Petrotal Corp. Reports Reserves and Prospective Resources in Respect of the Bretana Field as of June 30, 2018
Calgary, Alberta and Houston, Texas – October 25, 2018—PetroTal Corp. (“PetroTal” or the “Company”) (TSX-V: TAL) is pleased to provide a summary of the Company’s reserves and prospective resources in the Bretaña field in Northern Peru as of June 30, 2018. Reserves and prospective resources numbers presented herein were derived from an independent assessment (the “NSAI Report”) prepared by Netherland, Sewell & Associates, Inc. (“NSAI”), a qualified reserves evaluator as defined in National Instrument 51-101 – Standards of Disclosure for Oil and Gas Activities (“NI 51-101”), effective June 30, 2018. Unless otherwise noted, all figures referred to in this press release are denominated in U.S. Dollars. The figures in the following tables have been prepared in accordance with the standards contained in the Canadian Oil and Gas Evaluation Handbook (the “COGE Handbook”) and the reserve definitions contained in NI 51-101.
Key Highlights for the Bretaña Field
- Proved + probable (“2P”) reserves of 39.8 million barrels of oil
- Proved + probable + possible (“3P”) reserves of 79.3 million barrels of oil
- Net present value discounted ten percent (“NPV-10”) of approximately $405 million for 2P reserves and $996 million for 3P reserves
Summary of Reserves
- The Company owns a 100% working interest in Block 95 and a 100% net revenue interest in these properties.
- Net reserves do not include deductions for royalty expense for net oil volumes. Government royalties are included in property and mineral taxes.
- 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
Summary of Net Present Values of Future Net Revenue
- Utilizes NSAI’s price forecast as of June 30, 2018 as detailed below.
- Future net revenue is after deductions for the Company’s share of royalty burdens, capital costs, abandonment and reclamation costs and operating expenses by before consideration of any Peruvian income taxes.
- It should not be assumed that the undiscounted or discounted net present value of future net revenue attributable to the Company’s reserves estimated by NSAI represent the fair market value of those reserves. All future net revenues are estimated using forecast prices and cost assumptions. There is no assurance that the forecast prices and costs assumptions will be attained and variances could be material. The recovery and reserve estimates of the Company’s reserves provided herein are estimates only and there is no guarantee that the estimated reserves will be recovered. Actual reserves may be greater than or less than the estimates provided herein
Summary of Pricing and Inflation Rate Assumptions – Forecast Prices and Costs
The forecast cost and price assumptions are based on Brent Crude futures prices and are adjusted for quality, transportation fees and market differentials. Crude oil benchmark reference pricing, inflation and exchange rates utilized by NSAI in the NSAI Report were NSAI’s forecasts, as at June 30, 2018 as follows:
Estimated future abandonment and reclamation costs related to a working interest have been taken into account by NSAI in determining reserves that should be attributed to a property and in determining the aggregate future net revenue therefrom, there was deducted the reasonable estimated future well abandonment and reclamation costs. No allowance was made, however, for the abandonment of any facilities. The forecast price and cost assumptions assume the continuance of current laws and regulations.
Future Development Costs
The following table sets forth development costs deducted in the estimation of the Company’s future net revenue attributable to the reserve categories noted below:
The Company expects to use a combination of internally generated cash from operations, working capital and the issuance of new equity or debt where and when it believes appropriate to fund future development costs set out in the NSAI Report.Future development costs are capital expenditures required in the future for the Company to convert proved undeveloped reserves, probable reserves and possible reserves to proved developed producing reserves. The undiscounted development costs are $191 million for proved reserves, $303 million for proved plus probable reserves and $450 million for proved plus probable plus possible reserves (in each case based on forecast prices and costs).
Summary of Prospective Resources
Gross (100%) Prospective Oil Resources (MBBL)
- The Company has a 100% working interest in Block 95.
- All of the prospective resources have been classified as heavy oil with a gravity of 18.5 degrees API. There is uncertainty that it will be commercially viable to produce any portion of the resources in the event that it is discovered.
- “Unrisked Prospective Resources” are 100% of the volumes estimated to be recoverable from the field in the event that it is discovered and developed.
- NSAI has determined that a 36% chance of discovery is appropriate for the prospective resources based on an assessment of a number of criteria. See “Presentation of Oil and Gas Information”.
- The volumes reported here are “risked” in the sense that they have been adjusted for chance of discovery.
Manolo Zuniga, President and Chief Executive Officer, said:
“Our updated NSAI Report firmly underpins the PetroTal investment case with an independent third party attributing proved and probable reserves at the Bretaña oil field of 39.8 million barrels. This is in line with the numbers presented earlier this year when we announced our first reserves report. Additionally, this is an important step in the process to list on the London Stock Exchange’s AIM market.”
PetroTal is a publicly-traded independent 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 focused on safely and cost effectively developing and exploiting the Bretaña oil field in Block 95 and to continue to evaluate the promising Osheki prospect in Block 107.
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
Mark Antelme / Henry Lerwill
T : 44 207 520 9261
Presentation of Oil and Gas Information
Prospective resources are the quantities of petroleum estimated, as of a given date, to be potentially recoverable from undiscovered accumulations by application of future development projects.
Estimates of prospective resources included in this press release relating to the Bretaña field are based upon the NSAI Report.
The estimates of prospective resources provided in this press release are estimates only and there is no guarantee that the estimated prospective resources will be discovered. If discovered, there is no certainty that it will be commercially viable to produce any portion of the prospective resources evaluated. Not only are such prospective resources estimates based on that information which is currently available, but such estimates are also subject to uncertainties inherent in the application of judgmental factors in interpreting such information. Prospective resources should not be confused with those quantities that are associated with contingent resources or reserves due to the additional risks involved. Because of the uncertainty of commerciality and the lack of sufficient exploration drilling, the prospective resources estimated herein cannot be classified as contingent resources or reserves. The quantities that might actually be recovered, should they be discovered and developed, may differ significantly from the estimates herein.
The prospective resources estimates that are referred to herein are risked as to chance of discovery. Risks that could impact the chance of discovery include, without limitation, geological uncertainty, political and social issues, and availability of capital.
In general, the significant factors that may change the prospective resources estimates include further delineation drilling, which could change the estimates either positively or negatively, future technology improvements, which would positively affect the estimates, and additional processing capacity that could affect the volumes recoverable or type of production. Additional facility design work, development plans, reservoir studies and delineation drilling is expected to be completed by PetroTal in accordance with its long-term resource development plan.
The following classification of prospective resources is used in the press release:
- Low Estimate (or 1C) means there is at least a 90 percent probability (P90) that the quantities actually recovered will equal or exceed the low estimate.
- Best Estimate (or 2C) means there is at least a 50 percent probability (P50) that the quantities actually recovered will equal or exceed the best estimate.
- High Estimate (or 3C) means there is at least a 10 percent probability (P10) that the quantities actually recovered will equal or exceed the high estimate.
This press release contains oil and gas metrics, including “future development costs”, which do not have standardized meanings or standard methods of calculation and therefore such measures may not be comparable to similar measures used by other companies. Such metrics have been included herein to provide readers with additional measures to evaluate the Company’s performance; however, such measures are not reliable indicators of the future performance of the Company and future performance may not compare to the performance in previous periods. Future development costs are calculated as the sum of development capital plus the change in future development costs for the period.
This press release contains forward-looking statements and forward-looking information within the meaning of applicable securities laws. The use of any of the words “expect”, “anticipate”, “continue”, “estimate”, “may”, “will”, “should”, “believe”, “plans”, “intends” and similar expressions are intended to identify forward-looking information or statements. More particularly and without limitation, this press release contains forward looking statements and information concerning the PetroTal’s business strategy, objectives, strength and focus and the proposed listing on the London Stock Exchange’s AIM market. Statements related to reserves and prospective resources are deemed to be forward-looking statements and forward-looking information as they involve the implied assessment, based on certain estimates and assumptions, that the reserves and prospective resources can be profitably produced in the future. Specifically, forward-looking information contained herein regarding reserves and prospective resources may include estimated volumes of reserves and prospective resources.
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, 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.
This press release contains future-oriented financial information and financial outlook information (collectively, “FOFI”) about PetroTal’s prospective results of operations, future production and NPV-10 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.
This press release is for information purposes only and is not intended to and does not constitute, or form part of, any offer or invitation to purchase, subscribe for or otherwise acquire or dispose of, or any solicitation to purchase or subscribe for or otherwise acquire or dispose of, any securities in the capital of the Company.