the Company's most recent AIF
and MD&A which are available on SEDAR+ at www.sedarplus.ca. 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.
This press release contains future-oriented financial information and
financial outlook information (collectively, "FOFI") in respect of the Company
and the Assets, including prospective results of operations and production and
components thereof, including pro forma the completion of the Acquisition, 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
document was approved by management as of the date of this document and was
provided for the purpose of providing further information about PetroTal's
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 document, 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 document
should not be used for purposes other than for which it is disclosed herein.
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.
OIL REFERENCES: All references to "oil" or "crude oil" production, revenue or
sales in this press release mean "light crude oil" as defined in NI 51-101.
All references to Brent indicate Intercontinental Exchange Brent.
RESERVES DISCLOSURE. All reserves values and ancillary information contained
in this press release relating to Assets are derived from the are derived from
an independent assessment of reserves attributable to the Assets, which was
completed by Netherland Sewell and Associates Inc. ("NSAI"), a qualified
independent reserves evaluator as defined in Canadian National Instrument
51-101 - Standards of Disclosure for Oil and Gas Activities ("NI 51-101"),
with an effective date of March 31, 2024 (the "Reserves Report"), and prepared
in accordance with the most recent publication of the Canadian Oil and Gas
Evaluation Handbook ("COGEH") and the standards established by NI 51-101.
Estimates of reserves for individual properties may not reflect the same level
of confidence as estimates of reserves for all properties, due to the effect
of aggregation. There is no assurance that the forecast price and cost
assumptions applied by NSAI in evaluating PetroTal' reserves will be attained
and variances could be material.
Proved reserves are those reserves that can be estimated with a high degree of
certainty to be recoverable. It is likely that the actual remaining quantities
recovered will exceed the estimated proved reserves. Probable reserves are
those additional reserves that are less certain to be recovered than proved
reserves. It is equally likely that the actual remaining quantities recovered
will be greater or less than the sum of the estimated proved plus probable
reserves. Possible reserves are those additional reserves that are less
certain to be recovered than probable reserves. There is a 10% probability
that the quantities actually recovered will equal or exceed the sum of proved
plus probable plus possible reserves. Proved developed producing reserves are
those reserves that are expected to be recovered from completion intervals
open at the time of the estimate. These reserves may be currently producing
or, if shut-in, they must have previously been on production, and the date of
resumption of production must be known with reasonable certainty. Undeveloped
reserves are those reserves expected to be recovered from known accumulations
where a significant expenditure (e.g., when compared to the cost of drilling a
well) is required to render them capable of production. They must fully meet
the requirements of the reserves category (proved, probable, possible) to
which they are assigned. Certain terms used in this press release but not
defined are defined in NI 51-101, CSA Staff Notice 51-324 - Revised Glossary
to NI 51-101, Revised Glossary to NI 51-101, Standards of Disclosure for Oil
and Gas Activities ("CSA Staff Notice 51-324") and/or the COGEH and, unless
the context otherwise requires, shall have the same meanings herein as in NI
51-101, CSA Staff Notice 51-324 and the COGEH, as the case may be.
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