Calgary, Alberta and Houston, Texas – July 3, 2018—PetroTal Corp. (“PetroTal” or the “Company”) (TSX-V: TAL) is pleased to announce that it has achieved first oil production from the Bretana Norte discovery well (the “Discovery Well” or the “well”) at the Bretana field in Block 95 in Peru. The Company is also pleased to provide further operations updates for both Bretana and Block 107. All figures referred to in this press release are denominated in U.S. dollars.
- First oil production achieved in five months, significantly ahead of schedule
- Discovery well flowed oil without stimulation
- Well produced 100 percent oil with minimal natural gas and no formation water to date
- Commissioning of facilities is progressing as expected and on schedule
- Water handling facilities on schedule for commissioning in October, 2018
- 7,000 barrels of oil produced to date through the ongoing long-term testing phase
- Signed oil sales contract allows for strong operating netbacks to PetroTal
- First oil sales and shipment expected in early July, 2018
- Osheki prospect in Block 107 remapped, independent resource audit being prepared
The Company initially provided guidance that the Discovery Well, which had been tested but not produced, could commence production in 10 to 12 months from PetroTal taking over operational control of the field in late December 2017. The Company is pleased to announce that on June 1, 2018 the well was placed on production through long-term testing, allowing for the start of the commissioning of the newly installed oil production facilities, five months earlier than anticipated. Field personnel have controlled the choke sizes of the well over the initial four weeks to carefully manage the commissioning of the facilities and to properly commission the facilities. The Discovery Well is testing oil from the Vivian formation, producing 100 percent oil with minimal natural gas and no formation water. As previously announced, the Company is restricting the well flow rates to avoid water production until the required water injection facilities are installed and commissioned in October of this year.
In addition to putting the Discovery Well on production, the Company is installing initial water handling facilities at Bretana. The project is on schedule to begin commissioning water treatment and reinjection facilities by late October 2018. At that time, oil production rates from the Discovery Well are anticipated to increase to between 2,000 and 2,300 barrels per day (“Bbls/d”). The Company has also completed refurbishment and construction on the existing drilling pad and is now able to drill additional wells without causing material interruptions to production.
Manolo Zuniga, President and Chief Executive Officer of PetroTal, stated: “We are extremely pleased for having been able to achieve first production in just five months. The well and the newly installed equipment have met expectations of field personnel and there have been no issues with achieving oil flow at sufficient rates to commission equipment. As mentioned above, the well is being produced under a restricted choke to avoid producing water until the full facilities are installed to handle produced water in October of this year. In the meantime, the well is expected to produce without stimulation at rates of up to 1,000 Bbls/d, depending on the planned activities and objectives of field personnel, gather well and reservoir data, and meet the requirements of the initial oil sales contract which calls for PetroTal to sell up to 1,000 Bbls/d to the Iquitos refinery.”
OIL SALES CONTRACT
The Company is pleased to announce the execution of an initial oil sales contract with PetroPeru, Peru’s state oil company and owner of the Iquitos refinery, pursuant to which the Company is entitled to sell up to 1,000 Bbls/d to the refinery during the initial long-term testing phase. The Company successfully negotiated a discount equivalent to 14 percent from Brent; however the Company does not pay pipeline tariffs during the contract term as all oil is barged to the refinery. Additionally, the crude oil will be picked up at the Bretana field and transported to the refinery by PetroPeru at a cost equivalent to our internal cost projections. As a result, the Company expects to achieve strong operating netbacks. The Company expects to deliver most of the initial oil recovered to date to the refinery in early July. The chart below outlines the Company’s anticipated operating netbacks at certain benchmark reference prices:
The higher per unit lifting costs included above are driven by the initial lower production rates during the initial commissioning and testing phase. The Company expects future lifting costs to approximate $11.00 per barrel (“Bbl”) once production reaches 5,000 Bbls/d.
Mr. Zuniga continued “As demonstrated, the avoidance of paying the pipeline tariff effectively reduces our cost structure, thus the negotiated 14 percent discount is beneficial for both PetroTal and PetroPeru, the owner of the Iquitos refinery. We use a lifting cost of $21.95 per Bbl on this initial production as the early restriction on production rates affect the unit costs. Additionally, we have yet to finalize the commissioning process, so this initial estimate could vary. In any event, you can see that this is a robust project.”
BLOCK 107 OSHEKI PROSPECT
The Company has completed the remapping of the Osheki prospect based on all available data. The revised maps suggest there is closure on the structure and up to three producing horizons may hold hydrocarbons. Updated maps are available in the investor presentation on the Company’s website at www.petrotalcorp.wpengine.com.
In addition, the Company has retained Netherland, Sewell & Associates, Inc., qualified independent reserves evaluators, to prepare an initial hydrocarbons volumes assessment of the Osheki prospect.
Once this assessment is complete, the Company expects to open the Block 107 data room for prospective partners to review.
PetroTal is a publicly-traded oil and gas development and production company domiciled in Calgary, Alberta, focused on the development of oil assets in Peru. The Company’s management team has significant experience in developing oil fields in Northern Peru and is led by an independent Board of Directors that is focused on safely and cost effectively developing and exploiting the Bretana oil field.
FOR FURTHER INFORMATION, PLEASE CONTACT:
|Executive Vice President and Chief Financial Officer
|T: (713) 609-9026
|President and Chief Executive Officer
|T : (713) 609-9101
ABOUT BRETANA FIELD
Oil in the Bretaña field was first discovered in the 1970’s and was subsequently re-discovered. Several wells have been drilled to delineate the field and recent seismic has de-risked the structure. The rediscovery well drilled in 2014 tested 18.5 degrees API oil from the Vivian formation. The Northern oil fields in Peru have produced over one billion barrels of oil, mostly from the Vivian formation. The Company acquired the assets in Peru on December 18, 2017. The Company is working to put the field on long-term test and begin production as early as Q4 2018.
PetroTal is a publicly-traded oil and gas development and production company domiciled in Calgary, Alberta, focused on the development of oil assets in Peru. The Company’s management team has significant experience in developing oil fields in Northern Peru and is led by an independent Board of Directors, focused on safely and cost effectively developing and exploiting the Bretaña oil field.
For further information, please contact:
|Executive Vice President and Chief Financial Officer
|T: (713) 609-9026
|President and Chief Executive Officer
|T : (713) 609-9101
FORWARD-LOOKING STATEMENTS: This press release may contain certain statements that may be deemed to be forward-looking statements. Such statements relate to possible future events, including, but not limited to: the Company’s objectives; drilling, reactivation, water and other activities and the anticipated costs and results of such activities, including with respect to the Discovery Well; cost controls and savings; anticipated future production and revenue, including resulting from sales to PetroPeru; future development and growth prospects, including identifying a joint venture partner to develop the Osheki prospect. 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. 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, including the Refinery, 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, 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, availability of required equipment and services and prevailing commodity prices. 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 and 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. Please refer to the risk factors identified in the Company’s annual information form and management’s discussion and analysis for the year ended December 31, 2017 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 operating netbacks (calculated on a per unit basis as oil revenues less royalties and barging, pipeline and lifting costs). 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. All oil and gas disclosure contained in this press release complies with the requirements of National Instrument 51-101 – Standards of Disclosure for Oil and Gas Activities (“NI 51-101”).
References in this press release to production test rates, initial test 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. A pressure transient analysis or well-test interpretation has not been carried out in respect of all wells. Accordingly, the Company cautions that the test results should be considered to be preliminary.
FOFI DISCLOSURE: This press release contains future-oriented financial information and financial outlook information (collectively, “FOFI”) about PetroTal’s prospective results of operations, operating netbacks, operating costs 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 made as of the date of this press release and was provided 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.