Calgary and Houston – October 21, 2019—PetroTal Corp. (“PetroTal” or the “Company”) (TSX‐V: TAL and AIM: PTAL) is pleased to provide an update in respect of its operations and production at the Bretaña oil field in Block 95 in Peru (100% working interest). All monetary amounts in this release are in United States dollars.
- 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
- 4H initial four‐day production rate of 6,200 barrels of oil per day (“BOPD”), exceeding management’s expectations
- Bretaña reached new record production of over 8,000 BOPD, with three of five wells online
- Current Bretaña field production of approximately 7,800 BOPD
- Interim upgrades to production facilities increased production capacity to 7,500 BOPD
- Spud the BN 95‐5H (“5H”) well, which will be the Company’s second horizontal development oil well
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 20 percent savings), which will expedite payout of the well. The Company will announce additional well data, including sustained rates, with its quarterly financial filings and operations update in November 2019.
During the third quarter, the Company upgraded the production facilities, expanding PetroTal’s production capacity to over 7,500 BOPD. The Company plans to commission phase one of its central production facilities for Bretaña (“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 has 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, 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 by year‐end 2020. The Company expects the interim capital spent will yield an additional 5,000 BOPD of capacity in mid‐2020. As mentioned above, the CPF‐2 should bring total field oil production capacity to 20,000 BOPD by year end 2020.
Once completed, the 5H well will be the Company’s second horizontal well. Production from the well is expected to help the Company achieve a targeted exit rate of 10,000 BOPD at yearend 2019. 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. The Company plans to drill a second water disposal well in January 2020 as part of a new capital budget once approved by the Board of Directors.
Management expects to fund the 2019 additional capital spending with existing working capital and cash flow from operations. As of September 30, 2019, the Company has cash and cash equivalents of approximately $40.0 million. The Company produced approximately 4,800 BOPD in the fiscal third‐quarter. Management expects average above 6,500 fourth quarter production above 6,500 BOPD, a projected increase of over 35 percent over the third quarter average.
Manolo Zuniga, President and Chief Executive Officer, commented:
“Our drilling campaign continues to yield excellent results. The strong initial production from the 4H well validates our development plan. Our first horizontal well completion will provide significant data and the AICD valve will bring more oil into the wellbore. We are please to announce a number of recent milestones: 500 days of production, more than 1 million barrels of oil produced and new record production of over 8,000 BOPD (from only three wells as the production facilities reached the upper limits of capacity). Our team is doing an outstanding job in its drilling and capital discipline. As a result, we asked the Board for additional capital to continue our development drilling program and make facility upgrades to sustain oil production of over 10,000 BOPD. This additional capital will allow the Company to reach free cash flow generation faster and see our future drilling campaign funded from cash flow.
Capital discipline is key, and having stressed that from day one, we have seen the teams in Houston, Lima, and the field execute at a high level and in a safe and environmentally friendly manner. To save twenty percent on a single well is a very strong achievement. Our Board’s approval of the additional capital to continue the development drilling campaign through year‐end is testament to solid execution and ongoing capital efficiency.
Facilities to enable us to attain the 10,000 BOPD mark are scheduled to be commissioned in December 2019. The 5H well will help sustain oil production through the first quarter of 2020 which is key as our next well will be an additional water disposal well in early 2020 to provide assurance in the field. As part of the capital raise completed in May 2019, we promised to drill the 5H well and to drill a second water disposal well to provide assurance to production at Bretaña, and that is what we are delivering.”
PetroTal is a publicly‐traded, dual‐listed (TSX‐V: 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 development 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. More information on the Company can be found at www.PetroTal‐Corp.com.
For further information, please contact:
Executive Vice President and Chief Financial Officer
T: (713) 609-9101
President and Chief Executive Officer
T: (713) 609-9101
Mark Antelme / Jimmy Lea
Celicourt Communications (Financial PR)
T: 44 (0) 207 520 9261
James Spinney / Ritchie Balmer / Eric Allan
Strand Hanson Limited (Nominated & Financial Adviser)
T: 44 (0) 207 409 3494
John Prior / Emily Morris / George Price
Numis Securities Limited (Joint Broker)
T: +44 (0) 207 260 1000
Jonathan Wright / Hugh R. Sanderson
GMP FirstEnergy (Joint Broker)
T: +44 (0) 20 7448 0200
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: PetroTal’s business strategy, objectives, strength and focus; drilling, completion, and workover activities of oil producing and water disposal wells and the results and timing of such activities; the ability of the Company to achieve drilling success consistent with management’s expectations; anticipated future production, revenue and cash flow; exit production in 2019; and future development and growth prospects. 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 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 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 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 for the year ended December 31, 2018 and management’s discussion and analysis for the three months ended March 31, 2019 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: 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, production, payout, cash flow, budget 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 Canadian Securities Administrators’ National Instrument 51-101 Standards of Disclosure for Oil and Gas Activities.
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